Q2 2024 OGE Energy Corp Earnings Call & Business Update
Speaker Change: Good day, and thank you for standing by. Welcome to the OGE Energy Corp 2024 Second Quarter Earnings and Business Update Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.
Operator: 2024 Second Quarter Earnings and Business Update Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jason Bailey, Director of Investor Relations.
Operator: 2024 second quarter earnings and business update call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question in the answer session.
Operator: To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.
Speaker Change: To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.
Operator: Please be advised that today's conference is being recorded.
Jason Bailey: I would now like to end the conference over to your first speaker today, Jason Bailey, Director of Investor Relations. Please go ahead.
Speaker Change: Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Jason Bailey, Director of Investor Relations. Please go ahead.
Jason Bailey: Thank you, Hope, and good morning everyone, and welcome to your call. With me today, I have Sean Trauschke, our Chairman, President, and CEO, and Brian Buckler, our CEO. In terms of the call today, we will first hear from Sean, followed by an explanation from Brian of financial results.
Jason Bailey: Thank you, Hope, and good morning, everyone, and welcome to our call. With me today, I have Sean Trauschke, our Chairman, President, and CEO, and Brian Buckler, our CFO. In terms of the call today, we will first hear from Sean, followed by an explanation from Brian of financial resources. And finally, as always, we will answer your questions. I would like to remind you that this conference is being webcast, and you may follow along at oge.com. In addition, the conference call and accompanying slides will be archived following the call on that same website.
Jason Bailey: Thank you, Hope, and good morning, everyone, and welcome to our call. With me today, I have Sean Trauschke, our Chairman, President, and CEO , and Brian Buckler, our CFO .
Jason Bailey: And finally, as always, we will answer your questions. I would like to remind you that this conference is being webcast, and you may follow along at OGE.com. In addition, the conference call and accompanying slides will be archived following the call on that same website.
Speaker Change: I would like to remind you that this conference is being webcast and you may follow along at oge.com. In addition, the conference call and accompanying slides will be archived following the call on that same website.
Jason Bailey: Before we begin the presentation, I'd like to direct your attention to this paper statement regarding forward-looking statements. This is an SDC requirement for financial statements and simply states that we cannot guarantee forward-looking financial results. But this is our best estimate today.
Speaker Change: This is an SDC requirement for financial statements and simply states that we cannot guarantee forward-looking financial results, but this is our best estimate to date.
Sean Trauschke: I will now turn the call over to Sean for his opening remarks. Sean.
Jason Bailey: Before we begin the presentation, I'd like to direct your attention to the State Harbor Statement regarding Ford. This is an SDC requirement for financial statements and simply states that we cannot guarantee forward-looking financial results, but this is our best estimate. I will now turn the call over to Sean for his opening remarks.
Sean Trauschke: Thank you, Jason.
Sean Trauschke: Thank you, Jason. Good morning, everyone, and thank you for joining us today. It's certainly great to be with you.
Sean Trauschke: Good morning, everyone, and thank you for joining us today. It's certainly great to be with you. The second quarter of the year delivered solid results, and we are ahead of planned for the year. This morning, we reported consolidated earnings of 51 cents per share, including 54 cents per share for OGE and a holding company loss of three cents per share.
Speaker Change: I will now turn the call over to Sean for his opening remarks.
Speaker Change: Sean.
Sean Trauschke: The second quarter of the year delivered solid results, and we are ahead of plan for the year. This morning, we reported consolidated earnings of $0.51 per share, including $0.54 per share for OG&E and a holding company loss of $0.03 per share. Before we get underway, I do want to recognize our team. We have experienced our share of severe weather this spring and summer. And, as they always do, our team's response was quick, and it was safe.
Sean Trauschke: The second quarter of the year delivered solid results, and we are ahead of plan for the year. This morning, we reported consolidated earnings of $0.51 per share, including $0.54 per share for OG&E and a holding company loss of $0.03 per share.
Sean Trauschke: Before we get underway, I do want to recognize our team. We have experienced our share of severe weather this spring and summer, and as they always do, our team's response was quick and it was safe. We do that for our customers every day, and we answer the call for mutual assistance to restore electricity to other companies' customers when we travel away from home. Our teams stay focused on our North Star to generate, transmit, distribute reliable and affordable electricity every day, and I'm proud of all of them.
Sean Trauschke: We do that for our customers every day, and we answer the call for mutual assistance to restore electricity to other companies' customers when we travel away from home. With that, let's move on to the business at hand. Our second quarter delivered solid operational, customer, and financial results. With weather-normalized demand for electricity at 5.8% year-to-date, we are confident in our guidance for the year and expect to be in the top half of the range.
Sean Trauschke: We do that for our customers every day, and we answer the call for mutual assistance to restore electricity to other companies' customers when we travel away from home.
Sean Trauschke: Our team stay focused on our North Star to generate, transmit, distribute reliable and affordable electricity every day, and I'm proud of all of them.
Sean Trauschke: With that, let's move on to the business at hand. Our second quarter delivered solid operational, customer, and financial results. With weather-normalized demand for electricity at 5.8% year-to-date, we are confident in our guidance for the year and expect to be in the top half of the range. With regard to the Oklahoma rate review pending before the Oklahoma Corporation Commission, that process is moving forward. Last week, the ALJ recommended our uncontested settlement for approval, and we anticipate a final order in the coming month. A number of factors in the settlement benefit our customers, including an increase in our smart hours discount for seniors, additional funds for forestry, and vegetation management, which our customers regularly ask us to prioritize.
Speaker Change: With that, let's move on to the business at hand.
Speaker Change: Our second quarter delivered solid operational, customer, and financial results.
Speaker Change: With weather normalized demand for electricity up 5.8% year-to-date, we are confident in our guidance for the year and expect to be in the top half of the range.
Sean Trauschke: With regard to the Oklahoma rate review pending before the Oklahoma Corporation Commission, that process is moving forward. Last week, the ALJ recommended our uncontested settlement for approval, and we anticipate a final order in the coming months.
Speaker Change: With regard to the Oklahoma Rate Review pending before the Oklahoma Corporation Commission, that process is moving forward. Last week, the ALJ recommended our uncontested settlement for approval, and we anticipate a final order in the coming months.
Sean Trauschke: A number of factors in the settlement benefit our customers, including an increase in our smart hours discount for seniors and additional funds for forestry and vegetation management, which our customers regularly ask us to prioritize. And this time last year, our rates were 40% below the national average and the lowest in both states.
Speaker Change: A number of factors in the settlement benefit our customers, including an increase in our smart hours discount for seniors.
Sean Trauschke: In this time last year, our rates were 40% below the national average and the lowest in both states. And then in May of this year, we reduced the Oklahoma fuel factor, meaning year-over-year, impact the customer's summer bills would be $25 less per month.
Speaker Change: And this time last year, our rates were 40% below the national average and the lowest in both states.
Sean Trauschke: And then, in May of this year, we reduced the Oklahoma fuel factor, meaning the year-over-year impact on customer summer bills would be $25 less per month, creating even more headroom. We've issued RFPs in support of our current integrated resource plan and look forward to working through those. And our plan is to incrementally layer in generation capacity through a combination of new generation, continued plan upgrades, and energy efficiency and demand response. Speaking of energy efficiency and demand response, our new energy efficiency filing in Oklahoma last month reflects increased support for energy efficiency and demand response programs to economically drive 337 megawatts of energy and demand savings over the next five years. This doubles the contribution to capacity reductions from these programs.
