Q4 2022 Fortis Inc Earnings Call
Ladies and gentlemen, please standby the conference will begin momentarily.
So for a question. Please press the star followed by the one on your telephone any time during the presentation. We thank you for your patience and ask that you. Please remain on the line.
Ladies and gentlemen, thank you for standing by my name is Laura and I will be a conference operator today welcome to the fortress 2022 I know Ernie.
<unk> conference call and webcast during the call all participants will be in a listen only mode. There will be a question and answer session. Following the pacification.
At that time, those with questions to press star followed by the number one on the telephone keypad if at any time during the conference you need to reach an operator, Please press star zero.
At this time I would like to turn the conference over to Stephanie Mimo. Please go ahead Mr. Mimo.
Thanks, Laura and good morning, everyone and welcome to Fortas's fourth quarter and annual 2022 results Conference call I'm joined by David Hutchens, President and CEO , Jocelyn Perry Executive VP and CFO . Other members of the senior management team as well as Ceos from certain subsidiaries.
Before we begin today's call I want to remind you that the discussion will include forward looking information, which is subject to the cautionary statements contained in the supporting slide show actual results can differ materially from the forecast projections included in the forward looking information presented today.
All non-GAAP financial measures referenced in our prepared remarks are reconciled to the related U S. GAAP financial measures in our annual 2022 M. DNA also unless otherwise specified all financial information referenced.
Is in Canadian dollars with that I will turn the call over to David.
Thank you and good morning, everyone 2022 was a great year for Fortis, our utilities invested $4 billion of capital for system, resiliency and modernization and to interconnect cleaner energy to our systems. These investments translated into strong earnings and rate base growth demonstrating the value of our organic growth.
Strategy and supporting our roughly 6% dividend increase in 2022.
On the sustainability front, we reduced our 2022 annual greenhouse gas emissions by 28% since what since 2019, keeping us on track to reach our carbon reduction targets.
As part of their annual Board Games report the Globe and mail ranked number one among 226 companies in the S&P <unk> composite index for good governance, reflecting our board's commitment to best in class practices.
And most importantly, we remain focused on delivering safe and reliable service to our electric and gas customers across our North American utilities. These are the core tenants of our value proposition and at Fortis. We keep these at the forefront as we mitigate and respond to the impacts of climate.
Change.
And while our reliability metrics continued to outperform industry averages in 2022 our utilities remain committed to investing in their energy systems to better withstand the increasing frequency of severe weather events.
And with the backdrop of inflation, reaching 40 year highs. Our teams that successfully managed average annual increases in controllable operating costs per customer to approximately 2% over the past five years by finding efficiencies through innovation and process improvements.
And while we have limited ability to control energy commodity costs that are passed through directly to our customers in some jurisdictions we.
We are helping our customers manage their bills by extending recovery periods and through energy efficiency and payment assistance programs.
Over a 20 year time frame Fortis has delivered average annual total shareholder returns of approximately 11% or 751% in total well above the benchmark indices shown on the slide.
While our one year total shareholder return for 2022 was below our historical average returns we expect to continue to deliver stable and compelling returns over the long run.
At Tucson Electric power the closure of our last unit at the San Juan generating station renewed removed. Another 170 megawatts of coal fired generation from our portfolio and contributed to our 28% reduction in scope, one emissions compared to 2019 levels.
With this progress we are more than halfway to achieving our target to reduce greenhouse gas emissions, 50% by 2030 and are on track to meet our 2035 target of 75% reduction.
Achieving that target, we expect our assets will be primarily focused on energy delivery and renewable carbon free generation.
Last year, we also established a 2015 net zero scope on greenhouse gas emissions target.
Ian, forcing our long term commitment to decarbonize, while ensuring we preserve customer reliability and affordability.
In the fourth quarter, we rolled out our new $22 3 billion five year capital plan, our largest to date.
The plan consists of virtually all regulated investments and a diverse mix of highly executable projects supporting rate based growth across our portfolio of utilities.
It also includes $5 $9 billion for investments is directly support cleaner energy.
Over the next five years, we expect rate base to increase by $12 billion from approximately 34 billion in 2022 to over 46 billion in 2027 supporting average annual rate base growth of six 2%.
From a growth perspective, our teams continue to pursue opportunities beyond the base plan.
