California Water Service Group Q1 2023 Earnings Call

Good day and welcome to the California Water Service Group Q1, 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

You would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question. Please press star one again.

Now I'd like to welcome Mr. Thomas Scanlon corporate controller to begin the conference Tom over to you.

Thank you April and good morning, and welcome everyone to the 2023 first quarter results call for California Water Service group.

With me today is Martin <unk>, our president and CEO and Thomas <unk>, Our Vice President and Chief Financial Officer.

Replay dial in information for this call can be found in our quarterly results release, which was issued earlier today.

The replay will be available until June 26, 2023.

As a reminder, before we begin the company has a slide deck to accompany the earnings call this quarter.

Slide deck was furnished with an 8-K yesterday afternoon and is also available on the company's website at Www Dot Cal water group dotcom.

We're looking at this quarters results, we'd like to take a few moments to cover forward looking statements. During the course of the call. The company may make certain forward looking statements.

These statements deal with future events, they are subject to various risks and uncertainties and actual results could differ materially from the companys current expectations.

Because of this the company strongly advises all current shareholders as well as interested parties to carefully read and understand the company's disclosures on risks and uncertainties found in our Form 10-K Form 10-Q press releases and other reports filed from time to time with the Securities and Exchange Committee.

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I'm going to pass it over to Tom to begin.

Thanks, Tom.

Morning, everyone and thank you for joining us on our first quarter results call.

Going to start on slide number five of the slide deck.

As just a table of our financial results for the first quarter.

And what Youll see there is a large drop in revenue, which I'll get to you Andrew.

We had a decrease in operating revenue of $41 9 million or 24, 2% that.

That lines up with the decrease in operating expenses of $15 3 million.

That's a reduction of nine 3%.

Those among the other things that went on during the quarter was that we had a net loss.

The first quarter of 2023 of $22 2 million or <unk> 40 per share and that compares to net income of $1 1 million or <unk> <unk> per share in the similar quarter last year.

Want to highlight and we'll talk a little bit more later about the increase in capital investments of 19, 7% in the quarter and that is.

Certainly good news.

The company's business plans.

Turning to slide number six.

The big story for the quarter that.

That we are describing in this document and in the press release is that we had a combination.

Severe weather in our main service areas in California, very wet and cold weather here in California, and really what I would call a gap in our regulatory mechanisms.

This gap is temporary and we will talk a little bit probably a lot about where we go from here in terms of those mechanisms. So on slide six the big impact revenue, both billed and Unbilled revenue.

Again, the extremely wet winter in California, we saw a 12% decrease in our sales and remember that sales in California are usually quite low to begin with in the first quarter in the.

The worst months of January February and March.

The weather pushed down our unbilled revenue accrual, a $5 8 million as compared to last year.

And here's where we get into the regulatory mechanism. So in 2022 during a similar period we had.

And offset a $12 1 million.

Our Ram and M CBA mechanisms and Youll recall from our past presentations that the Ram and the <unk> are no longer active in 2023 for Cal water.

And that's a regulatory decision from the commission.

Those mechanisms are being replaced somewhat by other mechanisms.

However, those mechanisms are tied up in the delayed, California general rate case and so.

We have on the deck year on again in the middle of slide six an estimate.

What would have been recorded had we had a rate case in two accounts that would have been impactful for changes in weather.

First is the <unk> account, which is the drought response memorandum accounts that he is an account that.

Tracks lost sales during a drought period and we are still in a drought period in California, we estimate that where the rate case effective during the period that balance would have been from $665 million to $7 million revenue recovery from the Green Dot account in addition to that the Monterey style.

Ram mechanism, that's a price adjustment mechanism not quite similar to our full decoupling ramp but.

A mechanism that would be in place with the rate case that.

That would have generated $9 $5 million to $11 million of revenue.

Not not yet regarding the potential for a rate increase you can see where the regulatory mechanisms that are not currently in place.

We will be in place once the rate case gets adopted.

Not a significant positive effect on us.

On the quarter.

The second item that affected revenue I wanted to highlight here is revenue deferral. So in accordance with GAAP. When we are collecting our balancing account balances in California.

We have to evaluate.

How much of that is going to be recovered within 24 months and because of large balances that we have and the ram and the other balancing accounts some of the surcharges to customers.

See that length of time, and so we've had the deferred revenue.

That deferral of revenue is the increase.

Increased deferral of $18 8 million for the quarter.

And that was offset by cost of roll up 15, four 4 million in the quarter and so again that doesn't have a lot of impact to net income, but you do see that on the top line on the revenue side.

Flipping to slide seven just a couple of other notes about the quarter.

We did see again.

Gain on our non qualified retirement plan assets as compared to 2022.

In the same period $4 $6 million gain there are water production costs fell as you would expect due to lower sales.

$6 5 million couple of other financial highlights I mentioned $82 million in capital improvements, we had heavy rains in a lot of the quarter in California. Despite that we were able to get a lot of construction activity done.

19, 7% decrease from the same period in 2022.

As you saw.

As we filed.

Right at the end of the quarter, we have a new revolving credit agreement to increase the amount available to the company and to Cal water.

$550 million to $600 million and that is a new five year revolving credit agreement.

<unk>.

And then just a reminder that beginning in Q2 in May here.

That water is expected to increase most customer rates by 4% on an interim basis pending the resolution of the ERC and thats been authorized by the administrative law judge in California.

Moving very quickly to slide eight which is our EPS bridge.

And this just shows the factors that I discussed.

The other the other two factors that I haven't mentioned al mentioned here.

Is that AG and other operation and maintenance expenses apart from the deferral that that decreased our EPS by seven Thats. Your typical operating expense increases on an annual basis and then.

About the fourth bar over is just what we would call property related expenses interest depreciation and property tax as a result of having a higher invested capital base for the company.

One thing that is not on this EPS bridge and if you flip to slide nine is any potential for actually a rate increase is associated with the California General rate case, and do you want to highlight that on slide nine and so.

The unrecorded regulatory mechanisms, we already talked about the last two.

The am Ram and the Dreamer accounts.

We also have an interim rate memorandum accounts remember that the California General rate case is effective back to the first of January of 2023, we estimate that had the case been adopted.

We would have seen at the interim rate memorandum account balance between 8% and $15 million and that represents the eight represents the position of the reefer advocates of $15 million represent substation Cal water and the case.

And so.

Theres a lot of caveat to that obviously the judges independent the judge can choose to change rates in whatever manner that they feel the evidence warrants, but that gives you a guideline of where the advocate is and where Cal water is with respect to the rate increase for the first of the first quarter, we would not anticipate booking that.

Mount until after our rate cases decided.

Is that that interim rate memorandum account as.

Scheduled for a recovery.

Finally, the fourth mechanisms the incremental cost balancing account.

And that is also tied up in the rate case.

In terms of understanding what the adopted quantities are going to be so we did not book anything for the for the incremental cost balancing account.

I will keep going with slide 10, the California regulatory update not a lot to report here.

First bullet is that we did see the cost of capital case, you get a decision extending the statutory deadline. They now have a deadline of August of 2023 fleet that case.

Commission.

Could complete the case, but by that time or are they kind of issue another decision extending their statutory deadline.

So we don't really have any information on that as a reminder, that our cost of capital case, one of the issues. There is whether it would be effective.

At the date of the decision or retroactively.

<unk> identified as we have for the last several quarters the potential impact to the company if that if that decision is retroactive back to January one of 2022. When it was originally expected to be effective.

And there is no update on the California General rate case during the quarter.

So I'll stop for a moment and turn it over to Marty to talk about the routes. Okay. It actually seems kind of odd to talk about a drop given what we've just gone through it with the winter, but certainly when we want to eat you up to date on kind of what's going on out on the west coast.

As Tom mentioned it was a record of winter for California, especially as of April 24, If you look at the percent of normal snowfall in Northern California, which is also the northern tier is our country region and about 217% abnormal snowfall.

And the central scenarios, which is around the lake Tahoe area that 251% of normal for snowfall and in southern California as of April 24 are at 322% of normal snowfall.

The significance of that I'll talk about a little bit later as I start talking about the potential flooding.

Accordingly, given the winter results and the number of atmospheric rivers that have hit the west Coast Governor Newsom in California.

Basically issued an executive order is emergency declaration of are still in place by the eastern another order that wouldn't that basically ease some of the drought restrictions that were in place throughout the states. If you remember in 2022, we're in a fairly severe drought.

And we were in stage, two and moving into stage three of a five stage plan for the state.

And he has some of those restrictions as we go into spring.

The emergency regulation that was adopted by the state water resources control Board remains in effect and that has an expiration date of six turns at June 10th.

The emergency declaration of the state water resources control Board extended.

And at that point, so we believe that.

The Dreamer account, which is the drought response Mercy memorandum account will stay in effect until the state water resources control Board resigns that emergency drought declaration.

So if you look at our Q1 drought expenditures that they were about $300000 in total it seems weird that product expenditures, but these are programs that were put in place throughout 2022, and the cost kind of trickle into as you move forward and in total in our memo accounts that we have with the California Public Utilities Commission, we have a balance of 2.2 mill.

Yeah.

Going on to page 11.

I don't want to give you a quick ESG update.

During 2022, we invested more than $6 $1 million in water conservation that resulted in a 180 million gallons.

Saved of drinking water.

Further our service areas, we completed our fleet study to identify ways to optimize replace and downsize our vehicles.

We continue to clarify our brains around key facilities to help minimize risk of wildfire and waste installed continue to install additional backup generators to enable us to operate DRAM power interruptions, which in as you may recall last year, we had a few of those in the state of California that were fairly big as the grid in the state that all tax we had all of our backup systems.

Running none of our customers went without without water.

And we developed and we refined our plans to operate our water systems as they are impacted by climate change, including heavy rains, which we just experienced lads droughts fires et cetera.

In addition on the personnel side, we provided unconscious bias training for over 95% of our employees and we increased our discretionary spending with diverse suppliers too.

24% during 2022.

Our new ESG report is scheduled to be published on May 16th, which as you know the ESG reports contain a lot of information.

But this year during 2022, what's included in the New report is information on our recently completed greenhouse gas inventory in our efforts to mitigate climate change. So I would encourage you to look at that report when it comes out on May 16th and all the work we're doing in terms of climate change mitigation.

Moving on to page 13.

On key fasten key for us.

Sure.

Mcl is that were issued by the EPA. They were issued in March and that was a draft set of standards that set the maximum contaminant levels for both compounds at four parts per trillion.

Based on the current information if it's adopted we estimated to be about a $200 million capital cost to get our wells that have <unk> RFP fast trace elements.

Into compliance at the draft regulation is adopted as it is currently written.

We would have to be in compliance by 2026, which is relatively quick.

But this is something we've been working on.

Last couple of years in our service areas and I think we have a pretty good handle on it obviously there is a big cost associated with it but we have also seen over the last couple of years that Theres a lot of government grant money. That's out there that may be available to offset some of this cost with our customers and certainly we would be looking to get as much as we can offset the cost.

Additionally, I just want to note that our regulators have a strong track record of allowing these constant rates once the mcl has been set.

And.

We look forward to working with them on the final resolution about people on P. Fast with our standards are going to be and then we have been in place for our customers.

Going to page 14, since we last met last month in March.

Just one kind of update on the business development side as the vessel Green acres.

The acquisition closed in 2023 that was in Washington, a as an adjacent service area that we were providing some maintenance services for that we acquire are now integrated into our service area.

And I'll hand, it back to Tom to talk about capital investment and depreciation.

Great. Thanks, Marty So on slide 15, just a quick update there.

Q2 updates to the slide first of all the yellow bar is still indicate the projected estimated with the California rate case.

Yes.

Going on ADT.

$82 million year to date in.

And Youll note that this does not include any capital expenditure or P boss too fast treatment. There is no changes on slide 16, the silver since the projection of the California General rate case, but we'll keep showing you that and hope to give you an update when we get more certainty on the rate case, I'll turn it back to Marty.

Summary, alright, thanks, Tom.

Yes.

I don't know what to say other than it's been an interesting journey going from a severe drought in 2022.

Through one of the wettest winters on record and record snowfall on record and.

And the state of California.

The winter results, coupled with the temporary absence of certain regulatory mechanisms pending our 2021 general rate case, which is as you know is delayed.

It's certainly made for an interesting and confusing quarter.

We anticipate that the potential of future recognition of these mechanisms once our general rate cases, finalizing a decision has been issued in the meantime, we will continue to do our best to provide clarity.

And as much disclosure as possible. So you can see how all these pieces fit together.

I also want to point out that as long as its ERC is delayed we anticipate that the quarterly results to be remain volatile pending resolution of these regulatory mechanisms that we've discussed here today and again the team that will do as much as we can to provide as much clarity as possible. While we worked with the California Public Utilities Commission to successfully conclude our 2002.

21 General rate case, and then quickly move on to our 2024 general rate case, which is a little over a year away.

Additionally, as I mentioned, the ESG report will be available on May 16th I highly recommend people take a look at that and all the work. The company has done, especially on the greenhouse gas side, which is a focus for us in 2022.

And certainly as we wait to get these regulatory decisions out of the way you know the work does not stop as Tom mentioned.

We had almost a 20% increase in capital investment during the quarter, which is which is pretty remarkable given the wet weather that we had on the west coast.

Additionally, as as the snow levels are very very high and as some of you read maybe the La times. This week are some of the other newspaper periodicals and the state Theyre talking about a quote unquote big melt, which obviously with those record snow levels in the Crs, which I shared earlier, coupled with the fact, we rapidly moved into a warm spring.

For example was 82 yesterday in San Jose.

There is a big concern of flooding in the central and southern parts of the state as the snow starts to melt and the reservoirs are full it just has to Milton and overflows and floods certain parts of the central central plants in California.

So our teams have been busy working on on our now are.

Putting contingency plans for the service centers that we support.

And then once we get through this next few months on the flooding in this risk will probably last for probably the next say four to six weeks.

Rapidly move into fire season, and as you as many of you know we do a lot of work.

Fire mitigation plans to make sure we're ready to go into the warm summer months too.

Be ready for what May come our way so a bit of a confusing quarter again, we're at the Mercy of the California Public Utilities Commission, we're encouraging them to be as quickly at work as quickly as possible to resolve our general rate case, and our cost of capital.

And until then we'll continue to provide the disclosure and we appreciate everyone kind of hanging strong with us as we kind of work through these issues.

Because it does get a little bit confusing. So April what that we are going to open it up for questions. Please.

Thank you speakers at this time I would like to remind everyone that in order to ask a question. Please.

Please press Star then the number one on your telephone keypad, well pause for just a moment to compile the Q&A roster.

Yes.

Yeah.

Okay.

So again, if you would like to ask a question. Please press Star then the number one on your telephone keypad.

Yes.

Our first question comes from the line of Jonathan Reeder from Wells Fargo. Jonathan. Please go ahead.

Hey, good morning, Marty and Tom how are you guys doing.

Hey, just a little bit of clarity on one thing so I know in the release, you said cumulatively, it's 24% to $34 million.

Kind of your estimated adverse.

Revenue impact in Q1 from the delayed <unk> does that include I guess, the deferred revenue component that you talked about the $18 8 million that was offset by I think it was like $15 4 million of deferred costs.

No thats unrelated so what we're talking about there Jonathan are the dream on account of six five to seven <unk>.

<unk> account of nine five to 11, and then the interim rate accounts, which is C. J E T.

So just those three accounts is what we're summarizing there.

Okay. Okay, that's what I thought I just wanted to make sure.

I know you spent a little.

Sorry, Jonathan with respect to the deferred revenue obviously as time goes by that becomes on deferred.

Because those surcharges are in place and so we would expect that that would start to accumulate back to the company.

Future quarters, obviously, it's not a permanent disallowance or anything like that.

Right right Okay.

I know.

You might not have a whole lot you can say on this matter but.

Any any sense of what a reasonable timeframe might be forgetting a proposed decision in the general rate case.

I think a L J.

At least got the PDL and Golden State water and that's the same.

L. J that you have for this case do you think it's something we're going to get.

By year end or certainly by yearend earnings where we can get the true up recorded in 2023.

Jonathan I think we're certainly hopeful of that if you look back to our last case.

The same judge in our 2018 general rate case, and we did have about.

A year delay there but as.

As far as the time that he took was about a year on that from the time that we filed in October two.

A proposed decision that came out in October and so.

With the clearance of the <unk>.

The case for Golden State I would certainly hope that that timeline is reasonable, but you never can tell and obviously just a reminder, that the Golden State case was really three issues and unrelated to revenue requirement, whereas our case has really big open issues as far as capital investments and expenses.

And so.

Bit more for into the site and are in our case.

So.

That's the guidance that I can give you as we're hopeful.

But.

We're not sure let's put it that way.

Okay did you say it took about one year from the point you filed the settlement in the last case to get a PD. That's correct. Okay got you okay.

And then.

The black coal that is the cost of capital.

Any sense you know what's going on there like are we going to get.

Are we going to get a decision or you know if the commission is going to let it ride until the next time.

Yes, we're going to hopefully get a decision before you have to file again for us the capital that.

I think that the.

They give themselves essentially the full.

Extension that they could out to August .

And I think we're hopeful that we get a get a PD well before then and a decision by August .

It all comes down as you know to what it says and.

We have several issues and they're not just a normal issue of cost of equity.

But the question of retroactivity in the car.

Structure issue is it an issue for Cal water.

So.

It is both the timing and what what comes out that will matter to us.

Sure I mean.

There have been signs that like.

It is actively.

Being worked on like are there any discussions that you've been you know whereof in.

Stuff like that or is everyone just sitting around and waiting for the proposed decision.

The only thing that I'll say is we haven't heard anything.

But there's nothing to discuss there, but I will say that 30 days before every commission.

Commission meeting, which is when they typically publish all of their documents for the meeting.

Our blood pressure goes up just a little bit.

And.

I know Greg millimeter, you've talked to you on these calls before.

Usually share a text message at the end of that day, saying no Edie.

And so.

Whereas in the dark as anyone as far as that goes.

But.

You can always look to those meetings those meeting dates and calculate back 30 days and say.

When could news, possibly come out of the commission and certainly they do issue off cycle proposed decisions, but generally they're aggregating all of those on the last possible day that they can get on the agenda.

Okay.

And then last question I guess or just point of clarity so regarding the whole.

Drought emergency regulations that.

The state water resource control board.

Issued.

You said they expire at the end of June or at least.

Is it that the board has to come out with the decision whether to extend or or let them expire how exactly does that work. So the regulation expires on June 10, So they issued.

Emergency regulation I think it was probably June 10th the year before so it's for 12 months.

So it expires on June 10th unless they do something else. They could always come back here in may and in order to be expired earlier.

It could extend it.

I think the issues are as you know and as we've talked about in task orders that there are still certain areas of the state that are impacted by water shortage, particularly southern California with respect to the Colorado River situation.

I understand.

Addressing directly here at Cal water about I understand the Colorado River Basin has had a good winter as well, but that is an area. That's in long term decline and a major source of water for southern California, and so I think theres a little bit of hesitation regionally on just sort of widening our hands of the drought because theyre still.

Potential major impact in Los Angeles in Imperial County et cetera.

And so we will just wait and see on that I think that we're a washington water in northern California for sure.

So when we look at our wholesalers and those are the ones that really drive weather.

Whether we have voluntary or mandatory conservation we see them.

Their orders contingent on the state boards order.

<unk> for instance.

San Francisco Public Utilities Commission, which is a major wholesaler for us in San Francisco Bay area is made there.

Waving a drought restrictions contingent on what happens with the state water Board.

And so there are waiting that as well.

Okay.

That's why I kind of wanted to get out was just like I mean, obviously.

Water has been plentiful.

As of recent but yes from a long term perspective I mean.

Is it your view that the.

The groundwater.

Has been like fully recharged I know that always takes longer than just.

Just just the rain and everything so like right I mean.

On the long term view do you still want to keep kind of these restrictions in place to set the stayed up.

It could be in the best best position longer term.

Yes, John it's Marty.

<unk>.

Some hydrologist of estimated GDP 10 winters like we had.

Back to back to really a recharge the basins that had been set up and over pump. So.

And even with all this excess water that we've had it still takes a long time to recharge those basins.

So I think my impression is because the governor.

He's the drought restrictions he didn't step it all the way back and cancel Ed and the state water resources control Board has been kind of silent and we've kind of followed the state water resources control board because they.

Are in charge of managing the water in the state.

I think they are evaluating that and my sense is we'll roll back to probably a stage one or maybe take stage to drought, which is kind of a voluntary conservation, but your point about long term. This is a long term situation and if you look at that point I was trying to make on going from an extreme drought in the fourth.

Quarter of 2022.

One of the wettest winters on record.

People say climate changes right as these extremes in the intensity of the rain in the.

Rain that we had early on in January and February filled up the reservoirs in northern California, and then they had to start releasing water because these other storms are coming in because we didn't have enough storage or our capacity. So.

We're a long way from where we need to be as a state in terms of adequacy of supply sustainability.

Related to move moderate water transmission wise and store water. So.

I think there is a reason why those two declarations are still there are they haven't been fully canceled out yet and whatsapp to see how the politics of it play out here over the next.

Six weeks with the state water resources control board, but I'm, hoping to keep them in place.

Okay. So you said maybe roll it back to stage, one or stage two what's the G. Currently I remind me reinstatement. We're in stage two now so the talk would be to remove it moving back stage right now.

And that would that would include restrictions on the use of water for washing your car right.

<unk> water wasting water restrictions that sort of thing I think I think governor newsome, particularly called out that he would still like to see nonfunctional turf.

Not be irrigated.

That's in line with the potential long term regulation in California to try to avoid ornamental plantings of one everywhere.

You want your lawn to be used by soccer players in Brisbane, Frisbee, you dogs or whatever but not.

Not to not to put it everywhere all around so.

That's a long term effort that David Okay.

And then stage one like would you still have the availability of the Dreamer.

I don't I don't think so at that point, because it's really not a voluntary restriction that we are calling our customers on its really stage to this.

That's the one that would be qualifying for the three months.

Okay alright, thanks, Thanks for answering my questions I appreciate it and.

Good luck.

Good luck with the with the weather and with the regulatory front.

Thanks, John .

Yeah.

Our next question comes from the line of Greg <unk> from you UBS. Please go ahead.

Yes, thanks for taking my question.

Morning, Amit.

Hey.

<unk>.

I know you kind of touched on this but can you kind of like recast how you how you thought about the quarter.

With adding back.

Items.

The dreamer and the Monterey.

Account and if the rate case would have would have come in on time.

No.

How would you have.

Come out really.

Yes, I think that's a better.

The question I would anticipate that would've had a profitable quarter with those three items there.

And obviously the rate cases, the biggest variable.

Because we have a wide gap between what Cal water's presentation of the facts of the case are and what the ratepayer advocates proposal was and so.

Our estimate would be somewhere between breaking even and maybe.

Maybe.

Single single to it.

I would say nine or 10.

Profit for the quarter is this kind of depends on other things going on but that's really speculative at this point you could also do the math yourself and at those things and then at spectrum.

Get to to get to a number but.

Yes.

Its all things that we'll be booking in the future once we get a rate case so.

It's really timing Unfortunately at this point.

I would just add to what Tom said, Greg that we.

We always tell the street don't get too excited about Q1, because from a demand perspective. It is always the softest quarter.

And then having such a hard winter of this year clearly added.

<unk>.

On consumption and overall customer demand. So Q1's, just historically a soft quarter.

Q1 tends to be an ugly quarter. When you have a delayed general rate case, because you can't book stuff and I think again with Tom and the team will try to put all the variables in there. So you can see if they look like but it's really hard for us to speculate too much farther than that until we get the decision I think clarification from the commission.

Okay. Thanks.

That's great.

Next question comes from the line David Sunderlin Berry. Please go ahead.

Hey, good morning, guys. Thanks for taking my question good morning, Ryan.

I just wanted to ask I think last time on the call you guys had mentioned in the BD pipeline. There was some strength you were seeing or potential opportunities in wastewater with Texas and a few other opportunities, but that it was contingent on just kind of where things were going to go this year with inflation at the macro environment.

Just wanted to ask what what's the current status is there and what youre thinking with the development pipeline.

Sure. So in Texas, we are partnering with a company called <unk>.

And <unk> continued to grow in.

The.

<unk> had pretty explosive growth in Texas.

Where we have seen a number of companies and frankly a number.

Of friends and family that live around us in Silicon Valley, It's kind of followed the company since they've migrated to Texas because it's.

Pretty positive business environment to operate and so <unk> continues to do very very well for us and.

These are long.

It's early kind of early seed capital for us as a way to think about it. These are developments that are currently kind of getting underway and being planned and where we go in and become their wastewater supplier.

In addition, as we announced last year, we did the quarter will be based on River Authority project, which.

Yes.

Allowing us to partner with water wholesaler to build a pipeline into that South Austin area, which we think will be rapidly developed as well. So generally is still a very good I mean, clearly the overall market has slowed down a little bit as inflation is kind of creeped up but so far the business environment in Texas and Scott as.

And it has slowed down a little but it certainly is still maintain kind of forward momentum as you see a lot of people on business has moved to that state and relocate to that state.

Thank you that's helpful and I guess, just a quick follow up to that have any of the delays in the general rate case or any impacts from other parts of the business slowed down the pipeline.

Too early to tell I mean, the hardest thing about PD as kind of sellers' expectations and what we.

We're willing to pay and we tend to be kind of a value slanted.

Acquirer. So certainly you know inflation starts changing those calculations and when you run <unk>.

At present value calculations, our future value calculations.

Change in interest rates and potentially have an effect.

I think the thing that's going to be more interesting to watch frankly is as the stricter regulation regulations come out about <unk> and water quality changes in these small systems don't have the adequate operating capital to make the investments to meet those standards what do they do it.

Ed.

That may be.

A large catalyst to get some of these smaller systems to break off and ultimately get acquired.

So I think I would say that it slowed down a little bit, but certainly we are still seeing things come through the pipeline and we got a number of deals that we're closing and integrating and as those come to fruition. We'll continue to disclose those on page by page 14, we've been put in the deck every every quarter just to share where we are with everything will continue to update those as we as we move.

Forward throughout 2000 2023.

David Let me, let me add one more thing about the Nexus between business development and regulatory which I think is interesting is that.

Youll see in the in the Q that were.

We're preparing to file I think have just filed.

Washington Water company General rate case that is tied into the acquisition that we made a couple of years ago that Rainer view water company and so.

Sort of when you initially by these systems.

They need to help in terms of new capital as Marty mentioned improvements in water quality et cetera, and so we're seeing the second leg of that is being is being able to go into it.

Ratemaking process and we've been treated very fairly by those commissions as far as the.

The rate increases go most of those are outside of California. So we don't see that the regulatory lag that we have but I know we have a number of new systems to us in Hawaii.

That we've acquired over the last three or four years, and we're certainly starting to endeavor to go into the rate making process there.

And both Hawaii, Washington, and New Mexico.

And now even in Texas with the rate, making process, we've seen fairly favorable results from those commissions.

That's very helpful. Thanks, guys I'll pass it on.

Thank you.

There are no further questions at this time ill turn the call back over to represent case.

April . Thank you everyone. Thank you for taking time to be here today as I mentioned, you know, there's a lot of moving parts here.

If you have any questions. Please feel free to reach out to us and Tom I'll be available to answer any questions. Anyone has so until then be safe and we'll look forward to seeing everyone. At the end of July on our second quarter Conference call. Thank you very much.

Okay.

Today's conference call you may now disconnect.

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