Q2 2022 Exelon Corp Earnings Call
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Okay.
Hello, and welcome to <unk> second quarter earnings call.
My name is dilemma and I'll be your event specialist today.
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It is now my pleasure to turn today's program over to Jim Jones, Senior Vice President of corporate finance the floor is yours.
Thank you.
Good morning, everyone and thank you for joining our second quarter 2022 earnings conference call, leading the call today are Chris Crane, <unk>, President and Chief Executive Officer, and Joe Nigro, Exxon's, Chief Financial Officer, they're joined by other members of our senior management team.
Well to answer your questions following our prepared remarks.
Issued our earnings release this morning, along with the presentation.
All of which can be found in the Investor Relations section of our coupons Wednesday.
The earnings release, and other matters, which we discuss during today's call contain forward looking statements and estimates that are subject to various risks and uncertainties.
Actual results could differ from our forward looking statements based on factors and assumptions.
In today's material and comments made during this call.
Please refer to today's 8-K and Exelon other SEC filings for discussions of risk factors and other factors that may cause results to differ from management's projections forecasts and expectations.
Today's presentation also includes references to adjusted operating earnings and other non-GAAP measures.
Please refer to the information contained in the appendix of our presentation and our earnings release for reconciliations between the non-GAAP measures and the nearest equivalent GAAP measures.
We scheduled 45 minutes for today's call I will now turn the call over to Chris Crane <unk> CEO .
Thanks, Jamie and good morning, everyone and thanks for joining us before I get into that.
The quarter I wanted to spend a minute talking about your insulation reduction.
That's being considered.
Congress.
Appreciate it those who have been working.
And United States.
And cleaner energy future and combating climate change.
Ill extends tax benefits for familiar renewable technologies like solar and wind.
<unk>, new ones for clean energy sources like nuclear and hydrogen.
Also focuses on energy efficiency electrification and <unk>.
Importantly equity.
Thanks Bill.
In April this transformation for customers, while building a domestic clean energy sector.
Remember the bill.
Also proposes a corporate minimum tax.
That could undermine the benefits of those incentives and slowly investment needed to make this transformation.
The lower cost of clean energy technology, and efficiency investments will be offset by higher taxes on companies.
<unk> with this language currently proposed.
In other utilities could face an increase in cash tax.
Bill has yet to pass specifics could change as currently drafted we could see the impact of incremental cash tax.
Proximately 300 million per year, starting in 2023.
The higher tax would ultimately limit our ability to invest in infrastructure needed to accommodate the clean energy our customers want in a car.
Jurisdictions are pursuing.
But the situation remains very fluid.
We continue to monitor closely.
Bruce toward both the Senate and beyond in the meantime, we are working to advocate for language that better aligns the incentives to achieve.
We all want cleaner resilient reliable and affordable.
Great.
We're not getting the growth.
Great.
Turning now to the quarter our first.
<unk> separated.
April one fab.
February one we continued to execute on our plan.
On the operational and financial excellence to serve our customers and our communities, while supporting their environmental and social equity needs.
47 cents.
Per share on a GAAP basis, and 44 cents per share on a non-GAAP basis, we continue to expect our full range full year results.
In line with 2018 to $2 32 range, we provided at our analyst day.
We've updated on previously announced plans to financing a small portion of our $29 billion capital investment program with equity and Joe will provide additional details on our financing plan along with his commentary on the quarterly results. We are on track to live.
A number of rate cases, we have this year.
Delmarva power, Maryland filed its first multi year plan covering investments from 23 to 25 period.
Finally highlights improvement in del Mar is reliability and customer service in Maryland.
One marked the second straight year of record setting outage frequency performance, we look forward to building on the successes of the month.
Youre plans, we have in place and leveraged the lessons learned to deliver value for Delmarva power.
And customers into Illinois comment continues to work on a new rate setting process.
<unk> proposed performance metrics, we expect a final order by the end of the third quarter.
In addition on July 1st comment filed its first beneficial electrification plan.
With the Illinois Commerce Commission as required by the CTG com.
