Q1 2025 Essential Utilities Inc Earnings Call
star 1 on your touchtone phone. And to withdraw your question, please press star 1 again.
And to withdraw your question. Please press star one again it is my pleasure to turn the call over to Mr. Brian Dania edition you may begin.
Brian Dingerdissen: It is my pleasure to turn the call over to Mr. Brian Dingerdissen. You may begin. Thank you. Good morning, everyone. And thank you for joining us for our first quarter 2025 earnings call. If you did not receive a copy of the press release, you can find it on our investor relations website. The slides will also be found there as will be a webcast of the event.
Thank you good morning, everyone and thank you for joining us for our first quarter 2025 earnings call. If you did not receive a copy of the press release you can find it on our Investor Relations website. The slides will also be found there as will be a webcast of the event as a reminder, some of the matters discussed during this call may include.
Unknown Executive: As a reminder, some of the matters discussed during this call may include forward-looking statements that involve risk, uncertainties, and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward-looking Please refer to our most recent 10-Q, 10-K, and other SEC filings for a description of such risk and uncertainty. During the course of this call, reference may be made to certain non-GAAP financial measures. Reconciliation of any non-GAAP to GAAP financial measures is posted on the website.
Forward looking statements that involve risk uncertainties and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward looking statements. Please refer to our most recent 10-Q10-K and other SEC filings for a description of such risk and uncertainties. During the course of this call referenced.
Speaker Change: To be made to certain non-GAAP financial measures reconciliation of any non-GAAP to GAAP financial measures is posted on the website. We will begin the call with Chris Franklin, Our chairman and CEO, who will provide an update on the company.
Chris Franklin: We will begin the call with Chris Franklin, our chairman and CEO, who will provide an update on the company.
Mike Hewer: Then, Mike Hewer, the president of our gas business, will provide an update on the gas industry.
Speaker Change: Then Mike <unk>, the president of our gas business will provide an update on the gas business and then Dan Schuller, Our Chief Financial Officer will provide an overview of the financial results before Chris closes the call and opens it up for questions with that I will turn it over to Chris Franklin.
Dan Schuller: and then Dan Schuller, our Chief Financial Officer, will provide an overview of the financial results before Chris closes the call and opens it up for questions.
Chris Franklin: With that, I will turn it over to Chris Franklin. Hey, thanks, Brian, and good morning, everyone. Thanks for joining us today, and let's begin on slide five with some highlights. First, we posted strong results this quarter, $1.03 gap earnings per share, a 6% increase over last year's quarter results. Both our water and gas businesses performed well, as expected. You'll hear more about our gas business from my cure in just a few moments, as Brian mentioned. With those first quarter results, we are reaffirming our 2025 earnings per share guidance range of $2.07 to $2.11 versus last year's earnings of $1.97 per share on an on-gap basis.
Speaker Change: Thanks, Brian and good morning, everyone. Thanks for joining us today, let's begin on slide five with some highlights first we posted strong results this quarter $1 three GAAP earnings per share.
Speaker Change: A 6% increase over last year's quarter results.
Speaker Change: Both our water and gas businesses performed well as expected.
Speaker Change: You'll hear more about our gas business from my cure in just a few moments as Brian mentioned.
Speaker Change: With those first quarter results, we are reaffirming our 2025 earnings per share guidance range of $2 <unk> to.
Speaker Change: $2 11.
Speaker Change: Versus last year's earnings of $1 97 per share on a non-GAAP basis.
Chris Franklin: Dan will provide a quarter by quarter view of our 2025 earnings expectations in just a few moments. We are also reaffirming our plans to invest between $1.4 and $1.5 billion in infrastructure investments in 2025. Through March 31st, we've already invested $270.5 million in infrastructure improvements across our footprint. Now, we previously announced to support our growth and meet our credit metrics, we have began to raise equity through our ATM program. So far this year, we've issued approximately $210 million. And throughout the year, we'll look at the market conditions and our share price for opportunities to continue using our ATM.
Speaker Change: I will provide a quarter by quarter view of our 2025 earnings expectations in just a few moments.
Speaker Change: We are also reaffirming our plans to invest between one four and $1.
Speaker Change: $5 billion in infrastructure investments in 2025.
Speaker Change: Through March 31, we've already invested $275 million in infrastructure improvements across our footprint.
Speaker Change: Now, we previously announced to support our growth and meet our credit metrics, we have begun to raise equity through our ATM program. So far this year, we've issued approximately $210 million.
Speaker Change: Throughout the year, we will look at the market conditions and our share price for opportunities to continue using our ATM.
Chris Franklin: You know, it's always important to mention that our achievements go far beyond the financial results. Some of the things of which we are most proud are our operational achievements. Our water quality compliance results continue to be industry-leading at a 99.8% compliance rate, meeting state and federal regulations over the last 12 months. Our PFAS work continues to be on time and on budget. We will be fully compliant with the four parts per trillion MCL by 2028, and we remain on target to meet the $450 million in capital spend rate to achieve that compliance. Now, importantly for our customers, we expect to receive approximately $100 million in proceeds from the settlements from the polluters, and for Aqua Pennsylvania, we've already received approximately $10 million in low-interest loans and grants.
Speaker Change: It's always important to mention that our achievements go far beyond the financial results. Some of the things of which we are most proud of our operational achievements our water quality compliance results continue to be industry, leading at a 99, 8% compliance rate meeting state.
Speaker Change: And federal regulations over the last 12 months.
Speaker Change: R. P. Fast work continues to be on time and on budget.
Speaker Change: We will be fully compliant with the four parts per trillion mcl by 2028, and we remain on target to meet the $450 million in capital spend rate to achieve that compliance now.
Speaker Change: Now importantly for our customers, we expect to receive approximately $100 million and proceeds from the settlement from the polluters and for Aqua, Pennsylvania, We've already received approximately $10 million in low interest loans and grants.
Chris Franklin: from the government and are also on track in Pennsylvania to receive approximately $59 million in grants or loans after all the applications have been approved.
Speaker Change: From the government and are also on track in Pennsylvania to receive approximately $59 million in grants or loans. After all of the applications have been approved.
Chris Franklin: We also continue to see strong operating results in the natural gas company, and Mike will fill us in in a few moments on that work.
Speaker Change: We also continue to see strong operating results in the natural gas company and Mike will fill us in a few moments on network.
Chris Franklin: Environmental stewardship is a key element of our work, and it's why we were so proud to learn that for the third year in a row, we were named to USA Today's list of climate leaders. A great honor for us and a nice recognition of our continued commitment to protecting and providing essential resources for life.
Speaker Change: Environmental stewardship is a key element of our work and it's why we were so proud to learn that for the third year in a row, we were named to USA today's list of climate leaders.
Speaker Change: Great honor for us and a nice recognition of our continued commitment to protecting and providing essential resources for life.
Chris Franklin: As we think about our successes, I have to mention that our work in the Texas Legislature to pass future test year legislation is showing positive signs. Just last week, the Texas House of Representatives overwhelmingly passed the future test year bill and now it's off to the Senate for consideration. in that chamber.
