Q2 2023 Xcel Energy Inc Earnings Call
My name is Melissa and I will be your coordinator for today's event. Please note. This conference is being recorded and for the duration of the call. Your lines will be listen only if you require assistance at any point. Please press star is zero and you'll be connected to an operator, you will have the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question.
Questions will only be taken from institutional investors reporters can contact media relations with inquiries and individual investors and others can reach out to Investor Relations I will now hand, you over to your host Paul Johnson, Vice President Treasurer, and Investor Relations to begin today's conference. Thank you.
Good morning, and welcome to Excel Energy 2023 second quarter earnings Cool, joining me today or Bob Friendswood, Chairman, President and Chief Executive Officer, Brian <unk> Executive Vice President and Chief Financial officers. In addition, we have other members of the management team in the room to answer your questions if needed.
This morning, we were we will we review our 2023 second quarter results and highlights ensure a recent business developments slides that accompanies today's call are available on our website.
As a reminder, some of the comments during today's call may contain forward looking information significant factors that could cause results are different from those anticipated are described in our earnings release and are a SEC filings.
Today, we will discuss certain metrics that are now I'm getting measures information of the comparable GAAP measures and reconciliations are include <unk> with that I'll turn it over to Bob principle.
Thanks, Paul and good morning, everybody, let's start with our results.
We face some headwinds from weather and other items in the second quarter reporting earnings of 52 cents per share for the second quarter of 2023 as compared to 60 cents per share in 2022.
We've got tangible plans in place for the second half of the year to overcome the inflationary pressures as well as the impact of the lower than expected or are we in the Minnesota electric rate case and allow us to deliver on our 20th twenty-three guidance.
But our strategic priorities are unchanged.
Leading the clean energy transition enhancing our customer's experience in keeping our customers bills low and we've delivered on the strategic vision across are eight states for the past decade.
We invest in clean energy resources that provide both financial cost savings to our customers, while transitioning to a lower carbon economy.
We invest in network infrastructure to foster economic development for new businesses to.
To provide top quartile reliability and to provide resiliency in the face more volatile and unpredictable weather.
We're also building infrastructure to accelerate clean transportation for all of our customers and exploring innovative technologies like batteries and clean fuels to enable the policy objectives and the customer desires for lower carbon economy.
And we focused on continuous improvement to operate efficiently with a lower expense burden to our customers and as a result, we've been able to keep our operating expenses nearly flat for over the past for over a decade.
Our customers benefit from these actions, including significant carbon reductions in residential bills that are 20% below the national average.
As you can see we have a long history of delivering on our commitments to all of our stakeholders and are confident in our ability to meet our earnings guidance again in 2023.
This quarter, we made progress on our clean energy transition plans with a growing portfolio both company owned resources and power purchase agreements.
And our Nsp's solicitation, we recommended an incremental 250 megawatts of self build solar generation and 100 megawatt power purchase agreement Springs are total company owned solar projects at Serco to over 700 megawatts, which will utilize the transmission rates for the first of the three retiring coal units there.
And the Sps RFP, we recommended a portfolio of 418 megawatts of self build solar projects and a 230 megawatt power purchase agreement.
We are also proposing a battery storage project to one of the new self build solar facilities.
In addition later in the quarter, we expect to file a recommended Colorado portfolio for nearly 4000 megawatts of potential resources and based on our interim analysis the outcomes should be very beneficial to our customers.
Across our eight state footprint, we enjoy a geographic advantage for wind and solar resources, which enables higher capacity factors and as a result, excel energy can deliver new renewables at low and competitive prices due to a combination of high capacity factors IRI tax benefits and.
The ability to reuse transmission from retiring plants, all of which provides significant benefits to our customers.
Enables a faster transition to a clean energy economy.
Each of these rfps would represent incremental opportunities as compared to our base capital forecast.
Anticipate commission decisions on these proceedings in the second half of 2023 from Minnesota, and Colorado and in the first half of 2024 for Sps.
And May breakthrough energy ventures announced a 20 million dollar grant to support our 210 megawatt pilot projects perform energies 100 hour battery technology.
In July the Minnesota Commission unanimously approved the form energy pilot to be installed at our circles site alongside our new solar projects.
We planted filing for our second form energy pilot later in the quarter and are evaluating sites that could be supportive of this exciting new clean energy technology.
