Q3 2024 Edison International Earnings Call
Good afternoon.
Third quarter 2012.
For financial teleconference.
When we get to the question and answer.
A question press Star one.
Speaker Change: Today's call is being recorded I would now like.
Speaker Change: I turn the call over to Mr.
Speaker Change: Vice President of Investor Relations Mr. Ron.
Speaker Change: Begin your conference.
Ron: Thank you Sheila and welcome everyone. Our speakers today are president and Chief Executive Officer, Pedro Pizarro and execute a vice President and Chief Financial Officer Maria regarding also on the call are other members of the management team materials supporting today's call are available at Www Dot Edison Investor Dotcom leasing.
Speaker Change: <unk> Form 10-Q.
Speaker Change: Remarks from Pedro and Maria and the teleconference presentation.
Speaker Change: Moreover, we will distribute our regular business update presentation.
Speaker Change: During this call we will make forward looking statements about the outlook for Edison International and its subsidiaries.
Speaker Change: Actual results could differ materially from current expectations important.
Speaker Change: Important factors that could cause different themselves are set forth in our SEC.
Speaker Change: C filings. Please read these carefully the press.
With Asia includes certain outlook assumptions as well as reconciliation of non-GAAP measures.
Speaker Change: Get us GAAP measure during the question and answer session. Please limit yourself to one question and one follow up I will now turn the call over to Pedro well, Thanks, Sam and good afternoon, everyone.
Speaker Change: Edison International core earnings per share for third quarter 2024 was $1.51.
Speaker Change: Bringing year to date core EPS to $3.88 with this strong year to date performance, we are confident and narrowing our 2024 core EPS guidance to $4 80 to $5 <unk>.
Speaker Change: We remain confident in our ability to meet our 2025, EPS guidance and delivering a five to seven EPS CAGR through 2028.
My remarks today includes three important takeaways first SCE continues to demonstrate its ability to navigate the regulatory landscape and is in the final stages of two key regulatory proceedings, reaching a settlement agreement in the TK M cost recovery application and awaiting a proposed decision in the 2025 <unk>.
Speaker Change: <unk>, which will solidify our financial outlook through 2028.
Speaker Change: Second our team has achieved remarkable success over the last years, managing unprecedented external risks, making our operations more resilient and positioning us strongly for the growth ahead.
Speaker Change: Third we recently reaffirmed our net zero commitment in our latest white paper.
Speaker Change: Reaching net zero greenhouse gas emissions by 2045 is a core pillar of our climate related risk management.
Speaker Change: Starting with a couple of constructive updates on the regulatory front SCE is in the final stages of resolving the legacy wildfires.
Speaker Change: We have provided an update on page three.
Speaker Change: You saw that in August the utility reached an agreement with Cal advocates to settle the TK M application.
Once approved by the CPUC.
Speaker Change: Settlement with authorized recovery of 60% of the cost or $1 $6 billion.
Speaker Change: This settlement marks a significant milestone and it's a good compromise all around.
Speaker Change: Customers understates benefit from the demonstration of a strong regulatory framework and constructive negotiations with intervenors.
To you our owners.
Speaker Change: It is also another clear indication that the utility's ability to navigate the complex regulatory landscape.
Speaker Change: SCE recently filed the we'll see cost recovery application, which we expect to take about 18 months to complete.
Speaker Change: So you made a strong case supporting the prudency of its operations and the claim settlement process, but with the preceding just underway. It is premature to speculate about the ultimate outcome.
Speaker Change: As a reminder, we have not factored cost recovery for these legacy events into our earnings targets. Thus the T. J M settlement and the eventual outcome and we'll see will be additive to our core operational growth.
Speaker Change: Sce's rapid response to mitigate wildfire risk also resulted in numerous regulatory applications and these include into 2020 one G. RC tracks, two and three a couple of Lima applications. Several Cmos three a 10 54 securitizations and several others.
Speaker Change: SCE has achieved strong regulatory outcomes recovering substantial amounts of prior spending in rates and expecting another $3 billion of incremental cash flow over the coming years.
Speaker Change: Upcoming on the regulatory calendar our decisions on the Teekay M settlement and the 2025 G. R. C. Both of which we believe could happen in the first half of next year.
Speaker Change: The decisions will solidify our financial outlook for 2028.
Speaker Change: Capital investments enabled by the G. R. C is the driver for the growth and customer benefits necessary to ensure the greatest reliable resilient and ready to achieve the clean energy transition.
Speaker Change: We are confident in getting a strong outcome for sce's customers, but will also enable us to deliver on our commitment of a 5% to 7% EPS CAGR through 2028 with minimal equity needs.
Staying with the California regulatory environment, a couple of weeks ago. The commission change the cost of capital mechanism and the Investor owned utilities 20 twenty-five R O S.
Speaker Change: While it only applies to 2025.
Speaker Change: We believe the decision is unfortunate and the process was disappointing.
Speaker Change: That said this is just one of numerous business and regulatory outcomes that we manage in delivering on our commitments.
Speaker Change: To reiterate our confidence in delivering on our 2025, EPS and long term EPS growth commitments.
Speaker Change: Moving on to Sce's core operations.
Speaker Change: I am proud of our team's ability to manage unprecedented climate challenges and navigate the numerous associated regulatory applications over the last several years.
As you can see on page five we have made remarkable strides in reinforcing our operational resilience and financial stability.
Speaker Change: Our robust performance is a testament to our strategic initiatives and the dedication of our workforce my teammates.
Speaker Change: To address the climate challenge as you have seen the results of Sce's industry, leading wildfire mitigation plan for several years now.
Speaker Change: Wildfires will always be a part of California exacerbated by climate change and the number of acres burned. So far this year, it's roughly in line with the five year average why does important though is that SCE has adapted its operations and manage the risk to drive this point home page six.
Speaker Change: <unk> significant reduction in acres burn from Sce's Ignitions in high fire risk areas since 2017.
Speaker Change: And that this has happened while admissions have been relatively flat. Despite several of these years have you been extremely high fire risk experience.