Speaker Change: And then in May of this year, we reduced the Oklahoma fuel factor, meaning year-over-year impact to customer summer bills would be $25 less per month, creating even more headroom.
Sean Trauschke: Create an even more hit. We've issued RFPs in support of our current Integrated Resource Plan and look forward to working through those, and our plan is to incrementally layer in generation capacity through a combination of new generation, continued plan upgrades, and energy efficiency and demand response. Speaking of energy efficiency and demand response, our new energy efficiency filing in Oklahoma last month reflects increased support for energy efficiency and demand response programs to economically drive 337 megawatts of energy and demand savings over the next five years. This doubles the contribution to capacity reductions from these programs. Our strong load growth is driven by consistent customer growth exceeding 1%.
Speaker Change: Speaking of energy efficiency and demand response, our new energy efficiency filing in Oklahoma last month reflects increased support for energy efficiency and demand response programs to economically drive 337 megawatts of energy and demand savings over the next five years.
Speaker Change: This doubles the contribution to capacity reductions from these programs.
Sean Trauschke: Our strong load growth is driven by consistent customer growth exceeding one percent. This momentum is driven by continued economic growth and expansion in communities across our service area. Recent announcements reflect both geographic diversity, from Van Buren, Arkansas, to Seminole, Oklahoma, and industries as diverse as manufacturing, aerospace, and defense. Each expansion brings new residential and small business customers as well.
Speaker Change: Our strong load growth is driven by consistent customer growth exceeding one percent. This momentum is driven by continued economic growth and expansion in communities across our service area.
Sean Trauschke: This momentum is driven by continued economic growth and expansion in communities across our service area. Recent announcements reflect both geographic diversity from Van Buren, Arkansas, to Seminole, Oklahoma, in the industries as diverse as manufacturing, aerospace, and defense. Each expansion brings new residential and small business customers as well. Our low rates continue to make Oklahoma and western Arkansas attractive to a number of industries, including data centers. While we don't have anything to announce today, as we continue discussions with several potential projects, we continue to work through generation and transmission capacity and availability as we determine the right regulatory construct to support these projects.
Speaker Change: Each expansion brings new residential and small business customers as well.
Sean Trauschke: Our low rates continue to make Oklahoma and western Arkansas attractive to a number of industries, including data centers. While we don't have anything to announce today, as we continue discussions with several potential projects, we continue to work through generation and transmission capacity and availability as we determine the right regulatory construct to support these projects.
Speaker Change: Our low rates continue to make Oklahoma and western Arkansas attractive to a number of industries, including data centers.
Sean Trauschke: All the success we experience today is underpinned by our commitment to drive economic expansion. We put a stake in the ground years ago, and we continue to see dividends from those investments. So far this year, the 10 new projects our team announced represent nearly 20,000 new jobs. And the nation is watching and recognizes the benefits of expanding and relocating to our service area.
Sean Trauschke: We put a stake in the ground years ago, and we continue to see dividends from those investments. And just in the last year, the Wall Street Journal recognized Oklahoma City as the fifth-hottest job market. Forbes ranked Oklahoma City as the second-best metro for young professionals. U.S. News & World Report listed Oklahoma City as the third-most resilient housing market. And unemployment in both Oklahoma and Arkansas remains well below the national average.
Speaker Change: So far this year, the 10 new projects our team announced represent nearly 20,000 new jobs.
Speaker Change: And the nation is watching and recognizes the benefits of expanding and relocating to our service area.
Sean Trauschke: And just in the last year, the Wall Street Journal recognized Oklahoma City as the fifth hottest job market; Forbes ranked Oklahoma City as the second best metro for young professionals. US News and World Report listed Oklahoma City as the third most resilient housing market, and unemployment in both Oklahoma and Arkansas remains well below the national average. Our customer growth aligns well with our efforts to deepen relationships with our customers, offering them new self-service technologies and providing them additional tools and resources to manage their energy usage and monthly bills. Investments in affordability and reliability provide direct benefit to our customers and improve our overall performance.
Speaker Change: Our customer growth aligns well with our efforts to deepen relationships with our customers, offering them new self-service technologies and providing them additional tools and resources to manage their energy usage and monthly bills.
Sean Trauschke: Our new self service technology and our mobile app online and in the IVR have driven customer calls down 19% year over year, lowering costs and improving the experience. Great enhancements we're making provide more reliable and resilient electric service for customers with fewer and shorter outages.
Speaker Change: Our new self-service technology and our mobile app, online and in the IVR, have driven customer calls down 19% year-over-year, lowering costs and improving the experience.
Sean Trauschke: So as I wrap up my comments, I hope you'll take away that our sustainable business model that begins with low rates as the foundation to attract new customers, which leads to revenue growth, technology expansion, and efficiencies across our business. This virtual cycle sustains momentum, sustains momentum for our customers, it sustains momentum for communities, momentum for employees, and momentum to you, our shareholders.
Sean Trauschke: This virtual cycle sustains momentum. It sustains momentum for our customers, it sustains momentum for our communities, momentum for our employees, and momentum for you, our shareholders. With that, thank you, and now I'll turn the call over to Brian.
Brian Buckler: With that, thank you, and now turn the call over to Brian.
Brian Buckler: Thank you, Sean, thank you, Jason, and good morning, everyone. Let's start on slide six and discuss second quarter of 2024 results. On a consolidated basis, second quarter net income was 102 million, or 51 cents per diluted share, compared to 88 million, or 44 cents per share, in the same period 2023. In the core business, the electric company achieved net income of 109 million, or 54 cents per diluted share, compared to 92 million, or 46 cents per share in the same period 2023. The increase was primarily driven by exceptional load growth and warmer than normal weather.
Brian Buckler: Thank you, Sean. Thank you, Jason. And good morning, everyone.
Brian Buckler: With that, thank you, and now I'll turn the call over to Brian . Brian , thank you, Sean, thank you, Jason, and good morning, everyone. Let's start on slide 6 and discuss second quarter 2024 results.
Brian Buckler: Let's start on slide six and discuss second quarter 2024 results. On a consolidated basis, second quarter net income was $102 million, or $0.51 per diluted share, compared to $88 million, or $0.44 per share, in the same period in 2023. In the core business, the electric company achieved net income of $109 million, or $0.54 per diluted share, compared to $92 million, or $0.46 per share, in the same period in 2023.
Brian Buckler: In the core business, the electric company achieved net income of $109 million, or $0.54 per diluted share, compared to $92 million, or $0.46 per share in the same period, 2023.
Brian Buckler: These favorable drivers were partially offset by expected increased depreciation related to our capital invests. I will discuss our updated expectations for full year 2024 consolidated EPS in a moment. Let's move to slide seven and look at load results. When we came into this year, we felt our actual results for the first time. Our full year could indeed outpace the projected robust assumption of three to five percent whether normalize growth we shared with you in February. And with exceptional year-to-date load growth through June of 5.8%. We are now confident in increasing our full year load growth projection range to four to six percent.
