Q4 2023 Avista Corp Earnings Call
Yeah.
Operator: Hello, and thank you for standing by. Welcome to the Avista Corporation fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode.
Hello, and thank you for standing by.
Speaker Change: Welcome to the Avista Corporation fourth quarter 2023 earnings Conference call.
Speaker Change: At this time all participants are in a listen only mode.
Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.
Speaker Change: After the speaker's presentation, there will be a question and answer session.
Speaker Change: To ask a question. During this session you will need to press star one on your telephone.
Speaker Change: You would then here are automated message advising your hand is raised.
Operator: To withdraw your question, please press star 11 again. I would now like to hand the conference over to Stacey Wentz. You may begin. Good morning. I'm pleased to welcome you all to Avista's fourth quarter 2023 earnings conference call. Our earnings and 2023 Form 10-K were released pre-market this morning. You can find both on our website.
Speaker Change: To withdraw your question. Please press star one again.
Speaker Change: I would now like to hand, the conference over to Stacy once you may begin.
Stacy: Good morning, I'm pleased to welcome you all to read this as fourth quarter 2023 earnings Conference call. Our earnings and 2023 Form 10-K were released pre market. This morning, you can find those on our website.
Stacey Wentz: Joining me this morning are Avista Corp CEO Dennis Vermillion, President and COO Heather Rosentrader, Senior Vice President, CFO, Treasurer, and Regulatory Affairs Officer, Kevin Christie, and Vice President, Controller, and Principal Accounting Officer, Ryan Crossell. Today, we will make certain statements that are forward-looking. These involve assumptions, risks, and uncertainties, which are subject to change.
Stacy: Joining me. This morning are Avista Corp, CEO Dennis Vermillion.
Stacy: Didn't N C O O Heather rather than a trader.
Speaker Change: And your Vice President CFO, Treasurer, and regulatory Affairs Officer, Kevin Christie, and Vice President Controller, and principal accounting Officer, Ryan Crosswalk.
Speaker Change: Today, we will make certain statements that are forward looking.
Speaker Change: These involve assumptions risks and uncertainties, which are subject to change various factors could cause actual results to differ materially from the expectations. We discussed in today's call.
Stacey Wentz: Various factors could cause actual results to differ materially from the expectations we discuss in today's call; please refer to our 10-K for 2023, which is available on our website, for a full discussion of these risk factors. To begin, I'll recap the financial results presented in today's press release. Our consolidated earnings for the fourth quarter of 2023 were $1.08 per diluted share, compared to $1.05 for the fourth quarter of 2022. For the full year, consolidated earnings were $2.24 per diluted share in 2023, compared to $2.12 last year. Now, I'm happy to turn the call over to Dennis. Well, thanks, Stacy. And good morning, everyone.
Speaker Change: Please refer to our 10-K for 2023, which is available on our website for a full discussion of these risk factors.
Speaker Change: To begin I'll recap the financial results presented in today's press release.
Speaker Change: Our consolidated earnings for the fourth quarter of 2023 were $1.08 per diluted share compared to $1.05 for the fourth quarter of 2022.
Speaker Change: Full year consolidated earnings were $2.24 per diluted share in 2023 compared to $2.12 last year.
Speaker Change: Now I'm happy to turn the call over to Dennis.
Thanks, Stacy and good morning, everyone.
Dennis P. Vermillion: I'd like to start by saying how proud I am of what we accomplished in 2023. We really had a great year. Our 2023 earnings at Avista Utilities show significant improvement from 2022 and reflect the benefits of improved cost recovery resulting from our general rate cases, as well as our success in managing our costs through the headwinds of increased interest rates and the impact of higher power supply costs. Our improved earnings demonstrate the team's commitment to delivering results. This teamwork is core to Avista's values, and there are many examples I could point to. To touch on one, in November, we faced the largest natural gas outage in our company's history. Nearly 37,000 natural gas customers were impacted when a gas pipeline that transports gas to Avista's system was damaged by a third-party dig-in.
Dennis P. Vermillion: I'd like to start by saying how proud I am of what we accomplished in 2023, they really had a great year.
Dennis P. Vermillion: Our 2023 earnings at Avista utilities show significant improvement from 2022 and reflect the benefits of improved cost recovery, resulting from our general rate cases.
Dennis P. Vermillion: As well as our success in managing our costs through the headwinds of increased interest rates.
Dennis P. Vermillion: And the impact of higher power supply costs or improve our improved earnings demonstrate the team's commitment to delivering results.
This teamwork is core to our business values and there are many examples I could point to.
Dennis P. Vermillion: On one in November we face the largest natural gas outage in our company's history.
Dennis P. Vermillion: Nearly 37000 natural gas customers were impacted when a gas pipeline that transports gas to Vista system was damaged by a third party dig in.
