Q1 2024 American Electric Power Co Inc Earnings Call
Abby: Good morning, ladies and gentlemen, and thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Electric Power First Quarter 2024 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.
Good morning, ladies and gentlemen, and thank you for standing by my name is Abby and I will be your conference operator today.
Abby: At this time I would like to welcome everyone to the American Electric power first quarter 2024 earnings Conference call.
Abby: All lines have been placed on mute to prevent any background noise and after the Speakers' remarks, there will be a question and answer session.
Abby: And after the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star key followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you, and I would now like to turn the conference over to Darcy Reese, Vice President of Investor Relations. You may begin.
Abby: If you would like to ask a question during that time simply press the star key followed by the number one on your telephone keypad.
Abby: If you would like to withdraw your question Press Star one a second time.
Abby: Thank you and I would now like to turn the conference over to Darcy Reese Vice President of Investor Relations you may begin.
Darcy Reese: Thank you, Abby. Good morning, everyone, and welcome to the first quarter 2024 earnings call for American Electric Power. We appreciate you taking the time today to join us.
Darcy Reese: Thank you Abby good morning, everyone and welcome to the first quarter 2024 earnings call for American Electric power. We appreciate your taking time today to join US on our earnings release presentation slides and related financial information are available on our website at AEP Dot com today, we will be making forward looking statements. During the call. There are many factors that may cause future.
Darcy Reese: Our earnings release, presentation slides, and related financial information are available on our website at aep.com. Today, we will be making forward-looking statements during the call. There are many factors that may cause future results to differ materially from these statements. Please refer to our SEC filings for a discussion of these factors. Joining me this morning for opening remarks are Ben Fowke, our President and Interim Chief Executive Officer, Chuck Zebula, our Executive Vice President and Chief Financial Officer, and Peggy Simmons, our Executive Vice President of Utilities. We will take your questions following their remarks. I will now turn the call over to Ben.
Darcy Reese: <unk> to differ materially from these statements. Please refer to our SEC filings for a discussion of these factors. Joining me. This morning for opening remarks are Ben folk are president and interim Chief Executive Officer, Chuck the boiler, our executive Vice President and Chief Financial Officer, and Peggy Simmons, Our executive Vice President of utilities, we will take your questions following that.
Darcy Reese: Our remarks, I will now turn the call over to Ben.
Benjamin Fowke: Well, good morning, and welcome to American Electric Power's first quarter 2024 earnings call. Shortly, Peggy will give a regulatory update, followed by Chuck, who will provide a more detailed financial review.
Benjamin Fowke: Well good morning, and welcome to American Electric Power's first quarter 2024 earnings call.
Peggy Simmons: Shortly Peggy will give a regulatory update followed by Chuck who'll provide more detailed financial review.
Benjamin Fowke: A summary of our first quarter 2024 business highlights can be found on slide six of today's presentation. Beginning with AEP's financial results, today we announced first quarter 2024 operating earnings of $1.27 per share, a $0.16 increase over one year ago. We're also reaffirming AEP's 2024 full-year operating earnings guidance of $5.53 to $5.73 and the long-term earnings growth rate of 6 to 7 percent. I'm pleased to note we achieved a 14.2% FFO to debt ratio this quarter, which is within our stated range.
Peggy Simmons: A summary of our first quarter 2020 for business highlights can be found on slide six of todays presentation.
Benjamin Fowke: Beginning with Aep's financial results today, we announced first quarter 2020 for operating earnings of $1 27 per share a 16% increase over one year ago.
Benjamin Fowke: We're also reaffirming aep's 2020 for full year operating earnings guidance of $5 53 to.
Benjamin Fowke: The $5 73.
Benjamin Fowke: And the long term earnings growth rate of 6% to 7% I.
Benjamin Fowke: I am pleased to note, we achieved a 14, 2% <unk> to debt ratio this quarter, which is within our stated range.
Benjamin Fowke: Let me assure you that AEP's direction and strategy remain on track as this team is fully engaged, energized, and working well together to enhance the customer experience and investor value. I've reviewed AEP's financial targets, and I have total confidence in the plan's achievability.
Benjamin Fowke: Let me assure you that aep's direction and strategy remain on track as this team is fully engaged energized and working well together to enhance the customer experience and investor value.
Benjamin Fowke: I've reviewed aep's financial targets and I have total confidence in the plans achieve ability.
Benjamin Fowke: It's hard to believe it's been just two months since I stepped into the role of Interim CEO, and it has been a busy and productive 60 days. I've had the opportunity to meet with many different stakeholders, including elected officials, regulators, community leaders, customers, investors, and, of course, the team right here at AEP. All of these meetings have been very useful in helping shape the initiatives I will discuss shortly.
Speaker Change: It's hard to believe it's been just two months since I stepped into the role of interim CEO and it has been a busy and productive 60 days I've had the opportunity to meet with many different stakeholders, including elected officials regulators community leaders customers of investors and of course the team right here at AEP.
Speaker Change: All of these meetings have been very useful in helping shape the initiatives I will discuss shortly.
Benjamin Fowke: Before I dive into other business, I want to give you a brief update on the search for a permanent CEO. The process is well underway, and I am certain, based on the talent pool that we're looking at, that we will find the right person to lead AEP. As I mentioned when we first talked at the end of February, the search will probably take between 6 to 12 months.
Speaker Change: Before I dive into other business I wanted to give you a brief update on the search for a permanent CEO.
Benjamin Fowke: The process is well underway and I am certain based on the talent pool that we're looking at that we will find the right person to lead AEP.
Benjamin Fowke: As I mentioned when we first talked at the end of February the search will probably take between six to 12 months, we will take the time necessary to find the best candidate and we're committed to keeping you informed.
Benjamin Fowke: We will take the time necessary to find the best candidate, and we're committed to keeping you informed. So, across the AEP system, I see the need to increase capital spend in the future, including incremental investment related to commercial load growth from data centers and resiliency spend. Specific to load growth, the amount of service requests is truly staggering and ranges between 10 to 15 gigawatts of incremental load by the end of the decade, in addition to many, many more gigawatts from hundreds of inquiries.
Benjamin Fowke: So across the AEP system I see the need to increase capital spend in the future, including incremental investment related to commercial low growth from data centers and resiliency spend.
Benjamin Fowke: Specific to low growth the amount of service request is truly staggering and ranges between 10 to 15 gigawatts of incremental load by the end of the decade. In addition to many many more gigawatts from hundreds of inquiries there.
Benjamin Fowke: The key to capturing this commercial and industrial growth is to work with parties to make sure the commitments are real and secure, the tariffs and contracts are fair to all customers, and growth is self-funded, and, of course, that the load can be met. A couple of great examples of new commercial commitments can be evidenced by last week's announcements from both Amazon Web Services and Google to build large data centers in INM's Northern Indiana Service Territory. At AEP, we have the largest transmission system in the United States with a high-voltage backbone in the Midwest.
Benjamin Fowke: The key to capturing this commercial and industrial growth is to work with parties to make sure. The commitments are real unsecured the tariffs and contracts are fair to all customers and growth is self funded and of course that the load can be met.
Benjamin Fowke: A couple of great examples of new commercial commitments can be evidenced by last week's announcements.
Benjamin Fowke: Announcements from both Amazon Web services, and Google to build large data centers and items, Northern Indiana service territory.
Benjamin Fowke: At ADP, we have the largest transmission system in the United States with a high voltage backbone in the Midwest. We expect more transmission investment possibility is driven by this data set of growth specifically in substations and customer connections.
Benjamin Fowke: We expect more transmission investment possibilities driven by this data center growth, specifically in substations and customer connections. As a side note, I'd like to call attention to AP's commercial load in the first quarter of 2024, which grew at 10.5% over the first quarter of last year. In addition, we will file our system resiliency plan in Texas no later than the third quarter of this year, related to legislation passed in 2023, including investments related to hardening and modernizing the grid, expanding vegetation management, and, of course, wildfire mitigation. Clearly, a strong balance sheet is critical as we look to fund potential increased capital expenditures.
Benjamin Fowke: As a side note I'd like to call attention to a piece of commercial load in the first quarter of 2024, which grew at 10, 5% over the first quarter of last year.
Benjamin Fowke: In addition, we will find out file our system resiliency plan in Texas, No later than the third quarter of this year related to legislation passed in 2023, including investment related to hardening and moderate modernizing the grid expanding vegetation management and of course wildfire mitigation.
Benjamin Fowke: Clearly a strong balance sheet is critical as we look to fund potential increased capital spend.
Benjamin Fowke: And I believe the incremental growth equity needed to fund smart capital is positive. That said, we are open to equity alternatives through portfolio optimization, looking at opportunities where price meets execution, while at the same time staying focused on our efforts to achieve constructive regulatory outcomes. On a similar note, I'd now like to provide a brief update on the sales of our AEP Energy Retail and AEP On-Site Distributed Resources business, both of which are included in the generation and marketing segment.
Benjamin Fowke: And I believe incremental growth equity needed to fund smart capital is a positive thing.
Benjamin Fowke: That said, we are open to equity alternatives through portfolio optimization looking at opportunities where price meets execution, while at the same time staying focused on our efforts to achieve constructive regulatory outcomes.
Benjamin Fowke: On a similar note I'd now like to provide a brief update on our sales of our AEP energy retail and AEP onsite distributed resources businesses, both of which are included in the generation and marketing segment.
Benjamin Fowke: We are working through the final phases of the process and expect to conclude that process by our second quarter earnings call. Now, let's move on to last week's newly published federal EPA rules on greenhouse gas standards, coal combustion residuals, or CCR, and affluent limitation guidelines, or ELG. Although our team is still reviewing the rules, we will likely pursue legal challenges while working with others, including our states, who are aligned with AEP's commitment to provide customers with reliable and affordable energy. These new regulations, in some cases, require the use of unproven technologies, are extremely expensive, and establish unreasonable compliance schedules.
Benjamin Fowke: We are working through final phases of the process and expect to conclude that process by our second quarter earnings call.
Benjamin Fowke: Now, let's move on to last week's newly published federal EPA rules on greenhouse gas standards coal combustion residuals or CCR effluent limitation guidelines or elg.
Benjamin Fowke: Although our team is still reviewing the rules, we will likely pursue legal challenges, while working with others, including our states who are aligned with <unk> commitment to provide customers with reliable and affordable energy.
Benjamin Fowke: New regular regulations in some cases require the use of unproven technologies are extremely expensive and established unreasonable compliance schedules.