Key areas of focus include incremental investments supported by the inflationary reduction Act and the U S climate adaptation and grid resiliency as well as LNG and renewable fuels.
Progress also continues on MISO is long range transmission plan as.
As we previously discussed ITC anticipates transmission investments in the range of 1.4 to $1 8 billion U S dollars through 2030 for tranche one.
ITC currently has 700 million U S dollars of this estimate included in their five year capital plan.
Tranche two is well underway with the initial concepts identified by MISO in late 2020 to.
The second tranche will look at a new future dubbed <unk>, which calls for more renewable penetration and higher electricity demand and while it is still early in the planning process MISO Board approval of tranche two projects is targeted for the first half of 2024.
The inflation reduction act is expected to support T piece clean energy transition by reducing the cost of new renewables and providing funding to aid the communities impacted by the exit from fossil fuels.
The <unk> team continues to work through its all source request for proposals, which seeks to secure renewables and energy storage to support their transition away from coal.
In total we asked to make incremental investments of approximately $2 billion to $4 billion through 2035 will be required to implement tep's current integrated resource plan GP expects to file an updated plan later this year.
Next turning to slide 10, we increased our dividends paid per common share to $2.17 in 2020 to up approximately 6% from 'twenty to 'twenty, one marking 49 consecutive years of dividend increases.
Looking ahead, we remain committed to building on our track record through the execution of our organic growth strategy that supports our 4% to 6% dividend growth guidance through 2027.
Now I will turn the call over to Jocelyn for an update on our fourth quarter and annual financial results.
Thank you David and good morning, everyone before I get into the annual results I want to briefly touch on our fourth quarter performance reported earnings were 370 million or 77 cents per common share eight cents higher than the fourth quarter of 2021 adjusted earnings were $347 million or 72 cents per.
Common share nine cents higher than the fourth quarter of 2021.
The key drivers of growth include strong regulated rate base growth across our utilities as well as higher sales in transmission revenue in Arizona.
Higher hydroelectric production and beliefs, which was up significantly from historically low levels in the fourth quarter of 2021 and higher gas margins at Aitken Creek also contributed to earnings growth and.
And finally foreign exchange favorably impacted the translation of our U S denominated earnings during the quarter.
Corporate costs for the quarter reflect higher finance costs and taxes.
On an annual basis reported earnings were $1 3 billion or $2.78 per common share 17 cents higher than 'twenty 'twenty. One adjusted earnings for 2022 were also $1 3 billion or $2 78 per common share as the adjustments to reported earnings offset one another in 2022.
Adjusted earnings per common share of 2.78 represents 7% growth or approximately 6% absent foreign exchange impacts.
The waterfall chart on Slide 14 provides the annual EPS drivers by segment and while there were several market factors impacting our 2022 results underlying growth from our regulated utilities was the primary driver of year over year growth.
Our largest utility ITC increased EPS by <unk> <unk>.
Again reflective of strong rate base growth.
Our stock based compensation costs at ITC in 2022 were substantially offset by losses on investments that support retirement benefits higher non recoverable finance costs and gains recognized on interest rate swaps in 2021.
The 7% EPS increase from our Western Canadian utilities was driven by rate base growth.
The increase in EPS of six cents for our U S electric and gas utilities was mainly driven by U N S. In.
In Arizona higher sales in transmission revenue more than offset higher costs associated with rate base growth not yet included in customer rates higher operating expenses and losses on investments supporting certain retirement benefits.
Our energy infrastructure segment contributed to a five cent EPS increase mainly driven by higher gas margins at Aitken Creek.
Rate base growth and higher electricity sales in eastern Canada, and the Caribbean contributed three cent increase in EPS compared to 2021.
Foreign exchange favorably impacted the translation of our U S denominated earnings, which increased annual EPS by approximately six cents.
The EPS change in corporate or 11 cents was mainly driven by mark to Mark losses on both total return swaps and foreign exchange contracts as well as higher finance costs. The remaining decrease was largely related to increased corporate costs and taxes.
And as a note the mark to market losses in the corporate segment was more than offset by the favorable foreign exchange impact just discussed and lower stock based compensation recognized across the utilities in 2022.
And lastly, with our dividend reinvestment program EPS decreased four cents due to higher weighted average shares outstanding.
As you can see on slide 15, we were active in the capital markets again in 2022 issuing over three and long term debt.