Speaker Change: This is due to sce's strong wildfire mitigation plan execution and increased state fire suppression.
Importantly, none of the admissions are from the failure of covered conductor.
Speaker Change: Sterling of Sce's grid hardening strategy.
Speaker Change: Now with more than 6100 miles of covered conductor deployed SCE has physically hard and 85% of its distribution grid in high fire risk areas.
Speaker Change: Consequently, sce's greatest more resilient reliable and well positioned to focus on the growth ahead as we lead the clean energy transition.
Speaker Change: California will also continue to benefit from improved state fire suppression support and as other utilities in the state increased their grid hardening action.
Speaker Change: Moving to the bigger picture wildfires are just one way that climate change is impacting California's health economy and quality of life.
Speaker Change: As an international is acting to create a safer more affordable future with cleaner air and reduce risk of climate disasters.
Speaker Change: Reaching net zero greenhouse gas emissions by 2045 is a core pillar of our climate related risk management.
Speaker Change: We recently unveiled our latest whitepaper, reaching net zero.
Speaker Change: Which builds on our previous analysis of what is needed for California to reach carbon neutrality.
Speaker Change: The publication of focuses on Edison International's net zero plan and reaffirms our net zero commitment.
As you'll see on page seven.
Speaker Change: This plan is centered around delivering 100% carbon free power to sce's customers as 85% of enterprise wide emissions are associated with power delivery.
Speaker Change: In addition, we will reduce operational emissions, primarily by reducing those from the supply chain.
Speaker Change: Lastly, we project about 2 million tonnes of emissions will remain across all scopes in 2045 to.
Speaker Change: <unk> already carbon is we will need to neutralize those submissions preferably through high quality carbon removal solutions or offsets.
Speaker Change: As always we take a break matic approach tour analysis and findings.
Speaker Change: Key point of emphasis is that the states will need substantial deployment of clean firm generation to safely reliably and affordably supplied power 24, seven it anywhere.
Speaker Change: So one of the big and maybe sort of pricing conclusions is that California must retain as existing natural gas generation fleet as insurance against the legacy and new technology development and deployment.
Speaker Change: The generators will run significantly less often.
Speaker Change: The Bottomline is that to reach net zero nearly every sector of the economy will need to incorporate clean electricity.
Speaker Change: It will take much investment and cooperation between industry and government.
Speaker Change: The effort will be worth it for customers, who will see a projected 40% reduction in their total energy costs by 2045.
With that let me turn it over to Maria for her financial report.
Maria Rigatti: Hey, Joe and good afternoon, and my comments today I would like to emphasize three key financial messages.
Maria Rigatti: First we are very pleased with the EIA accident year to date financial performance, which reinforces our confidence in delivering yet another year of solid results.
Maria Rigatti: Second on the regulatory front SCE continues to generate cash flow by recovering past cost tracking memo accounts and is making strong progress through the final stages of resolving the legacy wildfires.
Maria Rigatti: Third we remain confident in our ability to deliver on our commitments for 2025 and beyond.
Maria Rigatti: I will note that we plan to update our projections next year following a final decision and Sce's GIC.
Maria Rigatti: Let's start with a brief review of our third quarter results.
Maria Rigatti: Yeah, I X reported core EPS of $1.51.
Maria Rigatti: As you can see from the year over year quarterly variance analysis shown on page eight core earnings grew by 13 sets.
Maria Rigatti: This EPS growth was primarily due to higher CPUC revenue authorized in track for the 2021 G. R C and higher authorized rates of return.
Maria Rigatti: Partially offsetting these drivers with higher interest expense associated with that for a wildfire claims payments.
<unk> parents and other was in line with the same period last year.
Maria Rigatti: Our quarterly results bring year to date EPS to $3.88 and this strong performance is largely driven by O&M benefiting from a combination of efficient execution and timing.
Maria Rigatti: Pages, nine and 10 show Sce's capital and rate base forecast, which are consistent with last quarter's disclosures.
Maria Rigatti: We expect our next major update to the capital plan will follow a final decision and Sce's 2025 JRC.
Maria Rigatti: In addition to the capital investment supported by the G. R. C. The utility is working on the Standalone application for its next generation enterprise resource planning system, which is expected to be filed in the next six months.
Maria Rigatti: Further SCE expects to file the advanced metering infrastructure to Plano application towards the end of 2025.
Maria Rigatti: Combined these represent over $2 billion of CPUC jurisdictional capital investments.
Maria Rigatti: SCE also has more than $2 billion of FERC transmission projects in development.
Both the incremental CPUC and FERC spending are upside to our current capital plan.
Maria Rigatti: Turning to page 11, following strong regulatory outcomes in recent years SCE has recovered about $4 $5 billion since 2021.
Maria Rigatti: And this quarter's update you will notice one new item the securitization that we expect will follow approval of the TK I'm settlement agreement.
Maria Rigatti: After a final decision on the settlement SCE will file an application to request approval to securitize, the $1 6 billion dollar recovery.
Maria Rigatti: Target and completion of a financing by year end 2025.
Maria Rigatti: In total the cash flow already received unexpected over the next couple of years significantly strengthened our balance sheet and credit metrics.
Maria Rigatti: Not only that but we should also see the amounts recovered through memo accounts decline over time as these activities are built into S. T. E. G. R. C is going forward simplifying the regulatory process.
Maria Rigatti: I would now like to expand on the status of fully resolving the legacy wildfires.
Maria Rigatti: SCE has now received demands for 95% of Teekay, EM and 94% of Woolsey outstanding individual plaintiff claims and the utility continues to work swiftly to resolve them.
Maria Rigatti: Under the settlement agreement the same 60% recovery ratio will apply to the remaining T. Cam costs net of the previously agreed to disallowance.
Maria Rigatti: But woolsey SCE also proposed to process to recover claims paid after the date the application was filed.
Maria Rigatti: The best estimate of total losses remained unchanged this quarter as additional settlements have been in line with expectations.
Speaker Change: Turning to EPS guidance page 12 shows our 2024 core EPS guidance and modeling considerations.
