Q2 2022 Dominion Energy Inc Earnings Call
Welcome to tenant to the Dominion Energy second quarter earnings Conference call. At this time each of your lines is in a listen only mode at the conclusion of today's presentation, we will open.
The floor for questions instructions will be given for the procedure to follow if you'd like to ask a question I would now like to turn the call over to David Mcfarland Director of Investor Relations.
Good morning, and thank you for joining today's call earnings materials, including today's prepared remarks may contain forward looking statements and estimates that are subject to various risks and uncertainties. Please refer to our SEC filings, including our most recent annual reports on Form 10-K, and our quarterly reports on form 10.
Q for a discussion of factors that may cause results to differ from management's estimates and expectations.
This morning, we will discuss some measures of our company's performance that differ from those recognized by GAAP reconciliation of our non-GAAP measures to the most directly comparable GAAP measures.
Actual measures, which we can calculate are contained in the earnings release kit.
I encourage you to visit our Investor Relations website to review webcast slides as well as the earnings release kit.
Joining today's call are Bob Blue Chair, President and Chief Executive Officer, Jim Chapman Executive Vice President Chief Financial Officer, and Diane Leopold Executive Vice President Chief Operating Officer, I will now turn the call over to Bob. Thank.
Thank you David and good morning, everyone. We had another solid quarter and are well positioned to meet our expectations for the year, we're steadily executing on the largest decarbonization investment opportunity in the country as outlined on our fourth quarter call in February the.
The successful execution of this plan is already benefiting our customers communities the environment and our investors.
I'll begin with safety on slide four through June our Osha recordable rate was five two which remains low relative to our historical levels and substantially below industry averages, we take pride in our relentless focus on safety and it is the first of our company's core values.
Now I'll turn to updates around the execution of our growth plan.
First at Dominion Energy, Virginia, our regulated offshore wind project development continues to be on schedule and on budget on Friday, we received approval from the Virginia FCC for our rider and the CP CN for onshore transmission.
The Commission concluded that the project is in the public interest and that our request for cost recovery associated with the project met all requirements as called for in the BCA.
We're continuing to review the specifics of the order, but we are extremely disappointed in the commission's requirement of a performance guarantee while there are scant details the order states the customer shall be held harmless for any shortfall in energy production blow in annual net capacity factor of 42% as measured on a three year Rolling average you may recall.
42% is also our projected 30 year lifetime average net capacity factor, meaning of course that roughly half the time it would be above that level and half below effectively such guarantee would require D. E Vita financially guarantee the weather among other factors beyond its control for the life of the project, while no party opposed <unk>.
All of the projects there were concerns raised regarding affordability and the financial risk to customers given a project of this magnitude.
However, the commissions performance guarantee created unprecedented layer of financial one way risks to D. E V. It is inconsistent with the utility risk profile expected by our investors. There are obviously factors that can affect the output of any generation facility, notwithstanding the reasonable and prudent actions of the operator, including natural disasters acts of war or terrorism.
Some changes in law or policy regional transmission constraints or a host of other uncontrollable circumstances.
We believe the commission already settled this is she went it declined to adopt the performance guarantee for our clean energy one solar projects in 2021 after such a provision was proposed by FCC staff in that case. The commission ordered that involuntary performance guarantees already unprecedented and regulated utility generation are not required for project.
<unk> contemplated within the framework of the VCA and need a bylaw to meet the objectives and requirements there in by applying the commissions on logic. The same outcome should be made here.
And all of this is occurring at a time when fuel cost have increased dramatically, leaving renewable energy is one of the few ways to alleviate inflationary pressures on electricity prices as shown on slide five offshore wind is expected to save Virginia customers billions of dollars in fuel cost. It will also enable economic development opportunities through Hampton roads and the Commonwealth. This <unk>.
<unk> is a key component to a diverse energy generation strategy to meet the Commonwealth's clean energy goals, while simultaneously meeting the need for an affordable and reliable grid. For example that is expected to provide customers over $5 billion in benefits on a net present value as compared to being dependent upon purchasing energy and capacity from the PJM market.
In summary, we continue to believe this is an important and beneficial project for our customers. It also has significant stakeholder support Nevertheless, the performance guarantee as outlined in the Commission's order is untenable, we plan to actively engage with stakeholders on the unintended consequences of that provision and are reviewing all public policy options, including <unk>.