Benjamin Fowke: We are at a time when our nation needs to add dispatchable generation to support grid reliability and growth, and these rules have the potential to not only prematurely accelerate plant closures but also discourage new dispatchable generation from being built. Now turning to labor management, we announced a voluntary severance program earlier this month, taking effect July 1st. We expect this initiative will save labor costs of approximately $100 million and will assist us in managing our costs to better serve our customers, allow us to redeploy resources locally in a regulated footprint, and finally mitigate impacts from inflationary pressures and interest rates.
Benjamin Fowke: We are at a time when our nation needs to add dispatch will generation to support grid reliability and growth and these rules have the potential to not only prematurely accelerate plant closures, but also discourage new dispatch of coal generation from being built.
Benjamin Fowke: Now turning to Labor management, we announced the voluntary severance program earlier this month, taking effect July one.
Benjamin Fowke: We expect this initiative will save labor cost of approximately $100 million.
Benjamin Fowke: And we will assist us in managing our costs to better serve our customers allow us to redeploy resources locally in our regulated footprint and finally mitigate impacts from inflationary pressures in interest rates.
Benjamin Fowke: Of course, we will do so in a way that is fair and equitable to all of our valued employees. As I mentioned, it's been a busy and productive couple of months. I have confidence in our strategy and team. I'm excited about the opportunities ahead to drive growth and create value for our investors. We look forward to providing you with even more positive updates as we move forward in the year, further solidifying stakeholder confidence in our financial targets.
Benjamin Fowke: Of course, we will do so in a way that is fair and equitable to all of our valued employees.
Benjamin Fowke: So as I mentioned, it's been a busy and productive couple of months I have confidence in our strategy team I'm excited about the opportunities ahead to drive growth and create value for our investors. We look forward to providing you even more positive updates as we move forward in the year further solidifying stakeholder confidence in our finance.
Benjamin Fowke: Targets.
Benjamin Fowke: Before we turn to Peggy for additional updates, know that I am aware of AEP's regulatory successes and some of our challenges. We continue to review plans to strengthen our regulatory compacts as we work through the past and are ready for the future.
Benjamin Fowke: Before we turn to Peggy for additional updates no that I am aware of Aep's regulatory successes and some of our challenges. We continue to review plans to strengthen our regulatory compacts as we worked through the past and are ready for the future Peggy.
Peggy Simmons: Peggy?
Peggy Simmons: Thanks, Ben, and good morning, everyone. Now, let's go to an update on several of AAP's ongoing regulatory initiatives. We are currently focused on investing more in people resources at the local level, particularly in regulatory and legislative areas. The utility industry is changing, and now more than ever, it's critical that we enhance our engagement in this dynamic environment. More details of our related regulatory activity can be found in the appendix beginning on slide 23. AAP's operating company leaders are running the business and engaging with our state regulators. Higher costs for materials and the frequency of cases shine a spotlight on affordability, and customer bills are top of mind for us.
Peggy Simmons: Ben and good morning, everyone now, let's go to an update on several of AEP ongoing regulatory initiatives. We are currently focused on investing more in people resources at the local level, particularly in regulatory and legislative areas. The.
Peggy Simmons: The utility industry is changing and more now than ever it's critical that we enhance our engagement in this dynamic environment.
Benjamin Fowke: More details of our related regulatory activity can be found in the appendix beginning on slide 23.
Benjamin Fowke: Aep's operating company leaders are running the business and engaged with our state regulators higher costs for material and frequency of cases shines a spotlight on affordability and customer bills are top of mind for us.
Peggy Simmons: We are focused on advancing interests in each of the states we operate to achieve outcomes that are good for our customers, our communities, and our investors. This includes economic development work across our service territory, which brings jobs and creates headroom from a larger load perspective. We continue to reduce our authorized versus actual ROE gap. We're doing the work, and our ROE improved slightly this quarter to 8.9 percent. Even considering this measure, it is depressed by approximately 30 basis points from mild weather conditions.
Benjamin Fowke: We are focused on advancing interest in each of the states. We operate to achieve outcomes that are good for our customers our community and our investors.
Benjamin Fowke: This includes economic development work across our service territory, which brings jobs and creates headroom from larger load perspective.
Benjamin Fowke: We continue to reduce our authorized versus actual ROE gap, we're doing the work and our ROE improved slightly this quarter to eight 9% even considering this measure is depressed by approximately 30 basis points from mild weather conditions.
Peggy Simmons: Staying with the recent positive developments, I'm pleased to report AP Ohio's Electric Security Plan 5 settlement, obtained last September, was approved by the Commission earlier this month. This ESP covers a four-year term from June 2024 through May 2028. As we shared previously, we filed new base cases in Indiana and Michigan in the latter half of 2023. In Indiana, we reached settlement, which was filed in December, and we expect a commission decision by June of this year.
Benjamin Fowke: Staying with the recent positive development I am pleased to report AEP, Ohio Electric Security plan five settlement obtained last summer excuse me last September was approved by the commission earlier this month.
Benjamin Fowke: This ESP covers a four year term of June 2024 through May 2028.
Benjamin Fowke: As we shared previously we filed new base cases in Indiana, and Michigan in the latter half of 2023.
Benjamin Fowke: In Indiana, we reached settlement, which was filed in December and we expect a commission decision by June of this year.
Peggy Simmons: In Michigan, we completed the procedural schedule and expect a ruling in that case in July. The team has been busy in 2024 so far, filing an Oklahoma-based case for PSO in January and an AAP Texas case in February. Last month, we filed the APCO Virginia biennial rate review required by statute from legislative changes attained in 2023. Earlier this month, in Swebco's Arkansas and Louisiana jurisdictions, we filed the annual formula rate
Benjamin Fowke: In Michigan, we completed the procedural schedule and expect a ruling in that case in July.
Benjamin Fowke: The team has been busy in 2024, so far.
Benjamin Fowke: Filing in Oklahoma base case for <unk> in January and in AEP, Texas case in February last month, we filed the Atco, Virginia Biennial rate review required by statute from legislative changes attained in 2023.
Benjamin Fowke: Earlier, this month and flip flop code, Arkansas, and Louisiana jurisdiction, we filed the annual Formula rate plan.
Peggy Simmons: Now on to the regulated resource edition. We continue to advance our five-year, $9.4 billion regulated renewable capital plan and have a total of $6.6 billion approved by state commissions at APCO, I&M, PSO, and SWEPCO. As you can see, we're making great progress.
Benjamin Fowke: Now onto the regulated resource additions we.
Benjamin Fowke: We continue to advance our five year $9 4 billion regulated renewable capital plan and have a total of $6 6 billion approved by state commissions at Opco.
Benjamin Fowke: <unk> <unk> and <unk> as you can see we're making great progress.
Peggy Simmons: We are also considering the renewables market, local input, as well as evolving reserve margins and margins and resource adequacy as we meet the needs of our customers. We are advancing toward our fleet transformation targets, which are aligned with and supported by our integrated resource plan. We have pending requests for proposals for a diverse set of additional generation resources at I&M, Kentucky Power, PSO, and SWEPCO, with more to come from other operating companies, including APCO.
Benjamin Fowke: We are also considering the renewables market local input as well as evolving reserve margin and margins and resource adequacy as we meet the needs of our customers.
Benjamin Fowke: We are advancing toward our fleet transformation targets, which are aligned with and supported by our integrated resource plan.
Benjamin Fowke: We have pending request for proposals for a diverse set of additional generation resources at <unk>, Kentucky power DSO and <unk> with more to come from other operating companies, including Atco.
Peggy Simmons: These generation investments are an integral part of our broader capital program, which is 100% focused on regulated assets. Looking ahead, we know there is more work to be done as we advance our regulatory strategies in 2024 to achieve a forecasted regulated ROE of 9.1 percent. We look forward to continuing to engage constructively with our regulators and strengthening relationships. With that, I'll pass it over to Chuck to walk through the performance drivers and details supporting our finance.
Benjamin Fowke: These generation investments are an integral part of our broader capital program, which is 100% focused on regulated asset.
Benjamin Fowke: Looking ahead, we know there's more work to be done as we advance our regulatory strategies in 2024 to achieve our forecasted regulated Roe of nine 1%.
Benjamin Fowke: We look forward to continuing to engage constructively with our regulators and strengthening relationship with that I'll pass it over to Chuck to walk through the performance drivers in detail supporting our financials.
Charles Zebula: Thanks, Peggy, and good morning, everyone. Today, I'll review our financial results for the first quarter, build on Ben's comments about our service territory load, and finish with commentary on our financial metrics and portfolio management activities. Let's go to slide seven, which shows the comparison of gap to operating earnings for the quarter. Gap earnings for the first quarter were $1.91 per share compared to $0.77 per share last year.
Charles Zebula: Thanks, Peggy and good morning, everyone. Today I'll review, our financial results for the first quarter build on Ben's comments about our service territory load and finished with commentary on our financial metrics and portfolio management activities.
Charles Zebula: Let's go to slide seven.
Charles Zebula: Which shows the comparison of GAAP to operating earnings for the quarter.
Benjamin Fowke: GAAP earnings for the first quarter were $1 91 per share compared to 77 per share last year.
Charles Zebula: There is a detailed reconciliation of gap to operating earnings on page 13 of the presentation today. One significant item I want to highlight in our Gap to Operating Earnings Walk is the one-time positive adjustment of $260 million, primarily for the remeasurement of a regulatory liability for excess deferred taxes due to guidance recently received from the IRS related to the standalone treatment of taxes for ratemaking purposes. Let's walk through our quarterly operating earnings performance by segment on slide 8.
Benjamin Fowke: There is a detailed reconciliation of GAAP to operating earnings on page 13 of the presentation today.
Benjamin Fowke: One significant item I want to highlight in our GAAP to operating earnings walk is the one time positive adjustment of $260 million, primarily for the Remeasurement of a regulatory liability for excess deferred taxes due to guidance recently received from the IRS.
Benjamin Fowke: <unk> related to the Standalone treatment of taxes for ratemaking purposes.
Benjamin Fowke: Let's walk through our quarterly operating earnings performance by segment on slide eight.
Charles Zebula: Operating earnings for the first quarter totaled $1.27 per share, or $670 million, compared to $1.11 per share, or $572 million in 2023. This results in a quarter over quarter increase of $98 million, or $0.16 per share. Operating earnings for vertically integrated utilities were $0.57 per share, up $0.05.