Speaker Change: We are pleased with our very strong year to date performance, which also gives us the opportunity to continue pulling forward O&M for the benefit of customers.
With nine months of results behind us and based on our outlook for the remainder of the year, you're very comfortable with narrowing our EPS guidance to $4 80 to $5.
Speaker Change: Turning to page 13, we have refreshed the modeling considerations for 2025.
Speaker Change: I'll note a couple of items.
Speaker Change: First we've updated rate base EPS to reflect the CPUC decision on cost of capital that Pedro mentioned.
Speaker Change: Secondly, continuing the trend, we see favorable cost management flexibility driven by the pace of O&M reinvestment and financing benefits.
Speaker Change: Lastly, I want to emphasize that we have not incorporated the benefits from the Teekay and settlement agreement into this refresh which would be incremental to our forecast.
Speaker Change: I will now discuss the plan for updating our guidance and long term outlook.
Speaker Change: At a macro level, let me note that the moderating interest rate environment removes the financing headwind we have faced in recent years.
Speaker Change: Additionally cost recovery in the legacy wildfire preceding provides a tailwind.
Speaker Change: Looking at our core operations Sce's G. R. C is the driver for our high quality earnings growth.
Speaker Change: As Pedro mentioned, we are hoping to see a CPUC decision in the first half of next year.
Speaker Change: Once you get the final decision from the CPUC on the G. R. C. We will update our capital plan financing plan 2025, EPS guidance and EPS growth forecast factoring in the T can settlement.
Speaker Change: So what gives us confidence in achieving our 2025 core EPS guidance of $5 50 to $5.90 and growing earnings by 5% to 7% through 2028.
Speaker Change: There are two key factors first is the strength of Sce's G. R C and progress throughout the proceeding.
Speaker Change: SCE made a strong case and even based on intervenors positions Sce's rate base growth would still be in line with its range case forecast of 6%.
Speaker Change: Second is our ability to manage the numerous variables in the business, obviously, we've demonstrated year in and year out over the last two decades.
Speaker Change: Additionally, it is important to reiterate that our guidance does not incorporate incorporate the upside from the teekay unsafe settlement as.
Speaker Change: As you saw on page three that total upside to 2025 core EPS, it's about 44 cents and the ongoing annual benefit beyond 2025 is 14th does.
Speaker Change: I'll conclude by saying that our strong financial discipline enables us to deliver not only on our financial targets, but also to continue sce's cost leadership for customers given that affordability is a key component of the clean energy transition.
Speaker Change: That concludes my remarks and back to you I'm sure.
Speaker Change: Sheila Please open the call for questions. As a reminder, we request you to limit yourself to one question and one follow up so everyone. In line has the opportunity to ask questions.
Speaker Change: Thank you.
Speaker Change: To ask a question. Please press star one on your phone one moment for the first question. Please.
Speaker Change: Our first question will come from Mike <unk> with Evercore ISI. Your line is open.
Speaker Change: Hi, Thanks for taking my question so.
So on the general rate case I was just wondering if you could share your latest thoughts on it in the context around affordability concerns in California, we've seen the change in the formula for the cost of capital trigger mechanism.
Speaker Change: A proposed decision in SG&A in Socal gas rate case, the countrys into your revenues.
Speaker Change: Yeah. Thanks, Michael I appreciate having you on the call and let me start by reminding folks of the comments. We've made are in other places.
Speaker Change: As we look at the rate trajectory for Southern California Edison.
Speaker Change: We I think said in the last quarter, we see that going.
Speaker Change: Going back to our.
Speaker Change: Levels at or below local inflation from 24, 1% to 28.
Speaker Change: So you know we think affordability is key.
Speaker Change: We are fortunate that the increases embedded in the general rate case are offset by a number of other items so that weekend.
Speaker Change: End up delivering bad around inflation performance in terms of rate trajectory over the next several years looking beyond that.
Speaker Change: Point that I made quickly in my remarks, and I know we stress.
Speaker Change: At other times is that as we look at the continued investments needed over the longer term beyond 2028 guidance period for driving the clean energy transition, we see those continue to put pressure likely youre running foot inflation levels for the electric rates, we see electric bills, increasing because people will be using more electricity.
Speaker Change: But if you look at the total energy Bill of electric was gasoline pushed natural gas, we see that total bill for average customer going down 40% in real terms through 2045.
Speaker Change: Their share of wallet you know the amount of their household income to their spending on their total energy Bill, which today is 7% goes to 3% interim analysis by 2045, So all of those and I can give you like a near term answer and a long term answer and both are important as we make the case and help educate our customer center policymakers.
Speaker Change: Yes, Michael maybe I'll, just add on a little bit. So you definitely referred to you know affordability being athene and you're right every rate cases different every preceding is different but that affordability theme is consistent through all of them.
Speaker Change: When SCE filed its application it had that affordability lens in everything but it asks for and all of its justification in fact, they introduced savings into the JRC that they had already accumulated between GIC periods.
Speaker Change: I think one really important factor to note is that even intervenor positions.
Speaker Change: The response to our application still have about a 6% growth rate on rate base. So we've had this focus on affordability for a long time, we've integrated it into our rate case, and we think you're seeing that sort of responsiveness from intervenors and we'll get the general rate case decision as we noted earlier you know in the first part of next year.
Speaker Change: Thank you and then secondly from me you've been talking about load growth materializing sooner than expected.
Speaker Change: You've mentioned potentially re prioritizing capex in the DRC or pursuing.
Speaker Change: Turning to funding approaches through separate applications, just wondering what your latest thinking is around that.
Speaker Change: Well you know we have the benefit of having repair the JRC forecast.
Speaker Change: In a time period, when we were already seeing some of that acceleration in load.
Speaker Change: And so I think that as we look at sort of the 2025, we're about 40, good bead on what is needed.
Speaker Change: As we look into the later years of their rate case, you will see first and foremost what.
Final decision, we get high in what.
Speaker Change: Capital levels is embedded in there we continue to have the ability to re prioritize capital to be.
Speaker Change: Deployed against the most pressing needs.
Speaker Change: And if we were to determine later on that we need.
Speaker Change: More capital support beyond the G. R. A C decision and there's a couple of different avenues.
Speaker Change: Yes, before Tim mechanism or mechanism.
And so the sort of the rate case process.
Speaker Change: So.
Speaker Change: Come up in the high distribution, how distributed energy resource.
Speaker Change: Proceeding so a couple of different avenues, but right now I think we're focused on.
Speaker Change: Continuing to.
Speaker Change: First for a good rate case outcome and prioritizing from there moving to wherever you are.
Speaker Change: Thanks, Michael.
Speaker Change: Thanks for taking my question.
Speaker Change: Right.
Speaker Change: Yeah.
Speaker Change: Thank you next we will hear from Shar <unk> with Guggenheim Partners you May proceed.
Speaker Change: Sure Hey, guys.
Speaker Change: Right.
Shar: So Peter just in terms of the <unk> settlement beyond the 14th sense of run rate EPS improvement does kind of the balance sheet flexibility from the memo account recovery plus Teekay am leave room for taking out some of the maybe the equity like instruments that were supporting wildfire claims like the <unk>.
Shar: Perhaps in the junior subordinated to your metrics are improving could you take down some of the equity would that be accretive to sort of your plan right now thanks.
Speaker Change: Hi, sure. Thanks for the question, yes, So I think first and foremost you know we have the framework of 15 to 17 17 per cent episode of debt I think that you know the the first thing that we would look at is the $100 million a year of equity that we've said is in our plan because qantas were solid on the balance sheet that might not be necessary.
Speaker Change: As we move forward in time, we will be looking at the hybrids I think those don't actually.
Speaker Change: <unk> really come into play until 'twenty, six and then even beyond that but that's definitely an opportunity that we wont be looking at.
Got it incremental to the plan right. So that's not something that you're embedding in the plan right now.
Speaker Change: We'll take a look at that as we get closer and closer to those.
Speaker Change: Reset dates mhm, okay, great and then as you guys know the assumption changes for ROA and 25 in the slides can you clarify if the offset in operation variance is driven by pulling back some of the reinvestment that was originally planned how much of the financing benefit that you're kind of calling out contribute to that 20.
Speaker Change: Positive there thanks.
Speaker Change: Yeah, so when we.
Speaker Change: Obviously, we got the final decision on the ROE.
Speaker Change: We wanted to update the rate base math for that that's something that we've done in the past few cycles because since we've given this guidance we've gone through a number of our cost of capital situations at.
Speaker Change: At the same time that we did that we thought it would be appropriate to update sort of those high level modeling considerations that we've provided but remember those are high level considerations. We we operate the business at a much more granular level. So we took a look at many many things in many many factors across the business one aspect of what we did was we looked at financing costs.
Speaker Change: We put those assumptions.
Speaker Change: Assumptions out there a number of years ago. We've obviously worked through a number of different interest rate environment. At this point both in terms of the underlying rates as well as spreads and we do see cost benefits across the board, including in the operational variances area, but across the other elements as well the other thing that we looked at which is really a lever that we have.
Speaker Change: Every year is that reinvestment rate I mentioned earlier that even in 2024, we have the flexibility to pull forward O&M costs into 2024 to the benefit of customers and that gives us further flexibility as we move forward. The same thing with 2025, we're not quantifying every penny now down to the to the Nat.
Speaker Change: But I think that that's the sort of work that we did as we went through the process for the quarter.
Speaker Change: Stress Maria you cover your well short or hopefully you'll walk away with a sense of our commitment to managing the business well for our customers and meeting our commitment to all of you around or you know 2025 in 2020 targets.
Speaker Change: Perfect.
And clear I appreciate it. Thank you I was just getting a couple a couple of weeks.
Speaker Change: Thanks, Susan.
Speaker Change: Our next question will come from Anthony <unk> with Mizuho. Your line is open.
Speaker Change: Hey, good afternoon Pedro.
Speaker Change: Just I guess.
Speaker Change: Two quick questions I think you talked about giving or providing an update once you get a G. R. C decision in.
Speaker Change: In 25 at that time do you think we will have clarity on TK mean, woosley and update you can provide will incorporate trc plus the two wildfire proceedings.
Speaker Change: So the schedule for Teekay M and the <unk>, we're thinking in the first half of the year. So hopefully we will have the ability to do both of them incorporate both of those woolsey. It's early in the process and Anthony I think you know we just filed the application relatively recently intervenors haven't yet filed their response.
That will bring us through you know we have a pre hearing conference until later this year. So we're going to work through the process, but what I want to emphasize is the same way that we treated T can where we werent incorporating any benefits from a settlement or a litigated process until we see we saw it happening and we get a decision same thing for a while.
Speaker Change: It's just much more straightforward if we keep that out and you'll just see the strength of the underlying business in our numbers.
Speaker Change: Great and my last question maybe.
Speaker Change: Counting challenging to answer but just.
Speaker Change: Some of the investors were concerned guys changing the cost of capital happened in year three of a three year, Matt because that we thought was kind of upset even though there wasn't a triggering event and as you look forward to.
Speaker Change: The next cost of capital period or cycle, I guess, the right word.
Speaker Change: How do you give investors.
Speaker Change: Assurances that we may not see another mid cycle change.
Speaker Change: Again, we don't know what happens on the macro environment, whether it's a cost of capital trigger but just.
Speaker Change: The uncertainty that this.
This was really a <unk>.
Speaker Change: <unk> event and that we Shouldnt expect something mid cycle, unless there was a trigger going forward.
Speaker Change: Yeah, maybe let me start on that one and I will take a bit of a broader aperture on it.
Speaker Change: You did hear me say in my comments that.
Speaker Change: We were disappointed with that specific decision, but then we put it in the broader context of the regulatory environment in California.
Speaker Change: And so I know as I sit down with investors.
Speaker Change: And talk about this I always point to making sure. We're looking at the whole broad picture of the framework here and the remarkable strengthening of the framework. We have lived through over the last half decade.
Alright, and so when you think about when the wildfire period started.
Speaker Change: The uncertainty around that and you saw us work through that you saw the state worked through that and importantly, you've seen the CPUC work through implementation of ABB 10, 54, Youll see in the CPUC work through a number of other proceedings Mario talked about.
The vast number of memo accounts, where we've been recovering cash from them, but a number of things that have been highly constructive in this environment and.
Speaker Change: I'm not a big sports Guy, but since baseball is a big thing right now nobody bats, right and so you're going to get a few Mrs.
Speaker Change: Mrs Here and there.
But I think overall, we're seeing a CPUC in a state that is committed to having a robust regulatory framework.
Speaker Change: The financial health of your abilities. It gives certainty to investors.
Speaker Change: We're going to disagree with a few of the things that they do and you know that's a bit of life.
Speaker Change: But we would expect as we turn to the 26 to 28 cost of capital proceeding.
Speaker Change: I think youll see that the table Seth in terms of some clarity on what came out of 25, we will come in with very strong arguments for why we see a continued need for the California premium that has been supported over the last couple of decades, and we will take it from there and in the meantime, we're gonna be looking for mineral constructive regulation out of the general rate case decision.
Speaker Change: You saw the very constructive outcome.
Speaker Change: Outcome with the Cal advocates on the PJM settlement. So again, a number of other proof points around the continued strengthening of the environment here.
Speaker Change: And since I said.
Speaker Change: You're supposed to use a sports analogy, which are really do questions. I know a number of you in New York at the risk of a.
Speaker Change: And Perry in what you write about US go Dodgers.
Speaker Change: Alright.
Speaker Change: Thanks, So much for taking my question Pedro and see you in Hollywood.
Speaker Change: Take care.
Speaker Change: Our next question will come from Steve Fleishman with Wolfe Research you May proceed.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Pedro.
Sorry, Matt but.
That's all right that's all right.
Speaker Change: Yeah.
Speaker Change: So just.
Maybe a little more color on the Trc timing and just because.
Speaker Change: P J D and <unk>.
Speaker Change: Sampras cases kind of went well into the.
Speaker Change: Towards the end of the year just.
Speaker Change: Are you.
Speaker Change: Hopeful on timing of first half just because there's less <unk>.
Speaker Change: Rental and.
Speaker Change: In positions or maybe just a little more color on.
Speaker Change: Timing and I guess also is there a chance to settle more of the issues before we get to an order.
Speaker Change: Yes, Steve I think as we've worked through the proceeding we've seen the the ALJ and all of the parties need every deadline. You know there are a few days here and there where people got extensions, but its been very.
Speaker Change: Very much according to the schedule at this point all of the documents are submitted everybody's finished with their written briefs et cetera, and we're really waiting on the ALJ to write that proposed decision. We think that there certainly is time to get a decision in the first half of the year with.
Speaker Change: But the other G. R. CS now sort of moving past our through to resolution. We think that also that helps a little bit with the staffing issues not everybody works on everything but it's always it's always more helpful. When you're when you're clear of that so we do think that the first half of next year right now it looks like a reasonable timeframe for us in terms of.
Speaker Change: <unk> settlement.
Speaker Change: Procedurally that is actually behind US now in terms of settling different things. These are very complex cases and to have an overall settlement is typically reasonably difficult, but as you know from some of the discussion last quarter. We have settled a number of different items, which helps to streamline them sort.
Speaker Change: Sort of what is remaining for the proposed and final decision. So we do think that we move through <unk>.
Speaker Change: Fair amount of items, but we'll be waiting for a final decision in the first half of next year.
Okay, and then I guess, the one missing piece would be the.
Cost of capital for the next three years.
Speaker Change: Which I guess that.
Speaker Change: Won't affect 'twenty five but just.
Speaker Change: That won't be decided probably till the end of 'twenty five for for the <unk>.
Speaker Change: So we will file in March.
Speaker Change: And typically the commission has a very long track record of getting those decisions out before the end of the year. So you can kind of know what what you're dealing with as you get into the first year of the three year cycle, we're going to file the same kind of cost of capital proceeding we have in the past, which is to really look at all the issues both from a quantitative perspective as well as a qualitative perspective and.
Speaker Change: We will be continuing to emphasize the quote unquote, California premium the thing that the commission has talked about in the past as well and they in fact coined the phrase because of all the differential work that we did the I O U's in California do relative to other jurisdictions I will note, though that as you know as we think about the longer term and we talked about the <unk>.
Speaker Change: 5% to 7% compound annual growth through 2028.
Speaker Change: We've said that consistently and different.
Speaker Change: ROE environments and so you know it has moved around a little bit over the past few years, some have been less than where we are today. Some have been more than where we are today again. Some sensitivities. So folks can understand sort of the magnitude of the change, but we're confident that we can manage the business along those lines regardless.
Speaker Change: Great. Thank you I appreciate it.
Speaker Change: Thanks, Steve.
Speaker Change: Our next question comes from Ryan Levine with Citi. Your line is open.
Ryan Levine: Hi, everybody.
Speaker Change: Brian couple couple.
Ryan Levine: Couple of quick ones in your Q you highlighted that there was a change the nuclear decommissioning trust estimates to $2 $3 billion net Edison.
Speaker Change: <unk>.
Speaker Change: What drove that and what are the impacts of the financings Greg.
Speaker Change: Sure. So every three years, we do update the cost to decommission, that's part of our regulatory process and as we do as we do that three year look we will be refreshing everything some of the things that change or just you know what's the expectation about when the federal government will remove the spent fuel from the site.
Speaker Change: So all of those things go into the mix. The Trust fund is very well funded and it does that change in the decommissioning Trust has no impact on our financing plan.
Speaker Change: Okay, and then maybe a follow up are related in terms of 2025 is there any additional color you could provide around the.
Speaker Change: Some of the.
Speaker Change: Offsetting items to the cost of capital benefit outside of rate case outcomes.
Speaker Change: Sure. So in terms of how we managed through and looked at all of those granular issues, it's a little bit akin to what I said earlier on the call. So we took a look at as an example, we had a lot of assumptions built in there around financing plans and over the past four years.
Speaker Change: The time from which we first announced the numbers to now we've actually done a good job at managing through various interest rate environments and from a portfolio perspective, we do find that we are doing better than we had originally assumed we would as we look forward into next year, we don't have too much left to finance for 2025.
Speaker Change: But we think that we can manage that as well through both the timing of when we go out to market as well as you know again some more.
Speaker Change: For.
Speaker Change: Positive expectations about what what the market will look like next year. When we think about more about the that the lever is on me.
Speaker Change: No reinvestment side.
Speaker Change: We are always evaluating the timing and the quantum of what we're investing in the business and that can range from anywhere.
Speaker Change: Around projects like inspections, and maintenance you know Doug can we pull some forward into 2024.
Speaker Change: Things like you know some telecom enhancements that potentially you know we can move around and that that will create some headroom and frankly, when we first announced chain.
Speaker Change: Changes related to the increase in the cost of capital we were accelerating some things into 2025 to create benefit faster in the next rate case cycle, we can manage the timing of that as we like.
Speaker Change: Thank you.
Ryan Levine: Thanks Ryan.
Speaker Change: Next we'll hear from Gregg <unk> with UBS you May proceed.
Speaker Change: Yeah. Thanks.
Speaker Change: A detail oriented.
Question.
Gregg: What's involved in the the next filing for the generation Enterprise resource planning system.
Gregg: And maybe just another question on.
Gregg: On top of that.
Speaker Change: Your view in terms of the role of gas in California, and how long that would.
Gregg:
Gregg: That would be around if you could scale that at all thank you.
Speaker Change: Thanks, Greg why don't we start with Steve on the ERP. Please sure. So are we call. It next Gen. VI Nextgen Enterprise resource planning program is going through its solution analysis right now and it's focused on.
Steve Fleishman: Both the technology underpinnings as well as the process changes around work management supply chain and kind of those major functions across the organization.
Steve Fleishman: We're getting to a point, where our current ERP system is nearing its end of life or end of service and so that's later this decade. So we are basically redesigning. The next generation of that ERP system to go into implementation right now were focused on finalizing the filing with the commission and so we expect that to come in in Q1, as we as we finish that up.
Speaker Change: And then on the gas piece, Greg I think you're probably referring to my comments on reaching for net zero, so reaching reaching net zero.
Speaker Change: And.
Speaker Change: What our team did here was.
Speaker Change: Frankly pretty important work right because he took a look not just at the normal kind of supply demand balance picture, but this included some level of powerful analysis really goes into how does the system really operated and how do you make sure that you know power.
Speaker Change: Power can flow across a number of conditions.
Speaker Change: I saw was that as I mentioned in my comments, California will need a lot of clean firm generation. So think about resources like next generation geothermal or.
Speaker Change: It could be nuclear over that would require a change in law in California.
Speaker Change: It could be a gas paired with with storage with carbon capture and storage right, but resources. It can run $24 seven or when needed and what's interesting is that one gigawatt of those clean firm generation resources gives you the same amount of greenhouse gas emissions effectiveness of reduction effective.
Speaker Change: This 711 gigawatts of solar paired with storage we.
Speaker Change: We will have lots of solar and storage would you need at all alright, and clean from duration will be an important part of the picture. The challenge, though is that a number of those resources are still not mature they need to go up the technology development and maturation curve.
Speaker Change: And then you also have the siting and permitting challenges for any resource so that means so theres a lot of uncertainty in terms of getting the steel in the ground.
Speaker Change: Between now and 2045 in the meantime, we have this big insurance policy and its all the natural gas generation that currently exist in the state. So part of our message is particularly as we look at scenarios, where we might see even higher load whereby see greater delays and the technology deployment and deciding in permitting and construction.
Speaker Change: Really important to hold onto the existing gas generation fleet as an insurance policy for those potential scenarios, but again, we expect that those generators gas centers will be running a lot less than they do today.
Speaker Change: Your analysis, we estimated that California would see something like between 4% and 5% of its electrons coming from gas resources in 2045.
Speaker Change: So hopefully that covers the second question.
Speaker Change: Yes. Thank you.
Speaker Change: Thanks, Greg.
Speaker Change: Our next question will come from Nicholas Campanella with Barclays. Your line is open.
Nicholas Campanella: Hey, everyone. Thanks for taking my question.
Speaker Change: You bet Hey.
Nicholas Campanella: Hey, So I know a lot of a lot of questions on 25, and the variance and cost of capital and you guys seem well positioned to absorb all this.
Nicholas Campanella: So just to kind of like tie it up when we kind of think about 25, and then into like 26 earnings power is it as simple as just.
Nicholas Campanella: Adding 2014.
Nicholas Campanella: Of that $5 70, midpoint, and then growing 5% to seven off that is there anything wrong with doing that and are there offsets that you would flag that that we should kind of consider as we kind of think about 25 and 26.
Nicholas Campanella: Pro forma TK up thank you.
Speaker Change: Yeah. So the 14th sense is the run rate for sure that's additive to anything that we've put out there for 26.
Speaker Change: The slight variation is in 25, because we don't know exactly when we'll get the decision during the year you could have you won't you might not have the full year run rate on the 14th cents in the first year, but it is a 14 run rates as you get out past that.
Speaker Change: And then just on the Teekay and you've got 60% recovery I know that you just started the woolsey requests, but can you just kind of talk about what can make that outcome different than the 60% in TK I'm like what are the key things to kind of watch for.
Speaker Change: You may now and we'll see as opposed to PJM, yes.
Speaker Change: Yeah. Thanks, Nick it'd be all these will stay pretty high level here, but the bottom line answer is theyre very different cases, and this is all very case specific.
Speaker Change: So we can't look at the Teekay M number and assume that that is therefore, you know the number for another fire with us, we'll see or something else.
Speaker Change: Just to remind you of a couple of the specifics.
Speaker Change: In PJM you had two different ignition sources.
Speaker Change: For one of those edition sources, we acknowledged at Edison equipment issue, we still think that SCE was prudent in its operations, but we know that the spark came from that equipment for the other ignition point, while there was some investigation report by a fire agency that pointed to Edison that really wasn't the evidence there. We don't think that that was good.
Speaker Change: Correct.
Speaker Change: In any case. So you have one ignition source that are point, that's linked to Edison Wonder, we don't think gas to fire start then they emerge.
Speaker Change: Complicated case right, we'll see is different they're saying single ignition point again, we know that itself.
Speaker Change: Linked to Edison infrastructure. Once again, we believe that SCE was fully prudent in its operations.
May be the case in its filing.
Speaker Change: But you know that said just different as Apple and Orange when Youre looking at.
Speaker Change: Just for starters two different starting.
Speaker Change: In addition points versus one ignition point.
Speaker Change: Are there you know the intricacies and Ed.
Speaker Change: Specific items for each of those fires so long winded way of going back to what I said at the beginning K specific for different fires.
Speaker Change: Very fair I appreciate the time thank you.
Speaker Change: Excellent.
Speaker Change: Next we will hear from Jeremy Tonet with Jpmorgan. Please go ahead.
Speaker Change: Hey, good afternoon, it's actually rich Sunderland on for Jeremy how are you.
Speaker Change: Alright.
Speaker Change: Just one for me.
Speaker Change: 2 billion for transmission Capex in that $2 billion across those two CPUC jurisdictional applications. When you give your plan I think next year any sense of that spend and if it would be right for including in the base plan and then maybe more broadly just on the FERC stuff. What is the status of your work on that when do you think you'll have a sense on <unk>.
Speaker Change: Timing of when that might be deployed and if youre going to be funding that thank you.
Speaker Change: So I'll, let Steve talk about the timing of the FERC and how we're working towards resolution on that but just in terms of the updates to the plan first.
Speaker Change: Typically what we would do is as we get close to filing the applications and we know the quantum and the amount and the timing of the spend better.
Speaker Change: That's when we would roll it into our plan and that's why we haven't rolled it in yet because we're still working through all the details I will note that on the FERC side much of that will be spent post 2028, but Steve wants to talk a little bit about the detail.
Steve Fleishman: Yeah. So in the 2022 through 'twenty three types of transmission plan, that's where edson.
Steve Fleishman: Medicine was awarded about 20 incumbent projects.
Steve Fleishman: Worth over $2 billion and generally those projects are as Maria mentioned, they come online outside the 28 period. So most of the spend is going to happen out there in that same process. There also was a competitive project that Edison one in partnership with with Lotus infrastructure partners and again that project is I think the online date is 2000 <unk>.
32, and so we'll be working through with the other approval processes with the public Utilities Commission design and all the steps it takes to get transmission built in so as the as the queso plants continue to come out with new projects I think it's important to note that transmission projects still take a long time and it's one of the reasons why we're also focused on getting site and in licensing.
Steve Fleishman: Improvements to help accelerate this because they are very long timeframes to get the projects built that are required really to help meet.
Steve Fleishman: Electrification growth as well as the growth of all the new energy resources that will be needed over the next decade and beyond.
Speaker Change: Great. Thank you for the time today.
Speaker Change: Thanks.
Speaker Change: Our next question will come from David Arcaro with Morgan Stanley. Your line is open.
David Arcaro: Hey, thanks, so much how are you.
Speaker Change: Hi, Dave.
David Arcaro: Let me see Oh I wanted to just follow up on the Woolsey process here is there a timeframe, where we might watch for the potential for a settlement would that be a year from now.
David Arcaro: In terms of just if I'm looking at T Cam versus Woolsey when might those discussions become more realistic in the process.
Speaker Change: So just to give you an overall view of the world reschedule as it exists today at least our proposed schedule.
Speaker Change: We would expect that.
On November 12 that will get protests and responses from intervenors, we would get a chance then to apply to that.
Speaker Change: And then a pre hearing conference probably in early December.
Speaker Change: Then we would need to wait for the scoping memo and that is where you'll get the more definitive schedule as the ALJ lays it out we have asked that SCE has asked for a single phase with an end date, that's about an 18 months schedule, which is consistent with teekay them when we get the scoping memo.
My mom would be the place to look for in terms of whether or not the ALJ wants to set aside time for a settlement conference et cetera, that's exactly what they did on TK EM, but one of the really important parts of Teekay am honestly, we did file the settlement that we reached with Cal advocates, but really important part there was developing that.
Testimony, having intervenors participate in that Cal P. A submitted quite a few.
Speaker Change: Volumes of of their own testimony in setting that stage is really important even as you look forward to either a litigated outcome or a settled outcome and so that's really what to be looking for.
Speaker Change: Got it got it that's helpful.
Speaker Change: Very thorough I appreciate that and then I was just curious on the ERP and Ami filings. It sounded like those were coming in the near term or I guess next roughly six to 12 months when how.
Speaker Change: How long would those processes be like when would the capex end up hitting the plan.
Speaker Change: So there would be capex and the plan for those projects in this next four years, but even for those projects, particularly the metering project Youll see spend beyond 2028.
Speaker Change: Okay.
Speaker Change: In terms of the.
Speaker Change: The length of time for the regulatory process is probably also kind of the standard call. It 18 months ago.
Speaker Change: Uh huh.
Speaker Change: Makes sense alright awesome. Thanks, so much.
David Arcaro: Thanks, David.
Speaker Change: Our next question will come from Angie <unk> with Seaport. Your line is open.
Speaker Change: Hi, Andrew.
Speaker Change: How are you.
Speaker Change: So.
Speaker Change: Great. So I have a question about.
Speaker Change: Data centers.
Speaker Change: Are you able to do some men to deal with you and you mentioned that you know, California is probably not the place or your service territory.
Speaker Change: This way you will have those.