Dennis P. Vermillion: Our people, along with mutual aid workers from eight utilities spanning eight states and contract employees, worked safely to restore service to every impacted customer in less than one week. That we were able to achieve 100% restoration in such a short time frame is a testament to the determination and drive of our people and the people who came alongside us to help. I'm thankful for each one and for the resilience and understanding of our customers. We're thankful for the safety of all involved, as well as the regulatory support from our Commission. We received approval to defer the costs of the incident for recovery to be addressed in a future regulatory proceeding. And I wouldn't be a utility guy if I didn't take this opportunity to say this. Please call 811 before you dig. Although much of the winter season has been milder than normal, we experienced very cold temperatures in mid-January.
Dennis P. Vermillion: Our people along with mutual aid workers from eight utilities spanning eight states and contract employees worked safely to restore service to every impacted customer in less than one week that.
Dennis P. Vermillion: That we were able to achieve 100% restoration in such a short time frame is a testament to the determination and drive of our people.
Dennis P. Vermillion: And the people who came alongside of us to help.
Dennis P. Vermillion: I'm thankful for each one and for the resilience and understanding of our customers.
Dennis P. Vermillion: We're thankful for the safety of all involved as well as the regular regulatory support from our commissions, we received approval to defer the cost of the incident for recovery to be addressed in a future regulatory proceeding.
Speaker Change: And I wouldn't be a utility guy if I didn't take this opportunity to opportunity to say this please call 811 before you dig.
Speaker Change: Although much of the winter season has been milder than normal we experienced very cold temperatures in mid January.
Dennis P. Vermillion: At the same time, two operational issues impacted our system and the natural gas system throughout the Pacific Northwest. Mechanical issues at both a third-party transmission pipeline and the natural gas storage facility we partially own reduced the capacity of natural gas in the region. These challenges, combined with the extreme cold, resulted in very high commodity prices.
Speaker Change: At the same time to.
Speaker Change: Two operational issues impacted our system and the natural gas system throughout the Pacific Northwest mechanical issues at both a third party transmission pipeline and the natural gas storage facility, we partially on reduce the capacity of natural gas in the region.
Speaker Change: These challenges combined with the extreme cold resulted in very high commodity prices.
Dennis P. Vermillion: Just as with the gas outage, I'm proud of the resilience of our customers and our operational decisions as we navigated these issues. Although we had to purchase energy during this period of higher commodity prices, these costs will be included under various deferral mechanisms for power and gas costs. We continue to make progress on our clean energy goals on the natural gas front with the four renewable natural gas supply contracts we've executed so far. We expect to purchase 9.7 million therms of natural gas annually from renewable sources.
Speaker Change: Just as with the gas outage I'm proud of the resilience of our customers at our operational decisions as we navigated these issues.
Speaker Change: Though we had to purchase energy during this period.
Of higher commodity prices. These costs will be included under various deferral mechanisms for power and gas costs.
Speaker Change: We continue to make progress on our clean energy goals out of the natural gas front with the poor renewable natural gas supply contracts. We've executed so far we expect to purchase $9 7 million in terms of natural gas annually from renewable sources. We're also partnering with school districts in our service territory to work toward fleet electrification.
Dennis P. Vermillion: We're also partnering with school districts in our service territory to work toward fleet electrification, and by the end of 2024, we expect to be working with nine school districts on this effort. So whether it's improving the carbon profile of our natural gas operations or assisting our customers with electrification initiatives, we're building on our foundation of clean hydropower to work towards an even cleaner energy future for our region. In December, we published our 2023 Corporate Responsibility Report. The latest report includes progress updates regarding Avista's aspirational goals for clean energy and workplace equity, inclusion, and diversity, including supplier diversity. And I really encourage you to check out the report if you haven't done so already.
Speaker Change: And by the end of 2024, we expect to be working with nine school districts on this effort.
Speaker Change: So whether it's improving the carbon profile of our natural gas operations or assisting our customers with electrification initiatives. We're building on our foundation of clean hydropower to work towards an even cleaner energy future for our region.
Speaker Change: In December we published our 2023 corporate responsibility report. The latest report includes progress updates regarding the Vista is aspirational goals for clean energy and workplace equity inclusion and diversity, including supplier diversity and I really encourage you to check out the report if you haven't done it already.
Dennis P. Vermillion: Great report. You can see recent examples that demonstrate our longstanding commitment to doing the right thing for our environment, our people, our customers, and communities, along with our shareholders. Earlier this month, the board increased our annual dividend to $1.90 per share. The board has a longstanding commitment to maximize shareholder value, and we strive to target a competitive dividend for our shareholders. We are committed to providing affordable and reliable energy to our customers, and we make customer-focused investments in our infrastructure to improve reliability and maintain the safety of our operations. Periodically, this requires us to request adjustments to customer rates to reflect the actual costs of providing service.
Speaker Change: Great report you can see recent examples that demonstrate our long standing commitment to doing the right thing for our environment, our people our customers and communities along with our shareholders.
Speaker Change: Earlier this month the board increased our annual dividend to $1 90 per share. The board has a long standing commitment to maximize shareholder value and we strive to targeted competitive dividend for our shareholders.
Speaker Change: Yeah.
Speaker Change: We are committed to providing affordable and reliable energy to our customers and we made customer focused investments in our infrastructure to improve reliability and maintain the safety of our operations.