Comment proposes spending approximately $300 million from 'twenty three 'twenty to 'twenty five the plan is designated to reduce barriers to beneficial electrification, including various to electric vehicles like the adoption of costs and charging availability.
And the plan approaches emphasizes equity and environmental Justice.
Our plan will ensure comments investment strategy delivers on the Cds journeys groundbreaking environmental and social equity goals as a reminder, comments first distribution rate case.
Okay.
Our structure.
Will.
We filed in early 2023 four rate.
Active in 2024.
And of course, we continue to support our communities and provide transparency to stakeholders on environmental social and governance practices. We recently published our annual corporate sustainability report, our first as a T&D only utility the details all the ways in which Exelon is.
Responsible stewards of the energy transition and delivers sustainable value for our jurisdictions for instance.
Theres mentioned programs going on for instance, it discusses our stem activities.
Hey, excuse me, which are in our fifth year. This summer hosting approximately a 180 young women and urban centers.
Joining me each of the three academies to talk with the participants in it.
It may.
The Exelon Foundation.
Selected nine young women.
Graduated from our stem program and academies to receive a scholarship for their college education totally.
<unk>.
It's quite impactful for those young women.
And it was quite impactful to be able to speak to them directly and tell them what they have just achieved.
I kind of broke down and we've identified.
It was our third.
Therefore, it also highlights 20 billion climate change investment initiatives.
And this supports startups with potential to have wide scale impact.
Climate change risks in mid July Exelon, Exelon Foundation selected nine startups to receive funding in the third round.
Program.
It's a 10 year program these companies'.
Business models address climate related.
Products and services like EV charging repair carbon accounting platforms.
Other focus areas, we're very proud of the work that all our employees do every day is important to customers and the communities and you can find all the details in our sustainability report switching to slide five.
Let me talk about our operational performance for the quarter, we continued to provide safe reliable service for our customers.
Reliability perspective, we've seen improvement from the first quarter. We now are in top quartile for outage duration across all jurisdictions and combat and ph is scored in the top decile comment delivered its best Katy performance on record despite severe storms in June .
We met the restoration targets early starting 80% of 125000 impacted customers in less than a day.
Comments distribution automation investments avoided almost 17000 additional customer interruptions, our outage frequency performance remains of top high levels with commented achieving top decile on a safety front ph I improved to top quartile, but we did.
Have a slip.
We go into the second quartile, we're doing additional training to address the primary drivers.
The underperformance at Bonefish.
Pico and BG as always safety remains our number one priority.
<unk> commented in Pico continued to earn top quartile customer satisfaction performance through the second quarter and lastly, we will maintain we maintained the top decile performance in OCA response across our three gas utilities.
<unk> continues its streak of.
Perfect execution responding to all gas odors reported less than one hour.
For the first half of 2022.
It is very important for us to maintain our confidence in the system our gas distribution system that we can fix.
Fix and repair anything that comes up so.
Really good to see.
Now, let me turn it over to Joe and he can provide the financial update.
Thank you, Chris and good morning, everyone. Today, I will cover our second quarter results, our quarterly financial updates and highlight several ways in which our utilities and power and the economic health and wellbeing and diverse communities in which we serve.
Beginning on slide six where we show our quarter over quarter adjusted operating earnings walk.
Exelon continuing operations or <unk> 44 cents a share in Q2 this year versus 36 cents a share in Q2 of last year.
As a reminder, the prior year's second quarter reflects a 9%.
Impact for discontinued operations adjustment for certain corporate overhead costs that were previously allocated to our generation segment that are required by accounting rules to be presented as part of Exelon to continuing operations.
As a reminder, these costs were paid for by generation and are not indicative of our corporate overheads post separation.
Additional information, including the full year impact of the discontinued operations adjusted.
By 2021 results can be cap can be found in the recast 10-K, which we filed on June 30.
Excluding the non churn impact quarter over quarter of the discontinued operations accounting adjustments for our service company allocations excellent second quarter results were a penny lower than second quarter of 2021.
We did benefit from higher distribution rates associated with completed rate cases.