Speaker Change: Hyperscale data center, just purely because those should flock the areas with you know basically cheap electric rates.
Speaker Change: I am just wondering I mean, if there were to be demand driven increases in electricity prices in California, how that would potentially impact your.
Speaker Change: Capex and growth plans, then again, even if its not related to two AI.
Speaker Change: Some additional growth. So that's number one and number two is so you mentioned that the argument about the.
Speaker Change: Decrease in our.
Speaker Change: Other non electric or sources of energy cost.
Speaker Change: And I'm just wondering.
During its.
Speaker Change: Based on the cause.
Speaker Change: Your customer feedback if that's how your customers actually look at it.
They will actually notice that there would be a sort of an offset to the amazing electric bill that they are going to see.
Speaker Change: Yeah. Thanks, Andrew maybe I'll do a quick one on both of these had and Steve you might have more to add on the data center, so you're right.
Speaker Change: People have been commenting on this.
Speaker Change: You probably won't see the big Hyperscale centers and the way to think about it in terms of AI, we are seeing some impact in California.
Speaker Change: You won't see the big Hyperscale training centers here right, but you are seeing we are seeing datacenter growth I think some of it is <unk> because the inference centers. The centers that are used to answer the question. When you put the question in a search engine.
Speaker Change: Typically the providers like having those closer to the load.
So that you can minimize latency issues.
Speaker Change: So we are certainly seeing datacenter applications in Sce's territory. It's just because we already have a fairly large datacenter presence in southern California. The percent increase is not as dramatic as what you might see in a state to seeing some of the big Hyperscale Center showing up.
Speaker Change: And Steve I know you're more share there.
Speaker Change: Some of that is already built into the 35% increase in the 10 year DRAM Fork as we commented on last quarter.
Speaker Change: Alright, then on the other point.
Speaker Change #100: The first one I talked about a 40% reduction in total energy costs.
Speaker Change #101: Yeah, Angie that is driven by really at the core of the fact that the appliances that are being replaced so.
Speaker Change #101: When you replace a gas water heater within electric heat pump water heater or gasoline automobile with any electric automobile.
Physics efficiency work into sort of energy and to work out efficiency of that is a lot higher right and so that's the main engine driving no pun intended driving the 40% reduction in total energy costs now you are asking our customers seeing that.
Speaker Change #101: Customers, who have made the switch are certainly seeing that.
I've got to tell you my wife, and I went through this year and a half ago, when we electrified our whole Hong.
Speaker Change #101: And our natural gas Bill.
Speaker Change #101: Drop we still have a barbecue and back.
Speaker Change #101: But we're not seeing the same sort of your search and we saw our electric will go up.
Speaker Change #102: The efficiency you know from the new appliances I think the broader question is do customers, who haven't made the switch yet understand that and that's where because she is working with other utilities working with <unk> working with the commission to make sure that we're getting the right sort of consumer education out there because that's going to be.
Speaker Change #102: An important part of the picture as far as the education for contractors, who are a critical part of the business cycle and making these particularly the home conversions. So you bought it.
Speaker Change #102: You'll see what I was wrong.
Speaker Change #102: I would say that.
Speaker Change #102: Nature to your point, it's education is going to be critical because today. The average customer most customers out there don't look at their electricity their gas and their gasoline builds together right. They show up on a different credit card charges and they are on different bills and so that's really the challenges as you see somebody buys electric vehicle or electric.
In some way and they see their electric Bill go up from that usage.
Speaker Change #102: Always correlating it to open back and by the way I don't see the reductions on other parts of my Bill. So one part of the education to make sure our customers are thinking about it before they make purchases as well as ones that are actually converted an electrified part of their usage.
Speaker Change #102: The other part is we have to look for ways to more simply bring that provide visibility to it how do you bring that snapshot together and thats something that.
We have to we can't do on our own it's something we're going to have to work with stakeholders as we continue to educate and build this out.
Speaker Change #102: Okay.
Speaker Change #102: But also just the like.
Speaker Change #102: A bigger picture question so.
Speaker Change #103: Understand that there was the the big basis for natural gas prices in California, where we currently sit but.
Speaker Change #104: What happens to your growth plan for example, if there were to be any meaningful pick up in the electric electricity prices be it the demand driven or higher natural gas prices do you feel like there is some sensitivity to the growth on the back of frequently shouldn't be higher electric.
Speaker Change #103: Mrs.
Speaker Change #105: I might say, they're sitting and Steve you might have a different view on that.
Speaker Change #103: Interesting.
Speaker Change #106: Here's what I'd say to Angie.
Speaker Change #106: The endpoint I think ends up being the same alright, because California has made an important and very firm commitment to getting to net zero by 2045.
Speaker Change #106: And Thats something that we believe.
Speaker Change #106: And not only in California, but more broadly if we're actually going to keep the plant at <unk>.
Speaker Change #106: Suitable to overall temperature increase.
Speaker Change #106: The way you get there right you might see those variations in any given year right and so whether it's.
Speaker Change #106: Gas prices or energy prices you were talking about it could also be if you have different changes in incentives. If you have impact of different rate structures and a number of factors that can impact.
Speaker Change #106: Folks adoption of these new technologies, when Theyre gas heater breaks and Youre sitting at home depot deciding on electric versus gas just as an example.
Speaker Change #106: So.
Speaker Change #106: Might see some ups and downs along the way, but if this thing is going to remain committed which I believe it is a must to near zero.
Speaker Change #106: And if we believe our analysis, which we absolutely true that the most affordable and reliable way to get there is by electrifying so much of the economy and the endpoint and so being the same now.
Speaker Change #106: Hopefully happens by 2045 has happened a little sooner a little later, that's where you might see some variations depending on what happens in between here and there.
Speaker Change #107: Okay. Thank you.
Thanks, Andrew I appreciate the the interesting strategic questions.
Speaker Change #108: That was our last question I will now turn the call back over to Sam Ross for closing remarks.
Sam Ross: Thank you for joining us. This concludes the conference call have a good rest of the day you may now disconnect.
Sam Ross: Okay.