Q2 2022 CenterPoint Energy Inc Earnings Call

August 2, 2022

Good morning, and welcome to Centerpoint Energy's second quarter 2022 earnings conference call with senior management.

During the Companys prepared remarks, all participants will be in a listen only mode.

There'll be a question and answer session. After managements remarks to ask a question press Star one one on your Touchtone keypad.

I will now turn the call over to Jackie Richert, Vice President of Investor Relations and Treasurer Ms record.

Good morning, everyone welcome to Centerpoint earnings Conference call, Dave <unk>, our CEO and Jason Wells, our CFO will discuss the company's second quarter 2022 results.

Management will discuss certain topics that will contain projections and other forward looking information and statements that are based on management's beliefs assumptions and information currently available to management. These forward looking statements are subject to risks or uncertainties actual results could differ materially based upon various factors as noted in our Form 10-Q.

<unk> other SEC filings and our earnings materials.

We undertake no obligation to revise or update publicly any forward looking statements.

We will be discussing certain non-GAAP measures on today's call.

When providing guidance, we will use a non-GAAP EPS measure of adjusted diluted earnings per share on a consolidated basis referred to as non-GAAP EPS.

For information on our guidance methodology and a reconciliation of the non-GAAP measures used in providing guidance. Please refer to our earnings news release and presentation, both of which can be found under the investors section on our website at.

As a reminder, we will use our website to announce material information. This call is being recorded information on how to access the replay can be found on our website now I'd like to turn the call over to Dave.

Thank you Jackie and good morning, and thank you to everyone joining us for our second quarter 2022 earnings call.

It has now been a little over two years since I was appointed as the CEO of this great company and the exciting progress that Centerpoint continues with lots of opportunities still ahead of us now.

Now that we're a pure play regulated utility our quarterly updates will continue to be streamlined and focused on our regulated utility operations.

In a minute I'll run through our latest highlights and headlines as we continue to build on our consistent track record of earnings delivery.

But first a quick side note as.

As Texas has heated up this summer we have gotten a number of questions from shareholders that indicate there may be a level of confusion to some shareholders about how we participate in the Texas electric market.

I thought it might be helpful to remind everyone about our role.

As most of you know the Texas ERCOT market is fully deregulated with respect to the generation and the retailing of electric power in Texas.

Centerpoint does not participate in either of the Texas generation or retail markets.

The Texas ERCOT market is regulated for the transmission and distribution of power, which is the market that centerpoint operates and therefore.

Therefore, centerpoint only transmit power from third party generators and delivers it to our territories third party retail energy providers.

Because of this we take no electric generation cost risk and no retail pricing risk in our business in Texas.

Think of as much as a regulated toll road that charges by the vehicle at.

As temperatures rise, we have more traffic into form of electricity driving on a regulated toll road in.

In addition, our Houston area transmission and distribution system makes up only about two 5% of the geographic footprint of Texas <unk>.

Transmit and delivers about 25% of the total ERCOT summer peak electric load.

So we have a very dense power grid in our territory.

Because of that Centerpoint imports up to 60% of its electric needs throughout our transmission lines, which connect to generation supply from locations elsewhere in the state.

All of this is why investing in resiliency and reliability is so critical.

I hope this helps those of you that are just becoming familiar with our story.

So now, let's turn to our headlines.

We have now delivered nine straight quarters of operational execution under this current management team.

We are halfway through 2022 and have increased confidence around our business performance.

That increased confidence specifically around Houston Electric's performance led us to raise our non-GAAP EPS guidance for the year to $1 37 to $1 39.

This means that at the new midpoint, we now expect to grow our earnings 9% this year over the prior year.

This is also our fifth earnings guidance increase under this new management team, which at the same time is laser focused on taking the steps necessary to keep our bills affordable for customers.

This increase to our full year guidance, we will provide the new and higher starting point for our future earnings guidance growth in other words. It is from this higher dollars 37 to $1 39 base that we now intend to grow our non-GAAP EPS, 8%.

Annually for 2023, and 2024 and beyond that we intend to grow at the mid to high end of our 6% to 8% growth range through 2030.

We believe that this will be an industry leading growth rate and.

And Jason will get into more of these details shortly.

Commensurate with our earnings guidance increase.

We also announced a <unk> <unk> increase to our second quarter dividend.

This quarterly increase is consistent with our objective of growing dividends in line with earnings.

We are also on track to meet our current capital investment plan for the year having.

Having invested over $2 billion in the first six months of 2022, which is nearly 50% of our 2022 investment plan.

We are also tracking very well against our five year and 10 year spending plans that support the safety resiliency and growth across our system to benefit our customers.

As mentioned in recent earnings calls we are working to develop the details around incremental customer driven capital opportunities to support a Houston area Regional Master energy plan.

This includes our resilient now initiative with the city of Houston.

We plan to provide an update to our capital investment plan and the third quarter call.

We also recently completed the final steps of our Vectren integration.

The integrated structure results in a more efficient debt structure, which will help us reach our goal of reducing parent level debt to approximately 20%.

So checking other box and our strategic commitment to strengthen our balance sheet and credit metrics for the benefit of our customers and our shareholders.

Jason will discuss it in more detail in his section.

Our Indiana generation transition plan is also tracking on course, including the recent commission approval of the natural gas, peaking facility.

We have also filed for another tranche of solar generation, which Jason will discuss.

As a reminder, our generation transition plan to cleaner fuels aligns with our peer leading 2035 scope, one and two net zero emissions goals.

Im also pleased to say today that despite the well known challenges around solar power. Our recently signed agreements will bring us to over 800 megawatts of owned or contracted solar.

So those are our latest headlines we strive to continue our track record that we've established over the past two plus years of executing on this world class investment thesis.

Turning now to our earnings guidance update.

As stated we raised our non-GAAP EPS guidance. This morning to a $1 37 to $1 39. This represents a 9% growth rate at the midpoint when compared to the 2021 non-GAAP utility EPS of $1 27 and <unk>.

Spite the current inflationary environment, we are continuing to see favorable tailwind such as the combined 1% to 2% organic growth and warmer weather, which led us to raising our guidance this quarter.

An example of the continued organic growth in the Houston area can be seen and it's greater than 6% year over year jobs growth, which added over 191000, new jobs in the last year alone.

Even as the Houston area temperatures recently peaked at 105 degrees and continue to be persistently hot our grid has held up well with limited disruptions for our customers.

These limited disruptions are largely related to the typical high intensity afternoon rain and wind storms that are common in Houston during our summer heat waves.

Related to these peak heating events, we have also seen a modest uptick this year and customer transformer related outages that have occurred across the industry.