Speaker Change: <unk> this requires us to request request adjustments to customer rates to reflect the actual cost of providing service. So in January we filed two year general rate cases in Washington in electric and gas. We've asked for increases in the first year of our plan of $77 $1 million for electric and <unk>.
Dennis P. Vermillion: So in January, we filed two-year general rate cases in Washington, electric and gas. We asked for increases in the first year of our plan of $77.1 million for electric and $17.3 million for natural gas. Coal Strip's exit from our generation portfolio will occur at the end of 2025 in compliance with the Clean Energy Regulations in the state of Washington, and the resulting change in the projected power supply costs, when netted with the changes resulting in the elimination of coal strip costs, results in a total request of $53.7 million in the second year of our plan for electricity. On the natural gas side, we've asked for an increase of $4.6 million in the second Kevin will share more about our Washington filing in a moment, and at this time, I'll hand the call over to Kevin. Thanks, Dennis, and good morning, everyone.
$19 3 million for natural gas.
Speaker Change: Cole strips exit from our generation portfolio will occur at the end of 2025 and compliance with the clean energy regulations in the state of Washington, and the resulting change in our projected power supply costs were netted with there were changes, resulting in the elimination of colstrip costs, resulting in a total request of 57.
Speaker Change: $53 $7 million in the second year of our plan for electric.
Speaker Change: On the natural gas side, we've asked for an increase of $4 6 million in the second year of our plan.
Speaker Change: Kevin will share more about our Washington filing in a moment and at this time I'll hand, the call over to Kevin.
Kevin Christie: Thanks, Dennis and good morning, everyone, we've executed meaningful steps in our strategy at Avista utilities that show in our results. Our core utility operations are strong and demonstrates significant earnings growth of over 35% in 2023, when compared to 2022 as.
Kevin Christie: We've executed meaningful steps in our strategy at Avista Utilities that show in our results. Our core utility operations are strong and demonstrate significant earnings growth of over 35% in 2023, compared to 2022. As Dennis mentioned, this increase in Avista utilities is largely a result of Improved Cost Recovery. Successful cost management and lower net power supply costs for the full year of 2023, the Energy Recovery Mechanism was a pre-tax expense of $8.4 million compared to a pre-tax expense of $10.9 million in 2022. AEL&P had a strong year as well. Their results met the high end of our expectations for the year. Our consolidated results came in below our expectations.
Kevin Christie: As Denis mentioned this increase at Avista utilities is largely the result of improved cost recovery. So.
Kevin Christie: <unk> cost management.
Kevin Christie: Lower net power supply cost.
Kevin Christie: For the full year of 2023, the energy recovery mechanism was a pre tax expense of $8 4 million compared to a pre tax expense of $10 9 million in 2022.
Kevin Christie: <unk> had a strong year as well their results met the high end of our expectations for the year or.
Kevin Christie: Our consolidated results came in below our expectations. This was the result of losses in our other businesses driven by the periodic valuation of our investments.
Kevin Christie: This was the result of losses in our other business, driven by the periodic valuation of our investment. We continue to invest the necessary capital in order for us to provide safe and reliable services for our customers and to comply with clean energy regulations. And we're getting timely recovery of that investment. This is in part due to the multi-year rate plan structure in Washington, which allows us to place capital and rate base prospectively, as well as file rate cases on a timely basis for a significant portion of our Washington electric rate requests. More than half in year one and nearly 70% in year two are related to the reset of power supply costs.
Kevin Christie: We continue to invest the necessary capital in order for us to provide safe and reliable service for our customers and to comply with clean energy regulations.
Kevin Christie: And we are getting timely recovery of that investment.
Kevin Christie: This is in part due to the multiyear rate plan structure in Washington, which allows us to place capital and rate base prospectively.
Kevin Christie: As well as filing rate cases on a timely basis.
Kevin Christie: A significant portion of our Washington electric rate request.
Kevin Christie: More than half in year, one and nearly 70% in year two is related to the reset of power supply costs, the removal of costs related to coal strip from customer rates.
Kevin Christie: The removal of costs related to coal stripping from customer rates and recovery of costs we previously deferred, all of which we expect to fully recover. Our improved cost recovery in 2023 is partially the result of the deferral mechanism. We've been successful in developing with our commission, such as wildfire and insurance costs. We continue to focus on additional regulatory mechanisms that improve cost recovery.
Kevin Christie: And recovery of costs, we previously deferred.
Kevin Christie: All of which we expect to fully recover.
Kevin Christie: Our improved cost recovery in 2023 is partially the result of deferral mechanisms we've been successful in developing with our commissions such as wildfire and insurance costs.
Kevin Christie: We continue to focus upon additional regulatory mechanisms that improved cost recovery.