Benjamin Fowke: Operating earnings for the first quarter totaled $1 27 per share or $670 million compared to $1 11 per share or $572 million in 2023. This.
Benjamin Fowke: This results in a quarter over quarter increase of $98 million or <unk> 16 per share operating.
Benjamin Fowke: Earnings for vertically integrated utilities were <unk> 57 per share up five.
Charles Zebula: Positive drivers included rate changes across multiple jurisdictions with the PSO base case and the Virginia proceeding being the most significant, favorable year-over-year changes in weather and income tax. However, these items were partially offset by higher interest, higher depreciation, and other taxes. The transmission and distribution utility segment earned $0.29 per share, up $0.05 compared to last year. Positive drivers in this segment included rate changes, primarily from the distribution cost recovery factor in Texas and the distribution investment rider in Ohio, increased transmission revenue, higher normalized retail load, and favorable year-over-year changes in weather.
Benjamin Fowke: Positive drivers included rate changes across multiple jurisdiction with the PSL base case, and the Virginia preceding being the most significant favor.
Benjamin Fowke: Favorable year over year changes in weather and income taxes.
Benjamin Fowke: These items were partially offset by higher interest higher depreciation and other taxes.
Benjamin Fowke: The transmission and distribution utilities segment earned <unk> 29 per share of <unk> <unk> compared to last year.
Benjamin Fowke: Positive drivers in this segment included rate changes, primarily from the distribution cost recovery factor in Texas, and the distribution investment rider and Ohio increased transmission revenue higher normalized retail load.
Benjamin Fowke: Favorable year over year changes in weather.
Charles Zebula: These items were partially offset by higher depreciation, other taxes, and interest. Please note that although weather was a positive variance quarter over quarter in both the vertically integrated and T&D segments, weather for the first quarter of 2024 was very mild. Compared to normal weather, our estimate of the variance is roughly $80 million unfavorable, which is about 12 cents per share.
Benjamin Fowke: These items were partially offset by higher depreciation and other taxes and interest.
Benjamin Fowke: Note that although weather was a positive variance quarter over quarter and both the vertically integrated and T&D segments, whether for the first quarter 2024 was very mild compared to normal weather. Our estimate of the variance is roughly $80 million unfavorable which is about <unk>.
Benjamin Fowke: <unk> per share.
Charles Zebula: The AEP Transmission Holdco segment contributed $0.40 per share, up $0.05 compared to last year, primarily driven by investment growth and favorable income tax. Generation and Marketing produced $0.12 per share, up $0.03 from last year. Positive drivers included higher generation and retail margins, along with favorable interest expense. However, these items were partially offset by lower wholesale margins, higher income taxes, and lower distributed and renewable generation results compared to the prior year, largely due to the sale of the universal scale assets in the third quarter of 2023. Finally, corporate and other income was down two cents compared to the prior year, primarily driven by higher interest costs.
Benjamin Fowke: The AEP transmission Holdco segment contributed <unk> 40 per share up <unk> <unk> compared to last year, primarily driven by investment growth and favorable income taxes.
Benjamin Fowke: Generation <unk> marketing produced <unk> <unk> per share up <unk> <unk> from last year.
Benjamin Fowke: Positive drivers included higher generation and retail margins along with favorable interest expense.
Benjamin Fowke: These items were partially offset by lower wholesale margins higher income taxes, and lower distributed and renewable generation results compared to the prior year largely due to the sale of the universal scale assets in the third quarter of 2023.
Benjamin Fowke: Finally, corporate and other was down <unk> <unk> compared to the prior year, primarily driven by higher interest cost.
Charles Zebula: Moving to slide nine, overall retail load continues to accelerate ahead of expectations. This is due to our ongoing success in economic development, as well as the rapidly increasing demand from the many data centers finding a home within our footprint. Weather normalized retail growth load grew 2.9% in the first quarter, highlighted by a remarkable 10.5% increase in our commercial load, which is where the data center load is classified. This is a trend we expect to continue over the next several years as the growth of AI and other technologies boost the need for additional data storage and processing. Driving the demand are existing and new projects that have ramped up more quickly than first anticipated, especially with some of our largest customers in Ohio and Texas, as we refine our forecast for the remainder of this year and next.
Benjamin Fowke: Moving to slide nine overall retail load continues to accelerate ahead of expectations.
Benjamin Fowke: This is due to our ongoing success and economic development as well as the rapidly increasing demand from the many data centers finding a home within our footprint.
Benjamin Fowke: Weather normalized retail load grew two 9% in the first quarter highlighted by a remarkable 10, 5% increase in our commercial load, which is where the data center load is classified.
Benjamin Fowke: This is a trend we expect to continue over the next several years as the growth of AI and other technologies boost the need for additional data storage and processing.
Benjamin Fowke: Driving the demand our existing and new projects that have ramped up more quickly than first anticipated, especially with some of our largest customers in Ohio and Texas.
Benjamin Fowke: As we refine our forecast for the remainder of this year and next expect that those projections to move higher to reflect the rapidly evolving situation as Ben had outlined in his comments.
Charles Zebula: I expect those projections to move higher to reflect the rapidly evolving situation, as Ben had outlined in his. Outside of data centers, our economic development efforts are also helping us maintain growth in industrial load, despite softness in manufacturing activity nationally. Industrial load grew 0.4% in the first quarter, roughly in line with expectations for the full year. This was driven primarily by increased activity amongst our plastics, tire, and paper manufacturing customers.
Benjamin Fowke: Side of data centers, our economic development efforts are also helping us maintain growth in industrial load despite softness in manufacturing activity nationally.
Benjamin Fowke: Industrial load grew 4% in the first quarter roughly in line with expectations for the full year.
Benjamin Fowke: This was driven primarily by increased activity amongst our plastics tire and paper manufacturing customers.
Charles Zebula: We are keeping a close eye on our industrial customers, given the higher interest rates for longer environment. However, the number of large new loads anticipated to come online in the next two years provides us with confidence that demand will remain steady in the face of any economic challenges for our existing customers. The main takeaway on load, however, is the significant growth in large customers that we continue to bring online across our footprint.
Benjamin Fowke: We are keeping a close eye on our industrial customers given the higher interest rates for a longer environment. However, the number of large new loads anticipated to come online in the next two years provides us with confidence that demand will remain steady in the face of any economic.
Benjamin Fowke: Challenges for our existing customers.
Benjamin Fowke: The main takeaway on load. However is the significant growth in large customers that we continue to bring online across our footprint as I mentioned earlier beyond the lookout for higher load projections as we provide additional guidance later this year.
Charles Zebula: As I mentioned earlier, be on the lookout for higher load projections as we provide additional guidance later this year. Now, let's move on to slide 10 to discuss the company's capitalization and liquidity position. In the top left table, you can see the FFO2 debt metric stands at 14.2% for the 12 months ended March 31st, which is a 100 basis point increase from year end and in alignment with what I discussed on the last two earnings calls.
Benjamin Fowke: Let's move on to slide 10 to discuss the company's capitalization and liquidity position.
Benjamin Fowke: In the top left table you can see the <unk> to debt metric stands at 14, 2% for the 12 months ended March 31.
Benjamin Fowke: Which is a 100 basis point increase from year end and in alignment with what I discussed on our last two earnings calls our debt to cap decreased slightly from year end and was at 62, 8% at quarter end.
Charles Zebula: Our debt-to-capital decreased slightly from year-end and was at 62.8% at quarter-end. In the lower left part of this slide, you can see our liquidity summary, which remains strong at $3.4 billion and is supported by $6 billion in credit facilities that were recently renewed and upsized by $1 billion to support our liquidity. Lastly, on the qualified pension front, our funding status has remained relatively flat since the end of the year and ended the first quarter at 100.6%. Let's go to slide 11 for a wrap-up of today's message.
Benjamin Fowke: In the lower left part of this slide you can see our liquidity summary, which remains strong at $3 4 billion and is supported by 6 billion in credit facilities that were recently renewed an upsized by $1 billion to support our liquidity.
Benjamin Fowke: Lastly on the qualified pension front our funding status has remained relatively flat since the end of the year and ended the first quarter at 106%.
Benjamin Fowke: Let's go to slide 11 for a wrap up of today's message. The first quarter has provided a solid foundation for the rest of the year with a <unk> increase in earnings per share compared to the first quarter of last year. Despite the mild weather conditions that we experienced this winter.
Charles Zebula: The first quarter has provided a solid foundation for the rest of the year, with a 16 percent increase in earnings per share compared to the first quarter of last year, despite the mild weather conditions that we experienced this winter. We remain focused on achieving our objectives, which include improving the financial performance of our utility. Offsetting cost increases due to inflation to keep electricity affordable and embracing the opportunity to bring economic development to our communities by serving large loads.
Benjamin Fowke: <unk>.
Benjamin Fowke: We remain focused on achieving our objective which include improving the financial performance of our utilities offsetting cost increases due to inflation to keep electricity affordable and embracing the opportunity to bring economic development to our communities by serving.
Benjamin Fowke: Large loads.
Charles Zebula: As an update, we successfully closed on the sale of our New Mexico solar assets for $107 million in cash in February. And we continue to work through the final phases of the AAP Energy and AAP On-Site Partners processes. We expect to announce the results of the process by our second quarter earnings call. Our first quarter results give us the confidence to reaffirm our operating earnings guidance range of $553 to $573 per share.
Benjamin Fowke: As an update we successfully closed on the sale of our new Mexico solar assets for $107 million in cash proceeds in February and we continue to work through the final phases of the AEP energy and AEP onsite partners process, we expect to announce the results of the.
Benjamin Fowke: Assess by our second quarter earnings call.
Benjamin Fowke: Our first quarter results give us the confidence to reaffirm our operating earnings guidance range of $5 53 to $5 73 per share.
Charles Zebula: We remain committed to our long-term growth rate of 6 to 7 percent and FFO to debt solidly in the 14 to 15 percent range. We appreciate your investment and interest in American Electric Power. Operator, can you open the call so we can address your question? Thank you.
Benjamin Fowke: We remain committed to our long term growth rate of 6% to 7% and <unk> debt solidly in the 14% to 15% range.
Benjamin Fowke: We appreciate your investment and interest in American electric power.
Speaker Change: Operator can you open the call. So we can address your questions. Thank you.
Abby: Thank you, and we will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the conversation. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it is star one if you would like to join the queue. And your first question comes from Jeremy Tonet with J.P. Morgan. Your line is open.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: And we will now begin the question and answer session.
Speaker Change: You have dialed in and then we'd like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.
