Q1 2024 Essential Utilities Inc Earnings Call

George: Hello and welcome to the Essential Utilities Q1 2024 earnings call. My name is George, and I'll be your coordinator for today's event. Please note this conference is being recorded, and for the duration of the call, you guys will be in listen-only mode. However, you will have the opportunity to ask questions towards the end of the presentation, and this can be done by pressing star 1 on your telephone keypad to register your question.

Hello, and welcome to the essential utilities Q1, 'twenty 'twenty four earnings call.

George: My name is George I'd be coordinator for today's event.

Please note. This conference is being recorded after the duration of the call you've actually been listen only mode. However, you will have the opportunity to ask questions towards the end of the presentation and this can be done by pressing star one on your couple of keep out to answer your question.

If your question is since at any point, Please press star zero, and you'll be kind of get to an operator.

George: If you have questions at any point, please press star zero, and you'll be connected to an operator. I'd like to hand this over to your host today, Mr. Brian Dingerdissen, to begin today's conference. Please go ahead, sir. Thanks, thanks.

I'd like now to hand, it over to your host today, but should widen dinger deason to begin today's conference. Please go ahead Sir.

Brian Dingerdissen: Thanks, thanks, George. Good morning, everyone.

Brad Widen: Thanks, George Good morning, everyone and thank you for joining us for our first quarter 2024 earnings call.

Speaker Change: If you did not receive a copy of the press release, you can find it by visiting the Investor Relations section of our website and the <unk>.

Speaker Change: Slides that we will be referencing a webcast of this event can also be found there.

Speaker Change: As a reminder, some of the matters discussed during this call may include forward looking statements that involve risks uncertainties and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward looking statements. Please refer to our most recent 10-Q10-K and other SEC filings for a description of such risks and uncertainties.

During the course of this call reference may be made to certain non-GAAP financial measures a reconciliation of any non-GAAP to GAAP financial measures is posted on the website.

Speaker Change: On the call with Chris <unk>, our chairman and CEO, who will provide an update on the company Mike <unk>. The president of our gas business will then provide an update on the gas business and then Dan Schuller, our CFO provide an overview of the financial results before Chris closes the call and open the call up for questions with that I will turn it over to Chris Franklin.

Brian Dingerdissen: And thank you for joining us for our first quarter 2024 earnings call. If you do not receive a copy of the press release, you can find it by visiting the investor relations section of our website. And the slides that we will be referencing during the webcast of this event can also be found there. As a reminder, some of the matters discussed during this call may include forward-looking statements that involve risk uncertainties and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward-looking statements.

Christopher H. Franklin: Okay, Thanks, Brian and good morning, everyone. Thanks for joining us.

Brian Dingerdissen: Please refer to our most recent 10-Q, 10-K, and other SEC filings for a description of such risk and uncertainty. During the course of this call, reference may be made to certain non-GAAP financial measures. A reconciliation of any non-GAAP to GAAP financial measures is posted on the website.

Christopher H. Franklin: Let's begin with some highlights from the fourth quarter. So far first but there is going to discuss in more detail our financials.

Christopher H. Franklin: We posted GAAP earnings of 90 97 per share which includes the significant gain on sale from the energy projects, which closed in January.

Brian Dingerdissen: We'll begin the call with Chris, our Chairman and CEO, who will provide an update on the company. Mike Hewer, the President of our Gas Business, will then provide an update on the gas business. And then Dan Schuller, our CFO, will provide an overview of the financial results before Chris closes the call and opens the call up for questions. With that, I will turn it over to Chris Franklin. Hey, thanks, Brian. And good morning, everyone.

Christopher H. Franklin: Started the year has been unusually warm.

Christopher H. Franklin: Your scoring a real need for weather normalization at our gas utility.

Christopher H. Franklin: Thanks for joining us. Let's begin with some highlights from the quarter so far. First, Dan's going to discuss in a lot more detail our financials, but we posted gap earnings of 90 cents to 97 cents per share, which includes a significant gain on sale from the energy projects which closed in January. Now, the start of the year has been unusually warm, underscoring our real need for weather normalization at our gas utility.

Christopher H. Franklin: Operationally, this was another very strong quarter for both gas and water, and we continue to achieve industry-leading operational metrics in both gas and water. You will hear more about the gas division from Mike York in just a few moments. Now related to our acquisition program, we have seen real progress on the C motion, which was introduced by Chairman DeFrank. We understand that more than 30 people have contributed to the process of the C-Motion comment period, and we expect the PUC to vote on the motion relatively soon.

Christopher H. Franklin: Operationally this was another very strong quarter for both gas and water and we continue to achieve industry, leading operational metrics in both gas and water you'll hear more about the gas division from <unk> in just a few moments are related to our acquisition program.

Christopher H. Franklin: We have seen real progress on the sea motion, which was introduced by Chairman D. Frank.

Christopher H. Franklin: We understand that more than 30 people have contributed to the process.

Christopher H. Franklin: Of the <unk> motion comment period, and we expect the PUC to vote on the motion relatively soon.

Christopher H. Franklin: We will continue to monitor the progress here, and we hope the process is completed soon here in Pennsylvania. Now, as you probably saw, the EPA published the first ever limits on PFAS last month. They were largely in line with what we were expecting, and I'll give you details at the moment, including our CapEx spending on PFAS. Speaking of CapEx, our significant infrastructure investment program continues to upgrade our pipes and plants, which enhances our ability to deliver on our mission of providing reliable water and natural gas to our customers.

Christopher H. Franklin: We will continue to monitor the progress here and we hope the processes completed soon here in Pennsylvania.

Christopher H. Franklin: Now as you probably saw the EPA published the first ever limits on P. Fast last month. These were largely in line with what we were expecting.

Christopher H. Franklin: And I'll give some detail in a moment, including our capex spending in Paphos on boss now speaking of Capex or significant infrastructure investment program continues to upgrade our pipes and plants, which enhance our ability to deliver on our mission of providing reliable water and natural gas.

Christopher H. Franklin: With customers.

Christopher H. Franklin: Through March 31st, we have invested approximately $253 million, and as a reminder, we expect to invest between $1.3 and $1.4 billion this year, which will be a record capital spend for us. By the way, you've heard me say that many times, and I can't tell you how proud I am of the company's leadership and what they have accomplished in terms of our work to improve customer reliability. Now, as part of our continued focus on operational excellence in 2024, I thought you might enjoy hearing from Mike Huer, our president of our natural gas division.

Christopher H. Franklin: Through them through March 31.

Christopher H. Franklin: We have invested approximately $253 million.

Christopher H. Franklin: And as a reminder, we expect to invest between one three and one 4 billion this year, which will be a record capital spend for us by the way you have heard me say that many times and I can't tell you how proud I am of the company's leadership and what they have accomplished in terms of.

Our work to improve customer.

Christopher H. Franklin: Reliability.

Christopher H. Franklin: Now as part of our continued focus on operational excellence in 2024.

Christopher H. Franklin: I thought you might enjoy hearing from Mike fjord, our president of our natural gas Division later in the year Youll hear from Colleen Arnold who runs our water business, but we are we are leading.

Christopher H. Franklin: We have leased leading efforts going on in our natural gas businesses.

Christopher H. Franklin: And later in the year, you'll hear from Colleen Arnold, who runs our water business. We have some leading efforts going on in our natural gas business. Finally, on this slide, it's been a busy week for the company. On Wednesday, we held our annual meeting of shareholders, where all agenda items received over 90% shareholder support. Notably, I'm pleased to report that Tammy Lindy and Chris Bruner have been elected to the board. Take a look at the next slide. I think you'll agree that they'll be great additions to the Essential Board.

Christopher H. Franklin: Kind of interesting.

Finally on this slide it's been a busy week for the company on Wednesday, we held our annual meeting of shareholders, which went all agenda items received over 90% of shareholder support.

Mike Fjord: I'm pleased to report that Kandi, Lindy and Chris Brener have been elected to the board. If you take a look at the next slide I think you'll agree there'll be great additions to the essential board.

Christopher H. Franklin: Over the last 10 years, we've really focused on corporate governance. And as a result, I think we have one of the most what we consider best in class corporate governance guidelines. And I believe we're really a leader in that part of our business. For example, our corporate governance includes tenure, limitations, and retirement ages. In fact, Ellen Ruff, our longest tenured board member, and she was a former Duke executive, and Lee Stewart, our longtime audit committee chairperson, have reached retirement age over the past year and formally retired from the board. Week.

Mike Fjord: Over the last 10 years, we've really focused on corporate governance.

Mike Fjord: And as a result, I think we are.

Mike Fjord: One of the most what we consider.

Mike Fjord: Best in class corporate governance guidelines and I believe we are really a leader in that part of our business.

Mike Fjord: For example, our corporate governance includes tenure limitations.

Mike Fjord: Retirement ages.

Mike Fjord: Ellen Ruff, our longest tenured board member and she is.

Mike Fjord: As a former Duke executive and Lee Stewart, our longtime audit Committee chair reached retirement age over the past year and formally retired from the board. This week now through a formal board succession search process, we identified Tambien Krish, who I believe will fit seamlessly into what is already a very.

Christopher H. Franklin: Now, through a formal board succession search process, we identified Tammy and Chris, who I believe will fit seamlessly into what is already a very strong board. Tammy is someone you may already be familiar with as a longtime industry executive general counsel at PSEG in New Jersey. She brings a great utility, legal, and regulatory mind to our board. Chris is a retiring audit partner at EY, and he previously served as the head of the Philadelphia Office of EY. He brings a depth of knowledge and experience participating in audit committees and board discussions.

Mike Fjord: <unk> Board.

Mike Fjord: Sandy somewhat you may already be familiar with us a long time industry Executive General counsel at PSEG, and New Jersey. She brings a great utility legal and regulatory bind to our board Chris is a retiring audit partner.

Mike Fjord: And he previously served as the head of the Philadelphia office of UI and he brings.

Mike Fjord: The knowledge and experience in participating and audit committees and board discussions Crystal rare for you on your Ed and his past the independents tests.

Christopher H. Franklin: Chris O'Rear from DUI Year End has passed the independence test of the New York Stock Exchange and the SEC and, of course, been declared independent by our board. We welcome Tammy and Chris to the board and look forward to their service.

Mike Fjord: The New York stock exchange and the setting of course declared independent by our board.

Mike Fjord: We welcome Tony and Chris of the Board and look forward to their service.

Mike Fjord: I'll just mention one other thing we disclosed through an 8-K. This morning that the board has not offered me and I have accepted a new three year contract that will commence on July one this year. It go through.

