Q2 2024 FirstEnergy Corp Earnings Call
Operator: Hello, and welcome to the FirstEnergy Corp. second quarter 2024 earnings conference call. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Irene Prezelj, Vice President, Investor Relations, and Communications. Please go ahead, Irene.
Hello, and welcome to the Firstenergy Corp, second quarter 2024 earnings Conference call.
Speaker Change: Mind you. This conference is being recorded it.
Speaker Change: It is now my pleasure to turn the call over to Irene to preserve Vice President Investor Relations and Communications. Please go ahead Irene.
Irene M. Prezelj: Thank you. Good morning, everyone, and welcome to FirstEnergy's second quarter 2024 Earnings Review. Our President and Chief Executive Officer, Brian Tierney, will lead our call today, and he will be joined by John Taylor, our Senior Vice President and Chief Financial Officer. Our earnings release, presentation slides, and related financial information are available on our website at FirstEnergyCorp.com. Today's discussion will include the use of non-GAAP financial measures in forward-looking statements. Factors that could cause our results to differ materially from these forward-looking statements can be found in our SEC filings. The appendix of today's presentation includes supplemental information along with the reconciliation of non-GAAP financial measures. Now, it's my pleasure to turn the call over to Brian. Thank you, Irene. Good morning, everyone.
Irene: Thank you good morning, everyone and welcome to first Energy's second quarter 2024 earnings review, our President and Chief Executive Officer, Brian Tierney will lead our call today and he will be joined by John Taylor, Our senior Vice President and Chief Financial Officer.
Speaker Change: Our earnings release presentation slides and related financial information are available on our website at Firstenergy Corp Dotcom.
As discussed and will include the use of non-GAAP financial measures and forward looking statements.
Speaker Change: Factors that could cause our results to differ materially from these forward looking statements can be found in our SEC filings. The appendix of today's presentation includes supplemental information along with the reconciliation of non-GAAP financial measures now, it's my pleasure to turn the call over to Brian.
Brian X. Tierney: Thank you for joining us today and for your interest in FirstEnergy. Today, I will review our financial performance and highlights for the second quarter, as well as our progress in executing our business plan. I'll also provide updates on recent regulatory and legacy issue developments, discuss trends we are seeing in the industry, and review the value proposition we offer our shareholders. Looking at our second quarter results, gap earnings were $0.08 per share in the second quarter of 2024, compared to $0.41 per share last year. We recorded a number of special items that impacted second quarter gap results, which John will address in a few minutes.
Brian: Thank you Irene good morning, everyone. Thank you for joining us today and for your interest in Firstenergy.
Brian X. Tierney: Operating earnings for the quarter were $0.56 per share versus $0.47 per share last year, an increase of 19 percent. Additionally, positively impacting second quarter operating earnings were rate adjustments and associated investments to better serve our customers. Customer demand was also a positive impact for the quarter, with weather-adjusted residential and commercial sales up four and 7%, respectively. However, these positive impacts were partially offset by higher planned operations and maintenance expenses and expected dilution from the 30% sale of FET. The items driving growth for the quarter point to the expected trend of improving utility earnings quality. Our capital investments to improve the customer experience increased 22% for the first six months of the year.
Brian X. Tierney: Today, I will review, our financial performance and the highlights for the second quarter as well as our progress executing our business plan.
Brian: I'll also provide updates on recent regulatory and legacy issue developments discuss trends, we are seeing in the industry and reviewed the value proposition we offer our shareholders.
Brian: Looking at our second quarter results GAAP earnings were <unk> <unk> per share in the second quarter of 2024 compared to 41 per share last year.
We recorded a number of special items that impacted second quarter, GAAP results, which John will address in a few minutes.
John: Operating earnings for the quarter were <unk> 56 per share versus 47 per share last year, an increase of 19%.
John Taylor: Positively impacting second quarter operating earnings were rate adjustments and associated investments to better serve our customers.
John Taylor: Customer demand was also a positive impact for the quarter with weather adjusted residential and commercial sales up four and 7% respectively.
John Taylor: These positive impacts were partially offset by higher planned operations and maintenance expenses and.
John Taylor: And expected dilution from the 30% sale of S E T.
The items driving growth for the quarter point to the expected trend of improving utility earnings quality.
Speaker Change: Our capital investments to improve the customer experience increased 22% for the first six months of the year.
Brian X. Tierney: This is reflective of our improved balance sheet that enables our energized 365 capital plan. We are executing well in 2024 and are on track to achieve the goals we've outlined. Today, we are reaffirming our 2024 Operating Earnings Guidance Range of $2.61 per share to $2.81 per share. Additionally, we are reaffirming our 2024 CapEx plan of $4.3 billion versus $3.7 billion in 2023, and we are reaffirming our six to eight percent long-term annual operating earnings growth.
Speaker Change: This is reflective of our improved balance sheet that enables our energized $3 65 capital plan.
Speaker Change: We are executing well in 2024 and are on track to achieve the goals we've outlined.
Speaker Change: Today, we are reaffirming our 2024 operating earnings guidance range of $2 61 per share to $2 81 per share.
Speaker Change: We are reaffirming our 2020 for Capex plan of $4 3 billion versus $3 7 billion in 2023.
Speaker Change: And we are reaffirming our 6% to 8% long term annual operating earnings growth rate.
Brian X. Tierney: June 1st marked my one-year anniversary with FirstEnergy. Our employees have made a significant amount of progress in the last year, positioning the company for success. From an operations standpoint, we have organized FirstEnergy into four new segments representing our five major businesses.
Speaker Change: June 1st marked my one year anniversary with Firstenergy.
Speaker Change: Our employees have made a significant amount of progress in the last year positioning the company for success.
Speaker Change: From an operation standpoint, we have organized firstenergy into four new segments, representing our five major businesses.
Brian X. Tierney: We have restructured the company into a strong operating company model and recruited external and promoted internal executives to lead these businesses. These changes put leadership, responsibility, and decision-making closer to the customer. We are investing in our people by engaging with our unions to enact mid-cycle pay adjustments to help ensure we are paying competitive wages to our representative workers. We started an effort to hire journey-level line workers to better serve our customers, and we are forming a new apprenticeship program to further support a skilled and well-trained workforce to serve our customers going forward.
Speaker Change: We have restructured the company into a strong operating company model and recruited external and promoted internal executives to lead these businesses.
Speaker Change: These changes put leadership responsibility and decision making closer to the customer.
Speaker Change: We are investing in our people by engaging with our unions to enact mid cycle pay adjustments to help ensure we are paying competitive wages to our representative workforce.
Speaker Change: We started an effort to hire journey level line workers to better serve our customers and we are forming a new apprenticeship program to further support our skilled and well trained workforce to serve our customers going forward.
Brian X. Tierney: Regarding capital investment, we initiated our new five-year, $26 billion capital investment program, Energize 365, to enable the energy transition and improve reliability in the customer experience. Energize 365 represents a 44% increase in investment over our previous five-year plan. On the regulatory front, we concluded constructive regulatory engagements in Maryland, New Jersey, and West Virginia, representing 35% of FirstEnergy's rate base. In Ohio, we currently have three traditional rape proceedings in flight.
Speaker Change: Regarding capital investment, we initiated our new five year $26 billion capital investment program energized $3 65 to enable the energy transition and improve reliability and the customer experience.
Speaker Change: <unk> 365 represents a 44% increase in investment over our previous five year plan.
Speaker Change: On the regulatory front, we concluded constructive regulatory engagements in Maryland, New Jersey, and West, Virginia, representing 35% of Firstenergy is rate base.
Speaker Change: In Ohio, we currently have three traditional rate proceedings in flight.
Brian X. Tierney: We received a constructive order in May for our ESP-5 case, but one that left a number of unresolved issues. We have asked for rehearing on those issues and are seeking to obtain more clarity during this phase. We filed a partial settlement agreement in our GridMod 2 case in April focused on deploying automated meters for all of our customers. Hearings concluded on this non-controversial issue on July 2nd, and we are anticipating an order in the fourth quarter.
Speaker Change: We received a constructive order in May for E. S. P. Five case, but one that left a number of unresolved issues.
Speaker Change: We have asked for a rehearing on those issues and are seeking to obtain more clarity during this phase.
Speaker Change: We filed a partial settlement agreement in our grid Mod to case in April focused on deploying automated meters for all of our customers.
Speaker Change: Hearings concluded on this noncontroversial issue on July 2nd and we are anticipating an order in the fourth quarter.
Brian X. Tierney: We filed our base rate case in late May, requesting a 10.8% ROE and an average equity ratio of approximately 55%. We will be updating that filing today to reflect changes from the ESP-5 order and other updates. We expect this case to continue well into 2025.
Speaker Change: We filed our base rate case in late May requesting a 10, 8% Roe.
Speaker Change: And in average equity ratio of approximately 55%, we will be updating that filing today to reflect changes from the ESP five water and other updates. We expect this case to continue well into 2025.
Brian X. Tierney: In Pennsylvania, we filed a base rate case in early April requesting a $502 million rate adjustment, including an 11.3% ROE and an equity ratio of 53.8%. As is customary in Pennsylvania, we will engage with intervening parties in an effort to reach a settlement prior to the scheduled hearings in mid-August. New rates are expected to be effective January 1st, 2025. Also, in Pennsylvania, we filed our Long-Term Infrastructure Investment Plan 3 on July 22.
Speaker Change: In Pennsylvania, we filed a base rate case in early April requesting of $502 million rate adjustment, including an 11, 3% Roe.
Speaker Change: And an equity ratio of 53, 8%.
Speaker Change: As is customary in Pennsylvania, we will engage with intervening parties in an effort to reach a settlement prior to the scheduled hearings in mid August <unk>.
Speaker Change: New rates are expected to be effective January one of 2025.
Speaker Change: Also in Pennsylvania, we filed our long term infrastructure investment plan three on July 22nd.
Brian X. Tierney: This five-year plan will result in approximately $1.6 billion in investments to support enhanced reliability. The proposed LTIP 3 is about twice the investment of the prior plan and demonstrates our ability to invest our strong balance sheet for the benefit of our customers. Finally, in New Jersey, we are currently in settlement discussions for our Energize New Jersey plan, which was filed in November and updated in February. This is a $935 million plan designed to upgrade Jersey Central Power & Light's electric grid infrastructure, using modern technology and smart devices to help reduce the size and duration of outages.
Speaker Change: This five year plan will result in approximately $1 $6 billion in investments to support enhanced reliability.
Speaker Change: The proposed L. Tip three is about twice the investment of the prior plan and demonstrates our ability to invest our strong balance sheet for the benefit of our customers.