Speaker Change: As we think about our successes I have to mention that our work in the Texas legislature to pass future test year legislation is showing positive signs and just last week, the Texas House of Representatives overwhelmingly passed the future test year, Bill and now it's off to the Senate for consideration.
Speaker Change: In that chamber.
Chris Franklin: We'll keep you posted as developments occur, and you may recall that our rate cases in Ohio have been taking an extended period of time over the last few cycles at the PUCO. In the last couple of weeks though, legislation was passed by both the House and Senate in Ohio that sets deadlines for rate cases. After the governor signs the legislation, there will be new statutory timelines associated with rate cases in Ohio. We see this as a really positive development.
We will keep you posted as developments occur.
Speaker Change: You may recall that our our rate cases in Ohio had been taken an extended period of time over the last few cycles at the PUC.
Speaker Change: And the last couple of weeks, though legislation was passed by both the house and Senate in Ohio.
Speaker Change: Deadlines for rate cases.
After the governor signs the legislation there will be new statutory timelines associated with rate cases in Ohio, We see this as a really positive development.
Chris Franklin: Also in Virginia, legislation was passed to expand the water and wastewater infrastructure surcharge. We are really proud of our work with both regulators and legislators to find opportunities to make vital and sizable capital investments and quickly and efficiently recover that capital so we can put it back to work again.
Speaker Change: Also in Virginia legislation was passed to expand the water and wastewater infrastructure surcharge.
Speaker Change: We are really proud of our work with both regulators and legislators to find opportunities to make vital and sizable capital investments and quickly and efficiently recover that capital. So we can put back to work again.
Chris Franklin: Now slide six, hopefully you recognize our consistent year after year growth in earnings and dividends. 2025 is shaping up to be another strong year in this string of success. For many years now, our team has been able to consistently deliver on the guidance that we provided you. Our earnings per share is consistently within a 5% to 7% annual growth rate. And since we started providing annual guidance back in 2016, we have consistently met or exceeded market expectations. That consistent earnings growth has allowed us to continue to build on our over 30 year history of growing our dividends.
Speaker Change: Now on slide six hopefully you recognize are consistent year after year growth in earnings and dividends.
Speaker Change: <unk> hundred 25 is shaping up to be another strong year in this string of success.
Speaker Change: For many years now our team has been able to consistently deliver on the guidance that we provided you.
Speaker Change: Our earnings per share is consistently within a 5% to 7% annual growth rate and since we started providing annual guidance back in 2016, we have consistently met or exceeded market expectations.
Speaker Change: That consistent earnings growth has allowed us to continue to build on our over 30 year history of growing our dividend.
Chris Franklin: That dividend growth has averaged about 7% since I became CEO in 2015.
Speaker Change: That dividend growth has averaged about 7% since I became CEO in 2015.
Chris Franklin: Lastly, our financial results are made possible by the excellent execution of our operating team and their commitment to the community where we serve. In 2015, we've invested nearly $8 billion in capital improvements and have grown rate base at a 15% compounded annual growth rate if you include the purchase of people. I continue to be impressed by what the team has achieved, and our team is incredibly honored to be the current stewards of this great company with its 140-year history.
Speaker Change: Lastly, our financial results are made possible by the excellent execution of our operating team and their commitment to the communities where we serve since.
Speaker Change: Since 2015, we've invested nearly $8 billion in capital improvements and a growing rate base at a 15% compounded annual growth rate. If you include the purchase of peoples.
Speaker Change: I continue to be impressed by what the team has achieved and our team is incredibly honored to be the current stewards of this great company with this 140 year history.
Chris Franklin: Many of you have told me you enjoy hearing from our segment president. So today.
Speaker Change: Many of you have told me you enjoy hearing from our segment presidents so today.
Mike Hewer: Our GAS Segment President, Mike Huer, is joining us. Mike's going to talk a little bit about some of our achievements and some of our ongoing initiatives. And we'll touch a little bit on the data center activity happening in the region where we serve.
Speaker Change: Our gas segment President Mike <unk> is joining us Montreal to talk a little bit about some of our achievements and some of our ongoing initiatives and I'll touch a little bit on the data center activity happening in the region, where we serve Mike.
Mike Hewer: Thanks, Chris. I'm happy to be here today and appreciate the opportunity to highlight the significant and important work that the team of Peoples Gas are doing. As noted on slide 8, Peoples is the largest natural gas LDC in Pennsylvania, with over 700,000 customers and over $4 billion of rate base as of the end of 2024. Additionally, our gas segment includes our operations in Kentucky, serving over 40,000 customers. Since the acquisition by Essential, the clear focus of our gas segment has been the increased safety and reliability of our 15,000 mile distribution system as we work to reduce risk and achieve constructive regulatory outcomes.
Speaker Change: Thanks, Chris I'm happy to be here today, and appreciate the opportunity to highlight the significant and important work that the team of peoples gas are doing as noted on slide eight peoples is the largest natural gas LDC in Pennsylvania with over 700000 customers and.
Speaker Change: <unk> 4 billion of rate base as of the end of 2024.
Speaker Change: Additionally, our gas segment includes our operations in Kentucky, serving over 40000 customers.
Speaker Change: Since the acquisition by essential.
Speaker Change: Clear focus of our gas segment has been the increased safety and reliability of our 15000 mile distribution system as we work to reduce risk and achieve constructive regulatory outcomes next.
Mike Hewer: Next, on slide 9, I wanted to turn to an operational highlight with the Intellis Meter Program. In Q3 of 2024, Essential implemented a pilot program with the Gas Division to install and assess the Intellis Solid State Gas Meter. The Intellus meters provide added safety features and increased protection of customers in the communities we serve. pilot concluded with the installation of over 30,000 Intellis meters in 2024, and in Q1 of this year, 2025. We've moved from the pilot stage to a full implementation plan to install these new meters in all residential and small commercial properties within our service area.
Speaker Change: Next on slide nine I wanted to turn to an operational highlight.
Speaker Change: With the entellus meter program.
Speaker Change: In Q3 of 2024 essential implemented.
Speaker Change: A pilot program with the gas division to install and assess the entellus solid state gas meter.
Speaker Change: The entellus meters provide added safety features and increased protection of customers in the communities we serve.
Speaker Change: The pilot to include it with the installation of over 30000 entellus meters in 2024 and in Q1 of this year 2025.
Speaker Change: Moving from the pilot stage to full implementation plan to install these new meters in all residential and small commercial properties within our service area.
Mike Hewer: The added safety measures associated with these meters include an automatic shutoff if the system were over-pressurized or if there was an uncontrolled flow of natural gas. Additionally, in the event of a fire, the meter has the functionality to shut down automatically. As of now, we are assessing a comprehensive program to install the Intellis meters at nearly 700,000 customer counts in the coming years.
Speaker Change: Added safety measures associated with these meters include an automatic shutoff if the.