Debt issued at Fortis, Inc. An ITC holdings, mainly refinance maturing debt, while our regulated utilities issue debt and supported their capital programs.
Debt maturing at Fortis, and ITC holdings averages approximately $400 million U S annually through 2025.
With our recent debt issuances, coupled with almost 4 billion available on our credit facilities. We continue to maintain a strong liquidity position supporting our $22 3 billion dollar capital plan as David mentioned earlier.
And despite several macro headwinds in 2022, we saw an improvement in our credit metrics and achieved a cash flow to debt ratio of 11, 7%.
And when you consider the impact of foreign exchange the ratio is actually 12%.
Our credit metrics, coupled with Fortis is low business risk profile continued to support our investment credit ratings.
Turning to some of our ongoing regulatory proceedings since we last updated the market at ITC for issued an order in November denying the complaint filed by the Iowa coalition for affordable transmission, which sought to lower ITC Midwest equity ratio.
We also await next steps from FERC on the MISO base, ROE and supplemental notebook and transmission incentives the timing and outcome of both proceedings remain unknown.
In Arizona Tep's rate case is ongoing in its application to a P requested rate base of $3 6 billion U S dollars and allowed ROE of 10.25% and equity layer up 54%.
It was on a Corporation Commission staff have recommended a 9.6 allowed ROE with rate base and equity layer largely consistent with T. P request, we bought all the testimony is expected to be filed over the next month with hearings scheduled to commence in late March.
Last month Central Hudson filed a response to the New York Public Service Commission show cause order regarding the deployment of the utilities new customer information system.
Central Hudson has devoted significant resources to rectify matters with the system and are making strong progress and resolving any remaining billing issues the timing and outcome of this proceeding remains unknown.
At Fortis BC, the generic cost of capital proceeding remains ongoing with a decision expected in the second quarter.
And lastly, the Alberta Utilities Commission issued a final decision in December approving for to sell part is 2023 revenue requirement, reflecting a 5% increase in distribution rates. The decision is expected to form the basis for going in rates for the third PBR term starting in 2024.
With that I will now turn the call back to David.
Thank you Jocelyn to recap in 2022, we invested $4 billion in capital delivered strong EPS and rate base growth further reduced our carbon emissions managed operating costs and we're recognized as a leader in Canada for our governance practices. These accomplishments wouldn't be possible.
Without the continued commitment of our 9200 people.
Moving forward, we are focused on executing our $22 3 billion capital plan, which will drive rate base growth of 6% and support our dividend growth guidance of 4% to 6% through 2027.
That concludes my remarks, I will now turn the call back over to Stephanie <unk>.
David This concludes the presentation at this time, we'd like to open the call to address questions from the investment community.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the number one on your Touchstone follow if you would like to invite your request. Please press star followed by the number to one moment. Please for your first question.
<unk>.
Your first question comes from the line of Maurice Choy from RBC capital markets. Please go ahead.
Thank you and good morning, My first question, Dave You mentioned in your prepared remarks that there is an incremental spending of $2 billion to $4 billion.
Through 2035 to implement the current T. P. I R. P. Although there is a new plan later this year, how would you characterize the impact of the IRA on the spending is it a case, where the mountains like a change or go up or is it a case, where the mix of projects will change and also on timing is there a way.
You can accelerate the decarbonization projects.
Yeah. Thanks, Mark for that question actually it so it might be a little of everything and that's what we're doing the integrated resource plan update now is to figure out exactly what that means from a timing perspective.
Investment opportunity perspective, as well as <unk>.
Cost associated with the renewable energy investments that we have to make to keep on that.
Transition path that we have there I'll have to say that probably one of the biggest benefits of the inflation reduction Act.
Is that those tax credits not just that there are those tax credits, but that those tax credits are transferable I think that really levels. The playing field between utility investments and Ppas. So you don't have to find some fancy way of finding the tax equity et cetera. So in.
All things being equal I think that's a another notch in the column for doing more utility owned and utility constructed.
Renewables.
And maybe just a follow on to that you obviously have a new.
Person within the commission there.
Any any thoughts about changes in how the commission or chair it looks at things in terms of affordability in terms of decarbonization.
Not not right out of the gate I'll, maybe turn that over to Susan to see if she has any opinions. After her initial conversations with the with the new commissioners there.
The Arizona Corporation Commission it is.
Obviously after the election, we've got two new commissioners and we're looking forward to.