Speaker Change: If you would like to withdraw your question simply press Star one again.
Speaker Change: <unk>.
Speaker Change: If you are called upon to ask your question and our listening via speaker phone on their device. Please pickup your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: Again, it is star one if you would like to join the queue.
Speaker Change: And your first question comes from Jeremy Tonet with J P. Morgan Your line is open.
Jeremy Bryan Tonet: I just wanted to peel in maybe a little bit more on the data center points that you laid out there. And just wondering, we see a lot of forecasts out there on the timeline of how quick some want to come to market, and we're trying to figure out how that matches against the system's ability to provide the power there in the network. And just wondering how you see those two aligning, what does that mean for AP over time versus plan? And just how do you think about, I guess, structuring rates in the right way so that other ratepayers don't bear more of a burden?
Jeremy Bryan Tonet: Hi, good morning.
Jeremy Bryan Tonet: Good morning.
Jeremy Bryan Tonet: Just wanted to Peel in maybe a little bit more on the data center point that you laid out there and just wondering we see a lot of forecasts out there on the timeline of.
Jeremy Bryan Tonet: How quick.
Jeremy Bryan Tonet: Want to come to market.
Jeremy Bryan Tonet: And we're trying to figure out how that matches against the system's ability to provide the power. They are in the connects.
Jeremy Bryan Tonet: Just wondering.
Jeremy Bryan Tonet: How you see those two aligning what.
Jeremy Bryan Tonet: What does that mean for AEP over time versus plan.
Jeremy Bryan Tonet: And just how do you think about I guess structuring rates in the right way so that other ratepayers.
Jeremy Bryan Tonet: Are more of a burden.
Benjamin Fowke: Yeah, those are all really good questions, Jeremy, and our team has done a tremendous amount of work thinking this through. I mean, first of all, you know, I like to say here at AP that we're really wired for growth, and we, as you know, we've been making significant transmission investments over the years, and that's going to allow us, I think, to accommodate this first wave of growth we're seeing from data centers, and so, you know, in our next five years, you will see that load coming on, and you'll see some of the capital spend, the incremental capital spend to support it.
Speaker Change: Yes, those are all really good questions, Jeremy and our team has done a tremendous amount of work.
Speaker Change: Thinking this through I mean first of all I'd like to say here at AEP that really wired for growth.
Speaker Change: You know, we've been making significant transmission investments over the years and that's going to allow us I think to accommodate.
Speaker Change: This first wave of growth, we're seeing from data centers and.
Speaker Change: So on FERC and our next five years, you will see that load coming on and Youll see some of the capital spend the incremental capital spend to support it.
Benjamin Fowke: You know, as we get out further in the decade, I think it's going to be a function of additional transmission and perhaps even generation that'll need to get built to meet it all, but I'm, you know, this team's working really hard. We have a great economic development team, a very supportive business community in the states, and, you know, we've done a lot of groundwork to put ourselves in this position. And you're also seeing, Jeremy, data center load ramp up at the same time, so that's a natural trend, too.
Speaker Change: As we get out further in the decade, I think it's going to be a function of.
Speaker Change: And additional transmission and perhaps even generation that will need to get built to meet at all but.
Speaker Change: This team is working really hard we have a great economic development team.
Speaker Change: Very supportive business community in states and.
Speaker Change: We've done a lot of groundwork to put ourselves in this position and Youre also seeing Jeremy.
Speaker Change: Data center load ramp up at the same time, so that's a natural trend to now to your latter question. This is one I've been keenly focused on.
Benjamin Fowke: Now, to your latter question, this is one I've been keenly focused on, and the good news is we believe that the load growth that will be coming on will be fair to all customers and, in fact, will help us keep our rates affordable across all of our We are developing new tariffs. Tariffs that require longer-term commitments, tariffs that require the data centers to deliver on the load expectations that we're building for, obviously, credit quality, etc.
Speaker Change: And the good news is we believe that the load growth that'll be coming on will be fair to all customers.
Speaker Change: And in fact will help us keep our rates affordable across all of our jurisdictions.
Speaker Change: We are developing new tariffs.
Speaker Change: Tariffs that require <unk>.
Speaker Change: Longer term commitments.
Speaker Change: Tariffs that require the data centers to.
Speaker Change: Deliver on.
Speaker Change: The lowered expectations that we're building for obviously credit quality et cetera, and when you do the math.
Benjamin Fowke: And when you do the math, that load growth then benefits all customers. And that's what I'm really excited about, because that was really important to myself and the team, that we keep rates affordable, and this growth will do just that.
Speaker Change: That low growth then benefits all customers and that's what I'm really excited about because that was really important to myself and the team that we do keep rates affordable and.
Speaker Change: This growth will do just that.
Jeremy Bryan Tonet: Got it. That's helpful. Thanks. And maybe just to dive in a little bit more, as we think about data center load sensitivity, should we be thinking about that more along the lines of commercial sensitivity or industrial sensitivity, as provided in your guidance when we think about demand outstripping the forecast? Go ahead.
Speaker Change: Got it that's helpful. Thanks, and maybe just to dive in a little bit more as we think about.
Speaker Change: Data center load sensitivity should we be thinking.
Speaker Change: More along the lines of commercial sensitivity or industrial sensitivity as provided in your guidance. If we think about demand outstripping the forecast.
Charles Zebula: Go ahead, Jim. Yeah, so I would think of Jeremy more like an industrial customer and that sensitivity there.
Speaker Change: Go ahead, Jim Yes, so I would think of it Jeremy more like an industrial customer.
Jeremy Bryan Tonet: Got it. That's helpful. Thanks for that. And then just the last one, if I could, is it relates to the...
Jim: And that that sensitivity there.
Speaker Change: Got it that's all.
Speaker Change: Thanks for that and then just the last one if I could as it relates to the.
Jeremy Bryan Tonet: External CEO Search. Just wondering, has anything changed with regard to, I guess, the characteristics that are in focus for a candidate? How is the pool building at this point? Just wondering, you know, if there's any other color that you might be able to share on how the process is going.
Jim: External CEO search just wondering.
Jim: Has anything changed with regards to I guess the characteristics that are in focus for kandi.
Jim: How is the pool building at this point.
Jim: Just wondering if theres any other color that you might be able to share on how the process is going.
Benjamin Fowke: Well, I can just tell you that the attributes and the qualities we're looking for remain unchanged from what I described on the first quarter call. We are well underway now. We've got some really good candidates, impressive candidates. It takes time to sort them all out, and there's other, obviously, things that we need to look at. But the timetable that I outlined for you just a couple months ago was 6 to 12, so truncate two months off of that, and it's 4 to 10. But that said, we'll take as much time as we need to get the right person in place. I'm very confident that we'll do just that.
Speaker Change: Well I can just tell you that.
Jim: Attributes and the quality. So we're looking for remain unchanged from what I described on the.
Jim: First quarter call, we are well under the underway now we've got some really good candidates pressed with candidates. It takes time to sort it all out and.
Jim: Theres other obviously things that we need to look at but.
Jim: The timetable that I outlined for you just a couple months ago was six to 12, so truncate two months off of that.
Jim: <unk> hundred 10.
Jim: And but that said.
Jim: We will take as much time, as we need to get the right person in place in <unk>.
Jim: Very confident that we'll do just that.
Jeremy Bryan Tonet: Got it, and actually, if I could just speak one last one on overall corporate strategy. Could you talk more about where things stand for AP decentralization efforts and looking to kind of more closely aligned P&L to the end decision maker at the local levels? Just wondering how that's progressing.
Speaker Change: Got it and actually if I could just sneak one last one and just wondering on overall corporate strategy could you talk more about where things stand for AP Decentralisation efforts.
Speaker Change: Looking to kind of more closely align P&L to the end decision maker at the local levels just wondering how that's progressing.
Benjamin Fowke: Well, I think this is a focus of ours, and I'm going to turn it over to Peggy. She has developed a detailed plan, but one of the things we want to do is put those local resources in our communities. No, that's the right thing to do, just talking to stakeholders. Now, you know, it costs money to do that, which is one of the reasons why we, you know, did the voluntary severance, so we can free up some of those resources going forward to make those critical investments in our communities.
Speaker Change: Well I think it's.
Speaker Change: This is a focus of ours and one of them and I'm going to turn it over to Peggy.
Peggy Simmons: She is developing developed a detailed plan but.
Peggy Simmons: One of the things we want to do is put those local resources.
Peggy Simmons:
Peggy Simmons: And our communities and.
Peggy Simmons: Hi.
Peggy Simmons: No. That's the right thing to do just talking to stakeholders.
Peggy Simmons: It costs money to do that which is one of the reasons why we did the voluntary severance. So we can free up some of those resources going forward to to make those critical investments in our communities I don't know if you want to add anything then I think you pretty much covered we have worked with the team and looking at how we can get some more of those enhance the resources from a regulatory and <unk>.
Peggy Simmons: Peggy, I don't know if you want to add anything. Ben, I think you've pretty much covered it. We have worked with the team and are looking at how we can get some more of those, enhance the resources from a regulatory and legislative perspective, and have more boots on the ground. As I mentioned in the opening statements, there's a lot of change in our industry, and having folks out there having these ongoing conversations is really important. So we're working through that process, and there will be more to come on that topic.
Peggy Simmons: Slater perspective, having more boots on the ground as I mentioned in the opening statements. There are a lot of change in our industry and having folks out there have any ongoing conversations is really important so we're working through that process and more to come on that topic.
Jeremy Bryan Tonet: Got it. Thank you for that. I'll leave it there.
Speaker Change: Got it thank you for that I'll leave it there.
Benjamin Fowke: Alright, thank you. Have a good day.
Speaker Change: Alright, Thank you and good day.
Steve Fleischman: And we will take our next question from Steve Fleischman with Wolf Research. Your line is open.
Speaker Change: And we'll take our next question from Steve Fleishman with Wolfe Research. Your line is open.
Steve Fleischman: Hey, good morning, Ben. Thanks.
Steve Fleishman: Hey, Steve.
Steve Fleishman: Hey, good morning. Thanks.
Steve Fleischman: So just You know, in Ohio and Texas, you're a wires company, but in Indiana, where these last two announcements were made, I think you've got generation two. And are you, so in some of these recent deals that were announced, you know, the past week, are you supplying the generation as well? And is there going to be a generation? Need, and Indiana related to those.
Speaker Change: Just.
Speaker Change: Yeah.
Speaker Change: In Ohio, and Texas, your wires company, but in Indiana, where these last two announcements.