However, our operations have responded well we had virtually all of our customers restored in less than two hours and we continue to expect to meet or exceed their reliability standards set by the Texas Public utility Commission.

During these recent record weather events, we only utilize commercial load management, one time and while we didn't need mobile generation. During this recent weather event, we have approximately 500 megawatts of capacity deployed across our system and we'll be prepared to utilize it for the bench.

A fit of our customers should the conditions call for it.

I am pleased with the performance of our system, but more importantly, with the performance of our employees, who managed all of our grids for Centerpoint.

Now of course, we still have several weeks of summer in front of us with more extreme temperatures forecasted and we will remain vigilant.

Now, let's move to capital investments.

Our five year capital investment plan of $19 3 billion has been increased twice since our September 2021 analyst day.

Our 10 year plan is still currently expected to be $40 billion plus in investments to support the safety resiliency and growth across our system to benefit our customers.

This leads to our industry, leading projected rate base growth of 9% CAGR over the 10 year plan.

We are making good strides in our strategic conversations with our customers to explore their views for further grid and infrastructure hardening and modernization residential weatherization and investments around renewable energy infrastructure.

This has included workshops with industrial customers the city of Houston and other surrounding cities.

No I don't want to front run these conversations this quarter, but we should be in place to better describe the potential additional capital investments related to these customer driven infrastructure discussions in our third quarter call.

We expect that this will include investment updates for the greater Houston Regional Master Energy plan, which includes the resilient now initiative jointly launched with the city of Houston earlier this year.

As we invest to meet our customers' interests. We continue to remain focused on the affordability of our capital spend.

We believe we have done a really good job in this area.

For example from 2013 due 2022.

Our average Houston electric charge has only increased by an average of about 1% per year.

Focus on that fact for a second.

That 1% translates to only a $5 increase in the average monthly charge over the last 10 years.

That's the beauty of having strong and continuous organic growth and charges rolling off to bill.

The Houston area has averaged over 2% annual customer growth for the last 30 years.

To further benefit customer charges in 2020 for our final Houston electric securitization charge will roll off the customer's bill, which will provide an additional 5% reduction to the current average residential charge.

This is on top of the 3% current average residential securitization charge that rolled off just this month.

These changes combined with an organically growing customer base O&M discipline.

Across our footprint work to help to reduce the customer impact the capital investment program across our system and we will seek to keep executing on these kinds of opportunities to help keep bills affordable for our customers.

As I mentioned in the highlights our Indiana coal generation transition plan is also tracking nicely against the filed IRB and we have some potential bill mitigates such as a recently filed securitization.

Jason will cover regulatory items in more detail in just a few minutes.

So in summary, before I turn the call over to Jason.

With all of the recent strategic actions behind US we are focused on our pure play regulated utility footprint.

With a projected 2022 rate base that is approximately 62% electric.

Which is within the range of some of our premium utility peers.

We believe we are one of the most tangible growth stories in the industry.

Our capital investments are not contingent on big bets. They are focused on meeting the needs of our customers across our system due to both organic growth and our continued investment in current system safety reliability and resiliency needs.

We expect that this will likely lead to incremental capital above our $40 billion plus included in our current 10 year plan.

We anticipate to provide a more detailed update of this additional investment opportunity on our third quarter call.

We raised our 2022 non-GAAP EPS guidance to $1 37 to $1 39, a 9% growth over 2021.

From that increased number projected to grow at 8% annually in 2023, and 2024 and at the mid to high end of 6% to 8% annually thereafter through 2030 and industry leading growth rate.

And we have peer leading 2035 net zero goals on our scope.

One and two emissions.

And for those of you that continue to track it we still expect to reduce O&M expenses by 1% to 2% per year on average over the 10 year plan and we still have no plan to issue any equity to meet our current capital spending plans.

As I stated in my opening remarks, we are excited about the nine straight quarters of execution.

I wanted to thank all of the great employees here at Centerpoint that are delivering on those results to you each and every day.

Lastly, we remain focused on achieving our value proposition, which is sustainable resilient and affordable rates for our customers.

Sustainable earnings growth for our shareholders and a sustainable positive impact on the environment for our communities.

With that let me turn the call over to Jason.

Thank you, Dave and thank you to all of you for joining US this morning for our second quarter call.

I'll start by covering the financial results for the quarter as shown on slide six.

On a GAAP EPS basis, we reported 28 for the second quarter of 2022.

Our GAAP EPS results included a portion of the tax on the gain on sale of our Arkansas, and Oklahoma gas <unk>, which we are required to recognize over the course of the full year.

On a non-GAAP basis, we reported 31 for the second quarter of 2022 compared to <unk> 28 for the second quarter of 2021.

Usage for this quarter was a favorable variance of <unk> <unk> when compared to the same quarter of 2021, largely driven by the hot weather, we've been experiencing in the greater Houston area.

Growth and rate recovery contributed another <unk> largely driven by continued organic customer growth and T cost rate recovery and our Houston Electric territory.

These favorable drivers were partially offset by higher interest expenses of <unk>, one set of which was related to absorbing costs previously allocated to our midstream segment in 2021.

The last thing I'll mention on the drivers as a tax benefit related to a lower state effective tax rate identified during the buoy restructuring at the end of this quarter.

This translated to a benefit of <unk>, which largely offset the <unk> <unk> onetime benefit for Louisiana NOL tax benefits recognized in 2021.

As Dave mentioned, we are raising our full year 2022 guidance range to $1 37 to $1 39 of non-GAAP , EPS, which reflects 9% growth over the comparable dollars 27, and non-GAAP EPS results for 2021, when using the midpoint of this new range.

On the O&M side for the balance of the year and for the benefit of our customers and similar to what we did in 2021, we see the opportunity to pull forward certain O&M work from 2023 and reinvest it back into the business in the latter quarters of 2022.

Some of this reinvestment will include accelerating additional vegetation management work into 2022.

I want to emphasize that we still expect to achieve our average annual 1% to 2% O&M reductions over the 10 year plan.

Beyond 2022, and from our new and higher $1 37 to $1 39 baseline. We continue to expect to grow non-GAAP EPS, 8% each year for 2023 and 2024.

And at the mid to high point of 6% to 8% annually through 2030.

Our focus continues to be on delivering strong industry, leading growth each and every year.

Turning to capital investments on slide seven we are tracking nicely against our current investment plan, having spent just over $2 billion in the first six months of this year, which is nearly 50% of our full year program.

These programs are focused on continuing to invest in safety resiliency reliability growth and clean enablement of our service.

To Echo Dave's earlier remarks, we are well on our way to developing incremental customer driven opportunities above our existing plan.