Consideration or an appeal so more to come here, we'll update you along the way.
Turning to other notable clean energy investment updates on slide seven last month, the Virginia SCC approved the settlement agreement for the nuclear subsequent license renewal rider filing.
<unk> life extension represents nearly $4 billion in capital investment through 2035, He's Virginia units performed exceptionally well for years, providing over 30% of our customers' energy needs and providing that energy at a low cost and with zero carbon emissions successful nuclear life extension is a win for our customers and the environment on.
Solar our next clean energy filing will take place in the third quarter. We expect the filing to include about a dozen solar and energy storage projects. The filing will represent at least $1 $5 billion of utility owned and rider eligible investment further derisking our growth capital plan provided earlier this year let.
Let me touch on the solar supply chain as we've discussed on prior calls there continue to be challenges supply is still tight and prices for certain components are still up however, our plans remain largely derisked as it relates to the department of Commerce is anti Circumvention review I would remind everyone of the detailed remarks I shared on last quarter's call we remain.
On the customer impact and advocate for energy policy that provides for an affordable clean energy transition.
Developments since our last call only reinforce our confidence in our near term and long term development expectations.
This past quarter, we received commission approval to suspend our rider Reggie as Virginia works towards its exit from that program. We also received approval that Reggie compliance costs incurred through July 31, and not yet recovered totaling approximately $180 million be alternatively recovered through base rates currently in effect. These approvals.
A meaningful benefit to customer bills.
Finally last month, we reached a settlement agreement with the SEC staff on the fuel factor component in Dev's rate. The settlement includes our voluntary mitigation alternative to spread the recovery of the under recovered fuel balance over a three year period to reduce the effect on customer bills. If approved this settlement together with other recent rate revisions.
<unk> represents an increase to the typical residential customers monthly bill by approximately 7%.
Turning to slide eight we're dedicated to the to the delivery of safe and reliable energy to our customers, which is also affordable based on data from the U S census Bureau, the share of our customers' wallet attributable to Dev's customer Bill has declined over the years a testament to the fact that T. V's rates have remained relatively stable despite an.
The overall increase in household income during that time.
Also as regards to the starting point for relative rates, we're proud to have rates today that remained below the national in various regional averages.
Just on EIA data our rates, even after taking into account our most recent fuel filing our 8% lower than the National average looking ahead, we expect to continue to offer a compelling value proposition to our customers with the addition of zero fuel resources to support sales growth in our service area.
As reflected on slide 10, the share of our typical customer rate attributable to fuel is expected to decline, reducing our customers' exposure to future fuel cost fluctuations by 2035 fuel is expected to be less than 10% of the total customer bill as compared to 25% of the total today.
Our customers and our policymakers have made it abundantly clear they want cleaner energy in a way that supports economic growth within our service area and we're working to deliver those results.
Let me now address data centers, which have provided strong sales growth in our service area to date a trend we certainly expect to continue.
Recently, we've been laser focused on the potential for transmission constraints on a small pocket of eastern Loudoun County, Virginia that could impact the pace of new connections for datacenter customers, which are shown on slide seven.
Let me share a few thoughts on one what has created this issue to what's being done to resolve it and three the impact to our long term financial plan.
First what has created this issue the datacenter industry has grown substantially in northern Virginia in recent years in aggregate. We've connected nearly 70 data centers with over 2600 megawatts of capacity. Since 2019. This is roughly equivalent to over 650000 residential homes datacenter volumes today represent about 20.
Percentage of total sales in Virginia.
Last year this growth began to accelerate in orders of magnitude.
Driven by one the number of data centers requesting to be connected onto our system to the size of each facility and three the acceleration of each facility's ramp schedule to reach full capacity.
For some context, a single data center typically as demand of 30 megawatts or greater however, we're now receiving individual requests for demand of 60 megawatts or greater.
After extensive discussions and exchanges of data with our team throughout 2021 P. J M. Incorporated this step change in growth into its 20 twenty-two load forecast is shown on slide 12 in 2020 seven alone. It shows an increase in data center load of 2600 megawatts, which represents a 12% increase as compared to the forecast.