In our cases adjudicated.
Adjudicated before them, but.
But I'll turn it over to Susan to answer that in a little more detail.
Okay. Thanks, Dave and thanks, Maurice for the question, Yes, I do think it's early to tell.
Our new composite can assure as well.
Will affect policy this year, but we do have any chair Mr. O'connor do you have two new commissioners, we've actually met with the new commissioners. They came down to Tucson last month, which I think is a really good sign that they're interested in understanding our operations. They wanted to see our generation fleet. They wanted to see.
Control room, where we where we participate in the energy imbalance market. So I think there's a greater understanding of our business.
Well always lead to better better outcomes, we really pride ourselves on having strong relationships with our commission and and that trend is continuing with these new commissioners, but I do think.
In terms of policy, it's pretty early to tell how the new chair and the new commissioners well.
Impact policy.
Great. Thanks for that and maybe I'll just finish off with.
Certain matters there are obviously, a number of regulatory items that remain outstanding.
How do you see these getting resolved with a four member for makeup being what it is right now and maybe as a quick follow up thoughts on the MISO base or where you. What are you booking in right now and then if there is a possibility of proactively requesting and justifying for higher rates.
Yes, Thanks, Marty So I think we've we've talked about this in the past on it's really tough to see where some of these.
Policy decisions are going to land and how it's going to be executed with a with a two two commissioned two Republicans and two Democrats in and seeing how that.
How the commission functions under the new interim Chair Chair Chair Phillips, we do think that based on a chair Philip's comments that he's really going to be pushing down the same path to get some of these.
Policy issues that are in the neighbors, the transmission planning and cost allocation no for us as well as the interconnection queue or it seems like he's really going to continue to progress those.
Has it has a big strong focus on reliability as you might imagine from his history working for Newark.
But also on making sure that.
There's a there's a energy equity.
And energy Justice.
And in some of these decisions as well so what we're looking forward to seeing him move forward on those dockets.
On the ROE.
So you're going to turn that over to Linda Apsey, our CEO of ITC because she can explain exactly.
Her thoughts on that.
Great Yeah. Thanks, Steven Thank you for the question.
We continue to book.
Book basically an assumed the $10 seven 7% all in ROE.
It's obviously, it's premature it's speculative to know or understand what FERC might do as a result of the.
CT reman off the base ROE case.
So we are continuing forward.
The current.
ROE projections with regards to.
Possibility for.
Our neutral five filing to file for a new ROE, that's certainly something that.
We continue to track and monitor as we continue to track.
So the mark to market rates, obviously, we are providing FERC with the appropriate sort of time, if you will to respond.
The heart reman, but we are continually in discussions.
Assessing our options with respect.
To whether we would move forward with a new updated till five filing.
At this time that decision has not been made up by MISO transmission owners.
Thanks, Linda I'd I'd, just add to that Directionally, obviously with the with the data that would be updated and any new Ro filing the current data and higher interest rates would be supportive of a higher Roe than the data that was used to set these prior.
ROE is back that data's 678 years old.
That makes sense thanks for the color.
Thanks, Mark Thank you.
Your next question comes from the line of Rob Hope from Scotiabank. Please go ahead.
Good morning, everyone I appreciate the thoughts on the Tucson rate filing, but I was hoping you could maybe dive a little bit deeper when you take a look at the staff testimony or the staff recommendation aside.
Aside from the ROE is there anything that gives.
It gives you pause for concern and how have conversations gone with other stakeholders I'll throw that may be a little bit early just given when the evidence is due.
Yes, I'm going to kick that over to Susan Greg I didn't probably properly introduce I, just introduced or Susan but you all likely know Susan grey as the CEO of our U S energy, so I'll kick it over to her to to give you some insight on where do we see that rate case gone.
Sure Yes. Thanks for the question Rob. So I think your question was do we have any concerns based on what stockpile, then I think that.
We think that what they filed with was largely in line with our initial our initial filing until we think that there is a pretty small gap between.
Their testimony and ours were still in the rebuttal phase. So the rebuttal testimony is due next week.
And we're optimistic that we can reach sun stipulation through this process and then go into the hearings went to start March 2019 and are in a pretty good position in terms of.
Agreements with staff and other other major.
Intervenors, we have not had significant conversations with the other intervenors at this time so.
I think there is a precedent set with the stipulations that were agreed to by staffing southwest gas in the southwest gas rate case that recently with settled.
So we're hopeful that we can also work with SaaS to get to some stipulations prior to the hearing.
Yeah.
Alright, I appreciate that color.
Moving north can you give us some updated thoughts on the build out of LNG at Tilbury.
We're able to get some first nations agreements. There recently, however, the regulatory framework is still slow and ongoing.
Yes, Rob that's great I'm going to actually I'm going to kick this right over to Roger Dell Antonio.
<unk> been working on some of these agreements.
As recent as last week, so he's got the most recent update.
Thanks, Dave Marine Rob So on Tilbury theirs too.
Primary regulatory processes, one is the environmental assessment on the jetty, which is.
The infrastructure to allow for filling a bunkering barges to fewer marine vessels.
Second is the environmental assessment for the Buildout of the Tilbury site, including a storage tank and additional liquefaction.
In both instances the environmental assessment office there is.
We see significant focus on it did yes support for those projects.
The deals that we've been announcing.
Recently.
Primarily focus on.
Uh huh.
<unk>.
The Jedi process. That's currently now.
With both the provincial and federal environmental assessment offices for referral.
We're hoping to see a decision on the jetty.
At some time in the next few months and the environmental assessment process for the Tilbury Buildout tank NIE for the liquefaction.
Is in the stage of preparing the detailed application working with the environmental assessment process in scoping out the the.
Application as well as considering how do you engage indigenous communities to have Indian sled environmental assessments as part of the process.
I appreciate it thanks. Thank you.
Your next question comes from the line of Linda <unk> from TD Securities. Please go ahead.
Thank you I'm wondering if you could give us a sense of how.
You view, the relative attractiveness of different financing options.
With the filing of your short form base shelf prospectus wondering where pres shares sit in terms of your leavers to finance either your current capital plan or if you choose to maybe accelerate some of the decarbonization initiatives.
And add to the current plan can you talk about also your capacity to add new projects to the current plan.
Before considering.
Other leavers that like a discrete common equity.
Thank you Linda this is jocelyn yeah. So with press yeah, that's certainly a part of our toolkit today and so we're always watching that market.
When we laid out our five year capital plan in the fall right. It was a pretty simple funding plan that we had for that $22 3 billion capital no discrete equity just the drip.
And most of the debt is that the regulated entity at Fortis, Inc. Perhaps certainly will be a part of the equation and we're looking at all sources of funding, but very very simple and we expect to keep our balance sheet, where it is from a capacity perspective.
I actually like.
Clearly it depends on drip participation, which remains quite healthy.
Thus far.
It really going to depend on the timing of any additional capital right I mean, if if for some chance that we.
We advance forward the L. R T P projects.
Choosing those as an example are the are the investments in Arizona.
It's possible that we know we all go back to the drawing board, but I actually feel there's there's certainly a bit of capacity in our.
In our plan today, so it's not no immediate need that if we see some are you know variances from our annual plan right now that we'll be able to handle it but if if in fact, we see a material change then as I always say Oh, I guess, we go right back to the drawing table and everything goes back on the table, but we do have a bit of.
Capacity in our funding plan today.
And are doing some bit more green.
I do expect more green financing is coming out of our subsidiaries, we're seeing more and more green financings, because we're getting more and more involved in cleaner energy investments. So I do expect to see that trend to continue as well.
Thank you I appreciate the context and maybe just on the on the flip side of the equation.
Recognizing that affordability is at the forefront in many jurisdictions.
What are the thoughts on potentially deferring other discretionary capital to the extent that.
Fortis and its subsidiaries choose to accelerate green initiatives.
And what sort of.
[noise] forbearance is there at the rating agencies to continue to kind of defer recovery of those expenses as kind of the customer.
Customer Bill pressures.
One of the lever as well to consider.
So I'll I'll I'll start that answer Linda I think on deferring capital. We don't we don't see that as necessary on a going forward basis, you have to remember that.
Not all capital immediately either contributes to rate increases or even shows up in rate increase we always like to prioritize our capital based on <unk>.
Doing that capital first that.
Saves our customers money you know the old Baxter opex kind of a kind of trade, even though the resource.
<unk> that we're doing down in Arizona, as we shut down a coal plant and remove the fuel and O&M and replace it with investments in infrastructure. It's a it's a good story for customers investors and in the planet. So those those are the things that we're really focused on it and we can't slow down the necessary investments that we need to make in reliability.