Kevin Christie: To that end, in our Washington general rate case, we are requesting a modification to the ERM. We propose a straight 95% customer, 5% company sharing of power supply costs. The ERM was introduced in 2002, and the energy markets have evolved since then. We believe this is the appropriate time to refresh the mechanism to better reflect current market dynamics. We are committed to investing the necessary capital in our utility infrastructure. Our capital expenditures at Avista Utilities were $485 million in 2023 so that we can continue to support customer growth and maintain our system to provide safe, reliable energy to our customers. Our planned capital expenditures are $500 million in 2024, 525 million in 2025, and 575 million in 2026. Our planned expenditures for 2026 have increased $25 million, primarily due to projects planned for wildfire mitigation. AEL&P's capital expenditures were $14 million in 2023.
Kevin Christie: To that end in our Washington General rate case, we are requesting a modification to the arm.
Kevin Christie: We propose a straight 95% customer, 5% company sharing power supply costs.
Kevin Christie: <unk> was introduced in 2002 and the energy markets have evolved since then.
Kevin Christie: We believe this is the appropriate time to refresh the mechanism to better reflect current market dynamics.
Kevin Christie: We are committed to investing the necessary capital in our utility infrastructure are.
Kevin Christie: Our capital expenditures at Avista utilities were $485 million in 2023.
Kevin Christie: So that we can continue to support customer growth and maintain our system to provide safe reliable energy to our customers. Our planned capital expenditures, our $500 million in 2020 for $525 million in 2025 and $575 million in 2026.
Kevin Christie: Our planned expenditures for 2026 have increased $25 million, primarily due to projects planned for wildfire mitigation.
Kevin Christie: <unk> capital expenditures were $14 million in 2023, and 21 million of capital expenditures are expected in 2024.
Kevin Christie: Twenty-one million capital expenditures are expected in 2024. We also invested $17 million in other investments during 2023, and we expect to invest $22 million in 2024. On the liquidity front, as of December 31st, we had $146 million of available liquidity under our committed line of credit and $30 million available under our letter of credit facility.
Kevin Christie: We also invested $17 million in other investments during 2023, and we expect to invest $22 million in 2024.
Okay.
Kevin Christie: On the liquidity front as of December 31, we had $146 million of available liquidity under our committed line of credit and $30 million available under our letter of credit facility.
Kevin Christie: We issued $112 million of common stock and $250 million of long-term debt in 2023. In 2024, we expect to issue approximately $85 million of long-term debt and $70 million of common stock to partially fund our capital spending for the year. Improved cash from operations will help fund the remainder. We are initiating our guidance for 2024 with a consolidated range of $2.36 to $2.56 per diluted share.
Kevin Christie: We issued $112 million of common stock and $250 million of long term debt in 2023.
Kevin Christie: In 2024, we expect to issue approximately 85 billion of long term debt and $70 million of common stock to partially fund our capital spending for the year.
Kevin Christie: <unk> cash from operations will help fund the remainder.
Kevin Christie: We are initiating our guidance for 2024 with a consolidated range of $2 36.
Kevin Christie: To $2 56 per diluted share.
Kevin Christie: We expect avista utilities to contribute within a range of $2 23.
Kevin Christie: We expect Avista Utilities to contribute within a range of $2.23 to $2.39 per diluted share in 2024. We expect the impact of the IRM on earnings to be negative during the first quarter of 24 in the 50% customer, 50% company sharing ban.
Kevin Christie: To $2 39 per diluted share in 2024.
Kevin Christie: We expect the impact of the ERM on earnings to be negative during the first quarter of 'twenty, four and the 50% customer 50% company sharing band.
Kevin Christie: For the full year, we expect the arm to be neutral to earnings as we anticipate a positive impact in the latter part of the year, which will offset the early negative impact.
Kevin Christie: For the full year, we expect the arm to be neutral to earnings, as we anticipate a positive impact in the latter part of the year, which will offset the early negative impact. Our guidance for Avista utilities in 24 reflects unrecovered structural costs, which we estimate reduce the return on equity by 70 basis points. We expect 60 basis points of regulatory timing lag in 2024. This results in an expected return on equity at Avista Utilities of 8.1% in 2024. In 2023, the distribution of earnings between quarters differed from our typical historical results due to the impact of customer tax credits being returned to customers, reducing customer bills and income tax expense.
Kevin Christie: Our guidance for Avista utilities, and 24 reflects unrecovered structural costs, which we estimate reduced the return on equity by 70 basis points.
Kevin Christie: We expect 60 basis points of regulatory timing lag in 2020 for.
Kevin Christie: This results in an <unk>.
Kevin Christie: <unk> return on equity at Avista utilities of eight 1% in 2024.
Kevin Christie: In 2023, the distribution of earnings between quarters deferred from our typical historical results due to the impact of customer tax credits being returned to customers, reducing customer bills and income tax expense.
Kevin Christie: We expect the distribution of earnings between quarters in 24 to more closely align with our results prior to 2023 with the first and fourth quarters, representing the largest contributions to our annual earnings.