Speaker Change: I think you've got generation two and are you. So in some of these recent deals announced in the past week are you supplying the generation.
Speaker Change: As well and is there going to be a generation.
Speaker Change: Need in Indiana related to those.
Steve Fleischman: Well, we do have RFPs outstanding. Peggy, do you want to take that? Yeah, we do have RFPs outstanding.
Speaker Change: While we do have Rfps outstanding Peggy do you want to take that yes, we do have rfps outstanding.
Peggy Simmons: Yeah, we do have RFPs outstanding in INM. But to answer your question, yes, in vertically integrated projects like Indiana, we will have to serve the generation component. And we are working with those large loads that are coming to us on what that would look like. And we are also focused on, as Ben mentioned earlier, redefining and looking at our tariffs as well. So that will be part of our strategy.
Peggy Simmons: But to answer your question yesterday in our vertically integrated like Indiana, we will have to serve the generation component.
Peggy Simmons: And we are working with those large loads that are coming to us on what that would look like and we are also focused on.
Peggy Simmons: As Ben mentioned earlier.
Peggy Simmons: Redefining and looking at our tariffs as well so that will be part of our strategy.
Peggy Simmons: Okay.
Peggy Simmons: And and just.
Steve Fleischman: And just to kind of clarify back to the initial question, so the transmission grid is built up and has capacity to take on these customers near term. But is there still more capital needed? Or is it more of this after this? Five years.
Speaker Change: To kind of clarify back to the initial question. So the transmission grid is built up.
Peggy Simmons: <unk> capacity to take on.
Peggy Simmons: These customers near term, but is there still even near term is there more <unk>.
Peggy Simmons: Capital needed or is it more of this after this.
Benjamin Fowke: No, Steve, there'll be more capital needed, but I don't think it'll be those massive 765 lines that can take a long time to get built. We believe the team has done a lot of work on how we could accommodate that load within our footprint, working with PGM, and others.
Peggy Simmons: Five years.
Speaker Change: No, Steve there'll be there'll be more capital need it.
Speaker Change: But I don't think it'll be those.
Speaker Change: Lastly, 765 lines that can take a long time to get built.
Speaker Change: We believe the team is team has done a lot of work on how we could accommodate that load within our footprint working with <unk>.
Steve Fleischman: And so, yeah, no, there'll be more spend, but it'll be manageable and doable to a point. Okay, and then on the FFO to debt, you're in the target range. Now, is there anything about that? That's kind of like, are you in there for good? Do you think now? Is there any timing reason, or not? You're in that and expect to be in it throughout the year. They were in the range.
Speaker Change: PJM and others and so.
Speaker Change: Yes, I know.
Speaker Change: There'll be more spend but it'll be manageable and doable and to the point.
Speaker Change: Okay.
Speaker Change: And then on the <unk> to debt you are in the target range. Now is there anything about that that's kind of are you in there for good do you think now is there any was there any timing reason or is it.
Speaker Change: You are in that and expect to be in it.
Speaker Change: Throughout the year.
Benjamin Fowke: We're in that range. We expect to be in that range now. You know, our forecast that we review internally and with the agencies shows us that we are in that range. So that's the plan, and we plan to defend that.
Speaker Change: We were in the range, we expect to be in that range now.
Speaker Change: Our forecast that we review internally and with the agencies.
Speaker Change: So us being in that range. So that's.
Speaker Change: Thats the plan and we plan to affirm that.
Speaker Change: Okay.
Speaker Change: Great. Thank you.
Shahriar Pourreza: We will take our next question from Shahriar Pourreza of Guggenheim Partners. Your line is open.
Speaker Change: We will take our next question from Shar <unk> with Guggenheim Partners. Your line is open.
Jamieson Ward: Good morning, Shahriar. Hi, it's actually Jamieson Ward on for Shahriar. He's on the road and regrets that he's not able to join you today, but we have a couple of questions for you here.
Shar: Good morning, Charlie Hi, Hi.
Shar: Hi, it's actually James moored on for Shar.
James: On the road and regrets.
James: That is not able to join you today, but we have a couple of questions for you here.
Jamieson Ward: The first was just on the annual customer bill increase; the pace there, you reduced it to 3% increases per year through 2028, which is great to see. Does that already take into account the anticipated infrastructure investment needed to support any future data center growth? Or could we see that number revised as well?
James: Yeah.
James: First was just on the annual customer Bill increase the pace there you've reduced to 3% increases per year through 2028, which is great to see.
James: Does that already take into account the anticipated infrastructure investment needed to support any future data center growth.
Speaker Change: Or could we see that number be revised as well.
Benjamin Fowke: Well, I mean, the answer is this, the incremental stuff we're talking about, and the incremental transmission investment, it's not included in that, but it's not going to drive that from three to four. If anything, it should, it should, it should level off, keep it level, and perhaps even drop it a bit. Obviously, there are other things that go into that, other inflationary factors, supply chain pressures, et cetera. But as I mentioned, we've done a lot of work making sure that the incremental investment that we would need to make over the forecast five-year timeframe is actually at a level that is accretive, if you will, to keeping customer rates affordable. And, you know, that's why I'm very confident of moving forward.
James: Well.
James: The answer is the incremental stuff, we're talking about and the incremental transmission investment. It's not included in that but it's not going to be it's not going to drive that from three to four if anything it should it should it should level keep it level, perhaps even drop it a bit.
James: There's other things that go into that other inflationary factor supply chain pressures et cetera, but as I mentioned this we've done a lot of work, making sure that the incremental investment that we would need to make over the forecast five year timeframe.
James: Is actually at a level that is accretive.
James: If you will to keeping customer rates affordable.
James: And that's why I'm very confident of moving forward with it.
Jamieson Ward: Got it. Terrific. Thank you for that.
Speaker Change: Got it terrific. Thank you for that.
Benjamin Fowke: And then expanding on Jeremy's earlier question, how are you approaching some of the more unique issues presented by data centers? For example, those who want to be behind the meter but still want to have an emergency tariff with the utility or data centers, which, as you mentioned, want to socialize the cost of interconnection through all rate classes but which may not have a major economic impact. If we can just get a bit more detail on that,
Speaker Change: And then expanding on Jeremy's earlier question.
Speaker Change: How are you approaching some of the more unique issues presented by data centers. For example, those who want to be behind the meter, but still want to have an emergency tariff with the utility or datacenters, which as you mentioned one of socialize the cost of interconnection rate classes, but which may not have a major economic impact.
Speaker Change: If we can just get a bit more detail there.
Benjamin Fowke: I want to turn it over to Peggy in a second, but listen, it's got to be fair to all customers now. This is a big deal. It's an exciting big deal, but growth needs to be as close to self-funded as possible. That's what I think we'll get with these tariffs and some of the other analysis that we're looking at.
Speaker Change: Turning it over to Bill I'm going to turn it over to peg in a second but listen it's got to be fair to all customers now Okay. I mean this is this.
Bill: This is a big deal, it's an exciting big deal.
Speaker Change: But.
Bill: Growth needs to be as close to self funded as possible and and that's what I think we will get with these tariffs and some of the other analysis that we're looking at.
Peggy Simmons: Yeah, so what I would add to Ben's comment there is that in our tariffs, we are looking at what minimum demands are. Most of the large loads are wanting to be connected to the system, but if they want some form of self-generation, we are asking so that we understand that, and we can include that as part of our planning. So we're trying to get all of that information on the front end so that we can appropriately serve customers and make sure that it's fair and balanced for all customers, and everyone's paying their fair share, as Ben has mentioned.
Bill: Yes, so what I would add to Ben's comment there is that on our tariffs. We're looking at what minimum demands are most of the large loads are are wanting to be connected to the system, but if they want some form of self generation. We are asking so that we understand that and we can include that.
Bill: As part of our planning so we're trying to get all of that information on the front end. So that we can appropriately serve customers and make sure that it's fair and balanced for all customers and everyone's paying their fair share.
Peggy Simmons: Yeah, I mean, the worst-case scenario, and this is what, to Peggy's point, we're preventing, is the load doesn't show up consistent with how we built the infrastructure. And when it does show up, it doesn't use, you know, especially on a peak basis, the energy that we built for.
Bill: As mentioned I mean worst case scenario and this is what to peg as point what were preventing is the the loan.
Bill: It doesn't show up consistent with how we built the infrastructure and when it does show up.
Bill: Doesn't use.
Bill: Especially on a peak basis, the energy that that we built for so and but if you control that which by the way I think we also have to be very careful to these large large loads or don't.
Benjamin Fowke: So, but if you can control that, which, by the way, I think we also have to be very careful, too, that, you know, these large, large loads don't jeopardize grid reliability. And so these tariffs address that, too. If you do all those things, then growth is good for all, and that's what we're pushing for.
Bill: <unk> good reliability and so these tariffs address that too.
Bill: If you do all those things then growth is good for all and that's what we're pushing for.
Jamieson Ward: Thank you, that's very clear. And then on the updated load growth forecast coming later this year, should we assume that at a high level, that means EEI, or are there particular IRPs or other proceedings that we should maybe watch out for, which could come, you know, say before EEI, that would be driving that?
Speaker Change: Thank you that's very clear and then on.
Speaker Change: The updated load growth forecast coming later this year should we assume that at a high level that means cei or are there particular, IRB or other proceedings that maybe watch out for which.
Speaker Change: Could come.
Speaker Change: Before.
Speaker Change: That would be driving that.
Benjamin Fowke: I mean, I think the big update will come, well, I understand EI in the third quarter earnings call right on the same, but it would either come in the third quarter or EI unless, you know, there might be drips and drabs that get released before that, but that's what we're planning to do right now.
Speaker Change: I mean, I think the big update will come.
Speaker Change: I understand <unk> and a third quarter's earnings call right on the same but.
Speaker Change: Either come on in the third quarter or <unk>, unless there might be drips, and drabs get released before that but that's what we're planning to do right now.
Jamieson Ward: Understood. Gotcha.
Speaker Change: Understood got Ya.
Jamieson Ward: My last question from us is just on asset sales. In the deck, you mentioned remaining committed to simplifying the business in the immediate term with a focus on continued execution of the sale processes. So how should we think about the potential for any additional sales announcements following the conclusion in the second quarter of the current process for the retail and distributed resources business?
Speaker Change: Last question from Us.
Speaker Change: Just on asset sales in the deck, you mentioned remaining committed to simplifying the business in the immediate term with a focus on continued execution of the sale processes. So how should we think about the potential for any additional sales announcements following the conclusion in the second quarter of the current process for the retail.