Christopher H. Franklin: We disclosed through AK this morning that the board has offered me, and I've accepted, a new three-year contract that will commence on July 1st of this year and run through mid-2027. That will be my fourth three-year contract since I've been CEO. Now moving to slide seven, I want to spend a little bit more time on PFAS, given the final EPA rule that was published last week, last month. As we've been discussing for more than five years, Dow has been an industry leader in setting company-wide standards for PFAS, publicly disclosing all of our sample results where we find PFAS, and certainly in creating innovative solutions to address PFAS issues. As a result, we are well positioned, applying the EPA limits as just said. Unlike many other utilities in the country, we have tested all of our water sources. Identify the sources that need treatment.

Mike Fjord: Mid 2027.

Mike Fjord: That will be my fourth of three year contracts that have been.

CEO.

Speaker Change: Now moving to slide seven I want to spend a little bit more time on P fast.

Speaker Change: Given the final EPA rule that was published last week last month.

Speaker Change: As we've been discussing for more than five years.

Speaker Change: <unk> has been an industry leader in setting companywide standards for <unk>.

Speaker Change: Publicly disclosing all of our sample results, where we find <unk> and certainly in creating innovative solutions to address the cost issue.

Speaker Change: As a result, we are well positioned to comply with the EPA limits that were just yet.

Like many other utilities in the country, we have tested all of our water sources identified the sources that need treatment and we have been implementing mitigation solutions now for years. In fact Aqua has installed nine treatment systems to date and mitigated another 10 sites by.

Christopher H. Franklin: We've been implementing mitigation solutions now for years. In fact, ACWA has installed nine treatment systems to date and mitigated another 10 sites by optimizing the use of supplies and removing wells from service. In 2024, we estimate that more than 10 systems will go online by year end. By using our modular design tailored to small systems, we anticipate ramping up our capability to mitigate as many as 100 systems in a single year. Just last month, we held the groundbreaking for a site in New Jersey. The final rule that came out was largely in line with our expectations, so there were no surprises there.

Speaker Change: Optimizing the use of pet supplies and removing wells from service.

Speaker Change: For 2024, we estimate that.

Speaker Change: More than 10 systems will go online by year end.

Speaker Change: And by using our modular design tailored to small systems, we anticipate ramping up our capability and mitigate many as 100 systems in a single year just last month, we held the ground breaking for our sites in New Jersey.

The final rule that came out was largely in line with our expectations. So no surprises there without getting into too much detail one of the most significant changes we saw was that the period of complaint.

Christopher H. Franklin: Without getting into too much detail, one of the most significant changes we saw was that the period of compliance was changed to five years. You may remember that previously we were all thinking that the compliance period was going to be a three-year period. And we think this was a very prudent approach and may be able to ease some of that potential pressure on the supply chain, though many of us utilities rush in. Implement our Mitigation Solution

Speaker Change: What's changed to five years.

Speaker Change: I remember that previously we were all thinking that the compliance period was going to be a three year period.

Speaker Change: And we think this was a very prudent approach and maybe able to ease some of that potential pressure on the supply chain for many of us utility rushing to implement our mitigation solutions.

Christopher H. Franklin: Recently, we named one of our internal experts to a newly created role solely focused on the rollout of the treatment technology, and one of his primary charges, to standardize our approach and minimize design and construction costs, is leading this work from headquarters to ensure that our standard is adopted across all of our subsidiaries, no matter what state, and all impacted operations. We're seeing the benefits of this structure already. Our work to mitigate PFAS costs for our customers also continues as we pursue lawsuits against the manufacturers and apply for state and federal loans and grants.

Speaker Change: Ah recently.

Speaker Change: We named one of our internal experts to a newly created role solely focused on the rollout of a treatment technology and one of his primary charges.

Speaker Change: To standardize our approach and minimize design and construction costs.

Speaker Change: Those are leading is leading this work from headquarters to ensure that our standard is adopted across all of our subsidiaries no matter what state.

Speaker Change: And all impacted operations and we're seeing the benefits of this structure already.

Speaker Change: Our work to mitigate <unk>.

Speaker Change: <unk> related cost to our customers also continues as we pursue lawsuits against the manufacturers and apply for state and federal loans and grants.

Christopher H. Franklin: We're going to stay focused on keeping costs down for our customers. Now, while our costs may change as we move through the process, I currently estimate that we'll spend at least $450 million to complete this PFAS mitigation. I'll leave you with one final thought on this topic.

Speaker Change: To stay focused on keeping costs down for our customers.

Speaker Change: While our costs may change as we move through the process.

Speaker Change: Currently estimate that we'll spend at least $450 million to complete this fast mitigation.

Speaker Change: I'll leave you with one final thought on this topic.

Christopher H. Franklin: We were a pioneer in our PFAS commitment five years ago. We have a plan. We expect to remain a leader in this area, and we also see opportunities to help other utilities with their PFAS mitigation plans, which could obviously help some of our corporate development. So next, it's really my pleasure to introduce the president of our natural gas division, Mike Huard. Mike has over 38 years of industry experience and joined us from Nisource back in 2020 when we completed the transaction with Peoples.

Speaker Change: We were a pioneer on R. P fast commitment of five years ago, we have a plan we expect to remain a leader in this area and we also see opportunities to help other utilities with their P. Fast mitigation plans, which obviously could help some of our corporate development work.

Speaker Change: So it's really my pleasure to introduce the president of our natural gas division by QR, Mike has over 38 years of industry experience and joined US from <unk> back in 2021, we completed the transaction with peoples he's.

Mike Huard: He's been a tremendous addition to the team, and I've asked Mike to join us today and provide some details on our natural gas utility that he leads. And by the way, just to give you a sense of size, we provide service to 750,000 customers in Pennsylvania and Kentucky. Mike, do you want to take it away?

Mike Fjord: <unk> been a tremendous addition to the team and I have asked me to join US today and provide some details on our natural gas utility that he leads and by the way just to give you a shot.

Mike Fjord: Size, we provide service to 750 customers in Pennsylvania and Kentucky.

Mike Huard: Sure. Thanks, Chris. And I'm happy to be here today and appreciate the opportunity to highlight the significant and important work that the team at Peoples and Delta's Gas is doing. So moving to slide nine, as noted on the slide, Peoples is the largest LDC and PA with over 703,000 customers and $3.5 billion of rate base as of the end of 2023. Additionally, our gas segment includes Delta Gas, now serving over 40,000 customers in Kentucky. It's important to be mindful that both Pennsylvania and Kentucky have supportive regulatory environments.

Speaker Change: Take it away.

Speaker Change: Thanks, Chris and I'm happy to be here today, and appreciate the opportunity to highlight the significant and important work that the team at peoples and Delta. This gas is doing so moving to slide nine as noted on the slide peoples is the largest LDC NPA with over 703000 customers.

Speaker Change: <unk>.

Speaker Change: $3 5 billion of rate base as of the end of 2023. Additionally, our gas segment includes Delta gas now serving over 40000 customers in Kentucky. When you think of these two jurisdictions, it's important to be mindful that both Pennsylvania and Kentucky are supportive.

Speaker Change: Regulatory environments, and then Pennsylvania people service territory sits directly on top of the Marcellus and Utica shale production zones that continue to give customers a lower cost commodity to the national average.

Mike Huard: And in Pennsylvania, People's Service Territory sits directly on top of the Marcellus and Utica Shell production zones that continue to give customers a lower cost commodity compared to the national average, and that's helping keep bills affordable. Since the acquisition by. The clear focus of our gas segment has been the increased safety and reliability of our 15,000-mile distribution system. The best example of that focus has been the reduction of year-end outstanding leakage on our annual DOT report, having reduced outstanding leaks by 83% over the past five years. It should also be noted that Peoples has maintained its really strong focus on customer service, continuing to lead its peer group in the annual PAPUC Customer Satisfaction Survey.

Speaker Change: And that's helping keep bills affordable.

Speaker Change: Since the acquisition by a central.

Speaker Change: Clear focus of our gas segment has been the increased safety and reliability of our 15000 mile distribution system. The Best example of that focus has been the reduction of year end outstanding leakage on our annual report having reduced outstanding leaks by 80.

Speaker Change: 3% over the past five years. It should also be noted people's hasn't been maintained its really strong focus on customer service continuing to lead its peer group on the annual PAA Tuc customer satisfaction survey.

Mike Huard: Moving to slide 10, you will recall, I filed a Pennsylvania gas rate case just before the new year. It's the first case under essential ownership after staying out since 2019, and it includes a doubling of the rate base, from the last fully projected future test year as compared to this case, from $2.1 billion to $4.2 billion, primarily for the replacement of aged bare steel and cast iron mains, work that both increases safety and reliability and reduces greenhouse gas emissions. In this case, Peoples has included a weather normalization mechanism like many of our peers currently have available to them. The case is proceeding as planned. Evidentiary hearings are scheduled for May 9th.

Speaker Change: Moving to slide 10, you will recall that we filed in Pennsylvania gas rate case, just before the new year.

Mike Huard: And as you would know, this is the typical time during the rate case process. Conversations are happening between stakeholders. Finally, we expect rates to go into effect before winter heating. On slide 11.

Speaker Change: The first case under a central ownership.

Speaker Change: After staying out since 2019.

Speaker Change: And it includes a doubling of rate base from the last fully projected future test year.

Prior to this case from $2 1 billion to $4 2 billion, primarily for replacement of aging bare steel and cast iron mains worked with both increases safety and reliability and reduces greenhouse gas emissions.

Speaker Change: In this case peoples has included a weather innovation mechanism like many of our peers currently have available to them.

The case is proceeding as planned.

Speaker Change: Evidentiary hearings are scheduled for may 9th and as you would know this is the typical time during the rate case process.

Speaker Change: Conversations are happening between stakeholders. Finally, we expect rates to go into effect before the winter heating season.

Speaker Change: On slide 11.

Mike Huard: Beyond the operational focus and customer satisfaction performance, Peoples and Essential Teams continue to execute on aggressive pipeline modernization programs under the currently active Long-Term Infrastructure Improvement Plan in PA, which has replaced over 510 miles of pipeline, or 60% of the current LTIP target. While again enhancing the safety and reliability of our distribution system, this effort is leading our way to the target of reducing CO2 emissions by 60% by 2035. At the conclusion of our current LTIP, we will assess our progress and continue this critical infrastructure improvement work in a series of five-year plans. It should be noted that the runway of needed safety and reliability enhancements continues to grow as the industry focus on Rebuilding Infrastructure and Reducing Greenhouse Gas Emission

Speaker Change: Beyond the operational focus and customer satisfaction performance with <unk>.

Speaker Change: <unk> and our central teams continued to execute an aggressive pipeline modernization programs under the currently active long term infrastructure improvement plan EPA.

Speaker Change: <unk> has replaced over 510 miles of pipeline.

60% of the current LTV target.