Including for the greater Houston area Regional Master Energy plan.

We expect to provide a comprehensive update on our third quarter earnings call.

We announced earlier this year that our Minnesota gas utility is now among the first gas utilities to add green hydrogen to its distribution system.

We appreciate the state support of these kinds of innovative solutions that reduce carbon emissions and advance a clean energy future.

And we look forward to working with the commission and other stakeholders as we get closer to filing our first plan under the natural gas Innovation Act next year.

Turning to our generation related investments we've received a few positive outcomes from the Indiana Commission recently, including the <unk> approval of our 460 megawatt natural gas, peaking facility.

This facility will help provide stability to our customers energy needs in times of intermittent renewable generation and is targeted to be operational in 2025.

Cleaner generation footprint compared to coal generation aligns with our current net zero goals.

Beyond this we recently filed our approval of 130 megawatts of owned solar generation. These projects will bring our total owned and contracted solar to over 800 megawatts, which is tracking well against our integrated resource plan that called for approximately 700 to 1000 megawatts of solar and approximately three.

<unk> hundred megawatts of wind, we anticipate filing for the remaining balance of generation needs. Later this year, which will include a project to be owned by our Indiana Electric utility.

We will begin the planning process for our next integrated resource plan soon after earnings and anticipate filing that plan in mid 2023.

This upcoming ERP will provide guidance on our remaining coal fired assets.

As a foundation for this AARP. We recently conducted an all source request for proposal, where we received nearly 100 proposals from several dozen participants, including wind solar and battery storage that will help inform our IRB process.

We look forward to working with stakeholders through this process to develop a constructive outcome for our customers.

Moving to a broader regulatory update on slide eight.

We have securitization efforts going on in a couple of jurisdictions, we anticipate receiving securitization proceeds in the coming months in Texas related to incremental natural gas costs also related to winter storm area, which will securitize approximately $1 1 billion of.

Of these costs.

With that we will have recovered over 80% of the incremental gas cost incurred during winter storm area.

In addition to the Texas securitization, we recently filed for securitization.

Indiana of approximately $360 million.

Of costs related to the retirement of two coal facilities.

This is a first filing of its kind in Indiana.

The securitization supports the generation transition capital investment plans and should result in a decrease for the benefit of our customers of the associated retirement costs of these assets by up to $60 million when compared to the traditional ratemaking.

The current procedural schedule anticipates a decision by the end of 2022 and if the financing order is approved we would expect a bond issuance in the first quarter of 2023.

Beyond the Securitizations, we will begin recovering the $78 million in Texas related to the traditional distribution capital portion of the <unk> filing in September .

Based on the Texas Public Utility Commission order, we filed an amendment for the mobile generation related portion of the <unk> filing and have a hearing scheduled in October .

As noted on our last call. There is often more regulatory scrutiny to getting new capital item into the existing mechanism. We look forward to working constructively with stakeholders to resolve that rate application in the coming months.

And we continue to believe these are valuable tools to help meet the needs of our customers in the event they are called upon.

Outside of those updates I'll remind everybody on a regulatory side, we have limited regulatory risk near term with no major rate cases to be filed until the latter part of 2023.

Turning to the buoy transaction on slide nine.

We're excited to complete the restructuring this past quarter, which has been about four years in the making.

We were able to transfer our Indiana gas company and Vectren electric delivery of Ohio subsidiaries into Circ, which now holds almost all of our natural gas utility businesses.

Along with the restructuring we were able to pay off approximately $700 million of additional parent level debt that will now be more efficiently finance that circ operating company instead of relying on intercompany borrowings.

The greater scale and stronger credit profile of <unk> should benefit our customers through lower future financing costs on an ongoing basis, resulting in anticipated customer savings over the long term through the restructuring process, we were able to remove certain restrictive covenants previously contained in the private placement notes that restricted the amount of securitization bonds that <unk>.

<unk> electric could issue, which I discussed earlier.

Additionally, in the future, we anticipate financing, Indiana electric on a standalone basis through first mortgage bonds further reducing intercompany borrowings from the parent.

These actions also align with our goal to have parent level debt at approximately 20% of total debt outstanding which will help mitigate the impact of a rising interest rate environment.

This restructuring is another example of delivering value for both our customers and our investors.

Lastly to cover some credit related topics.

In addition to improving parent level debt balance our <unk> to debt as of the second quarter was approximately 16% exceeding our long term objective of 14% to 15% aligning with Moody's methodology.

We believe that these improvements in the balance sheet, coupled with our efficient recycling of capital puts us in a position of being able to offer industry, leading growth without the need for external equity.

Ill briefly mentioned that we plan to renew our shelf registration in the near future as the existing 2019 registration statement is expiring we have not issued any new shares under that program in a few quarters and have no intentions of doing so in the future, but we believe it is good practice to keep a shelf registration outstanding.

Those are my updates for the quarter as we continue to express we take our commitment to be good stewards of your investment very seriously and realize our obligation to optimize stakeholder value.

I'll now turn the call back over to Dave.

Thank you Jason.

As you've heard from US today, we have nine straight quarters of meeting or exceeding expectations. We are a pure play regulated utility and firmly on the pathway to premium with incremental growth opportunities driven by our customers' demands.

Thank you, Dave I will now turn the call over to Q&A.

At this time, we will begin taking questions. If you wish to ask a question. Please press star one one on your Touchtone keep at the company requests that when asking a question Carl is pick up the telephone handset. Thank you.

Our first question comes from Shar <unk> with Guggenheim Partners. Your line is open.

Hey, good morning, guys.

Thanks Shar.

Dave, but sort of the guidance raise today for 'twenty two as you call out is now kind of implying 9% growth in 'twenty, two does that kind of imply a stronger trajectory for future years. Despite you're just reiterating 8% of the near term I mean, you're obviously showing some confidence in the res despite sort of the broader backdrop.

Our pending <unk> filing potentially and at the end of 'twenty three so what's driving it and any placeholders there with your internal planning assumptions for resiliency now in there.

No I think yes.

Yes first of all we Wouldnt expressed the confidence that we have in continuing to grow our earnings if we didn't believe in it so I think that needs to be your first takeaway.

Second is we do have a lot of tailwind in the business right now I think the great thing for US is that almost all of them are customer driven.

<unk>, we clearly have the organic growth that we highlighted the jobs growth, 2% residential growth quarter over quarter.

Certainly weather is helping us at this point higher and helping us really because the margin we're getting from that or allowed that polo around forward quantum two.

<unk> thousand three to benefit our customers in 'twenty, two and then clearly we continue to have the 1% to 2% long term O&M reduction the increased capital is clearly showing up in earnings and well continue to show up in earnings So as I said.

