Q4 2023 IDACORP Inc Earnings Call
Welcome to Ita Corp's fourth quarter and year end 2023 earnings Conference call. Today's call is being recorded in our webcast is live a replay will be available later today and for the next 12 months on the Ida Corp website, if you need assistance at any time during this presentation.
Please press star zero on your phone.
I will now turn the call over to Amy Shah Vice President of finance compliance and risk.
Thank you good afternoon, everyone. We appreciate you joining our call. This morning, we issued and posted diet equips website, our fourth quarter and year end 2023 earnings release, and our Form 10-K, the slides and accompany today's call are also available in EDA group's website during the call we'll refer to the slides by number.
As noted on slide two our discussion today includes forward looking statements, including earnings guidance spending forecast and regulatory plans that reflect our current views on what the future holds but are subject to risks and uncertainties. These risks and uncertainties may cause actual results to differ materially from statements made today and we.
Caution against placing undue reliance on any forward looking statements. This cautionary note is included in more detail for your review in our filings with the Securities and Exchange Commission.
As shown on slide three Lisa grow it Eclipse, President and Chief Executive Officer, and Bryan Buckler, Mitraclip Senior Vice President and Chief Financial Officer, and Treasurer will be presenting today. In addition to Lisa and Brian We have other members of our management team available for Q&A session with all of them following our prepared remarks.
<unk> four shows our full year financial results.
2023 diluted earnings per share were <unk> 14, compared with 511 last year, both 2023 revenues and earnings Idaho right if were.
Highest in the history of the company in 2023 was the 16th consecutive year of growth in earnings per share, which is something to celebrate today, we initiated our full year 2024 eight of core earnings guidance estimate in the range of 525 to 545 diluted earnings per share, which includes our expectation that.
Idaho power will utilize approximately $35 million to $60 million of additional tax credits that are available to support earnings at the $9. One 2% return on equity level in the Idaho jurisdiction under its Idaho General rate case settlement stipulation. These estimates assume historically normal weather conditions throughout the year.
Normal power supply expenses also it is important to note that approximately $25 million of our expected usage of additional tax credits related to amortization of incremental tax credits generated from Idaho Power's investment in 2023 battery storage projects, which you may recall, we were moved from the revenue requirement as part of our 2023.
The general rate case proceeding in Idaho, now I will turn the call over to Lisa.
Thanks, Amy and thanks to everyone for joining us on today's call.
To begin my remarks by highlighting Amy's comment on Ida core completing our 16th year of earnings growth as shown on slide five.
Idaho power also didn't use any of accumulated deferred investment tax credits in 2023, preserving the full balance of credits in the Idaho regulatory stipulation for future earnings support.
I want to thank our entire team for all the efforts that have contributed to this success.
As we turn to 2024, we remain focused on keeping our employees safe building for the future to keep pace with growing customer demand keeping prices affordable working toward our clean energy goal and seeking innovative ways to serve our customers.
Our ability to deliver strong results, while meeting the challenges of growth and the ever shifting energy industry is a testament to our culture and Idaho Power's hardworking employee.
Many of the topics I will touch on today, we'll continue we'll continue to drive our efforts in business strategy throughout 2024 and beyond.
Turning to slide six you'll see that strong growth continues across Idaho power service area, our customer base grew two 4% in 2023, and we now serve more than 630000 customers.
With that growth earlier. This year, we also set a new winter peak load of 2000, and 719 megawatts an increase of over 4% from our prior winter peak in 2022.
Moody's most recent GDP calculate calculations for our region remained robust forecasting growth of three 6% in 2024 and three 7% in 2025, we believe the reliable affordable energy Idaho power provides continues to be a driver for growth across our service area in our local economy.
<unk> continues to outperform national trends.
Idaho Power project annual peak load growth of three 7% from 2024 to 2028 based on our 2023 integrated resource plan.
This growth includes several new and expanding large load customers, including meta and micron both of their sites are under construction and both are participating in our clean energy Your way program, which received commission approval last year and is garnering interest from other large customers, including the city of Boise.
The Mic website help push Idaho to number five in a recent site selection magazine ranking of states with the highest dollar value mega projects breaking ground across the country.
Overall economics development continues at a rapid pace.
Particularly in the manufacturing space.
In 2023, we brought online the stope company in Napa and true west to East and Jerome.
We also continue to have a robust pipeline of potential large commercial and industrial customers, including data centers enquiring about service.
With so many finding our service area increasingly attractive there's likely some upside in our load forecast that we have and accounted for at this point and we are considering what additional infrastructure would be needed to serve this potential load.
Even with this growth we continue to provide strong reliability for our customers in 2023, we had our second best year for reliability with fewer customer outages, which resulted in less O&M costs related to outages.