Speaker Change: The system or over pressurized or if there was an uncontrolled flow of natural gas. Additionally, in the event of a fire the meter has the functionality to shutdown automatically as.
Speaker Change: As of now we are assessing a comprehensive program to install the entellus meters at nearly 700000 customer accounts in the coming years.
Mike Hewer: We are extremely bullish on this effort as we work to be among the safest gas utilities in the United States.
Speaker Change: We are extremely bullish on this effort as we work to be among the safest gas utilities in the United States.
Mike Hewer: Moving along to slide 10, let me now mention a couple updates to our gas business, starting with the weather normalization adjustment, which is a mechanism we received in our last people's rate case. As with other utilities across the nation, People's Gas also experiences volatility in weather patterns and subsequently impact distribution revenue.
Speaker Change: Moving along to slide 10.
Speaker Change: Let me now mention a couple of updates to our gas business, starting with the weather normalization adjustment, which is a mechanism we received.
Speaker Change: Last peoples rate case.
Speaker Change: As with other utilities across the nation peoples gas also experiences volatility in weather patterns and subsequently impact distribution revenues beginning October one 2020 for People's received authority to implement a weather normalization.
Mike Hewer: beginning October 1, 2024. People's received authority to implement a weather normalization adjustment or WNA mechanism to combat volatility and stabilize bills for customers and the company. Since the inception of the WNA mechanism, actual weather has varied in billing months from greater than 17% colder than normal in January of 2025 to almost 30% warmer than normal in March of 2025. given the weather volatility.
Speaker Change: Adjustments or W and a mechanism to combat volatility and stabilize bills for customers and the company.
Speaker Change: Since the inception of the WMA mechanism actual weather has varied and billing months from greater than 17% colder than normal in January of 2025 to almost 30% warmer than normal in March of 2000.
Speaker Change: 25.
Speaker Change: Given the weather volatility.
Mike Hewer: This type of alternative rate making mechanism has proven to be valuable for the company and our customers. The mechanism requires the company to track weather, heating degree day. During the billing cycle of each customer, when the weather is 3% colder than normal or 3% warmer than normal, an adjustment is reflected on the bill. The primary driver of the mechanism has been to moderate the financial impact of volatile weather for customers and the company. We believe the WNA mechanism is working as intended for all stakeholders.
Speaker Change: This type of alternative ratemaking mechanism has proven to be valuable for the company.
Speaker Change: And our customers.
Speaker Change: <unk> requires the company to track whether heating degree days during the billing cycle of each customer when the weather is 3% colder than normal or 3% warmer than normal and adjustment is reflected on the bill.
Speaker Change: The primary driver of the mechanism has been to moderate the financial impact of volatile weather for customers and the company.
Speaker Change: We believe that WNS mechanism is working as intended for all stakeholders.
Mike Hewer: Finally, throughout the nation, there is a great deal of attention focused on the development of data centers and the associated need for electric power. We continue to field inquiries related to on-site power generation and data center development to support artificial intelligence, AI. As of today, we are in discussions with data center developers that represent up to five gigawatts of needed power generation in the Pittsburgh region. It's no secret that the vast natural gas resources within the Marcellus and Utica Shell formations presents an opportunity of robust and lower-cost power generation within the people's gas footprint and across Pennsylvania.
Speaker Change: Finally throughout the nation. There is a great deal of attention focused on the development of data centers and the associated need for electric power.
We continue to field.
Speaker Change: <unk> related to on site power generation and data center development to support artificial intelligence AI.
Speaker Change: As of today, we are in discussions with data center developers that represent up to five gigawatts of needed power generation in the Pittsburgh region.
Speaker Change: It's no secret that the vast natural gas resources within the Marcellus and Utica shale formations presents an opportunity of robust and lower cost power generation within the peoples gas footprint and across Pennsylvania.
Speaker Change: Key message is that our company will support these activities in every way possible as they present, new and unique economic development opportunities.
Mike Hewer: is that our company will support these activities in every way possible as they present new and unique economic development opportunities. Given the projected shortfall of available power generation within PJM, our regional transmission organization, the company is working with individual customers Data Center Developer. Energy Producers, and Natural Gas Pipelines to support these important development efforts.
Speaker Change: Given the projected shortfall of available power generation within PJM or regional transmission organization. The company is working with individual customers.
Speaker Change: Data center developers energy producers and natural gas pipelines to support these important development efforts.
Mike Hewer: While it's certainly too early to predict the exact investment needed to develop these projects, there are clear benefits to the region in what has been described as a very, very fluid environment surrounding data centers and energy use. for People's and Essential Utilities. The potential increase in load could increase the utilization factor of the distribution system that would help to keep natural gas service affordable for our customers.
Speaker Change: While it's certainly too early to predict the exact investment needed to develop these projects there are clear benefits to the region. In what has been described as a very very fluid environment surrounding data centers and energy usage.
Speaker Change: For peoples and essential utilities the.
Speaker Change: The potential increase load could increase the utilization factor of the distribution system that would help to keep natural gas service affordable for our customers.
Dan Schuller: And with that, I will turn it to Dan for a review of the financials. Thanks, Mike. And good morning, everyone.
Dan Schuller: And with that I will turn it to Dan.
Dan Schuller: A review of the financials.
Speaker Change: Thanks, Mike and good morning, everyone.
Dan Schuller: Let's begin on slide 12 with a high-level view of the first quarter results, and then we'll get into the details on the waterfront. Our quarterly performance was strong, with revenues up 28%, O&M flat, and earnings per share up 6.2%. Recall that last year's first quarter earnings per share included a 24 cent gain from the sale of the Pittsburgh Area Energy Project.
Speaker Change: Let's begin on slide 12 at a high level view of the first quarter results and then we'll get into the details on the waterfall.
Our quarterly performance was strong with revenues up 28% O&M flat and earnings per share up six 2%.
Speaker Change: And recall that last year's first quarter earnings per share included a 24% gain from the sale of the Pittsburgh area Energy project.
Dan Schuller: Let's dive into the waterfall slides to further review the drivers of this strong quarter and the comparisons to last year. On slide 13, we have the revenue waterfall for the first quarter. Revenue has increased 28% from $612.1 million a year ago to $783.6 million this year. Additional revenues from regulatory recoveries, higher purchase gas costs, and higher regulated natural gas segment volumes were the primary revenue drivers. of the roughly $67 million increase in regulatory recovery. Two-thirds is from gas and one-third is from water. of the higher purchased gas costs, about half is due to volume and half is due to higher commodity price.
Speaker Change: Let's dive into the waterfall slide to further review the drivers of the strong quarter and the comparison to last year.
Speaker Change: On slide 13, we have the revenue waterfall for the first quarter.
Speaker Change: Revenues increased 28% from $612 1 million a year ago to $783 6 million this year.
Speaker Change: Additional revenues from regulatory recoveries higher purchased gas costs and higher regulated natural gas segment volumes were the primary revenue drivers.
Speaker Change: Of the roughly $67 million increase in regulatory recoveries.