Brian Buckler: When we came into this year, we felt our actual results for the full year could indeed outpace the projected robust assumption of 3 to 5 percent weather normalized growth we shared with you in February. And with exceptional year-to-date load growth through June of 5.8%, we are now confident in increasing our full-year load growth projection range to 4 to 6%. I will now go over some details related to our second quarter load.
Brian Buckler: We consistently talk about our sustainable business model where we leverage our low rates, reliable service, and business and economic development activities to attract new businesses to our service area. Our low rates are a significant driver of load expansion when compared to other electric companies across the country. We envision our low rates continuing to drive this great growth to our service area for years to come. I will now go over some details related to our second quarter load results. Our customer count continued to expand nicely at a 1.2 percent clip in a second quarter. And this combined with robust economic expansion and Oklahoma and Arkansas led to extraordinary load growth of 6.7% compared to the second quarter of 2023.
Brian Buckler: Our low rates are a significant driver of load expansion when compared to other electric companies across the country.
Brian Buckler: We envision our low rates continuing to drive this great growth to our service area for years to come.
Brian Buckler: I will now go over some details related to our second quarter load results.
Brian Buckler: This marks one of the largest year-over-year growth rates in our company's history. And each customer class is contributing a key data point to underscore the strength of these results is that each class showed year-over-year growth this quarter of over 2%.
Brian Buckler: This marks one of the largest year-over-year growth rates in our company's history. Now, let's address our full year's earnings expectations on slide 8. We are reaffirming our consolidated EPS guidance previously issued in February. Given our remarkable load results in the first half of the year, we now expect EPS to be in the top half of our 2024 consolidated range of 206 to 218 per share. Okay, let's wrap this up on slide nine.
Brian Buckler: Now let's address our full-year earnings expectations on slide 8. We are reaffirming our consolidated EPS guidance previously issued in February. Given our remarkable load results in the first half of the year, we now expect EPS to be in the top half of our 2024 consolidated range 206 to 218 per share. Okay, let's wrap up on slide 9. Our only financing transaction to be completed for the remainder of the years at the electric company where we plan to access the capital markets for 350 million in the third quarter to fund our previously disclosed capital investment plan and for general corporate purposes.
Brian Buckler: Given our remarkable vote results in the first half of the year, we now expect EPS to be in the top half of our 2024 consolidated range of $206 to $218 per share.
Brian Buckler: Our only financing transaction to be completed for the remainder of the year is at the electric company, where we plan to access the debt capital markets for $350 million in the third quarter to fund our previously disclosed capital investment plan and for general corporate purposes. Our current five-year capital plan requires no external equity to maintain our estimated credit metric of 17% FFO to debt each year of the plan. And as a reminder, we have no fixed-rate maturities until 2027.
Brian Buckler: Okay, let's wrap up on slide nine. Our only financing transaction to be completed for the remainder of the year is at the electric company, where we plan to access the debt capital markets for $350 million in third quarter to fund our previously disclosed capital investment plan and for general corporate purposes.
Brian Buckler: Zoom in out. We remain confident in our company's ability to deliver 5 to 7% consolidated EPS growth each year of our five-year plan. And we continue to be pleased with our financial positions. We have one of the strongest balance sheets in the industry. Our current five-year capital plan requires no external equity to maintain our estimated credit metric of 17% FFO to debt each year of the plan. And, as a reminder, we have no fixed rate maturities until 2027.
Brian Buckler: Zooming out, we remain confident in our company's ability to deliver 5-7% consolidated EPS growth each year of our 5-year plan, and we continue to be pleased with our financial position.
Brian Buckler: Our current five-year capital plan requires no external equity to maintain our estimated credit metric of 17% FFO to debt each year of the plan. And as a reminder, we have no fixed-rate maturities until 2027.
Brian Buckler: Before we open the vine for Q&A, let me summarize today's message. The first half of this year's financial results are ahead of plan. And given our excellent load growth, this allows us to point to the top half of our 2024 EPS guidance range. The pillars of our business are formidable with dynamic load growth, cross brewing communities, and constructive regulation, all backed by a strong balance sheet and the relentless dedication of our employees. Please.
Brian Buckler: The pillars of our business are formidable, with dynamic load growth, prospering communities, and constructive regulation, all backed by a strong balance sheet and the relentless dedication of our employees.
Operator: That concludes our prepared remarks, and we will now open to line for your questions. Hope are you with us? Hope, can you hear us?
Speaker Change: That concludes our prepared remarks and we will now open the line for your questions.
Operator: Participants, if you'll just wait a moment and see if we can read your questions.
Speaker Change: Participants, if you'll just wait a moment and see if we can re-establish connection. Hello everybody, I'm so sorry that just went down. At this time we will conduct the Q&A session. As a reminder, to ask a question you will need to press star 1 1 on your telephone and wait for your name to be announced.
Operator: Hello, everybody. I'm so sorry that just went down. At this time we will conduct the Q&A session as a reminder to ask a question. You will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
Shahriar Pourreza: Our first question comes from Shahra Pourreza with Guggenheim Partners. Your line is now open. Good morning.
Operator: Our first question comes from Shahriar Pourreza of Guggenheim Partners. Your line is now open.
Speaker Change: Our first question comes from Shahriar Pourreza with Guggenheim Partners. Your line is now open.
Sean Trauschke: Good morning, Sean. Just congrats on the results, obviously pointing to the top half. Are you seeing any strong July August weather component there? And just kind of more importantly, does that kind of imply a level of ONM contingency going back into the back half of the year? So potential tailwind for next year? Sure.
Char Pereza: Good morning. Good morning, Sean. Just congrats on the results, obviously, pointing to the top half. Are you seeing any strong July-August weather component there? And just kind of more importantly, does that kind of imply...
Speaker Change: A level of O&M contingency going back into the back half of the year, so potential tailwind for next year.
Sean Trauschke: Sure, so great question. So, you know, here in Oklahoma and Arkansas in July and August, it's hot, right? So there's not a ton of upside there, to be quite honest with you, but it's hot. But, as we've said consistently, we're managing the business for the long term. We're going to deliver on our earnings commitments, and we've got a lot of flexibility in our plan, and we move things around all the time.
Sean Trauschke: So great question. So, you know, here in Oklahoma and Arkansas, July and August are tight, right? So there's not a ton of upside there, to be quite honest with you, but it's hot. And so, as we've said consistently, we're managing the business for the long term. We're going to deliver on our earnings commitments. And we've got a lot of flexibility in our plan. And we move things around all the time, but I want you to hear me that we're doing that for the long term. We're not doing it for a particular quarter, but we're in really good shape for the year.
Speaker Change: As we've said consistently, we're managing the business for the long term. We're going to deliver on our earnings commitments.
Sean Trauschke: I want you to hear me out that we're doing that for the long term. We're not doing it for a particular quarter, but we're in really good shape for the year, and our confidence really doesn't have anything to do with July and August.
Sean Trauschke: And our confidence really doesn't have anything to do with July and August.
Brian Buckler: God, and just on the ONM side, maybe just a question for Brian there. Obviously, but like just on the ONM side, Brian, are you kind of pulling some ONM forward, just given the strong start and how you're going to end the year? So, should we be thinking about the potentially a tailwind on the ONM side as we're bridging from this year to 25?
Brian Buckler: Got it. And just on the O&M side, maybe just a question for Brian there, obviously, but like, just on the O&M side, Brian , are you kind of pulling some O&M forward, just given the strong start and how you're going to end the year? So should we be thinking about potentially a tailwind on the O&M side as we're bridging from this year to 2025?