<unk> higher treasury rates impacting Commonwealth Edison distribution returns.
This was offset by higher depreciation and amortization.
That timing of other costs.
And the impact of rising rates on the debt at the holding company.
As Chris mentioned, we continue to reaffirm our 2022 EPS guidance range of $2 18 to $2 32 per share our year to date operating earnings results of $1 eight per share are exactly in line with the historical percentage of full year earnings in which we outlined.
Notwithstanding.
Growth in the balance of the year will occur primarily in Q4 as we continue to realize the benefits of higher distribution and transmission revenues, including the net impact of higher Treasury some time yet.
It will also include the absence of unfavorable weather and storms through previous year and the timing of taxes.
It impacted us in the first two quarters.
Any updates to guidance will be provided on our next call for Q3.
Moving onto slide seven looking at our utility returns on a consolidated basis.
We expect to be in our consolidated 90, 10% target by year end.
As of the second quarter, our trailing 12 12 month ROE of eight 8% was slightly below our targeted range.
As we discussed on our last call the timing of equity infusion infusion supporting capital investments across all utilities outpaced the higher earnings driven primarily by distribution and transmission rates.
We remain focused on delivering strong total returns at the utilities, which sustain the investment we make on behalf of consumers.
Turning to slide eight.
It was another quiet quarter on the regulatory front with one notable rate case development.
On May 19th Delmarva power filed its first multi year plan with the Maryland PSC.
Of its kind in the state preceded only by sister utilities have any impact.
The filing outlines the company's plans to invest hundreds of millions of dollars into local energy grid and other customer experience improvements during the three year period from 2023 to 2025.
As we've noted before multiyear plan approach allows us to align with all stakeholders.
Where the company is focusing its investments among the hundreds of projects planned specifically.
Investments in the electric distribution system.
Continuing to prove improve reliability and customer service advanced technologies to modernize the distribution system and provide tools to assist customers in managing their usage.
We expect an order by the end of the year.
We also have three rate cases that are still in progress Delmarva, Delaware has a gas case with rates going into effect on August 14, subject to refund and an expected decision in the first quarter of 'twenty three.
Additionally, we expect the decision on the Pico gas case in the fourth quarter. This year and I have comments final formula rate filing in December each case is proceeding in line with our expectations.
Overall, we are pleased with the progress in advancing progressive regulatory designs that benefit our customers ease regulatory burden and improved visibility for our utilities. As a reminder, we expect nearly 100% of our rate base growth will be covered by alternative mechanisms by the end of our planning.
And more details on the rate cases can be found on slide 18 to 21 of the appendix of our earnings presentation.
On slide nine we want to spend a moment discussing the work that our utilities due to partner with local state and federal agencies as well as community groups to ensure we are maximizing opportunities for our customers.
Benefits from the various bill assistant assistance programs available to them.
With the challenges presented in the last couple of years by the pandemic and recent inflationary pressures on customers. There have been increases in the funding available to ship product support our most vulnerable customers.
Instincts for Lockheed program has grown since 2017 by $400 million and $3 8 million total however.
However, the percentage of households, taking advantage of this assistance has remained flat nationwide.
<unk> additional opportunity to support our customers and it's gone untapped.
Our utilities with their capabilities around billing and customer service have stepped up to this challenge looking for innovative ways to support the governmental agencies and ensure more eligible customers are taking advantage of the programs available and.
And I'd like to touch on just a couple of examples.
Comment introduced to community energy assistance Ambassador program, whereby the offered employment to over 100 local residents to serve as trusted partners to educate customers about financial assistance as well as energy efficiency.
With support from these ambassadors comment was able to expand its reach into hard to engage communities.
<unk> more than 11000 energy efficiency kit and connect customers to a record $146 million and financial assistance, representing a 95% increase in the number of grants customers received relative to 2020.
<unk> utilities Ace Delmarva and Pepco also took advantage of local outreach strategies, leveraging a data driven approach to ensure they were targeting the highest opportunity areas.
More they also partner partnered closely with the relevant governmental agencies to identify and reduce which is called pain points around applications.