Speaker Change: Finally in New Jersey, we are currently in settlement discussions for energized New Jersey plan, which was filed in November and updated in February.
Speaker Change: This is a 93 $935 million plan designed to upgrade Jersey Central power and light electric grid infrastructure, using modern technology and smart devices to help reduce the size and duration of outages.
Brian X. Tierney: We are currently in settlement discussions and hope to reach a constructive outcome. From a financial standpoint, the strides Stride's FirstEnergy made over the past year to improve its balance sheet were nothing short of remarkable. On March 25th, the company closed its transaction to sell 30% of FET. This was the final stage of a multi-year $7 billion equity raise that has transformed the future prospects of the company. On July 17th, the company received the last $1.2 billion of the $3.5 billion sale.
Speaker Change: We are currently in settlement discussions and hope to reach a constructive outcome.
Speaker Change: From a financial standpoint, the strides firstenergy made over the past year to improve its balance sheet were nothing short of remarkable on.
Speaker Change: On March 25th the company closed its transaction to sell 30% of S. E T.
Speaker Change: This was the final transaction of a multi year $7 billion equity raise that has transformed the future prospects of the company.
Speaker Change: On July 17th the company received the last $1.2 billion of the $3 5 billion dollar sale.
Brian X. Tierney: This cash has been used to pay down short and long-term debt and re-equitize our operating companies. Rating agencies have taken notice, with all three rating FirstEnergy Corp's senior unsecured rating as investment grade, and S&P and Fitch retaining positive outlooks. Last week, S&P increased FET's Senior Unsecured Rating from BBB- to BBB+ and retains its positive outlook. This two-notch upgrade reflects FET's enhancements in liquidity, governance, and cash management practices, and places FET's Senior Unsecured Credit Rating at or above the ratings of our fully regulated utilities.
Speaker Change: This cash has been used to pay down short and long term debt and re <unk> our operating companies.
Speaker Change: Rating agencies have taken notice with all three rating Firstenergy Corp's senior unsecured rating as investment grade and S&P and Fitch retaining positive outlooks.
Speaker Change: Last week S&P increased <unk> senior unsecured rating from Triple B minus to Triple B, plus and retains its positive outlook.
Speaker Change: This two notch upgrade reflects <unk> enhancements and liquidity governance, and cash management practices and places <unk> senior unsecured credit rating at or above the ratings of our fully regulated utilities.
Brian X. Tierney: This significantly strengthened balance sheet represents a major transformation for FirstEnergy, as well as a significant differentiator for many of our peers. It is on the basis of this balance sheet that we were able to introduce Energize 365 and make the investments needed to enable the energy transition and improve reliability and the customer experience. Many of our peers still have to raise significant amounts of equity to continue to grow or will have to issue large debt volumes at higher rates. FirstEnergy does not have to do either.
Speaker Change: This significantly strengthened balance sheet represents a major transformation for firstenergy as well as a significant differentiator from many of our peers. It.
Speaker Change: It is on the basis of this balance sheet that we were able to introduce energized $3 65, and make the investments needed to enable the energy transition and improve reliability and the customer experience.
Speaker Change: Many of our peers still have to raise significant amounts of equity to continue to grow or we'll have to issue large debt volumes at higher rates first.
Speaker Change: First energy does not have to do either the.
Brian X. Tierney: The balance sheet component of our transformation is complete. We are now focused on executing our operating and regulatory plans for the benefit of our customers. Turning to slide 9, let's talk about data. We are getting a fair number of load study requests from data center developers across our service area. Large load studies for this type of development have more than doubled from last year.
Speaker Change: The balance sheet component of our transformation is complete we are now focused on executing our operating and regulatory plans for the benefit of our customers.
Speaker Change: Turning to slide nine let's talk about data centers, we are getting a fair number of load study requests from data center developers across our service area.
Speaker Change: Large load studies for this type of development have more than doubled from last year.
Brian X. Tierney: We are fortunate that in much of our service territory, we have excess transmission capacity to serve this and other economic development priorities. This capacity comes from previous manufacturing, processing, and generating facilities. We are also participating in the PJM open windows related to Dennett data center and other load. We were successful last year in the Window 3 RTIP solicitation process, and we'll be submitting proposals for the current. Generation resource adequacy has become a very hot topic over the past year. It appears that load growth and baseload generating retirement could outpace dispatchable generating resource additions. As you know, in four of our five states, we are wires-only utilities.
Speaker Change: We are fortunate that our much of our service territory, we have access excess transmission capacity to serve this and other economic development priorities.
Speaker Change: This capacity comes from previous manufacturing processing and generating facilities.
Speaker Change: We are also participating in the PJM open windows related to Dennis datacenter and other load growth. We were successful last year in the window three our tip solicitation process and will be submitting proposals for the current one.
Speaker Change: Generation resource adequacy has become a very hot topic over the past year.
Speaker Change: It appears that load growth and baseload generating retirements could outpace dispatch able generating resource additions.
Speaker Change: As you know in four of our five states. We are wires only utilities, we are working with customers states and other interested parties to help ensure there is adequate capacity to meet growing load and enable the energy transition.
Brian X. Tierney: We are working with customers, states, and other interested parties to help ensure there is adequate capacity to meet growing load and enable the energy transition. Finally, regarding potential retail tariff changes. We are reviewing our current tariffs and think there is enough flexibility to allow us to negotiate terms for us to serve new loads and, at the same time, maintain existing customer protection. We need to be able to serve all loads affordably. If we find the need for future tariff adjustments, we will make them on a state-by-state basis.
Speaker Change: Finally regarding potential retail tariff changes.
Speaker Change: We are reviewing our current tariffs and think there is enough flexibility to allow us to negotiate terms for us to serve new loads and at the same time maintain existing customer protections, we need to be able to serve all loads affordably.
Speaker Change: If we find the need for future tariff adjustments, we will file them on a state by state basis.
Brian X. Tierney: During the second quarter, we made significant progress resolving legacy issues. On July 21, the U.S. Attorney's Office for the Southern District of Ohio filed a status report confirming that FirstEnergy successfully completed the obligations it was required to perform for a three-year period under the Deferred Prosecution Agreement, including remediation measures and the implementation of a compliance and ethics program. As a result, the reporting requirements related to those obligations have ended.
Speaker Change: During the second quarter, we made significant progress resolving legacy issues.
Speaker Change: On July 21, the U S Attorney's office for the Southern District of Ohio filed a status report confirming that Firstenergy successfully completed the obligations. It was required to perform for three year period under the deferred prosecution agreement, including remediation measures and the implementation of our compliance and ethics program.
Speaker Change: Yeah.
Speaker Change: As a result, the reporting requirements related to those obligations have ended.
Brian X. Tierney: As provided under the DPA, we will continue to fully cooperate with the DOJ on other outstanding matters, and we will continue other reporting obligations. This was an important step as we put the past behind us and move forward as a stronger company with a robust culture of ethics, integrity, and compliance. We have reached an agreement in principle with the SEC staff, subject to the approval of the Commission, which would settle the SEC's security claims against FirstEnergy. The proposed settlement is based on the facts set forth in the DPA. We have recorded a reserve of $100 million for this settlement.
Speaker Change: As provided under the DPA, we will continue to fully cooperate with the Doj on other outstanding matters, and we will continue other reporting obligations.
Speaker Change: This was an important step as we put the past behind us and move forward as a stronger company with a robust culture of ethics integrity and compliance.
Speaker Change: We have reached an agreement in principle with the SEC staff subject to the approval of the commission, which would settle the EC security claims against Firstenergy. The proposed settlement is based on the fact set forth in the DPA.
Speaker Change: We have recorded a reserve of $100 million for this settlement.
Speaker Change: Similarly, we are in the final stages of a resolution with the Ohio organized crime investigations Commission.
Brian X. Tierney: Similarly, we are in the final stages of a resolution with the Ohio Organized Crime Investigations Committee. The resolution is expected to include a non-prosecution agreement based on the facts in the DPA and is expected to resolve the Ohio Attorney General's civil case against FirstEnergy. We have recorded a reserve of $19.5 million in anticipation of resolving both Ohio matters.
Speaker Change: The resolution is expected to include a non prosecution agreement based on the facts and the DPA and is expected to resolve the Ohio Attorney General's Civil case against Firstenergy.
Speaker Change: We have recorded a reserve of $19 $5 million in anticipation of resolving both Ohio matters.
Brian X. Tierney: The three docketed cases related to these legacy issues continue to move forward at the PUCO. An audit report is due on August 28th on the Political and Charitable Spending, discovery continues, and a hearing is scheduled for October 9th on the Corporate Separation. Discovery is ongoing with a hearing scheduled for February 3rd on the Rider DMR-DCR audit. We continue to cooperate in these audits and appreciate that these cases are the appropriate forum for review of this activity and not our business-as-usual rate.
Speaker Change: The three docket of cases related to these legacy issues continue to move forward at the <unk>.
Speaker Change: And audit report is due on August 28th on the political and charitable spending review.
Speaker Change: Discovery continues and hearing is scheduled for October 9th on the corporate separation review.
Speaker Change: Discovery is ongoing with a hearing scheduled for February 3rd on the rider DMR Slash D C. Our audit.
Speaker Change: We continue to cooperate and these audits and appreciate that these cases are the appropriate form for a review of this activity and not our business as usual rate cases.
Brian X. Tierney: Let's take a moment to review FirstEnergy's value proposition to shareholders. Our 6-8% operating earnings growth rate is predicated on an average annual growth rate and rate base of 9%. Our ability to invest in our system for the benefit of our customers is enabled by our strong balance. We have the need, opportunity, and means to make the necessary investments to enable the energy transition and improve reliability and the customer experience. FirstEnergy has an attractive, low-risk profile that supports solid BBB credit metrics.
Speaker Change: Let's take a moment to review Firstenergy is value proposition to shareholders.
Speaker Change: Our 6% to 8% operating earnings growth rate is predicated on an average annual growth in rate base of 9%.
Speaker Change: Our ability to invest in our system for the benefit of our customers is enabled by our strong balance sheet, we have the need opportunity and means to make the necessary investments to enable the energy transition and improve reliability and the customer experience.
FirstEnergy: Firstenergy has an attractive low risk profile that supports solid triple B credit metrics, we are targeting a 14% to 15% <unk> to debt profile over the horizon and do not anticipate incremental equity needs for our energized $3 65 investment plan beyond our employee benefit programs.