We're also working with the department of energy on additional funding opportunities to further reduce the cost of these projects for our customers.
And May we filed our second transportation electrification plan in Colorado. The proposed plan, which covers the 2024 to 2026th period includes expanded solutions and rebates to support new public charging stations and charging at homes businesses multifamily buildings and community locations.
It also proposes program supporting electric school buses innovation and income qualified customers.
Our focus is to bring clean transportation to all customers in communities into expeditiously assist in the build out a quarter charging to reduce range anxiety of easy purchasers.
Next month, we plan to file a clean heat plan in Colorado and will follow with our natural gas innovation plan from Minnesota during the fourth quarter.
These plans will be similar to our electric resource plans and provide a framework for our natural gas system to achieve our carbon reduction goals, while meeting the reliability and affordable and needs of our customers.
Taken as a whole these innovative projects and partnerships and electricity and clean transportation and and home heating our essential for XL energy to meet our sustainability goals and to continue to deliver our customers the safe clean.
Reliable and affordable energy that they expect now and long into the future.
In June the Boulder County Sheriff's office announced the findings of its investigation into the cause of the martial fire in December of 2021.
Our thoughts continue to be with the families and the communities impacted by this devastating fire, including our own employees, whose homes and families were directly affected.
The report states that the first Marshall fire started as a result of an ignition on a property affiliated with an entity called the 12 tribes and that this ignition had nothing to do with Excel energy power lines.
The Sheriff's report also discusses second ignition that started more than an hour. After the first fire at a different location, which the report estimates is approximately 80 to 110 feet away from our power lines.
Sheriff's report says that the most probable cause of the second ignition was <unk> power lines, and we strongly disagree with that conclusion.
Because of the pending litigation that's been filed we're not in a position to discuss the martial fire in more detail at this time, but.
But we will vigorously defend ourselves and look forward to presenting our position in court.
Importantly, additional information about the lawsuits and some of the relevant legal standards is included in our earnings release.
And our 10-Q filing and I would direct you there.
Finally, we recently released our comprehensive sustainability report.
The report focuses on four core ESG pillars.
Reached net zero responsibly.
Strengthen our communities.
Operate with integrity and a value people.
Tales, our progress in achieving our industry, leading ESG goals as well as our priorities moving forward.
Some of the key highlights include XL energy has reduced our carbon emissions by 53% since 2005.
More than half of the electricity, we provide to our customers comes from carbon free resources as compared to 41% nationwide.
We outperformed the industry reliability standard restoring power to 94% of customers within 24 hours during major storm events.
And this past year in addition to contributing over $10 billion to local organizations through the XL Energy Foundation.
Our employees contributed $3 million and volunteered over 74000 hours for nonprofit and community improvement projects.
We're proud of our track record it's.
Keeping with our corporate strategy and it's based on our values of connected committed trustworthy and safe.
And with that I'll turn it over to Brian .
Thanks, Bob Good morning, everyone.
We had earnings of 52 cents per share for the second quarter of 2023.
Byrd to 60 cents per share in 2022.
Please note that the line by line income statement comparisons are more complicated this quarter as a result of troops for the Minnesota cases here in the Texas right case last year.
Most significant earnings drivers for the quarter included the following.
Lower depreciation and amortization expense increase earnings by 10 cents per share largely due to the reversal of deferrals in the Texas right case last year and the extension of depreciation lives from the Minnesota right case. These decreases are partially offset bar capital investment program.
Lower taxes other than income taxes increase earnings by six cents per share, reflecting property tax deferrals in Minnesota and Colorado.
In addition, other items combined to increase earnings by force that's for sure.
Offsetting these positive drivers.
Lower electric revenues less fuel decreased earnings by 23 per share, reflecting unfavourable weather the impact of the Minnesota Ricky's and recognition of revenue from the Texas Ricky's last year.
Higher O&M expense decreased earnings by two cents per share.
And higher interest expense decreased earnings by three per share.
Turning to sales.
Year to date, whether adjusted electric sales increase by.
6%, we continue to expect annual electric sales growth of approximately 1% in 2023, which is driven by growth in CNI sales, partially offset by projected declines in residential sales.
No shifting to a expenses.
O&M expenses increased $14 million for the second quarter.
This increase was primarily due to the timing of generation outages higher bad that expense insurance costs and inflation.
Partially offset by the recognition of previously deferred costs from the Texas Electric Brachiation 2022.