Turning to slide seven the Idaho Commission approved the settlement agreement in our Idaho General rate case in December the settlement, which resulted in new rates effective on January one this year resulted in an overall rate increase of $54 7 million.
Or an average of $4 two 5% for Idaho customers.
This was a positive outcome for our company and our customers and underscores our constructive regulatory environment.
US recover some of the significant infrastructure investments, we've made to serve our growing customer base since our last general rate case in 2011.
This outcome also benefits our cash flows as we continue to develop continue to develop additional infrastructure and maintain the reliability of our system.
As noted on slide eight Idaho power filed its general Oregon General rate case in December 2023, and that case will be processed throughout much of 2024.
We asked for a total annual rate increase of $10 $7 million in Oregon.
We expect to make additional rate filings as we experienced significant growth in our service area. For example earlier. This week, we provided notice to the Idaho Commission of our intent to file a general rate case or a limited issue rate proceeding as soon as June 1st of this year.
Still working to determine what type of case, we might file which will include conversations with Idaho staff and other key stakeholders.
We continue to plan for and add resources that will meet our growing demand.
Turning to slide nine in 2023, Idaho power installed a total of 131 megawatts of energy storage capacity, the first utility scale batteries in Idaho.
Table on slide nine doesn't account for an additional 11 megawatts of batteries installed at several distribution substations in 2023.
These systems are already helping to maintain reliability and affordability do work during periods of high use.
The 100 megawatt Franklin Solar project in Southern Idaho was scheduled to come online in 2024 and will include an additional 60 megawatts of company owned battery storage. These resources.
This will be instrumental as we move away from coal fired generation and integrate additional intermittent renewable energy resources.
As highlighted on slide 10, we published our 2023 integrated resource plan in September the plan shows Idaho power expects to be completely out of coal fire generation by 2030.
We're planning to convert our remaining coal fired units to natural gas, which will reduce the carbon emissions of those units by about half and help keep our system reliable and affordable we.
We expect to have those units to be ready by the summer.
Evaluations on Rfps for 2026, and 2027 resource needs are ongoing.
May recall, Idaho power has self builds included in that process.
At this point the separate evaluation team has a short list of projects and neither initiated contract negotiations with the shortlist of bidders, we expect to execute contracts in the coming months.
As shown on slide 11, 2023, it was a big year for our high voltage transmission project is especially boardman to Hemingway.
We obtain certificates of public convenience and necessity for B to H in Oregon, and Idaho, We also finalized an agreement with the Bonneville power administration and Pacific core that transfers BPA share b to H to Idaho power we.
We expect to break ground this year and finish the project no earlier than 2026.
Idaho power and Pacificorp are also working together on the 1000 mile Gateway West transmission line, which will help both companies to meet rising customer demand and improve reliability.
We're currently discussing with specific for the timing of construction for the segment's most important to Idaho power and the specific ownership allocation of those segments.
In addition, we continue to look at other transmission projects that will be key to supplying reliable affordable clean energy in the future.
As I close my remarks, I want to reiterate my thanks to our employees and our leadership team for all the great work they did to drive our success in 2023.
As I reflect on the year, it's incredible how much we accomplished.
The challenges growth rising cost and the increasing demand for clean energy, while maintaining safety reliability and affordability are real but it's clear to me we have the right team in place to thrive in this fast moving energy landscape.
I'll hand, the presentation over to Bryan for an overview of financial results and outlook Brian. Thank.
Hi, everyone. We appreciate you tuning in for today's call.
I'll start on slide 12, which is a reconciliation of our 2023 results compared to 2022.
As a broad overview before I get into more detail in 2023, and we saw continued strong customer growth and we benefited from our ongoing commitment to operating efficiently.
With our O&M expenses coming in basically flat compared to 2022.
We also have the benefit of the June 2022 rate change related to Bridger for a full year and lower income tax expense.
Those positives were partially offset by reductions in usage from mild weather and higher depreciation and financing costs from our record level of Capex.
Getting into more granular detail customer growth of two 4% and increased operating income by $15 7 million.
Our residential customer growth rate remains strong at two 6% for the year and this is a continuation of steady growth, we've seen and the trend points to continued strong customer and load growth in our service area.
It wouldn't be an Idaho power earnings call. If we didn't talk about the weather usage per customer decreased operating income by about $31 million in 2023 compared to the prior year more moderate temperatures and greater precipitation resulted in the irrigation customers using less energy to operate their pumps.
And of course residential and commercial customers to use less energy per customer for <unk>.
Willing and heating during the year.
The impact of the decrease in sales volumes for customer was partially offset by a $15 million increase from the fixed cost adjustment decoupling mechanism.