Eligibility verification and disbursement these.
These efforts resulted in customers securing $125 million of.
Energy diligent expense, an increase of 70% from 2012.
I can say similar approaches were also inflated our Pico DTE operating companies and excellence efforts across all utilities resulted in over $450 million of funding, making a wet making its way to more than 650000 customers, which lowers our rarities thus bills for all consumers.
This level of funding representing 22% increase in the assistance, we are able to connect to our customers relative to the prior year. In fact these efforts were recognized by Evi. We selected Exelon is an Edison award finalist in 2022, specifically for the innovative.
Ways, we helped our customers.
Assistance.
Connecting customers to financial support is just one of the ways in which Epsilon is sharing its customers are making a transition to a cleaner and more resilient grid and affordable and equitable manner.
If I move on to slide 10 during the second quarter, we continued to invest capital for the benefit of our customers and are on track to meet our $6 $9 million commitment for 'twenty two easy.
These investments will improve reliability and resiliency enhanced service for our customers and prepare the great for a clean energy future today I would like to talk about the impressive effort led by the gene to replace the half century old underground underwater circuits nearing the end of its useful life and the <unk>.
Heart of Baltimore Harbor.
CD key crossing reliability in Wolfcamp installed a double circuit 230 kv overhead electric transmission line.
The two mile wide tax code River.
Proactive outreach and early engagement stakeholders significantly reduced permitting durations in the lab <unk> need to incorporate that feedback into the projects design that benefit benefiting both HDD and its customers.
To reduce durations allowed overhead construction to begin in may of 2020, and complete 15 months hero.
Michigan Monopoles were installed including two full lot Polish towers on the continent, which contemplated adequate clearance for cargo and cruise ships entering in the port of Baltimore today and into the future.
Reliability improvement improvements stemming from the key crossing and his team were made possible by the estimated 300 to 350 talented women and men who contributed to this project and all the constituents in Gainesville.
Each phase of it.
PGE opted to replace the segment with overhead transmission lines.
Does the environmental impact was minimal and if it's cost effective and a better supported the port of Baltimore shipping operations, while having the greatest potential for local and domestic job creation.
This project perfectly embodies our mission of providing clean reliable affordable and innovative solutions to all our key stakeholders.
Lastly, I want to provide an update on our balance sheet.
We committed to keeping strong to support the investments made for the benefit of our customers and communities.
As we announced in February in 2021.
We have firmed as recently as last quarter's call, we plan to issue $1 billion of equity at the holding company.
Five as part of our balanced fund with your strategy.
We are establishing a $1 billion ATM programs and we plan to issue $500 million of equity in 2020, Q leveraging either the ATM program or one time offering or some combination of both of that.
Yes.
We will complete the remaining $500 million opened in 2023.
2025, and we commit to continuing to update you as we make progress on these points.
Beyond our equity plans as we noted in the first quarter, we have completed our long term debt financings at corporate for the year. There is no change to our expectation that our consolidated corporate metrics will average, 13% to 14% at both S&P and Moody's over into 2022 to 2004 period.
And with a number of financings completed this quarter at our utilities, we continue to benefit from robust robust demand that get backed by extremely strong credit ratings that are operating.
As you've heard from Chris we are monitoring the inflation reduction act and its potential impact on cash cash and she's made a pass we will.
To update you on that.
Thank you and I'll turn back the call to Chris for his closing remarks, thanks, Joe turning to slide 12, I'll close by reiterating that excellence value propositions is positioned in the sector.
Exelon is a premier to you the only company in the nation.
Sure.
Consistent.
System of delivery and reliability results. There are several of the pediatric use of distinguishes us.
We have an unmatched size and scale leveraging a common platform across all of our utilities we consistently.
And reliably offer best in class operation performance. This drives a superior customer experience and facilitates a positive positive regulatory engagement in our jurisdictions.
The purpose of powering the clean brighter future for our customers and communities.
Sure.
How important ESG principles are to our company.
And we maintained a strong balance sheet that drives investment needed to sustain our success.