Given these drivers as well as the Minnesota Ricky's decision, we're taking actions to mitigate O&M, which will include evaluating discretionary programs staffing levels consulting employ expenses variable compensation and other management actions.
As a result, we now expect the O&M expenses to decline 3% for the year.
During the second quarter, we also made progress on several regulatory proceedings.
Starting with our completed proceedings.
In June Minnesota Commission approved a three year electric rate increase of $311 billion based on an <unk> of 9.25% equity ratio of 52.5% in a forward test here.
We plan to file for reconsideration of a decision as we felt the <unk> was not consistent with the ALJ recommendation or recent commission decisions and other Minnesota proceedings.
And our South Dakota Electric Ricky's The commission approved the settlement for approximately $14 million revenue increase.
And are pending Colorado electric Ricky's, we reached a partial settlement that reflects a $95 million rate increase based on an <unk> of $9, 3% equity ratio of 55.7% in 2022 historic test here.
Remaining items for litigation or the structure of the TCA rider and treatment of coal plant depreciation.
We expect the commission decision later this summer grades going into effect in September .
And our new Mexico electric rate case, we reach a contestant settlement that reflects a rate increase of $33 million based on an army of 9.5%.
Equity ratio of 54.7% in the forecast us here.
We expect a decision and implementation of final rates by October .
Both the Colorado, and new Mexico settlements reflect significant negotiation and compromise by excel energy and a wide range of intervenors with varied interests. The party to believe that the settlements resulted in a just and reasonable outcome for our customers.
As a result, we are hopeful our commissions will approve the settlements without modifications.
We also have pending rate cases in Wisconsin in Texas, which are early in the process Intervenor testimony is expected and the Texas case in August with a decision in the first quarter of next year.
While in Wisconsin, you expect intervenor testimony in the fall and the commission decision by year end.
Turning to the inflation reduction act as most of you are aware of the U S. Treasury recently provided guidance on tax credit transferability, which was consistent with our expectations.
Considerable demand and anticipate monetizing excess excess tax credits later in the year.
Finally, we are reaffirming our 2023 earnings guidance range of $3.30 to.
$3.40 per share, which is consistent with our long term EPS growth object of 5% to 7%.
We've updated our key assumptions to reflect the latest information which are detailed in our earnings release.
Please note that the guidance assumption changes regarding capital riders depreciation property taxes, and ETR, primarily refract regulatory decisions or changes to assume PTC levels are largely earnings neutral.
However, the lower O&M and a portion of the interest expense assumptions will generally impact earnings.
With that I'll wrap up with a quick summary.
We continue to expect to deliver 20th twenty-three earnings with inner guidance range as we have for the past 18 years, managing through regulatory outcomes changing economic environments and periodic headwinds.
We are delivering on our capital planning and executing on opportunities, including clean generation transmission and distribution is for reliability resiliency and broader economic growth.
And we remain confident we can continue to deliver long term earnings and dividend growth within the upper half of our five to some some objective range as we support our communities and states in the clean energy transition.
This concludes our prepared remarks, operator will now take questions.
As a reminder, I think I would like to ask a question on today's call. Please test star one on your telephone keypad.
Your question.
<unk>.
Okay.
And our first question comes from Jeremy connect from J P. Morgan. Please go ahead.
Hi, good morning.
Hey, Hey, good morning, Jeremy how are Ya.
Good thanks for asking.
Just wanted to touch base with a bit on the targeted O&M reductions as as you called out there.
These efficiencies in 2023 and was wondering if you could peel back the onion, a little bit more to see how much of this is one time a nature versus carry forward into.
Into future years.
Just any thoughts that would be helpful.
Sure a good morning, Jeremy and thanks for the question. So I think I'll hit on a couple of different ways Talkable kind of the near term actions.
And when you think about it now how do we hit our year end known him guidance one as we look at no second half of last year, we had elevated O&M. If you look at Ah versus the the first half of last year, and particularly in queue for as well as some one time items in queue for relative to I'm, having a good year.
Investing in the system.
And then there are some impacts this year, where we've had some timing of generation outages earlier and this year and.
And we also expect bad that expense to decline, we saw some higher Baghdad expense levels, given the commodity price impacts earlier. This year. So as I think of all that bad that expense levels should be more sustainable Ah you have some time in a generation outages and then we're also looking at a number of what I call. It near term and long term opportunities near term is what you would call more one time.