Speaker Change: Two thirds is from gas and one third is from water.
Speaker Change: The higher purchase gas costs about half is due to volume and half is due to higher commodity prices.
Dan Schuller: The higher gas segment volumes reflect normal weather in this year's first quarter compared to significantly warmer than normal weather in the Pittsburgh area last year. The other category includes an $8.5 million increase in our customer assistance surcharge costs, which has a direct offset in O&M. It also reflects a lower tax repair-related credit to customers as a result of the P&G rate case and $2 million of weather normalization credits back to our Pennsylvania customers.
Speaker Change: The higher gas segment volumes reflect normal weather in this year's first quarter compared to significantly warmer than normal weather in the Pittsburgh area last year.
Speaker Change: The other category includes an $8 $5 million increase in our customer assistance surcharge costs.
Speaker Change: Which has a direct offset in O&M. It also reflects a lower tax repair related credit to customers as a result of the PNG rate case.
Speaker Change: And $2 million of weather normalization credits back to our Pennsylvania customers.
Dan Schuller: Next on slide 14, the O&M slide, we see flat O&M expenses year over year, but there are a few things going on that we should discuss. The main drivers for O&M were increases in customer assistance surcharge costs, which have an equivalent offsetting amount in revenue. increases in employee related costs, and water production expenses. These increases were offset by a decrease in bad debt expense and other expenses. The decrease in bad debt primarily reflects the rate recovery of a regulatory asset tied to increased bad debt during COVID. And the other category reflects lower outside services costs and insurance expense.
Speaker Change: Next on slide 14, the O&M slide we see flat O&M expenses year over year, but there are a few things going on that we should discuss.
Speaker Change: The main drivers for O&M or increases in customer assistance surcharge costs, which have an equivalent offsetting amount in revenue increase.
Speaker Change: Increases in employee related costs and water production expenses.
Speaker Change: These increases were offset by a decrease in bad debt expense and other expenses.
Speaker Change: The decrease in bad debt, primarily reflects the rate recovery of a regulatory asset tied to increased bad debt during COVID-19.
Speaker Change: And the other category reflects lower outside services costs and insurance expenses.
Dan Schuller: On the EPS waterfall on slide 15, we see a $0.17 positive impact from rates and surcharges, an $0.08 increase due to higher volumes of gas, reflecting normal weather this year, and a $0.02 pickup due to lower expenses. These increases are offset by lower water volume and other.
Speaker Change: On the EPS waterfall on slide 15, we see a 17 positive impact from rates and surcharges and <unk> increased due to higher volumes of gas, reflecting normal weather this year and the <unk> pick up due to lower expenses.
Speaker Change: These increases were offset by lower water volume and other.
Dan Schuller: For the quarter, other includes the prior year 24 cent gain on sale from the Pittsburgh Area Energy Project, tax related impact, and other items. Turning to slide 16, this is something we've shown occasionally in the past to provide more insights on how our annual earnings per share breaks out by quarter.
Speaker Change: For the quarter. Other includes the prior year 24 gain on sale from the Pittsburgh area energy projects tax related impact and other items.
Speaker Change: Turning to slide 16. This is something we've shown occasionally in the past to provide more insight on how our annual earnings per share breaks out by quarter. We thought it was important to bring this back for those of you that run quarterly models and we've modified it to more accurately reflect how we expect 2025 to lock.
Dan Schuller: We thought it was important to bring this back for those of you that run quarterly models, and we've modified it to more accurately reflect how we expect 2025. In the past, we would have said that the first quarter could move our earnings materially higher or lower depending on the weather. Now that we have a revenue normalization mechanism in Pennsylvania, that volatility will be more muted. For this year, we see that the first quarter actual result was at the high end of the 40 to 50% of annual EPS expected in the first quarter. The recovery of the regulatory asset I mentioned earlier was a portion of this outperformance.
Speaker Change: In the past, we would have said that the first quarter could move our earnings materially higher or lower depending on the weather.
Speaker Change: Now that we have a revenue normalization mechanism in Pennsylvania.
Speaker Change: Volatility will be more muted.
Speaker Change: For this year, we see that the first quarter. Actual result was at the high end of the 40% to 50% of annual EPS expected in the first quarter.
Speaker Change: The recovery of the regulatory asset I mentioned earlier it was a portion of this outperformance.
Dan Schuller: In the two middle quarters of the year, heating-related gas sales are normally light due to warm summer temperatures. Thus, we expect 10 to 20% of our annual earnings in each of these two quarters, and as you will recall, the third quarter EPS is generally the lowest of the year. And the fourth quarter should be between 20 and 30% of our earnings as the gas business picks up going into winter. We remain confident in our ability to meet our full year earnings for sure guidance range of $2.07 to $2.11.
Speaker Change: In the two middle quarters of the year heating related gas sales are normally light due to warm summer temperatures. Thus, we expect 10% to 20% of our annual earnings in each of these two quarters.
Speaker Change: And as you will recall the third quarter EPS is generally the lowest of the year.
Speaker Change: In the fourth quarter should be between 20, and 30% of our earnings as the gas business picks up going into winter.
Speaker Change: We remain confident in our ability to meet our full year earnings per share guidance range of $2 seven to $2 11.
Dan Schuller: While we're here, I do want to reiterate what Chris said about the equity needs for the year. We're pleased to report that we've already completed approximately two-thirds of our 2025 equity needs. We see this as a significant accomplishment, especially considering the general market volatility that we've experienced so far this year.
Speaker Change: While we are here I do want to reiterate what Chris said about the equity needs for the year. We're pleased to report that we've already completed approximately two thirds of our 2025 equity needs.
We see this as a significant accomplishment, especially considering the general market volatility that we've experienced so far this year.
Speaker Change: Yeah.
Dan Schuller: Next, let's move to slide 17 to provide an update on regulatory activity. We continue to manage our regulatory activity to maintain safe and reliable service, earn an appropriate return on the capital that we invest, and minimize regulatory lag, while always considering affordability for our customers. New rates went into effect on February 22nd for Aqua Pennsylvania following the Pennsylvania PUC approval of the recent rate The rate order allowed a base rate increase designed to increase total annual revenues by $73 million. During the first three months of 2025, we implemented rate increases in Ohio and North Carolina designed to increase total revenues on an annual basis by 5.8%.
Speaker Change: Next let's move to slide 17 to provide an update on regulatory activity.
Speaker Change: We continue to manage our regulatory activity to maintain safe and reliable service earn an appropriate return on the capital that we invest and minimize regulatory lag while always considering affordability for our customers.
Speaker Change: New rates went into effect on February 22nd for Aqua, Pennsylvania, following the Pennsylvania PUC approval of the recent rate case.
Speaker Change: The rate order allowed a base rate increase designed to increase total annual revenues by $73 million.
Speaker Change: During the first three months of 2025, we implemented rate increases in Ohio, and North Carolina designed to increase total revenues on an annual basis by $5 8 million.