Brian X. Tierney: We are targeting a 14 to 15% FFO to debt profile over the horizon and do not anticipate incremental equity needs for our Energize 365 investment plan beyond our employee benefit profile. The increase in traditional utility earnings means that our earnings quality has improved, and our customer affordability is expected to remain strong for the foreseeable future. Our Long-Term Annual Operating earnings growth rate, combined with our dividend, represents a total shareholder return proposition of 10 to 12 percent.
Speaker Change: The increase of traditional utility earnings means that our earnings quality has improved and our customer affordability is expected to remain strong for the foreseeable future.
Speaker Change: Our long term annual operating.
Speaker Change: Earnings growth rate combined with our dividend represents a total shareholder return proposition of 10% to 12%.
Brian X. Tierney: We have made significant progress in strengthening our balance sheet, restructuring our business, putting legacy issues behind us, and focusing on our operational, regulatory, and financial plan. The men and women of FirstEnergy are singularly focused on executing that plan and serving our customers.
Speaker Change: We have made significant progress on strengthening our balance sheet restructuring our business, putting legacy issues behind us and focusing on our operational regulatory and financial plans.
Speaker Change: The men and women of Firstenergy are singularly focused on that execution and serving our customers.
Brian X. Tierney: Before I turn the call over to John, I would like to mark two significant management transitions for FirstEnergy. Two executives have recently notified me of their decision to retire after many years of service to the company. Chris Walker, our Chief Human Resources Officer, will be retiring with nearly 39 years of service. I would like to thank Chris personally for all she has done for me over the past year and also thank her for her many years of dedicated service on behalf of our employees. We owe Chris a debt of gratitude and wish her well in retirement.
Speaker Change: Before I turn the call over to John I would like to Mark two significant management transitions for Firstenergy to.
Speaker Change: Two executives have recently notified us of their decision to retire after many years of service to the company.
Speaker Change: Chris Walker, our Chief Human Resources Officer will be retiring with nearly 39 years of service I would like to thank Chris personally for all she has done for me over the past year and also thank her for many years of dedicated service on behalf of our employees, we owe Chris a debt of gratitude and wish her well in retirement.
Speaker Change: After more than 40 years of service Irene, Brazil has decided to retire.
Brian X. Tierney: Many of you have gotten to know Irene as our Head of Investor Relations and Communication. For many years, she has been the face of the company to investors and the public alike. We are grateful to Irene for her leadership and dedication to serving our employees, investors, customers, and the public. We wish her the best going forward. With that, I will turn the call over to John. Thank you, Brian. And good morning, everyone.
Speaker Change: Many of you have gotten to know Irene as our head of Investor Relations and communications.
Speaker Change: For many years Irene has been the face of the company to investors and the public alike.
Speaker Change: We are grateful to Irene for her leadership and dedication to serving our employees <unk>.
Speaker Change: Investors customers and the public we wish her the best going forward.
Speaker Change: With that I will turn the call over to John.
John Taylor: I also want to extend my sincere gratitude and best wishes to Chris and Irene. They have been great to work with over the years and have always been there for me and the employees of the company. I wish them every bit of happiness in their retirement. Today, I'll review our financial performance, discuss economic and customer trends, and provide an update on our regulatory and financial initiatives. Let's start by reviewing the larger special items that impacted our second quarter gap results. These include increased asset retirement obligations recognized in connection with the planned transfer of a legacy impoundment site to a third party and the impact of the new EPA Legacy Coal Combustion Residuals.
John Taylor: Thank you, Brian and good morning, everyone. I also want to extend my sincere gratitude and best wishes to Chris and Irene.
John Taylor: They have been great to work with over the years and have always been there for me and the employees of the company I wish them every bit of happiness in their retirement.
Speaker Change: Today, I'll review, our financial performance discuss economic and customer trends and provide an update on our regulatory and financial initiatives.
John Taylor: Cost associated with redeeming high-cost debt using the proceeds from the FET transaction. Charges connected to the anticipated resolution of the OOCIC and SEC investigations, partially offset by the receipt of insurance proceeds associated with the shareholder derivative lawsuit settlement, and Regulatory Charges resulting from a commitment in the Ohio ESP-5. We continue to see strong execution on our Energize 365 capital investment program, solid financial discipline, and a culture of continuous improvement. And because of that, we delivered second quarter operating earnings of $0.56 per share, which is above the midpoint of our guidance and compares to $0.47 per share for the second quarter of 2023.
Speaker Change: Let's start by reviewing the largest special items that impacted our second quarter GAAP results.
John Taylor: These include increased asset retirement obligations recognized in connection with the planned transfer of the legacy impoundment site to a third party and.
John Taylor: And the impact from the new EPA legacy coal combustion residuals rule.
Speaker Change: Cost associated with redeeming high cost debt using the proceeds from the transaction.
Speaker Change: <unk> connected to the anticipated resolution of the OCI and SEC investigations, partially offset by the receipt of insurance proceeds associated with the shareholder derivative lawsuit settlement and.
Speaker Change: And regulatory charges, resulting from a commitment and the Ohio ESP five order.
Speaker Change: We continue to see strong execution on our energized 365 capital investment program.
Speaker Change: Solid financial discipline, and a culture of continuous improvement.
Speaker Change: And because of that we delivered second quarter operating earnings of 56 per share, which is above the midpoint of our guidance and compares to <unk> 47 per share for the second quarter of 2023.
John Taylor: The results primarily reflect new base rates in our integrated business, strong invested capital across all of our businesses in formula rate investment programs, and significantly higher year-over-year customer demand. Looking at our segment results for the quarter, in our distribution business, operating earnings were $0.22 per share compared to $0.24 per share in the second quarter of last year. This reflects planned increases in operating expenses we discussed previously, partially offset by higher customer demand and rate-based growth in formula rate investment programs, and a lower customer rate credit in Ohio as part of our 2021 earnings test settlement. In our integrated segment, operating earnings were $0.21 per share versus $0.12 per share in the second quarter of last year.
Speaker Change: The results primarily reflect new base rates in our integrated business strong invested capital across all of our businesses and formula rate investment programs and significantly higher year over year customer demand.
Speaker Change: Looking at our segment results for the quarter in our distribution business operating earnings were <unk> 22 per share compared to 24 per share in the second quarter of last year.
Speaker Change: This reflects planned increases in operating expenses, we have discussed previously partially offset by higher customer demand and rate base growth and formula rate investment programs and a lower customer rate credit in Ohio as part of our 2021 earnings test settlement.
Speaker Change: And our integrated segment operating earnings were <unk> 21 per share versus <unk> 12 per share in the second quarter of last year.
John Taylor: Results primarily reflect new base rates in Maryland, West Virginia, and New Jersey that went into effect over the past eight months as part of the Rate-Based Growth and Distribution and Transmission Formula Rate Investment Program, and the impact of higher customer demand, partially offset by a higher effective tax. Operating earnings in our standalone transmission segment were $0.14 per share compared to $0.18 per share in the second quarter of 2023. Year-over-year rate base increased more than 10% as a result of our transmission investment program, but this was offset by the dilution from the 30% interest sale of FirstEnergy Transmission LLC to Brookfield, which closed in March of this year. Finally, in our corporate segment, losses were $0.01 per share versus $0.07 per share in the second quarter of 2023.
Speaker Change: Results, primarily reflect new base rates in Maryland, West, Virginia, and New Jersey that went into effect over the past eight months rate base growth and distribution and transmission formula rate investment programs.
Speaker Change: And the impact of higher customer demand, partially offset by a higher effective tax rate.
Speaker Change: Operating earnings in our Standalone transmission segment were <unk> 14 per share compared to <unk> 18 per share in the second quarter of 2023.
Speaker Change: Year over year rate base increase more than 10% as a result of our transmission investment program, but this was offset by the dilution from the 30% interest sale of Firstenergy transmission LLC to Brookfield, which was closed in March of this year.
Speaker Change: Finally in our corporate segment losses were <unk> <unk> per share versus <unk> <unk> per share in the second quarter of 2023.
John Taylor: This improvement is the result of ongoing lower financing costs from the redemption of high-cost debt. More detail on our second quarter and year-to-date results can be found in the Strategic and Financial Highlights document we posted to our IR website yesterday afternoon. Looking ahead, we are providing guidance of 85 to 95 cents per share for the third quarter, which reflects the continued impacts of new base rates in our integrated business, continued rate based growth and higher customer demand, partially offset by a lower planned earnings contribution from Signal, And as Brian mentioned earlier, we are reaffirming our 2024 guidance of $2.61 to $2.81 per share, as well as our long-term 6% to 8% annual operating earnings growth.
Speaker Change: This improvement is the result of ongoing lower financing costs for the <unk> from the redemption of high cost debt.
Speaker Change: More detail on our second quarter and year to date results can be found in the strategic and financial highlights document we posted to our IR website yesterday afternoon.
Speaker Change: Looking ahead, we are providing guidance of 85 to 95 per share for the third quarter, which reflects the continued impacts of new base rates in our integrated business continued rate base growth and higher customer demand, partially offset by a lower planned earnings contribution from signal peak.
Speaker Change: And as Brian mentioned earlier, we are reaffirming our 2024 guidance of $2 61 to $2 81 per share as well as our long term, 6% to 8% annual operating earnings growth rate.
John Taylor: In his remarks, Brian shared a look at the trends related to data center growth in our service territory. I want to expand on that by taking a quick look at some of the broader economic and load activity in our region. Recent economic trends over the past year are positive in our region, including GDP that has averaged just over 2% for the past year and employment growth of just under 1.5% over the past 12 months.
Speaker Change: In his remarks, Brian shared and look at the trends related to data center growth in our service territory I want to expand on that by taking a quick look at some of the broader economic and load activity in our region.
Speaker Change: Recent economic trends over the past year are positive in our region, including GDP that has averaged just over 2% for the past year and employment growth of just under one 5% over the past 12 months.
John Taylor: And from a customer demand perspective, we're seeing positive weather-adjusted customer demand of 1% over the last 12 months, primarily resulting from increases of 1.3% in the commercial and 1.1% in the industrial customer growth, with demand in the auto and services sectors of 14% and 7%, respectively. And so we believe we're in a great position to serve our customers, and our investment program will adjust as needed to ensure capacity and reliability. From a financing plan perspective, earlier this month, we received the remaining $1.2 billion in proceeds from the $3.5 billion 30% FDT interest sale to. You'll recall that we received the initial proceeds of $2.3 billion when the transaction closed in March. The remaining $1.2 billion in interest-bearing notes that were extinguished with Brookfield's final payment on July 7.