Discretionary items around programs spend consulting third party content contracts and variable compensation levels, you more traditional management initiatives, but I think we're spending a lotta time on longer term initiatives around our innovation and transformation transformation team.
We've invested heavily in driving what we call waste elimination and process improvements across our arms and then we're also investing heavily in technology, you heard I've talked about before something called the digital operations factory, which.
Which is focused on using AI and in our operations. We started that in nuclear with our corrective action program now, we're rolling that out to distribution and gas in our field operations and that's using traditional AI. We're also looking and I'll use cases for Jen AI. So as we look at it you know our goal is to hit 3% down for the year longer.
Term our goal is to kind of keep O&M flat and as Bob said, we've done that for nearly a decade and so we have some work to do to get there a balance of the year, but then think longer term O&M flat as we go forward.
Got it that's that's very comprehensive very helpful. There and so that kind of touches on I guess the next question I had just with regards to.
Ah well the Minnesota.
Cause you to revisit any embedded assumptions over.
The remainder of your five year plan at this point and had these kind of O&M.
Items as you called out.
Adjusted for that.
No I I don't think it does I think about our our long term assumptions and our long term, 5% to 7% earnings growth rate and always continue respected love room upper half of that that long term guidance.
Got it.
And then just at a high level of if I could you know given the growth of wildfire risk.
Yeah.
As your mitigation strategy I guess evolved over time or do you have any other thoughts on that side.
Hey, Hey, Jeremy It's Bob I. Appreciate the question is you know we've been operating under in Colorado under a wildfire mitigation plan that was instituted probably more than three years ago and that plans due to be refreshed.
In Colorado at the end of this year and we expect to propose.
Continuation of existing programs and new programs in Colorado that understand the Ah the.
The volatility of weather in the west and the footprints of the Colorado Company in particular, so we're still working through that nothing specific right now, but but certainly.
Looking at everything.
Everything that we can in terms of the risks and the opportunities to strengthen our own system and make sure that we protect our communities and our customers.
Got it just one last one if I could post what we've seen in Minnesota here so far.
Your view of the relative attractiveness of Minnesota versus a X LS wider footprint change in any way.
Look I think as I said in my opening remarks.
We feel like we've run a really good utility in Minnesota and across are eight states focusing on our customers and our communities and helping our states achieve their policy objectives around clean energy and clean transportation.
And the outcome I'll I'll I'll say was was disappointing.
You know for two reasons, Paul and Brian mentioned, one which was.
You know it was inconsistent with previous decisions in Minnesota.
That had been 942965.
But equally important probably didn't recognize what I think excel energy as a national leading utility and advancing a lot of these initiatives, making sure we do it reliably and affordably and sustainably.
We will continue to review our investment opportunities in our programs in the state.
But I think generally really confident that this is our headquarters state and we want to work proactively with the governor and the legislature and the PUC too advanced these initiatives.
Got it that's very helpful I'll leave it there thanks.
Thank you. Our next question comes from Surrogates Chopra Everquest. Please go ahead.
Hey, good morning, I'm, sorry, I was in the nude.
Okay.
Later, we are still getting caught by the mute button.
Okay can you hear me now I'm sorry, Brian .
Okay, perfect sorry about that guys bra.
Ryan I heard you mentioned.
Minnesota right gift item.
<unk> could you just give us a little bit more color there as to what the next steps are timeline.
Yeah the reconsideration.
Develop a reconsideration 20 days after the written orders so that's coming up and so certainly we will file for reconsideration.
Around <unk> around.
The decision on the prepaid pension acid in some other expense levels.
And.
We're hopeful.
<unk> Commission that will take that up and look at Harvard or reconsideration borrowing.
And they have 60 days once.
They have 60 days to decide so that's the process.
Got it okay, so that should be coming out shortly and then 60 days after that decision whether they take it up or not.
Minnesota Commission Okay. Thank you and then just you know you mentioned the transfer ability guidance was in line with your expectations, there's been a lot of discussion.
Within the industry investors and credit agencies on the implications do CFO .
Yeah I know.
You're very knowledgeable on this topic in general to just get your thoughts there, how you're seeing display out and implications for your credit metrics.
Yeah. So I mean, we've spent a lot as I would call. It an industry collaboration on how we work this through our financials and so not only worked with a lot of our peer utilities. We've also work with the big for accounting firms and.