Brian Buckler: Hey Shahriar, good morning. Hey Brian.
Brian Buckler: Hey, Shar, good morning. Hey, Brian. You know, first of all, for 2024, it is in excellent shape. And as we pointed to in our comments, it's primarily driven by this exceptional growth routine. You know, we're going to stay focused on operations and the, you know, the reliable, reliable care of our system.
Brian Buckler: Hey Shahriar, good morning. Hey Brian .
Speaker Change: You know, first of all, for 2024, it is in excellent shape, and as we pointed to in our comments, it's
Brian Buckler: It's primarily driven by this exceptional load growth we're seeing. You know, we're going to stay focused on operations and the, you know, the reliable.
Brian Buckler: When it comes to 2025, there may be a little bit of room there to move to Moan and Maround, Shar, but what we're really focused on is, as John mentioned, the long term. We're hitting 25, 26. We're in a great position for 24 of houses to go ahead and plan ahead across the board. And we look at capital investments as well, and all the other areas we stay focused on. And so I think 2025 is in great shape, more based on the fundamentals of the business, the low growth, the strong balance sheet. And so we're really not in need, if you will, of pulling forward ONM.
Brian Buckler: reliable care of our system when it comes to 2025.
Brian Buckler: There may be a little bit of room there to move some O&M around, sure, but what we're really focused on is, as Sean mentioned, the long-term.
Sean Trauschke: hitting 25, 26. We're in a great position for 24. It allows us to go ahead and plan ahead across the board and you know we look at capital investments as well.
Shahriar Pourreza: Okay. Perfect.
Shahriar Pourreza: And then just on, obviously, you know, you raised your low growth expectations. I guess maybe a little bit of a top level, but I guess how are these higher expectations maybe changing the calculus for the existing generation RFPs and kind of near term needs? Do you see kind of an opportunity to shift between kind of prefer technology? So CCGT versus simple GT?
Speaker Change: Okay, perfect. And then just on, obviously, you know, you raised your load growth expectations, I guess, maybe a little bit of a top level, but...
Speaker Change: I guess, how are these higher expectations maybe changing the calculus for the existing...
Speaker Change: generation RFPs and kind of near-term needs. Do you see kind of an opportunity to shift between kind of preferred technologies, so CCGT versus simple GT, any need to potentially recast the net of the IRP? Thanks.
Sean Trauschke: Any need to potentially recast the net of the IRP? Thanks.
Brian Buckler: Thanks Shahriar. I don't think that anything we've seen is a surprise to us, backlog that we see of potential growth coming for many, many years is robust, but it's not necessarily linear, and so, you know, it's difficult to forecast exactly what you're going to see in terms of load growth increases more than a year out, you know, because it matters on what quarter it comes in and things like that, but nothing is, we anticipated this load growth, and I don't think at this point in time it changes kind of our direction.
Sean Trauschke: Yeah, thanks, Shar. I don't think that anything we've seen is a surprise to us. We've been consistent in saying this backlog that we see of potential growth coming from many, many years is robust, but it's not necessarily linear.
Speaker Change: Yeah, thanks Shahriar. I don't think that anything we've seen is a surprise to us. We've been...
Speaker Change: consistent in saying this
Speaker Change: backlog that we see of potential growth coming for many many years is robust.
Sean Trauschke: And so, you know, it's difficult to forecast exactly what you're going to see in terms of low growth increases more than a year out. You know, if it matters on what quarter it comes in and things like that. But no, it's not necessarily linear. And so, you know, it's difficult to forecast exactly what you're going to see in terms of low growth increases more than a year out. You know, if it matters on what quarter it comes in and things like that. But, no, nothing is we anticipated this low growth.
Speaker Change: But it's not necessarily linear, and so, you know, it's difficult to forecast exactly what you're going to see in terms of load growth increases more than a year out, you know, because it matters on what quarter it comes in and things like that, but
Sean Trauschke: And I don't think, at this point in time, it changes kind of our direction. Got it. Perfect.
Speaker Change: Nothing is, we anticipated this low growth, and I don't think at this point in time it changes kind of our direction.
Shahriar Pourreza: And just lastly, Shar, for me, it's just congrats on the rate case settlement. It's fantastic. But like, obviously with the higher low growth and higher catbacks, you know, kind of runway environment that we're going to be seeing.
Sean Trauschke: Just talk a little bit about just the rate case cycle. Do you need more frequent cases? And would you look to maybe go back to propose any kind of incremental interim mechanism to reduce the lag, especially given that the catback needs to probably accelerate? Thanks. Sure. Now, a great question. Thanks for that. You know, I, I am a, I think it's important that we stay current with our investments and we recover those. So, we're going to have a consistent cadence in terms of rate activity in both states. And your second question there, in terms of.
Speaker Change: Just talk a little bit about just the rate case cycle. Do you need more frequent cases? And would you look to maybe go back to propose any kind of incremental or interim mechanism to reduce the lag, especially given that the CapEx needs are probably accelerating? Thanks.
Speaker Change: Sure. No, great question. Thanks for that. You know, I am a...
Shahriar Pourreza: More real time tracking mechanisms. Yes, we are going to pursue that as well. Okay.
Shahriar Pourreza: That was Chris. Thanks, guys. Appreciate the call. Thanks. Thanks, Shar.
Speaker Change: Okay, that was crisp. Thanks guys. Appreciate the call. Thanks.
Operator: Our next question comes from Nicholas Campanella with Barclays. Your line is now open.
Nicholas Campanella: Our next question comes from Nicholas Campanella with Barclays. Your line is now open.
Speaker Change: Thanks, Shahriar.
Nicholas Campanella: Hey, good morning. Good morning, Nick. Hey, so thanks for all the updates today.
Nicholas Campanella: Good morning. Hey, good morning, Nick.
Nicholas Campanella: Hey, so thanks for all the updates today.
Speaker Change: Hey, good morning.
Nicholas Campanella: You know, I, I think in the past, you’ve commented on having, you know, maybe six or so different customer discussions with data centers. And I just want to kind of level set on where you stand in those discussions. You know, how real is it that we can maybe potentially see something? You know, come to your service territory or just an announcement in your service territory by your end. And then just what, how can that affect your current load forecast as it stands today, because I know that there's been some things that are happening right now, which is causing you to revise it higher, but I assume, you know, getting a, you know, a large data center customer could even be further pressure higher on this load growth forecast.
Speaker Change: You know, I think in the past, you've commented on having...
Speaker Change: you know maybe six or so different customer discussions with data centers and I just
Speaker Change: Wanted to kind of level set on
Speaker Change: Where you stand in those discussions
Sean Trauschke: Thanks. Yeah, I, I think that's, that's clearly upside. And, you know, you listen very well. You're right. We have kind of more than half a dozen or so, and various stages of development.
Sean Trauschke: That's clearly the upside. And, you know, you listened very well.
Speaker Change: Yeah, I, I think that's a.
Sean Trauschke: I wouldn't put a timeline on it by the end of this year or anything like that. But I think that what's quite remarkable, and Brian went through that in his comments, is all of this growth we're seeing doesn't include any of the data center work. And so I don't want to take away from the underlying strength of the business itself. And so we're working through some of those. Certainly, we have to incorporate, you know, transmission and generation availability. And think about that and make sure that we have the right regulatory construct for those. And if we get one that we're satisfied with, that supports everything we're trying to do, what we'll be glad doing now.