Speaker Change: And from a customer demand perspective, we're seeing positive weather adjusted customer demand of 1% over the last 12 months, primarily resulting from increases of one 3% in the commercial and one 1% in the industrial customer classes with demand in the auto and services sectors up 14% and 7% respectively.
Speaker Change: <unk>.
Speaker Change: And so we're we believe we're in a great position to serve our customers and our investment program, we'll adjust as needed to ensure capacity and reliable service.
Speaker Change: From a financing plan perspective earlier. This month, we received the remaining $1 2 billion in proceeds from the $3 5 billion, 30% equity interest sale to Brookfield.
Speaker Change: Youll recall that we received the initial proceeds of $2 $3 billion. When the transaction closed in March the remaining $1 2 billion and an interest bearing notes that were extinguished with Brookfield final payment on July 17.
John Taylor: We're deploying those proceeds in a credit-accretive manner consistent with our plan to further transform our balance sheet and support our Energize 365 grid investment program. As we've discussed, the sale completes a series of transactions over the last two and a half years that resulted in nearly $7 billion in equity capital at an equivalent share price of $87 a share, or 36 times trailing P.E. In total, these proceeds were used for over $3 billion in high-cost debt redemptions at FECorp, including the remaining $460 million of the 2031 bonds in the second quarter.
Speaker Change: We're deploying those proceeds in a credit accretive manner consistent with our plan to further transform our balance sheet and support our energized $3 65 grid investment program.
Speaker Change: As we've discussed the sale completes a series of transactions over the last two and a half years that resulted in nearly $7 billion in equity capital at an equivalent share price of $87 a share or <unk> 36 times trailing p/e multiple.
Speaker Change: In total these proceeds were used for over $3 billion in high cost debt redemptions at Etsy Corp, including the remaining $460 million of that.
Speaker Change: 1031 bonds in the second quarter.
John Taylor: Nearly $2 billion in utility long-term debt redemptions and $2 billion to pay off short-term debt that would have otherwise been financed with long-term debt at our utility. Following the closing of this transaction in March, our corporate credit rating was upgraded by Moody's and S&P, restoring it to investment grade at all three rating agencies. The credit ratings at our subsidiaries were also upgraded, and this momentum continued last week as S&P further upgraded FET and its subsidiaries.
Speaker Change: Nearly $2 billion in utility long term debt redemptions and $2 billion to pay off short term debt that would have otherwise been financed with long term debt at our utilities.
Speaker Change: Following the closing of this transaction in March our corporate credit rating was upgraded by Moody's and S&P restoring it to investment grade at all three rating agencies.
Speaker Change: The credit ratings at our Subsidiaries' subsidiaries were also upgraded and this momentum continued last week as S&P further upgraded.
Speaker Change: <unk> and its subsidiaries.
John Taylor: Going forward, our focus is on continued execution of our plan, achieving credit-supported regulatory outcomes, Moving Past Legacy Issues, and Financing Our Robust Investment Plan in a Credit-Supported, consistent with a BBB flat credit profile. Additionally, earlier this month, we launched a request for proposal for a second pension lift-out transaction to eliminate the remaining $700 million and Non-Regulated Pension. If this transaction is successful, it would eliminate all non-regulated pension liabilities, further reduce pension volatility, and improve the quality of earnings. Recall that in December of last year, we executed the first pension lift-out transaction, removing approximately $720 million of pension liability at 95 cents on the dollar.
Speaker Change: Going forward. Our focus is on continued execution of our plan achieving credit supported regulatory outcomes.
Speaker Change: <unk> past legacy issues and financing our robust investment plan and a credit supportive manner consistent with a triple B flat credit profile.
Speaker Change: Additionally earlier this month, we launched a request for proposal for a second pension lift out transaction to eliminate the remaining $700 million.
Speaker Change: And nonregulated pension liability.
Speaker Change: This transaction is successful would eliminate all nonregulated pension liability.
Speaker Change: Reduced pension volatility and improve the quality of earnings of the company.
Speaker Change: Recall that in December of last year, we executed the first pension lift out transaction, removing approximately $720 million of pension liability.
Speaker Change: At 95 cents on the dollar.
John Taylor: Turning now to recent regulatory developments, In Ohio, we filed our base rate review on May 31st. The request was for a $94 million rate adjustment on a rate base of $4.3 billion. A 10.8% proposed return on equity and a 55% equity capitalization ratio, based on a 2024 test. The rate adjustment supports recovery investments in the distribution system and customer experience enhancements while keeping rates affordable for customers. The case includes recovery of investments in Riders DCR and AMI, which includes the GridMod 1 capital investments and base rates, and resetting those riders to zero.
Speaker Change: Turning now to recent regulatory regulatory activity.
John Taylor: It also includes a request to change the recovery of pension costs from service cost only to total pension, including previously incurred actuarial losses, as well as a request for a pension tracking mechanism to avoid volatility. And it includes recovery of other costs previously incurred, including major storm restoration costs and a program to convert streetlights to LED. Today, the Ohio companies will file an update to the base rate case review filing with an updated rate.
Speaker Change: In Ohio, We filed our base rate review on May 31.
Speaker Change: The request was for a $94 million rate adjustment on rate base of $4 3 billion.
Speaker Change: 10 for 10, 8% proposed return on equity and a 55% equity capitalization ratio based on the 2024 test year.
Speaker Change: The rate adjustments supports recovery invest investments in the distribution system and customer experience enhancements, while keeping rates affordable for customers.
Speaker Change: The case includes recovery of investments and writers VCR in Ami, which includes the grid mind, one capital investments in base rates and resetting those writers to zero.
Speaker Change: It also includes a request to change the recovery of pension costs from service cost only to total pension cost, including previously incurred actuarial losses.
Speaker Change: As well as a request request for pension tracking mechanism to avoid volatility in the future.
Speaker Change: And it includes recovery of other cost previously incurred included including the major storm restoration costs and a program to convert street lights to Leds.
Speaker Change: Today, the Ohio companies will file an update to the base rate case review filing with an updated rate request. The update is necessary to include the impacts addressed in the may 15th ESP five water and to update 2020 for test year financial information through May 31 to reflect actual operating results.
John Taylor: The update is necessary to include the impacts addressed in the May 15th ESP-5 order and to update 2024 test year financial information through May 31st to reflect actual. Our initial request represents an estimated overall bill impact for typical residential customers ranging from a rate decrease of 1.3% in Toledo-Edison to a 3.5% increase in CEI, or an average increase of 1.4% across. Also, in Ohio, on May 15, the PUCO issued an order The order extended Rider-DCR through the conclusion of the base rate but excluded certain investments from recovery in Ryder.
Speaker Change: Our initial request represents an estimated overall bill impact for typical residential customers ranging from a rate decrease.
Speaker Change: Of one, 3% and Toledo Edison to a three 5% increase in Ci or an average increase of one 4% across Ohio.
Speaker Change: Also in Ohio on May 15th the PUC issued an order approving our ESP five with modifications, which became effective June one.
Speaker Change: The order extended rider <unk> through the conclusion of the base rate case, but excluded certain investments from recovery and rider ECR.
John Taylor: The order also provided for recovery of vegetation management expenses for the first two years of the ESM, and Prospective Deferral of Major Storms While we appreciate the support for key terms of our ESP-5 in the near, the order did not provide clarity regarding these key terms of the ESP for the entire five-year period, with many directed to the base rate case for resolution. We subsequently filed an application for rehearing, seeking greater certainty regarding key terms, as well as proposed modifications, which included shortening the ESP-5 term to three years, providing full recovery of investments in the DCR through the conclusion of the base rate case and other proposals that preserve the economic value of the order for customers.
Speaker Change: The order also provided for recovery of vegetation management expenses for the first two years of the ESP.
Speaker Change: And prospective deferral of major storm expenses, while we appreciate the support for key terms of our ESP five in the near term. The order did not provide clarity regarding these on these key terms of the ESP for the entire five year period with many direct it to the base rate case for resolution.
Speaker Change: We subsequently filed an application for rehearing seeking grady greater certainty regarding key terms as well as proposed modifications, which included shortening the ESP five turn to three years.
Speaker Change: <unk> full recovery of investments in the <unk> through the conclusion of the base rate case, and other proposals that preserve the economic value of the order for customers.
John Taylor: Earlier this month, the PUCO granted the applications for rehearing filed by all parties for the purposes of further consideration. This step gives the PUCO more time to make its final decision, because there is no statutory deadline for the.
Speaker Change: Earlier this month, the PUC granted the applications for rehearing, Bob by all parties for the purposes of further consideration. This step gives the PUC has more time to make its final decision. There is no statutory deadline for the decision.
John Taylor: This summer, hearings were held in our Ohio Grid Mod 2 settlement, and we anticipate an order during the fourth quarter. In Pennsylvania, earlier this month, we filed the third phase of our long-term infrastructure improvement plan, known as LTIP 3, which is part of our Energize 365 investment plan. LTAT3 includes a total projected investment of $1.6 billion over five years. Building on the projects completed in LTIP1 and LTIP2, the third phase of the program supplements reliability and best practices and includes both grid modernization and system resiliency projects.
Speaker Change: This summer hearings were held in our Ohio grid Mod to settlement and we anticipate an order during the fourth quarter.
Speaker Change: In Pennsylvania earlier this month, we filed a third phase of our long term infrastructure improvement plan known as <unk> III, which is part of our energized $3 65 investment program.
Speaker Change: We also had three includes a total projected investments of $1 $6 billion over five years.
Speaker Change: Building on the projects completed in <unk>, one and <unk> two the third phase of the program supplements reliability investments.
Speaker Change: It includes both grid modernization and system resiliency projects. This.
John Taylor: This includes target investments to accelerate infrastructure improvements and help enhance service reliability for more than 2 million customers in the state while remaining focused on affordability. Investments are recovered through a Distribution System Improvement Charge, or DISC, based on the actual capital structure and the benchmark ROE, which is currently 9.8%.
Speaker Change: This includes targeted investments to accelerate infrastructure improvements and help enhance service reliability for the more for more than 2 million customers in the state while remaining focused on affordability.
Speaker Change: Investments are recovered through a distribution system improvement charge or disk based on actual capital structure in the benchmark ROE, which is currently nine 8%.
John Taylor: The cumulative average residential customer rate impact recovered through DISC is $2.88, or a 2% MQA, pending PUC approval. We expect capital deployment to begin in the first quarter of 2025, with disk revenues estimated to begin in the second quarter of 2020. Also in Pennsylvania, in mid-August, hearings will begin in our base rate review filed in April. As we discussed on last quarter's call, this is a request for a $502 million rate adjustment on a rate base of $7.2 billion, with an 11.3% proposed return on equity and a 53.8% equity capitalization.