So everything renew is going to be in accordance with GAAP, it's going to take the income tax approach is going to flow through our income tax expense lines little also flow through cash from operations and so I think it's pretty straightforward in I know, there's been a lot of discussion whether it'll show up in F. F O dot matrix I feel pretty good about it I mean, because it absolutely.
Will reflect the economics of our underlying financials.
And it is Ross right it'll be reoccurring cash flow benefit is you look to monetize these tax credits so I'm I'm.
[laughter] I feel pretty good about how will be reflected across the radio and cheese and we've spent time with each of those talking him through that and like I said also work closely with the big for accounting firms and is generally the approach the whole industry will take.
Well, that's really helpful. Thanks, and then maybe just.
The extent you were willing to comment in this just a little bit more pointed question on 2023 guidance.
Obviously, you mentioned the history of <unk>.
Meeting and exceeding expectations.
With the unfavourable weather you know in the in the.
<unk> decision what are you tracking and with your sort of cost efforts in place what are you targeting or where you're tracking within the guidance range.
Yeah. So you know I'm sitting here two six months of the year, we're tracking to mid mid point of guidance and I'll give you a little bit more color right I think about it and kind of three buckets versus execution of our on our O&M plans, which I, which I talked about earlier second is we do have additional reiki is revenue that will come in the door.
<unk> and the second half of the year, particularly with the Colorado Rockies and flight the New Mexico, right, Keith and flight and then is still continued benefits from Wisconsin last year and then we do have expected continued sales growth and our service territories and so those are really the three buckets that I think about it and targeting mid point of guidance and obviously as we.
Normally do in Q3.
We will.
Look at where we are in Q3 unnecessarily rude tightened guidance.
Very clear. Thank thanks, so much I appreciate the time.
[laughter].
Thank you. Our next question comes from Julianne <unk> Smith, a bank of America. Please go ahead.
Hi, good morning. Thank you so much of the time and the opportunity appreciate it 18.
I wanted to focus on the wildfire dynamics, obviously, a lot of fixation on this perhaps principally coming from out of state as well can you elaborate a little bit I know the prepared remarks, you said you refer to us as a 10-Q immediately here, but can you can you elaborate a leason on your insurance levels today your insurance programs.
Cross the states as well how do you frame the risks here from the lawsuits that have been filed I imagine that some of the commentary you alluded to you in the queue here, but can you help frame up your understanding as well as maybe some of the differences critically from some of the out of state considerations that are drawing renewed scrutiny.
Yeah, Hey, Julian it's Bob and thanks for the question and here's what I can say about martial right now the Boulder County Sheriff's report concluded that the Marshall fire first ignited on the property of the 12 tribes and that the signature was unrelated to our equipment.
With respect to the cause of the second ignition, which began an hour. After the first we strongly disagree with the conclusion of the share support and we will vigorously defend ourselves in court the share.
Sure support concluded that there were no design or installation or maintenance defects or deficiencies and public services electrical circuit in the area of the second ignition.
And so you know regarding the litigation there's a hearing in September where we expect to learn more about the procedural next steps.
Additional information about the lawsuits in the legal standards are included in our disclosures in our earnings release and in our 10-Q.
Given the lawsuits Ah you know I don't think we're going to comment any further beyond those particular disclosures I'll, let Brian comment on insurance coverage.
But other than that I think we're going to stick to stick to our disclosure statements and Julian insurance coverage is included in our disclosure approximately $500 million.
Got it alright understood and then it any further commentary about the differences in context across the different states, especially whether it pertains to illegal Ricky.
Recovery construct <unk> jury construct.
Yeah. It's all included in disclosure is an entire page of disclosures in the earnings release in the queue.
Alright fair enough, we'll leave it there. Thank you guys very much appreciate it I appreciate it thanks.
Thank you. Our next question comes from Anthony crowd out.
Please go ahead.
Hey, good morning, good morning, Brian .
Paul sorry.
I didn't Wanna leave you out.
Just hurtful hopefully [laughter] hopefully two quick questions one on Ah Julien.
Following up on Julian with the Marshall fire is there a timing when that resolves itself or are you you just have to lie to places of course, and you can't give any real.
Sheila.
When that proceeding will wrap up in that overhang lifted.
As I as I mentioned look at it.
We have a September hearing, where we're going to learn a lot more about the procedural schedule.
And will know more than.