Arent really confident in where we were going we wouldn't say I mean, maybe the benefit I get as CEO is focusing on the tailwind is there are some headwinds out there maybe Jason Kevin Yeah sure.

Sure. Thanks, David Thanks for the question Shar I know the industry has been talking a lot about rising interest rates and pension expense I think we are in an enviable position on both of those from an interest expense standpoint.

We're really one of the few utilities that are significantly paying down parent company debt and floating rate debt over the last six months, we paid off a $1 1 billion of parent company debt with a weighted average coupon of three 4% and as I indicated in the prepared remarks, we're prepared to pay down a billion one of floating rate debt as soon as the Texas securitization proceeds.

Ah received here in the second half of the year and from a pension expense.

Really fortunate to work.

And constructive regulatory jurisdictions, we get to defer about two thirds of our pension expense. So.

We're in a good spot and while maybe not necessarily a headwind what I do want to remind folks of is the fact that we increased capital already $500 million this year.

And so that provides further aon's.

Address anything that comes up and sort of central to your question Shar.

The guidance.

Raise and a resulting increase in subsequent years as before the addition of the resiliency now capital we will provide a comprehensive update as it relates to that incremental capital on Q.

Q3 call, Yes, I think thats the key.

Quite that Jason just said, we're not going to front run our Q3 conversation on incremental capital. So the increased guidance, we're giving us. The we gave you today is essentially from the capital that we've already communicated to you in the past.

Got it so the incremental capital the incremental to your guidance got it.

And we will look forward to the third quarter.

And then just Dave just looking at sort of that interest rate backdrop, I guess does that kind of prompt any potential reconsideration of the M&A outlook as we think about the value of potentially monetizing more LDC assets any change here versus your prior thoughts it sounded like from your prepared remarks.

You may be comfortable with sort of that electric gas business mix as you comp closely with other premium names now so just curious as youre thinking about it just given the change in the capital markets. Thanks.

Well I think.

As Jason alluded to we've got plenty of cash flow at this point in time and if you recall, what we've said almost from day. One are I've said from day, one I mean, our Northstar is no further issuance of equity to dilute our shareholder base out so that's sort of the <unk>.

Stake in the ground as.

As Jason said in his prepared remarks, we've got certainly a lot of cash flow from the prior LDC sales enable sale, we've got some upcoming securitization.

As we refine startup the tax exposure on some of the transactions were finding additional capital there. So.

At the end of the day, we're going to wait until Q.

Three and we will give a comprehensive update to not only the incremental capital that may come out of our resilient now in master energy plan, but how we intend.

To finance all add without additional equity issuances, so just sort of hold that thought.

Okay perfect Congrats guys on the results I appreciate it thanks.

Yeah.

Our next question comes from Steve Fleishman with Wolfe Research Your line is open.

Hey, Steve Thanks.

Hey, good morning, Great update.

Just curious I know, it's very recent but the.

Curious on how you think the company is positioned on the corporate and a minimum tax thats part of the proposed inflation.

Inflation.

Act from last week.

Yes ill, let Jason take Alan Hey, Good morning, It's David I appreciate the question maybe.

Maybe before turning directly to the minimum tax and I do think the real opportunity here is.

The opportunity for incremental margin associated with transportation electrification as we highlighted at our analyst day ever.

Every.

Electric vehicle that is connected to our grid is about $80 of margin a year or.

So we are excited about the continued support of electrification.

In addition, the extension of the tax credits.

We will help us more efficiently execute our KOL transaction transition up in Indiana. So we think those are definitely tailwind for the company as it relates to the minimum tax it's going to likely be.

A very modest headwind for the company that we will be able to efficiently overcome.

We've been historically cash taxpayer.

And as you cut through all the one time transactions as we've been executing on our strategic reset and.

The timing of the Unrecovered natural gas costs.

<unk> generally paid.

Federal cash taxes added effective rate of about 10%.

So we see the introduction of a minimum tax.

That will likely be reduced from the credits that will be generated from the coal transition in Indiana as a modest headwind, but again I would emphasize.

This is something that we will be able to efficiently over time and I think that.

Candidly that we're in a much better position than many of our peers, who have been paying federal cash taxes over the years.

Great. Thank you and one other question just.

We've had a little bit of a tougher market environment in terms of capital markets.

I know you just said you don't really have a lot of cash available, but in the event you were too.

<unk>.

Other gas LDC sale do you feel like the.

The market is.

Still there to sell it.

Strong price.

Somewhere in the ballpark of last time.

We do Steve we continue to get a significant amount of inbound from from the market and clearly rising interest rates are having what I would say sort of a modest impact.

But what I think is more than offsetting that as I think.

<unk> and <unk>.

A much higher terminal value for gas Ldcs I think.

Confluence of events, whether it be what our storm Yuri or the war in the Ukraine has kind of lagged sort of better comfort for long term diversity and energy supply and so.

We get kind of inbound interest, we're seeing again much more comfort with a much higher terminal value for gas LDC, particularly mid continent.

Fortunately to operate ours, but I just wanted to sort of emphasize.

Dave already mentioned.

We've had a number of.

Incremental improvements to our cash flow forecast since our last update at analyst day, a couple of things that I would quickly point out is we were really conservative as it related to the.

The tax basis for the gas LDC sales.

So with lower taxes, there than we expected.

And his team are continuing to optimize our tax position.

We were able to minimize some of the taxes on the sale of the energy transfer common units, we've got about $100 million more of incremental proceeds from the securitization up in Indiana, and so what I would say all in all we have a significant amount of Pos.

<unk> cash flow developments that will help us efficiently fund our.

Capital update that we plan to provide on our Q3 call.

Our next question comes from Jeremy Tonet with JP Morgan Your line is open.

Hi, good morning, Brian .

Morning.

Just wanted to come back to the DC package, if I could just wondering.

On the tax credit side is there anything in particular, there that's catching your interest that you are closely watching that could present more opportunities for centerpoint.

Okay I think.

For us.

The core benefit is the extension of the tax credits in it of themselves I know some of our peers are talking about transferability or not necessarily in a position to really take advantage of that just given the fact that we have a fairly modest coal transition program. We're talking about effectively one gigawatt of generation up in Indiana. So we'll utilize.

Those credits to kind of optimize our current tax position and so yes.

The key benefit is just the extension of the tax credits will look at the opportunity maybe a lack of production tax credits for solar, but ultimately whats going to govern this is sort of what's the most efficient way for us to complete the coal transition for our customers up in Indiana.