Speaker Change: The cumulative average residential customer rate impact recover through disc is $2 88.
Speaker Change: Or a 2% increase.
Speaker Change: Pending PUC approval.
Speaker Change: We expect capital deployment to begin in the first quarter of 2025.
Speaker Change: With disk revenues estimated to begin in the second quarter of 2026.
Speaker Change: Also in Pennsylvania in mid August hearings will begin in our base rate review filed in April.
Speaker Change: As we discussed on last quarter's call. This is a request for $502 million rate adjustment on rate base of $7 2 billion.
Speaker Change: With an 11, 3% proposed return on equity and a 53, 8% equity capitalization ratio.
John Taylor: The review builds on our service reliability enhancements in Pennsylvania with additional investments in a smart, modern electric grid and a customer-focused program, while keeping rates comparable to other utilities. Key components include implementing a 10-year enhanced vegetation management program to reduce tree-caused outages, reduce outage restoration time, and reduce future maintenance costs. Recovery of Costs Associated with Major Storms, COVID-19, and LED Street Light Conversion. Changing pension recovery from average cash contributions to traditional pension expense, including previously recognized actuarial losses.
Keith: The review built on our service reliability enhancements in Pennsylvania with additional investments in a smart modern electric grid and customer focused programs, while keeping rates comparable to other utilities in the state Keith.
Keith: Key components include implementing a 10 year enhanced vegetation management program to reduce tree caused outages reduced outage restoration time and reduce future maintenance costs.
Keith: Recovery of costs associated with major storms, COVID-19, and led streetlight conversions.
Speaker Change: <unk> pension recovery from average cash contributions to traditional pension expense, including previously recognized actuarial losses.
John Taylor: The review also includes a blended federal statutory tax rate of approximately 27 percent but also continues to provide customer savings from previous legislative changes to federal and state tax. Additionally, the application proposes a pension OPEB normalization mechanism, Tracking Deferred Differences Between Actual and Test Year Expense to Reduce Volatility from the Future. And, as Brian mentioned, we are engaging with the intervening parties in an effort to reach settlement prior to the scheduled hearings in mid-August.
Speaker Change: The review also includes a blended federal statutory tax rate of approximately 27%.
Speaker Change: But also continues to provide customer savings from previous legislative changes to federal and state tax rates.
Speaker Change: Additionally, the application proposes a pension and OPEC normalization mechanism to track and deferred differences between actual and test your expense to reduce volatility from the pension.
Speaker Change: And as Brian mentioned, we are engaging with intervening parties in an effort to reach settlement prior to.
Brian X. Tierney: Prior to the scheduled hearings in mid August.
Speaker Change: Yes.
John Taylor: Finally, in addition to the settlement discussions on our Energize New Jersey infrastructure improvement proposal, we are also engaged in settlement discussions for our New Jersey Energy Efficiency and Conservation Plan. This plan, which was filed with the BPU in December 2023, covers the period from January 1st, 2025 through June 30th, 2027, with a proposed budget of approximately $964 million. It consists of a portfolio of programs addressing energy efficiency, peak demand reduction, and building decarbonization, with Recovery of Lost Revenues that provides a return on the investment. The BPU suspended the procedural schedule on July 1st in light of these settlements.
Speaker Change: Finally in addition to the settlement discussions on our Energize New Jersey infrastructure improvement proposal. We are also engaged in settlement discussions for our New Jersey energy efficiency and conservation plan.
Speaker Change: This plan, which was filed with the <unk> in December 2023 covers the period from January one 2025 through June 32027, with a proposed budget of approximately $964 million.
Speaker Change: It consists of a portfolio of programs addressing energy efficiency peak demand reduction and building de carbonization with recovery of lost revenues and provides a return on the investments.
Speaker Change: The Btu suspended suspended the procedural schedule July one in light of these settlement discussions are final Btu decision and order is required no later than October 15th of this year.
John Taylor: And the final BPU decision and order is required no later than October 15th of this year. So we're making good progress in 2024. We're executing well. We have a strong strategy and opportunities to continue our positive momentum and growth. Thank you for your time today, and I'll open the call to your questions. Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone.
Speaker Change: So we're making good progress in 2024, we're executing well.
Speaker Change: We have a strong strategy and opportunities to continue our positive momentum and growth.
Speaker Change: You for your time today I'll now open the call to your questions.
Speaker Change: Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.
John Taylor: Confirmation, tell when to indicate your line is in the question. You may press star 2 if you'd like to remove your question from the..., participants using speaker equipment, it may be necessary to pick up your handset before pressing the, One moment, please, while we poll.
Kate: Information tailwind to Kate your line is in the question queue you.
Kate: You May press star two if you'd like to remove your question from the queue.
Kate: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Kate: Please while we poll for questions.
Operator: Our first question comes from Shahriar Pourreza with Guggenheim Partners. Please proceed with your question. Hey guys, good morning. Good morning, Brian.
Shar <unk>: Our first question comes from Shar <unk> with Guggenheim Partners. Please proceed with your question.
Shar <unk>: Hey, guys good morning.
Shar <unk>: Good morning, Shar good morning, Brian just a.
Shahriar Pourreza: Just a couple quick ones here. Brian, just some of the growth numbers out there. Obviously, you're highlighting the opportunities around data centers and kind of large energy-intensive consumers. You have transmission capacity to take on the load, but you still have this kind of 1% load growth figure out there. You know, a lot of your peers have been raising expectations, some are quantifying the impacts, I guess, what's holding you back?
Shar <unk>: Just a couple of quick ones here.
Shar <unk>: Brian just on the growth numbers out there, obviously, you're highlighting the opportunities around data centers and kind of large energy intensive consumers you have transmission capacity to take on the loan but you still have this kind of 1% load growth figure out there a lot of your peers had been raising expectations somewhat quantifying the impacts I guess what is.
Speaker Change: <unk>, you back and how and when are you thinking about updating investors around potential upsides there. Thanks.
Brian X. Tierney: And how and when are you thinking about updating investors around potential upsides? Look, we're seeing some things that are positive from the data center side, some of those still a few years out. We're seeing some positive impacts from adoption of EVs in places like Maryland and New Jersey. But overall, we're still seeing modest, steady load growth and not seeing it knock out of the park at this point. Okay, perfect.
Speaker Change: Thank you for that show, we're going through our evaluation of our future load growth rate right now.
Speaker Change: Look we're seeing some things that are positive from the data center side. Some of those still a few years out we're seeing some positive impact impacts from adoption of Evs in places like Maryland, and New Jersey, but overall, we're still seeing modest steady load growth.
Speaker Change: I'm not seeing it knock out of the park at this point.
Speaker Change: There's been so much talk about data center shar.
Speaker Change: When we look at even look at it even if we get the load growth. They are generally taking service at a transmission level, which isn't as earnings impactful today it could be rate impactful in a positive way to our existing customers as we spread some of that existing capacity over more units, but the real opportunity.
Speaker Change: <unk> for us around data centers has been around things like PJM open window, three where we were awarded about $800 million worth of opportunity to invest in the transmission system.
Speaker Change: To serve some of that data center load thats in that Northern Virginia Panhandle of Maryland.
Speaker Change: Areas, So that's where we've seen more impact from the data centers, but.
Speaker Change: More to be seen and I anticipate.
Speaker Change: Probably around <unk> will be able to update you on the load growth.
Brian X. Tierney: And then lastly, and maybe somewhat related, it's been noisy around sort of co-located nuclear data center deals and PJM. I mean, some of your current states, like Pennsylvania and Ohio, could see similar deals, like we saw with Susquehanna on AWS. I guess why haven't you filed a FERC petition around the Susquehanna ISA docket when most of your peers have, and what's your stance on the current complaint out there? Thank you, Discussions there.
Speaker Change: Perfect and then lastly, and maybe somewhat related it's been noisy around sort of co located nuclear data center deals in PJM I mean, some of your current states like in Pennsylvania, and Ohio could see similar deals like we saw with Susquehanna on AWS I guess why haven't you filed at FERC around the Susquehanna ISI docket when.
Speaker Change: Most of your peers have and what's your stance on the current complaint out there. Thanks.
Speaker Change: Yes, so thank you for that question.
Speaker Change: Look I think those are things that FERC will figure out in time.
Speaker Change: Not as business impactful to us at this point, given our service territory and where we are.
Speaker Change: And I'm interested to see what FERC has to say about that I'm.
Speaker Change: Im not sure what their tools are to be able to block something like that what their view is on whether or not it takes net capacity out of the market and what that would do for existing customers.
Speaker Change: We just saw some pretty high prints on the PJM capacity auction yesterday.
Speaker Change: I think people are looking to that mechanism to solve generation resource adequacy I'm not sure. It really does right. That's one print in that auction that happened yesterday, there was virtually no new generating capacity was offered and I just don't think that a one year print.
Speaker Change: Or a two year print or a three year print is going to solve that problem and attract significant increased investment into the PJM region. So it's something we need to figure out it's important for our customers. We're actively engaged in that discussion.
Speaker Change: But I don't think the PJM auction is the place where that issue is going to be solved.
Speaker Change: Got it Brian and just just a quick follow up on that you're referring to potentially owning certain amount of peaking assets and rates is that what the discussions are.
Speaker Change: So the issue is how could we help that happen.
Speaker Change: And in certain of our states today, we're not allowed to own capacity in West Virginia, We do in Maryland under certain circumstances, we could in Ohio under certain circumstances, we could but in other states. We would have to have legal challenges to allow that to happen and if our states were to come to us and say, we would like you to invest in.
Speaker Change: Some form of dispatch of coal generation for the life of the asset at a regulated return those are the things that we think would would benefit our customers of other people aren't adding the capacity and today theyre not and those are discussions that we think would be constructive on behalf of our customers.
Speaker Change: Okay perfect Fantastic guys, we'll see you soon thank you again thanks.
Speaker Change: Thanks sure.
Speaker Change: Our next question comes from Steve Fleishman with Wolfe Research. Please proceed with your question.
Steven Isaac Fleishman: Yes, hi, good morning.
Steven Isaac Fleishman: First I don't know if Irene started working there when she was 10 years old but.
Speaker Change: Congrats tirade on 40 years in her retirement.
Speaker Change: Yeah.
Speaker Change: I guess <unk>.
Speaker Change: First question just on the Pennsylvania, you mentioned.
Speaker Change: Youre getting close to settlement.
