Q2 2023 Edison International Earnings Call

July 27, 2023

Good afternoon, and welcome to the Edison International second quarter 2023 financial teleconference.

My name is Brent and I will be your operator today, when we get to the question and answer session. If you have a question. Please press star one on your phone.

Today's call is being recorded I would now like to turn the call over to Mr. Sam Ron Raj Vice President of Investor Relations. Mr. <unk> you may begin your conference.

Thank you Brent and welcome everyone. Our speakers today are president and Chief Executive Officer, Pedro Pizarro and executed Vice President and Chief Financial Officer Maria regarding also on the call are other members of the management team.

<unk> supporting today's call are available at Www Dot Edison invest in Dot Com. These include our Form 10-Q prepared remarks from Pedro and Maria and the teleconference presentation Tomorrow, we will distribute our regular business update presentation. During this call we will make forward looking statements about the outlook.

Edison International and its subsidiaries.

Actual results could differ materially from current expectations important factors that could cause different results are set forth in our SEC filings. Please read these carefully.

The presentation includes certain outlook assumptions as well as reconciliation of non-GAAP measures to the nearest GAAP measure.

During the question and answer session. Please limit yourself to one question and one follow up I will now turn the call over to Pedro.

Thanks, a lot Sam and good afternoon, everyone I would like to begin with three financial comments first driven by impressive performance through June we are confident in our 2023 in core EPS guidance of $4 55 to $4 85.

Second we remain fully confident in and deeply committed to delivering our long term EPS growth target of 5% to 7% from 2021 through 2025.

This target incorporates all known business headwinds, but does not factor in potential tailwind, which could present significant upside.

Third based on the strength of Sce's 2025, DRC application and other investment opportunities, we are providing EPS growth guidance of 5% to 7% or 20% to 25% to 228, which provides the path towards $7 in earnings per share potential for 2028.

Underpinning this is the rate base growth driven by the essential investments to advance California's clean energy transition.

Importantly, these actions will maintain sce's cost leadership and the lowest system average rates for customers among California's investor owned utilities for the foreseeable future.

We are very proud of this commitment that I will share more about it later.

On the operational front by two key messages today are first SCE is strategically positioned to make substantial investments in the reliability resiliency and readiness of the grid as outlined in its 2025 <unk> application and.

And second SCE is well prepared for the wildfire season due to its successful grid hardening actions.

I will also emphasize that core to everything that we do is sustainability as Edison International remains at the forefront of the clean energy transition.

Please turn to page three.

While may 12, SCE filed its 2025 DRC application the overarching objectives are to ensure the greatest reliable resilient and ready.

Reliable so that it can meet customer's needs today and in the future.

Resilience to protect public safety and the integrity of the grid and ready ready to support the widespread electrification, Andrew carbonization needed to meet California's ambitious greenhouse gas reduction goals.

These ghd reduction goals are not just stretch targets. They are deeply embedded in the fabric of California's most important legislative and policy frameworks.

Mindful of the longer term cost of an action when confronting the global climate crisis.

<unk> reflects that urgent need for the state to rapidly electrify vast swaths of the economy, which is facing the fastest electricity demand growth in decades.

These objectives SCE requested in 2025 base revenue requirement of $10 3 billion.

That's an increase of $1 9 billion or about 12% over total 2020 for rates.

This also represents a system average rate increase of 9% and an average residential customer bill increase of 10%.

So 2025% to 2028 period will be critical to achieving California's 2030, and 2045 climate goals.

<unk> will continue to make substantial investments in wildfire mitigation to address the remaining wildfire risk on the system.

There is also a need to ramp up infrastructure replacement work returning to historical levels of proactive replacement to safeguard reliability.

Two key things are always top of mind in any of Sce's applications, and frankly and how the company runs.

Those are operational excellence and affordability for customers with.

We recognized that the investments in the grid are borne by customers. So we continuously look for ways to gain efficiencies and save customers money.

SCE has been building its capabilities in artificial intelligence and advancing the integration of technology into its operations.

In 2018, SCE began to apply technology to some of its highest priority challenges, including wildfire risk mitigation and data quality.