Speaker Change: While again enhancing the safety and reliability of our distribution system. This effort is leading our way to the target of reducing cotwo emissions by 60% by 2035 to.

Speaker Change: At the conclusion of our current L tip peoples, we'll assess our progress and continue this critical infrastructure improvement work in a series of five year plans. It should be noted the runway of needed safety and reliability enhancements.

Speaker Change: <unk> is the industry focused.

Speaker Change: Rebuilding infrastructure and reducing greenhouse gas emissions.

Mike Huard: Beyond the pipeline, replacement, and modernization, Peoples has been active in implementing technology improvements that have short-term and long-term benefits for system operation. Our ability to reduce the potential for overpressure events and the GPS functionality of our tracking and traceability program highlight this opportunity. Lastly, People's will pilot game-changing meter technology in 2024 that allows utilities to interact with customers and have greater control over the distribution system. We are excited about the progress we have made and look forward to our future and continued focus on safety, reliability, affordability, and our customers. Chris, thank you, and back to you. Mike, thanks for your leadership. Thanks for being with us today.

Speaker Change: Beyond the pipeline replacement and modernization.

Speaker Change: <unk> has been active in implementing technology improvements that have short term and long term benefits to system operation.

Our ability to reduce the potential of over pressure events and the GPS functionality of our tracking and traceability program highlight this opportunities lastly.

Speaker Change: Peoples, we'll pilot a game changing meter technology in 2024 that allows utilities to interact with customers and have greater control over the distribution system.

Speaker Change: Peoples and essential we are excited about the progress we have made and look forward to our future and continued focus on safety reliability.

Speaker Change: Portability and our customers.

Speaker Change: Thank you and back to you Mike.

Mike Fjord: Thanks for your leadership, thank you for being with us today.

Daniel J. Schuller: Review of the Financial Results. On this slide, let's talk at a high level, and then we'll get into the details of the waterfall. The quarterly performance was strong, especially when factoring in the gain on the energy project sale that was completed in January. However, operating revenues were down due to the decline in natural gas commodity prices year over year, which positively impacted customer bills. The weather was warmer than normal, but was largely comparable to last year. We continued our focus on managing O&M expenses with a slight decline there year over year. I'll cover this more in detail when we talk about water.

Mike Fjord: View of the financial results.

Mike Fjord: Thanks, Chris and good morning, everyone.

Chris: And this slide lets talk high level, and then we'll get into the details of the waterfalls.

Chris: The quarterly performance was strong, especially when factoring in the gain and the energy project sale that was completed in January.

Speaker Change: Operating revenues were down due to the decline in natural gas commodity prices year over year, which positively impacted customer bills.

Speaker Change: Weather was warmer than normal largely comparable to last year.

Speaker Change: Continued our focus on managing O&M expenses with a slight decline there year over year and I'll cover this more in detail when we talk to the waterfall.

Daniel J. Schuller: These items, combined with the after-tax gain of $66 million from the sale of the three district energy projects... resulting in net income growth of $38.8 billion and Earnings for Shared Worth of $34.7 billion compared to last year. Next, let's walk through the first quarter water.

Speaker Change: These items combined with the after tax gain of $66 million from the sale of the three district energy projects, resulting in a net income growth of 38, 8% and earnings per share growth of 34, 7% compared to last year.

Speaker Change: Let's walk through the first quarter waterfalls.

Daniel J. Schuller: On slide 14, we have the revenue waterfall for the first quarter. Moving left to right, we have regulatory recoveries for rate increases and surcharges of nearly $14 million. Acquisitions and Organic Growth in the Water Business contributed $3 million, and that small increase is due to increased volumes of water. This was then offset by a decline in other and a significant reduction in purchased gas costs, the kind of all that reflects a positive one-time impact.

Speaker Change: On slide 14, with the revenue waterfall for the first quarter.

Speaker Change: Left to right, we have regulatory recovery.

Speaker Change: Rate increases in surcharges of nearly $14 million.

Speaker Change: Acquisitions and organic growth in the water business contributed $3 million that small increase is due to increased volumes of both water and gas.

Speaker Change: This has been offset by declines in other and a significant reduction in purchased gas cost.

Speaker Change: You can find in other reflects a positive onetime impact of contracted deposit fees in Q1 2023.

Daniel J. Schuller: Contracted Deposit Fees in Q1 2023 and lower P&G Universal Service Rider revenue this year due to lower customer bills. The lower purchase gas reflects the significantly lower gas commodity price that our customers enjoyed relative to 2023. How about that one thing you don't see here is a large change in the volume of gas due to weather because the same period in 2023 also had materially warmer than normal weather. For the first quarter of 2024, it was about 15% warmer than normal, which resulted in weather-related natural gas sales, net of purchased gas costs, being about $20 million below projections, for an earnings impact of $0.05 per share.

Speaker Change: And lower PNG, nap or P&G Universal service provider revenue this year due to lower customer bills.

Speaker Change: The board purchased gas reflects the significantly lower gas commodity price that our customers enjoyed relative to 2023.

I'll note that one thing you don't see here is a large change in the volume of gas due to weather.

Speaker Change: Because the same period in 2023 also had materially warmer than normal weather.

Speaker Change: For the first quarter of 2024, it was about 15% warmer than normal weather resulted in weather related natural gas sales net of purchased gas costs.

Speaker Change: About $20 million below projections for an earnings impact of <unk> <unk> per share.

Daniel J. Schuller: Next, let's take a look at the O&M on slide 15.

Speaker Change: Next let's take a look the O&M on slide 15.

Daniel J. Schuller: Here we have the O&M waterfall. We saw increases in production costs of $2.4 million and employer-related costs of $2 million. Employee-related costs are largely in line with inflation; however, we saw some larger increases in production expenses due to purchased water, purchased wastewater, and power prices. Next, we had an increase due to cuts or growth in the water segment. These increases are offset by lower costs from the gas segment Universal Services Rider, which decreased due to lower gas commodity prices this year, as well as lower other expenses.

Speaker Change: Here, we have the O&M waterfall, we saw increases in production costs of $2 4 million in employee related costs of 2 million employee related costs were largely in line with inflation. However, we saw some larger increases in production expenses due to purchased water purchased wastewater and power prices.

Speaker Change: Yes.

Speaker Change: Next we had an increase due to customer growth in the water segment.

Speaker Change: These increases were offset by the lower cost from the gas segment, Universal services rider, which decreased due to the lower gas commodity prices this year.

As well as lower other expenses.

Daniel J. Schuller: Other includes a number of items, increases in bad debt and materials and supplies, decreases in year-over-year gas segment expenses, and the impact of the sales of both West Virginia utility assets and the energy project. This resulted in O&M that was down slightly from last year, so overall, a positive story here. For the year, we expect O&M to be largely in line with our historic norm.

Speaker Change: Other includes a number of items.

Speaker Change: It's been bad debt in materials and supplies decreases in year over year gas segment expenses.

Speaker Change: Impact of the sales in both West Virginia utility assets.

Speaker Change: And the energy project.

Speaker Change: This resulted in O&M that was down slightly from last year. So overall a positive story here for the year, we expect O&M to be largely in line with our historic norms.

Daniel J. Schuller: Next, let's look at the EPS waterfall on slide 16. Starting on the left side of the EPS waterfall with $0.72 from last year, the next thing we see is a $0.20 pickup in the other category. This increase in EPS includes the $66 million after-tax gain on sale from the energy projects, which closed in January. However, this was offset by increases in depreciation, interest, and taxes other than income. Next, we have the impact of the rates and surcharges, which contributed almost $0.04. Finally, we have slight increases due to water growth and additional volumes of both water and gas. And finally, the insignificant impact of increased expenses.

Speaker Change: Next let's look at the EPS waterfall on slide 16.

Daniel J. Schuller: That lands then at 97 cents in EPS.

Speaker Change: Starting on the left side of the EPS waterfall with 72 from last year. The next thing we see is that 'twenty pick up in the other category.

Speaker Change: This increase in EPS includes the $66 million after tax gain on sale from the energy projects, which closed in January this was offset by increases in depreciation interest and taxes other than income.

Speaker Change: Next we have the impact of the rates and surcharges, which contributed almost four.

Speaker Change: Then we have slight increases due to water growth and additional volumes of both water and gas and finally, an insignificant impact of increased expenses.

Speaker Change: That land at 97.

Speaker Change: <unk> for the quarter.

Daniel J. Schuller: [inaudible] We can't get that 97 cents of GAAP earnings per share for the quarter, and we subtract the gain on sale of $0.24, and then we add back the $0.05 for weather that I mentioned earlier. We get to a number that exceeds our Q1 incentive. Next, let's move to slide 16 to provide an update on regulatory activity. I decided to fix our rancher activity so far this year.

Speaker Change: So if we can't get that 97 of GAAP earnings per share for the quarter and we subtract off the gain on sale of 24 cents and then we add back the <unk> <unk> for weather that I mentioned earlier, we get to a number that exceeds our Q1 consensus.

Speaker Change: Next let's move to slide 16 to provide an update on regulatory activity.

Speaker Change: This slide depicts our retro activity. So far this year, we continue to manage our regulatory activity to maintain safe and reliable service earn a return on the capital, we invest and minimize regulatory lag while always considering affordability for our customers.

Daniel J. Schuller: We will continue to manage our regulatory activity to maintain safe and reliable service, earn a return on the capital we invest, and minimize regulatory lag while always considering affordability for our customers. Thus far, we've received authorization to increase water segment revenues by $13.7 million annually in Illinois, North Carolina, Ohio, and Pennsylvania, and the Kentucky and Pennsylvania gas businesses have surcharges that will increase revenues by $1 million annually. We have water segment rain cases or surcharges pending in Illinois, New Jersey, Texas, and Virginia for a total of 43.2 million. A detailed breakdown of these can be found in the appendix.

Speaker Change: Thus far we've received authorization to increase water segment revenues by $13 7 million annually in Illinois, North Carolina, Ohio, and Pennsylvania.

And the Kentucky, and Pennsylvania gas businesses surcharges that it will increase revenues by $1 million annually.

Speaker Change: We have a water segment rate cases, or surcharges pending in Illinois, New Jersey, Texas, and Virginia and totaled $43 2 million.

Speaker Change: A breakdown of these can be found in the appendix and of course, Mike just covered that peoples rate case, which is underway currently.

Daniel J. Schuller: And, of course, Mike just covered the People's Great Case, which is underway currently. Finally, we expect to file a Pennsylvania water rate case during the third full week of May, nearly three years since we last saw it. We'll provide more details on that case on our Q2 call in August. Chris?

Speaker Change: Finally, we expect to file our Pennsylvania water rate case during the third full week of May which is nearly three years since we last trials.

Speaker Change: We will provide more details on that case on our Q2 call in August and with that I'll hand, the mic back to Chris Chris.