Speaker Change: I wouldn't put a timeline on it by the end of this year or anything like that, but I think what's quite remarkable, and Brian went through that in his comments, is all of this growth we're seeing doesn't include
Brian Buckler: Any of the data center awards.
Speaker Change: And if we get one that we're satisfied with that supports everything we're trying to do, we'll be glad to announce it.
Nicholas Campanella: Just as a follow up to that, what is the size of your current system versus the maybe average request of the customers that you're seeing today? What exactly when you say size of our system in terms of load, load requirements or load requirements peak demand, however you want to frame it. Thank you. Yes, so we're peaking in the mid six thousandths, and you know, you could imagine any of these requests could be anywhere between 250 and 500 megawatts. Got it. That's helpful.
Speaker Change: What is the size of your current system versus the maybe average request of the customers that you're seeing today?
Speaker Change: What exactly, when you say size of our system, in terms of load requirements, or?
Speaker Change: And, you know, you could imagine any of these requests could be anywhere between 250 and 500 megawatts.
Nicholas Campanella: And then I also just wanted to follow up.
Nicholas Campanella: You know, what are your kind of thoughts on, you know, a formula rate or a PBR framework for next year as you kind of get out of this case and just any updated thoughts about that. That's it for me. Thank you.
Sean Trauschke: Yeah, I you should expect us to continue to pursue some formula rate mechanism in both states. We need to renew that in Arkansas as well.
Speaker Change: Yeah, you should expect us to continue to pursue...
Speaker Change: some formula rate mechanism in both states.
Nicholas Campanella: Thank you.
Alexander Mortimer: Our next call comes from Alex Mortimer with Mizzouho Securities.
Speaker Change: Thank you. Our next call comes from Alex Mortimer with Mizuho Securities. Your line is now open.
Alexander Mortimer: Your line is now open. Hey, good morning, team. Hey, good morning.
Sean Trauschke: You're right, we have more than half a dozen or so in various stages of development. I wouldn't put a timeline on it by the end of this year or anything like that. But I think what's quite remarkable, and Brian went through that in his comments, is that all of this growth we're seeing doesn't include
Alexander Mortimer: Morning. Given the strong weather tailwinds this year, the constructive load growth backdrop expect to continue in the coming years and then as well, the potential increasing catbacks coming in the new year.
Nicholas Campanella: Just as a follow-up to that, what is the size of your current system versus the, perhaps, average request of the customers that you're seeing today?
Sean Trauschke: What exactly is meant when you say the size of our system, in terms of load, load requirements, or?
Alex Mortimer: Hey, good morning, team.
Alex Mortimer: Hey, good morning. Morning.
Brian Buckler: Is it possible at the base of the five to seven EPS Kager eventually gets changed in the coming years, either to be based off of actual results or some other number?
Brian Buckler: And you want to take that one? Sure, Alex.
Nicholas Campanella: Load requirements, peak demand, however you want to frame it. Thank you.
Sean Trauschke: We're peaking in the mid-$6,000s, and you can imagine any of these requests could be anywhere between 250 and 500 megawatts.
Brian Buckler: Good morning. And, you know, when we think about this five to seven percent, call it six point six percent of growth at the midpoint. We're looking at this as a, you know, meeting that commitment every year. So we're planning 25, 26, 27, 28 to hit those numbers. And you're right, we have just exceptional load growth. This is the fourth year in a row. So it's not just something we're projecting. We're kind of in the middle of a nice wave, if you will, of load growth. I've spent from two and a half to the three percent by three years this year.
Speaker Change: to hit those numbers.
Brian Buckler: We expect it to be maybe even over five percent. I think you should expect that to continue to be strong and 25 beyond. I've pointed to at least two percent load growth and 25 through 28 and past calls. I think there's momentum that we can even beat that. So it's a great question. Capital investments are strong. We got to meet the growth of our customers. So you're right on all those points.
Speaker Change: It's been from 2.5% to 3% in the last three years. This year we expect it to be maybe even over 5%. I think you should expect that to continue to be strong in 2025 and beyond. I've pointed to at least 2% load growth.
Speaker Change: and 25 through 28 and past calls. I think there's momentum that we can even beat that. So it's a great question. Capital investments are strong. We got to meet the growth of our customers. So you're right on all those points.
Brian Buckler: So is there upside on the long-term EPS forecast potentially? But we're continuing to work through that, and we look forward to having a nice update for you in February.
Brian Buckler: Wonderful.
Alexander Mortimer: And then just kind of wrapping up the load growth conversation. I've actually continued to look impressive.
Sean Trauschke: Are there any factors that you can point to that maybe in your view make your load growth unique compared to others in the industry? We're looking at each other. I would just say, you know, what is really remarkable, what we're seeing is it's not just some of this manufacturing that we're seeing come to our service territory because of our rates, but the multiplier effect for the ancillary small businesses and residential customers we're seeing. I mean, we're seeing real customer growth occur in our service territory, and it's real. And we've been talking about it, and we're seeing it materialized. And, you know, as these businesses continue to prosper, they're expanding.
Speaker Change: Some of this manufacturing that we're seeing come to our service area because of our rates, but the multiplier effect for the ancillary small businesses and residential customers we're seeing. I mean, we're seeing...
Speaker Change: occur in our service territory, and it's real. And we've been talking about it, and we're seeing it materialize, and as these businesses continue to prosper, they're expanding, and so this is solid, solid growth.
Alexander Mortimer: And so, this is a solid, solid growth. Great. Thank you so much. I'll leave it there. Thanks, Alex.
Speaker Change: Great. Thank you so much. I'll leave it there.
Julien Dumoulin Smith: Our next question comes from Julien Dumoulin Smith with Jeffries. Your line is now open.
Speaker Change: Our next question comes from Julien Dumoulin-Smith with Jeffreys. Your line is now open.
Brian Russo: Yeah, good morning. It's actually Brian Russo on for Julien. Hey, good morning, Brian. Morning, Brian. Good morning, Sean. Good morning, Brian.
Operator: Hey, good morning. Good morning.
Operator: Given the strong weather tailwinds this year, the constructive load growth backdrop expected to continue in the coming years, and then also the potential increase in CapEx coming in the new year, is it possible that the base of the 5-7 EPS CAGR eventually gets changed in the coming years, either to be based off of actual results or some other number?
Speaker Change: Yeah, hi, good morning. It's actually Brian Russo on for Julien.
Brian Buckler: Brian, you want to take that one? Sure. Hey, Alex, good morning.
Brian Buckler: Hey, just to follow up on the regulatory strategy with the incremental low growth forecast. Do you think the cadence of rate cases will still be kind of annual with low to mid single digit rate increases, or like the last case, we're able to offset quite a bit of the initial revenue request with about $670 million, I think, of offsetting revenue from historical load.
Speaker Change: And good morning, Brian . Morning, Brian . Good morning, Sean. Good morning, Brian . Hey, just a follow-up on the regulatory strategy with the incremental load growth forecast.