The net results in our operating our opportunity to invest $29 billion of capital over the next four years for our customers.
With an annualized 6% to 8% operating earnings growth through 2025.
We expect to pay out 60% of those operating earnings each year to our stakeholders shareholders.
Thank you for your time and now I will turn it over to Q&A.
Thank you.
As a reminder to ask a question you will need to press star one one on your telephone keypad.
Please stand by while we compile the Q&A roster.
I show. Our first question comes from the line of Sharia Theresa from Guggenheim Partners. Please go ahead.
Yes.
Hey, good morning, guys.
Good morning.
Chris just on the inflation reduction act just given your comments any thoughts on prospects for ultimate passage I think cinema stance is still unclear and we may get a vote. This week and Jill 15% Amt's passive stance would you be sort of able to update the finance.
<unk> planned by the EI timeframe, and just remind us the multiyear plans would they adjust for the tax changes on the fly or would you require separate proceedings in most jurisdictions.
Yes, I'll take the first half and let Joe take the second half.
We have been working with.
Our head of Federal regulatory Affairs, Melissa <unk> NUCYNTA room here I'll ask if she wants to add new picking up speed.
We have done significant amount of outreach.
Not fully as a company, but as an industry to make sure that.
The message is heard that there is a technical fix that that's a potential.
Or other other methods, but.
I don't think.
We all know enough now it's very fluid.
As you talk to the Senators theyre getting up to speed as we're getting up to speed. So.
It came quick it came out of the closet.
And we have to.
Continue to die.
<unk>.
With the.
And as a company to <unk>.
We indicate the unintended consequences of where we.
We're at Melissa anything else.
Thank you.
You hit it.
It remains fluid we know that centers are working.
Chad.
The bill.
And understand the impact.
Expectations are that they they're.
The bill, but again things remain fluid did I Miss speak on the technical fix.
I think yes.
As we look at the Bill.
You too.
I talked with the centers about potentially unintended consequences of healthy for amendment tax might be applied and its impact on our ability to continue their robust investments that.
So we're making Ed so we are talking with them about some of the tax policy that has existed over time, that's enabled us to cost effectively and affordably invest in and talk about ways.
So look at the way that the minimum tax is currently structured.
David.
Thanks, Melissa Joan Yes, I'll pick up the second two questions Shar. Good morning, good morning.
The 15%.
As you mentioned, but we wouldnt expect to update our financing plans by <unk>. Our normal cadence is that we would do that on the Q4 call. After the first of the year and the reason we do that is it gives us time to get through our year end budgeting processes and mark things to that viewpoint, whether it's treasuries, the pension et cetera et cetera.
And we would be very transparent and at that point.
As for your last question, yes.
Go ahead.
No sorry, Joe you've got please.
So that's for your last question.
Alter your plans adjust for tax changes I think what I would say it's unclear at this point.
These taxes will flow through to our customers and this obviously is Melissa Christian talked about this situation is very fluid as it's currently written we reached that threshold for the tax at the consolidated level.
And so we're working through all of this real time.
Got it got it and then just lastly, Joe a little bit of confusion. This morning around the language around the equity plans for 'twenty. Two I guess, what are sort of the puts and takes of doing it via the ATM versus just the pure block I guess, what are you trying to walk through why not just do an ATM.
Yes, I think Theres a couple of answers to that chart I think the first thing is if we were having this conversation the first of the year, we might've, even had a different view, but after that as market conditions change we have to change with it.
E.
The way interest rates have moved for example, so what we've tried to do is be transparent that we're putting $1 billion ATM in place between now and 'twenty five which is what we told you.
The equity needs, where we're going to do $500 million of August this year, but I think it's important for us to maintain flexibility and Thats why were.
Saying that we've been doing probably got one or two ways that I mentioned.
Great Alright, Thank you guys terrific appreciate it.
Yes.
Thank you.
And I show. Our next question comes from the line of Paul Zimbardo from Bank of America. Your line is open.
Hi, Thank you good morning.
Good morning, just following up on the Iran minimum tax so.