Chris: Dan Thanks.

Christopher H. Franklin: All right, Dan. Next, let's touch briefly on the Municipal Acquisitions Program. As of this call, we have six signed asset purchase agreements in two states where we already have existing water and wastewater operations. These acquisitions will add over 215,000 customer equivalents and about $385 million in purchase price. We continue to see a strong and healthy pipeline of opportunities for additional growth, and we're currently engaged in active discussions with many municipalities. In fact, the customer count for those is over 400,000, and that would be on the water and wastewater side.

Chris: The next one.

Chris: Briefly on the municipal acquisition program.

Chris: As of this call we have six signed asset purchase agreements in two states, where we already have existing water and wastewater operations. These acquisitions will add over 215000 customer equivalents.

Chris: And about $385 million in purchase price, we continue to see strong and healthy pipeline of opportunities for additional growth and we're currently engaged in active discussions with many municipalities. In fact, the customer catalyst is over 400000 that would be on the water and wastewater side.

Christopher H. Franklin: As we mentioned, if Chairman DeFrank's proposal and any of the associated bills in the legislature are successful, there should be a much clearer path to closing municipal acquisitions in Pennsylvania in the future, and I think that will free some of the municipals that are currently thinking about it but maybe standing still for the moment. We continue to believe increasing compliance requirements, such as PFAS, will lead to continued consolidation in what, as you all know, is a very fragmented industry with over 50,000 water systems and 14,000 wastewater systems throughout the country.

Chris: As we mentioned if chairman D, France proposal and any of the associated bills in the legislature are successful there should be a much clearer path to closing municipal acquisitions in Pennsylvania in the future and I think that will free some of the meter.

Chris: Municipals that are currently thinking about it but maybe standing still for the moment, we continue to believe increasing compliance requirements such as P. Vos should lead to continued consolidation and what as you all know a very fragmented industry with over 50000 water systems in 2000 14000 wastewater system.

Chris: Throughout the country.

Christopher H. Franklin: All right, so in closing, let's update the guidance we provided in February so you have a clear line of sight to the opportunities in front of you. In February, we provided guidance for 2024 of net income per diluted common share of $1.96 to $2, and at the time, we clearly indicated that that guidance was based on normal weather, as most utilities do. As Dan has mentioned, the weather in Q1 has been much warmer.

Speaker Change: Alright, so in closing, let's update the guidance we provided in February. So you have a clear line of sight to the opportunities in front of US in February we provided guidance for 2024 of net income per diluted common share.

Speaker Change: <unk> of $1 96 to $2 and at the time, we clearly indicated that that guidance was based on normal weather as most utilities do.

Speaker Change: And then as mentioned the weather in Q1 has been much warmer than normal so.

Christopher H. Franklin: So, for clarity's sake, if we assume normal weather from this point forward... We would finish the year on a gap basis, above our guidance range due to the gain on sale. Dan took you through some of the calculations there just a moment ago. Now, through 2028, we plan to invest about $7.2 billion in regulated infrastructure in our existing utilities, a really strong capital program. And in 2024, we expect to invest between $1.3 billion and $1.4 billion. And we're on track to do so.

Speaker Change: Clarity sake.

If we assume normal weather from this point forward.

We finished the year on a GAAP basis above our guidance range due to the gain on sale.

Speaker Change: That took you through some of the calculation there just a moment ago.

Speaker Change: Through 2028, we plan to invest about seven 2 billion in regulated infrastructure in our existing utilities are really strong capital program and in 2024, we expect to invest between $1 3 billion to $1 4 billion.

Christopher H. Franklin: And as we've said many times, this is the primary generator of More Reliability and Service for our customers as well as the primary generator of earnings per share for our shareholders. Based on this investment, we expect Ratebase will grow at a compounded annual growth rate of approximately 8% for water, and about 10% for natural gas through 2028. The combined utility rate base will grow to a compounded annual growth rate of over 8%.

Speaker Change: And we're on track to do this and as we've said many times. This is the primary.

Generator of more reliability and service for our customer as well as the primary generator of.

Speaker Change: Earnings per share for our shareholders.

Speaker Change: Based on this investment we expect rate base will grow at a compounded annual growth rate of approximately 8% for water.

Speaker Change: 10% for natural gas through 2028, and the combined utility rate base will grow at a compounded annual growth rate of over 8%.

Christopher H. Franklin: We continue to expect that together, organic customer growth and growth from acquisitions for water and wastewater will climb at a rate of 2-3% per year on average, but we remind investors that growth from acquisitions is lumpy and should be viewed over a three-year average. We expect continued stability in our natural gas customer base. As we said before, we expect to raise about $250 million in equity this year using an ATM equity program. We remain committed to a 60% reduction in our Scope 1 and Scope 2 greenhouse gas emissions by 2035 from our 2019 baseline, and as you know, we've made significant progress already on this, and we estimate it to be over 25% as of year-end last year.

Speaker Change: We continue to expect that together organic customer growth and growth from acquisitions for water wastewater will climb at a rate of 2% to 3% per year on average.

We remind investors always that growth from acquisitions as lumpy and should be viewed over a three year average we expect continued stability in our natural gas customer base.

Speaker Change: And as we said before we expect to raise about $250 million in equity this year using an ATM equity program.

Speaker Change: We remain committed to a 60% reduction in our scope, one and scope two greenhouse gas emissions by 2035% from our 2019 baseline as you'd hope we've made significant progress already on this.

Speaker Change: We estimate it to be over 25% as.

Speaker Change: As of year end last year I'll note that the team feels that we are well prepared for the SEC climate rule, which is currently stayed through the various legal challenges.

Christopher H. Franklin: I'll note that the team feels that we are well-prepared for the SEC climate rule, which is currently being staged due to various legal challenges. With that, I'm going to conclude my formal remarks for today, and we'd like to open it up for questions. I'll send it back to the operator.

So with that I'm going to conclude my formal remarks for today and we'd like to open it up for questions I'll send it back to the operator.

Speaker Change: Thank you very much sir.

Operator: Ladies and gentlemen, as a reminder, if you wish to ask any audio questions, please press star one on your telephone keypad and also just make sure your mute function is not activated. Our first question today is coming from Durgesh Chopra calling from Evercore ISI. Please go ahead; your line is open, sir.

Speaker Change: Ladies and gentlemen, as a reminder, if you wish to ask any audio questions. Please press star one.

Speaker Change: Helpful. Keypad. It also just make sure your mute function is not activated likes to lose your equipment.

Speaker Change: Our first question today is coming from <unk> Chopra from Evercore ISI. Please go ahead. Your line is open Sir.

Durgesh Chopra: Hey, good morning, Josh.

Durgesh Chopra: Hey, Chris, Dan, good morning. Thanks for giving me time. Hey, just I wanted to kind of kick start with a gas rate case in Pennsylvania. Obviously, you guys have probably seen all the media reports around the water case that is ongoing. Just any read throughs from there or any color that you can share on how that case is progressing?

Durgesh Chopra: Hey, Chris Good morning, Thanks for giving your time.

Durgesh Chopra: Just I wanted to kind of kick start with <unk>.

Durgesh Chopra: Gas rate case in Pennsylvania, Obviously, you guys have probably seen all the media reports.

Durgesh Chopra: Our on the water case that is ongoing.

Durgesh Chopra: Any read throughs from there or any color that you can share on how that group is progressing.

Christopher H. Franklin: Yeah, I guess I would just say apples to oranges in many ways. So we feel very good about the strong case that we presented. And as Dan mentioned, I'm sorry, as Mike mentioned in his comments, that, as you would expect, we're sort of in that period of time where we can have discussions, you know, about a settlement. And, you know, we'll see how those discussions go. But we're prepared to see this case through. But so far, we have had very, very creative and good relationships with the advocates and the commission.

Speaker Change: Yeah, I guess I would just say.

Speaker Change: Apples to oranges.

Speaker Change: In many ways and so we.

Speaker Change: We feel very good about the strong case that we presented and Dan.

Speaker Change: Dan mentioned I'm, sorry, as Mike mentioned in his comments.

Speaker Change: As you would expect we're sort of in that period of time, when we can have discussions.

Speaker Change: About about a settlement.

Speaker Change: We will see how those discussions go.

Speaker Change: We are prepared to see this case throat, so far very very accretive and good relationships with the advocates and under.

Speaker Change: The Commission.

Christopher H. Franklin: And then maybe just switching gears, you know, other states, and I'm sure you've seen this also, there have been some lawsuits filed by residents against the utility, the water utility, related to PFAS. Can you comment on whether you've seen anything like that in your service territories and the implications, if any, for your business?

Speaker Change: Excellent thanks for that update Chris.

Speaker Change: Then maybe just switching gears.

Speaker Change: No.

Speaker Change: Other states and I'm sure you've seen this also there have been some lawsuits filed by residence against the utility of the water utility of <unk>.

Speaker Change: Related to <unk> question for Us.

Speaker Change: Can you comment whether you've seen anything like that in your service territories and implications if any for your business.

Christopher H. Franklin: So fortunately, we have not. And I like to think that that's because we've been so out front on this issue for so many years. Durgesh, you recall, five years ago, we started down this path before most people even knew what the PFAS discussion was about, and we started mitigation well before many others. So I like to think it's because of the work we've been doing, and our disclosures have been really strong. Anywhere we've used EPFAS, we have reported it publicly.

Speaker Change: So Fortunately we have not.

Speaker Change: I I I.

Speaker Change: I'd like to think that that's because we've been so out front on this issue for so many years.

Speaker Change: You will recall.

Speaker Change: Five years ago, we started down this path before most people have been even though with the with the <unk> discussion was and we started.

Speaker Change: Litigation.

Speaker Change: Before many others. So I'd like to think it's because of our our work we've been doing in our disclosures have been really strong anywhere we've DPP bus we have reported publicly and.

Christopher H. Franklin: And of course, we created that internal standard at 13 parts per trillion several years ago, well before the EPA came out with any standards. And so I like to think that all of that proactive work is part of the reason why we haven't been in that focus for losses. No, at this point, we've not seen anything.

Speaker Change: Of course, we.

We created that internal standard 13 parts per trillion several years ago, well before the EPA came out with any standard.

Speaker Change: I'd like to think that all of that proactive work.

As part of the reason why we haven't been in that focus for losses, but no at this point, we've not seen anything.

Durgesh Chopra: Yeah, Chris, and I can certainly attest to your leadership there. You were kind of the first voice in the industry talking about those issues.

Speaker Change: Yes, Chris Chris.

Speaker Change: So on your desk to your leadership there.

Speaker Change: The first choice in the industry.

Operator: OK, thank you very much. That's all I had. Thanks for the time.

Speaker Change: Welcome to those issues. Okay. Thank you very much that's all I had thanks for the time.