Brian X. Tierney: Just any sense yet on kind of the likelihood that you might be able to reach a settlement in Pennsylvania? So thanks for that, Steve. Those talks are in early discussions, so I guess the benefit you're seeking is to kind of keep it shorter. You'll have less time. Here's what happened.
Speaker Change: Discussions there just any.
Speaker Change: Yet on kind of the likelihood that you might be able to to reach a settlement in Pennsylvania.
Speaker Change: So thanks for that Steve those talks are in early discussions.
Speaker Change: And.
Speaker Change: We would always like to reach a settlement and present that to the commission, but I'd say early stages at this point and we're optimistic that we'll be able to get something done hopefully.
Speaker Change: Before the hearings in August.
Speaker Change: Okay.
Speaker Change: And then just on the go into Ohio on the ESP five.
Speaker Change: I guess the benefit youre seeking to to kind of keep it shorter.
Speaker Change: <unk> it sounds like the benefit of that is that.
Speaker Change: You have.
Speaker Change: You'll have less time.
Speaker Change: So kind of just be there with an ESP.
Speaker Change: With this limited definition or do you really want to just get better definition.
Speaker Change: Over the life of the ESP if some of these clauses.
Brian X. Tierney: The commission has punted some key aspects of ESP-5 to the base rate case, and so it's hard for us to accept a five-year plan when there's uncertainty beyond the current rate case. And so if we were to time those things a little better and get more certainty on them, it's easier for us to accept an ESP-5 over a five-year term with more certainty. But it's really hard for us to know what's going to happen to certain of those items that got punted after we get a resolution in the base rate case. Okay, and just, I know you mentioned that you are, you know, I guess far enough on some of the Ohio issues to... Yeah, so thank you for that, Steve.
Speaker Change: Here's what happened.
Speaker Change: The commission punted some key aspects of ESP five to the base rate case.
Speaker Change: And so it's hard for us to accept a five year plan. When there is uncertainty beyond the current rate case, and so if we were to time those things up a little better and get more certainty on it it's easier for us to accept an ESP five over a five year term with more certainty, it's really hard for us to know what's going on.
Speaker Change #114: Happen to certain of those items that got planted after we get resolution in the base rate case got it Thats right and then obviously, it's your decision whether to accept an ESP or not so that's.
Speaker Change: Thats part of it.
Speaker Change: Got it great.
Speaker Change: Alright, Okay, and just I know you mentioned that.
Speaker Change: You are I guess far enough on some of the Ohio issues too.
Speaker Change: Two.
Speaker Change: Take a reserve on those this quarter just maybe you could just talk to.
Speaker Change: And then resolving the GPA two periods just could you maybe just talk to kind of what your overall take on the environment, there and how Firstenergy is these days.
Brian X. Tierney: We've, look, we've worked very, very hard to take responsibility for what happened in the past, make any payment and penalties that we need to and move on beyond that. The thing that was very positive this quarter was that on three of those issues, we made some really significant progress. I just want to follow up a little bit more on some of the earlier points on power prices here and given the rise in both capacity and energy prices.
Speaker Change: Yeah. So thank you for that Steve. We've look we've worked very very hard to take responsibility for what happened in the past.
Speaker Change: Make any payment and penalties that we need to and move on beyond that.
Speaker Change: That was very positive this quarter was in three of those issues. We made some real significant progress first there was the filing by the U S. Attorney's office for the Southern district of Ohio.
Speaker Change: Recognizing that the three year term of the DPA. It ended and that we've been fully compliant with the requirements.
Speaker Change: During that term second we were able to make progress on the OS CIC.
Speaker Change: And we were able to take a reserve for the amount that we think will be required to put that behind us.
Speaker Change: And then third we were able to make progress achieving an agreement in principle subject to commission approval with the SEC. So across all fronts, we're making real progress on putting those legacy issues behind us and focusing on the future and I think it's being well received.
Speaker Change: <unk> and all of those venues.
Speaker Change: Great. Thank you.
Speaker Change: Thank you Steve.
Speaker Change: Our next question comes from Jeremy Tonet with J P. Morgan Chase. Please proceed with your question.
Jeremy Bryan Tonet: Hi, good morning.
Jeremy: Good morning, Jeremy.
Jeremy Bryan Tonet: Just wanted to follow up a little bit more on some of the earlier point on on power prices and given the rise in both capacity and energy prices.
Speaker Change: Just wondering how you think about this impacts customers still headroom there and just.
Speaker Change: Do you see any potential efforts out there to kind of.
Speaker Change: Curb this.
Speaker Change: Could you share any thoughts on potential for state legislation to support new generation state to form a strategic reserve.
Brian X. Tierney: Multiple VIUs coming together for a larger consolidated IRP, greater FRR use, or just in general, do you see anything happening? Jeremy, you used just about every acronym we have in the industry in that question. That was amazing.
Speaker Change: Multiple via use coming together for our larger consolidated ERP greater fr Fr argue sort of just in general do you see anything happening.
Speaker Change: Tim higher prices.
Speaker Change: Jeremy you use just about every acronym we have in the industry in that question that was amazing.
Speaker Change: Yeah.
Brian X. Tierney: Here are some of the things that we're doing right now, right? It was late breaking news yesterday afternoon. So we're going to do a jurisdiction by jurisdiction analysis of the impact of a couple of things. One is the higher capacity print that we saw yesterday, but we also still have some energy prices in there that are reflective of the Ukrainian impact on gas prices and electricity prices in the United States. And some of those are rolling off at the same time that those higher capacity prices will be rolling in.
Jeremy Bryan Tonet: Here's some of the things that we're doing right now right. It was late breaking news yesterday afternoon. So we're going by a jurisdiction by jurisdiction analysis of the impact of a couple of things. One is the higher capacity print that we saw yesterday, but we also still have some energy prices in there that are reflective of.
Speaker Change: The.
Speaker Change: The Ukrainian impact.
Speaker Change: Impact on gas prices and electricity prices in the United States and some of those are rolling off at the same time those higher capacity prices will be rolling in so we're trying to determine right now in a jurisdiction by jurisdiction basis, how that will happen and what the impact to our customers would be in west Virginia, We think.
Brian X. Tierney: So we're trying to determine right now, on a jurisdiction by jurisdiction basis, how that will happen, and what the impact to our customers will be. In West Virginia, we think the impact will be kind of a wash. We have about the amount of capacity that our West Virginia customers need and are buying and selling at those amounts. We don't expect there to be a significant impact in the state of West Virginia. As we look forward to other states, right? We have. Hey, Jeremy, it's John.
Speaker Change: The impact will be kind of a wash we have about the amount of capacity that our west Virginia customers need and buying and selling at those amounts. We don't expect there to be a significant impact.
Speaker Change: In the state of West, Virginia, as we look forward to the other states that we have.
Speaker Change: What I would say among the most progressive energy policy States.
Speaker Change: In the country and among the most traditional as well so I think west.
Speaker Change: West Virginia has traditionally been responsive to being protocol, but also all of the above we've added some solar there recently and I'd like to see us in our next IRB, we might be able to add.
Speaker Change: Some combined cycle gas in West Virginia in addition to that.
Speaker Change: And then in some of the other states where wires only we're open to any construct that would allow us to invest in capacity on something that looks like a regulated basis. So if we were to have in Pennsylvania, and Ohio, something that looked like nice serta neper, whereas.
Speaker Change: Agency could buy.
Speaker Change: At long term.
Speaker Change: Capacity that they might hold an auction for that anyone competitive.
Speaker Change: Generators regulated generators could offer into that.
Speaker Change: Those auctions, if it looked like a regulated basis than we could.
Speaker Change: Offer at a price that would allow us something that looked like a regulated return.
Speaker Change: And allow us to recover on it on a pass through basis fuel and energy those are things that we'd be willing to do the thing we wouldn't be willing to do would be start competitive generation of our own that is something that we've recently come out of we paid a heavy price for that we've rebuilt our balance sheet.
Speaker Change: In the wake of that and Thats not a place that we're going to be going back to but other things other opportunities that could benefit our customers have the capacity that they need be responsive from a price standpoint are all things that are on the table and are all things, we're talking to our states about.
Speaker Change: Got it that's clear competitive generation been there done that.
Speaker Change: Yep.
Speaker Change: Just wanted to pivot a bit here smaller question. Just wondering if you could speak to the size of cost savings that you guys are expecting with some of the facility optimization moves you're making.
Speaker Change: Shrinking changing location, where those initiatives stand today and what can we expect for timing impact of that in other kind of cost saving initiatives on your radar.
John Taylor: I think we'll see some savings associated with, you know, for instance, getting out of the general office headquarters here in Akron and moving over to our own building. You know, but those savings, I would say, are fairly minimal in the grand scheme of things. Where we're really trying to focus our efforts on continuous improvement and taking cost out of the business is really around the productivity of our workforce, investing in infrastructure, data, and technology that will help us drive better decision making and faster decision making. And we have some pretty aggressive targets for the productivity of our workforce, so we can, you know, make sure that we get contractors off the property and do our work ourselves.
Speaker Change: Hey, Jeremy this is John.
John Taylor: I think we will see some savings associated with.
John Taylor: For instance, getting out of the General office headquarters here and accurate and moving over to an owned building.
John Taylor: But those savings I would say are fairly minimal in the Grand scheme of things, where we're really trying to focus our efforts on continuous improvement and taking cost out of the business is really around our productivity of our workforce investing in infrastructure and data and.
John Taylor: <unk> technology that will help us drive better decision, making faster decision, making and we have some pretty.
John Taylor: Aggressive targets on productivity of our workforce. So we can make.
Speaker Change: To make sure that we get contractors off the property that we do our work ourselves that's where the bulk of the savings are coming from and in fact, if you look over the last couple of years, we've done a pretty nice job of taking cost out with about $200 million of cost savings in 'twenty three of about 100 million of that was sustainable and we are targeting 70 million.
John Taylor: That's where the bulk of the savings are coming from. And in fact, if you look over the last couple of years, we've done a pretty nice job of taking costs out with about $200 million of cost savings in 2023, about $100 million of that was sustainable, and we're targeting $70 million of cost savings this year. So we'll continue to do what we can to offset inflation going forward, and that's part of our plan. Got it.
Speaker Change: A cost savings this year.
Speaker Change: So we will continue to do what we can to offset inflation going forward and that's part of our plan.
Brian X. Tierney: That's very helpful. And I just forgot to mention with my earlier question, if, as far as offshore wind is concerned, is that something that is, Thanks, Jeremy. Look, so thank you for the question, Nick. Look, I think it's interesting. I'd call yesterday's print the canary in the coal mine, and the canary didn't make it.