Is the right way to think about it that you could probably absorb that reduction in cash flow is just looking at the 12% trigger versus your guidance range or can we think about that as potentially increasing equity needs.
Yes.
Chad. This is obviously, a very fluid situation and we're not ready to commit to either of those it all gets tied up and if this were to pass in its current form this would all get tied up in our into your planning process. What I can say, though is our analyst day, we committed to you in 6% to 8% earnings.
Her through 2025.
We're still committed to that.
Okay.
Thank you and then you mentioned the performance base rate. So we've been watching and comment do you embed any kind of benefit and not just in Illinois, but across our footprint from potential positive incentives under the performance base rates at that CAGR mid point you mentioned.
Yeah, no in our plan, we don't embed any incremental benefit from performance.
Strategically Calvin.
We're heading we're trying to head in that direction. We are so as you mentioned, we've been working with stakeholders and cloud.
Our performance based metrics outline a goal, which would add is combat is able and we are confident to sit back and afford reliable and electricity to our customers as well as help the state achieve its goals the reliability metrics as outlined could add 60 basis points.
And we also provided an alternative to the commission if they wanted to consider adding up to 40 basis points, but all based on comet rising to the standards that have been outlined in <unk>.
Collaboration with the stakeholders.
Okay, great. Thank you clearly have a good one.
Sure.
Thank you.
And I show. Our next question comes from the line of Steve Fleishman from Wolfe Research. Your line is open.
Yes, thanks, good morning.
Just hey.
Hey, Chris could you just give us a calculated just later, but just if you had sandy.
$300 million of cash flow potentially impacted by the IRS.
What is that in terms of <unk> to debt percentage.
Yes, Hi, Joe.
You want to yes, Steve, but whatever is there.
I don't think we're ready to get into that because.
The way we look at this is not in isolation, we have to go through a year end planning process and see what if what portion of this we can offset with other actions that we can take across key enterprise.
And then net of that what what falls to the impact of on our metrics and obviously this is so fluid we haven't gone through that detailed process.
Cost cutting there is adjustment in project schedules theres multiple ways too.
To avoid any impact on our metrics and that's what we'll be focused on when we figure out where this thing is going.
What we've heard is by the end of the week potentially over the weekend things could happen.
But once we get a final we'll be able to evaluate and we can put the numbers in and.
To start to see what we can do for mitigation.
<unk>.
I want to keep our capital spending plan, where its at our growth where it's at for reliability.
And affordability.
We are maintaining our system.
Take on the renewables so.
There's a few balls in the year that we will have to.
Have to juggle, but.
Rather have the fix to the bill so we're not having to juggle.
We'll see.
We prevailed as an industry as we go forward.
Okay.
Okay.
And then second question is just in terms of Joe your thought process on the.
Equity issuance timing doing half of it.
Kind of the first year.
Here as opposed to just spread out could you maybe just give some flavor why.
Why kind of.
You decided that.
Yes, I think Steve a couple of reasons.
This is the first window, we have open post separation.
We had to file the updated 10-K at the end of June which began when we went into blackout.
So as we previously disclosed we are.
<unk> some short term debt at the time of separation that we're now planning to <unk>.
We need to pay down and that's all part of our balanced funding strategy to continue to support the balance sheet.
We went through an evaluation of the type of equity issue and as I said earlier to be very fluid given changing market conditions, and we want to maintain as much flexibility as we can and that's why we're saying, we're putting an ATM in place, but we do have the.
The flexibility to do it as a one time.
Okay.
<unk>.
Thanks, Steve.
Thank you.
And so our next question comes from the line of David Arcaro from Morgan Stanley . Please go ahead.
Oh, hi, Thanks mature taking my question could.
Could you maybe just speak to as you look out over the EPS growth forecast period, your current thoughts on maintaining that linearity.
Annual kind of cadence and achieving the growth each year through the forecast.
Yeah.
Thanks, David for the question and good morning, we've talked about this some.
We're confident in that 6% to 8% growth rate that we've given you through 2025 correlates to earnings. We said there is some variability between the years and it's really driven.