Speaker Change: Thank you so much sir.

Davis B Sunderland: Our next question will be coming from Davis Sunderland, calling in from Baird. Please go ahead, your line is open.

Speaker Change: Our next question will be coming from David sorry from the Davis Sunderland, calling in from Baird. Please go ahead. Your line is open.

Davis B Sunderland: Hey guys, happy Friday!

Davis B Sunderland: Hey, Dave Hey, Dave is paid.

Davis B Sunderland: Are you guys happy Friday, Thanks for taking my question.

Davis B Sunderland: Yes that would be Friday I wanted to ask.

Christopher H. Franklin: Thanks for taking my question. Thank you. I wanted to ask about the pending municipal transactions and the PFAS guidance for the $450 million in capital. Does this include the pending transactions? And maybe I guess just to add on to that, how has PFAS discussions or discussions surrounding costs associated with upgrading systems made their way into potential discussions for new systems so far? Yeah, it's a good question. And, you know, what we're largely focused on, as you mentioned in your question, are municipal transactions.

Davis B Sunderland: Thank you wanted to ask about the pending municipal transactions and the <unk> guidance for the $450 million in capital.

Davis B Sunderland: Does this include the pending transactions and maybe I guess just to add on to that how has PFS discussions or discussions surrounding cost associated with upgrading systems made its way into sessions for new system. So far.

Christopher H. Franklin: And generally, generally, I'm not talking about Los Angeles and Philadelphia and New York, but generally, the municipal systems that we're focused on are smaller. And so I would say, more of a prevailing theme would be that they haven't been tested yet. So not all of them even know whether or not they have.

Speaker Change: Yes, it's a good question.

Speaker Change: <unk>.

Speaker Change: What we're largely focused on as you mentioned at the beginning of your question is municipal transactions.

And generally generally I'm not talking about Los Angeles and.

Speaker Change: Philadelphia, New York, but generally the municipal systems that we're focused on are smaller and so I.

Speaker Change: I would say more of a prevailing theme would be that they havent tested yet and so not all of them even know.

Speaker Change: Whether or not they have plus and so I think what we're going to find is this.

Daniel J. Schuller: And so I think what we're going to find as this MCL, the maximum contaminant level, was put in place recently, I think we're going to find a lot of testing, and we're going to find a lot of them that have problems. So I would expect that kind of discussion really to ramp up in this coming year and over the next five years as everybody is forced to comply with four parts per trillion.

Speaker Change: <unk> is putting the maximum contaminant level was put in place recently.

Speaker Change: Recently, I think we're going to buy a lot of testing going to find a lot of them that find problems. So I would expect the deca discussion you really ramps up in this coming year and over the next five years as everybody is forced to comply with the four parts per trillion.

Daniel J. Schuller: But I wouldn't say that it was a major theme at this point in our current situation. I think your second question, Davis, was around, does the $450 million include capital for acquisition? And we don't typically, until we close, include those that wouldn't be in our calculation data. Yeah, that's correct. And Davis, if you look at the acquisitions that we have pending to close, they are more biased toward wastewater acquisitions rather than water. And I don't believe at this point that there are PFAS in the water, in any event.

Speaker Change: But I wouldn't say that it was a major theme at this point and what we are in our current discussions with the municipal transactions we have today.

That would take your second question was.

Speaker Change: I think your second question, David went around with the $450 million include capital for acquisitions.

We don't typically until we close those they wouldn't be in our calculation.

Speaker Change: That's correct David.

Speaker Change: Look at the acquisitions that we have pending flows they are more bias towards wastewater acquisitions rather than water.

Speaker Change: And I don't believe at this point Theres PFS in the <unk>.

Speaker Change: Water acquisition or two that are in that list.

Speaker Change: In any event.

Davis B Sunderland: We think it's $450 million, or as we've said, at least $450 million. It wouldn't be a material change on that if we had a few more. Got it.

Speaker Change: We think we think that it is.

Speaker Change: We think it's a $450 million as we've said at least $450 million it wouldn't be a material change on that if we have a few more sites.

Davis B Sunderland: That makes sense. That's helpful. And maybe one other question. This might be a bit hypothetical.

Speaker Change: Got it that makes sense that's helpful and maybe one other question this might be a bit hypothetical hum. So I guess, just asking us to weather normalization and what you've applied for and the pending gas case do you have any estimates or any commentary or any thoughts maybe as what a normal <unk>.

Davis B Sunderland: So I guess just asking as to weather normalization and what you've applied for in the pending gas case. Do you have any estimates or any commentary or any thoughts maybe as to what a normal season would have been for this past quarter or what the impact would have been had you been given this weather normalization clause that you guys have applied for? I guess the way I'd characterize that is if you think of the $20 million net revenue shortfall that I mentioned.

Speaker Change: Season would have been for this past quarter, what the impact would have been had you been given this.

Speaker Change: The normalization clause that you guys have applied for.

Speaker Change: I guess, it's the way I would characterize that is if you think of the $20 million net revenue shortfall that I mentioned that would be inside call. It $5 million impact if we had weather normalization kind of depend.

Davis B Sunderland: That would be inside, call it a $5 million impact if we had weather normalization. But it would, as you can see, materially reduce the volatility that we see in a year like we had last year or this year in terms of the downside, but also, in a very cold year, it would have the impact of keeping customer bills at a more normalized level as well. That's helpful. I appreciate your time, guys.

Speaker Change: Depending where that weather normalization comes out exactly.

Speaker Change: But it would.

Speaker Change: You can see it would materially reduce the volatility that we see in a year like we had last year or this year in terms of downside, but also in a very cold year. It would have the impact of keeping customer bills at a more normalized level is.

Speaker Change: Well.

Got it that's helpful. I appreciate the time guys. Thank you very much.

Yes. Thank you. Thank you was just underlined.

Operator: Our next question will be coming from Travis Miller calling from Morningstar. Please go ahead. Your line is open. Good morning, Travis. Good morning.

Speaker Change: Our next question will be coming from Travis Miller, calling from Morningstar. Please go ahead. Your line is open.

Travis Miller: Hey, Travis.

Travis Miller: Hello everyone. Hi. A couple of.

Travis Miller: Hi.

A couple of follow ups.

Travis Miller: follow-ups to some things you mentioned in the prepared remarks.

Travis Miller: Some of the things you mentioned in the prepared remarks, one of the supply chain of thought that was an interesting comment there and thought process. There in terms of are there raw materials or equipment or something that you see constrained right now or you would anticipate could be constrained to your point about the short time period here.

Travis Miller: One is the supply chain. I thought that was an interesting comment there and thought process there in terms of are there raw materials or equipment or something that you see constrained right now or you would anticipate could be constrained to your point about the short.

Christopher H. Franklin: Unconstrained to your point about the short time period here, the short time period. Yeah, we think about tanks, right? Each of them, you know. By the way, most of our systems where we're doing mitigation are small systems. We do have some large ones, but a lot of them, the vast majority of them, are small systems where you think about two different tanks.

Travis Miller: Relatively short time period.

Travis Miller: Yes, if we think about tax rate each of them.

Travis Miller: Sure.

Travis Miller: But by the way most of our system. We're doing mitigation are small systems, we do have some large ones.

Travis Miller: A lot of them. The vast majority of them are small systems. When you think about two different tanks. So those tanks have to be fabricated purchased and fabricated.

Christopher H. Franklin: So those tanks have to be fabricated, purchased, and fabricated, and put to use. And we think about two times all of the systems that we have to implement, which are hundreds. And then the carbon material, you know, is also something that would be ongoing, essentially because that would have to be replaced or regenerated. But if we think about those materials, there could be some constraints on the ability to deliver. That's why I say over a five-year period, spreading it out, it's going to be a lot more palatable to people because if we try to squeeze that into three years, it's really tough.

Travis Miller: It put us in.

Travis Miller: And we do think about two times all of the systems that we have to implement which are hundreds and then but marvin.

Material.

Travis Miller: It's also something that what that would be ongoing essentially because that would have to be replaced or regenerated.

But if we think about those materials.

Travis Miller: We there could be some constraints on our ability to deliver and that's why I say over five year periods spreading it out it's going to be.

Travis Miller: A lot.

Travis Miller: More.

Palatable with people because.

Travis Miller: If we try to squeeze that into three years, it's really tough we're out there we're already doing math purchases to get ready so.

Christopher H. Franklin: We're out there, and we're already doing mass purchases to get ready, so that's not going to be a challenge for us necessarily, but it could be for others. And let's remember that EPA significantly underestimated the impact of this rule. And so, you know, the rush on some of these materials is going to be much more significant than I think was initially anticipated by EPA.

Travis Miller: That's not going to be a challenge for us necessarily but it could be for others, but.

Speaker Change: Let's remember that EPA significantly underestimated the impact of this rule and so the the rush on some of the materials is going to be much more significant than I think.

Speaker Change: Was initially anticipated by EPA.

Travis Miller: Okay, makes sense. And then just real quick follow up on the tanks that you mentioned.

Speaker Change: Okay makes sense and then just real quick follow up the things that you mentioned.

Christopher H. Franklin: You obviously are doing a lot of the PFAS stuff already. Can you use the tools I'm using already, or are those unique? tanks that you would have to replace or don't have. Does that make sense? [inaudible] could be in a building or outside of a building, but they would be brand new to the process at each site.

Rob: Hey, Rob.

Speaker Change: On the deal.

Speaker Change: A lot of the PFS stuff already.

Speaker Change: Can you use the same using.

Speaker Change: Using already or are those unique things.

Speaker Change: Thanks.

Speaker Change: You would have to replace or don't have does that makes sense.

Speaker Change: Yeah, Yeah, it makes sense.

Speaker Change: These would be brand new added to the site of each of these sources right.

Speaker Change: And so the.

Speaker Change: The <unk> b would be could be in a building or outside of a building, but they would be brand new to the process at each site.

Speaker Change: Okay that makes sense.

Travis Miller: Okay, that makes sense. And then there is one more, it's the hottest topic in the sector right now, data centers.

Speaker Change: And then one other it's the hottest topic in the sector right now data centers.

Speaker Change: Okay.

Travis Miller: Any impact there either or even large manufacturers for the gas business, large factories? anything there that would be upside. Yeah, Mike's here, and there's none that I'm aware of that would be materially impacting gas, but Mike, anything you're seeing?

Speaker Change: Any impact there either or even large manufacturers for the gas business large factories.

Speaker Change: Thing there that would be upside.

Speaker Change: Yes, Mike here and there.

Mike Fjord: There is none that I'm aware of that that would be materially impacting.

Gas, but Mike.

Mike Huard: I think it's a great question, and I will say that locally within our service territory, there are project developers that are looking for opportunities that include sites with connection to the grid, customers that may even want to take power offline. And the value of being located with vast pipelines as well as ample and low-cost natural gas is driving that opportunity. And anything on the water side?