Brian Buckler: How should you think about the strategy coming forward? I think you said it very well. I think you should expect us to have a consistent cadence every year or 18 months with where we've invested into the low growth, and so we're able to offset the impact the customers with this low growth. Continue to improve the reliability of our system. So, I think we're in great shape.
Speaker Change: offsetting revenue from
Speaker Change: historical load, you know, how should we think about this strategy going forward?
Speaker Change: I think you said it very well. I think you should expect us to have a consistent cadence of every year or 18 months. We've invested into the load growth and so we're able to offset the impact to customers with this load growth.
Speaker Change: and continue to improve the reliability of our system. So, I think we're in great shape.
Brian Buckler: Great.
Brian Buckler: Then just a segue into the RFP. Are there any opportunities to increase your cat-backs outside of the generation needs with maybe additional headroom from the accelerating low growth? Yeah, I think there's, in terms of the capital expenditures, it's really driven by the low growth and customer growth we're seeing in our service territory. Like I said, we're investing against that, and that'll be the driver for a lot of our activities. The way we think about it is, we're committed to delivering that earnings growth rate we've committed to year after year, and for many, many years. We're committed to the ratings and the balance sheet, and we're committed to this affordability and reliability momentum we've created in our service territory because that's generating the growth.
Speaker Change: And like I said, we're investing against that.
Speaker Change: and that'll be the driver for a lot of our activities.
Brian Buckler: And, you know, when we think about this 5 to 7 percent, call it 6.6 percent of growth at the midpoint, we're looking at this as a commitment to meeting that commitment every year. So we're planning 25, 26, 27, 28 to hit those numbers. And you're right.
Brian Buckler: So, we're going to keep all of those in balance, but with this growth we're seeing in the growth that we're anticipating, it's significant. And we're going to have a lot of opportunities to make investments.
Brian Buckler: We have just exceptional growth. This is the fourth year in a row. So it's not just something we're projecting. We're kind of in the middle of a nice wave, if you will, of load growth. It's been from 2.5 to 3 percent in the last three years. This year, we expect it to be maybe even over 5 percent. I think you should expect that to continue to be strong in 25 and beyond.
Brian Buckler: And then just lastly, are there any large projects being considered in your regional transmission footprint that we should maybe be monitoring? Yeah, we're always looking at transmission opportunities to see if they produce any value or to our service territory, but nothing that is imminent that we're ready to announce yet.
Brian Buckler: Great, thank you very much. Thanks, Brian.
Speaker Change: Great, thank you very much.
Travis Miller: Thank you. Our next question comes from Travis Miller with Morningstar Inc.
Speaker Change: Thank you. Our next question comes from Travis Miller with Morningstar Inc. Your line is now open.
Travis Miller: Your line is now open. Good morning. Thank you. Good morning.
Brian Buckler: I've pointed to at least 2 percent load growth in 25 through 28 in past calls, and I think there's momentum that we can even beat that. So it's a great question because capital investments are strong. We've got to meet the growth of our customers, so you're right on all those points. So is there upside on the long-term EPS forecast? Potentially. But we're continuing to work through that, and we look forward to having a nice update for you in February.
Sean Trauschke: We're looking at each other. Who's going to do it? You know, Alex? I would just say, you know, what is really remarkable is that it's not just some of this manufacturing that we're seeing come to our service area because of our rates, but the multiplier effect for the ancillary small businesses and residential customers we're seeing.
Travis Miller: Yeah, I was thinking on the load growth popular subject here.
Travis Miller: Good morning. Thank you. Morning.
Travis Miller: Morning. Yeah, sticking on the load growth popular subject here. Can you remind us what is the load growth or long-term load growth in that five to seven percent earnings?
Brian Buckler: Can you remind us what is the load growth or long-term load growth in that five to seven percent earnings? Growth outlook? Sure.
Operator: Great. Thank you so much. I'll leave it there.
Brian Buckler: Hey, Travis, it's Brian. Good morning. You know, it's a great question because obviously six percent load growth year-to-date is remarkable and, you know, it's certainly a testament to the business-friendly environment in Oklahoma and Arkansas and the dedication of our employees to drive that economic development.
Speaker Change: Growth Outlook
Speaker Change: Sure. Hey, Travis, it's Brian . Good morning. You know, it's a great question, because obviously six percent load growth year-to-date is remarkable.
Operator: Our next question comes from Julien Dumoulin-Smith with Jeffries. Your line is now open.
Brian Russo: Yeah, hi, good morning. It's actually Brian Russo on for Julien.
Brian Buckler: In our teen employees and generation employees to connect it and keep the lights on. So we're very excited about it. What we had in our face plan to five to seven percent, and now it's asked a question earlier. We're going to continue to target five to seven, and what to tell when we hope to hit somewhere towards the higher end of that range. But with respect to load growth, I've pointed to, you know, two greater than two percent is what we said for 2025 and beyond. Obviously, there's tell wins there to beat two percent potentially substantially in some years.
Speaker Change: The dedication of our employees to drive that economic development and our T&E employees and Generation employees to connect it and keep the lights on. So we're very excited about it.
Speaker Change: What we had in our base plan, the 5-7%, and Alex asked a question earlier, now we're going to continue to target 5-7%, and with the tailwinds, we hope to hit somewhere towards the higher end of that range.
Speaker Change: But with respect to load growth, I've pointed to, you know, greater than 2% is what we've said for 2025 and beyond.
Brian Russo: And good morning, Brian. Good morning, Brian.
Brian Buckler: But as Sean mentioned, it's, you know, some of these large loads are a little unpredictable and timing, and it can be a bit spiky. But I think in all those years, 25 to 2028, we feel sitting here today. And then in beating that two percent. So we'll give us a couple more quarters, and we'll provide a more full update in February. Okay. Got it.
Speaker Change: But as Sean mentioned, it's, you know, some of these large loads are a little unpredictable in timing and...
Speaker Change: and can be a bit spiky, but I think in all those years, 25 through 28, we feel, sitting here today, we feel really confident in beating that 2%. So, give us a couple more quarters and we'll provide a more full update in February .
Brian Buckler: And then just sticking on that real quick. If you were to go to three percent or four percent and saw that as a sustainable load growth. What does that do to earnings in general earnings growth in general? What's that kind of link? Even if you can't quantify it qualitatively. That was two percent move earnings growth, one percent long term earnings with one percent.
Speaker Change: Okay, got it. And then just sticking on that real quick, if you were to go to three percent or four percent and saw that as a sustainable load growth, what does that do to earnings in general, earnings growth in general?
Speaker Change: 2% move earnings growth, 1% long-term earnings growth, 1%, stuff like that.
Brian Buckler: Yeah, you know, kind of the way I think about it and a good sensitivity to carry around in your pocket, maybe, is that a 1% incremental load across the board equates to about five cents of EPS. And perhaps even more importantly, you know, that equates to about a half percent reduction in customer rates. So that's just really helpful as we go into our rate cases. It frees up, of course, more capital to deploy in the teeny business or in generation assets. But those are some rough numbers that I hope help help. Yeah, that's great. Thanks a lot.
Sean Trauschke: Good morning, Sean. Good morning, Brian. Hey, just to follow up on the regulatory strategy, with the incremental load growth forecast, do you think the cadence of break cases will still... https://www.youtube.com request with about 60-70 million dollars, I think, of offsetting revenue from... historical load? You know, how should we think about this strategy going forward? I think you said it.