<unk> has implemented several computer vision algorithms as part of the PND aerial inspection process.

Images and detect defects like broken cross arms and other failure risks that could lead to outages are additions.

The utility is now leveraging its images other data and these algorithms to develop other predictive models that can identify and refined asset data to more efficiently operate the grid and hence fire spread modeling.

And better prioritize grid hardening efforts.

Building on this and further leveraging tools such as artificial intelligence robotic process automation and mobile solutions.

<unk> is ramping up its efforts around the customer experience integrated grid planning and execution and driving efficiencies in our support functions.

Examples include predicting customer issues before they call and proactively addressing them or diverting them to the lowest cost most effective channel.

Leveraging speech and image recognition and inspections to automatically fill out surveys and focusing inspections.

And using generative AI to create first drafts of everything from communications to data request responses.

I am really proud that SCE as an early mover in implementing new technology that furthers its operational excellence and affordability goals.

Now turning to page four let me give you a brief update on the 2017 and 2018 wildfire and mudslide events SCE.

SCE is putting finishing touches on the PK M cost recovery application and expect to file in August .

I reiterate that SCE will seek full CPUC cost recovery.

Excluding amounts already recovered or foregone under the agreement with the safety and enforcement Division.

SCE will show a strong compelling case that it operated its system prudently.

And that it is in the public interest to authorized forecast recovery.

Looking at this year's wildfire season, Sce's confidence in mitigating wildfire risk associated.

With its equipment continues to grow up.

Over the past couple of years SCE has deployed covered conductor at a <unk>.

Rate of approximately 100 miles per month.

Ed has now replaced nearly 5000 circuit miles of bare wire with covered conductor since the inception of this program around four and a half years ago.

In addition to the CPUC endorsed grid hardening measure SCE.

<unk> completed 360 degree inspections of its transmission and distribution structures that represent up to 99% of risk each year prior to peak fire season, and then performance repairs and replacements.

SCE continues its robust vegetation management programs and expecting $1 6 million trees across our service area annually.

Typically mitigating approximately 850000.

More than half of those trees are in high fire risk areas.

In 2023, SCE plans to inspect over 130000 trees.

A threat of falling into Sce's electrical equipment in the highest risk locations.

Now, let me give you some proof points of how well this is all working to reduce emissions and their impacts.

On fully covered segments, there have not been any ignitions due to failure of covered conduction conductor.

In 2021, and 2022, there were 98% fewer structures destroyed and 92% fewer acres burned during 2017 and 2018.

And a lot of other statistics are shown on page five.

As it has since 2021.

SCE uses a rigorous insurance industry modeling approach to estimate the probability of losses from catastrophic wildfires relative to the thresholds defined by 80% to 54.

Incorporating sce's latest mitigation data into the industry, leading North America wildfire HD model.

Moody's RMS now estimates SCE has reduced the probability of losses from catastrophic wildfires by 85% compared to the pre 2018 levels as highlighted on page six.

Importantly, the contribution from public safety power shut offs continues to decline and it's now only 10%.

SCE has been expeditiously hardening its grid since 2018 with 76% of distribution lines and <unk> expect it to be heartened by year end, which you can see on page seven.

<unk> anticipates ramping down its flagship mitigation measure of covered conductor beginning in 2025.

And also largely completing its targeted underground work by the end of 2028.

Meanwhile, the state of California continues to allocate substantial funding to force resiliency and to fire suppression.

And this includes Cal fire crews and aerial resources.

We were pleased that the approved state budget maintained $2 7 billion.

That was 98% of the original proposal.

We're four years four critical investments restoring forest and wyland health to continue reducing the risk of catastrophic wildfires in the face of extreme climate conditions.

To put the state's commitment in context. The total 2023 to 24 Cal fire budget of $4 $1 billion is double what was originally enacted in the 2017 to 18 budget and Cal fire staffing has increased by 74% since that.

Edison International remains at the forefront of the clean energy transition.

And we continue to execute on our strategy and net zero commitment.

As climate change continues to challenge our world in unprecedented ways I am confident in the strength of our team to lead the transition affordably and effectively.