Dan Schuller: Also, during the first three months of 2025, we implemented infrastructure rehabilitation surcharges designed to increase total revenues on an annual basis by $10.8 million in our water and wastewater divisions in Pennsylvania and Ohio, and by approximately half a million dollars in our natural gas subsidiary in Kentucky.
Speaker Change: Also during the first three months of 2025, we implemented infrastructure rehabilitation surcharges designed to increased total revenues on an annual basis by $10 8 million and our water and wastewater divisions in Pennsylvania, and Ohio and by approximately half a million dollars in our natural gas.
Gary: Gary in Kentucky.
Dan Schuller: On April 30th, 2025, the company's regulated water and wastewater subsidiary in North Carolina, Aqua North Carolina, followed an application with the North Carolina Utilities Commission designed to increase rates by $32.9 million in the first year of implementation. and then by two incremental approximately $6 million increases in the second and third years respectively. As a reminder, we began using a multi-year approach in North Carolina three years ago. We find that that works well for all of the state.
Gary: On April 32025, the company is regulated water and wastewater subsidiary in North Carolina, Aqua North Carolina, followed an application with the North Carolina Utilities Commission designed to increase rates by $32 9 million in the first year of implementation.
Gary: And then by two incremental approximately $6 million increases in the second and third years, respectively.
Gary: As a reminder, we began using a multi year approach in North Carolina three years ago, we find that that works well for all of the stakeholders.
Chris Franklin: And with that, I'll turn it back over to Chris.
Chris Franklin: And with that I'll turn it back over to Chris Chris.
Chris Franklin: All right, thanks, Dan. Let's move to slide 19. Now, we'll touch briefly on our long-term growth acquisition strategy that, as you know, focuses on water and wastewater utility acquisition. In fact, since 2015, we've acquired over $518 million in rate base and more than 129,000 new customers or customer equivalents. Last month, we closed on the acquisition of the Village of Midvale's water system in Ohio, which serves approximately 1,000 customers. We paid approximately $3 million for this relatively small system. And as a reminder, Ohio is our second largest water operation with over 150,000 customers. And we continue to see strong opportunities for regionalization in that state.
Chris Franklin: Alright, Thanks, Dan.
Chris Franklin: Let's move to slide 19, now will touch briefly on our long term growth through acquisition strategy that as you know focuses on water and wastewater utility acquisitions. In fact since 2015, we've acquired over $518 million in rate base and more than 129000, new customers or.
Chris Franklin: Customer equivalents.
Chris Franklin: Last month, we closed on the acquisition of the village of mid billed water system in Ohio, which serves approximately 1000 customers we paid approximately $3 million for this relatively small system.
Chris Franklin: As a reminder, Ohio is our second largest water operation with over 150000 customers and we continue to see strong opportunities for regionalization in that state.
Chris Franklin: Now in January, we closed the acquisition of the Greenville Wastewater Utility Assets, which serves approximately 2,300 customers in Greenville, Pennsylvania. We paid approximately $18 million for this system. And just recently, we filed an application with the Pennsylvania Public Utility Commission for the acquisition of the Greenville Water System, which we hope to close later this year. Now, including Greenville Water, as of today, we have five signed purchase agreements for the acquisition of water and wastewater systems in Pennsylvania and Texas that are pending closing and are expected to serve over 210,000 customers or customer equivalents and total approximately $340 million in purchase price.
Chris Franklin: Now in January we closed the acquisition of the Greenville wastewater utility assets, which serves approximately 2300 customers in Greenville, Pennsylvania.
Chris Franklin: We paid approximately $18 million for the system and just recently, we filed an application with the Pennsylvania Public utility Commission for the acquisition of the Greenville water system, which we hope to close later this year.
Chris Franklin: Now, including Greenville water as of today, we have five signed purchase agreements for the acquisition of water and wastewater systems in Pennsylvania, and Texas that are pending closing and are expected to serve over 210000 customers or customer equivalents and total approximately $340 million.
Chris Franklin: The purchase price.
Chris Franklin: Our $276.5 million dollar agreement to acquire Delcoura, a Pennsylvania sewer authority that serves approximately 198,000 customer equivalents in the Philadelphia suburbs, is included among the signed purchase agreements, but as you know, is not included in our current guidance numbers.
Chris Franklin: Our $276 $5 million agreement to acquire del Quora, but Pennsylvania sewer authority to serves approximately 198000 customer equivalents.
Chris Franklin: The Philadelphia suburbs is included among these signed purchase agreements, but as you know is not included in our current guidance numbers.
Chris Franklin: And finally, on slide 20.
Chris Franklin: And finally on slide 20.
Chris Franklin: As usual, we'll close the call by sharing some of our goals and aspirations, both short-term and long-term. We continue to see a healthy pipeline of opportunities for additional growth, both on the water side as well as the gas business. We expect our combined utility rate base will grow at a compounded annual growth rate of 8%. Breaking this down a little bit further. We anticipate our regulated water segment rate-based growth at about 6%, and our regulated natural gas segment rate-based growth to be at about 11%. Importantly, we are reaffirming our 5-7% Multi-Year Earnings Per Share Guidance through 2027.
Chris Franklin: As usual, we'll close the call by sharing some of our goals and aspirations, both short term and long term.
Chris Franklin: We continue to see a healthy pipeline of opportunities for additional growth both on the water side as well as the gas business.
Chris Franklin: We expect our combined utility rate base will grow at a compounded annual growth rate of 8%.
Chris Franklin: Breaking this down a little bit further.
Chris Franklin: We anticipate our regulated water segment rate base growth at about 6% and our regulated natural gas segment rate base growth to be about 11%.
Chris Franklin: Importantly, we are reaffirming our 5% to 7% multi year earnings per share guidance through 2027.
Chris Franklin: As I've said before, this guidance does include acquisitions which are expected to close in 2025 and 2026 and excludes Delcoura. Of course, this projection includes the crucial work that we're doing to remediate PFAS across our water systems, as well as our work to replace aging natural gas pipes. By the way, our gas pipeline replacement work is expected to continue well beyond the next 10 years.
Chris Franklin: As I said before this.
Chris Franklin: This guidance.
Chris Franklin: Those include acquisitions, which are expected to close in 2025, and 2026 and excludes <unk>.
Chris Franklin: Of course this projection includes the crucial work that we're doing to remediate <unk> across our water systems as well as our work to replace aging natural gas pipes.
Chris Franklin: By the way our gas pipeline replacement work is expected to continue well beyond the next 10 years.
Chris Franklin: Now we will continue to maintain a strong balance sheet with a focus on continued improvement in our debt metrics while we grow the dividend and we'll keep the payout ratio at the same time at 60 to 65 percent. So all in all, we see a bright future for the company as we continue to invest in our nation's infrastructure and build value for shareholders. Very excited about the future of this company.
Chris Franklin: Now we will continue to maintain a strong balance sheet with a focus on continued improvement in our debt metrics.
Chris Franklin: Can we grow the dividend and we will keep the payout ratio at the same time.
Chris Franklin: At $60 to 65%.