Operator: We expect the distribution of earnings between quarters in 2024 to more closely align with the results prior to 2023, with the first and fourth quarters representing the largest contribution to our annual earnings. We expect AELP to contribute in the range of $0.09 to $0.11 per diluted share in 2024. And we expect our other businesses to contribute in the range of $0.04 to $0.06 per diluted share in 2024. Assuming a constructive outcome in our 2024 Washington General Rate Case filings, we expect our earnings to grow over the long term in the range of 4-6% from a 2025 base year. We'll be happy to answer questions now. Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star 1-1 on your telephone and then wait to hear your name announced.
Kevin Christie: We expect <unk> to contribute in the range of <unk> to <unk> 11 per diluted share in 2024.
Kevin Christie: And we expect our other businesses to contribute in the range of $4 <unk> per diluted share in 2024.
Kevin Christie: Assuming a constructive outcome in our 2020 for Washington General rate case filings, we expect our earnings to grow over the long term in the range of 4% to 6% from 2025 base here.
Speaker Change: Now, we'll be happy to answer questions.
Speaker Change: Thank you.
Ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone and then wait to hear your name announced.
Speaker Change: To withdraw your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Our first question comes from the line of Tanner, James with Bank of America. Your line is open.
James Tanner: Hi, good morning.
James Tanner: Hey, good morning quick one.
James Tanner: Hi, good morning, Tim.
James Tanner: On sizing the ERM and the ongoing support that updated bands might provide.
Tanner, James: What are the impact of look like for 2023 with the updated bands as requested in your 2020 for rate case filings and then also regarding precision of your annual EPS guidance with implementation of a less volatile or them encourage you to tighten the typical EPS guidance range you provided.
Operator: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Tanner James with Bank of America. Your line is open. Hi. Good morning.
James Tanner: Yeah.
Kevin Christie: Just a quick one-size IRM and the ongoing support that updated bans might provide. What would the IRM impact have looked like for 2023 with the updated bans as requested in your 2024 rate case filing? And then also regarding the precision of your annual EPS guide. Would implementation of a less volatile IRM encourage you to tighten the typical EPS guidance range you provide? Yeah, thanks for the questions, Tanner. The, uh, I don't have the exact numbers off the top of my head here, but obviously, with, uh, ERM, that was negative, or at power supply cost, it was negative to the tune of nine cents. If we had a 95.5 mechanism in place, it would have shrunk that significantly. My off-the-cuff estimate would be in the range of a couple of cents.
Speaker Change: Yes, thanks for the questions Tanner.
Speaker Change: I don't have the exact numbers off the top of my head here, but obviously with.
Speaker Change: Earn that was.
Speaker Change: Negative or a power supply costs. It was negative to the tune of <unk>. If we had a $95 five mechanism in place it would have shrunk that significantly.
Speaker Change: My my off the top off the cuff estimate would be in the range of a couple of cents.
And then to your second question, we will continue to evaluate as we move through the Washington case.
Speaker Change: How successful we are in modifying that mechanism and what what comes out the other side before we can really say, how we would narrow guidance on a go forward basis.
Speaker Change: If we would narrow guidance on a go forward basis.
Speaker Change: Great. Thanks, and thank you for the disclosure of the wildfire related increase to the Capex sort of the cumulative T&D spending guide can you deconstruct what might be allocated towards typical maintenance versus wildfire resiliency on a go forward basis, just trying to figure out the run.
Kevin Christie: And then to your second question, we'll continue to evaluate as we move through the Washington case how successful we are in modifying that mechanism and what comes out the other side before we can really say how we would narrow guidance on a go-forward basis, or whether we would narrow guidance on it going forward. Great, thanks. And thank you for the disclosure of the wildfire-related increase to the CapEx. For the cumulative T&D spending guide, can you deconstruct what might be allocated towards typical maintenance versus wildfire resiliency on a go-forward basis? I am just trying to figure out the run rate system need for wildfire resiliency going forward. Well, when we plan our capital spending, we have allocated the capital for 2024 on a basis based on the needs that we received from the business. And so those dollars are more well known or understood by project and program.
Speaker Change: System need for wildfire resiliency going forward.
Speaker Change: Well when we when we plan our capital spending we have allocated the capital for 2024.
Speaker Change: Sure.
Speaker Change: On a basis based on need that we've received from the business and so those dollars are more well known or understood by project and program as we look forward for 2025 and beyond we have not yet allocated all the dollars among all the potential programs and projects generally speaking, though we would.
Speaker Change: Expect for capital for wildfire, and 2025 to be about $35 million or so.
Speaker Change: Closer to $60 million in 2026.
Speaker Change: Alright, great. Thank you so much really appreciate it.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of will it Grainger with Google Your line is open.
Kevin Christie: As we look forward to 2025 and beyond, we have not yet allocated all the dollars among all the potential programs and projects. Generally speaking, though, we would expect capital for wildfires in 2025 to be about $35 million or so and closer to $60 million in 2026. All right, great. Thank you so much. I really appreciate it. Thank you. Please stand by for our next question, which comes from the line of Willett Granger with Mizzou.
Will Grainger: Hi, good morning team.
Will Grainger: Hey, good morning for taking my question.
Will Grainger: Maybe just a question on the financing plan.
C.