Okay got it so maybe this doesn't impact generation replacement in Indiana, it depending on how things fall out share, but just wondering if theres any more details on that side, specifically that you might be able to provide.

Well I think as we've talked about I think we're well on our way.

Transitioning.

And retirement of two of the three coal units up in Indiana.

What the extension of the tax credits as they put us in a better position with this third and final coal facility that will be addressing at our integrated resource plan that we will file in early 'twenty, three but I just think with the certainty around the.

The extension of the tax credits were just going to be in a much better place to efficiently execute on the retirement of that third and final coal facility.

Got it just a real quick last one as far as the capital update I know you are not going to front run it here for <unk>, but should we be thinking this as largely Houston focused or could there be other elements of site.

We're not going to front run the conversation sorry.

Got it. Thank you very much have a good one.

Okay. Thanks.

Our next question comes from Andrew Weisel with Scotiabank. Your line is open.

Good morning, and thank you good morning, everyone. Good morning.

First just a couple of questions on the summer heat waves and how youre managing that I think you said you only use the commercial load management. Once can you remind us the relative sizes of the voluntary demand response program versus force load shedding and can you specifically comment on the role that crypto currency miners played in terms of curtailing demand.

And if you view that to be a real and reliable lever to pull going forward.

Good morning, Andrew Thanks for the question.

Our official load management program was roughly call it 125 megawatts.

And that was the official.

One official sort of use of the commercial lead management program. There was one other day, where we curtailed load on.

A very minor basis, using a reduction in voltage.

But just again to give that to size, it's roughly about 125 megawatts versus our peak demand of call. It 19, five gigs so kind of a fraction of the overall demand in our system.

As it relates to crypto.

<unk>, what I would say is.

I think parties are still trying to kind of understand how effective a lever that is.

Not seeing directly as much mining in the greater Houston area as we've talked about historically, we represent about two 5% of the geography access, but a quarter of the energy demand and so.

We're sort of short power required requiring a significant import from out of state as a resolve that and land is more expensive here as a result of that we're seeing crypto mining more located in the Texas Panhandle closer to the generation sources. Some of that is really flexible and I think has been a lever.

ERCOT has used some of that is behind the meter.

Is maybe a little less visible to ERCOT. So I think there is.

Opportunity around embracing sort of economic development of crypto mining for the state is one that will require continued focus to make sure that we can balance demand and supply as we see some of these peak events.

It's fair to say that it is on the radar screen of the PUC because the last time, we visited with a number of the PUC commissioners.

Which was just a few weeks ago. It was really top of mind at that point in time, but as Jason has said there everybody is trying to get a handle on how much of it really is behind the meter right now and how much of it is addressable if the state continues to to get tight on power.

Okay, Great and then maybe more broadly after being tested so intensely through July how do you feel about the condition of the grid as it kept up with the strong economic and population growth in recent years.

I'm talking about the wires, specifically not the supply piece, which is beyond your control and then can you just remind us how much of the $40 billion plan relates to Houston reliability of resiliency before the update in a few months.

Yes, Jason you want to take that.

I think.

Yeah.

The grid itself, so the transmission and distribution system held up remarkably well.

We build our system here in the greater <unk> area too.

Withstand.

The seat heat events that we experienced in <unk> and as we said our system.

Stood up well our focus is on making sure theres adequacy of energy supply.

But very proud about how our system held up power curves responded when we add some outages from storm related events that Dave mentioned in his prepared remarks.

It's a $40 billion Capex program that we outlined the 10 year Capex.

Plan for the entire company about $22 billion of that relates to Houston electric.

And what I would say currently about $8 billion of that $22 billion is really sort of resiliency spend.

Think about $11 billion of that is really sort of growth enablement connecting new customers increasing capacity there system. The rest is sort of capital that's.

Can you just to kind of support the overall business and so as we think about our broader capital update and ensuring that.

Our system remains resilient resilient in the face of a more extreme temperatures more extreme weather events, we likely will see it increase.

That resiliency component, but again, we'll provide a comprehensive update on on the Q3 call.

Very good and then one more if I may Jason I think you said, you're starting to you are thinking about pulling forward expenses from future years into 2022 has that already started I think you mentioned tree trimming.

Does the hot summer weather impact your ability both physically and in terms of affordability in the context of inflation.

And are you thinking about the timing of O&M is relative to the Houston Electric rate case, do you intend to file in 15 or 18 months or so.

Yes, let me handle side of the front end of that I'll, let Jason handle the latter part of the question I think to put it in context, if you remember back to our discussions last year, where we did reduce our O&M, 1% year over year, even though we brought forward $27 million cloth of O&M from 'twenty.

Two into 'twenty, one, but basically to attack things like vegetation management and opportunities like that and we really are sort of in a rinse and repeat year here in 'twenty to taking advantage of the margin that the hotter weather has provided us.

To call some O&M forward from 'twenty three to 'twenty two to address the various <unk>.

Exact issues that we've talked about more vegetation management, and really spending that money for the benefit of our customers, while still being able to reduce O&M, 1% to 2% over the 10 year average that we have so again it really is the benefit of that fantastic.

A market that we have in Houston, I know you probably get tired of me harping on it but the beauty of organic growth and the ability to invest ahead of that growth is just a luxury that other utilities don't have that we have here in Houston and so.

Every decision we make is made through the lens of how can we benefit our customers sooner rather than later and Thats thats the decisions that we're making.

Great. Thank you very much.

Our next question comes from David Arcaro with Morgan Stanley . Your line is open.

Hey, good morning, Thanks, so much for taking my question.

Good morning, Jeff.

I'm wondering if you could talk to load growth for a minute just what youre seeing in terms of weather normal.

Load growth and specifically on the industrial growth side of things I'm also curious if you're seeing just any any indications or early indications of any softness in the industrial.

Low levels.

No I think.

The industrial load growth continues to expand I think if you just look at who our customer base is down and basically if you take the court facility in Houston and through refinery ROE through the Petro Chem complex and the amount of vinyl.

Investment decisions that have been made over the last few years expanding capacity and basically the whole petrochemical complex. So we see that as a continued growth engine.

For us and I think the short answer is I don't think were seeing any indication of any slowdown in industrial demand on our system at this point in time.

I would add from a from a residential standpoint, we're continuing to see just north of 2% increase in new customers.

Weather adjusted basis, what I think is really interesting is at least through the first five months of the year set through May we saw usage on a weather adjusted basis outpacing customer growth.

We didn't see that as much in June but June was as we've talked about sort of a record month.

With weather, but I come back to the sort of usage trends that we're monitoring to see how this unfolds there could be.

What I'll call, maybe a new normal in terms of residential usage with.