And so you really can't go beyond what we've already set in the disclosure. So we have to limit the questions on that.
Okay, Great and then on site 11.
Pending settlement at in Colorado, just you're talking about I think an alternate alternative rate increased $47 million, but that that's dependent upon I guess some coal plant deferrals I'm just curious if you could talk about how the commission.
They hopefully when they approved the settlement is that when they will address how they handle the coal plant deferrals or does that get rolled into a separate proceeding.
Hey, Anthony that will all be decided within the reiki decision of the commission will make here in Q3 saw they deliberated they had.
Hearings on it in July and so that's all part of the record. So it's kind of either the 95 million dollar one nor the alternatives. If you defer some additional depreciation is $47 million in that did that $48 million difference is just the deferral. The depreciation so all all will be decided.
So it would be earnings neutral, but it would have a cash flow impact obviously.
Great. Thanks, I'll I'm going from here, Thanks, again for taking the questions.
Yep.
Thank you. Our next question comes from Stuffy car of Keybanc. Please go ahead.
Hi, Good morning, Thank you for taking my question.
Yeah, Hi, my questions have been answered then maybe I can just ask a couple of them.
Questions here, Sir I'm volumes at I'm Jessica.
If you could discuss a little bit wouldn't drives the volumes any ability here aside from whether it seems like you know I was C&I volumes or equally or close to equally.
We.
As well as the essential.
So like what that some person takes that drives it against you over here.
Hey, so yeah, if I think about sales in really looking at the weather normalized sales. We continue to see really strong growth on the <unk> side of the Sps and and and Q2 on wasn't roma's basis, Weirds strength in Minnesota, and Wisconsin too.
Colorado on a year to the day basis on teen either as a a.
Large manufacturing facility it was down for the first quarter in.
In the first quarter of this year in Colorado, So that it had some weakness on the residential side the residential while we're down close to a percent for the year. It's tracking in line with our forecasts are our expectations for the year right. We continue to see good customer growth, but we do see continued use for customer declines is are we have really strong.
<unk> efficiency, India DSM program. So I think overall it is tracking both on the CNI side and on the <unk> side is tracking to expectations offer kind of through the first six months and for the balance here with our with our guidance on sales.
Alright, Thank you and.
Maybe I can just ask I couldn't do the Fisher question here I know you've been looking at potentially involve and then uhm upgrading and that's M. R. Adjacent to one of your territory is just kind of curious how.
How do you still thinking about that and it's been any progress to report.
Yeah, Hey, it's Bob we Luckily as a company, we certainly have a view on nuclear both current and future.
Key priority for us is preserving the existing nuclear fleet and making sure that there's a potential for a nuclear future for the country.
We have been working with a company called new scale on their technology, It's an S. M R technology.
Mostly helping them through the nuclear regulatory process, and making sure that their applications Neath the NRC guidelines and hoping to get that that technology can get through.
Can get through the regulatory process, we don't have plans as a company to own or operate a S.
<unk> at this point.
We really are just taking our nuclear expertise.
Helping with the nuclear future for that company.
So we don't have any specific plans to announce on Mars and specifics.
Alright. Thank you that's all for me.
Thank you our next question comes from.
[noise] highly Davenport at Goldman Sachs. Please go ahead.
Hey, good morning, Thanks for taking my questions Carly.
Carly welcome aboard.
Thank you I appreciate that Bob you've been vocal about sort of in in all of the above approach kind of on the energy transition from a technology perspective, and he talked a little bit about the grant the form energy pilot could you just talk a little bit about kind of how that pilots involving and other opportunities that might exist in that space.
Do you think about long duration storage.
Yeah happy to look as we think about it as a company.
First first utility to announce 100% carbon free given our geographic position, our ability to transition with wind and solar cost effectively for our customers to the end of this decade allowed us to make an interim target of an 80% carbon reduction, we feel very confident and that but we've always been folk.
Just on.
We need new technology, New research development and deployment of new technologies to achieve our 100% goal and the nation's clean energy goals one of the big pieces of that is obviously energy storage.
We have a lot of lithium ion four hour batteries around the country and we have some on our own systems.
But long duration energy storage is a critical part of the energy future and so the form energy battery.
100 megawatt hour battery, so instead of four hours, it's four days.
That's a nice asset class as we think about periods when the wind doesn't blow and the Sun doesn't shine and we've seen evidence of that.