Will Grainger: Previously for 2024, you're guiding to about $60 million of equity and it's come up modestly to $70 million just kind of wanted to understand what's driving that I saw capex is staying the same across utilities, but just any color on that would be helpful. Thank you.
Speaker Change: Yes, that's really thanks again for the question, we are rebalancing debt and equity as we move forward with this case and as the regulators consider what we filed there.
Operator: Your line is open. Hi, good morning, team. Thanks for taking my question. Maybe just a question on the financing plans. I see that previously for 2024, you were guiding to about 60 million of equity, and it's come up modestly to 70 million. I just kind of wanted to understand what's driving that.
Speaker Change: And so it's really just fine tuning the numbers at this point in time.
Speaker Change: As you pointed out capital Hasnt changed planning wise for 2024.
Kevin Christie: I saw that CapEx is staying the same across utilities, but just any color on that would be super helpful. Thank you. Yeah, that's really, thanks again for the question. We are rebalancing debt and equity as we move forward with this case and as the regulators consider what we've filed there. And so it's really just fine-tuning the numbers at this point in time that, as you pointed out, capital hasn't changed planning-wise for 2024. We've had changes in expenditures, a little bit higher run rate for winter given power supply costs and what have you.
Speaker Change: We've had changes in expenditures a little bit higher run rate for winter given power supply costs and what have you.
Speaker Change: Understood.
Speaker Change: And then maybe just one on <unk>.
Speaker Change: Kind of how are you thinking about.
Speaker Change: I know you said weather's been challenging from an earnings perspective, so far in Q1 and your guidance do you expect that the kind of balance out on the ended towards the end of the year.
Kevin Christie: And then maybe just one on, you know, kind of, how are you thinking about, I know you said weather's been challenging from an ERM perspective so far in Q1, and you, in your guidance, you expect that to kind of balance out at the end of the year or towards the end of the year. Are you assuming that, you know, you just have more control over some of, like, the variables and the hydrology here? Or what's the kind of puts and takes on that, if you can unpack that a little bit for us?
Speaker Change: Are you assuming that you used.
Speaker Change: Have more control over some of like the.
Speaker Change: The variables and the hydrology here or whats kind of the puts and takes to that if you can unpack that a little bit for us.
Speaker Change: Sure.
Speaker Change: We are building into our forecast the expectations of current hydro.
Speaker Change: Which is below normal.
Speaker Change: And at the same time, we believe we have the opportunity to optimize our resources on a go forward basis, and if we're able to optimize the resources like we plan that would help offset the first quarter negative.
Kevin Christie: Sure, we are building into our forecast the expectations of current hydro, which is below normal. And at the same time, we believe we have the opportunity to optimize our resources on a go-forward basis. And if we're able to optimize the resources like we plan, that would help offset the first quarter negative. Understand. Thank you very much, team.
Speaker Change: Understood. Thank you very much Tim I'll leave it there.
Speaker Change: And I also wanted to add that of course that assumes that we have a reasonable.
Speaker Change: Belt and are in our hydro and our Snowpack AD flow comes over and we can optimize in our hydro facilities to the extent that we have hydro outcome that look similar to 2023, it'll be tougher to do that.
Kevin Christie: I'll leave it there. And I also want to add that, of course, that assumes that we have a reasonable melt in our hydro, in our snowpack, and that the flow comes over and we can optimize our hydro facility. To the extent that we have a hydro outcome that looks similar to 2023, it'll be tougher to do that.
Speaker Change: Thank you great.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Brian Russo with Sidoti Your line is open.
Brian Russo: Hi, good morning.
Brian Russo: Hey, Bryan Bryan.
Brian Russo: Hey, you mentioned, the two buckets of regulatory lag.
Kevin Christie: Thank you. Great. Please stand by for our next question. Our next question comes from the line of Brian Russo with Sidoti. Your line is open. All right, good morning. See you, Brian.
Brian Russo: That.
To support the 2020 for guidance, but.
Brian Russo: Just remind me what can be mitigated with new Washington rates in 2020.
Operator: Bye. Hey, you mentioned the two buckets of regulatory lag that support the 2024 guidance. Just remind me, what can be mitigated with new Washington rates in 2025? Is it the 60 basis points of timing, or is it the 70 basis points of structural? Yeah, the structural lag, Brian, can't change. It's in place because of ruler law.
Brian Russo: Five.
Brian Russo: <unk>.
Brian Russo: Is it the 60 basis points of timing or is it to 70 basis points of structural <unk>.
Brian Russo: The structural lag Brian can change its in place because of rule or law.
Brian Russo: So we're focused on.
Brian Russo: The timing lag that 60 basis points.
Kevin Christie: So we're focused on the timing lag, that 60 basis point, and with the constructive outcome in the Washington case, ongoing fair treatment on our deferral mechanism, and keeping in mind that we need to file rate cases or will likely file rate cases in Idaho and Oregon as we move forward. Assuming we manage our costs, all of that would allow us to reduce that 60, the majority of that 60. Okay.
Brian Russo: And with the constructive outcome in the Washington case ongoing fair treatment on our deferral mechanisms.