Speaker Change: Got it that's very helpful and just I forget to mention with my earlier question.
Speaker Change: As far as offshore wind is concerned.
Speaker Change: Is that anything that is.
Speaker Change: On your radar at all or really just kind of the transmission side just wanted to check on that.
Speaker Change: Tell you what our favorite part of offshore wind is it's the on land part and we are investing a significant amount of money to shore up the transmission system in new Jersey to enable there.
Speaker Change: Initiatives to have significant offshore wind come ashore.
Speaker Change: In our service territory and were making hundreds of millions of dollars of investments to enable that and thats. The part of offshore wind that we want to participate in.
Speaker Change: Understood I appreciate it thank you thanks.
Jeremy Bryan Tonet: Thanks, Jeremy.
Jeremy Bryan Tonet: Our next question comes from Nick Campanella with Barclays. Please proceed with your question.
Nicholas Joseph Campanella: Hey, good morning, Thanks for taking my questions.
Nicholas Joseph Campanella: I know a lot of talk good morning, I know a lot of talk on PJM, just I wanted to follow up on that Brian I know you said that one print.
Speaker Change: Is not a signal, but we'll have another one in December and my guess is that not much changes just given the lead times.
Speaker Change #106: To build that generation and I guess my question is is there a tipping point.
Speaker Change:
Speaker Change: It is truly a step change in the environment is there any need to reevaluate how you deploy capital are you very comfortable kind of where you are right now.
Speaker Change: So thank you for the question look I think it's interesting I'd call Yesterdays print the Canary in the coal mine.
Speaker Change: And the Canary didn't make it.
Speaker Change #143: If you look at what's happened with the IPP prices over the course of the year.
Brian X. Tierney: If you look at what's happened with IPP prices over the course of the year, they are all anticipating higher prices in the years going forward. If you look at the amount of new generation that cleared in the auction yesterday, according to PJM's auction report, it was like 100 megawatts, so essentially nil. The same in the auction prior to that.
Speaker Change: They are all anticipating.
Speaker Change: Higher prices in the years going forward.
Speaker Change: If you look at the amount of new generation.
Speaker Change: It cleared in the auction yesterday according to Pjm's.
Speaker Change: <unk> report it was like 100 megawatts, so essentially nil.
Speaker Change: Same in the auction prior to that it was about 300 megawatts again, not the right amount if people were to respond to yesterday's print.
Brian X. Tierney: It was about 300 megawatts, again not the right amount. If people were to respond to yesterday's print and say, yeah, I think it's a good idea to invest in baseload dispatchable generation and PJM, it would be six years before that capacity would come online. The reality is that we can increase load and build data centers almost immediately, whereas it takes years of planning, permitting, procurement, and construction to build a power plant.
Speaker Change: And so I think it's a good idea to invest in Baseload dispatch of coal generation in PJM. It would be six years before that capacity would come online. The reality is that we can increase load and build data centers.
Speaker Change: Almost immediately.
Speaker Change: And it takes years of planning permitting and procuring and construction to build a power plant. So.
Speaker Change: I think it's indicative of the future.
Speaker Change: But it certainly doesn't solve the problem so.
Brian X. Tierney: So I think it's indicative of the future, but it certainly doesn't solve the problem. So what we're going to do is what we need to do is enable energy transmission. You need a robust grid to be able to do that. PJM keeps opening these open windows.
Speaker Change #102: What we're going to do is what we need to do is enable the energy transmission you need a robust grid to be able to do that PJM keeps opening. These open windows. There's a current want to open that we will be.
Brian X. Tierney: There's a current one open that we will be submitting proposals to. We just had significant action that we won in the last one, and we'll continue to do that, and we're going to engage in the discussion constructively with our state regulators and customers to see if there's a way that we could deploy our balance sheet capacity for generation that looked regulated to us and our investors. But that's how we're viewing the lay of the land right now. I don't have the silver bullet.
Speaker Change: Submitting proposals too.
Speaker Change: <unk> had significant action that we want and the last one and we will continue to do that and we're going to engage in the discussion constructively.
Speaker Change: With our states regulators and customers to see if there's a way that we could do.
Speaker Change: Deploy our balance sheet capacity for generation that looked regulated like.
Speaker Change: To us and our investors, but that's.
Speaker Change: That's how we're viewing the lay of the land right now I don't have the silver bullet that's.
Speaker Change: Thats the solution that we will solve this tomorrow or in two years or three years, but we're engaged in that discussion I just don't think.
Brian X. Tierney: That's the solution that will solve this tomorrow or in two years or in three years. But we're engaged in that discussion. I just don't think the PJM construct is going to fix the issue, even if it sends some positive price signals. Hey, and thanks. I really appreciate your thoughts on all that. Hey, Nick, this is John.
Speaker Change: The PJM construct is going to fix the issue even if its send some positive price signals.
Speaker Change #101: Hey, Thanks, I really appreciate your thoughts on all that.
Speaker Change #109: And then you brought up the balance sheet capacity and one thing that we've noticed.
Speaker Change #111: Obviously, you've done a great job derisking the balance sheet. This year youre really not relying much on capital markets. This year either.
Speaker Change #100: I know you kind of are working towards another update maybe in the fall or later in the year just as you roll forward, presumably the Capex plan fees pressure higher and how you're kind of thinking about financing that isn't the plan that kind of continues to have.
Speaker Change #123: Sizable balance sheet capacity, when we can see now equity on a roll forward. Thank you.
John Taylor: So we'll work through that as we do our long-term plan and update the investment community and, you know, rating agencies. We're not there yet. If you look at where their thresholds are versus where our plan targets are, we do have some balance sheet capacity. I would say 4% of the CapEx program is probably in the right neighborhood. But there's going to be a lot of puts and takes as we think about the capital plan over the next, you know, five to 10 years that we'll have to consider.
Speaker Change: Hey, Nick this is John So we'll work through that as we do our long term plan and update the investment community in the.
John Taylor: Springtime or winter time of next year.
Speaker Change: I would tell you listen we got to balance a couple of different things.
Speaker Change #103: We want to be at a triple B flat credit rating with.
Speaker Change #103: Rating agencies, we're not there yet.
Speaker Change: If you look at where their thresholds are versus where our planned targets are we do have some balance sheet capacity I would say, 4% of the Capex program is probably in the right neighborhood, but theres going to be a lot of puts and takes as we think about the capital plan over the next.
Speaker Change: Five to 10 years that we'll have to consider.
Speaker Change: As a base capital that Youll have regulatory lag or is a formula rate transmission capital. Those are all things that are going to go into the mix, but we do have some balance sheet capacity, but I would probably peg it at less than 5%.
John Taylor: You know, is it base capital that you'll have regulatory lag, or is it formula rate transmission capital? Those are all things that are going to go into the mix. But we do have some balance sheet capacity, but I would probably peg it at less than 5%. This is a customer class that took a pretty hard hit after the COVID pandemic.
Speaker Change: Of the Capex program.
Speaker Change #139: That's really helpful. Appreciate that have a great day.
Doug: Thanks, Doug.
Speaker Change: Our next question comes from Carly Davenport with Goldman Sachs. Please proceed with your question.
Carly S. Davenport: Hey, good morning, Thanks, so much for taking my question.
Carly S. Davenport: Just wanted to quickly go back to the load growth piece.
Carly S. Davenport: Strong print across both commercial and residential customer classes. This quarter could you just talk a little bit about what's driving that and kind of how you see that evolving going forward.
Karla: Karla, Let me, let me start with residential I mean, we're just generally seeing at least this quarter higher average usage per customer across all of our jurisdictions jurisdictions, especially in areas like New Jersey, and Maryland, which have a much more progressive.
Karla: Energy policy with respect to electrification of vehicles or electrification of other industries.
Karla: We also continue to see.
Karla: Higher customer and growth in Maryland, given some of the economic activity that we're seeing in that part of our service territory. So thats really whats driving the residential growth for the quarter. If you look at commercial and commercial for US is our kind of our small and medium sized businesses.
Karla: This is a customer class it took a pretty hard hit after the Covid pandemic, we saw a pretty significant drop off and now we're starting to see some of that rebound and if you look at the last four quarters three of the four had been higher quarter over quarter, and it's getting closer to what I would call prepay.
John Taylor: We saw a pretty significant drop off, and now we're starting to see some of that rebound. And if you look at the last four quarters, three of the four have been higher quarter over quarter, and it's getting closer to what I would call pre-pandemic levels of usage. So those are really what are the drivers for the residential and commercial prints for the quarter. Those ideological issues or what have you, I mean, for whatever reason... Yeah, so Paul, you ask a politically fraught question.
Carly S. Davenport: <unk> level usage. So those are really what are the drivers for the residential and commercial print for the quarter.
Speaker Change #115: Okay I appreciate that I'll leave it there. Thank you.
Speaker Change #110: Thank you currently.
Speaker Change #110: Our next question comes from Michael Logan with Evercore ISI. Please proceed with your question.
Michael B. Lonegan: Hi, good morning, Thanks for taking my question.
Michael B. Lonegan: So <unk>.
Michael B. Lonegan: Ohio rate case, obviously, it's early on but just wondering if you see an opportunity for ultimately reaching a settlement there you've.
Speaker Change: Reached a partial settlement in grid mod to this year.
Speaker Change #119: Our settlement with the hospital six refunds credits a few years ago and now youre resolving some of the legacy issues in the state, but that being said ESP five there were some issues with that so I'm just wondering what your thoughts are about ultimately reaching a settlement there.
Speaker Change: Michael It's always our desire desire to reach a settlement in any of these rate cases. This one is something that I think is very much in its early stages will be <unk>.
Speaker Change: Filling our update to the rate case filing later today.
Speaker Change: And then of course, we'll be engaging with intervenors and other interested parties as we work our way through the balance of 2024 and well into 2025. So yes always want to reach a settlement always open to that and always striving to do that.
Speaker Change: In any case that we file.
Speaker Change #138: Got it great and then secondly for me obviously, the big Capex increase earlier this year the 44%.
Speaker Change #117: The expectation is that you'll file more regular rate cases, obviously you have the two big ones going on in Ohio, and Pennsylvania, right now and you recently reached settlements in your other states.
Speaker Change #108: Wondering how we should think about.
Speaker Change #120: The jurisdictions and timing of your next rate cases.
Speaker Change #125: So thank you for that as well Michael look I have the belief that a.
Michael: Well run and growing utility should be going in for regular rate cases, we have a strong balance sheet. We have energized $3 65, the capex plan that were pursuing.
Speaker Change #108: We have a significant amount of our capital is covered under <unk>.