<unk> and resiliency in fact, those are ones that we probably need to step up more on a going forward basis to make sure that our systems are ready to handle more severe weather events going to going forward.
So that's that's kind of on the on the on the capital side and on the on the cost control side, that's something that we're always focused on so we know that every every dollar that goes in there we want to figure out how much that how much of that we can offset with other with other costs and that's that's really.
Things that we that we can do across the board. So we start with.
Obviously, managing our capital managing our expenses looking at innovation and efficiencies as best we can we look at the entirety of the Bill what are customers use focus on energy efficiency conservation programs. We focus on you know in our vertically integrated utilities on how we dispatch that energy to maximize.
The benefits of being in the market for our customers and at the end of the day as you alluded to.
We have to find a couple of things for assistance for our customers. One is February eight assistance to help them pay their bills, if they're if they're struggling which is something that we always do in the obviously step up even more so than in hard economics time at times like we're focused.
We're in today, but we also look at ways that we can.
Since you use our balance sheet, when we need up you need to use our balance sheet to spread out some of these cost recoveries and smooth the bill impacts for our customers and those are things that we have done in the past and will likely do going forward just to help manage our that affordability and the impacts on our customers.
Okay.
And just to clarify the debt rating agencies have they communicated kind of any sort of notional limit to how the balance sheet can be used to smooth out bill impacts or is that de minimis in the grander scheme of things with them.
But Linda this is jocelyn no they have not specify them.
That detail, we have conversations with them of course about.
How we plan to fund the capital program and how we see recovery in affordability is clearly a part of that discussion, but they've not defined any boundaries by which you know we can execute and fund the capital program.
Thank you I'll jump back in the queue.
Thanks, Linda your next Gen.
Next question comes from the line of Mike Harvey <unk> from CIBC capital markets. Please go ahead.
Yeah.
Okay.
Thanks, Good morning, everyone.
I just wanted to talk about the sort of longer term or medium term growth prospects at ITC.
Now.
Five year plan Youre looking around 6% rate base growth as you look into.
So long long term.
Planning prospects there too you talked about David.
Mutations around maybe seeing a higher growth in the back half of a decade is we're seeing some other transmission coming just from ISO growing north of 8% is that something you guys think you can achieve.
As you're going through our planning processes.
So mark that's a great question and it's early days for that right now I think.
As we put out our five year capital plan.
Want to press last fall right. So we immediately then start on the on the next one.
And we tried to see how far out we can look on these investment opportunities in the long range transmission planning process is a long process in it.
Obviously early days in tranche two we like what we see in the early days, but we have no idea, where that's all going to land and we won't for a bit longer. We don't expect those those final projects to really be approved by the MISO board until the middle of next year, but we'll have more information each quarter as we go along and as that process.
Proceeds, but it's really hard to see.
How much and where those will fill in the in the out years.
Even in the in the tranche one that we have we have less than half of our estimate in the next four years with the remaining part really in the following three years. So we can kind of see how that stacking up but beyond that it's just this layering effect of additional transmission projects, where they go in and how they can be supported the tie.
For permitting and siting etcetera so.
It's too early to really give you anything other than Directionally, we think that there's going.
B B.
Fair bit more transmission, while I'll say not just in MISO directionally in the United States I will say in North America we.
We will see a much more robust investment thesis on transmission, we see the inflation reduction act and how that is driving it.
The ends of this conversation the generation transits in the renewable energy clean energy of any kind and then of course on the demand side looking at electrification manufacturing et cetera.
We have to make sure that we're focused on the middle part, which is the transmission and distribution. That's between those two and that's the investment that we think is really going to be.
I can off here going forward, we just can't put numbers.
On it but we do know directionally it should be up.
Okay, and then maybe coming back a little bit of a different direction or is there any elements of itc's footprint agency assets capacity available right now that we're constrained.
The upside case relative to other transmission operators in the region.
Or whether it's more challenging permitting are citing in terms of where you operate right now.
No. There's no I don't I don't see any reason that the ITC would be challenged any more than anyone else as to bold transmission in fact.
I might say in it.
That team on the back and say that they're probably the best transmission planning and development team out there so.
If there's if there's ways to do it and they've got a great footprint too right I mean, they're in MISO.