Sean Trauschke: I think you said it very well. I think you should expect us to have a consistent cadence of every year or 18 months. We've invested in load growth, and so we're able to offset the impact on customers with this load growth and continue to improve the reliability of our system. I think we're in great shape.
Speaker Change: And perhaps even more importantly, you know, that equates to about a half percent reduction in customer rates.
Brian Buckler: And then, just to segue into the RFP, are there any opportunities to increase your CapEx outside of the generation needs, you know, with maybe additional headroom from the accelerating load growth?
Sean Trauschke: And then one quick high-level question: what do you see right now as the biggest hurdle to connecting some of these large loads, whether it's manufacturing or data centers? Is it regulatory, is it system access? What's the big hurdle that you're seeing as you're trying to hook up more, especially C&I load? Yeah, I think as you think about some of the significant load opportunities, you know, obviously, you know, these large loads, these large facilities, they have, you know, similar supply chain lead times that the rest of us have, right? So there's, you know, just trying to forecast this, plan this, and do it in a thoughtful way.
Speaker Change: Yeah, that's great. Thanks a lot. And then one quick high-level question. What do you see right now is the biggest hurdle to connecting some of these large loads, whether it's manufacturing or data centers?
Speaker Change: Is it regulatory? Is it system access? What's the big hurdle that you're seeing as you're trying to hook up more of this, especially with C&I load?
Brian Buckler: Yeah, I think there's, you know, capital expenditures are really driven by the low growth and customer growth we're seeing in our service. And like I said, we're investing against that. And that'll be the driver for a lot of our activities. And the way we think about it is, we're committed to delivering that earnings growth rate we've committed to year after year and for many, many years, and we're committed to the ratings and the balance sheet.
Brian Buckler: And we're committed to this affordability and reliability momentum we've created in our service territory because that's generating growth. And so we're gonna keep all of those in balance, but with this growth we're seeing and the growth that we're anticipating, it's significant. And we're gonna have a lot of opportunities to make investments.
Brian Buckler: And then just lastly, are there any large projects being considered? A mission footprint that we should maybe even monitor. You know, we're always looking at transmission.
Speaker Change: Yeah, I think as you you think about some of these significant load opportunities, you know, obviously, you know,
Speaker Change: These large loads, these large facilities, they have similar supply chain lead times that the rest of us have, right? So there's just trying to forecast this, plan this.
Sean Trauschke: Obviously, making sure that you've got access capabilities and capacity from a generation and transmission standpoint to serve that. That takes a lot of time. It takes time to create.
Speaker Change: and then do it in a thoughtful way. Obviously making sure that you've got access, capabilities and capacity from a generation and transmission standpoint to serve that, that takes time to create.
Sean Trauschke: And then I would say the last point is to make sure that you've got the right regulatory construct, such that all the costs and expenses are shared equitably across your right classes. Okay, great. That's very helpful. Thanks so much. Take care, Travis.
Speaker Change: And then I would say the last point is to make sure that you've got the right regulatory constructs such that all the costs and expenses are shared equitably across your rate classes.
Speaker Change: Okay, great. That's very helpful. Thanks so much.
Operator: As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced.
Speaker Change: As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. Our next question comes from Paul Fremont with Bladenburg, Fahlman & Co. Your line is now open.
Paul Fremont: Our next question comes from Paul Fremont with Landberg, Falman, and Co. Your line is now open.
Paul Fremont: Hey guys, congratulations. I guess my first question is the energy efficiency filing that you guys just made. Is that reflected in the DSM numbers that you provided in the last IRP, or is that incremental to that? That's reflective of those numbers as well. That's consistent.
Paul Fremont: Hey guys, congratulations. I guess my first question is the energy efficiency filing that you guys just made, is that reflected in the DSM numbers that you provided in the last IRP or is that incremental to that?
Sean Trauschke: Okay, and then I guess if I look at the IRP and the deficiency in terms of capacity. In the past, you guys have indicated that you've got concerns in terms of bill inflation and that you're looking to do maybe sort of 100 megawatts of additional construction per year. Has that changed at all, or do you expect that you would end up building a significantly higher portion of the capacity shortfall that you were projecting in your 24 IRP?
Speaker Change: Okay, and then I guess if I look at the IRP and the deficiency in terms of capacity,
Speaker Change: In the past, you guys have indicated
Speaker Change: that you've got concerns in terms of bill inflation and that you're looking to do...
Speaker Change: maybe sort of a hundred megawatts of additional construction per year. Has that changed at all or do you expect
Sean Trauschke: Yeah, thanks, Paul. This is Sean. I think I was expressing that 100 to 150 megawatts a year. That was my wishful thinking. I was really trying to make the point that our strategy is going to be to layer in these capacity additions continually over a number of years versus having it all come in and one very large investment and create that immediate impact. So that was really I was trying to just draw the distinction between we're going to do this incrementally over time. So obviously the energy efficiency and demand response efforts were making, not just in this new filing, but what we've done this year is incremental, is helpful.
Speaker Change: Yeah, thanks, Paul. This is Sean. You know, I think I was expressing that 100 to 150 megawatts a year. That was my.
Speaker Change: having it all come in in one very large investment and create that immediate impact from a customer standpoint. So that was really, I was trying to just draw the distinction between we're going to do this incrementally over time so obviously the energy efficiency and demand response.
Speaker Change: efforts we're making, not just in this new filing, but what we've done this year is incremental, is helpful. We're always looking at our existing fleet, you know, for whether there's an economic opportunity for a turbine upgrade or things like that where you can get incremental megawatts.
Sean Trauschke: We're always looking at our existing fleet, you know, for whether there's an economic opportunity for a turbine upgrade or things like that where you can get incremental megawatts. You've got repowering opportunities. So we're looking at all of those things in addition to adding new generation, but the goal is not to get in a position where we've got to make a very, very large investment in any one particular year. here.
Sean Trauschke: We're always looking at transmission opportunities to see if they add any value to our service territory, but nothing that is imminent that we're ready to announce.
Operator: Thank you. Our next question comes from Travis Miller with Morningstar Inc. Your line is now open.
Speaker Change: You've got repowering opportunities. So we're looking at all of those things in addition to...
Sean Trauschke: Okay, so does that, I mean, does that mean that we should assume that some of that shortfall that's been identified in your IRP will go to third parties and not to OGE, or am I misunderstanding that? Well, I don't think you should assume that at all. It's my preference that we own this and that we operate it. One of the big learnings we took out of Winter Storm Yuri is where we had difficulty was where we were relying on others. And so we think we're pretty good at this, and it's our intent to own those and operate those.
Travis Miller: Good morning. Thank you. Morning. Yeah, sticking on the load growth popular subjects here. Can you remind us what the load growth or long-term load growth is on that 5 to 7% earnings?
Speaker Change: Okay, so does that, I mean, does that mean that we should assume that some of that shortfall that's been identified in your IRP will go to third parties and not to OGE, or am I misunderstanding that?
Brian Buckler: Sure. Hey Travis, it's Brian. Good morning.
Speaker Change: One of the big learnings we took out of Winter Storm Uri is...