Just last year.
To put that in perspective that is equal to the entire install capacity of our planned offshore wind project.
This is an important step as the official P. J M. Dom zone load forecast is what governs all transmission planning and demonstration of need both FERC and the Virginia State Corporation Commission.
After reviewing existing load and contract commitments and validating the powerful low models, we've identified the need to accelerate our previous plans for new transmission and substation infrastructure in this area of Eastern Loudoun County.
It forward by several years.
To be clear, we're not at the limits of our facilities today, but we need to act now to alleviate transmission constraints in the future while serving our customers growth in this region.
As delivering safe and reliable energy to our customers is our core mission. One that includes maintaining transparency, we're actively engage with our customers and other stakeholders to communicate about this potential issue.
This resulted in a pause on new datacenter connections, while we work on solutions to alleviate the constraints as quickly as possible.
For the avoidance of any doubt transmission capacity is not constrained outside of this datacenter alley in eastern Loudoun County.
Nor our datacenter customers in other parts of our service territory impacted by this issue.
What are we doing to resolve the issue we are actively working on a variety of potential solutions to serve as much of this increased demand as possible, while we work to accelerate transmission solutions to ensure a safe and reliable grid.
This includes reviewing the current capacity constraint analysis, including performing additional in depth analysis substation by substation engaging further with customers and other stakeholders on projects to pace, new connections and ramp up schedules and reviewing a variety of technical alternatives to address areas of concentrated load.
Based on the work and outreach done to date. It is clear that we will be able to resume new connections in the near term, but how much and how quickly is still being determined for longer term solution will absolutely require additional transmission infrastructure to be built among the needed additional infrastructure. Our two new 500 kv transmission lines into eastern Loudoun County.
We're working expeditiously with PJM, the FCC local officials and other stakeholders to fast track. These along with several other critical projects in order to alleviate the constraints. In fact, we have already submitted plans for the first new 500 kv transmission line with an in service target date of 2026 to <unk>.
J M last week, and we plan to file for approval with the FCC in the coming weeks.
We're committed to pursuing solutions that support our customers and the continued growth of the region.
Finally, whats the impact to our financial plan, it's still early and we'll have to work through this issue, but at a high level. We see this issue as being neutral to our financial plan based on the following for 2022 in the near term, we expect no impact to sales growth as we have sufficient transmission capacity to meet our customers' load growth has recently connected data centers are continuing to ramp.
Up their demand from existing facilities, a little more color for that perspective, datacenters tend to have longer ramp up and load following their connection to the electric grid. Historically that period is about three to four years, although we see that period shortening overtime.
For the latter few years of our five year plan, we expect slightly lower sales growth due to the transmission capacity constraints until new infrastructure can be placed into service.
However, we expect to overcome any potential headwinds by the acceleration of needed Newbuild transition projects from later in the long term plan to earlier, which increases capital and rider form and our five year growth capital program.
We plan to reflect such updates in our next roll forward to a long term capital plan in early 2023 as a reminder, all related transmission capital spend is in rider form at FERC Formula rates. We will continue to provide updates as things develop we remained focused on our core responsibility of safely providing reliable energy to our customers.
And it's worth noting that in Virginia last week, we reached a record summer peak demand and our colleagues kept the electric grid operating flawlessly under demanding load conditions, we expect that exceptional performance to continue.
Turning to other business updates on slide 13.
At Dominion Energy, South Carolina, New electric and gas customer accounts increased nearly 3% in the second quarter as compared to last year driven by continued strong underlying population growth.
South Carolina as population continues to increase at one of the fastest rates in the nation.
In addition, we've reduced the average annual customer outage minutes are Sadie by over 20% during the first half of the year relative to the same period last year I'd note that we've been in the top quartile among all utilities in the southeast eight out of the past 10 years investments made in prior periods are critical to system reliability and the continuation of this.
Trend for the benefit of our customers in that regard, let me provide an update on our integrated resource plan last month, the South Carolina Public Service Commission unanimously approved our 2021 ERP update as a reminder, our preferred plan is indicative of the potential for accelerated de carbonization and assumes our three remaining coal units are retired by the end of the deck.
Which would result in a nearly 60% reduction in D. E F E C O two emissions.