We're paving the way for our future powered by 100% carbon free electricity adapting our system to climate change and supporting customers and reaching net zero emissions.

While the road ahead, this long or 2022 progress demonstrates our sense of urgency and our ongoing commitment to sustainability.

I want to encourage you to read our 2022 sustainability report it has details about our accomplishments our goals and our long term ESG commitments.

Highlight just a few commitments and these are covered on pages eight and nine.

In 2022, SCE delivered 45% carbon free power to customers installed electric vehicle charging infrastructure to enable customers to add more than 500 medium and heavy duty electric vehicles.

<unk> installed or contracted for more than 1800 megawatts of energy storage.

By year end Sce's energy storage portfolio totaled more than 5000 megawatts. That's one of the largest in the nation.

Our team continues to forge coalitions nationally and internationally to address climate change and we are proud to lead the way on these initiatives and partnerships and to support our stakeholders.

Our future powered by clean electricity is upon us so we stand fully ready to make this future of reality and we're going to do that reliably affordably and sustainably.

With that let me turn it over to Maria.

Thanks, Pedro and good afternoon, everyone.

My comments today I will discuss second quarter results, our 2023, EPS guidance and provide some additional insight into our long term core EPS growth expectations.

Starting with the second quarter of 2023 extra.

<unk> reported core EPS of $1.01.

As you can see from the year over year quarterly variance analysis shown on page 10.

<unk> second quarter earnings saw a 13% increase.

Among the major items GIC attrition year revenue escalation added 19 cents year over year.

Additionally, higher FERC and other revenue added <unk> and there was a 10 cent increase related to balancing account interest income.

Partially offsetting this growth was an increase in interest expense of 16 driven.

Driven by higher interest rates associated with funding wildfire claims payments.

At <unk> parent and other there was a negative variance of <unk>, primarily due to higher holding company interest expense.

Overall, we are pleased with our performance through the first half of the year and are confident in delivering on our full year core EPS guidance of $4 55 to $4 85.

Laid out on page 11, which we are reaffirming today.

I will now discuss Sce's capital expenditure forecast shown on page 12.

Following Sce's 2025, <unk> filing in May we introduced our 2023 through 2028 capital plan of $38 billion to $43 billion.

Underpinned by spending covered by Sce's 2021, and 2025 general rate cases.

During the 2025, GIC cycle, which extends through 2028.

We project annual capital deployment to be in the $8 billion range, which is double the level from only six years ago.

Over 85% of Sce's investments are in its distribution grid.

These are essential to meeting reliability, resiliency and readiness injected that support the widespread electrification and decarbonization needed to meet California's greenhouse gas reduction goals.

You May ask how do you plan to finance this a significant step up in Capex.

The vast majority will be financed with cash from operations and debt.

Between 2025, and 2028, we expect our equity needs will be fulfilled using internal programs, which typically bring in about $100 million of equity annually totaling about $400 million over the period.

We expect this financing plan to keep us within the 15% to 17% episode of that range through 2028.

As a reminder, this financing plan does not incorporate potential cost recovery and the legacy wildfire proceedings.

I wanted to highlight that Sce's capital expenditure forecast does not include substantial additional capital deployment opportunities.

There is at least $2 billion of potential investment that SCE will request and standalone applications over the next couple of years.

As you May recall filing standalone applications in California is typical when major projects are still in early stages at the time GIC testimonials developed.

Let me give you some historical perspective, you can see on page 13 that SCE has obtained approvals of standalone applications for approximately $3 billion of capital spending over the past two rate case cycles.

Discrete applications have contributed meaningful growth in the past and we expect that to continue in the future.

To wrap up my comments on the upside opportunities <unk> recently approved transmission plan identified 17 projects that upgrade sce's existing facilities.

As the incumbent transmission owner these projects represent at least $2 3 billion of FERC transmission investment for SCE.

The Queso plan also identified $3 billion of competitive projects in southern California that SCE will be able to compete for.

Turning to page 14, Sce's GIC request supports approximately 6% to 8% rate base growth starting from a 2023 base of $41 9 billion.

Which itself is nearly 20% higher than only two years ago.