It was basically wind alley, and even even solar alley to to some extent.
So the ability.
The number of projects, particularly as you look at the planning process, that's going on in MISO and our expertise in.
In my view should put us.
Ahead of the curve.
Okay. That's good to hear and then just turning to central Hudson and in terms of the customer information system.
To at all give any color in terms of potential range of outcomes and if it's just sort of onetime penalties you might be faced or if there's other sort of more I guess recurring pressure in terms of earnings profile at central Hudson and they come out of this precedent.
No. It's it's hard to say, what's going to come out of the proceeding. We're obviously we answered the the show cause order there and now we will have conversations with our regulators in and tried to figure out where this is going most.
Most of the O&M impacts that we have seen in 'twenty, one and 'twenty two.
Were to get the system to where it needs to be.
And we continue to make additional changes and adjustments and tweaks to that system. As we go to make sure that it's you know we got to get to the point, where it's ultimately.
Operating as designed which we think we're getting close on.
But we won't see the ongoing.
M drag that we saw the last couple of years, but as far as penalties. That's that's hard to hard to figure out now I think we have got a good response to that show cause order and we just need to explain the situation and get ahead of it.
Got it thanks for the time this morning.
Yeah.
Thank you. Your next question comes from the line of Ben Pham from BMO. Please go ahead Sir.
Alright. Thanks can you hear me okay.
And then we can hear you okay great.
I was wondering on your electric versus gas mix.
How do you think that that mix changes.
Or will it change over the next five years and then.
Do you have an internal target of where you want it being once the Capex program is to this current Capex program is complete.
Right.
Yeah, No. We don't we don't have like a <unk>.
And makes other than what you can see clearly in our five.
Five year capital plan and the level of investments that we see there in fact, a Florida SBC is still a very.
Growing utility and I think it all for all the right reasons. There is not just the natural gas service territory, but they'll have there, but some of the LNG investments they're making.
To help reduce greenhouse gases and other people's neighborhoods.
That's a great asset for us to harvest and still has very strong growth. We don't have any designs are changing.
On purposely changing that mix going forward.
Okay, Great and then can you share for <unk>.
2022.
<unk>.
Realized returns.
Or is there any any utilities that.
And our earning below their loud.
<unk>.
Okay.
Yeah, I don't know I don't have that at my fingertips and.
But yeah that's.
I don't have that handy, obviously, when you look at regulatory lag cycles.
Just.
I'll, just say philosophically, what you would see.
Like in Arizona is that you probably wouldn't be quite earn your return rate as you're getting into a rate case, because after a few years of lag you would see a dip, but I actually don't have those numbers at my fingertips.
Okay, and then maybe.
Maybe lastly on on your.
And maturity schedule on that and your breakup between non ragen.
And regulators have that's quite useful.
You expect.
To recover to interest rate change and then not I'm sorry in our regulated.
Maturing debt and rates.
Oh, yes.
There'd be a corridor of are proceeding well.
Utilities, some of our utilities have mechanisms that track it but it certainly will be proud of the rate case, and we've not had any issue in front of the regulator recovery.
These types of costs, so we're not anticipating any problems going forward.
Okay perfect. Thank you.
Thanks, Brian .
Thank you, ladies and gentlemen, as a reminder, should you have a question. Please press star followed by the number one on your telephone keypad.
Your next question comes from the line of Richard Sunderland from J P. Morgan. Please go ahead.
Hi, Good morning, and thank you for your time today I wanted to circle back to Mike So in the future too.
Could you speak a little bit to what this refresh scenario considers versus the old future too and how thats translating to the early stages of the tranche two process versus I guess, what you were witnessing at this point in time for tranche one.
Yes, I I don't know the exact tweaks between what they did to future too to make it future two way.
So they they just to be clear, though I mean, the first tranche tranche. One was was based off of future, one which was the kind of lowest level of electrification and the.
And the probably lowest level of resource transition and renewable integration so future two which was in the middle obviously future three was the one that was the was the fastest on both of those.
And if you remember historically and this is data that was now a couple of years old they put.
Price tags on those different futures of $30 billion for our.
Future, one and up to $80 billion for future through future tea in the middle I never had a number on exactly what that future invest.
The investment portfolio would look like.
But it's.
I don't know if it's quite halfway there or not but I don't know the exact adjustments that were made.