Speaker Change #108: Riders and trackers, but I think a very regular interaction with.
Speaker Change #108: With our regulators is something that we should be doing regularly. So I think in most jurisdictions, we should be going into every two to three years at the Max and.
Speaker Change #108: And updating rates clearing out trackers and riders getting them reflected in base rates and then and then moving forward with those again. So I just think it's a hallmark of our growing utility that you should be regularly engaging with irregulars.
Speaker Change #124: Great. Thanks for taking my question.
Speaker Change #118: Thank you Michael.
Speaker Change #122: Our next question comes from Paul Patterson with Glen Rock Associates. Please proceed with your question.
Paul Patterson: Hey, good morning.
Paul Patterson: Morning, Paul.
Paul Patterson: Okay.
Speaker Change #121: I wanted to echo.
Speaker Change #108: Steve.
Speaker Change: Congratulations to Irene.
Speaker Change #148: First of all and then all of my questions have been answered but just.
Speaker Change: Just sort of back to the.
Speaker Change: Sort of the regulated or sort of.
Speaker Change: Procurement.
Speaker Change:
Speaker Change #126: Ideas that you were throwing out there I'm just wondering.
Speaker Change #126: What jurisdictions in Europe.
Speaker Change #132: Distribution only.
Speaker Change: <unk> service territories, do you think or.
Speaker Change #134: Or more receptive to that idea than than others sometimes.
Speaker Change #131: So as the hydrological issues. So we're happy for whatever reason some might be it is logical that something might be.
Speaker Change #131: So might be a little.
Speaker Change #133: More resistant or a little bit more receptive than others I was just thinking or any thoughts.
Speaker Change: About.
Speaker Change: In your discussions about who might be a little bit more open to that idea.
Brian X. Tierney: Look, I think the real need here in the near term is for baseload dispatchable generation, and we are ready, willing, and able to engage in all of our jurisdictions for anyone who would like to add that on a regulated basis. You know, West Virginia has really said to us that coal is important to them, but everything should be in the tool bag in West Virginia. We're willing to engage with them on that basis. Maryland and Ohio, under certain circumstances, we could add generation there, and Pennsylvania would need a legislative change.
Speaker Change: So Paul you ask a politically fraught question.
Paul Patterson: Look I think the real need here in the near term is for base load dispatch will.
Speaker Change: Generation.
Speaker Change #127: And we are ready willing and able to engage in all of our jurisdictions.
Speaker Change #136: For anyone who would like to add that.
Speaker Change: On a regulated type basis.
Speaker Change: West Virginia has has really said.
Speaker Change: The us that cole is important to them but.
Speaker Change: Everything should be in the tool bag in West, Virginia, we're willing to engage with them on that basis.
Speaker Change: Maryland.
Speaker Change: Ohio under certain circumstances.
Speaker Change: We could.
Speaker Change: We could add.
Speaker Change: Generation there in Pennsylvania would take a legislative change. So we are we are open to all and if they are open to us we'd be willing to engage on that regulated type basis and again.
Brian X. Tierney: So, you know, we are open to all, and if they're open to us, we'd be willing to engage on that regulated basis. And again, there are people that get upset and say, "Oh, you're going back to regulation." I don't think you have to go back to regulation. I think you can still have energy markets. I think you could still have retail choice where you have it today, but I also think you could have constructs like NYSERDA or NYPA where they could buy on behalf of the state's residents.
Speaker Change: There are people that get upset and say Oh youre going back to regulation I don't think you have to go back to regulation I think you can still have.
Speaker Change: Energy markets I think you can still have retail choice, where you have it today, but I also think you could have construct like nice nice serta or neper, where they could buy on behalf of the states.
Brian X. Tierney: And that doesn't have to be an end to competition, and they could even have auctions where all people could participate in that, utilities, independent power producers, and others. So for the people that say it has to be one or the other, I just don't think that's a valid premise.
Speaker Change: <unk> and that doesn't have to be in and the competition.
Speaker Change: And they could even have auctions, where all people could participate in that utilities independent power producers and others. So for the people that say it has to be one or the other.
Speaker Change #141: I just don't think that's a valid premise.
Speaker Change #112: Alright, great.
Speaker Change #147: Thanks, a lot.
Speaker Change #128: Oh great.
Speaker Change #128: Thank you Paul I appreciate it.
Speaker Change #149: Our next question is from Andrew Weisel with Scotiabank. Please proceed with your question.
Andrew Marc Weisel: Hi, good morning.
Andrew Marc Weisel: Also congratulate Irene on an incredible career and Chris I don't know you, but looking at the number of new leaders, who are joined in the last year I think you certainly deserve congratulations as well.
Speaker Change #128: Okay.
Speaker Change #130: Thank you for that.
Speaker Change #146: I'll pass it on.
Speaker Change #137: Couple of quick ones on the balance sheet.
Speaker Change #150: I know youre targeting 14% to 15% as I've noted that consistent with prior guidance are you still on track to reach that by yearend, where does that metric stand as of June 30 years. After the SEC proceeds and I see you're still reiterating equity needs of up to $100 million per year, you've taken about 120 million.
Speaker Change #116: Reserves should those turned into cash outflows would that ultimately require incremental equity is sort of a one timer or would that be able to or would you be able to satisfy that without more equity and I recognize the timing of that would be very uncertain, but maybe just some thoughts on that yes.
John Taylor: So we've made significant improvements in the metrics just So let me take GRIDMOD 2 first, Gregg. We anticipate an order in the fourth quarter of this year on the settlement that we proposed. So I hope to get that done this year, and as I said, we could start making those investments right away in the AMI. On NYSERDA, it would require legislation changes in all of our jurisdictions to make that happen, and then they would have to have a process where they would run an auction to do that.
Speaker Change #116: Yes, Andrew this is John So we've made significant improvements in the metrics just.
Speaker Change #116: If you look at where we are as of the trailing 630 numbers.
Speaker Change #116: Close to 200 basis points of improvement.
Speaker Change #116: A lot of that is coming from higher <unk>, but if you just look at our debt levels. There are about $2 billion below where they were this time last year I do think we're going to be a little bit challenged this year to hit the 14% a lot of that is because of the SEC and oci's accrual if you were to back.
Speaker Change #116: Those out we would be closer to the 14%, but longer term, we're going to be a 14% to 15%.
Speaker Change #116: Yeah.
Speaker Change #116: Okay.
Speaker Change #145: Does that mean by next year or will it yes, yes.
Speaker Change #145: It would be next year it would be next year. So sometime like in probably the first second or third quarters of next year on a trailing basis, we would probably get to that 14% level.
Speaker Change #152: Okay, great. Thank you and then just a quick follow up remind me. If you were to do a pension lift out would that be cash or noncash.
Speaker Change #161: Well it would be funded through the pension plan it would be non cash to the company, but the pension plan would have to funded which would use the investments that it has on hand to fund that.
Speaker Change #135: Right, but it wouldn't.
Speaker Change #153: Wouldn't require external financing no no no. That's right. If you think about what we did in December we eliminated a $720 million liability by paying 95 cents on the dollar through the pension plan. So no no external financing to the company.
Speaker Change #142: Okay very good thank you so much.
Andrew: Thank you Andrew.
Gregg Gillander Orrill: Our next question comes from Greg <unk> with UBS. Please proceed with your question.
Greg: Thank you and thank you Irene I appreciate it.
Speaker Change #142: Just.
Greg: Couple of timing questions just on the potential construct of.
Greg: A nice Serta type agency what is the earliest do you think.
Speaker Change #156: Something like that could get started in in any of your states.
Speaker Change #159: And then just on grid Mod to I know you've got the partial settlement there what's your thinking on sort of the.
Speaker Change #142: The timing too.
Speaker Change #116: Get that done what has to be done there.
Greg: Let me take grid Mod to first Greg.
Greg: Anticipate an order in the fourth quarter of this year.
Speaker Change #158: The settlement that we proposed.
Greg: Hope to get that done.
Greg: Like I said this year and we could start making those investments right away on the Ami.
Greg: On the nice sort of it would require legislation changes.
Greg: And all of our jurisdictions to make that happen.
Greg: And then they would have to have a process, where they would run an auction too.
Speaker Change #116: To do that so.
Operator: So. Yep, thank you. Great, thanks for taking my questions. Thank you, Anthony.
Speaker Change #116: I'd say, it's it's not a short term process. It would require legislation change and then.
Speaker Change #116: Activation of that new entity.
Speaker Change #116: To do what it needs to do on behalf of its customers. So.
Speaker Change #116: Behalf.
Speaker Change #166: Residents of the state rather than customers.
Speaker Change #116: Important.
Speaker Change #116: Thing about that is it could be a structural change that could be a path forward rather than an auction to auction do I build <unk> build there would actually be a structure for how the state would procure it's incremental needs that could survive.
Speaker Change #116: Live auctions administrations, and the like and it could be truly sustainable and I think we need is a sustainable solution here, even if it's not a short term fix.
Speaker Change #116: Yep. Thank you.
Greg: Thank you Greg.
Greg: Our next question is from Anthony <unk> with Mizuho Securities. Please proceed with your question.
Anthony: Hey, Thanks for squeezing me in just one quick one Brian.
Brian X. Tierney: Talked about the PJM construct.
Speaker Change #157: It is now which struggled to attract new generation Canary in a coal mine all of this do you think as we're in this period, while they're trying to figure out how to incentivize new generation that could delay the economic growth or.
Speaker Change #157: Stall the economic growth or low growth that you should see it in the <unk>.
Speaker Change #157: <unk>.
Speaker Change #164: I don't.
Anthony: So Anthony.
Anthony: Obviously, we have capacity to use still.
Anthony: I think.
Speaker Change #116:
Speaker Change #160: We're still serving capacity, we're still adding load we still have transmission capacity to serve people.
Speaker Change #162: I think long term it could be a problem for economic development and load growth and I think that's why we need to solve it so it's not happening now.
Speaker Change #116: It could happen going forward and I think on a regional and statewide basis. That's why we need to think about this we can't seed our competitiveness to other regions because.
Speaker Change #116: Because we don't have the energy to serve them and it's our job to make sure that doesn't happen.
Speaker Change #116: Okay.
Speaker Change #165: Thanks for taking my questions.
Anthony: Thank you Anthony.
Speaker Change #163: We've reached the end of our question and answer session and ladies and gentlemen, does conclude today's teleconference and webcast. You may disconnect. Your lines at this time and have a wonderful day, we thank you for your participation.
Anthony: Okay.
Speaker Change #116: Yes.