Brian Russo: And keeping in mind that we need to file rate cases, or will likely file rate cases in Idaho, and Oregon as we move forward.
Brian Russo: Assuming we manage our costs all of that would allow us to reduce that $60 a majority of that 60 basis points.
Speaker Change: Okay got it sort of way to look at your earnings trajectory 25 versus 2024.
Kevin Christie: So the way to look at your earnings trajectory in 2025 versus 2024 is, you know, ROE improvement on a growing rate base, as simple as that. Yeah, and assuming we continue to manage our costs appropriately and we get that good regulatory treatment or constructive regulatory treatment.
Speaker Change: Is.
Speaker Change: ROE improvement Anna on a growing rate base.
Speaker Change: Just simplistically is that.
Speaker Change: And assuming we continue to manage our costs appropriately and we get that good regulatory treatment or constructive regulatory treatment.
Speaker Change: Okay great.
Speaker Change: In past calls you've talked about.
Speaker Change: Longer term transmission and renewables.
Speaker Change: Investment opportunities and then I see on slide nine.
Kevin Christie: Okay, great. And then, you know, in past calls, you've talked about longer-term transmission and renewable investment opportunities. And then, on slide nine, there's a bullet evaluating opportunities for expansion on the generation side. Could you maybe elaborate on that? And that just kind of ties into, you know, this, it looks like a 575 million run rate, CapEx in 26, to support a 5% rate base growth, right, on a growing rate base. Is that kind of the optimal solution?
Speaker Change: There's a bullet.
Speaker Change: Evaluating opportunities for expansion on the generation side I think.
Speaker Change: Could you maybe elaborate on that and that just kind of ties into.
Speaker Change: It looks like a 575 million run rate Capex in 'twenty six to support a 5% rate base growth rate on a growing rate base is that kind of the optimal.
Speaker Change: Capex level to manage.
Speaker Change: Customer rates and maybe that balance of purchase power agreements versus steel in the ground that you have now.
Kevin Christie: CapEx level, you know, to manage customer rates and maybe, you know, that balance of purchase power agreements versus steel in the ground that you have now. The way I would look at it, Brian, is that the run rate that we've given you on capital is the capital we need to spend to continue to run the utility and balance customer rates, to the extent that we have an opportunity to invest further in clean generation that may be incremental to our current capital plan.
Speaker Change: Yes, the way I look at it Brian is that.
Speaker Change: The run rate that we've given you on capital as the capital we need to spend to continue to run the utility and balanced customer rates to.
Speaker Change: To the extent that we have an opportunity to invest further in clean generation that may be incremental to our current capital plan.
Kevin Christie: And the way I've been thinking about it is we have more near-term opportunities to potentially invest in clean generation that's not in our rates right now through ownership. And there may be some something out there that we could purchase that would make sense both for customers and for the company as we move forward. And then on the transmission side, there is, I think about it this way, the opportunity to enhance or build around our current system. That's more of a near-term opportunity. And when I do say near-term, I don't mean this year or next year, but nearer. And then when we think about transmission... Really across the entire region and perhaps the country, there's a longer-term opportunity or really a requirement if we're going to deliver all this clean energy to all the locations that it needs to be delivered. And that that takes quite a bit more time.
Speaker Change: And the way I've been thinking about it is we have more near term opportunities to potentially invest in clean generation, that's not in our rates right now through ownership.
Speaker Change: And there may be some something out there that we could could purchase that would make sense both for customers.
Speaker Change: And for the company as we move forward.
Speaker Change: And then on the transmission side, there really I.
Speaker Change: I think about it this way there is there is the opportunity to enhance or.
Speaker Change: Or.
Speaker Change: Built around our current system.
Speaker Change: That's more of a near term opportunity and what I do say near term I don't mean, this year or next year, but but nearer and then when we think about transmission.
Speaker Change: Really across the entire region and perhaps the country. There is a longer term opportunity or really a requirement. If we're going to deliver all of this clean energy to all the locations that it needs to be delivered and that takes quite a bit more time.
Kevin Christie: Okay, great. And then just to follow up on the ERM, I think it's been many years since you've actually tried or proposed adjustments to that. You know, when was the last time you requested an ERM adjustment?
Speaker Change: Okay, Great and then just to follow up on on the earn.
Speaker Change: I think it's been many years since you've actually tried were proposed adjustments to that.
Speaker Change: When was the last time, you did requests and interim adjustment and would you say that the adjustments you propose puts you kind of on a.
Kevin Christie: And would you say that the adjustments you propose put you kind of on a more comparable, you know, level relative to your regional peers? Yeah, good, good question. Yeah, it was in the late 2000s.
Speaker Change: More comparable.
Speaker Change: Level relative to your regional peers.
Speaker Change: Yes, good question.
Kevin Christie: I think the last time we filed to adjust the arm, or we put in an adjust the arm, and the, we're watching closely regional peers, there's been some change in Power Supply Treatment in Oregon, and there's a filing in Washington that we're keeping a close eye on as well. And we think that if we were able to move forward with this change, it would position us at par with our peers.