More of a work from home model.

We see customers spending a couple of days working from home. While also at the same time businesses are wealthier employees back we may see on a longer term basis, a trend with a slightly higher usage on a weather adjusted basis that we're seeing in terms of just new customer connections so base business.

Remained strong as David continue to highlight in terms of new customer connects while there has been great. But we're also seeing kind of a modest uptick in usage.

I would say the other thing that.

We're looking at is another potential tailwind in adjacent hit on it a little bit earlier.

As we said in our last analyst day, Houston is one of the least penetrated EV markets of a major city in the U S and with the inflation reduction Act basically being very supportive of the electrification of the vehicle fleet.

We see a big potential for the city of Houston, and the need for us to continue to enhance the grid just to handle the.

It needs that are going to come out of there.

Jason mentioned, the $80 per margin per car per year from an electric vehicle.

Another way to think about it is the staff that we gave at our last analyst day, where it could be another 1% organic growth driver on top of the 2% organic growth. We have at this point in time, which really would be sort of extraordinary baseline growth.

In your organization, all pointing to why for the benefit of our customers. We would have to continue to upgrade the resiliency and hardening of the grid. So it's a really good place to be right now.

Got it that's really helpful color.

It sounds like continued strong fundamentals on that basis.

And then I was wondering if you could just talk to any transmission growth opportunities that emerge.

Such a tight power market.

In Texas recently this season wondering if any.

Transmission related solution.

Have popped up whether it's congestion related around the city of Houston, and whether that could be an element of the capex upside or capex update that we see.

Yes, I think we're continuing to work on a number of transmission opportunities as I highlighted we're short.

Anywhere between sort of 40% and 60% of kind of the.

Power and <unk> here in the greater Houston area, just kind of given our profile.

So there is <unk>.

Strong focus on increasing the number of import transmission lines sort of available.

To bring power and reducing congestion I think it was really in customers' interest.

The state passed and put into law last year, the opportunity to build a new transmission from.

From an economic.

Mentioned standpoint so.

Economic basis, reducing kind of the congestion charges, we're working with <unk> to develop those projects.

And there may be.

Some incremental transmission updates that we provide as part of our Q3 update.

Which will be a comprehensive capital update at that time. So it continues to be an area, where we think that there is incremental investment opportunity.

I will say, if you sort of quantify that update until we.

We provide a comprehensive.

Capex increase on the Q3 call I think if you look at what came out of the change in Texas law at the end of the last session instead of a move from.

Reliability base to economic based.

Transmission lines were waiting and I know the PUC is focused on getting their regulations that hopefully here by the end of the year in and around how they're going to approach the.

The <unk> NAND and putting in a new transmission lines. So as Jason said, we're excited about it we think that we can make the case for economic transmission lines. We've just got to wait for that process to get it get itself completed.

Okay, great that makes sense. Thanks, so much.

Our next question comes from Julien Dumoulin Smith with Bank of America. Your line is open.

Hey, good morning, Jami, Thanks for the time.

Hey, Julien good morning Julien.

Pleasure.

First off.

So our update just can you can you give us a little bit of a sense of the timeline for those projects now and the Capex that was moved around and pull forward to offset the impact of delays previously.

Kind of enquire, a higher step up in 2425 than previously expected or how should we think about the the latitude created <unk> exactly where sort of the status of solar projects start today as best you see them.

Yes, thanks for the question I.

I think we are seeing.

A lot more comfort.

From the developers that were working with in terms of panel supply our original.

10 year plan assumed.

Our first solar project coming online at the end of 'twenty three.

That may move into 'twenty, four, but I think as I said overall, we're starting to see a lot more comfort with panel supply. So I think that we will largely be on sort of schedule for the build out and ownership of the solar component of the plan.

You pointed out we on a net basis over the first five years that 10 year plan increased our capital expenditures $400 million.

<unk>.

Last quarter that gives us the opportunity to overcome any.

Potential delay if that depth of our solar project shifts from 23 to 24 as we get back on schedule to your point that upfront or million dollars. It becomes incremental earnings power for the company. So.

We'll give a sort of a broader update on that as well as the incremental capital from resiliency now and and other opportunities on the Q3 call, but think about this as just a stronger sort of set a tailwind for the company as we move forward.

Got it alright.

Shift in earnings.

Alright, let me come back to your O&M commentary I just wanted to make sure I understand this because you guys have been.

How did you put forward on this 1% to 2% for a while here, but what's the gross level. If you can speak of it this way.

Inflation that youre seeing out there and how much of an incremental fight or you're having to put up here to offset that impact, yes, I just want him.

You guys nicely packaged Jason just saying.

We reiterate our commitment on the reductions just want to understand how much of an inflationary pressure you are otherwise having to track against here to maintain that commitment that obviously cognizant.

Of the pull forward into 'twenty, two here to Derisk 23 as well.

Yes, Thanks Joanne for the question.

We're not immune.

<unk>.

Okay inflation, but I think we're relatively well positioned.

We're seeing.

The reduction just want to understand how much of an inflationary pressure you are otherwise having to track against here to maintain that commitment that obviously cognizant.

Of the pull forward into 'twenty, two here to Derisk 23 as well.

Yes, Thanks Joanne for the question.

We're not immune.

<unk>.

Okay inflation, but I think we're relatively well positioned.

We're seeing the impact of inflation more on the capital side more on sort of materials.

And we are necessarily on labor.

As it relates to sort of a broader kind of labor costs.

<unk>.

Our crews and our contract contractors that we use relates to sort of a broader kind of labor costs.

Our crews and our contract contractors that we use all sort of follow our union agreements those are multi year agreements that have stated annual increases.

In labor costs.

And so we have set those those have been sort of in place and I think what that does is that provide certainty to our workforce and here's where maybe inflation is lower our workforce is getting.

A benefit in terms of our stated increase and in years, where.

Maybe inflation runs a little higher.

Our customers are getting the benefit of kind of a stable overall cost too.

Labor so for that reason, we're not necessarily seeing that cost impact of inflation on O&M quite as much as one may think.

So at the end of the day, it really is kind of a little bit more pressure on supplies on the capital standpoint.

Interesting that so just just to clarify that you had third quarter update here would you expect to also.

Cascade forward that inflationary impact on your core plan. In addition to some of these other factors you talked about before or are you thinking about just simply shifting out projects in order to keep your sort of critical core plan. In fact, if you will just given those inflationary pressures on capital.

Yes, no. It's a good question and I want to.

Provide context and as we look at kind of a $19 3 billion five year plan of $40 billion Capex plan over 10 years, the incremental inflationary pressure is not that significant it's not going to be one of the growth drivers.

We are focused on executing our product projects right.

It is important to me.

<unk>, our gas system improved reliability.

Our electric system, so it's about executing work.

Tess directly answer your question then.

Yes, it will be a comprehensive capital update inclusive of new project work for resiliency now inclusive of the potential for some some inflation, but I wouldnt necessarily yes. Thank you operator, we are going to driver of any capex increase.

Understood excellent see you guys soon.

Thank you operator were going to thank everyone for joining our second quarter call now that we're past the hour here. So we're going to disconnect, but thank you everyone for joining in on our second quarter call.

This concludes Centerpoint Energy's second quarter earnings Conference call. Thank you for your participation you may now disconnect.

The conference will begin shortly to raise your hand during Q&A you can dial one one.

[music].

Okay.

Yes.

[music].

Okay.

Yes.

[music].

Yeah.

Yes.

Sure.

Okay.

Sure.

[music].

<unk>.

Okay.

Yes.

Sure.

Yes.

Okay.

Yes.

Okay.

[music].

Thanks.

[music].

Okay.

Yes.

[music].

Okay.

Thanks.

[music].

Yes.

Okay.

Thank you.

Yes.

Okay.

Yes.

Okay.

Great.

Thanks.

Okay.

Sure.

Okay.

Sure.

Okay.

Yes.

Thanks.

Okay.

[music].

Yes.

Okay.

Yes.

Okay.

Sure.

Okay.

Yes.

Sure.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

[music].

Yes.

Okay.

Sure.

[music].

Sure.

Yes.

Great.

Okay.

Yes.

Okay.

Yes.

Okay.

Sure.

Okay.

Yes.

Okay.

[music].

Yes.

Sure.

Okay.

Thank you.

<unk>.

[music].

Thanks.

Yes.

<unk>.

Great.

Okay.

Yes.

Okay.

Yes.

Sure.

[music].

Yes.

Okay.

[music].

Yes.

[music].

Yes.

Sure.

Okay.

Yes.

Okay.

[music].

Sure.

Okay.

Yes.

Okay.

[music].

Yes.

Sure.

Yes.

Okay.

Yes.

Okay.

[music].

Okay.

Yes.

Okay.

Uh huh.

Yes.

[music].

Yes.

Okay.

Yeah.

Sure.

Yes.

Okay.

Please.

Yes.

<unk>.

Yes.

Sure.

Yes.

Sure.

Yes.

Okay.

Yes.

[music].

Sure.

Okay.

Sure.

Thanks.

Okay.

Sure.

Yes.

Okay.

Yes.

Okay.

Sure.

Yes.

Thanks.

Okay.

Thanks.

Okay.

Yes.

Okay.

Yes.

Thanks.

Okay.

Sure.

Yes.

Okay.

Sure.

Yes.

Thanks.

Yes.

Okay.

Yes.

Okay.

Thank you.

Yes.

Okay.

Yes.

Okay.

Sure.

Okay.

Yes.

Sure.

Okay.

Yes.

Sure.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Thank you.

Thanks.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

Thanks.

Yes.

Okay.

Great.

Yes.

Good morning, and welcome to Centerpoint Energy's second quarter 2022 earnings conference call with senior management during the Companys prepared remarks, all participants will be in a listen only mode.

A question and answer session. After managements remarks SaaS. Good question Press Star one on your Touchtone keypad.

I will now turn the call over to Jackie Richert, Vice President of Investor Relations and Treasurer, Mr. Eckert.

Good morning, everyone and welcome to Centerpoint earnings Conference call, Dave <unk>, our CEO and Jason Wells, our CFO will discuss the Companys second quarter 2022 results.

Other SEC filings and our earnings materials.

We undertake no obligation to revise or update publicly any forward looking statements.

We will be discussing certain non-GAAP measures on today's call when.

When providing guidance, we will use the non-GAAP EPS measure of adjusted diluted earnings per share on a consolidated basis referred to as non-GAAP EPS.

As a reminder, we will use our website to announce material information. This call is being recorded information on how to access the replay can be found on our website.

Now I'd like to turn the call over to Dave.

Thank you Jackie and good morning, and thank you to everyone joining us for our second quarter 2022 earnings call.

It has now been a little over two years since I was appointed as the CEO of this great company and the exciting progress that Centerpoint continues with lots of opportunities still ahead of us now.

Now that we're a pure play regulated utility our quarterly updates we will continue to be streamlined and focused on our regulated utility operations.

In a minute I'll run through our latest highlights and headlines as we continue to build on our consistent track record of earnings delivery.

But first a quick side note as.

I thought it might be helpful to remind everyone about our role.

As most of you know the Texas ERCOT market is fully deregulated with respect to the generation and the retailing of electric power in Texas.

Centerpoint does not participate in either of the Texas generation or retail markets.

The Texas ERCOT market is regulated for the transmission and distribution of power, which is the market that centerpoint operates and therefore.

Therefore, centerpoint only transmit power from third party generators and delivers it to our territories third party retail energy providers.

Because of this we take no electric generation cost risk and no retail pricing risk in our business in Texas.

Think of as much as a regulated toll road that charges by the vehicle at.

As temperatures rise, we have more traffic in the form of electricity driving on a regulated toll road in.

In addition, our Houston area transmission and distribution system makes up only about two 5% of the geographic footprint of Texas, but transmit and delivers about 25% of the total ERCOT summer peak electric load.

So we have a very dense power grid in our territory.

Because of that Centerpoint imports up to 60% of its electric needs throughout our transmission lines, which connect to generation supply from locations elsewhere in the state.

All of this is why investing in resiliency and reliability is so critical.

I hope this helps those of you that are just becoming familiar with our story.

So now, let's turn to our headlines.

We have now delivered nine straight quarters of operational execution under this current management team.

We're halfway through 2022 and have increased confidence around our business performance.

That increased confidence specifically around Houston Electric's performance.

US to raise our non-GAAP EPS guidance for the year to $1 37 to $1 39.

This means that at the new midpoint, we now expect to grow our earnings 9% this year over the prior year.

This is also our fifth earnings guidance increase under this new management team, which at the same time is laser focused on taking the steps necessary to keep our bills affordable for customers.

Annually for 2023, and 2024 and beyond that we intend to grow at the mid to high end of our 6% to 8% growth range through 2030.

We believe that this will be an industry leading growth rate and.

And Jason will get into more of these details shortly.

Commensurate with our earnings guidance increase we also announced a <unk> <unk> increase to our second quarter dividend This quarterly.

The increase is consistent with our objective of growing dividends in line with earnings.

We are also on track to meet our current capital investment plan for the year having.