Rate base growth through 2028 is driven by the crucial grid infrastructure needed to facilitate California's leading role in transitioning to a carbon free economy.

Page 15 shows our progress in successfully executing the parent company's 2023 financing plan.

And the parent issued debt during the quarter and both transactions were well within our average projected refinancing rates by 2025.

Further bolstering our confidence in achieving our 2025 EPS guidance.

Page 16 provides an update on the CPUC cost of capital mechanism.

Given that the Moody's BW BW utility bond index is trading well above the dead band with only two months remaining in the annual measurement period. It is likely the mechanism will trigger.

We believe an upward ROE adjustment is justified given the current interest rate environment has increased the utility cost of capital in line with the overall financial market.

Once triggered SCE will file an advice letter to implement the adjustment for the 2020 for ROE.

And update the cost of debt and preferred equity.

The CPUC equity ratio will remain at 52% on an adjusted basis.

Consistent with the proposed decision issued yesterday afternoon to extend Sce's capital structure waiver for two years or until final decisions have been made on cost recovery for the 2017 and 2018 events.

I previously discussed our operational excellence program and noted that we would share updates along the way.

Sce's employee driven ideas have identified O&M savings for customers that are already reflected in the GIC request.

We worked higher lift way to continue Flushing out these ideas and finding additional benefits for customers irrespective of the GIC cycle.

I'm pleased to share some tangible examples of our successful efforts to find efficiencies, which you can see on page 17.

Starting on the left side in May the CPUC approved Sce's expanded wildfire self insurance program, which saves customers approximately $160 million per year and has the potential for greater long term savings.

In the category of work planning, we successfully implemented our wildfire mitigation plan year in and year out and have continually found ways to improve.

To give you an example, SCE programmatically and facts about 216000 structures in high fire risk areas every year from the ground and the air which in the past was performed by distinct teams.

We have transformed the program by combining ground and aerial inspections into a single 360 degree inspection process.

This reduces driving time in the field benefit safety force field personnel and improve overall quality and customer experience.

Through this effort, we expect to generally generate nearly $55 million in cumulative O&M savings.

In the category of procurement, we are successfully finding ways to buy better with.

We recently reevaluated the prescription benefit provider in our health care plans and switch vendors, achieving about $15 million of accumulative O&M savings, while maintaining the level of benefits and service for our employees.

These are just representative example that clearly demonstrates the value our team can uncover and implement in a short period of time.

We are excited about such opportunities to provide savings to customers and we will continue to share additional examples with you in the future.

Turning to our financial commitments, we remain confident in our 5% to 7% EPS growth rate guidance from 2021 through 2025.

I reiterate our management team's steadfast focus on delivering this growth.

Additionally for the 2025 to 2028 period, we expect to continue core EPS growth of 5% to 7%, which provides a pathway towards $7 earnings per share potential for 2020 as shown on page 18.

We give further understand this pathway. We have also provided some key sensitivities on page 25 of the appendix.

We see this long term EPS growth is highly achievable for three primary reasons.

First the core driver for this earnings trajectory as Sce's strong rate base growth.

Second the headwinds we have navigated over the past couple of years, we will have mostly stabilized by 2025, allowing for a simplified growth story through 2028.

These past headwinds included the cost of financing wildfire claims payments driven by both the increase in legacy wildfire reserves and higher interest rate environment.

The reduction in CPUC Roe.

And issuance of preferred equity at the parent to strengthen the balance sheet.

Taking these into consideration you can see that the midpoint of our 2025 guidance provides a stable platform for a strong long term growth trajectory.

Third this growth is achievable, even without incorporating a few key items.

We can achieve this growth at Sce's current authorized ROE and rate base forecast without factoring in the additional capital potential I mentioned earlier are upside to the cost of capital by 2028.

Additionally, we have not incorporated potential cost recovery in the legacy wildfire proceedings, which clearly presents substantial upside value to our long term earnings power and credit profile.

Based on these factors I want to underscore we see 5% to 7% growth is highly achievable.

We firmly believe we can achieve our targeted growth both for 2025 and 2028 based on Sce's significant investment to ensure the grid is reliable resilient and ready for California's economy wide clean energy transition.