Speaker Change: Yes. It was in the late two thousands I think the last time, we file to adjust or we put it adjust the arm.
Speaker Change: And the one we're watching closely regional peers that theres been some change in and power supply treatment in Oregon, and there was a filing in Washington that we're keeping a close eye on as well and we think that if we're able to move forward with this change it would position us.
Speaker Change: At par with our peers.
Kevin Christie: Okay, great. Thank you very much. Thank you. As a reminder, ladies and gentlemen, that's star 11 to ask the question. I'm showing no further questions in the queue. One moment. We do have a question from... Alan Roach. Mr. Rocha, your line is open.
Speaker Change: Okay, great. Thank you very much.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: As a reminder, ladies and gentlemen that star one one to ask the question.
Speaker Change: I'm showing no further questions in the queue.
Speaker Change: One moment.
Speaker Change: We do have a question from.
Speaker Change: Hello Roche.
Roche: Mr. <unk> your line is open.
Operator: Good morning. I appreciate the conference call. I'm curious as to the two wildfires that happened in the summer of 2023. Did that have a negative impact on your bottom line? Yeah, I mean, with regard to the wildfires, you're I think you're referring to, fire north of the Spokane area, and then there was one west of town. With regard to both of those,
Roche: Good morning, appreciate the conference call I am curious as to the two wildfires have happened in the summer of 2023.
Roche: That had a negative impact on your bottom line.
Roche: Okay.
Speaker Change: Yes, I mean with regard to the wildfire to your I think you're referring to.
Speaker Change: The fire North of Spokane area, and then there was one west of town.
Speaker Change: With regard to both of those are.
Dennis P. Vermillion: You know, our facilities were impacted by the fire in the West Plains, in the Medical Lake area. We lost some of our infrastructure out there. However, we were not involved in any way, shape, or form with the fire, and then with the other fire that was north of the Spokane area. That happened and originated well away from all of our facilities, and in fact, none of our infrastructure was damaged in that fire, so really, no impact at all on the bottom line. You know, we had to spend a little bit of money fixing all the stuff that was lost out in the West Plains there, but that was definitely manageable.
Speaker Change: Our facilities were in.
Speaker Change: Impacted by the fire.
Speaker Change: On the West Plains and medical Lake area.
Speaker Change: We lost some of our infrastructure out there. However, we were not involved.
Speaker Change: In any way shape or form with the.
Speaker Change: The start of that fire.
And then.
Speaker Change: With the other fire that's.
Speaker Change: Was north of Spokane area.
Speaker Change: That happened in originated.
Speaker Change: All away from all of our facilities and in fact, none of our infrastructure was damaged in the fire So really no impact at all.
Speaker Change: To the bottom line.
Speaker Change: Yes.
Speaker Change: Had to spend a little bit of money.
Speaker Change: Fixing all the stuff that was lost out and.
Speaker Change: On the West Plains, there, but you know that.
Speaker Change: That was definitely manageable.
Dennis P. Vermillion: Got you. That's good news. So one other quick question: if the breach of the four Snake River dams happens to occur. How is that going to affect your bottom line? Well, the four Snake River dams are federal projects, and the power output from those facilities is managed by the Bonneville Power Administration, and we do not have any ownership stake or any off-take agreements for generation from those facilities, so it really won't impact us at all from a power supply perspective. However, regionally, you'd be taking a thousand megawatts of supply out of the system, so until that's replaced in some manner, you could see an impact on commodity prices, on power prices in markets, but no direct impact on our company from the removal of those facilities.
Speaker Change: Got you that's good news one other quick question.
If the.
Speaker Change: Breach of the four Snake River dams happens to occur.
Speaker Change: How is that going to affect your bottom line.
Speaker Change: Well the four Snake River dams are federal projects and.
Speaker Change: The power output from those facilities.
Speaker Change: Is managed by the Bonneville Power administration, and we do not have any.
Speaker Change: Ownership stake or any offtake agreements for generation from those facilities. So it really won't impact us at all from a power supply perspective.
Speaker Change: However, regionally you'd be taking 1000 megawatts of supply out of the system. So.
Speaker Change: <unk> replaced in some manner, you could see an impact on commodity prices on power prices in the end markets, but no direct impact to our company.
Speaker Change: From removal of those facilities.
Dennis P. Vermillion: Okay, thank you. Thank you. I'm sure there are no further questions in the queue.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
Speaker Change: I am showing no further questions in the queue.
Stacey Wentz: I would now like to turn the call back over to Stacey for closing remarks. Thank you all for joining us today and for your interest in Avista. Have a great day. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Thanks for watching my transition music video. I hope you enjoy it! Don't forget to subscribe to my channel and leave me a like. Thanks.
Speaker Change: I'd now like to turn the call back over to Stacy for closing remarks.
Stacy: Thank you all for joining us today and for your interest and to this day have a great day.
Stacy: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
Stacy: Okay.
Stacy: Okay.
Stacy: [music].
Stacy: Okay.
Stacy: Okay.
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Stacy: Okay.
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