As recently as early June of this year and the southwest where we had very limited wind production. We've seen it in polar vortex is where in winter storm here, where we had no wind production for almost a three day period. So this idea of a long duration battery is is really interesting what's exciting about form in particular, it's it's a pretty old.
Technology really this was found by the department of energy almost 60 years ago, but is becoming commercializable by it by a new company form energy and they are a breakthrough energy V. C funded company and energy impact partners funded company and the technology is pretty interesting I want to call. It simple could that because that would.
That would.
Minimize the impact and the efforts of the development team and the and the the founders of that company, but it's basically rusting in D. Rusting iron in the great part about that is iron as as readily available it's domestically available not subject to counterparties and regimes in the world, where we have challenges and so you know when I think about <unk>.
Technologies.
You know, sometimes it's not the best that wins is the one that's most commercializable and the one that can deploy the fastest and I was really proud to be in west, Virginia last month, and breaking ground with the form energy team with Secretary Grand home and Senator mansion.
They're building it and 800 megawatt capable factory in West, Virginia, as we speak with with loan guarantees and grants from the government. So this is a technology that is going to come to fruition. It's a technology that's going to be scalable, we're really pleased to be there first.
Partner in sales of that but it's a pilot it's 10 megawatts and we're gonna put it on a 9000 megawatts system. So we have a great opportunity to build it with them and invest alongside and then the breakthrough energy grants and the potential Joey grants by down that cost and buy down that risk for the company. So very exciting technology really excited.
About the future what this could mean.
I would just add we have another another pilot in Colorado, Andrea which is in as a liquid metal technology that will have online in 2024, that's a eight to 12 hour duration. So kind of caught mid duration. So we're spending a lotta time on this new technology and I think also longer term it kind of raw.
And the definition of energy storage.
Green hydrogen as a form of energy storage as we think about longer term yellow star and then burn it through some of our firm Dispatchable Eunice longer term. So we're pretty excited about Latvia called new technologies.
And glad really happy to see how excited I've been sort of commission is on form energy with unanimous approval that project.
Awesome I appreciate those perspectives and then that's all just around earnings guidance, obviously, a reiterating the guidance for 2023, we just wanted to check check in on temperature on on the five to seven longterm guidance as you kind of think about the incremental spending opportunities from our capex perspective, along with some of the regulatory out.
<unk> kind of hard thinking about that long term range.
Yeah, Hey, Carly good question and we.
Fully expect to continue delivering in the upper half of our 5% to 7% a long long term gotten so that that's unchanged.
You mentioned the incremental opportunities that we have.
And I think in Bob's comments, he mentioned the Sherpa solar three farm. The Sps. The 420 418 megawatts of solar farms that are going to provide significant customer benefits and Sps, we filed that CCN yesterday. So those two together are north of $1 billion of clean energy investments that will benefit.
Our customers that are outside of our current Apple plan nothing.
Nothing longer term right will file here in Q3 are preferred plan for with the Colorado Commission around or.
RFP you know going into that that was decided pre iras. The commission ruled on that resource plan before we can lay around the significant benefits.
Customer benefits of the Iras, so when we look at how.
How the costs are coming in relative to what was approved we believe we can go bigger and faster.
And above board that initial 4000 megawatts of renewable has in store and show. It. So we're excited to work with our Colorado Commission on that look for that filing in Q3, and hopefully get the decision in Q4, and then even more longer term in the next 18 to twenty-four months will be following more rfps in Minnesota, Colorado and Sps for.
Further significant additions to clean energy assets as we March towards the age of Saint by 2030 goal. So I'm pretty excited about it pretty excited about long term opportunities and we do feel good about delivering the upper half of or a longterm guidance range.
Great. Thank you.
Thank you. Our next question comes from a replacement please.
<unk> research. Please go ahead.
Yeah, Hi, good morning, David could have all view on the phone, including Paul [laughter]. Thank you Steve.
The [laughter].
The one Marshall fire question is there a deadline when any claims needs to be filed by.
Yeah, Steve It's Bob My understanding is it <unk>.
Claims are a two year deadlines, so that would say at the end of this year is when claims needs to be filed.
Okay.
Second questions a different topic on the.
Colorado settlement is there I know I think you mentioned Q3 for the final water is there a specific date for that.
Approval.
Mmm.
There's not a date, but we expect that the commissioner ruled probably in the middle of August .