For our residential and small commercial customers remember the decoupling mechanism doesn't apply the irrigation customers. So we saw a negative weather related impact of irrigation sales without an attendant FCA revenue offset in 2023, just like we saw in 2022.
The change in retail revenues per megawatt hour net of associated power supply costs and power cost adjustment mechanisms increased operating income by $11 million in 2023, compared with 2022 that increase was primarily due to the June 2022 bridge related rate increase for our Idaho customers.
Other O&M expenses were almost equivalent in the last two years inflationary pressures on labor related costs were mostly offset by our continued efforts to operate efficiently really part of our culture and from lower expenses from scheduled cyclical plant maintenance projects.
And the timing of regulatory deferrals and credits received related to a jointly funded infrastructure project.
Depreciation expense increased $25 3 million, which I'll admit initially found significant however.
However, the magnitude on a year over year comparison basis is due partially to an increase in plant in service and partially to the impact of the Bridger order I mentioned earlier, the latter is actually the larger of the two reasons.
Nonoperating expense decreased $4 $7 million in 2023, compared with 2022 allowance for funds used during construction increased the average construction work in balance and progress balance was higher throughout 2023.
Also interest and investment income increased due to higher interest rates and higher average cash and cash equivalents balances.
These increases were partially offset by higher interest expense on long term debt.
Wrapping up the table the $11 million decrease in income tax expense was primarily due to plant related tax adjustments.
As Lisa mentioned, we ultimately didn't record any additional amortization of accumulated deferred investment tax credits as at the end of 2023, preserving the full year and 2023 balance of around $86 million for future years.
Well, we've predicted to use additional <unk> throughout the year, our yearend results ultimately eliminated or need to use them to achieve a nine 4% return on yearend equity in Idaho by a small margin.
Beginning in 2020 for the ITC mechanism supports Idaho earnings at a 91, 2% level.
Our capex on a cash basis with over $600 million in 2023, and Idaho power record and it was an increase of more than 40% over 2022.
On an accrual basis, it was $734 million and if you look at the projects that entailed its our standard system reliability work plant upgrades and work on our transmission system and our battery storage projects to meet customer growth.
On Slide 13, we've included our updated five year forecast of Capex you'll.
Youll see our current plan for 2024 to 2028 has a 21% increase in capex compared to the 2023 to 2027 forecast. We added this time last year amounting to $700 million of additional capex in this updated five year forecast.
We have a healthy mix of capital projects that make up our spending plan with no. One particular project, making up a majority of the expected spend our updates include refresh cost assumptions from our major capital projects, but it's worth pointing out. This update still doesn't include any projects related to the pending rfps for 2026, and 2027 and <unk>.
<unk> capacity resources.
Or if we end up with new large loads that are in the pipeline that drive further infrastructure needs. We are only including what we believe is known and executable as of today. So there is the potential for increases we hope to have some clarity around the rfps later in the first quarter, though we're still a ways out on any final decisions on the Rfps.
Slide 14 is our estimate of the conversion of our Capex spend and the rate base eligible assets at the end of each of the next five years as we place the assets into service.
Last year at this time, our estimated five year rate base CAGR was 11, 1% based.
Based on rate base eligible assets at the end of 2022 and additions through 2027.
So as we roll forward, our Capex forecast for our next five year outlook with rate base from our 2023 general rate cases, the starting point.
Our rate base CAGR for 2024 through 2028 to 10, 8% again with about $700 million of higher Capex in the current five year forecast compared to our five year forecast at this time last year.
In terms of financing that Capex as I've mentioned before our goal is still to maintain our current credit ratings as well as the capital structure and is near $50 or 51% equity to do that we are still planning to blend debt and equity issuances.
We don't have any sizeable debt maturities to address in the next few years, which helps on the debt side and with our credit ratings. We also haven't drawn down any of the funds from our November 2023 forward equity offering to date, though it's intended to satisfy our equity needs in 2024 and as a matter of good housekeeping, we could put in place an ATM later this year as we looked at.
That aside future equity needs keep that debt equity ratio in a good spot.
We're also focused on affordability for customers through this capital cycle, we start with rates well below the national average and then combining that with the denominator expanding due to customer growth.
Our regulatory philosophy, where growth base for growth and the fact that the average life of the assets. We're placing into service is relatively long and we have the formula to maintain affordability for our customers I think they're relatively small single digit percentage size of our general rate case, asking Idaho last year, despite having not filed the general rate case in over a decade.
Is indicative of our ability to maintain a low customer rates, while our capex and rate base forecast is elevated.
Turning to slide 15 cash flow from operations decreased compared to 2022 as we discussed during the second quarter earnings call last year, we received approval from the Idaho Commission to collect the $200 million increase in power supply costs from customers for higher power and gas Scott with collection from June of 2023 through May of 2025, we expect.