Speaker Change: Anything you are seeing.

Mike Fjord: It's a great question and I will say that locally within our service territory. There are project developers that are looking for opportunities that include sites with connection to the grid customers that may even want to take power offline and the value of being located with vast pipelines as well as ample and <unk>.

Mike Fjord: Low cost natural gas is driving that opportunity.

Christopher H. Franklin: We hear that data centers are water-intensive. Anything? That would be relevant there. Yeah, no, yeah, no, it's a good question.

Mike Fjord: And anything on the water side it would appear that the data centers are water and tons of anything.

Mike Fjord: So it would be relevant there.

Travis Miller: And I'll tell you what, Ohio has been really successful at attracting some of these facilities, not only data centers but also, you know, chip manufacturing and also general manufacturing. They've really done a beautiful job there. And we would like to participate in that. And so, you know, we are. And of course, there's a lot happening in Texas as well. Travis isn't necessarily the plant itself, but then the housing that comes along with a new manufacturing plant because of the employee base that's added. And so we're seeing that kind of growth, particularly in Texas. And so that would be more the nature of our participation on the water side, not necessarily the plant itself but the follow-on housing.

Yes, no. It's a good question and what I'll tell you what Ohio has been really successful at attracting some of these facilities not only data centers, but also chip.

Mike Fjord: Chip manufacturing.

Mike Fjord: Also general manufacturing that they've really done a beautiful job there and we would like to participate in that and so.

Mike Fjord: We are.

Mike Fjord: Engaging in Ohio.

Mike Fjord: And of course, there's a lot happening in Texas is well set travelers isn't necessarily the plant itself, but but then the housing that comes along with a new manufacturing plant.

Mike Fjord: Cause of the employee base, that's added and and so we're seeing that kind of growth, particularly in Texas, and so that would be more the nature of our participation on the water side not necessarily the plant itself, but the follow on housing.

Christopher H. Franklin: Yeah. Okay. Makes sense. Thanks so much for the time. You bet. Take care, Travis.

Speaker Change: Yeah, Okay makes sense. Thanks, so much for the time.

You bet take care.

Speaker Change: Thank you Sir.

Operator: We're now moving on to Jonathan Reeder calling from Wells Fargo. Please go ahead. Good morning.

Speaker Change: Would have been moving to Jonathan Reeder, calling from Wells Fargo. Please go ahead.

Jonathan Garrett Reeder: Hey, good morning, good morning.

Jonathan Garrett Reeder: I was hoping to just get a little more clarity on the guidance, exactly. So excluding the 24 cent gain on sale, do you expect to be able to deliver, you know, the full year 24 EPS within that $1.96 to $2 range? You know, in other words, can you offset the five cent weather headwind in Q1? I think we'd say that that's a difficult challenge at this point, given the five cent weather impact in the first quarter.

Jonathan Garrett Reeder: I was hoping to just get a little more clarity on the guidance exactly so excluding the 24 gain on sale do you expect to be able to deliver.

Jonathan Garrett Reeder: The full year 2000, and for Etfs within that $1 96 to $2 range in other words can you offset the <unk> weather headwind in Q1.

Speaker Change: Yeah, Jonathan I think we'd say that that's that's a difficult challenge at this point given that the weather impact in the first quarter I think the math Ben took you through is pretty clear what we can't predict.

Jonathan Garrett Reeder: I think the math Dan took you through is pretty clear, but what we can't predict, as we had in, I guess, 2022, Jonathan, is a blockbuster deceptive November-December in natural gas, which could make up, but we try to predict and guide based on normal weather. And that's why when we add in the weather normalization, it makes it a much easier prediction.

Speaker Change: We had in 2022 Jonathan.

Speaker Change: Blockbuster.

Speaker Change: November December and natural gas, which could.

Could make up but we try to predict and guide based on normal weather and that's why when we add in the.

Speaker Change: Weather normalization.

Speaker Change: It makes it a much easier prediction.

Christopher H. Franklin: We would not have anticipated, especially two years in a row, to have the weather impact that we just saw in 2023 Q1 and 2024 Q1. So again, I think Dan's math took you through how we think about that as an impact given what we saw in the first quarter. Yeah, for some reason, I was thinking the impact on Q123 was even larger, like closer to $0.08.

Speaker Change: We would not have anticipated.

Speaker Change: Especially two years in a row to have the weather impact that we just saw in 2023 Q1 2020 for Q1.

Speaker Change: So again I think Dan's math took you through how we think about that.

Speaker Change: <unk>.

Speaker Change: An impact given what we still saw the first quarter.

Daniel J. Schuller: Yes for some reason I was thinking.

Daniel J. Schuller: Packed on Q on 23 was even larger like closer to eight so.

Jonathan Garrett Reeder: So when I saw, or when I heard you guys say $0.05, it sounded like, okay, maybe that was something that could be a little more manageable. Or, like you said, maybe you get some favorable weather, whether it's the water business over the summer or, you know, the gas business in Q4 that helps kind of balance things out. So... Yeah, Jonathan, I might I might add that, you know, last year, there was a significant impact in the first quarter.

Speaker Change: So when I heard you guys say <unk> it sounded like maybe that was something that could be a little more manageable or like you said, maybe you get some favorable weather whether its at the water business over the summer the gas business in Q4.

Speaker Change: That helps kind of balance things out so.

Jonathan Garrett Reeder: But by this point, we also had a few positives that we had already experienced in the air or that we're seeing ahead of us. So we already had that New Jersey contractor contract fee reversal that we talked about in the first quarter of last year, we had a Texas water pass through that you've heard us talk about, we had some things that were cleaned up from our SAP implementation, we had Capitalization of 2020, to expenses in the first quarter of 2023, which were beneficial. And then at this point, when we had the call, we knew we had a relatively chilly April.

Speaker Change: Yes, Jonathan I might I might add that last year, there wasn't a significant impact in the first quarter.

Speaker Change: At this point, we also had a few positives that we were already had already experienced in the year or we're seeing ahead of us.

Speaker Change: We already had that new Jersey contractor contract fee.

Speaker Change: Reversal that we talked about in the first quarter last year, we had a Texas water pass through that you've heard US talk about we had some things that were clean up from our SAP implementation, where had some capitalization of 2022 expenses in the first part of 2023, which were beneficial.

Speaker Change: And then at this point when we had the call. We knew we had a relatively Chile April.

Daniel J. Schuller: So, we're in a little bit different situation, and ultimately, we saw the natural gas safe harbor come through, which was beneficial last year in terms of getting back on track and inside that guidance range. I think this year we're a little bit more susceptible to weather impact.

Speaker Change: No.

Speaker Change: We had a we're in a little bit a little bit different situation and then ultimately we saw the natural gas safe Harbor come through which was beneficial as well last year in terms of getting back on track and inside that guidance range.

Speaker Change: I think this year, we're a little bit more susceptible to the weather impact as you know we will do everything we can to clawback pennies and focus on our operating model in order to do that but.

Jonathan Garrett Reeder: As you know, we'll do everything we can to claw back pennies and focus on our operating model in order to do that, but just in terms of transparency of that here today, it's just a little bit harder than it was last year. Gotcha. Appreciate that additional clarity there. Maybe try and ask Durgesh's one question a little differently.

Speaker Change: And transparency of that here today, it's just a little bit harder than it was last year.

Speaker Change: Got you.

Speaker Change: That addition, Clare.

Clare: Clarity there.

Clare: Maybe trying to ask <unk> question, a little differently can you talk about the prospects of reaching the settlement and the the peoples gas case as well as just more broadly.

Christopher H. Franklin: Can you talk about the prospects of reaching a settlement in the people's gas case, as well as just more broadly, you know, the challenges or inability on the water side for you? And, you know, now it appears that Pennsylvania Americans are more likely to reach settlements in the cases, because historically, you know, settlements seem to be the norm in Pennsylvania. Listen, I can't give you any details because, for obvious reasons, but I think it's often about the healthy exchange between the parties and we're not going to agree on everything. That's why I call it a settlement. I'll just leave it at that, Jonathan.

Clare: The challenges our inability on the water side for you and now it appears Pennsylvania American to reach settlement cases, because historically settlement seem to be the norm in Pennsylvania.

Speaker Change: Hey, listen.

I can't give you any details because for obvious reasons.

Speaker Change: But.

Speaker Change: But.

Speaker Change: I think it's often about.

Speaker Change: The healthy exchange between the parties and we're not going to agree all agree on everything Thats why I call. It a settlement.

Speaker Change: I'll just leave it at this job and it is a constructive discussion that's taking place right now and I can't predict whether we're going to have a settlement or.

Christopher H. Franklin: It is a constructive discussion that's taking place right now, and I can't predict whether we're going to have a settlement or we'll litigate it. Gotcha. Okay. So, I mean, you don't think there's anything more broadly in the Pennsylvania regulatory construct or regulatory environment that's, I guess, leaning parties not to settle anymore. I do not.

Speaker Change: We will litigate it.

Speaker Change: Struck the discussion.

Speaker Change: Got you Okay. So I mean, you don't.

Speaker Change: It's like them.

Speaker Change: There is anything more broadly in the Pennsylvania regularly regulatory construct or regulatory environment. That's I guess leaning party is not not to settle anymore.

Speaker Change: I do not.

Speaker Change: Okay.

Jonathan Garrett Reeder: And then I know you said you expect the commission will vote shortly on the final revisions to the Fair Market Value Framework. Do you have any insight regarding the potential, like, significance of any changes from Chair DeFrank's original proposal? And then, you know, are you still of the opinion that the only changes to the framework will be from the commission and not legislatively? So, yeah, let me answer those two separately.

Speaker Change: And then I know you said you expect the commission will vote shortly on the final revisions.

Speaker Change: To the fair market value framework do you have any insight regarding.

Speaker Change: Potential like significant of any changes from chaired the Frank's original proposal and then are you still of the opinion that the only changes to the or will.

Speaker Change: It will be from the commission and not legislatively.

So yes, let me answer it two two separately.

Christopher H. Franklin: There were over 30 commenters, right, a lot of comments about, you know, Chairman's C-Motion, and I know that they are carefully considering all of those comments and will think about how they might impact, but, you know, and those are all public, right, so we'll be able to see those. I wouldn't say there's anything new in those comments from what we've seen and heard of the C-Motion, so all those opinions I think are, you know, there are no surprises there. Let's say that.

Speaker Change: There was over 30 commenters right a lot of comments about about.

Speaker Change: Chairman.

Speaker Change: See motion.

I know that they are carefully considering all of those comments and we'll think about how.

Speaker Change: How they might impact but.

Speaker Change: And those are all public Reits, so we'd be able to see those.

Speaker Change: I wouldn't say, there's anything new in those comments from what we've seen and heard prior to the sea motion. So all of those opinions.

Speaker Change: I think our.

Speaker Change: There were no surprises there, let's say that.

Christopher H. Franklin: And so I would be hopeful that the Chairman would, you know, be pretty close to his view initially. But there are five votes and five opinions up there, so we'll have to see what that looks like as they kind of push through. Now, the second part of the question about legislation, I think there is a series of pieces of legislation that moved through the House of Representatives on the committee level, and those are on the floor.

Speaker Change: And so I would be hopeful that the chairman.

Speaker Change: We're pretty close to us.

Speaker Change: You initially, but there's five boats and five opinions up there. So we'll have to see what that looks like I think kind of pushed through the second part of the question about legislation, though I think there is a there is.

Speaker Change: The series a piece of legislation that moved through the house of Representatives.

Speaker Change: On the committee level and those are on the floor and there is ongoing discussion with the leadership in the house of Representatives about what might we accomplish because the bills that were released from committee are not things that we would want to see passed and we understand that they would probably not be successful in the Senate. However, if there was some copper.

Christopher H. Franklin: And there is an ongoing discussion with the leadership in the House of Representatives about what we can accomplish, because the bills that were released from committee are not things that we would want to see passed, and we understand that they would probably not be successful in the Senate. However, if there was some compromise language that could be reached that would be similar to Chair DeFrank's motion at the commission, I think there are real possibilities there.

Speaker Change: <unk> language that could be reached it would be similar to chair D. Franks motion.

Speaker Change: At the Commission I think Theres real possibilities there in that discussion in the house of Representatives is ongoing and I think theres a lot of stakeholders that.

Christopher H. Franklin: And that discussion in the House of Representatives is ongoing, and I think there are a lot of stakeholders that are involved. So, you know, and we're participating, but I would hope that it would come out similar to the motion in the commission, and this would really give us all a clear path as to how this is going to work moving forward. Okay, no, that's really helpful to know that, yeah, like if something comes out of the legislature, it's not, I guess, in the current kind of penal form or like removing Act 12 and, you know, the draconian kind of stuff.

Speaker Change: Our involved so.

Speaker Change: And we are participating but I would hope that it would come out similar to the motion and the commission and this would really really give us all a clear path as to how this is going to work moving forward.

Speaker Change: Okay. That's really helpful to know that yet, but it's something you think if something comes out of the legislature it's not.

Speaker Change: And the current like kind of penal former like removing at 12.

Speaker Change: The draconian kind of stuff.

Speaker Change: How do we how do we tweak their market value to still promote the consolidation of the fragmented industry and everything like that.

Christopher H. Franklin: It's, you know, how do we, how do we tweak fair market value to still promote the consolidation of the fragmented industry and everything like that? That's right. I'm told that in the Senate, there's not an appetite for repeal, and they believe that municipal leadership as elected officials have the right to transact if that's what their decision is. And so that's been made pretty clear by the Senate. So I think if there's compromise language, we could all work together. If not, I don't think much will happen at all on the legislative side. Great. That's an excellent color.

Speaker Change: That's right I'm told that in the Senate Theres not an appetite for repeal that they believe that municipal leadership.

Speaker Change: <unk> officials have the right to transact if that's what their decision is and so that's been made clear by the Senate. So I think if theres compromise language. We can all work together if not I don't think much will happen at all.

At the legislative side.

Jonathan Garrett Reeder: So thank you so much. Good luck with the fair market value. Good luck with the rate case. And then you said on the water side, you're going to be filing, I think next week, for the new water rate case in PA.

Speaker Change: Great that's helpful.

Speaker Change: Color. So thank you so much good luck with.

Speaker Change: With a fair market value. Good luck with the rate case, and then you said on the water side youre going to be filing I think next week.

Christopher H. Franklin: Lead Case MPA. Is that right? Later in the month of May,

So the new water rate case, NPA is that right.

Christopher H. Franklin: Later in the month of May, the third full week. Oh, third full week. Alright, thanks a lot guys, see you at EGA.

Speaker Change: Later in the month of May the third full week in May.

Speaker Change: Gotcha I missed that Lola alright, thanks, a lot guys.

Speaker Change: Alright take care.

Thank you for Schrader.

Operator: We'll now move to Ryan Connors calling from North Coast Research. Please go ahead.

Speaker Change: We'll now move to Ryan Connors claims from Northcoast Research. Please go ahead.

Ryan Michael Connors: Morning. Morning.

Ryan Michael Connors: Right. Good morning, good morning, Mike.

Ryan Michael Connors: Mike My question.

Ryan Michael Connors: Thanks for taking my question. So yeah, I actually had a couple of big picture questions. One came to mind as you were discussing the PFAS kind of potential bottlenecks in equipment purchasing and that sort of thing. And you're talking about making mass purchases, you know, been on some of the earnings calls for these vendors of this equipment lately. And you know, it's a real gravy train.

Ryan Michael Connors: So yes, I actually had a couple of big picture questions. One came to mind as you were discussing the <unk> kind of potential bottlenecks and equipment purchasing and that sort of thing and you were talking about.

Ryan Michael Connors: Making mass purchases.

On some of the earnings calls for these vendors of this equipment lately, it's a real gravy train them or they are talking about not giving back any of the pricing that they took the last few years and continuing to to raise prices above and beyond inflation.

Ryan Michael Connors: They're talking about not giving back any of the pricing that they took the last few years and continuing to raise prices above and beyond inflation. And so it kind of comes to mind that that's all happening at the same time, you know, your industry is seeing greater concern about affordability, and if not yourselves, at least some are seeing surreal pushback on rates cases and that sort of thing. I mean, are utilities going to just kind of get squeezed in between the manufacturers and the rate payers here? Or is there some, at what point does the pushback on the pricing of the equipment or what construct is in the regulatory framework to account for sort of price gouging?

Ryan Michael Connors: And so it kind of comes to mind that that's all happening at the same time.

Ryan Michael Connors: Our industry is seeing.

Ryan Michael Connors: Greater concern about affordability and if not yourselves at least some seeing some real pushback on rates cases, and that sort of thing I mean.

Ryan Michael Connors: You are the water utilities are going to just kind of get squeezed in between the manufacturers and the rate payers here or is there. Some at what point does the pushback on the pricing of the equipment or what.

Christopher H. Franklin: Or just curious what your thoughts are on that? It seems like you're caught in the middle there. Yeah, to some extent, you're right.

Ryan Michael Connors: What construct is in the regulatory framework for to account for sort of price gouging or just curious what your thoughts are on that on that it seemed like you were caught in the middle there.

Christopher H. Franklin: Yeah, to some extent, you're right. Although I'll give Dan, Dan's purchasing and procurement is under his purview at the company, a lot of credit. They've already been out there in the market negotiating some of these things. So maybe Dan, you want to talk a little bit about some of our success there?

Yes, so to extent Youre right.

Ryan Michael Connors: Although I will give them.

Ryan Michael Connors: Purchasing and procurement is under dense for you as a company given a lot of credit they've already out there in the market negotiating some of these things. So maybe Dan you want to talk a little bit but.

Daniel J. Schuller: Some of our success there.

Daniel J. Schuller: Yeah, so, you know, we think about this all the time. There are a couple of different scales here. So we've got small systems in states like North Carolina and areas like Western Pennsylvania, where we've got relatively small items we're going to put in. I think three-foot-diameter canisters, you know, we would look to buy those in mass across the need there, which is, as Chris said, you know, we've got hundreds of these to do, you've got two tanks per installation of two vessels.

Daniel J. Schuller: Yes.

Daniel J. Schuller: We think about this.

Daniel J. Schuller: There are a couple of different scales here. So we've got small systems in states like North Carolina and in areas like Western Pennsylvania, where we've got relatively small comes we're going to put in.

Foot diameter canisters.

Daniel J. Schuller: We would look to buy those in.

In mass across across.

Daniel J. Schuller: Need there which is.

Daniel J. Schuller: As Chris said you know we've got hundreds of these to do you got to two tanks per installation of two vessels. So it is a lot of vessels Ryan as we think about it.

Daniel J. Schuller: So, you know, it's a lot of vessels, Ryan, as we think about it. So we'll go out with videos that are for packages of those, if you will, not all at once, obviously, but with enough volume to drive volume-based discounts, buying a lot of the same size vessels with multiple suppliers. Now, two is something that's been discussed in the spaces.

So.

Daniel J. Schuller: We'll go out with bids that are four packages of those if you will not all at once obviously, but with enough volume to drive volume based discounts.

Daniel J. Schuller: Buying a lot of the same size vessels.

Daniel J. Schuller: Multiple suppliers now too is something that's been discussed in the spaces.

Daniel J. Schuller: For those things that are funded by the federal government in some way, we're getting a grant or a loan, you know, we have to use American-made products. So we're going to have to use that everywhere, and I think the municipal and the restaurant utilities will all realize that, you know, they've got to go a little more broadly in terms of finding supply here. And to hold prices down, we need to go to offshore manufacturers of these types of vessels that will do that. So I think we've got those small vessels; we've got larger vessels, so I think, you know, kind of a 12-foot diameter.

For those things that are funded by the federal government in summary, we're getting a grant for a loan we have to use.

Daniel J. Schuller: <unk> need product.

Daniel J. Schuller: To use that everywhere and I think the municipal and in restaurant and utilities will allow realize that they've got to go a little more broadly in terms of finding supply herein.

Daniel J. Schuller: To hold price down we need to go to offshore.

Daniel J. Schuller: Manufacturers of these types of vessels that will do that so think we've got those small vessels larger vessels. So I think kind of 12 foot diameter.

Daniel J. Schuller: You know, again, these are things that are fairly standard. There are multiple manufacturers of those. We'll look for multiple bids and go with the best price. I mean, that's really our objective here is to always put in the appropriate equipment at the appropriate price for the protection of our customers. Yeah, it capitalizes on our economy to scale, and it will obviously be a big player in the purchases. And I do think, Brian, where we're somewhat susceptible would be on the resin or on the carbon because it's going to be ongoing purchases. But, you know, we're hopeful that we can negotiate fair pricing.

Daniel J. Schuller: Again. These are things that are fairly standard there are multiple manufacturers of those we will look for multiple bids and go with the best price I mean, that's really our objective here is to always put in the appropriate equipment at the appropriate price.

Daniel J. Schuller: For the protection of our customers capitalize on our economies of scale I mean, obviously, you're going to be a big player in the purchases and I do think Brian where we're at so much susceptible would be on on the resin or on the.

Daniel J. Schuller: Our carbon because it's going to be ongoing purchases.

But we're hopeful that we can negotiate fair pricing.

Ryan Michael Connors: Okay, I appreciate all the detail there. My other one was, you know, Chris, you mentioned, as this reform process plays out for Act 12, you mentioned that, you know, potential sellers have been kind of standing still, and I'm a little surprised. Curious why it wouldn't be the opposite. Why if I'm a city and I feel like there's going to be a cap on valuations, why wouldn't I be rushing to sort of get my APA signed before that happens, because presumably there'll be some grandfathering in of deals that have been signed.

Speaker Change: Yeah, Okay, no I appreciate that all of the detail there.

Speaker Change: My other one was Chris you mentioned so is this reform process plays out for <unk> 12.

Ryan Michael Connors: So can you discuss, like, why is that not the case? Why is there not sort of a rush to get things done and sit on your hands and wait for a cap to be put in from a seller standpoint? Doesn't seem to make sense. I think the reality is, even

Brian: You mentioned that potential sellers have been kind of standing still and I'm, a little surprised I'm curious why it wouldn't be the opposite why pharma city and I feel like there's going to be.

Brian: Cap put on valuations why I wouldn't be rushing to sort of get my apa's signed before that happens because presumably there'll be some grandfather again of deals that have been been signed so.

Brian: Can you discuss like why is that not the case why is there not sort of a rush to get things done and then sit on your hands and wait for a cap to be put in from a seller standpoint doesn't seem to make sense.

Christopher H. Franklin: I think the reality is even if there's a grandfathering, that's, you know, part of the language that's out there. Just the base reality is here: these things are ending up in court. And so, you know, even if it's grandfathered and the commission was okay with it, and the consumer advocate then challenges it, as they have in some cases for us and, you know, some of our peers. We ended up tied up in court, and we won.

Brian: I think the reality is even if theres a grandfathering that is as you know.

Brian: Part of the language that's out there.

Just the base reality is here these things are ending up in court and so even if it's grandfathered and the commission was okay with it.

Brian: Consumer advocate then.

Brian: Challenges it.

Brian: And in some cases for us and some of our peers.

Brian: We ended up being tied up in court and we won.

Christopher H. Franklin: I think we're tired of it, investors are tired of it. We want to get deals that we can transact on and actually close. And so that's the important work with this C motion, and it's the clarity of how do we get to close, what is an affirmative public benefit, and what's not challengeable in court. And I just think that as municipalities look at it, and we do too at this point, they should take a little bit of a wait and see attitude.

Brian: We're tired of it and investors are tired of it we want to get deals that we can transaction actually transact nationally to close and so.

Brian: That's the important work with the sea motion.

Brian: It's the clarity how do we get to close what is affirmative public benefit and and what's not challenging both in court and I, just think that municipals look at it and we do too.

Brian: At this point.

Brian: If we think that even if they're grandfathered probably they're going to end up tied up in court and an appeal and everything else.

Brian: <unk>.

We can take a little bit of a wait and see attitude.

Ryan Michael Connors: That's a great point. It makes total sense when you put it that way.

Brian: Yes.

Speaker Change: That's that's a great point it makes total sense and when you put it that way.

Speaker Change: And then lastly.

Christopher H. Franklin: Just on the PFAS thing, you know, I remember you talk about treatment or testing, rather, and the fact that not all these systems have been tested. I remember visiting Bryn Mawr, the brand new Bryn Mawr, you know, kind of labs when it was constructed a few years ago. And one of the things that the tour talked about was how that facility could do testing for not only European stuff but for municipalities and so forth. I mean, is that going to be a commercial opportunity that would be meaningful if a lot of these systems just have to get samples tested, or is that just kind of immaterial? Yeah, I mean it.

Speaker Change: Just on the P fast thing.

Speaker Change: I remember you talking about treatment or testing rather than the fact that that's not the only systems have been tested I remember visiting the Bryn Mawr, the brand new Bryn Mawr kind of labs. When it was constructed I guess few years ago and one of the things that were talked about was how that that facility can do testing for now.

Speaker Change: Only for Europe stuff, but for municipalities and so forth I mean is that going to be a commercial opportunity that would be meaningful if a lot of these systems just have to get samples tested or is that just kind of immaterial.

Christopher H. Franklin: Yeah, I mean, you raise a good point. We are still the only state-certified utility lab that can test PFAS in the state of Pennsylvania now, so there is an opportunity there. Now, having said that, you know, we want to get ourselves situated where we're in full compliance within the five-year period, so there's substantial testing running through the lab before we would add another call shift. We would want to exploit that opportunity a little bit, but I'm not saying that we're not, Brian. I'm just saying that at this point, we're really focused on full compliance at Essential Utilities, and then we'll look for opportunities beyond that, but you're thinking about it the right way. Yeah. Okay. Thanks for your time.

Speaker Change: Yes.

Speaker Change: It could be a good point, we are still the only state certified utility lab.

Speaker Change: SP plus and the state of Pennsylvania now so.

Speaker Change: There is there is opportunity there now having said that we.

Speaker Change: We want to get ourselves situated where we are in a position that working for compliance within the five year period. So there is substantial testing running through their lab before we would add another call it shift.

Speaker Change: We would want to explore opportunity a little bit, but I'm, not saying that we're not.

Ryan I'm, just saying that at this point, we're really focused on full compliance.

Speaker Change: At essential utilities, and then we'll look for opportunities beyond but you're thinking about it the right way.

Speaker Change: Okay.

Speaker Change: Thanks for your time.

Speaker Change: Alright take care.

Ryan Michael Connors: Thank you very much, Mr. Connors. Ladies and gentlemen, once again, if you have any questions, please do press star 1 at this time. We'll now move to Gregg Orrill calling from UBS. Please go ahead, sir. Thank you, Gregg.

Speaker Change: Thank you ladies.

Speaker Change: Ladies and gentlemen, once again, if you have any questions. Please do press star one at this time, we'll now go to Greg Oro, calling from UBS. Please go ahead Sir.

Speaker Change: Hey, Greg Yeah, Hi, Thank you.

Gregg Gillander Orrill: Hey, do you have any.

Gregg Gillander Orrill: Any thing to report on the Dell Cora purchase agreement.

Operator: Oh, Gregg, we couldn't go on one call without a Delcourt question. I'm great, of course, but yeah, you know.

Gregg Gillander Orrill: Oh, Gregg we couldn't go one call without El Corte question.

Gregg Gillander Orrill: Of course, but.

Gregg Gillander Orrill: Yes.

Gregg Gillander Orrill: I guess one bit of good news, I guess you could position it as good news, so we were due to be in court on May 8th, and this was in the Commonwealth State Court, and they were going to hear the argument from the county, which essentially is appealing the decision of the lower county court that said that the asset purchase agreement was valid and enforceable. And so the oral argument was canceled, and the judges said that they were going to make the decision based on the filed briefs.

Gregg Gillander Orrill: We I.

Speaker Change: I guess one bit of good news and I guess, you could even positioning to good news. So we were we are due to be in court on may eight.

Speaker Change: <unk>.

Speaker Change: And this was in the Commonwealth State Court.

Speaker Change: And they were going to hear the argument from the county.

Speaker Change: We just said essentially is appealing the decision of the lower the County Court. It said that the asset purchase agreement is valid and enforceable and so.

Speaker Change: That's that.

Speaker Change: Where argument was canceled.

Speaker Change: The judges said that they were going to make the decision based on final briefs.

Gregg Gillander Orrill: Now typically, that's good news; we won't know until the decision is out, but I think the aspect of pining is actually probably helpful here too because we're told that often the judge's decision comes a little bit more quickly when they're not digesting oral arguments and they're just focused on the briefs that are already filed because, obviously, they've read them already. And so we take that as a little bit of a vote there for optimism. That would be a nice addition.

Speaker Change: Typically that's good news.

Speaker Change: We won't know until the decision is out but.

Speaker Change: Think.

Speaker Change: The aspect of timing actually it's probably helpful here too because as we've told you.

Speaker Change: Often the judge's decision comes a little bit more quickly when they're where they're not digesting oral arguments and they're just focused on the briefs that have already been filed because obviously read them already and so we take that as a.

Speaker Change: A little bit of.

Speaker Change: A vote there an optimism that.

Speaker Change: That would be a nice.

Christopher H. Franklin: And, you know, in Delaware County, where this Delcor facility exists, they raised taxes last year, and there's talk about raising taxes again this year. We've taken that as an opportunity to reengage with elected officials in the county and just to remind them that there are significant proceeds associated with closing this transaction. And might they consider, you know, reengaging in a settlement discussion and then letting the need for a tax increase go? So I would say that that discussion is ongoing.

The addition.

Speaker Change: In Delaware County, they were just <unk> exist.

Speaker Change: It raised the taxes last year and there is talk about raising taxes again. This year, we've taken that as an opportunity to reengage with elected officials and accounting.

Just to remind them that there are significant proceeds associated with closing this transaction and might they consider.

Speaker Change: Re engaging on a settlement discussion.

Speaker Change: And then letting the need for a tax increase go so I would say that that discussion is ongoing.

Christopher H. Franklin: So there's always something going on at Delcora. But remember that the key gating factor here is we have a stay on the process by a federal bankruptcy court judge that is not associated with the transaction itself but the bankruptcy of the city of Chester, where some of the assets of Delcora lie. So we're still waiting for action on that, but we continue activity in the background.

Speaker Change: Always something happening on Dell quora, but remember that the key gating factor here is we have a we have a stay on the process by a federal bankruptcy court judge that is not associated with the transaction itself, but the bankruptcy of the city of Chester, where some of the assets of Dell core alive. So we.

Speaker Change: We're still waiting for action on that but we continue activity in the background.

Okay I appreciate the update.

Operator: Thank you very much, Mr. Orrill. Ladies and gentlemen, we don't appear to have any further questions, but I turn the call back over to Mr. Chris Franklin for any additional or closing remarks. Thank you.

The takeaways from this.

Speaker Change: Sure.

Ladies and gentlemen, the we don't appear to have any further questions. So I'll turn the call back over to Mr. Chris Franklin for any additional or closing remarks. Thank you.

Christopher H. Franklin: All right. Thanks, folks, for joining us. And, as always, Brian, Dan, and the team stand ready to answer your follow-up questions, should you have any. Thanks for joining us today.

Speaker Change: Yes.

Christopher H. Franklin: Alright, thanks folks for joining us and as always.

Speaker Change: Brian.

Christopher H. Franklin: The team stands ready to answer your follow up questions should you have any thank you for joining us today and have a great weekend.

Operator: Thank you very much. Ladies and gentlemen, that will conclude today's presentation. Thank you for your attendance. You may now disconnect. Have a good day, and goodbye.

Speaker Change: Thank you very much ladies and gentlemen that will conclude today's presentation. We thank you for your attendance you may all disconnect have a good day and goodbye.