Speaker Change: And distributed resources businesses.
Benjamin Fowke: It would be on an opportunistic basis. We're always open to ideas. Chuck and I and the team have been around for a while.
Speaker Change: And then just it would be it would be on an opportunistic basis, we're going to look at we're always open to ideas.
Speaker Change: Chuck and I and the team had been around a while we know that sometimes good ideas sound. Good on paper, but you can't execute on them.
Benjamin Fowke: We know that sometimes good ideas sound good on paper, but you can't execute on them. So we do filter those through the regulatory screening process, as you can imagine. And then we like our assets, so obviously the price has to be right. But what you're not going to see from us is a strategic review too and the kind of things that we're looking at. If the opportunity arises and we can execute on it, then you'll hear about it.
Speaker Change: So we do filter that through the regulatory screening process as you can imagine and then we.
Speaker Change: Like our assets. So obviously the price has to be right, but whats you are not going to see from US is like the strategic review too.
Speaker Change: And print.
Speaker Change: Pre announced the kinds of things that we're looking at if the opportunity arises and we can execute on it then you will hear about it but in the meantime, our status quo plan I think it's a pretty darn good plan and to the extent that we issue equity to fund additional incremental capex is going to be smart capex good growth for all.
Benjamin Fowke: But in the meantime, our status quo plan is a pretty darn good plan. And to the extent that we issue equity to fund additional incremental CapEx, this is going to be smart CapEx, good growth for all. And we'll keep our balance sheet strong, which I think is so important as you enter, I think, an extended era of higher CapEx.
Speaker Change: And we will keep our balance sheet strong, which I think is so important as you enter I think an extended area era of.
Jamieson Ward: Perfect. Thank you very much. It is much appreciated.
Speaker Change: Higher capex growth.
Speaker Change: Perfect. Thank you very much much appreciate it.
Speaker Change: Welcome.
Carly Davenport: And we will take our next question from Carly Davenport with Goldman Sachs. Your line is open.
Speaker Change: Yeah.
Speaker Change: And we will take our next question from Carly Davenport with Goldman Sachs. Your line is open.
Carly Davenport: Hey, good morning. Thanks for taking the questions today. Maybe just going back to the balance sheet, as you think about your financing needs for the remainder of the year, can you just give us an update there and if you expect to see any impacts relative to your initial plan with the move that we've seen in rates here to date?
Carly Davenport: Hey, good morning, Thanks for taking the questions today.
Carly Davenport: Maybe just going back to the balance sheet as you think about your financing needs for the remainder of the year can you just give us an update there and if you expect to see any impact relative to your initial plan with the move that we've seen in rates year to date.
Charles Zebula: Yeah, hi, Carly. The plan that we laid out at EDI is still intact. Other than, I think, at EDI, we had the West Virginia securitization in the plan. And that has been replaced by a Kentucky securitization, you know, nearly of equal amounts. So the plan is still intact. There have been no significant changes. And, and we're proceeding on that plan.
Speaker Change: Yeah, Hi currently.
Carly Davenport: Our plan that we laid out at Adi is still intact.
Carly Davenport: Other than I think any we.
Carly Davenport: We had the west Virginia securitization in the plan and that.
Carly Davenport: Has been replaced by a Kentucky securitization nearly of Av.
Carly Davenport: Equal amounts. So the plan is still intact. There has been no significant changes.
Carly Davenport: And we're proceeding on that plan.
Carly Davenport: Great, thank you for that. And then just going back to the commercial load and data centers, as you think about, you know, that and the expectation to raise it later this year, could you just talk a little bit about sort of what surprised the plant to the upside so materially thus far? Is it just sort of more success on the economic development front or more consumption from existing customers?
Speaker Change: Great. Thank you for that and then just going back to the commercial load and data centers as you think about that and the expectation to raise later this year could you just talk a little bit about sort of what surprised the plan to the upside so materially thus far or is it just sort of more success on the economic development front or more.
Carly Davenport: Consumption from existing customers just any color on that would be helpful.
Benjamin Fowke: Just any color on that would be helpful. Yeah, Carly is
Speaker Change: Yeah, clearly, it's just mainly.
Carly Davenport: Yeah, Carly, mainly the ramp rates of the customers that have hooked up have come on more rapidly than we anticipated. And so that's why you're seeing those big bumps in commercial load as we go through the quarters here.
Speaker Change: The ramp rates of the customers that are hooked up.
Speaker Change: Have come on more rapidly than we anticipated.
Speaker Change: And so that's why you're seeing those big bumps in commercial load as we go through the quarters here.
Nicholas Campanella: And we will take our next question from Nicholas Campanella with Barclays. Your line is open.
Speaker Change: Great. Thank you.
Speaker Change: We will take our next question from Nicholas Campanella with Barclays. Your line is open.
Nicholas Campanella: Hey, everyone. Thanks for taking my questions today. I'll try to keep it to two. So, I guess, you know, you talked about this need for growth equity. Can you just elaborate on when you anticipate needing that? And what part of this five-year plan would that be? And then, I guess just you do have seven to 800 million, I think a year in your financing walk here of equity needs.
Nicholas Campanella: Hey, everyone. Thanks for taking my questions today, I will try to keep it to two.
Nicholas Campanella: So I guess you talked about this.
Nicholas Campanella: Need for growth equity can you just elaborate when you anticipate needing that.
Nicholas Campanella: What part of this five year plan would that be and then I guess just.
Nicholas Campanella: You do have $7 million to $800 million I think a year and your and your financing walk here of equity needs.
Nicholas Campanella: You know, why not do something sooner than later to kind of knock that out if the opportunity presents itself? I know you don't want to pre-announce and go into strategic review round two, like you said, but maybe you can kind of give us some additional thoughts on how you're thinking about that.
Speaker Change: Why not do something sooner than later to kind of knock that out.
Speaker Change: If the opportunity presents itself I know you don't want to pre announce and go into the strategic review round to like you said, but maybe you can kind of give us some additional thoughts on how youre thinking about that.
Benjamin Fowke: Well, I'll turn it over to my esteemed colleague here, Chuck. No, Nick, it's a good question.
Speaker Change: I'll turn it over to my esteemed colleague here Chuck.
Charles Zebula: No Nick it's a good question I mean look as we.
Nicholas Campanella: I mean, look, as we said earlier, we're formulating, right, the changes to our plan and how, ultimately, how financing is going to affect that. You are right, we have, you know, $400 million in equity this year, followed by $800 million, you know, in equal amounts in the following two years. So I think the point that we, you know, I tried to make earlier on FFO to debt, look, we're going to defend our BBB credit, right, we're going to maintain a long, strong balance sheet.
Charles Zebula: Said earlier right, we're formulating right the changes to our plan and how how on ultimately right how financings going to affect that.
Charles Zebula: You are right, we have $400 million in equity this year.
Charles Zebula: Followed by $800 million in.
Charles Zebula: In equal amounts in the following two years, so I think the point that that.
Charles Zebula: I tried to make earlier on <unk> look we're going to defend our triple B credit right, we're going to maintain a strong balance sheet. So as we as we put out additional capital forecast I think you could assume that that strong balance sheet is going to remain intact. So just kind of wait for that.
Nicholas Campanella: So as we put out additional capital forecasts, I think you could assume, right, that that strong balance sheet is going to remain intact. So just kind of wait for that update on CapEx, and you should be able to figure that out, you know, pretty, pretty clearly.
Charles Zebula: Update on Capex, and you should be able to figure that out.
Charles Zebula: Pretty pretty clearly.
Charles Zebula: Okay, I appreciate that. And then, Chuck, I know, I know that, you know, whether a VIU is kind of a 10 cent drag versus normal, but you also have some of these tax items in there, as well, just on the tax item benefits. Is that, you know, normalizing from last year? Or is that one-time in nature as we kind of think about, you know, year over year into 2025?
Speaker Change: Okay I appreciate that and then.
Speaker Change: I know that whether <unk> is kind of a 10 cent drag versus normal but you also had some of these tax items in there as well just on the on the tax item benefits is that normalizing from last year or is that onetime in nature as we kind of think about.
Nicholas Campanella: Yeah, so Jeremy, about half of that will normalize throughout the year, and the other half, you know, is a one-time thing; things that happen in 23 that won't happen again in 24, so it's a trend. Okay, have a great day.
Speaker Change: Year over year in the 25.
Speaker Change: Yeah, so jeremy about half of that will normalize throughout the year and the other half.
Jeremy Bryan Tonet: As a onetime things that happen in 'twenty three that won't happen again in 'twenty four so it's a true increase.
Nicholas Campanella: Okay. Have a great day. Thanks.
Speaker Change: Okay have a great day.
Speaker Change: Thank you.
Durgesh Chopra: We will take our next question from <unk> Chopra with Evercore ISI. Your line is open.
Durgesh Chopra: We will take our next question from Durgesh Chopra with Evercore ISI. Your line is open.
Durgesh Chopra: Hey, good morning. Hey, good morning, Ben. Great, great talking to you. After a while now.
Charles Zebula: Okay.
Chopra: Hey, good morning.
Durgesh Chopra: Hey, good morning, Ben Great Great talking to you.
Durgesh Chopra: Hey, listen, just wanted to go back on your commentary, Ben, on portfolio optimization, and the new financing plan. Just to be clear, you know, the financing plan, the capex updates, the load board updates. Is that sort of should we think of that as a separate process, you know, and the CEO search? I'm just thinking about the two, and are those two, you know, independent processes that we should think about, or are they somehow tied? I'm thinking about the cadence of your updates, your new plan, and then the parallel CO surge.
Durgesh Chopra: After a while ago.
Speaker Change: Listen just.
Speaker Change: I wanted to go back.
Chopra: On your commentary been on portfolio optimization, new financing plan just to be clear.
Chopra: The financing plan, the capex updates that load growth updates.
Chopra: Is that sort of should we think of that as a separate process.
Chopra: And the CEO search.
Chopra: Im just thinking about the two and are those two independent processes that we should think about or are they somehow tied I would think about the cadence of your updates.
Chopra: New plan and then the battle of Seo search.
Benjamin Fowke: Oh, I mean, if I understand your question right, are we holding things back until the new CEO gets in place? Is that what you mean? No, no, I mean,
Speaker Change: Oh, I mean, if I understand your question right.
Speaker Change: We are holding things back until the new CEO gets in place is that what you is that what you mean.