That rate of change along with the increased collection that began on January one from the Idaho General rate case settlement to help support cash flows from operations.
As Lisa mentioned in late December the IPC issued an order approving the settlement stipulation for Idaho General rate cases, we've included a summary of the settlement on slide seven the settlement provides for an increase to annual retail revenues of about $55 million Ifs.
<unk> as of January one of this year, that's net of some transfers of cost recovery to rate base rate, including $168 million from current PCA rates, most notably the settlement includes an ROE of nine 6%, which sets our overall rate of return at 724, 7% in Idaho.
Last December we filed a general rate case in Oregon targeting a rate increase on October 15th of this year as outlined on slide eight the filing requested an annual.
Rate increase of $10 7 million.
The filing we requested a 10, 4% authorized rate of return on equity and a $189 million of Oregon jurisdiction retail rate base.
Oh power proposed the capital structure of 49% debt and 51% equity in that case.
Slide 16 shows our updated full year earnings guidance and key operating metrics, we expect Iot corpus diluted earnings per share this year to be in the range of $5 25 to $5 45.
With the assumption that Idaho power will use between 35% and $60 million additional investment tax credit amortization to realize the nine 1%, 2% return on yearend equity in Idaho.
As we contemplated in our Idaho general rate case filing around $25 million of the additional investment tax credit amortization, we expect to use this year relates to covering the revenue requirement for our investment in 2023 battery storage projects.
Other items, causing the expected additional investment tax credit amortization usage. This year are higher depreciation and interest expense from the Capex increase as well as higher book equity expected at year end 2024, offset by the reduction from a nine 4% to 91, 2% ROE in Florida, and the guidance assumes normal weather throughout 2024 and normal.
Power supply expenses.
We expect full year O&M expense to be in the range of $440 million to $450 million.
While this looks and sounds like a notable increase over our 2023 spending.
Born to note that about $40 million of that expected expense relates to amortization of pension and wildfire mitigation plan regulatory assets, which was approved for recovery in the general rate case settlement. So excluding the new amortization that are not collected through retail rates. Our O&M expense in 2024 could be relatively comparable to our O&M expense in 2023.
We anticipate spending between $925 to $975 million of Capex for 2024 as the five year forecast showed we expect to see a continuation of these higher capex numbers in subsequent years as we address growth in our service area.
Finally, given our most updated forecast of hydro power operating conditions. We currently expect hydro power generation to be within the range of five 5% to seven 5 million megawatt hours for the year.
With that we're happy to address questions you might have.
Thank you we are now ready to begin the question and answer session for attendees, who have joined on the Q&A line. If you would like to ask a question. Please do so by pressing star one on your phone. Please ensure your mute function is turned off before you ask your question and we will take as many questions.
Hi, I'm permits on a first time basis. Once again that is star one on your phone to ask a question now.
And your first question comes from the line of Alex <unk> with Mizuho Securities. Alex Your line is open.
Hi, good afternoon team.
So I know youre still waiting for the RFP process to finalize for the 26 2007 timeframe, but could you directionally quantify what that opportunity could potentially look like from a capex perspective, as well as when such how we might get that update.
Hi, Alex this is Adam.
It's a little bit difficult with these rfps because so much of it is confidential.
Right now there is a short list and Idaho power did put in three benchmark bid.
One was for wind projects <unk>, four and to really work for battery projects with <unk> 600 megawatts to two battery projects were $1 50, and 100 megawatts.
In terms of weather, Idaho power to win those bids are not we wont know here for a couple of months.
And hoping to execute agreements March April timeframe.
Just want to let you know thats the general size, whether there'll be successful or not is to be determined.
And Alex This is Brian just to add to that remember the original need that we had at the time, we started the RFP processes with 350 megawatts of capacity.
That aside by as much as 1100 megawatts at variable energy. So that can change from time to diamond our operating needs change, but that was the original magnitude of the RFP.
Okay understood and then can you discuss potential timing and scale of future equity issuances, maybe in the $25 26 timeframe given it seems like 24 has been covered with the.
Yes earlier announcements.
Yeah. Alex This is Brian. So you are right. The 2023 forward issuance. We did back in November was intended to finance 2024, as equity need and actually maybe even a little of 2025, given that we upsized the offering so some of the variables. We've got to look at in terms of what 2025 entails is cash flow what we get in terms of tax credits.
Where our power supply costs things like that that's going to impact the equity need we do expect cash flow to improve in 2024 and in 2025 compared to what we saw in 2023, and that's going to help reduce the need.
Our regulatory approach in 2024 that were looking to.
That turns out could also impact what our equity needs to look like so we can reduce some of our regulatory lag we can reduce some of our equity need.