Chris Franklin: So all in all we see a bright future for the company as we continue to invest in our nation's infrastructure and build value for shareholders very excited about the future of this company.
Chris Franklin: With that, I'm gonna conclude my formal remarks for the day and we'll open up for questions.
Chris Franklin: With that I will conclude my formal remarks for the day and we will open up for questions send it back to the operator.
Unknown Executive: send it back to the operator.
Chris Franklin: Okay.
Unknown Executive: And at this time, we will begin the question and answer session. To ask a question, you may press star 1 on your touchtone phone. And to withdraw your question, please press star 1 again.
Chris Franklin: Okay.
Chris Franklin: We will begin the question and answer questions to ask a question you May press Star one on your Touchtone phone to withdraw your question. Please press star one again.
Julien Dumoulin: Our first question comes from the line of Julien Dumoulin Smith from Jefferies. Please go ahead. Hey, this is Mark on for Julien. This is Mark. Congrats on a nice quarter. Thank you. Good morning.
Speaker Change: Our first question comes from the line of Julien Dumoulin Smith from Jefferies. Please go ahead.
Speaker Change: Hey, this is Frank on for Julian This is mark congrats on a nice quarter.
Speaker Change: Thank you.
Mark: Morning, my first question is on equity issuance. We know two thirds of the equity needs have been completed so far.
Speaker Change: Thanks.
Speaker Change: Good morning. My first question is on equity issuance. We now two thirds of the equity needs have been completed so far just given recent share price strength.
Mark: Just given recent share price strengths, are you considering completing the remaining roughly 100 million equity ahead of second quarter?
Speaker Change: And completing the remaining roughly $100 million equity ahead of second quarter, and maybe any thoughts on perhaps pulling forward a portion of 2006 equity needs. Thank you.
Chris Franklin: And maybe any thoughts on perhaps pulling forward a portion of 206 equity needs? Thank you. Yeah, I appreciate the question. And I think for the time being, our focus is really getting the $315 million in equity raised here in 2025, rather than really thinking about the 2026 equity. But, you know, as you know, we've got a relatively strong share price. So, you know, when we can, we'll be in the market issuing shares in a way that doesn't dramatically impact the share price.
Speaker Change: Yes, I appreciate the question and I think for the time being our focus is really getting the $315 million in <unk>.
Speaker Change: Equity raised here in 2025, rather than really thinking about 2026 equity, but as you.
Speaker Change: We've got a relatively strong share price. So when we can we'll be in the market issuing shares in a way that doesn't dramatically impacting the share price.
Speaker Change: Got it that's very clear and maybe if I can just give a little bit on the Texas rate case I know you are gearing up for your first Texas filings in roughly 20 years and just what level of revenue increase ROE and equity ratio are you targeting I guess, how should we set expectations around the case an outcome I know you meant.
Speaker Change: And some positive dynamics earlier in terms of future rate case future test year, just any color on that front will be helpful. Thank you.
Chris Franklin: Yeah, so that rate case, we haven't filed it yet. We're looking to file it at the end of this month. That's our target at this point. You know, you'll see when we file that, you know, you'll see what that revenue ask is and also, you know, equity layer and an ROE. But, you know, I'd say an equity layer and ROE, you know, expect to see something consistent with what we ask for in our other states. And I would say just to add to that, you know, we we work very hard to to build a reputation in all the states where we operate with strong operating results, try to be very, very Accommodating to regulators when they need us to do things.
Speaker Change: Yes, so that rate case, we haven't filed that yet we're looking to file it at the end of this month.
Speaker Change: Our target at this point.
Speaker Change: You'll see when we file that Youll see what that revenue ask is and also equity layer in Roe.
Speaker Change: ROE, but 10 equity layer in or we expect to see something consistent with what we ask for in our other states.
Speaker Change: And I would say just to add to that.
Speaker Change: We work very hard to to build a reputation in all the states, where we operate with strong operating results.
Speaker Change: Very very rare.
Speaker Change: Accommodating to regulators when they need us to do things that we've done the same thing in Texas now anytime you come in for rates after 20 years of being out.
Chris Franklin: We've done the same thing in Texas. Now, any time you come in for rates after 20 years of being out, you know, there's gonna be some things to get over and figure out because we haven't been in for so long. And so I would just say, you know, we'll work really closely with Texas regulators to adjudicate that case, but certainly, you know, there may be some things in that case that we'll figure out as we go. Got it. That's very clear. And congrats again. Thank you. Yeah, thank you. Thank you.
Speaker Change: There's going to be some some some things that get over and figure out because we haven't been in for so long and so I would just say.
Speaker Change: We will work really closely with Texas regulators to adjudicate that case, but but certainly.
Speaker Change: There may be some things in that case it.
Speaker Change: And we'll figure out as we go.
Speaker Change: Got it thanks very much.
And congrats again, thank you.
Speaker Change: Yes. Thank you.
Speaker Change:
Durgesh Chopra: Our next question comes from the line of Durgesh Chopra from Evercore ISI. Please go ahead. Good morning, Chris, and thank you for giving. Hey, just a little bit more color. I'm just looking for some reaffirmation. It looks like you started the year really strong in terms of EPS. And when I sort of do some high level map and take the midpoints of the ranges you have highlighted in terms of earnings contribution for quarter, second, third, and fourth, that will put you ahead of your top end of the guidance range. So, maybe just talk to that.
Speaker Change: Thank you. Our next question comes from the line.
Speaker Change: This chopra from Evercore ISI. Please go ahead.
Chopra: Good morning.
Chopra: Good morning, Chris Dan Thank you for again.
Chopra: Hey.
Chopra: A little bit more color.
Speaker Change: Just looking for some reaffirmation you looks like you started the year really strong.
Speaker Change: In terms of EPS, and when I sort of do some high level math and take the midpoint of the ranges you highlighted in terms of earnings contribution per quarter second third and fourth that will put you ahead of your top end of the guidance range. So maybe just maybe just talk to that is that you've started strong but there's a.
Chris Franklin: Is that you've started strong, but there's a long year to go. So, you're kind of, you know, not raising guidance here, but you're starting strong. Or the strategy is to move costs from 26 into 2025 and be with 26. Maybe just talk to that as to how you are seeing that play out. Yeah. Great, great question, Durgesh. I think, you know, you That first point you made, right, that we're four months into the year here and the financials really only reflect the three months. seems premature to do much in terms of adjustment of our guidance range.
Speaker Change: Long year to go so you kind of.
Speaker Change: Not raising guidance here, but you are starting to strong or the strategy is to move costs from 26 into 2025 and <unk> 26, maybe just maybe just talk to that as to how you're seeing that play out yes, great. Great question drew cash I think.
Speaker Change: Yes.
Speaker Change: That first point you made right.
Speaker Change: Four months ended the year here in the financials really only reflect the three months.
Speaker Change: It seems premature to do much in terms of adjustment of our guidance range.