Recently, we filed a retirement study to evaluate the generation and transmission resources needed to replace those units. These findings among other updates will be part of our 2022 IR Pea update expected to be filed next month, we look forward to engaging with all stakeholders on this planning process.
Our gas distribution, our utilities operate in some of the fastest growing areas of the country with annual customer growth rates over 2% and two of our largest markets. We continue to see strong support for timely recovery on prudently incurred investment that provides safe reliable affordable and increasingly sustainable service.
In May we filed our statutory scheduled rate case at Dominion Energy, Utah. We're currently in the discovery phase and responding to data requests we asked for in ROE of 10, 3% and a revenue requirement increase of $70 million, which represents around a 6% increase to our typical customer bill we expect new rates to be effective in January .
Next year.
Last month first gas occurred in our natural gas storage project in Utah, Magna, LNG, which will be used to meet system reliability for customers gas supply in the Salt Lake City area, we remain on schedule to place. This facility in service later this year.
On R&D, we remain one of the largest agriculture based RMG developers in the country. We've recently commenced operations at our fourth R&D project and expect two additional projects to come online. This year for a total of six projects producing negative carbon renewable natural gas.
In addition to these six projects, we have a portfolio of projects in various stages of development continuing progress towards our aspirational goal of investing up to $2 billion by 2035.
Before I hand, it over to Jim I'll recap an important addition to our board of directors last month, our board elected Kristen Lovejoy to serve as a director effective August 1st Chris brings CEO experience and entrepreneurial experience at global business perspective, a passion for diversity as a catalyst for business excellence and deep experience in the intersection of Biz.
<unk> technology, and cyber security Chris's skills and experience in management governance, and technology will enhance our continuing efforts to deliver on our core mission. We look forward to her leadership on behalf of the company and our 7 million customers and with that I'll turn the call over to Jim.
Thanks, Bob.
Now I'm going to discuss our second quarter results and a few related financial topics.
Our second quarter 2022 operating earnings as shown on slide 14, where 77 cents per share.
Which included one penny of hurt from worse than normal weather in our utility service territories.
These results were above the midpoint of our quarterly guidance range extending to 26 consecutive quarters, our track record of delivering whether normal quarterly results that meet or exceed the midpoint of our quarterly guidance ranges.
Positive factors as compared to the second quarter last year includes strong sales growth and increased regulated investment across electric and gas utility programs.
Other factors as compared to the prior year include a millstone planned outage, some tax timing and share dilution.
Second quarter GAAP results reflect a net loss of 58 cents per share.
Which includes the previously announced sale of the retired Cumani nuclear power station in Wisconsin.
The noncash mark to market impact of economic hedging activities.
Unrealized changes in the value of our nuclear decommissioning trust funds and.
And other adjustments.
A summary of all of adjustments between operating and reported results is included in schedule two of our earnings release kit.
Turning now to guidance on slide 15 for the third quarter of 'twenty 'twenty. Two we expect operating earnings to be between 98 cents and $1 13 per share.
Positive factors as compared to last year are expected to be normal course regulated rider growth and sales growth.
Other factors as compared to last year are expected to be interest expense tax timing and share dilution.
We are affirming our existing full year and long term operating earnings and dividend guidance as well no changes here from prior guidance.
Through the first half of this year weather normal operating EPS of $1 93.
Is tracking in line with our expectations.
We will provide our formal fourth quarter earnings guidance as is typical on our next earnings call, but let me provide some commentary on the implied cadence of our earnings over the second half of this year.
As compared to last year, we expect a number of items will lead to a slightly larger fourth quarter, including normal course regulated rider growth the absence of a millstone plant outage.
Absence of last year's Covid deferred O&M and tax timing that combined are expected to help us deliver solid second half results in line with our annual guidance.
Next let me touch on electric sales trend in Virginia weather normalized sales increased two 5% over the 12 months through June as compared to the prior year period, and 1.1% in South Carolina.
Components of this growth include a slight decline for residential as you would expect continued backed work trend and higher growth for the commercial segment.
For 2022 we expect the growth rate to moderate some as we move into the second half of the year and we expect overall sales to be just slightly above our long term run rate of one to one 5% per year.
I know this topic of sales expectations for our sector is of interest to many investors as we head into what is perhaps a less certain economic period. So we are again, providing demand related earnings sensitivities for our two electric utilities in today's materials.
As we show on slide 16.
Let me share some commentary first for our largest segment Dominion energy, Virginia, you'll recall that demand in PJM Dom zone last few years was despite the pandemic relatively resilient due.
Due to robust residential and data center demand as Bob touched on.
Around 50% of Dev's operating revenues are effectively decoupled from changes in load due to riders as fuel pass through our.
A dynamic that is reflected in E. P. S rules of thumb provided on this page.
Let me now turn to South Carolina, which is more exposed to industrial load, but on the other hand continues to benefit from strong customer growth as Bob mentioned.
In addition, like Virginia, there are structural mitigates to the load impact on revenue.
Including riders and fuel pass through mechanisms as well as the gas operation that adjust annually for changes in usage.
In total about half of D. E. F. C's operating revenues are also effectively decoupled from changes in load.
Turning now to our other business segments, our gas distribution.
About 88% of segment operating margin has stabilized through decoupling or fixed charges, including riders and gas path pass through mechanisms.
And our contracted asset segment operates primarily under long term PPA or hedge arrangements.
In West Virginia.
We recently reached a comprehensive settlement agreement with the West Virginia Public Service Commission staff and other parties to approve the sale of hope gas.
If approved by the West Virginia Commission the transaction May close as soon as the end of this month.
So we've covered a lot of ground today, we continue to aggressively execute on our de carbonization investment programs to meet our customers' needs, while creating jobs and spring new business growth.
We will be actively engaging with stakeholders on offshore wind and reviewing all public policy options.
Including reconsideration or appeal of the FCC order.
We will be filing our next clean energy solar and storage rider in Virginia later in the quarter.
We're working expeditiously with all stakeholders to alleviate the constraints in eastern Loudoun County for our data center customers.
We're quite pleased that the South Carolina Public Service Commission unanimously approved our 2021 ERP.
And we're on track to meet our annual earnings guidance.
With that we're ready to take your questions.
Yeah.
At this time, we will open the floor for questions. If you would like to ask a question. Please press the star key followed by the one key on your Touchtone phone.
Any time, you would like to remove yourself from the question queue. Please press star two again to ask a question at this time. Please press star one now.
And we'll take our first question from Shar <unk> from Guggenheim Partners.
Hey, good morning, guys.
Sure.
Bob just maybe starting with offshore wind and the performance guarantee I know its obviously its tough position and be inherits a lot of risks are you going to be taken on and that can be kind of long term in nature. I know you guys talked about paths to resolve.
But if you don't resolve right. So one we know it's a lot of growth for you, but could you decide to walk away from this project is ordered can this be a no go into I know you laid out some thoughts in the script on next steps and is there a bid ask here that would make some sort of a standard palatable could you negotiate this or any performance.
Guarantees are a no go.
Yeah sure first of all I'm I'm shocked that you didn't ask about millstone that breakthrough and that was my follow up question, Bob Okay Fair enough Alright fair enough well good.
Your your remaining consistent but.
Let me address the questions that you asked.
It's premature to be talking about that Shar. We just got this order Friday afternoon.
As we said in our prepared remarks, there is very little detail.
In that order.
And as it is drafted as we look at it.
It is inconsistent with the utility risk profile expected by our investors.
But it's a great project and it has a lot of stakeholder support.
There are options for us to seek reconsideration.
And options for us to work with stakeholders. So that we can get that clarity that we need for this to meet our expectations of what utility investors are looking for.
So we're confident that we're going to be able to get that clarity as we work with stakeholders, but we're just 72 hours. After the order. So there's not a lot more beyond that that I can tell you. This morning.
Bob.
Any sense on just the timing and when we can get some more clarity a resolution on this.
Yeah, that'll depend obviously on stakeholders and on the commission.
So.
We will work through that I would hope and over.
Over the coming weeks.
The kind of timeline that we would be looking for for something like this okay got it got it and then just maybe just switching gears quickly to Washington, Obviously, the Iowa passed the Senate seems to be a lot of puts and takes for utilities and how are you I guess thinking about the potential impacts of the 15% empty on <unk>.
Cash flows and rate base growth weighted against maybe the enlargement and extension of some of those tax credits and just remind us on the E. M. T recovery methods in the states and should we assume some lag.
Sure. Good morning, It's Jim Let me, let me recap our view on the.
The act inflation reduction that it's still a moving target of course really good that it passed the Senate, we'll see what other amendments.
Pop up of any is it goes to the house this week, but here's here's where we are in broad strokes, so really high level.
Pretty good.
Really positive from a de carbonization incentive perspective.
Really positive for our utility.
Customer cost perspective, so good.
When it comes to all of the impacts to Dominion's financial plan.
You touched on a little bit of it the Devil's in the details it's going to take a long time before all the treasury regs are worked out and that's not even launched yet but right now based on what we know we don't really see a major impact to our plan.
Now customer beneficial incentives good and that could have some knock on effects that are positive, but we don't see it as being an impact and let me, let me talk about a little bit the parts.
ITC and PTC.
The extension increases again, all all good.
Good for us good and are in the sense that it's direct.
Customer Bill benefit we assume they were going to continue to do what we've already been doing.
Recognizing those benefits and the customer bill overtime.
And it's different for different asset so nuclear PTC.
A big topic of discussion of course.
We view that as positive as well for us for the nuclear industry for customers.
I think there it's going to take some real time before the regulations are worked out.
To determine how exactly nuclear units within a vertically regulated utility like most of ours, how they're treated when it comes to earned revenue per megawatt hour because there is a phase out right $43 a megawatt hour above that you're.
You're not eligible.
But we'll see when we have low cost units should be eligible how that's calculated for vertically regulated utility no detail yet.
If our if we qualify under that cap its a benefit to our customers in Virginia, and South Carolina No question Millstone, obviously not regulated.
Hedged PPA, but as a reminder, under that existing 10 year PPA all tax attributes new tax attributes like this.
100 for 100% of the plant output they flow through to the PPA off takers and their customers. So again customer friendly element, even for millstone and long term good for the industry. Good for the future of most of them whatever happens after that 10 year PPA for offshore wind again sticking with PTC on the surface.
We expect kind of the same thing when we talked about in the BBB era.
That if theres, a full rate PTC, which the Senate version includes a full rate PTC that could lower the L. Coa for our offshore wind project by up to $7. So pretty good pretty good there too so all of that the Ptc's itc's the extension and increase we think it is good in it.
Customer friendly way and that can have as I mentioned knock knock on effects. The a M. T of course, the other part.
And my sense for the a M. T is it's going to impact companies, even in even in our industry in really different ways.
Depending on whether you are a cash taxpayer right now or not.
And whether you generate credits or not.
C P D C.
So in our case.
We're already a federal cash taxpayer and have been for some years.
Our rate, though a federal cash tax rate is shielded by our inventory of tax credits, because we generate a lot of tax with it so.
So as you know the way that works is 21%.
Federal rate is shielded by tax credits, but the the maximum you can shield is 75% of your of your cash tax liability.
What that means for us our current federal cash tax rate is five and a quarter.
So 25% of the federal.
21% 25, 25% down to 21%.
So the IRA this bill totally different approach.
15% minimum on adjusted GAAP.
Pre tax income and there's adjustments.
Again Devils in the details, but you take out pension plans.
You take out in D Ts mhm.
You add in the I mean, this is a change from over the weekend, you add and accelerated tax depreciation on the tax books into the <unk>.
This calculation of GAAP adjusted GAAP.
But the tax credit that shield.
It remains so.
So you can still shield up to 75% of your cash tax liability with credits.
So in this case it would be not to 525 of your tax pre taxable income, but it would be $3 75 of adjusted GAAP, So 25% of the 15%.
So a lot of math, there, but you can probably guess from that Theyre, taking a view on a go forward basis like what is this going to look like what's the difference between $5 two 5% of taxable income.
Compared to $3 two five of adjusted GAAP.
How does it change over time, it's complicated, but our view based on what we know is.
Probably kind of in the same general area since we're already a cash taxpayer.
So that drives us to the conclusion that look devils in the details we're not seeing a material impact.
So detailed com, we'll see where it lands. This week in the house, we would guess that the dust will settle in the next couple of weeks.
And we're going to be in a position to talk about the detailed impacts on a more granular basis by the time, we're sitting down with you and others at EI.
Perfect. Thank you guys for the color Bob I'll jump back in the queue to ask my standard Millstone question. Thanks, guys.
Alright, Thanks Shar.
Our next question comes from Jeremy Tonet from J P. Morgan.
Hi, good morning.
Good morning, Jeremy.
Maybe I'll pick up with Millstone, a little bit here and there were some reports at Massachusetts might have interest in and nuclear power and just wondering any thoughts that you could share there.
And I guess you know does.
Things change with the PTC for Millstone, just any thoughts on this as it relates to regular regulated and nonregulated Nucor in Massachusetts potential interest in a millstone.
Well as we've been saying for a while Jeremy we think millstone is critical to the new England region, achieving its zero carbon goals.
And our view on that has only grown our confidence on that has only grown in recent months.
Connecticut General Assembly passed a law, allowing for additional nuclear as long as it's at the site.
Of an existing nuclear plant, obviously that would be.
Millstone.
So we think there is an increasing recognition of the value of millstone.
And we're happy to work with stakeholders throughout the region.
On ensuring that millstone is there to help them meet their.
Clean energy goals, but beyond that sort of specific to it.
The recent developments in Massachusetts, not a lot to offer we just think it's a great long term asset incredibly valuable to the region.
Got it.
That's helpful. Thank you and just as it relates to the the issues around the data centers with regards to congestion there could you provide any more color on what the accelerated T&D investments.
What might look there.
And could you provide us perspective on.
Potential dollar amounts here and what size of the planned. This represents just trying to see if there's any more detail possible that you could provide on the side.
Hey, Jeremy it's Jim full detailed a common a full roll forward of our five year plan and you'll see changes are an acceleration of transmission spend one data point that's out there last week, there was a filing with PJM for one.
Required transmission investment one of several to come to make sure. We're meeting demand there and that was $5 million to $600 million, but that's not the total more will be.
Defined in our planning and we'll discuss that on our on our fourth quarter call. When we do our full roll forward of our capital plan, including all the transmission spend in Virginia.
Yeah.
Got it that's helpful I'll leave it there thanks.
Your next question comes from Ross <unk> from UBS.
Okay.
Hey, Ross good morning, Ken.
Can you hear us.
Yeah, we're not we're not hearing you.
Well, it's going once.
Alright, we'll try again.
Operator shall we go to the next in the queue, Hey, guys can you hear me.
There we go Hey, Ross Good morning, Hey, how are you.
Good.
This is apparently too hot outside from my headphones to work. So there we go.
Just a couple of questions. So Jim you talked about how there is up to $7 a megawatt hour savings in.
In terms of the Ptc's shut the house passed this as written.
Against that 80 to $90, a megawatt hour cost for offshore wind or else.
That would also lower.
Cost cap at 125, because it's a 1.4 times multiple I just want to make sure.
I'm clear on that.
Yeah, Ross actually that.
It does not affect the cost cap the multiple and the statute is off of a C. T. A what a L. T O E M. A C T from the EIA report of 2019, I think was so.
That change while incredibly valuable to our customers.
It does not change the cost cap figure.
Gotcha Gotcha. So it gives you more headroom to that cap alright, and then in the in the original settlement for offshore wins.
It certainly wasn't a performance guarantee but there was this concept of.
Lower capacity factor of about 37% and then you would report to the commission if it works well more than that on a three year rolling average.
And then the commission would determine whether that was dosed at deficiency related to.
Basically unreasonable actions by you versus sort of weather and everything else. So it seems like there's space between that and what was very unclearly in.
In the order.
As a as a reconsideration here to make sure we're not necessarily punishing you for the kind of weather and things you can't control is that is that fair that kind of where you see it in where we could be headed here.
Yeah, I mean, you've accurately you accurately described the performance provisions in the stipulation.
And yes, so there is space in between and as we mentioned, we intend to work with stakeholders obviously.
Just got the order.
Less than 72 hours ago, but.
That space in between I think is precisely where we would be looking to try to find common ground.
Alright, that's perfect. Thanks, Bob.
And our next question comes from Julien Dumoulin Smith from Bank of America.
Hey, good morning team. Thanks for the time and the opportunity followed by second quarter, Yeah, Hey, Thank you guys.
If I can just following up a little bit from Jeremy here.
<unk>.
That capex related to PJM, if I can can you elaborate a little bit on it as well as maybe how this might tie into some of the Q reform that we're seeing with PJM, obviously that impacts more from the renewable side, but yes, again, obviously load interconnect matters as well here as it goes can you talk a little bit about that from a PJM perspective, obviously you submitted these things.
PJM and then if I can throw in that the second question is the same it's all related you identified a series of numbers here related to load sensitivity to data centers and if I get it right you're talking about a 12% number and you know broadly speaking it kind of backs into about a 2% and change total load growth from the <unk>.
Ada Center side going into next year, and if you look at the sensitivities as perhaps two to three on earnings I just want to make sure you tried to call. It out very specifically I want to make sure. We're looking at that math correctly here.
On the area as well.
Good morning, Julien This is Diane Leopold I'll at least start and then maybe hand it off to Tim on some of the latter parts of your question.
So related to timing on the data center. So these were all transmission projects that we had planned long term anyway. We've seen some of these constraints we are already designing it so accelerating it is really moving the capital in our plan.
Up roughly two years so to have the first set of projects in by.
By 2026, the latter part of 2025, so that transmission spend that was maybe more focused on 'twenty.
25, six and seven would move into capital that would be 23, four and five and likewise. The next set of projects and that's what's going to be filed in the next in the coming weeks. The next tranche of relieving the transmission constraint all sudden moving up in time.
But instead of being online by 2026 as 2028. So you can just kind of move that on out.
Yes.
Hey, Julien on your on your sales question, Let me, let me give you a couple of comments there.
So.
First.
You need to differentiate between demand and sales some of Bob's comment when we set out as on demand.
Increases in demand for data centers and in this potentially affected area. So we don't get paid on demand of course.
Typically not fully utilize it takes a long time for data centers ramp up.
Et cetera.
But we get paid on sales.
And for this customer class like other high usage customers. There is a lower margin so what drops to the bottom line isn't necessarily the same as a.
Our sales number.
It's still helpful, meaning the increase sales helps offset increases to the typical customer bill across the system.
But it is lower margin based on its high usage.
So impacts on impacts to the bottom line from these issues just described could be a little bit years out. After this ramp period of plateauing slower growth slightly in data center sales offset by what Diane just mentioned.
Increases in the needed transmission spend which is of course, not lower margin its FERC formulaic FERC formula rate and rider.
So it's hard to take a in summary a.
Straight straight line from changes in demand down to the bottom line for EPS sensitivities.
Yes, yes.
That's why I asked excellent and then just to clarify the last comment you did a bunch of math Super quick with respect to the ability of some of the changes over the weekend here.
The tax adjustments that you can do for the just the gap just clarify you can deduct items against the empty with respect to bonus depreciation here.
As you described I think I think you said that I just want to make it crystal clear.
Okay, not not not bonus depreciation, but the tax depreciation makers the whatever's in your tax books for including for utility spend translates over the adjustment in this GAAP adjusted GAAP pretax income calculation for a M D purposes.
Got it excellent. Thank you I appreciate that.
Our next question comes from Dervish Chopra from Evercore ISI.
Hey, good morning team, Thanks for giving me the time this morning.
Bob.
Jim just a finer point on Julians question, just to be clear on the utilities arent eligible for bonus depreciation correct I mean rewrite it assets. Okay. So from the last round of tax reform is correct right. So this is just when we talk about accelerated depreciation. This is just normal makers.
Setup exactly right Joe Gosh, Okay.
Okay. Thanks.
Just quickly following up on the sort of the performance guarantee provision.
I understand there's a lot of moving pieces, how does this impact the sort of the schedule of the project and you know your planned activities in the second half of year and next year.
We wouldn't expect it to have any effect on the schedule.
We're.
Again.
We'll work quickly as quickly as we can with our stakeholders.
But this as you know is a guarantee that affects the.
Applies to the operation not the construction of the facility. So it won't have an effect on the schedule.
Got it thanks guys.
Thanks, you guys.
Yeah.
Thank you. This does conclude this morning's conference call you may disconnect your lines and enjoy your day.
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