Rfps, Adam just mentioned, though if we're successful in the Rfps, we will likely finance a portion of that with equity potentially in 2025. So we're looking to keep that debt equity at 50 or 51% equity as I mentioned, so it will take equity to fund our growth, but as of now all of those variables are still in play on the equity side.
So for now what I will say is we do plan to put up an ATM at some point this year for equity needs to come up, but we would be funding them equity needs in 2025 and that at that point no near term equity need certainly given our prior forward, but with the ATM also looking at a potential forward component like we did in our follow on offering last.
Year just to be ready.
In the market if any of you on the equity side.
Understood. Thanks, so much and congrats on a great year.
Thanks, Alex.
Your next question comes from the line of Paul's Zimbardo with Bank of America. Paul Your line is open.
It's actually Julien on for Paul how are you guys doing.
Hey, Julien Hi, Julien.
Just wanted to go back to that rate base question Super quickly. If you don't mind can you talk briefly about maybe the discrepancy from the last update just in terms of like the puts and takes beyond the just the Capex increase if you don't mind would that be okay.
Yes. This is Mike go ahead, Brian Yeah, I can talk about what's driving that change Capex forecast one is changes in assumptions around some of our transmission. So we've been working with our partners in terms of ownership and allocation and timing around the transmission project and also as Lisa mentioned looking at other potential transmission opportunities that might be out.
There for us so that caused some of the change in the forecast from 2022 to 2023.
B to H is then there certainly and that moved around a little bit.
Battery storage is in there for 'twenty four 'twenty five.
But again no no incremental upside for many of the Rfps in our Capex forecast really is.
Some of them have had increases in prices from projects that you're seeing across the board pretty much all over we've seen acceleration in project by Gateway West that's a piece of that driving capex as I mentioned and other transmission projects as well.
So really no one really large driver in there is really price increases some project scope changes and then additional projects that are in the pipeline for us.
Right it sounds like a bunch of different things moving around but to that end.
When you think about 2026 here can you comment a little bit about like what the puts and takes right just because it seems like you ratcheted up Capex and then a rate base was maybe even slightly down if you will just making sure I'm hearing you right, it's like a little bit.
Yes, that's exactly great point, though on the rate base side things have moved so one of the biggest things that caused the rate base slide the change was.
We have higher Capex overall of these off from a capex light, but on rate base. Some of the things move like <unk> moved.
In this scenario.
<unk> shifted out a little bit and then when you have projects like gateway west while they have a capex element. They don't show up in the rate base forecast because they wouldn't be flat and service. So we're only only including plants in service you can see some of that is a quick one and so we've added that quick widen show a little bit more about wind plant might be closing and going in to be able to.
Of our rate base, so really the answer to your question on the rate base guidance is the shifting of projects timing wise not the elimination of projects.
Right. It sounds like really this is a question of just when it's coming into the forecast or what have you. But then ultimately if you can just going back to what is not included in timeline for when you get that resolution here I mean, and ultimately what that forecast is looking I mean, it seems like a lot of these forecasts are kind of changing real time do you want to comment a little bit of what that ultimate.
They could look like for 27, 28, especially considering that some of the rate base could have been pushed out from 26 in that period right how much of a spiky.
No uptake could you see capex and rate base in that ZIP code, specifically or is it going to get smoothed out here potentially with the RFP.
Pushed out of it.
Part of this is Brian as a part of the answer to that depends on how we pay for the projects right. Some of these projects could have milestone payments some of them to pay at the end. So there is capex associated with that that can impact the capex slide that we put out today the rate base slide, though a lot of those projects would actually come into the window.
I mean that 'twenty six 'twenty 728 timeline, so there could be a little bit of lumpiness in some of those years, depending on when we when we go into the regulators and try to incorporate those into rates.
Wonderful alright, guys excellent and then just.
You don't mind, just real quickly if I can follow up on one more item here.
Do you think about solidifying plans for a single a single issue rate proceeding versus the kind of a general rate case here if you will.
Or what do you need to do.
Yes.
We're looking at that right now this is Lisa.
We are well.
Date out for over a decade. So this last rate case was.
Quite large and lot of.
There's a lot of work went into.
Sending that in and working through all the discovery requests and just how big that rate case was so this rate case will be a lot simpler so we're working.
Working with the staff and other stakeholders to gauge their interest and see if we can make it a more simplified case that would be really focused on our.
Sure.
The investments that we're making and perhaps labor increases so.
Were exploring that now and we will decide.
As we talk to those stakeholders.
Excellent. Thank you guys for the time.
Thank you Joanna.
Yeah.
Okay.
Hi, it's actually Josh <unk> on for Shar, how are you guys got it.
The head fakes here.