Maybe Linda has a little bit additional color on what <unk> includes.
That that you could share.
Yeah, Dave they have not yet released specifically their updated assumptions into a however, we do know directionally, it's being updated to assume.
Greater level of renewables penetration update for utilities carbon reduction goals as well as increased load projections based on electrification. So I would say from a directional perspective.
All pointing in the direction of a more probably ultimately a more realistic scenario what the future looks like.
I think from a <unk>.
<unk> mission perspective, I think what Directionally result in the need for more transmission interconnect more renewable generation resources.
Got it that's very helpful color and just one follow up on the MISO fraud.
You again around the trust II process, you're hearing anything from me so on.
Now they might tackle kind of the greenfield versus brownfield split or how they're baking that into our analysis, obviously spent a lot of attention over the past few years.
Some of the headwinds on Greenfield transmission development. So just curious if you're hearing anything from MISO on on this front with the latest tranche.
Go ahead, Linda Thank you yeah. Thanks.
I wouldn't say any.
Great.
<unk> I think there is recognition that yes, I mean, certainly as we.
Drive to build out more and more transmission investment the sighting.
Certainly more challenging to get the necessary land.
I would say at a high level Directionally, certainly theres a lot of.
Encouragement to the extent that you can.
Upgrade existing infrastructure or upgrade to the infrastructure and existing rights of way.
That can certainly help to facilitate the realization of those projects.
But in terms of MISO.
Being sort of.
Yeah, I would say directive or assuming those things in their planning process.
It does not really emerge I think they leave that more to the specific transmission owners.
Two identify and determine.
The specific.
Routing sighting.
And ultimately the necessary siting requirements.
But I would say just dramatically just given the transmission is getting more difficult to build and land is getting more difficult.
To acquire yes, I mean, I think solutions that would.
Look at utilizing existing rights of way structures towers would be certainly.
Beneficial and realizing the investments.
Great. Thank you for taking my questions.
Absolutely Thanks, Ed.
Thank you. Your next question comes from the line of Patrick Kenny from National Bank Financial. Please go ahead.
Thank you and good morning, everyone.
Just back to <unk> on the on the wood fiber gas pipeline.
I know, it's relatively small in the Grand scheme of things, but just with respect to the.
A 20% increase in the total cost up to $420 million I believe.
Is the expectation that you'll be able to earn on the full final price tag.
Whatever that ends up being by 2027 or is it just the original $350 million and then you'll have to absorb any excess costs above that on the balance sheet.
No no we we wouldnt absorb any any excess costs, there's a bit of a complicated formula and the close and contributions in aid of construction that that.
Wood fiber would pay for in the remaining part all of our investment will go into rates.
Okay perfect. Thanks for that and then.
In Alberta.
Just given how high power prices have been here I know you've received approval for a 5% increase in.
Distribution rates for 2023, but just wanted to.
Check in on how you're thinking about managing or perhaps smoothing of future rate increases.
And if you're getting any.
Pushback from the regulator on the pace of rate base growth.
Until power prices settle back down.
Yeah. That's a great question because it's the same thing that we're seeing in every one of our jurisdictions and in Alberta, where just the distribution.
System operator, there so.
Our rates are very kind.
Kind of slow and steady increasing part of the bill it's not a not.
Not a very volatile it's not volatile at all so this is the the rate increase that we got going into this year.
<unk> pales in comparison to the increases that they're seeing in the actual power part of their build the energy part.
So we're obviously watching that we invest in as we need to invest in the system and the needed reliability upgrades that we need to do to connect new customers, obviously, the Alberta economies a bit cyclical. So we see the boom in Boston growth and where we're seeing good growth there now and hopefully.
A long period of time.
So we were cognizant of that.
Cost focus, but it's really not our part of the build thats, causing the eggs, we just but we do know though that its a total bill perspective.
The regulators look at in that province.
But we're doing what we can control the cost that we can control, but we still have to make those investments we need to make in the in.
The system.
I appreciate the color thanks, David.
Thank you there are no further questions in the phone line at this time Ms. Stephanie Miller.
This continued for any closing remarks.
Thank you Laura we have nothing further at this time. Thank you everyone for participating in our fourth quarter and annual 2022 years at this conference call. Please contact Investor Relations should you need anything further thank you for your time and have a great day.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating ask that you. Please disconnect your lines have a lovely day.
Yeah.