Chopra: Yep.
Speaker Change: No no.
Durgesh Chopra: No, I mean, we typically, as you know, we typically update all our CapEx and financing plans and, you know, all those sorts of things at the time of EEI. And, you know, if there's something major in between, obviously, we give you updates. But we're not, no, I mean, this company's not in neutral. I mean, we really are moving forward. You know, this team is, you know; they share my belief that this growth is here.
Speaker Change: Right.
Speaker Change: No I mean, we typically.
Speaker Change: As you know, we typically update all our capex and financing plans and all those sorts of things.
Speaker Change: At the time of EI.
Speaker Change: And if there is something major in between obviously, we'll give you updates, but we're not no I mean I.
Speaker Change: This company is not in neutral I mean, we really were moving forward.
Speaker Change: This team is.
Speaker Change: They share my belief that this growth is here, we need to accommodate it we need to talk about it and we need to make sure. It is fair to all so we're really really focused on that focused on I think the strategy of putting more.
Durgesh Chopra: We need to accommodate it. We need to talk about it. And we need to make sure it's fair to all. So we're really, really focused on that, and focused, I think, on the strategy of putting more control at the local level and more resources at the local level. So, you know, and we just announced a voluntary severance. So we're not, we're not kind of just putting it in neutral and coasting until a permanent CEO gets in there. You know, I honestly think these are all, you know, no regret type decisions that, you know, the new CEO will ultimately benefit from. Did I answer your question?
Speaker Change: Control at the local level more resources at the local level. So.
Speaker Change: We just announced the voluntary severance so we're not we're not kind of just putting it in neutral and coast until the.
Speaker Change: A permanent CEO gets in there.
Speaker Change: I honestly think these are all no regret type decisions in that.
Speaker Change: The new CEO will ultimately benefit from but.
Speaker Change: Did I answer your question you did thank you very much that's exactly what I wanted to ask you in a.
Benjamin Fowke: You did. Thank you very much. That's exactly what I wanted to ask you, and a very clear response. Thank you.
Durgesh Chopra: And then, second question, Ben, again, like you mentioned, challenging the EPA proposed ruling. Maybe, can you share a little bit more color there? Is it the carbon capture technology that you were referring to? And then you mentioned the accelerated plant retirements, was that directed towards coal?
Speaker Change: Very clear response, thank you and then.
Speaker Change: Question, then again like you mentioned challenging b.
Speaker Change: The EPA proposed ruling maybe can you share a little bit more color. There is it the carbon capture technology that you were referring to and then you mentioned the accelerated.
Speaker Change: Plant retirements was that directed towards call just any color you can share there. Thank you.
Benjamin Fowke: Just any color you can share there would be great. Thank you.
Durgesh Chopra: Yeah, well, it's a great question, and again, I hearken back to Steve Fleischman's report that came out a couple months ago where he talked about our industry, which if you aggregate the market cap is somewhere around a half a trillion being responsible for this, we want to onshore data centers, artificial intelligence, reshoring, and manufacturing. And it's our industry that has to do it. And we're going to build all the transmission lines we possibly can. That's not easy to get built either.
Speaker Change: Yeah, well, it's a great question and again.
Speaker Change: I would just I harken back to Steve Fleishman report that came out a couple of months ago, where he talked about our industry, which if you aggregate market cap is somewhere around a half a trillion being responsible for this.
Speaker Change: Want to onshore data centers artificial intelligence, we shoring of manufacturing.
Speaker Change: And as our industry that has to do it.
Speaker Change: We're going to build all the transmission, we possibly can and that's not easy to get built either but we are going to have to plug into something and as you know my former role I'm a big advocate for renewable energy I think its great, particularly when its economic now some of that changes overtime and regionally, but to think that we don't need dispatch of coal generation.
Benjamin Fowke: But we are going to have to plug into something. And, you know, as you know, in my former role, I'm a big advocate for renewable energy. I think it's great, particularly when it's economical.
Benjamin Fowke: Now, some of that changes over time and regionally. But to think that we don't need dispatchable generation is, I mean, we need it. And I, you know, I'd love to see things like SMRs and other things develop, but they're not going to happen overnight. And in the meanwhile, we can't, we can't, we have to be willing to move forward realistically.
Speaker Change: I mean, it's.
Speaker Change: We need it and.
Speaker Change: Love to see things like <unk>, and other things develop but theyre not going to happen overnight and in the Meanwhile, we cant we cant we have to be willing to.
Benjamin Fowke: And yeah, it's not just the carbon capture rules. I mean, you know, there's, we're looking at all the other rules, the CCR rules, the ELG rules, which, by the way, we just spent a lot of money coming into compliance with that. And that was only a couple years ago. And now it's a completely different role, one which would require different technology. So, you know, it's, it's. Our industry has come so far in carbon reduction, and I think we're willing to do so much more, but it has to be with affordability, reliability, and resiliency in mind.
Speaker Change: Move forward realistically and yes, it's not just the carbon capture rules I mean, there's we're looking at all the other rules the CCR rules, the LG rules, which by the way. We just spent a lot of money coming into compliance on that and that was only a couple of years ago and now it's a completely different role ROHL, which would have required different technologies.
Speaker Change: <unk>.
Speaker Change: It's okay.
Speaker Change: Our industry has come so far and carbon reduction and I think we're willing to do so much more but it has to be with affordability reliability and resiliency in mind.
Benjamin Fowke: And I'm just, you know, I'm really passionate about that. And you never like to have to sue, but we're going to do what we have to do to defend our grid and our customers that use that grid every single day.
Speaker Change: And I'm, just I'm really passionate about that and.
Speaker Change: You would never like to have to sue, but we're going to do it we have to do to defend our grid and our customers that use their grid every single day.
Durgesh Chopra: That's great. I appreciate you giving me time today. Thank you again.
Speaker Change: That's great I appreciate your time today, Thank you again.
Speaker Change: Thank you.
Speaker Change: Yeah.
Andrew Weisel: And we will take our next question from Andrew Weisel with Scotiabank. Your line is open.
Speaker Change: And we will take our next question from Andrew Weisel with Scotiabank. Your line is open.
Andrew Weisel: Hi, good morning. Thank you. Excuse me.
Andrew Weisel: Good morning.
Andrew Weisel: Hi, good morning, Thank you.
Andrew Weisel: Two quick ones here, please. First, to elaborate on the commentary on load growth, Ben. I think you mentioned an incremental 10 to 15 gigawatts by the end of the decade. I assume that's across the entire portfolio. Can you talk a bit about the vertically integrated utilities? You have about 20 gigawatts identified through the current IRPs. My question is, how soon might we see more filings to include the new expected load, which is no doubt coming quickly?
Andrew Weisel: Excuse me two quick ones here. Please first to elaborate on the commentary on load growth. Then I think you mentioned, an incremental 10 to 15 gigawatts by the end of the decade I assume that's across the entire portfolio can.
Andrew Weisel: Can you talk about the vertically integrated utilities.
Andrew Weisel: About 20 Gigawatts identified due to current <unk>. My question is how soon might we see more filings to include the new expected load, which no doubt coming quickly.
Benjamin Fowke: Yeah, so when I look at those incremental loads, I mean, Ohio, within the PGM footprint, Ohio is the biggest driver of it, although, you know, Indiana is definitely getting its share, and I suspect we will have to do incremental RFPs to capture that load. I can't give you the exact timing of when that would be.
Speaker Change: Yeah, So when I look at those incremental loads, Ohio within the PJM footprint, Ohio is the biggest driver of it although Indiana is definitely getting its share.
Speaker Change: And I suspect, we will have to do incremental rfps to capture that load.
Speaker Change: I can't give you the exact timing of when that would be.
Peggy Simmons: We have, so Indiana will, we have an IRP that's coming up that's going to be later in November. But, so that will be part of the process as we start to look at how we accommodate some of this load as we start to see it come on as well. We'll be using those same types of processes.
Speaker Change: We haven't so Indiana will we have an IRB that's coming up that's going to be later in November, but so that will be part of the process as we start to look at how we accommodate some of this load as we start to see it come on as well we'll be using those.
Benjamin Fowke: You know, and maybe outside of data centers, if you look down at SPP, that's a very constrained region as it is right now. And they haven't seen a tremendous amount of data center growth today. But that doesn't mean they won't.
Speaker Change: Types of just.
Speaker Change: Just maybe outside of data centers, if you look down at SPP Thats, a very constrained region as it is right now.
Speaker Change: They haven't seen a tremendous amount of data center growth today that doesn't mean, they won't but in the meantime, we've got to make sure. We've got adequate load to serve the low that we do that we have.
Benjamin Fowke: But in the meantime, we've got to make sure we've got an adequate load to serve the load that we do know we have. In Ohio, you know, again, we don't have generation in Ohio. So, the incremental investment will be in transmission. You know, there's a lot of talk here in Ohio and among the business community at the state level: do, you know, regulated utilities need to be back in the generation game? You know, I don't know.
Speaker Change: In Ohio.
Speaker Change: Again, we don't have generation in Ohio, so that the incremental investment will be transmission.
Speaker Change: There's a lot of talk here in Ohio, and the business community and at the state level to regulated utilities need to be back in the generation game.
Speaker Change: I don't know I think honestly I think that would take legislation at least from our perspective, so that we'd be assured of good recovery and potentially any kind of stranded cost risk because.
Andrew Weisel: I think, honestly, I think that would require legislation, at least from our perspective, so that we'd be assured of good recovery and potentially any kind of stranded cost risk. Because we've seen that play out before. It doesn't mean we're not; we would be open to it. But it would probably require legislation. ERCOT, ERCOT, we don't own the generation. But we would obviously need to be building a lot of transmission and ultimately needing something to plug into.
Speaker Change: You've seen that play out before it doesn't mean, we're not we wouldn't be open to it but it would probably require legislation.
Speaker Change: In ERCOT.
Speaker Change: ERCOT, we don't own generation, but but we would obviously need to be building a lot of transmission and ultimately needing something to plug into.
Andrew Weisel: Okay, great. That's very helpful.
Speaker Change: Okay, Great. That's very helpful and one quick one on the voluntary separation program would there be any kind of meaningful onetime cash outflow associated with that and if so how would you finance it.
Benjamin Fowke: And one quick one on the voluntary separation program. Would there be any kind of meaningful one-time cash outflow associated with that? And if so, how would you finance it?