Yeah.
Yeah.
Yeah.
Well Julian just asked.
Most of the question I was going to ask on the rate case. So that was my second one now I'll ask the second part.
It's a little suffered from that and then <unk>.
One on the ITC.
Battery projects amounts going forward.
Just to follow on Julians Quest.
A question there.
How do we factor in Hells Canyon and timing.
Knowing that that is now expected to be 2025 events right now.
That was reiterated in the slides the licensing was expect expected to occur in 'twenty five so if the case was filed in June.
What impact if there is an impact would Hells Canyon play just knowing that in prior conversations we've had that.
Was going to be.
At least at one point a deciding factor when a case would be filed does this play.
Play into that.
So.
The case, we would file this year wouldn't include Hells Canyon.
But no.
I realize in this.
<unk> rate cases, when we do get the license that very well could trigger.
Perhaps a single.
Issue rate proceeding or it may be included in another general rate case, we will have to wait to see kind of what's going on in that year and before we make that decision.
Okay. Okay. That's that's the answers yes, no I realize there will be separate I guess I was trying to get a sense of whether.
You would hold off for a certain amount of time after or if it would get.
Trigger.
Quicker case than you otherwise would have expected to file just again, because you hadn't filed.
Long and now the pace is picking up just trying to get a sense of the cadence as we model rate increases going forward.
James just to add on that just add onto that one thing I will mention that there is a possibility that we would look to file something in advance of the actual data received a license to the extent we have any visibility to that we may file earlier, then license. The license state you saw this on the Langley Gulch plant when we put it into service we did have a filing in advance.
And our rate change actually happened very near to the time that the plant went into service given the magnitude of the health Canyon license.
May look to do something similar to that in the future as well we will be in front of the regulator. We expect relatively relatively frequently. So this could be something that goes into <unk>. If the timing works out if not it could be a single issue case and remember we did take Hells Canyon to the regulator earlier since it had been such a long project and got a prudency determination.
Nation through 2015 on expenditures, we've made on that project just because it's been out there for so long and we have so much <unk> on that project.
Also been collecting AFDC on it which has been helpful from a rate perspective, as we do take that is incorporated into customer rates.
Yes.
Perfect. Thank you yes.
<unk>.
Your comments are consistent with.
My recollection in my notes from from what you just mentioned earlier.
I appreciate the additional color.
Thank you for that.
Yes.
As we think about the amount of Adi.
Battery projects.
The level that it supports of courses.
Down to $9 one too.
The 95% 96 authorized how should we think going forward.
Kind of an expected amount and I'm, saying this with the full realization and understanding that you do not provide multiyear guidance or long term EPS CAGR et cetera, but.
More just from a practical standpoint.
What might be realistic to assume is going to be.
Sorry.
Something safe to model.
Say for the next few years.
As you're continuing to invest at the pace. The clip that you are.
And depending on the timing of rate cases.
Sure Yeah. James This is Brian So a few things you have to look at in terms of how many credits will use I'll give you. This answer first you have to look out and look at it separately each year theres not a specific number that we would say it's going to be used every year. There is an upper limit right first of all there is an upper limit to credits right now as of the end of the year, we had $86 million in the mechanism.
Do you expect to add some more to that from the 2023 batteries as they go into service and are paid for.
In terms of future additions to the mechanism that takes regulatory actions with action. That's the end of the regulator and ask for additional ITC to be put into the mechanism whether their current balance sheet credit or credits that come off of renewable project in batteries, we install in the future depending on what that balance is the <unk>.
Number is going to depend on a lot one thing Thats a big factor as equity for example on equity initiatives issued it increases book equity.
Is that a is that incorporated into our financial statements that could use additional credit catch up to that higher book equity now that moves EPS as well of course.
And then we have to look at financial headwinds that every and every year. For example in 2024, we've talked about higher depreciation and interest expense. So to the extent we have to absorb that tax credits would be used to absorb some of the financing costs associated with our growth.
Beyond that I would say on the credit side, it's going to depend on the size of the bucket in any given year as to what we're doing and what we're going to be using so you can't just take a straight line look at tax credits as we go into the regulator and we increase our cash collection. For example, we would expect our rate base earnings.
<unk> power.
To eliminate the need for as many credit so over time, we would expect then the need to rely on credit to earn close to our authorized rate of return would go away, but that's something that Fortunately these credits in the interim do provide us with earnings support.
I think it's also worth noting that the way the mechanism works, we don't have discretion to decide how many teus.
Whatever the number is that announcing T cell.
It's not we can't hold them back.
Sure.
Got it got it that's helpful.
Okay that all makes sense and I appreciate it.
All the detail there it sounds like.
Should continue using the yearend book equity.
Iterative calculation.
I think we all used to sort of figure out each year.
What the need will be it sounds like Thats still to go forward practice.
That's correct remember Justin.
The number can change, though remember in this particular case the number of galvanized one too if the ROE were to go up in subsequent cases that number it would be expected to also move with it.
Absolutely got it.
You very much that's all I have thanks for taking our questions.
Thank you Jamie.
And our next question comes from the line of Brian Russo with Sidoti Brian Your line is open.
Hi, Thank you hi, good afternoon.
Hey, so just good afternoon, so just to follow up on the limited issue or general rate case.
If you follow but by June.
Fair to say that you would have new rates effective.
In January of.
2025, and then what would be the test year, and then like the true up.
How much capex from your last rate case would you capture in this for rates.
2025 to reduce any lag.
So.
We'll start with yes, we would file in June with the.
The.
Expectation that we would they would go into effect January one.
We would be using a 2024 last year.
Then what was the other sorry, Brian what was the other part of your question.
Alright.
Yeah for true up, but I guess, if youre going to use the 2020 for test year, then it's basically current rate base would be.
Collected in rates.
Yes.
Brian This is Brian So we don't have that put together yet in terms of what the actual number we will submit to regulators would be the drip component is relatively small at this point.
But the amount of additional rate base that we plan to color plant that we put into service. During 2024 that is rate base eligible is very significant.
So when we have that number it will we'll be able to share that.
Yeah understood and it seems like if you kind of back out the amortization of.
The expense.
In your 2020 for guidance.
Is it fair to say that this case will again really be capital driven and not really operating expense driven.
Yeah, that's correct. That's what we we believe that with so many other things being settled in the in to this.
Last rate case, we feel like it's really a matter in a time, where we're growing so fast we just simply can't.
Stay out another decade, when we're spending roughly $1 billion a year. So we will be in more frequently.
Yeah, and Brian you've seen us control, our O&M and keep it relatively flat you saw in $2010 22 to 'twenty three we're pushing to do it again for 2024, but one area, where we just aren't able to do that of course is in labor. So that's an area that is very difficult to absorb particularly as we are.
A few people here and employed in order to meet these growth demands. So we look at that one is an area where we're looking at limited scope labor is something we would look to include in the mix. In addition to the infrastructure investment. Yes. This is Adam I think in addition to that just with the growth. We're seeing in batteries you guys maintained all of this in.
The new systems that are out there. So that's part of the O&M increases, we're seeing as well and then I would also add.
Our.
We have some regulatory deferral mechanisms for games like the wildfire mitigation plan that allows us to make those investments now.
And defer the.
Recovery within till later, so that that helps for underwriting costs that are going up.
Okay, Great and you mentioned earlier.
Inquiries for data centers can you just add more context behind that.
And.
When you might need additional generation capacity, which I assume would have to be.
Some baseload or gas fired generation, maybe along with with renewables and then tie that into maybe when we could expect the next IOP.
Yeah. So it is a time right now where it is.
The amount of megawatts that are sort of kicking the tires.
Used to be three to five megawatts. We say these are showing up at 100 or more so it's an ongoing process that it feels like we're just in a perpetual Iot.
Analysis to happen when it gets a little more color. Yes. This is Adam maybe just to add to that when we track large load requests we consider large load of megawatts or more this year in 2023, we had more requests and inquiries on our system than ever in the history of the company.
We used to get as Lisa mentioned 1234 megawatts. These requests are now in the hundreds to even thousands now whether they will actually come to our service territory is an open question and obviously those discussions are confidential, but if we did see a significant amount of these ftes decided to come here.
You could see us having to move forward with for example, a cap plan sooner than what our IRT showed just as a reminder, and I are in our ERP.
Now look at large load scenarios and so as we move forward with future <unk> will do the same and what that could show as the need for gas may increase even as early as the 2000 32029 timeframe, but again it all depends on what loads come to fruition and whether these companies decide.
Two site.
Idaho or somewhere else.
Okay, and then maybe just two.
More detailed update on B to H, you mentioned has shifted a little bit yet you're still expecting to break ground. This year I mean, what's the likelihood.
You know that.
That is the earliest 2026.
Still.
Realistic and on track.
Yes.
If you've been following us for quite a while so that this has been quite the.
Process to get to where we are so we're feeling good about them.
Getting to the finish line with permits right now there have been some delays in getting the notice to proceed has been mostly viewed it says the responsiveness of the agencies, but.
I will have Adam give you a little more color on it but.
I feel like we're getting to the end I think.
It won't be any sooner than.
2000, 22006 for sure Yes, you hit on most of.
The issue we've run into is just a little bit of delays related to the notice to proceed from the Oregon Department of energy and from the BLM, We still do plan to start construction. This year hopefully in the first half of this year as possible at our end date is still 2026, given what we're seeing so as long as we can work with the agencies.