Sean Trauschke: What I would suggest to you, there's a lot of assumptions in the IRP; some were conservative, some were probably, as we look back, maybe too aggressive. Nevertheless, when we complete the RFPs, we'll communicate all that, and you'll see it. But what I'm trying to convey is we're not waiting on the IRP. We're being proactive; we're working on these capacity reductions in terms of energy efficiency and demand response, and we're continually looking to get additional megawatts out of the existing assets we own today. So, I mean, if I look at the 600 megawatts of shortfall that were identified in your IRP that were incremental to sort of the projects that you've identified so far, is it safe then to assume that you would expect to construct all of that yourself?
Speaker Change: What I would suggest to you, there's a lot of assumptions in the RFPs. Some were conservative, some were probably, as we look back, maybe too aggressive. Nevertheless, when we complete the RFPs, we'll communicate all that and you'll...
Brian Buckler: You know, it's a great question because, obviously, 6% load growth year-to-date is remarkable. And, you know, it's certainly a testament to the business-friendly environment in Oklahoma and Arkansas and the dedication of our employees to drive that economic development and our T&E employees and Generation employees to connect it and keep the lights on. So we're very excited about it. What we had in our base plan, the 5 to 7 percent, and Alex asked a question earlier, we're going to continue to target 5 to 7, and with the tailwinds, we hope to hit somewhere towards the higher end of that range.
Brian Buckler: But with respect to load growth, I've pointed out greater than 2 percent is what we've said for 2025 and beyond. Obviously, there are tailwinds there to beat 2 percent, potentially substantially in some years. But as Sean mentioned, some of these large loads are a little unpredictable in timing and can be a bit spiky. But I think in all those years, 2025 through 2028, we feel, sitting here today, we feel really confident in beating that 2 percent. So we'll give them a couple more quarters, and we'll provide a more full update in February.
Brian Buckler: If you were to go to 3% or 4% and saw that as sustainable low growth, what does that do to earnings in general? What's that kind of link, even if you can't quantify it qualitatively? 2% move earnings growth, 1% long-term earnings growth, 1% stuff like that.
Brian Buckler: Yeah, you know, the way I think about it, and a good sensitivity to carry around in your pocket, maybe, is that a 1% incremental load across the board equates to about 5 cents of EPS. And perhaps even more importantly, you know, that equates to about a half percent reduction in customer rates. So that's really helpful as we go into our rate cases. It frees up, of course, more capital to deploy in the T&E business or in generation assets. But those are some rough numbers that I hope will help you.
Travis Miller: Yeah, that's great. Thanks a lot.
Travis Miller: And then one quick high-level question. What do you see right now as the biggest hurdle to connecting some of these large loads, whether it's manufacturing or data centers? Is it regulatory, is it system access? What's the big hurdle that you're seeing as you're trying to hook up more of this, especially with C&I loads?
Sean Trauschke: Yeah, I think as you think about some of these significant load opportunities, you know, obviously, these large loads, these large facilities, they have similar supply chain lead times that the rest of us have, right? So it's just trying to forecast this, plan this, and then do it in a thoughtful way. Obviously, making sure that you've got access capabilities and capacity from a generation and transmission standpoint to serve that, that takes time to create. And then, I would say, the last point is to make sure that you've got the right regulatory constructs such that all of the costs and expenses are shared equitably across your rate class.
Travis Miller: Okay, great. That's very helpful. Thanks so much. Take care, Travis.
Operator: As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. Our next question comes from Paul Fremont with Bladenberg, Fahlman & Co. Your line is now open.
Paul Fremont: Hey guys, congratulations. I guess my first question is about the energy efficiency filing that you guys just made. Is that reflected in the DSM numbers that you provided in the last IRP, or is that incremental?
Sean Trauschke: That's reflective of those numbers as well. It's consistent.
Paul Fremont: Okay, and then I guess if I look at the IRP and the deficiency in terms of capacity, in the past, you guys have indicated that you've got concerns in terms of bill inflation and that you're looking to do maybe sort of 100 megawatts of additional construction per year. Has that changed at all? Or do you expect that you would end up building a significantly higher portion of the capacity shortfall that you were projecting in your 24 IRP?
Sean Trauschke: We would expect to own all of that ourselves. Yes. Okay. Great.
Speaker Change: We would expect to own all of that ourselves.
Paul Fremont: Thank you very much. Right.
Sean Trauschke: Yeah, thanks, Paul. This is Sean.
Operator: Thank you, Paul. I'm showing no further questions at this time.
Sean Trauschke: You know, I think I was expressing that 100 to 150 megawatts a year. That was my wishful thinking. You know, I was really trying to make the point that our strategy is going to be to layer in these capacity additions continually over a number of years versus having it all come in with one very large investment and create that immediate impact from a customer standpoint. So that was really, I was trying to just draw the distinction between how we're going to do this incrementally over time.
Sean Trauschke: So, obviously, the energy efficiency and demand response efforts we're making, not just in this new filing, but what we've done this year are helpful. We're always looking at our existing fleet, you know, for whether there's an economic opportunity for a turbine upgrade or things like that, where you can get incremental megawatts. You've got repowering opportunities, so we're looking at all of those things in addition to, you know, adding new generation. But the goal is not to get in a position where we've got to make a very, very large investment in any one particular year.
Sean Trauschke: I'm showing no further questions at this time. I would now like to turn it back to Sean Trotsky for closing remarks.
Paul Fremont: Okay, so does that mean that we should assume that some of that shortfall that's been identified in your IRP will go to third parties and not to OGE, or am I misunderstanding that?
Sean Trauschke: Well, I don't think you should assume that at all. It's my preference that we own this and that we operate it. One of the big learnings we took out of Winter Storm Yuri was where we had difficulty was when we were relying on others. And so we think we're pretty good at this, and it's our intention to own those and operate them. What I would suggest to you is that there are a lot of assumptions in the IRP. Some were conservative, some were probably, as we look back, maybe too aggressive.
Sean Trauschke: Nevertheless, when we complete the RFPs, we'll communicate all that, and you'll see it. But what I'm trying to convey is we're not waiting on the IRPs. We're being proactive. We're working on these capacity reductions in terms of energy efficiency and demand response, and we're continually looking to get additional megawatts out of the existing assets we own today.
Speaker Change: Right, thank you Paul. I'm showing no further questions at this time. I would now like to turn it back to Sean Trauschke for closing remarks.
Sean Trauschke: I would now like to turn it back to Sean Trotsky for closing remarks. Thank you, Hope. And I just want to thank everybody for your interest and your engagement on the call today.
Paul Fremont: So, I mean, if I look at the 600 megawatts of shortfall that were identified in your IRP that were incremental to sort of the projects that you've identified so far, is it safe then to assume that you would expect to construct all of that yourself? We would expect to own all of them.
Sean Trauschke: We would expect to own all of that ourselves.
Paul Fremont: Great. Thank you very much.
Operator: All right. Thank you, Paul.
Sean Trauschke: Well, thank you, Hope, and I just want to thank everybody for your interest and your engagement on the call today, and I hope you all have a wonderful day. Thank you.
Sean Trauschke: Thank you, Hope, and I just want to thank everybody for your interest and your engagement on the call today, and I hope you all have a wonderful day. Thank you.
Operator: And I hope you all have a wonderful day. Thank you. Thank you for your participation in today's conference.
Operator: Thank you for your participation in today's conference. This does conclude the conference.
Operator: This does conclude the program.
Operator: You may now disconnect.