Deliberations the middle of August .
Okay.
And then lastly, just I know.
You all have been pretty focused on a number of I R. A.
Provisions, including the hydrogen one.
And and just kind of curious latest thoughts on.
The ability.
Someone could hydrogen production.
Green hydrogen.
So kind of.
<unk> of the Green hydrogen when do you think you'll get will get that and whether nuclear might be included in that or institutional if you're going to be a problem for that thanks, Yeah pegged Steve It's Bob. Thanks for the question, we've been very active in clean fuels in general and hydrogen in.
Killer.
Philosophically.
We believe that we're going to undergo a large period of electrification over the next 10 or 20 years as a as a country and as a company.
Penny.
But there are parts of the economy that it can be difficult.
Or expensive or even in some cases impossible to electrify and therefore, we feel like we need a clean molecule to help in those areas and today, that's natural gas, but tomorrow. The most promising molecule that we see as a green hydrogen molecule and and this looks like as in.
Opportunity for the company. It's another version of steel for fuel at some level.
The federal government supportive of it the states are supportive of it and we've got two hydrogen hub applications. One in the Rocky Mountain region with Mou's from four states.
Two of which we serve Colorado, New Mexico, as well as Utah Wyoming.
And then here in the upper mid West Ah five state Mou again, two of which three of which that we serve.
Wisconsin, Minnesota, North Dakota, Montana.
And we're in front of the Doa those of progress through the process and we expect to know by the end of the year, whether we're gonna get you a loan grants for hydrogen and I think you're aware of some of the challenges around what qualifies for a tax credit in.
In hydrogen land and I think they are sort of three areas of sort of debate and what we're trying to do is balance.
Cost of the customer and a need to accelerate.
<unk> to build and take us down the technology curve of Oel, electrolyze hers and balance of plant.
And I think about those as location.
Generation matching and then additionality, so with respect to location we have been.
All three of those.
One entity, we think we need flexibility and all three of those categories.
On the location, we've been supporting us accompany a balancing area type location.
But certainly not national which causes real market distortions and challenges with generation nationally.
Similarly on matching you know I think that the pure level would say, we need the hourly matching but we probably need some transition period to get to that strict hourly matching and so we've been supportive of some period of time, where.
Ah you know maybe by the end of the decade or late this decade, we've got Ah hourly matching but.
Go to annually matching for for some period of time, and then with Additionality again very supportive of the additionality as a concept but.
But areas of flexibility there one we would really support nuclear.
In regards to additionality, and we have supported pretty vocally that as well as any sort or otherwise back down energy. We would support that is additionality. If it came back into the grid and so I'm very.
Very active we're very active and he I were very active at a CPA Ah and I think those are generally in line with principles that both of those organizations are supporting Steven.
Even you asked about timing or the statutory deadline. The August 20th second and they haven't missed statutory deadline, yet, but what we're hearing is that there are still a lot of.
Ah uncertainty around the position does it all lying given the some of the polarizing viewpoint. So it certainly could slip into September or October .
Okay. That's a lot of good information. Thank you appreciate it.
Thank you.
Thank you. Our next question comes from the <unk> <unk> a city. Please go ahead.
Hi, everybody in terms of the 500 million dollar insurance, what was the cost of that insurance.
[noise] was it occurred.
And then I guess go forward or are you seeing changes in pricing for wildfire related insurance and what's your strategy on a go forward basis relationship to insurance.
We haven't disclosed the cost Ryan and every year, we renew our insurance program and we continue to look at that insurance program is for everything is based on market experience for the insurance companies and as you can imagine it gets more challenged all the time, that's not just related a wildfire, but that's about all we have.
Say about insurance.
Heavy already procured it.
And 23 for the next year or is that.
An upcoming event for the back half of the year.
We're still in the process.
Okay.
And I guess, one last question on that I mean, it's a 500 million any associated costs with recurring it is that passed onto ratepayers or is that embedded in your O&M cost Allen.
It's a it's a reflection it's Ah it's covered through rape cases, yes.
And it's included in or whatever.
Included in.
It's included in O&M expense.
Okay I appreciate the call. Thank you.
Thank you actually I have no further questions in the queue I will turn the call back over to Seattle signed in April at closing remark.
And thank you all for participating in our earnings call. This morning, please contact our Investor relations team with any follow up thank you.
Mhm.
Welcome Christine contact you May know.
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