Chris Franklin: You know, and I'll acknowledge we did have some nice tailwinds in the first quarter, but we've got three more quarters to go and we may have some headwinds there that that we encounter. So our thought was really just to wait and provide clarity really as the year goes on. Got it. Okay. I appreciate that commentary.
Speaker Change: Now I'll acknowledge we did have some nice tailwind in the first quarter and we've got three more quarters to go and we may have some headwinds there that we encountered so our thought was really just to wait and provide clarity really as the year goes on.
Speaker Change: Got it okay I appreciate that commentary and then just kind.
Durgesh Chopra: And then just kind of wanted to ask you on the EPA announcement here late April on PFAS. You know, they were kind of announced specific targeted actions. Just wondering how that impacts your operational strategy in tackling that forever chemical and then any implications for the capital that you have in the five-year plan.
Speaker Change: Kind of wanted to.
Speaker Change: Ask you on the EPA announcement here late April on DFAST.
Speaker Change: <unk>.
Speaker Change: We're kind of announce specific targeted actions just wondering how that impacts your operational strategy in tackling that forever chemical and then any implications for the capital that you have in the five year plan. Please thank you.
Chris Franklin: Thank you. Durgesh, we're full speed ahead. I've mentioned on previous calls that we've sat with regulators, both economic and environmental regulators in our key states, and the orders, what we've received from them is full speed ahead, mitigate this, meet the timelines, and so we're still on our projected budget of $450 million. We continue to test our systems, so there are occasions where that could grow a little bit as we continue to test the various locations around the company's footprint, but we've Got it.
Speaker Change: We're full speed ahead.
Speaker Change: I've mentioned on previous calls that we've sat with <unk>.
Speaker Change: Regulators, both economic and environmental regulators in our key states and.
Speaker Change: The orders with the <unk>.
Speaker Change: We've received from them is full speed ahead mitigate this meet the timelines and.
Speaker Change: And so we're still on our projected budget of $450 million.
Speaker Change: And be complete by 2028.
Speaker Change: With no hesitation here at all we're going to we're going to spend it and we're going to we're going to mitigate.
Speaker Change: The affected.
Speaker Change: Sources.
Speaker Change: We continue to test our system. So there are occasions, where that could grow a little bit as we continue to test various locations around the company's footprint, but there is no. We've seen nothing from EPA or this administration that would suggest that we should slow in any way. So we're full speed ahead.
Speaker Change: Got it thank you.
Durgesh Chopra: Thank you.
Speaker Change: Q.
Travis Miller: Our next question comes from the line of Travis Miller from Morningstar. Please go ahead. Good morning, everyone. Thank you. Just a little follow up there on the PFAS discussion. In terms of the financing, got those numbers that you were talking about for Pennsylvania specifically, since you had some success there. How much is left, would you say, of the $450,000 that's allocated to Pennsylvania than NEP, those low-interest loans, the $55 million, if you get that? Well, I would say that the spend in Pennsylvania is still largely to come. We have not spent much because in Pennsylvania, we have some larger plants that need mitigation, and so that takes much more planning, permitting, and testing.
Speaker Change: Thank you. Our next question comes from the line of Travis Miller from Morningstar. Please go ahead.
Travis Miller: Travis good morning, everyone.
Speaker Change: Thank you.
Travis Miller: Just a little follow up there on the.
Travis Miller: Pizza discussion in terms of the financing.
Travis Miller: <unk> got those numbers that you were talking about for Pennsylvania, specifically since you had some success there.
Travis Miller: How much is left would you say of the $4 50, that's allocated to Pennsylvania then.
Travis Miller: Those low interest loans $55 million, if you get that.
Travis Miller: Well I would say that.
Travis Miller: The spend in Pennsylvania is still largely to come we have not spent much because in Pennsylvania, we have some larger.
Travis Miller: Plants that need mitigation and so that takes much more planning permitting and casting so travis most of that spend is yet to come.
Chris Franklin: So Travis, most of that spend is yet to come. We continue to look at the low-interest loans and grants in Pennsylvania, and we're hopeful that we can get more. We've already been, as you said, successful, but we've got applications in for additional dollars to offset what our customers need to pay.
Travis Miller: We continue to look at the low interest loans and grants in Pennsylvania, and we're hopeful that we can get more we've been already been as you said successful but.
Travis Miller: We've got we've got applications in for four additional dollars to offset.
Travis Miller: But.
Travis Miller: What our customers need to pay up.
Travis Miller: I don't have exact numbers on the applications that are in right now, but we're happy to take that offline and get you. Okay, and that'd be incremental to the $69 million, the $10 million, and the $59. Okay, great. Okay, okay.
Travis Miller: I don't have.
Travis Miller: The exact numbers on the applications that we're in right now, but we are happy to take that offline and get you some more numbers.
Speaker Change: Okay, and that would be incremental to the 69 million to $10 million and $50 million.
Travis Miller: Yes.
Travis Miller: Okay great.
Travis Miller: <unk> received.
Mike Hewer: And then a question for Mike, data centers, I'm sure you weren't surprised that there'd be a question on data centers. When you talk about the opportunity there, is that just simply more gas flowing through the distribution center? Or are you thinking more direct contracts to like onsite generation? I heard a couple of gas companies talking about. Projects. Essentially behind the meter, is that a supply source that you would think about or are we just talking about more distribution volume?
Travis Miller: Okay. Okay.
Travis Miller: And then a question for Mike.
Speaker Change: Dissenters sure you Werent surprised there did the question on data centers.
Travis Miller: When you talk about the opportunity there is that.
Travis Miller: There are simply more gas flowing through the distribution center or are you thinking more direct content direct contracts to like on site generation nodes heard a couple of gas companies talking about <unk>.
Travis Miller: Projects.
Travis Miller: Essentially behind the meter or is that a supply source that you would think about or are we just talking about more distribution volume.
Mike Hewer: Thank you for the question. I mean, I think it's a variety of things. I think Team Pennsylvania, the economic development entity of Pennsylvania, has indicated there's somewhere around 72 projects in various forms of development. What I'm describing is some form or fashion of all the things that you talked about. We believe in behind-the-meter generation, not only for data centers, but large-volume customers as well. But it is very fluid at this particular time. And of the projects that we're currently in discussions with, it's very clear that there are different approaches to how this might happen. It's also very clear that the PJM grid does not have the adequate generation, as you look at, into 2030 and beyond to support virtually, you know, many of these projects.
Travis Miller: Thank you for the question I mean, I think it's a variety of things I think team, Pennsylvania, the economic development and pay in Pennsylvania has indicated there is somewhere around 72 projects in various forms of development, what I'm, describing is some form or fashion of all the things that you talked about.
Travis Miller: We believe in behind the meter generation not only for data centers, but large volume customers as well.
Travis Miller: But it is very fluid at this particular time of the projects that we're currently in discussions with its it's very clear that there are different approaches to how this might happen. It's also very clear that the PJM grid does not have.
Travis Miller: Adequate generation as you look out into 2030 and beyond to support <unk>.