By three factors one is combat the distribution returned through 2023 still tied to treasuries, which obviously, we don't control that the mark to market exercise and Thats priced on a daily average throughout the year. So it's continuing to obviously change Pico.
Pico is on a three year rate case cadence and the way that cadence works is there higher earning in the early years spending or the later years and that has some variability and then lastly.
We're transitioning to different ratemaking in Illinois, 2024, and beyond and we have to make an assumption that looks like and we've done that and we're comfortable with branches around that in that 6% to 8% growth rate, but that drive some variability as well.
Okay got it thanks, that's helpful and on the.
Just the ROE.
Down slightly in this quarter could you just.
Refresh us on the confidence level in that.
Rising in the back half of this year and then any latest thoughts as to when you might be able to achieve something in the middle like nine 5% Roe.
As you look out in the forecast.
Yes, I think the reason you see the lower ROE is early in the year and you saw the same trend last year as it is tied to the equity warrants using in the utilities. We do have a majority share of our debt offerings early in the year across the enterprise and as such to keep those capital structures in line.
We infused the equity which over the course of the year. It takes time for the year, where we need to catch up and Thats really the big drivers that we're confident we target 10% to 10% for all of our utilities were confident at year end will be in that range you know on average across the.
Across the utilities.
The key on this is the rate cases as Jos.
We've seen downward pressure in other jurisdictions on that 95% to 10%.
So we have to work through that and explain with a higher interest rate environment.
Need to.
Be able to move that back up as we're working through our rate cases, so it's.
It's reversing the trend of what we've seen in the industry.
To accommodate the interest rate.
A rise in it's very quick to come down with interest rates come down.
It's a crawl back when interest rates go back up, but that's where we're focusing.
Chris If I can add this is Kelvin David I would also point out Joe alluded to comment.
<unk>.
Earnings be tied to the treasury, but understand comment is also one of the lowest in earnings up any utility because that impacts that 9% to 10% average so as <unk> begins to transition out of the formula rate you will see that have a greater impact on the collective of the utilities and it's also important to note.
When we talk about the multiyear plans those three year plans that we have been put in place in Maryland, as well as in the district of Columbia.
That's a process that is done in collaboration with the stakeholders and commission. So when we talk about investments across the utilities.
That transparency is giving stability to those Roe.
And also the growth projection that Joe talks about that 6% to 8% a year. That's how we feel confident that we can come in here and tell you what that growth plan looks like it has done in collaboration with our commissioners and all of our stakeholders.
Great that all makes sense. Thanks, so much.
Thank you.
And our last question comes from the line of their guests Chopra from Evercore ISI.
Line is open.
Hey, guys.
I'll keep it quick.
Joe I just wanted to go back to the 300 million per.
For your cash impact from the alternative minimum tax.
Given that your cash effective tax rate is going up each year, if I'm looking at this slide which shows 2022. This slide 16 in the appendix I believe which shows the effective tax rate going from like less than half a percent to 4% in 2023.
Thinking about 'twenty four 'twenty five three.
$300 million cash tax impact would be actually lower given that youre going to pay some cash taxes.
The effective tax rate going up naturally in the plan.
I think theres a lot of variables that go into that equation.
Given the size of our enterprise and the number of operating companies. We have obviously theres a lot of things that move around in any given year with taxes, and we see that each and every year around quite frankly, each and every quarter.
So.
This is very fluid situation, we're dealing with.
Both smallest thing Chris alluded to here, there's still we still got to get to the goal line on this and see where it plays itself out.
I'm not going to sit here and commit to you to say, it's going to do this or do that.
If you what we think that that impact looks like over our planning horizon that we disclosed.
Got it thanks guys much appreciate it.
Thank you Chris.
Concludes our Q&A session at this time I would like to turn the call back over to Chris Crane, President and CEO for closing remarks.
Yes. Thank you all for joining the call today, we look forward to Q2, new to execute on their plan and with that I'll close out the call.
In Q4.
Your continued support.
Thanks to all our participants for joining US today. This concludes our presentation. You may now disconnect have a good day.
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[music].
Okay.
[music].