Get some of these final notice to proceed.
We have some right away work to also do and then we're doing some micro siding and some amendments on that front. If it all comes together yeah construction would start in 2024 and it will.
And before the end of the year in 2026.
Okay, Great and lastly, just given new rates and I suppose it might be tiered rates.
During the peak demand season, along with the.
The itc's, which are partly due to the.
The battery storage revenue being transferred there.
Is there anything we should be aware of in terms of the quarterly dispersion.
Your margins or earnings as it relates to your <unk>.
Full year guidance.
Brian not from my perspective, I mean, one of the things we've done in the past is as we've used AI Tcs. We have made an estimate early in the year of the full year 80, ITC usage amount and then we record that pro rata over the year not based on anticipated sales each quarter.
So you'd expect us to do that again this year with the ITC, but otherwise yes. There were some minor changes in the case to tearing but I wouldn't expect it to have a dramatic impact on seasonality, we should still have seasonality that's <unk>.
Similar to what we've seen in the past driven more heavily by weather.
Then by any changes to rates.
Okay. Thank you very much.
Thanks, Brian Thank you.
And your next question comes from the line of Bill at the salary with UBS. Your line is now open.
Hey, Bill Hey, Bill.
Hi, good afternoon, Thanks for taking my question.
It's already been asked and answered, but just to clarify on the ITC.
See balance so Brian I think you said you ended the year at $86 million and then we should add to that.
The full amount from the from the batteries right and so is that is that $50 million. I know you you referenced the 25, but the total value of the batteries, which is what it adds to the ITC.
ITC balance is that 50 million or what is that sort of then you sort of add to that and then we back off what we.
What you assumed two to.
To utilize this year right and then we'll have the residual balance for moving forward is that the way to think about it.
You are correct bill so.
We had $45 million originally authorized by the regulators we have planned to use some of that in 2023, but did not so we had $45 million balance and then we're authorized to add to that all of the credits that are generated from the batteries that we installed in 2023, we don't get the credits until they are.
Installed and paid for and so we have some outstanding payments on some of the batteries right now the $86 million is the bulk of it thats. The total amount 45, plus the amount. We added we expect another $15 million to $20 million to be added to that from portions of the batteries that were 2023 batteries, but are not yet on the books for.
Purposes of the mechanism, so ending ending closer to.
Around $100 million of tax credits eligible in the mechanism for 2024.
Okay, Alright, and then and then you'll back off whenever you end up consuming in that range for this year right.
Correct.
Okay, and then in this rate filing that youre going to make.
Should we assume that you would go back and ask for additional credits.
I mean, we may that is one thing we can do because we are installing batteries in 2024 and they will also generate ITC and we think it's we think it's an efficient mechanism for both our customer than our shareholders to use the ITC mechanism for those credit. So it's possible that we would make a similar asset.
It goes into the mechanism and even a limited scope case in front of the PUC.
Okay, Alright, that's helpful. And then just going back a little bit to the questions around the capex.
You guys have talked about.
Brian sort of asked about this a little bit you talked about regarding the data center.
But these potential for additional capital as it related to higher load growth.
Is that more back end loaded potentially to the extent that there are additional capex revisions from from higher load growth.
Excluding the Rfps, but just just strictly from the low growth that would be sort of on the backend of this capex forecast or is there a potential for some of that to be feathered in sooner.
How should we think about that.
I think it's safe to say, it's probably towards the it would be the end towards the end of the time period, we're talking about just given.
Quickly you could actually build something with you.
And you negotiated the contract with such a large load.
Okay, and then and then Brian you had mentioned about.
When we think about the financing and what what's the right metric.
Look at it and you'd mentioned, the 50% to 51% equity, but I mean you.
Maybe you can share with us the essence of the debt number that you ended the year you talked about the cash flow improvement.
Should we think about that metric.
If you have that Andy.
So what I would tell you is we want to be more towards the 15% to 18% <unk> to debt number we ended up the year below that and probably through this capex cycle might be closer to that 13% to 15% range.
Where we've been recently.
Okay.
Okay, Alright thats helpful.
All right I'll leave it there thank you very much.
Okay. Thank you Bill.
Thank you and there is a final opportunity here simply press star one to signal for a question and well pause for just a few moments to see if any questions come in to our Q.
Okay.
Alright, it looks like there are no further questions. So this does conclude the question and answer session for today Ms grow I will turn the conference back over to you.
Thank you.
Thank you everyone for joining us this afternoon and for your continued interest in <unk> I Hope you all enjoy president's weekend and have a great evening. Thank you.
That concludes today's conference. Thank you for your participation.
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