Having invested over $2 billion in the first six months of 2022, which is nearly 50% of our 2022 investment plan.

We are also tracking very well against our five year and 10 year spending plans that support the safety resiliency and growth across our system to benefit our customers.

As mentioned in recent earnings calls we are working to develop the details around incremental customer driven capital opportunities to support a Houston area Regional Master energy plan.

This includes our resilient now initiative with the city of Houston.

We plan to provide an update to our capital investment plan and the third quarter call.

We also recently completed the final steps of our veteran integration.

The integrated structure results in a more efficient debt structure, which will help us reach our goal of reducing parent level debt to approximately 20%.

Check another box on our strategic commitment to strengthen our balance sheet and credit metrics for the benefit of our customers and our shareholders.

Jason will discuss it in more detail in his section.

Our Indiana generation transition plan is also tracking encores, including the recent commission approval of the natural gas, peaking facility.

We have also filed for another tranche of solar generation, which Jason will discuss.

As a reminder, our generation transition plan to cleaner fuels aligns with our peer leading 2035 scope, one and two net zero emissions goals.

Im also pleased to say today that despite the well known challenges around solar power. Our recently signed agreements will bring us to over 800 megawatts of owned or contracted solar.

So those are our latest headlines we strive to continue our track record that we've established over the past two plus years of executing on this world class investment thesis.

Tony now to our earnings guidance update.

As stated we raised our non-GAAP EPS guidance. This morning to $1 37 to $1 39. This.

Zentz, a 9% growth rate at the midpoint when compared to the 2021 non-GAAP utility EPS of $1 27.

And despite the current inflationary environment, we are continuing to see favorable tailwind such as the combined 1% to 2% organic growth and warmer weather, which led us to raising our guidance this quarter.

An example of the continued organic growth in the Houston area can be seen and it's greater than 6% year over year jobs growth, which added over 191000, new jobs in the last year alone.

Even as the Houston area temperatures recently peaked at 105 degrees and continue to be persistently hot our grid has held up well with limited disruptions for our customers.

This limited disruptions are largely related to the typical high intensity afternoon rain and wind storms that are common in Houston during our summer heat waves.

Related to these peak heating events, we have also seen a modest uptick this year and customer transformer related outages that have occurred across the industry.

However, our operations have responded well we had virtually all of our customers restored in less than two hours and we continue to expect to meet or exceed the reliability standards set by the Texas Public utility Commission.

The fit of our customers should the conditions call for it.

I am pleased with the performance of our system, but more importantly, with the performance of our employees, who managed all of our grids for Centerpoint.

Now of course, we still have several weeks of summer in front of us with more extreme temperatures forecasted and we will remain vigilant.

Now, let's move to capital investments.

Our five year capital investment plan of $19 3 billion.

Ben increased twice since our September 2021 analyst day.

Our 10 year plan is still currently expected to be $40 billion plus in investments to support the safety resiliency and growth across our system to benefit our customers.

This leads to our industry, leading projected rate base growth of 9% CAGR over the 10 year plan.

This has included workshops with industrial customers the city of Houston and other surrounding cities.

As we invest to meet our customers' interests. We continue to remain focused on the affordability of our capital spend.

We believe we have done a really good job in this area.

For example from 2013 due 2022.

Our average Houston electric charge has only increased by an average of about 1% per year.

Focus on that fact for a second.

That 1% translates to only a $5 increase in the average monthly charge over the last 10 years.

That's the beauty of having strong and continuous organic growth and charges rolling off to bill.

The Houston area has averaged over 2% annual customer growth for the last 30 years.

To further benefit customer charges in 2020 for our final Houston electric securitization charge will roll off the customer's bill.

We will provide an additional 5% reduction to the current average residential charge.

This is on top of the 3% current average residential securitization charge that rolled off just this month.

These changes combined with an organically growing customer base.

O&M discipline across our footprint.

Work to help to reduce the customer impact the capital investment program across our system and we will seek to keep executing on these kinds of opportunities to help keep bills affordable for our customers.

Jason will cover regulatory items in more detail in just a few minutes.

So in summary, before I turn the call over to Jason.

With all of the recent strategic actions behind US we are focused on our pure play regulated utility footprint.

With a projected 2022 rate base that is approximately 62% electric.

Which is within the range of some of our premium utility peers.

We believe we are one of the most tangible growth stories in the industry.

Our capital investments are not contingent on big bets.

We are focused on meeting the needs of our customers across our system due to both organic growth and our continued investment in current system safety reliability and resiliency needs.

We expect that this will likely lead to incremental capital above our $40 billion plus included in our current 10 year plan.

We anticipate to provide a more detailed update of this additional investment opportunity on our third quarter call.

We raised our 2022 non-GAAP EPS guidance to $1 37 to $1 39, a 9% growth over 2021 and from that increased number project to grow at 8% annually in 2023 and 2024.

Sure.

The mid to high end of 6% to 8% annually thereafter through 2030 and industry leading growth rate and.

And we have peer leading 2035 net zero goals on our scope.

One and two emissions.

As I stated in my opening remarks, we are excited about the nine straight quarters of execution.

I want to thank all of the great employees here at Centerpoint that are delivering on those results to you each and every day.

Lastly, we remain focused on achieving our value proposition, which is sustainable resilient and affordable rates for our customers.

Sustainable earnings growth for our shareholders and a sustainable positive impact on the environment for our communities.

With that let me turn the call over to Jason.

Thank you, Dave and thank you to all of you for joining US this morning for our second quarter call.

I'll start by covering the financial results for the quarter as shown on slide six.

On a GAAP EPS basis, we reported 28 for the second quarter of 2022, our GAAP EPS results included a portion of the tax on the gain on sale of our Arkansas, and Oklahoma gas <unk>, which we are required to recognize over the course of the full year.

On a non-GAAP basis, we reported <unk> 31 for the second quarter of 2022 compared to <unk> 28 for the second quarter of 2021.

Usage for this quarter was a favorable variance of <unk> <unk> when compared to the same quarter of 2021, largely driven by the hot weather, we've been experiencing in the greater Houston area.

Growth and rate recovery contributed another <unk> largely driven by continued organic customer growth and T cost rate recovery and our Houston Electric territory.

These favorable drivers were partially offset by higher interest expenses of <unk>, one set of which was related to absorbing costs previously allocated to our midstream segment in 2021.

The last thing I'll mention on the drivers as a tax benefit related to a lower state effective tax rate identified oriented buoy restructuring at the end of this quarter. This.

This translated to a benefit of <unk>, which largely offset that <unk> <unk>, one time benefit for Louisiana NOL tax benefits recognized in 2021.