That concludes my remarks Valerie Sam.

Brian Please open the call for questions. As a reminder, we request you to limit yourself to one question and one follow up so everyone. In line has the opportunity to ask questions.

If you would like to ask a question. Please press star one on your phone.

One moment for the first question please.

Our first question is from Ryan Levine with Citi. Sir Your line is open.

Thank you in terms of your longer term growth outlook.

Where do you see as the biggest risks to achieving the longer term, 5% to 7% outlook through 2028 and from a financing standpoint.

You highlighted a couple of billion dollars' worth of upside to the extent that that were to materialize. How would you look to fund that.

Yes, So Ryan Hi, <unk> nice to hear from you in.

In terms of your first question, what I really want to focus on is you'd ask about risk to the 5% to 7% growth. We think that is highly achievable. We also think that as we move forward into the 25 through 28 period that the story and the profile is much simplified we've worked through a bunch of headwinds that we're dealing with in the 'twenty one through 'twenty five period and we've managed.

Do those and we are reaffirming our 5% to 7% growth rate and as we move into the next period, you'll see a lot of those things because they stabilized really allow us to focus on the key factors of our business, which frankly, our rate base growth and so when you ask about if we get if we realize these other potential capex opportunities some of which we'll be filing for in the next year or so.

What the equity program would need to look like I think it really will have to take a look at that is when the when the dollar is actually start to hit because we're always targeting that 15% to 17% <unk> to debt range. The financing plan, we put in front of you. During the comments earlier today is absolutely supportive of that 15% to 17% <unk> to debt.

And as the other capital comes in depending on where we are in that range.

It will drive whether or not we need more equity. So I think we'll see when those dollars come in the door.

Ryan This is Pedro let me just underscore the first question.

The need for this infrastructure build.

Is so clear and strong.

The team at SCE has done a nice job in calculating that in the general rate case application.

There are other pieces as Mario discussed or the need will also be very strong. So to me. It's got a certain answer because it needs to be for infrastructure, thats clearly needed for reliability and resiliency and readiness.

And that's the big opportunity here and that's why we're so confident.

Great and if I could ask one follow up in terms of the O&M cost outlook you highlighted some changing vendors more broadly how are you seeing.

<unk> pressures across your supply chain and then any color you could share around your outlook.

The O&M costs.

Sure.

We'll have Steve Powell kind of address what we're seeing with some of our vendors. He's the CEO of the utility Steve Yes. So.

And we've got a lot of the vendors that we work with on multi year agreements and so we are regularly going back to the market as we get towards the end of those agreements certainly over the last couple of years, we've seen escalations in labor rates as well as on the materials side I think the global supply chain.

Crunch has extended timeframes for clean everything from.

Customer meters to Transformers to switch gear, which is also driving costs up and so those are all those are all things that our team is constantly getting ahead of to build inventories. It's all the things that we're baking into our general rate case, and we have inflation adjustment mechanisms in the rate case too to take that into account and so these are things that we've got the mechanisms.

To manage through our through a rate case, and we're constantly looking at different ways.

To work with our vendors to drive the cost of the service is down.

I think as you look even longer term, we will also start seeing the benefits across the economy.

So things like the chips, plus <unk> and the focus of the federal government is bringing.

Bringing back manufacturing supply too.

Yes.

Domestically. So that's not a next year thing and so you answered the question well in terms of the near term, but I'm also.

Confident that in the longer term.

Supply chain will respond to market signals and the impact of.

The chips will act and other infrastructure, Bill etcetera, and bringing back manufacturing for supply of critical components in the U S will help.

Great. Thank you.

Thanks Ryan.

Our next question from Shar <unk> with Guggenheim Partners, Sir Your line is open.

Hey, Hey, guys.

Hey, Pedro.

I just wanted to get a sense here.

Obviously claims cost recovery of CCM trigger.

Hi, so transmission opportunities.

Pretty significant it's incremental so I guess should we be thinking about these opportunities.

Their fruit is extending that 5% to 7% growth rate or could we see a step up increase assuming that we get some of these implants.

And so maybe Charlotte, let's tick through some of them that you mentioned.

The queso opportunities are significant as you say $2 $3 billion for the projects for which SCE is the incumbent transmission owner.

Those are largely going to be incurred probably post 2028, so that's our runway issue right.

You talked about the CCM trigger we absolutely believe that.

With two months left as I said before it's highly likely that the CCM will trigger.

We think that it is fully supported by what's going on in the broad financial markets. We are not relying on the CCM trigger for a 5% to 7% growth trajectories. So we will.

So through that process as we go through that process I would also note that by the time, we get to 2028, we're in yet another cost of capital cycle. So youll see some interplay there and then in terms of claims cost recovery as Pedro said earlier, we had been fully prudent and we will make a strong case for cost recovery when we file our application in August .

The proceeds from that of course would be used to pay down existing debt at SCE and and so you would see for sure it will.

Help to our earnings profile because interest expense is currently hitting the bottom line would be.

Authorized for recovery and also will have an improvement in our credit metrics. So I think youll see a lot of improvements from all of those things.

We'll take them as they come.

Perfect and then.

Obviously, one of your peers in the state is inching closer to selling part of its regulated genco there seems to be a lot of interest there seems to be a wide amount of interest you have a lot of capex the stock still trades at a bit of a healthy discount do you see other efficient ways to fund this cap.

Little increase versus having to rely on the equity markets, especially if you see the step up.

So first I would note.

In terms of the equity financing plan that we put forward for 25% to 28, we're really talking about our internal programs. So that's about $100 million a year is where you typically realize through that program. So just to size that for you in terms of looking at other opportunities beyond that.

For other forms of financing, we'll certainly watch with interest what's going on up in the north, but theres a regulatory process until it needs to be gone through and so I think it's just for US an observational pointed this at this point in time.

Sure the core thing.

Maria will walk you through the strength of the capital program.

Loan growth rate.

And we would expect that we can do all of that.

With only the internal programs.

Good.

Good strong statement about the very limited equity needs and how manageable that we expect this to be.

No that's fantastic. Thank you Pedro Murray I appreciate the additional color guys have a good evening.

Thanks Chuck.

Our next question from Greg oral with UBS, Sir Your line is open.

Hello, Greg.

Hey.

Resolutions.

The.

The transmission Capex you highlighted from the.

Hello, So awards how does that.

How does that process renew itself over time and often into those occur should we be expecting more.

Capex behind ratified.

Let's have Steve talk about the Kellogg's us flooding process alright. So.

The California independent independent system operator.

Great.

<unk> develops and approves these projects through their transmission planning process, which.

They are putting now updated plans.

Basis going forward, we have a 20 year outlook that defines the big picture projects that need to happen over a long time and the last one they did.

<unk> identified.

About $30 billion.

Projects need to happen over the next 20 years now theyre going through and developing these 10 year plans and right now they are working through the process with the current approved plan.

Both gain.

Jamie incumbent projects assigned and so we know that we've got our $2 3 billion of projects, we need to do and then they run their competitive process for the competitive projects in the current plan 10 year cycle. There's three projects that are that are going out to bid that are worth approximately $3 billion based on the early estimate.

And those bids will go we do later in the fall in <unk>.

September and October and bids will be awarded next year they'll work their way through that process, a new plan has been developed and put out.

Another another two years out and then they will continue to work work that cycle.

They identify new projects on the horizon that are filling out within their long term outlook.

Great. Thanks, a lot.

Thanks, Greg.

Our next question is from Angie <unk> with Seaport and Ma'am your line is open.

Good morning.

How are you.

So first with the operational Brian Aaron Smith, So just so I understand so if there is if you will if you see upside to earnings associated with the cost of capital or any other drivers should I expect that there is some offset from those operational variances and and I understand that a big portion of that.

<unk>, but again, it's there.

Portion that can go up and down depending on how much you basically need to meet your earnings call.

Sure.

And so that's a great question and I think maybe.

Maybe I'll step back for a second.

Historically, we've given you some of the information to kind of think through our business and our operating model. If you will we've kind of bucket buckets things into a number of different line items and one of them is the operational variances that you just referred to but when we think about.

Our business.

Underneath those four line items. There is many many more things that were that were actually managing and so as we roll forward and we're thinking about 25% to 2028, we've tried to actually provide you with some additional information that's more granular. There. We're hoping is going to be allow you to get more insight into our busy.

So as an example, what have we talked about in that 2025 operational variances bucket, we've talked about <unk> talked about the timing of regulatory approvals, we talked about operational efficiencies.

We've talked about.

Depreciation and we've kind of given you some insight into that as we roll forward between 25 and 28, you'll see the sensitivity is actually go right to okay. So what is the sensitivity around AFDC and if you see because our capital program is growing so rapidly and so and so.

Robustly by the time, we get to 2028 <unk> is like in the 45 range as opposed to being in the 30% to 35% range than it was before we've given you. Some depreciation sensitivities that you can factor in frankly by the time, we get to 2028, we don't actually see regulate the timing or regulatory proceedings or O&M variances as being the major.

The drivers for that for that part of the of the model. If you will so I think that's how we're trying to provide you with that additional information as well as all the other sensitivities that people like to ask is about like interest rate assumptions and things like that so I think that's hopefully a more granular approach to how we think about our business.

Thank you. Our next question from Anthony <unk> with Mizuho, Sir Your line is open.

Hey, good afternoon, Roy good afternoon Pedro.

Just one quick question on slide four talking about the application of the Teekay <unk> events.

If you could maybe provide as much as you know on the clarity on the timing of how long it will take for that application to play out and then.

More specifically what type of.

I guess part do you meet with parties ahead of time or any type of feedback you could give us on your meeting with any of the intervenors right now on the application. Thank you.

Yes, Thanks, Anthony and we're gonna be requesting or do we expect we will request an 18 month timeline.

The preceding.

Sure.

Think thats, an appropriate amount of time for something like this.

I think at a very high level before we file any application.

We will meet with a range of stakeholders.

I think those are really more listening sessions on anything.

Don't think we have anything that we will report back in or it wouldn't be appropriate anyway.

Just be aware that we are making sure folks understand.

Underpinning case here alright.

We believe after having looked at all the evidence that.

We were prudent.

And we're providing visibility into the strengths of our arguments as well as the process here and importantly.

The need for a fair outcome in these cases.

We recognize this is not just about getting cost recovery of costs. So we think our appropriately recoverable.

But we also recognize that this is a strong signal here, but California has continued its commitment to financially healthy utilities.

So we will.

Youll see that our obligation.

There's a range of issues around the rationale for this that will in terms of the merits of the case, but the importance of this being another key step in affirming the strength of the California regulatory framework.

Great. Thank you so much for taking my question.

Thanks, Kevin.

Our next question is from David Arcaro with Morgan Stanley and your line is open.

Hey, thanks, so much for taking my questions.

Let me see one maybe a little bit of housekeeping item I was just wondering if you could give any outlook.

Outlook for equity needs into 2024, it seems like we've got good clarity around it but just curious if there's any specific financing.

That we should be keeping an eye on for 24.

We will be relying on our internal programs in 'twenty 'twenty four as well.

Okay got it so it should be I guess in that same $100 million roughly cadence.

That's been what we've been realizing them.

Okay got.

Got it and then I was just wondering longer term I guess the rate base growth comes down as you look if I just look at rate base grew 25% to 28, it's more like 5% to 7% I know it's early on.

But in that kind of lines up then with the EPS growth in the five to seven range does that get tight in your mind or is the rate base growth just likely to.

Escalate over time as new Capex plans are identified.

I'm not sure I quite Halloween, you mean by tight.

Expand on that a little bit.

Oh sure I guess.

Historically you've had.

GAAP between the rate base growth.

Level, and the EPS growth rate level and.

I guess looking out further into the plan rate base growth ends up being kind of equating to EPS growth I'm. Just wondering if that's just an early stage dynamic or if we start to see.

GAAP widening out overtime.

Thank you for clarifying.

We're very comfortable with that five to seven EPS growth in combination with that 5% to 7% rate base growth some of the things that have been happening.

The next five years are different than the last five years right and so in the past you've seen the gap actually widen out because of the things that we were dealing with going from a lower amount of for example, wildfire claims that to a higher amount having the.

Interest rate environment change on us during that period as we get into the 25% to 28 period things are stabilized we have now six at the end of this quarter, we had $6 billion outstanding on wildfire claims that so everything is baked in in that period.

Think about even what we're refinancing around wildfire claims that during that five year period.

That debt was actually issued in the more recent interest rate environment. So the average of that the average rate for the debt that we're refinancing is already about four 6%. So you're seeing a lot of things sort of stabilize I think the other thing you're starting going to start to see is at the parent company were obviously seeing our costs increase at a slower ray.

Now and we'll be looking to refinance.

Some of the outstanding maturities with more efficient.

<unk> I think you saw us do that early this year like freight as an example, when we needed equity content Securities. We moved away from perhaps into junior subordinated notes and I think the one other thing that kind of drives the ability to have those two numbers EPS and rate base growth move together is youll see that the <unk> is increasing quite strongly over that period.

And that also makes a difference.

Got it thanks very helpful.

Just sorry, if this is a little repetitive, but just on operational variances I see that <unk> rising from the 25 to 28 period.

Do is there much change in the rest of the operational variances bucket between the 25 level, where you've defined it versus where it'll end up in 2008.

Yes. So we have also included.

Sensitivity there to depreciation we've talked about those depreciation variances before.

And you can see where we are.

Now call that out for folks. So you can actually do a little bit of the investigation yourself as we modify capex and we go from a request case to our range case.

Can see that we've made a lot of simplifying assumptions so at a minimum in the lower Capex cases, you need to make a 15 you may need to have an assumption about a 15% depreciation adjustment. So that variance that variance is in is additive to the other numbers that you would get in terms of rate base growth I think as we look out in time.

Other things that we've talked about in terms of timing of regulatory proceedings and O&M efficiencies. We just don't see them as big as the driver as we get out to 2028.

Okay understood. Thank you so much.

Excellent. Thank you. Our next question is from David Paz with Wolfe Research answer your line is open.

But.

Hello.

Thank you for the time.

Just on the growth rate.

Hum.

Yes.

Where would you be on the low end or lower half of your growth rate.

ROE remains a ton over five.

Percent.

We assumed <unk> five across the entire range five to seven so it's embedded in all of our scenarios.

Okay.

And then.

Forgive me if there is a slide here I'm missing it but what level of cash recoveries are you expecting.

<unk> from GIC, and the TK M, which I know youre not expecting but aside from those proceedings what level of cash recovery through 28 is in your embedded in your plan I think for instance, you had.

$1 billion of recovery in 2024 in the slide earlier this year I believe.

Any sense of what we should assume cash recoveries through 28.

Yes, so in fact.

Over the past couple of years, we've actually recover at $3 billion in cash from these memo accounts.

Folks have heard us talk about before over the next two years, we expect to recover about $2 billion.

From those same types of accounts and just to just to reiterate and clarify maybe something that you mentioned, we are not assuming recovery on any of the 17 and 18 wildfire legacy claims.

Right got it okay. Thank you.

Yes.

Our next question is from Nick Campanella with Barclays. Your line is open Sir.

Hey, everyone hope you're doing well good to reconnect thanks for taking my question.

I guess I'm so.

Sorry, if I missed it as well, but acknowledging that you reaffirmed 2003.

As well as the $5 70 midpoint of 25, just can you give us a sense of how to think about 'twenty four or you're going to be in that five to seven range.

Yes, so we have a number of things that we are going to be looking at moving pieces before we give formal guidance for 2024. So we still have our track for.

Items that have to be resolved, we have other regulatory filings I think frankly going to be tracking interest rates, we will be looking at the CCM potential.

Potentially triggering so we will be providing that update when we give guidance and I just do want to reiterate that that CCN trigger is relevant but it is not relevant for our 'twenty, one through 'twenty, five or 25% to 28, 5% to 7% EPS CAGR.

Absolutely and I guess, that's a good segue.

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