Benjamin Fowke: Yeah, I think the you know, so it would go into effect mid-year July 1st, and so these annual savings that we would see this year would just about offset the severance cost, and then, of course, then on an annualized basis, 25 and beyond would benefit from that. And again, this is about, this is about, yeah, okay, I'll just stop there.
Speaker Change: Yes, I think so it would go into effect mid year July one and and so these.
Speaker Change: The annual savings that we would see this year with just about offset.
Speaker Change: The severance cost and then of course, then on an annualized basis 25, and beyond would benefit from that.
Speaker Change: And again this is about this is about yes, okay I'll just stop there.
Andrew Weisel: All right, thank you. Thank you so much.
Speaker Change: Alright, thank you so much.
Ryan Levine: And we will take our next question from Ryan Levine with Citi. Your line is open.
Speaker Change: And we will take our next question from Ryan Levine with Citi. Your line is open.
Ryan Levine: Good morning.
Ryan Levine: On rate design for a data center load, what duration commitments and load ramps are you assuming or looking for to help protect residential customers? Any differences on race design between jurisdictions to call out? Any color is appreciated.
Ryan Levine: On rate design for data center load.
Ryan Levine: What duration commitments and load Graham.
Ryan Levine: Are you assuming are looking forward to help protect residential customers any differences on rate design between jurisdictions to call out any color is appreciated.
Peggy Simmons: So I'll take that. Thank you for the question. I mean, generally, we need to work, we should be building long-term assets. So we need some commitments that are longer in nature. So I mean, you would think somewhere around the 10 plus 15 plus year range, but we're working through that process now.
Ryan Levine: Yes, so I'll take that thank you for the question I mean generally we need.
Graham: We would have to be building long term asset. So we need some commitments that are longer in nature.
Speaker Change: So I would think somewhere around the 10, plus 15, plus year range, but we're working through that process now.
Ryan Levine: And then in the prepared remarks, you're signaling higher load and potential new investments in terms of funding those potential new investments in the back half or outside of plan. Any, you know, how are you thinking about what tools are most advantageous to execute on that potential?
Speaker Change: Now.
Speaker Change: Thank you and then in the prepared remarks, you are seemingly higher load and potential new investments.
Speaker Change: In terms of funding that potential new investments in the back half are outside of plan.
Speaker Change: Any.
Speaker Change: Are you thinking about what tools are most advantageous.
Speaker Change: To execute on that potential opportunity.
Charles Zebula: As Ben mentioned, we would consider everything, everything's on the table, but I think the underlying tenet is that we will defend our Triple B credit.
Speaker Change: As Ben mentioned, we would consider everything everything's on the table, but.
Speaker Change: I think the underlying tenant is that we will defend our triple B credit.
Ryan Levine: Okay, thanks for taking my questions.
Speaker Change: Okay. Thanks for taking my questions.
Paul Patterson: And we will take our final question from Paul Patterson with Glenrock Associates.
Speaker Change: We will take our final question from Paul Patterson with Glen Rock Associates. Your line is open.
Paul Patterson: Good morning, Paul. Good morning.
Paul Patterson: Good morning, Paul.
Paul Patterson: I wanted to circle back on the one-time gain associated with the PLR rulings that you got or the letters that you got. What's the ongoing impact of that? And could you just elaborate a little bit more on, I did read the 10Q and that section of it, but I just wanted to make sure I fully understood it.
Paul Patterson: Morning.
Paul Patterson: I wanted to circle back on the.
Paul Patterson: On the one time gain.
Paul Patterson: Associated with appeal or ruling that you got.
Paul Patterson: Letters that you got.
Paul Patterson:
Paul Patterson: What's the ongoing impact of that in and could you just elaborate a little bit more on <unk>.
Paul Patterson: Read the 10-Q.
Paul Patterson: That section of it but I just wanted to make sure I fully understood. It.
Charles Zebula: Yeah, so thanks for the question, Paul. So, stand-alone rate-making for tax purposes has really been on our radar for some time now. You know, it really kind of results from some of our affiliates today generate taxable income, and others generate, you know, tax losses, which has really kind of created an issue for us. And really, you know, kind of compounding that is, our significant capital program over the last five years, as well as bonus depreciation, has extended that dynamic. So we were, you know, concerned that if we did not address that, we might have a normalization issue.
Speaker Change: Yeah. So thanks for the question Paul.
Speaker Change: So thats standalone rate, making for tax purposes has really been on our radar for some time now.
Paul Patterson: It really kind of results from some of our affiliates today generate taxable income and others to generate tax losses, which is really kind of created the issue.
Paul Patterson: For us and really.
Paul Patterson: Compounding that is our significant capital program over the last five years as well as.
Paul Patterson: Bonus depreciation has extended that dynamic. So we were concerned that if we did not address that.
Paul Patterson: May have a normalization issue. So we ask the IRS for a private letter ruling.
Paul Patterson: So we ask, you know, the IRS for a private letter ruling. You know, interestingly, some of our jurisdictions support the standalone approach, either in legislation or in their own ratemaking. And other utilities have also endorsed and used the standalone approach as well.
Paul Patterson: Interestingly some of our jurisdictions support the standalone approach either in legislation or in their own ratemaking and other utilities also endorsed and use the standalone approach as well.
Charles Zebula: So we received the PLRs in the first quarter, and the PLRs really kind of boil down four key facts. You know, one is that the standalone NOL must be included in the rate base. The second, which addressed the gain in our adjustment from gap to operating, is that the NOL must be included in the calculation of excess ADIT, so that reduces the overall regulatory liability for excess ADIT, which, of course, was created due to tax reform, and then any adjustment to offset the NOL would constitute, you know, a normalization violation.
Paul Patterson: So we received the <unk> in the first quarter.
Paul Patterson: And in the <unk> is really kind of.
Paul Patterson: Boil down four key facts.
Paul Patterson: One is the Standalone NOL must be included in rate base.
Paul Patterson: The second which addressed the.
Paul Patterson: The gain.
Paul Patterson: In our adjustment from GAAP.
Paul Patterson: Two operating is that the NOL must be included in the calculation of excess Adi.
Paul Patterson: So that reduced the overall regulatory liability for excess.
Paul Patterson: Which of course was created due to tax reform.
Paul Patterson: Then any adjustment to offset the NOL would constitute.
Paul Patterson: A normalization violation.
Charles Zebula: So we took corrective action, and we're glad that we did, to avoid a normalization violation. And our plan now is to work with regulators to make the appropriate adjustments to rates so that we can include that going forward.
Speaker Change: So we took corrective action, we're glad that we did too.
Speaker Change: To avoid a normalization violation.
Speaker Change: And our plan now is to work with regulators to make the appropriate adjustments to rates. So.
Speaker Change: We can include that going forward.
Paul Patterson: Okay, so that should be positive going forward, assuming the regulators agree.
Paul Patterson: Okay, so that should be a positive going forward, assuming the regulators agree.
Charles Zebula: Once we're able to go through our jurisdictions and get it into rates, yes. And when I read the 10-Q, it said West Virginia was, they've agreed to the standalone approach, correct? In the past, they've been a little bit...
Paul Patterson: Once we're able to to go through our jurisdictions and get it into rates, yes, and when I read the 10-Q, It said West Virginia was was.
Paul Patterson: They have agreed to pay or agree to the Standalone approach correct.
Paul Patterson: Okay, and then, just with respect to transmission, FERC has some stuff coming out in a few weeks, and I was wondering if you had any idea about, if you know what I'm talking about, the planning and what have you, sort of long-awaited reforms. Do you guys have any sense as to what we might see there? And then, sort of a related question on grid enhancement technologies, how do you see those playing with your large transmission system? Just any thoughts you have with respect to that.
Paul Patterson: So that's been a little bit.
Speaker Change: Is that right.
Speaker Change: Yes, that's correct.
Speaker Change: And then.
Speaker Change: With respect to transmission.
Speaker Change: FERC.
Speaker Change: Some stuff coming out.
Speaker Change: Two weeks.
Speaker Change: And I was wondering if you had any idea about if you know.
Speaker Change: What I'm talking about it.
Speaker Change: The planning and what have you sort of long awaited.
Speaker Change: Reforms do you guys have any sense as to what you might we might see there and then sort of related question on grid enhancement technologies do you how do you see those playing with your large transmission system.
Speaker Change: Just any thoughts you have with respect to that.
Benjamin Fowke: Yeah, as far as the planning, I am told from our in-house experts that we don't anticipate it having much of an impact on us. The Grid Enhancing Technologies, I'm not quite sure about that one.
Speaker Change: Yes, as far as the planning.
Speaker Change: I am told from our experts in house experts that we don't anticipate it having much of an impact on us.
Speaker Change: The grid enhancing technologies, so I'm not quite sure about that one.
Peggy Simmons: So we do use grid-enhancing technologies, and as it relates to the planning information at FERC, I mean, our team's been very involved in it. I mean, I think they're looking at longer planning horizons and things of that nature, so our team's been at the table the whole time working with FERC on those.
Speaker Change: We did use grid enhancing.
Speaker Change: <unk> and as it relates to the planning.
Speaker Change: Information at FERC I mean, our team has been very involved in it I mean, I think they are looking at longer planning horizons and things of that nature. So our team has been at the table the whole time working with with FERC.
Paul Patterson: Okay, thanks so much. You're welcome.
Speaker Change: Okay. Thanks, so much.
Abby: Thank you for joining us on today's call. As always, the IR team will be available to answer any additional questions you may have. Abby, would you please give the replay information?
Speaker Change: Youre welcome.
Speaker Change: Thank you for joining us on today's call as always the IR team will be available to answer any additional questions. You may have abbvie would you. Please give the replay information.
Abby: Thank you. This call will be available for replay today, approximately two hours after the conclusion of the call, and will run through Tuesday, May 7, 2024, at 11:59 p.m. ET. The number to access the replay is 1-800-770-2030 or 1-609-800-9909. The conference ID to access the replay is 7939-795-POUNDS.
Speaker Change: Thank you.
Speaker Change: This call will be available for replay today approximately two hours. After the conclusion of the call and will run through Tuesday May seven 2024, and 11 59 P M Eastern time.
Speaker Change: The number to access the replay is one 877 zero.
Speaker Change: 030, or 1609 809 909.
Speaker Change: The conference I'd to access the replay is 7939795 pound.
Abby: And thank you, ladies and gentlemen. This concludes today's call. We appreciate your participation, and you may now disconnect.
Speaker Change: Thank you ladies and gentlemen, this concludes today's call. We appreciate your.
Speaker Change: Participation and you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change:
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: