Q3 2022 Exelon Corp Earnings Call
Okay.
Good day and thank you for standing by welcome to the Q3 2022 Exelon Corporation earnings Conference call.
At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session.
To ask a question during the session you will need to press star one one on your phone.
Today's conference is being recorded.
Now I'd like to hand, the conference over to your Speaker today, Mr. Andy plunged Vice President of Investor Relations. Sir. Please go ahead.
Thank you Chris Good morning, everyone and thank you for joining our third quarter 2022 earnings conference call.
Call today are Chris Crane excellence.
Excellent.
Officer.
Excellent Chief Financial Officer, they're joined.
Joining me Calvin Butler.
President and Chief operating officer.
Chris.
Other members of Exelon.
To answer your questions following our prepared remarks.
Our earnings release this morning, along with the presentation all of which can be found in the Investor Relations section of excellence website.
Earnings release, and other matters, which we discussed during today's call.
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 discussed in today's material and comments made during this call.
Please refer to today's 8-K and excellent the 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.
non-GAAP measures please.
Please refer to the information contained in the appendix of our presentation.
Our earnings release for reconciliations between the non-GAAP measures.
As to equivalent GAAP measures.
Scheduled 60 minutes for todays call ill now turn the call over to Chris Crane Exelon.
Okay.
Good morning, everybody.
Glad to have you with this morning.
As you all know yesterday, we announced my retirement from Exelon.
Hello.
Addressing that.
After.
The operational and financial.
Okay.
Okay.
Okay.
Okay.
First.
So the operating aspects.
Uh huh.
Calvin Butler oppressed.
Sure.
Presidents.
Excellent.
Sure.
This is calvin.
With us.
Okay.
Yeah.
The developer network.
Distribution platform.
Great.
Customer satisfaction with best in class significantly increased leadership diversity.
Okay.
CEO of Exelon utilities after that.
Ro.
Of course, the operating companies to align with the management.
Industry in Beijing.
Thanks.
Jesus CFO , which we were very pleased with it.
He has been with Exelon for 15 years.
Various finance roles across.
And former nuclear division.
<unk> com.
Most recently senior Vice President.
Okay.
China is a very strong background.
Experience.
<unk> per well for expanded responsibility.
Therefore, all material leases.
And both Calvin and Gilles join me.
Okay.
I would also like to thank <unk> for his work launching.
Exelon is successfully executing this.
Happy to report solid performance for the quarter the investments we're making.
We have for our customers.
Continue to drive strong operation and financial results.
We reported GAAP earnings.
68 cents per share.
Adjusted operating earnings of 75 cents per share.
Richard affirming the midpoint of our range.
Narrowing it makes sense.
Providing more color on that.
She gets triggered.
We continue to execute.
Hi, operational levels, which I'll speak to more of our stock.
Next slide.
We had a construction rate case outcome.
This quarter.
The commission in Delaware and Pennsylvania.
Troops settlements.
Distribution rates.
Hello, Mark.
Got it.
We also reached a settlement on key elements with the first multiyear filing for Delmarva, Maryland.
Purchase settlements for the multiyear plan.
We expect a final order in December .
And Illinois comment received a final order on its performance tracking.
Mechanisms.
The plan in September that's a big milestone.
While the transition to.
To a multiyear distribution rate construct.
It gives us a good foundation to build upon.
As a result, we intend to file a multiyear distribution plan.
With a four year rate structure.
January 1st 2024.
Changing making sure Hendrik.
2022.
The multi year plan over future test year right.
Great choice for our customers and our shareholders.
We appreciate the transparency and forward looking planning.
Great predictability allows.
Our rate case will be filed at the same time.
Our multiyear.
Integrated grid plan.
A final order.
2023.
So there's been a lot of good operational and financial progress this year.
On track to close.
The strong year.
We.
We know investors are focused on.
Our outlook. This year first we'll update you on the inflation reduction Act.
If all we strive for transparency.
Last quarter.
The potential impact.
Higher cash tax as herself.
Since passing of Bill we've been working with the industry.
And we remain optimistic the treasury will implement the guidelines.
Wade.
Materially Medicaid.
Impact.
Yes.
Regardless of the outcome of a treasury.
We are reaffirming.
Reaffirming our 6% to 8% annual growth target.
$21 45.
It's possible.
Sure.
In addition to reaffirming our growth.
We should have emphasized the impact of a potential higher cash tax.
Even if you add to the impact is.
<unk> mitigated.
Re.
Regulations, we expect higher cash needs will not require us to issue additional equity.
Regional 1 billion.
Fitments through 2025.
On the positive side due to inflationary reduction act as very beneficial for our customers.
Lead the energy transition.
Forward to moment that we will build on our industry.
And as the industry takes advantage of.
This historic legislation passed this year.
Our jurisdictions Ferrari driving for cleaner.
And schedule support and accurate.
Here, just more affordable and accessible to customers, we see opportunities in terms of <unk> and connectors.
Connect renewables.
For alternative fuel production.
Distribution and make the grid ready for increased electrification, including electric vehicles ledger.
Legislation.
Alongside the infrastructure jobs act provided more than $550 billion in fundings for energy related.
The structure.
Over the next 10 years, which will generate significant demand for our investments.
Finally, I'd like to talk about our growth outlook.
We told you on analyst day, we expect the.
Invest $29 billion of capital.
To serve our customers and our communities over the next four years, which supports an annual grow a tree.
Eight 1%.
That will drive long term earnings growth rate.
No.
To achieve our annualized growth target is not linear.
But 6% to 8% commitments through 2025 and <unk> partners.
Largely because the cadence of rate cases several years basically.
<unk> and other years, there will be above that.
Sure.
Deals, we'll see that steadily reaching coverage for <unk>.
Slide nine.
On the operational highlights slide five.
We continue to ensure customers receive safety affordability and reliability and completion, which underpins everything we do.
Excuse me.
Liability remains a top notch very agenda top quartile outage tradition over all of our jurisdictions.
Outage frequency performance remains at high levels commented Pico, which achieved their best on record performance.
Actually the third quarter of 2022 comment has delivered the most reliable service.
And over 100 years.
Reliability is 82% better.
Comment set out on the smart grid improvements in 2011, our customers greatly benefited from the investment is reliability.
Decreases.
Yes.
Through the third quarter BGC.
Got it.
A testament to the reliability page ahead of us.
A testament to the reliability increased data set of growth and the comment district in the last few years. The data center additions aggregated about 500 megawatts of.
Each year approximately nine times average.
<unk> seen it earlier.
Prior deck.
Safety commented main change top decile performance, but the three other utilities continued to fall outside of that.
We only.
We expect only the highest safety standards and performance for our utilities, each utility's dedicated to implement safety practices to lessons learned.
Minimize the chance that incident.
The intense training program going on with first line supervisors to help further educate.
The expectation, which all utilities are participating together, which helps.
The third quarter.
Third quarters.
Excuse me, but three quarters BG comment Pico remainder chop a courthouse of customer satisfaction performance Lastly desk.
<unk> outperformance and orders sponsored across our three gas utilities.
For the third quarter in a row ph I responded to all gas odor.
Reports and less than one hour.
Let me turn.
Over to change to provide the financial update.
Thank you, Chris and good morning, everyone. Today I'll cover our third quarter results completed an upcoming rate case activity and then as Chris noted to provide further clarity on our earnings trajectory and potential balance sheet implication at the appropriate minimum attack.
On slide deck to show our quarter over quarter adjusted operating earnings.
Continuing operations earned 75 cents per share in the third quarter of 2020 versus <unk> 53 per share in the third quarter of 2021.
As a reminder, the prior year third quarter, reflecting <unk> <unk> per share discontinued operations adjustment for certain corporate and overhead costs previously allocated to generation that are required by accounting rules to be presented as part of Exelon continuing operation. These costs were paid for by generation and they are not indicative of our corporate overhead.
Separate sag.
Excluding the <unk> excellent third quarter results were <unk> <unk> per share higher than the third quarter of 2021 journeys, Greg This product driven primarily by higher distribution rates associated with incremental investments and completed rate cases relative to third quarter 2021, the impact of higher treasury rates on comment distribution Army yes.
As the summer storm activity and distribution Formula rate timing Act on that.
This was partially offset by depreciation and amortization and higher interest expense on that at the holding company here.
Year to date with all of the drivers in the prior year are detailed on appendix slide 14.
Turning to the full year, we are narrowing our 2022 of EPS guidance range to $2, 21% to.
At $2 29 per share from <unk> 18 to $2 32 per share at analyst day. We told you we expect it to earn 20% of our full year earnings in the first quarter, 20% in the second quarter and 32% in that third quarter or about 80% of full year earnings by the end of the third quarter delivering year to date earnings of $1 84.
Sure. This is slightly ahead at 82% at the midpoint of our revised guidance range, which considered the impact of higher treasury rates a comment on the distribution, yes the store now.
Continued disciplined approach to cost management.
Partially offset by higher financing costs at corporate.
Along with onetime items occurred in the first quarter, we are delivering on our financial commitments and are confident we will be within our guidance range at year end.
Moving to slide seven looking at our utility returns on a consolidated basis, our trailing 12 month ROE at the third quarter has improved to nine 3% and is back within our 9% to 10% targeted range.
David point increase from last quarter is in line with expectations of timing of equity infusion from the first half of the year are offset by the earnings growth in the second half of the year.
As discussed on previous calls, we expect that trailing 12 month RV to remain on our 9% to 10% target range at year end. Our focus continues to be delivering strong earned returns at the utilities, which sustain the investment we make on behalf of our customers.
Turning to slide eight there were some important developments in our open distribution rate case proceeding to acquire.
Our successful execution build momentum into 2023 with several jurisdictions, except the final multiyear plan.
Let me begin by highlighting key developments in the 2020.
Keith.
On October 12, the Delaware Public Service Commission approved Delmarva power settlement agreement without modification for its gas distribution rate case.
<unk> was $13 4 million increase in distribution rate, which includes the transfer of files.
With 8 million of revenues from the distribution system improvement charge capital tracker Intubated distribution rate.
Reflecting an <unk> of nine 6%.
As permitted by law Delmarva power nickel net Paul elaborates on August 14th subject to refund.
Additionally, on October 27, the Pennsylvania Public utility Commission issued an order approving the joint petition for settlement and TECOS GAAP breakeven, including intangible natural gas distribution revenue increase of $54 8 million beginning January one 2023.
We also have two rate cases pending final orders, notably Delmarva power reached the settlement on the majority of key elements first electric distribution multiyear plan with the Maryland Public Service Commission, including a cumulative revenue increase of $28 9 billion beginning in 2023 through 2025, reflecting it or are we at $9.
Perfect.
Your ability to reach a settlement is a testament of the many benefits of this difference.
Separate designs, including customary predictability ease of regulatory burden and transparency into future system investments at our utilities, we expect a final order from the commission by year end.
Lastly, we expect a final order on comments final distribution formula rate update in the fourth quarter more details on the 2022 rate cases can be found on slides 18 through 22 of your annex.
Turning to 2023 rate filings comment continues to prepare for a new rate filing in January of 'twenty three throughout 'twenty. Two comment has been working with stakeholders on the performance metrics proceeding.
September 27th the Illinois, Commerce Commission issued its order approving the performance and tracking metrics.
Which includes certain performance metrics with a total value plus or minus 32 basis points.
The order paved the way for comments first multiyear plan filing in January 23 for rates effective 2024 to 2027 detailed that the filing will be shared on our fourth quarter call.
The multiyear plans across our east coast jurisdictions have enabled investment necessary to improve reliability and customer service that modernize the distribution system and supported state environmental goals that have served our customers and communities as well building on this momentum we anticipate filing second multiyear plan at <unk> in the first quarter at Pepco, Maryland.
In the second quarter and at Pepco D. C. In the first half of 2023. Additionally, we anticipate filing the first multiyear plan reconciliation with BG expected to file in the first quarter of 2003. Our first multiyear planned reconciliation is an important milestone that helped us throughout variances from the coffee filed as part of the multiyear plans in early two.
Thousand 20.
Importantly, this reconciliation process will also provide our first opportunity to understand how the profits will be implemented for any potential cost variances in future multiyear plans.
As you can see next year will be busy on the regulatory front, but we are excited for the transparency and stability of the multiyear plan will continue to provide our customers and stakeholders relationships across our jurisdictions remain constructive and we are working together with our regulators states and communities to support their clean energy and chemicals as Chris noted this your federal legislation.
<unk> only bolster the support for and the affordability of the transformation of our energy economy.
The multi year plan to provide a great structure to align on the peaks and the progress of that transformation. As a reminder, we expect nearly 100% of our rate base growth will be covered by alternative.
Recovery mechanism such as the multiyear plans by the end of our planning period.
Moving to slide nine as Chris described we are confident that $29 billion of investments we are making on behalf of our customers will result in expected rate base growth of 8% and 16% annualized earnings growth from 'twenty, one through 'twenty five.
We have noted that our business model does include some variability in year over year earnings growth due to the timing of rate cases, largely driven by Pennsylvania, which generate strong returns to support the continued need to invest for the benefit of our customers.
In addition for 'twenty two 'twenty three of combat we're exposed to the 30 year treasury rate, but we're making the transition to a more traditionally that return on equity.
We've attempted to provide investors with additional information on the year over year variability with the building blocks of our earnings growth trajectory as defined in the chart. The green arrows represented $5, 6% to 8% CAGR path from the 2021 guidance midpoint of 210 per share assets was at analyst day through 2025, while the tilda.
Illustrates expected year over year growth percentages from the prior year relative to the 6% to 8% range each year.
I think another growth driver starting with 23, we have already mentioned combat and its exposure to the 30 year treasury rate, although current forwards imply we should see some good upside with RB will need to monitor the impact through 'twenty, three which remains fully extend to mark and then <unk>.
<unk> will be in year two of its existing electric distribution rate three year cycle and as a result are expected to have lower year over year earnings assuming normal weather.
Can you give us earnings would be positively impacted by new GAAP rate transmission and distribution system improvement charge tracker, which provides a mechanism for recovery on distribution investments made between rate cases.
Whether in store normalization will also be a factor given people knocking decoupled and we are modestly benefiting from weather to date.
Like all companies, we face challenges from higher financing costs and inflation, which we are working hard to offset through productivity initiatives and factors in technology and by leveraging our size and scale reconciliation processes in 'twenty three in Maryland, and D. C will help establish precedent for future cost recovery under the multiyear plan lastly.
Lastly, export Brett we will see increased costs as we continue to refinance our remaining floating rate debt from the separation as well as financing the investment needs of our utilities at the current higher rates.
We do have the utility to continue to challenge, our corporate center to reduce costs.
For all these reasons 23 is expected to be below the lower end of the six 8% growth range based on our outlook as of September 30th in 2024, we expect to be in the range as we enter the next cycle of our B D. M. P go multiyear plans, which allow us to align with stakeholders for the next three year phase of the clean energy transition.
<unk> is expected to be in its third year of its existing electric distribution rate impacting year over year crop than with an expected rate case filing for Pico electric in 'twenty, five and the rest of our utilities growing generally in line with the rate based investments, we expect to be above the upper end of the 60% range in 2025.
The company's net growth across easier should put us squarely in the 60% range on an annualized basis for the 'twenty one through 'twenty five planning horizon.
You can expect us to initiate 23 guidance and provides a roll forward of Capex right based on financing plans as we normally do on our fourth quarter earnings call.
Turning to slide 10, Exxon remains committed to maintaining a strong balance sheet and investment grade credit ratings continue to be a top priority.
Our long term corporate consolidated credit metrics outlook remains strong for both S&P and Moody's regardless of the outcome of the corporate minimum tax.
If the corporate and other taxes enacted as written and you place. Your reduction Act does your backlog balance sheet is approximately 200 million per year at the space and our August 8-K filings, we are working with the industry and remain optimistic that this impact can be mitigated.
Even if I'm mitigated as Chris noted, we expect to absorb the cash impact on our balance sheet with cushion above our downgrade threshold.
That could be in our targeted 30%, 40% average range over the planning horizon without a need for incremental equity beyond the previously announced 1 billion commitment from 'twenty to 'twenty five as a reminder, we issued $575 million of equity in August there were onetime offerings and will complete the remaining $425 million over the 23 through 20.
Third period, our commitment to a strong balance sheet is a top priority to ensure we can make the investments needed on behalf of our customers.
I want to close by reiterating our confidence in investing an estimated $29 billion of capital from 22% to 25% driving 60% earnings growth from 21% to 25% and a strong balance sheet.
It remains the case, regardless of whether the corporate minimum taxes mitigated.
I will now turn the call back to Chris for his closing remarks, thanks to moving to slide 11.
I'd like to emphasize X launch.
A proposition.
And places.
Delivery industry.
Economies, making the transition to a cleaner.
Mortgage related synergies.
No.
Yes.
The significant federal legislation passed this year.
Uh huh.
Hi.
Okay.
IRET.
Provide momentum and support.
Two our jurisdictions, which happens.
The way for years.
Exelon offers an unparalleled exposure to that opportunity.
Sure more electric and gas customers the utility in the country.
The single largest producer in the country.
We have earned the trust of our customers and earn commissions by consistency reliability.
Ireland.
Got it.
Providing top notch operations personnel.
<unk>.
And we live our values with steady commitments to path.
Our path to clean coal.
As well as through.
Environmental advocacy and support for our communities.
<unk> governance model.
As a result, there is a tremendous demand.
<unk> four investments, we expect to make in our communities, which as I said earlier totaled $29 million of capital from 22.
<unk>.
Jim.
Only in the beginning stages of the transition that will take a bolder dude.
Decades.
None of our investments represent more than 1%.
Yes.
29 billion.
The results from customer growth.
To keep up with customer demand and producer relationships.
Bob.
So we continue to feel confident in our.
Sure.
Eight 1% rate base growth.
Projected.
6% to 8%.
Growth through.
Okay.
Our rig crews through.
25, we offer a very strong position.
It offers a very strong proposition.
Tissue for years to come with our balance sheet and matching dividend commitments, combining our three 5% dividend.
Dividend yield.
6% to 8% annual growth offers low risk to the nine five to 11 and a half.
Percent total return proposition.
That brings me to my retirement announcement.
As noted.
The release yesterday, our it's higher at the end.
In the year.
As I mentioned Calvin will assume the role of CEO .
<unk> on the board.
They have made this decision recently.
Good.
We'll need treatment for significant spine and hip issue.
That report to focus on myself.
Because of these issues I won't be able to drive.
Hi.
But cowen and <unk> and other members of our senior team.
Forward to speak to their.
Big part of building this industry, leading company over the last 24 years, it's been an honor.
Regardless of the economy and the commodity prices the regulatory work.
For our asset mix extra walnuts have always focused on.
Charles.
Running its operations.
And our top notch levels to serve their customers via.
We have built an amazing platform over the decades.
Tickets.
Sure.
I want to thank.
All of our talented employees.
They have done to get us, where we are today and recognize.
Chris experience innovative approaches that will get us to where we need to go tomorrow.
While I will miss being part of the change.
David.
Energy industry transformation.
All the trust in the World in Calvin and its leadership team to drive us to the law.
<unk> challenges.
In many ways.
Thank you for your time and support and we'll now take questions.
Thank you.
As a reminder to ask a question you will need to press star one one on your phone.
Please standby as equal bio the Q&A roster.
One moment. Please go ahead first question.
Our first question will come from Ross Sandler of UBS. Your line is open.
Good morning, Chris Good morning, Jean Chris Best way.
As you as you deal with the tariff issue.
We sincerely hope everything works out okay.
So thank you.
On slide.
Maybe go back to go back to slide nine.
Just think about what this is communicating if I if I kind of look at the 210, which is the midpoint of 'twenty, one guidance that should be like base year for thinking about the.
Six to eight range and then you are saying in 'twenty three.
Below that.
No.
If I'm thinking about this correctly, let's take the 225 base or a midpoint of 22, that's really saying given that that 7% growth off of 'twenty, one that youre growing maybe at.
We're at 4% if im thinking about the math correctly.
After 'twenty two into 'twenty three.
But then if I think about what you are saying for 'twenty four 'twenty five.
Squiggly lines here around 7% and above eight you've got to kind of get back to that 7% four year CAGR mid point off 21 by the time, we get up to 25 does that is that a fair way to think about this.
Yep Yep, you're thinking about it right and I'll just reiterate the tilden represent the year over year growth from the prior year. So the way you've walked through it it's right and what we've tried to do it is not give you a specific number for every year, but just sort of narrow the outcome based on the building blocks below.
The CAGR line. So you can see the combination of growth over those years puts us squarely in the 6% to 8% commitment 21 through 25.
Okay, great perfect.
And then maybe on the on the $200 million of cash tax impact.
You said that mitigated is mitigation here really just about the <unk>.
<unk> rules.
And what's the timing of maybe getting a first preliminary look at than stretching rules is that really Q1. Since every corporation is going to have to make an estimated tax payment at some point in April and then if you mitigate that does that change the equity need at all or is that equity would be pretty firm, regardless of what happens with this $200 million.
Sure Yeah. So I think three questions there first when.
We think about mitigation there is working with Adi and the industry on the regulations, so that certainly would be a.
A meaningful mitigation there the regulations are written in a way that allows for certain deductions that we previously had.
But I would also say as you know right.
We will look internally to do what we can.
And again anything that we can on our end, but it's a combination of those factors, but that breaks the 60 to 70 basis points that we put on the slide is the mitigated whether through withdrew due to regulations or internally that the most conservative and act.
I think you are.
Second question I'm forgetting, but the third question was if the regulations do mitigated or if it's if the 60 to 70 basis might go away or are we still committed to the 425 million that remains we are so we're not we don't expect to do any more than $1 billion, we announced as you know we've already done the $5 75, and then the remaining 425.
<unk> will execute between 'twenty, three and 'twenty five.
And then your guidance dropped yes, the second question.
To your question, Yes, yes timing yes.
Yeah. So.
It would be helpful to have them by the first quarter, obviously that that would be when we would make our first payment.
That would be helpful and we've sort of signaled that that how that would be helpful. But we really can't control and.
So we should know more next year that the sooner the better obviously, but.
Still working through that Theyre, obviously, treasuries, obviously still working through that.
Okay, great. Thank you I'll jump back in the queue. Thanks.
Yes.
Thank you thanks Ross.
One moment. Please go ahead next question.
Our next question will come from Paul Zimbardo of Bank of America. Your line is open.
Hey, good morning, it's actually Julien here. Thanks, Thanks for the time.
Chris My best wishes here.
If I may just with respect to the.
The squiggly lines as we call them and your commentary about being squarely within I don't mean to repeat the last question too much but to ask you. This squarely within equate to effectively at the midpoint of the six to eight is that is that a fair way to interpret that specific language you used.
Yeah, I think we always aim to be.
We're solidly within the range right, but we that we haven't given you you know sort of where with that but what we've tried to do is show you that if you look at the year over year growth and you look at the drivers below it that we are confidently reaffirming our six 8% in 'twenty one 'twenty five.
Okay Fair enough, sorry, I don't mean to words with you too much you used the words and then related second follow up if I may on balance sheet I know you talked about.
Certainties here, but it sounds as if I'm hearing you correctly.
The risk of having to make a payment that payment being unknown youre confident in the colon cumulative of $1 billion.
Capital outlay equity as being in tax almost regardless of the various scenarios I guess it doesn't sound like it's less than 1 billion cumulatively, but it also similarly, depending on the surface. It doesn't sound like it's more than that as best you can tell right now again and then if you can elaborate a little bit is there any other new ones that we should be aware of that.
Might be an offset.
To the cash flow here to keep metrics intact or is this just simply a reduction of the debt metrics.
Yeah, I think it's I think youre thinking about it right right we are.
Pardon me, we don't need more than 1 billion that we mentioned after analyzing the unmitigated impact we can have it again, whether it's mitigated through <unk> or internal or internally, we can absorb that on the balance sheet stay above our downgrade threshold, but without incremental equity.
And then b within our 13th or 14% over the planning horizon.
Got it alright fair enough. Thank you for the clarification.
Thanks Julien.
Thank you.
Please go to the next question.
Yeah.
Our next question will come from Steve Fleishman of Wolfe Research. Your line is open.
Hi, good morning.
Chris I wanted to give you the best wishes.
Hope Youre helps gets better and just recognize just I know I know, we're seeing it more through a different stock right now with CG, but just.
The turnaround in nuclear that Youll help kind of make happens pretty pretty remarkable so congrats on that.
Thanks, Joe.
<unk>.
Just on the.
I guess gene just on the first question on the.
The non linear growth I think from the very beginning when you gave the guide of the New Exelon you did kind of you did say that it wasn't going to be linear.
It may not be in the range each year. So just now that you are giving this incremental information is it pretty consistent where would have been if you just given this.
So at the beginning of the year.
Just reflecting this pico rate cycle.
For the most part or is there a leather like big changes that have occurred.
Yeah, I think the I think the trajectory is pretty consistent there might've been some puts and takes between 'twenty three 'twenty four but the sort of non linearity and I think the fundamental thing is.
With what we said at analyst day, and that we're investing 29 billion, which drives the rate based growth of eight 1%, which drive the earnings growth, but because of the rate case timing. There is some variability in there and I think what we're hopeful here is that this visual provides more clarity on on how that how those.
Key cases impact different years.
Okay.
Second question is I think some people are trying to take those each year.
From the slide nine and kind of taken even though it's an estimate kind of adding that up and when you do that by 'twenty five you're kind of.
Maybe get to the lower half of.
25 range is that not what you should do because theres that estimates or just.
How should we.
Yes, I'll take that.
Yeah, I think what I would I would just say you know the combination of growth over the year and then.
The Tilda discussed I'm laughing because we you wouldn't you would laugh at how much we spent over until those versus other things here to show the visual but what we're trying to show here is that the combination of growth, but you're squarely in the range.
And so that that's what we want to reiterate through the investment that the 29 billion.
But we're confident we're going to be squarely in the range.
Okay.
And then just on the.
Going back to the alternative minimum tax I think one of the big issues of focus with treasury as the repairs tax and weather.
Could get included.
If you could get the repairs tax addressed as part of this would that.
Would that cover most of this $200 million.
Because some companies are actually assuming that it will get fixed.
Yeah.
Okay.
Substantially mitigate it yet.
Thanks, Steve.
With the IRS.
The largest of the room.
Our tax folks here working with the industry.
We're really working on trying to communicate a necessity.
But.
Yeah.
The <unk> guarantees from the first quarter.
Agreement on the approach.
Okay, great. Thank you very much.
Thanks, David.
Thank you.
A moment for our next question.
Our next question will come from David Arcaro Morgan Stanley . Your line is open.
Hey, good morning, Thanks, so much for taking my questions and Chris Best wishes from my end as well.
Yes.
As we as we look at the upcoming comment multiyear plan filing in January I was just wanted to get a sense how comfortable.
<unk> confident are you in managing that jurisdiction within a four year plan going forward do you anticipate the parameters are going to be manageable to work under over that period.
This is Gil <unk> CEO comment.
We have a we have had.
Habit construct it.
Our relationship with stakeholders and other parties here.
And in our jurisdiction and what you will see from US is that our plants will squarely aligned with the goals of the climate Equitable jobs Act and generally the energy environmental and economic policy at this stage so that would be our plan and that's what's noted in the earlier remark.
ARX with details of such wheelchair.
Our next earnings call.
Okay got it thanks.
And then as we think.
Think about just the.
The Pico electric earnings dynamic here I was just wondering if as you are.
Leaning out longer term are there opportunities that you are looking for are exploring to smooth out just the EPS contributions, whether it's kind of shifting around expenses and cost saving opportunities.
Are there other longer term ways to smooth out the EPS growth trajectory.
Hey, Good morning. This is Calvin we're always looking at ways to operate our business more efficiently and manage our costs, because that's our responsibility and delivering that value to our customers and as we've talked about previously affordability is a driving factor as we operate in all of our jurisdictions.
And just remember Pico, which one of our highest the highest burning utility in the fleet and one of the highest earning across the country and the constructive regulatory environment within Pennsylvania, if something that we've come to build on and have that relationship collaborative relationship with the regulators. So as we continue to manage across our.
We will always look at costs within the operating units as well as at the corporate center. So to answer your question directly yes.
Okay.
Okay, great. Thanks, so much.
Got it.
Thank you.
One moment.
Just a second floor next question.
Our next question will come from Jeremy Tonet.
J P. Morgan your line is open.
Hi, good morning.
Good morning, Kevin.
Just wanted to come back I guess.
<unk> 'twenty through 'twenty five growth drivers, a little bit and anything else you could say as far as what you can to minimize the headwinds for 'twenty three to offer against the against the plan and really just wanted to see what 30 year.
Expectation was baked into the guidance there.
Sure, Yes, I'll take that as Calvin mentioned I think the first and foremost is our continued focus on cost management. So we continue to do that I think the other thing is.
We're also looking to manage interest rate volatility. So when you think about our long term financing we use to hold their leg and creation of hedging to dollar cost average into that into the long term rates before the issuance on our short term debt we've got interest.
Interest rate caps that protect against the upside, but also retain the benefit should rates fall. So we're doing all the things we can control costs heading into 'twenty three.
And then in addition to that if you.
Asked about where we Mark this up I think in the footnote. It says as of 930, So Mark's comment to the 934 are great for 'twenty three there.
Got it that's helpful. Thanks.
Maybe just one more question if I could if you applied the new Illinois performance metrics historically to comment how would it have scored and how do you think about the opportunity here going forward.
Yeah. It was either the categories are somewhat consistent but they are also different enough where I don't think you can back cabinet, but what I would say is under the formula rate one piece, that's very different if there weren't the only downside risk and so we only had penalties under the formulary, but constructive about this new new pop going forward as we now have.
The opportunity to get better and as you heard Chris say no comments performing the best it ever has in its 100 years of operations.
And so we're excited about that I think the other thing about the multi year plan is is the upfront alignment around the investments and you know that was also there in the in the Formula rate, where we agreed that there would be you know grid modernization required in smart meters and when you look at that.
<unk> of that combat improve their reliability, 82%. So we like the ability to line up front.
And we like the ability to get recognized ship me performed well, which which come at them.
Has done Jeremy I would add that keep in mind, how those performing metrics were developed they were done in collaboration and partnership with stakeholders. So it started the process of transparency and which combat if they'd go into filed their multiyear rate plans.
That's the value of working with your customers and your regulators to ensure that the investments that you're making are leading to the increase reliability resiliency of meeting the clean energy goals of the state as Gil pointed out and I think that is the first step as we continue to build the process in a constructive regulatory environment.
Got it that's helpful I'll leave it there thanks.
Thanks, Jeremy Thank you.
Thank you.
A moment for our next question.
Yes.
Yeah.
Our last question will come from Michael Lapides of Goldman Sachs. Your line is open.
Thank you very much and Chris obviously wish you well wish you the best physically.
Tim.
Our cost question, when you benchmark yourselves, whether benchmarking T&D O&M or benchmarking at the corporate center and I'm sure you still do a lot of that.
Where do you think you do that score in the first quartile, meaning from a cost management perspective, where do you think whether it's transmission distribution customer service customer accounts.
Our corporate G&A, where do you think the greatest opportunity set not in the near term, but over a three to five three to seven year period is to get more efficient like can you just kind of point directionally, where the opportunity sets may lie.
Yeah, I think I think Dave it operate we look at it across the board in movie theaters opportunity everywhere right, we want to drive to the lowest cost possible, while maintaining safety and reliability I think the where you can where everyone can kind of see what we see is where it shows up in our affordability metric because the O&M is such a lever when you.
Think about.
Driving affordability and so when you look at our electric whether it's built right on any metric.
Are below the national average, whether it's you know percent of median income whether it's average rate you know we look at our average rates in there 20% below the top 20 metropolitan cities. When you look on the gas side, our gas bill or some of the lowest in the states. We operate so I think that that's where you can see our history of continued financial discipline.
But that's that's important that we we look across all areas, whether it's the corporate centre at every utilities and I think it shows up it shows up as soon as an actor Michael where that jumps out at you is that in 2022 after the split.
Got a lot of talent go over to the other side of Truecar.
Installation and we continued to maintain our operational.
Performance metrics continued to be at that time. It was one keeping your O&M flat to below the rate of inflation in each of our operating companies continue to do that at our corporate center stepped up because one of our commitments and it continues to be one of our commitments when we announced the split that we would not let our corporate services.
Right as a result of that and we were.
Spending so much of that building over to the other side the business.
We ended the year on the split to go back to our commissions will be met that regulatory compact and that's what our process here, but team for their leadership and how they continue to diabetics and as I said earlier costs will always be made a focus of ours and other Christmas leadership with <unk> speed is that extra life has continued to raise the bar and meet that challenge.
I commit to you what we committed to leadership team will continue to do that.
Got it and I guess, one follow up on the cost side, because I was kind of probing for a little more granularity and kind of where when you benchmark performance.
You see the opportunity sets within the organization to kind of get the cost performance hub.
Thats kind of a follow on if you can give a little detail. The other is we're starting to see companies that have formed via years and years of combinations.
Recognize that there is a little bit of hidden value in corporate real estate given the fact that you serve a lot of urban markets. Just curious how you're thinking about the real estate footprint of the company and whether there is value that maybe not necessarily being the owner or the lessor of all of that real estate.
Seeing companies like one of your T&D neighbors in the Midwest mid Atlantic and we sell piccinini with their headquarters a year or so ago, just curious how youre looking at that opportunity set as well to both lower cost to improve the income statement, but also to improve customer bills.
Yes.
We haven't we continued to look at that I'll review of our consolidated our control centers across our fleet. We continue to look at how this new hybrid work environment in some of our areas. What does that mean for office space and that's part of our real estate portfolio of supply chain, we continue to drive those costs out of our business.
But as we've said affordability is going to remain a focus and we're going to look at every opportunity we have to drive it and I'll turn it over to Chris.
Well I think.
You're used to us having the nuclear benchmarking book.
Every nuclear operator shared.
Operational data.
And their cost data.
You see Chi we've got a lot of information from them.
So we had very solid bench.
Benchmarks.
What we know is the national rates.
Word ability of rates.
And.
Thank you Steve.
But you're not going to get the same level of disclosure from every surety.
They are clear.
So.
The team has to work hard.
Not only are benchmarking ourselves against ourselves.
Also flagged.
Partners.
Let us benchmark with them work with us.
We have a very high levels of comp.
Great.
With these affordability metrics.
And.
The total cost to the consumer.
Were far below average.
Mark.
The costs of putting a full cost of transport.
We just don't get down to that level of detail.
Sure.
So we.
We'd have to depend on.
Our own challenges.
Depend on some that we can benchmark with.
And continue to drive other indicators to ensure we're providing the services to spreads.
Got it and could I ask you Chris.
Okay.
Sure.
I think that's the end of the call.
I'd like to thank you for joining the call today the team looks forward to see many of you.
Hi.
Later that month this month.
With that I'll, just close everything out.
Thank you all.
Thank you. This concludes today's conference call. Thank you all for participating you may now disconnect and have a pleasant day.
Yeah.
The conference will begin shortly to raise your hand during Q&A you can dial one one.
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