Travis Miller: Actually many of these projects so natural gas will play a huge part of that there are certainly latency with within our system load factor that can be extrapolated to the benefit of customers not only new customers, but our existing customers and there is also potential investment that we might look at with potential partners.
Mike Hewer: So natural gas will play a huge part in that. There's certainly latency within our system, load factor that can be extrapolated to the benefit of customers, not only new customers, but our existing customers. And there's also potential investment that we might look at with potential partners. So we have a team that's been working on this for quite some time. We're thinking about it every day and how we can support these efforts not only to the benefit of the region, but to our customers and specifically peoples in effect.
Travis Miller: So we have a team that's been working on this for quite some time, we're thinking about it every day and how we can.
Travis Miller: Support these efforts not only to the benefit of the region, but to our customers and specifically peoples and essential.
Mike Hewer: Okay, great. I appreciate all the details. That's all I had. Thanks. Thank you.
Speaker Change: Okay, great well I appreciate all the details.
Travis Miller: Thanks.
Travis Miller: Hey, Travis.
Unknown Executive: Again, should you have a question, please press star followed by the number one.
Speaker Change: Thank you again, so you have a question. Please press star followed by the number one our next question comes from the line of Greg <unk> from UBS. Please go ahead.
Gregg Orrill: Our next question comes from the line of Gregg Orrill from UBS. Please go ahead. Hey, Greg. Good morning, Greg. Hey, good morning. Congratulations. Just maybe a follow up there.
Speaker Change: Hey, Greg Good morning, Gregg Hey, good morning congratulations.
Speaker Change: Just maybe a follow up there.
Mike Hewer: with regard to the discussions that you're having with, you know, business opportunities on on the gas side with data center customers. How do you see that, you know, evolving? When do you when do you think, you know, that, you know, those discussions would reach, you know, terms of agreements, what kind of what sort of updates should we be looking for as the year progresses? Again, I appreciate that question, you know, as mentioned. with the vast number of projects that are currently in play. It's really hard to say specifically what the timing of any announcements would be.
Speaker Change: With regard to the discussions that youre, having with.
Speaker Change: Business opportunities on the gas side with data center customers.
Speaker Change: How do you see that.
Speaker Change: Evolving when do you when do you think.
Speaker Change: Yeah.
Speaker Change: Those discussions would reach.
Speaker Change: The terms of agreements with.
Speaker Change: Kind of what sort of update should we be looking for as the year progresses.
Speaker Change: So again I appreciate that question.
Speaker Change: You mentioned.
Speaker Change: With the vast number of projects that are currently in play it's really hard to say specifically, what the timing of any announcements would be you've seen fairly large data center campuses that have already been announced those are not anything that we have portrayed in any of our analysis.
Mike Hewer: You've seen fairly large data center campuses that have already been announced. Those are not anything that we have portrayed in any of our analysis. I would also say that the state of Pennsylvania and any economic development packages they would put together, those are going to have tremendous influence on who locates here. The unique potential of where individuals would locate data centers is something that we continue to look at, a really strong, robust delivery system.
Speaker Change: I would also say that the state of Pennsylvania in any economic development packages. They would put together those are going to have tremendous influence on who locates here.
Speaker Change: The unique potential of where individuals would locate data centers is something that we continue to look at a really strong robust delivery system.
Mike Hewer: So I would hesitate to present the timing of when we would announce any type of deal. And as I mentioned, of the ones that we're looking at, they all come in various forms, shapes, and sizes. So what we do know is that the speed to market influence is going to be really important for these developers. So I would suggest that as we develop deals and sign deals, we would come to the table with those immediately. There's so many contributing factors to state government here. Pennsylvania's really got to play a major role as well. We think about site location, site readiness, in addition to everything that the company's doing to provide, you know, the adequate supply.
Speaker Change: I would hesitate to.
Speaker Change: The timing of when we would announce any type of deal and as I mentioned of the ones that we're looking at they all come in various forms shapes and sizes.
Speaker Change: So what we do know is that the speed to market influence is going to be really important for these developers. So I would suggest that as we develop deals and signed deals we would come to the table with us immediately.
Contributing factors to state government here in Pennsylvania is really going to play a major role as well be thinking about site location site readiness. In addition to everything that the company is doing too.
Speaker Change: Hi.
Speaker Change: You'd be adequate supply.
Mike Hewer: Mike, I think the one you mentioned that got completed already is Bedford, right? Well, Omer City. Omer City, I'm sorry. Omer City. Yep, yep, yep. And so, you know, we have had some successes here in Pennsylvania. That one was not in our service area. But we're hopeful to see more of those, whether it's throughput or combinations. Sort of like we've done, Greg, with the energy products that we sold last year. Those are always a possibility. It's hard to say what form these ultimately will take, let alone timing.
Speaker Change: Mike I think the one you mentioned.
Speaker Change: Got complete already Bedford rape, Oklahoma City, Oklahoma City, I'm, sorry, I'm going to say.
Speaker Change: And so we have had some successes here in Pennsylvania that will move out in our service area, but.
Speaker Change: But we're hopeful to see more of those whether it's throughput or combination of sort of like we've done Greg with the with the energy products that we sold last year those are always a possibility.
Speaker Change: It's hard to say what form these ultimately will take let alone timing.
Mike Hewer: Okay, thanks. Thank you.
Speaker Change: Okay. Thanks.
Speaker Change: Yeah.
Ryan Connors: Our last question comes from the line of Ryan Connors from North Coast Research. Please go ahead. Hey, Ryan. Morning. Yeah.
Speaker Change: Thank you. Our last question comes from the line of Ryan Connors from Northcoast Research. Please go ahead.
Ryan Connors: Hey, Ryan Good morning, Good morning, Good morning, Yeah. So Dan one for you Dan on the O&M expenses.
Ryan Connors: So, Dan, one for you, Dan, on the O&M expenses. Seemed like that was a big surprise for us. And you mentioned, you know, the bad debt, you know, kind of a good guy there.
Speaker Change: It seemed like that was a big surprise for us and you mentioned.
Speaker Change: The bad debt.
Dan Schuller: Can you kind of give us frame a little bit for us what the core growth rate was and kind of core O&M and where we should be thinking about that over the balance of the year? Is that bad debt benefit going to continue? Or is that, will that tail off? The Fed Debt Benefit that I mentioned, you know, that will continue, meaning it doesn't get any better.
Speaker Change: Kind of a good guy there can you kind of give us frame a little bit for us what the core growth rate was and kind of.
Speaker Change: Core O&M.
Speaker Change: And where we should be thinking about that over the balance of the year is that bad debt benefit is going to continue or does that will that tail off.
Speaker Change: And that that tenant.
Speaker Change: Benefit that I mentioned that will continue meaning it doesn't get any better it was sort of a.
Dan Schuller: It was sort of a, you know, one-time non-recurring item that's coming through the balance sheet here as a result of the conclusion of the Aqua Pennsylvania rate case. But if we look and you know, we had the same question. So we look end to end here and say, well, if we didn't have some of these one time ish effects, including the Customer Assistance Rider, that $8.5 million bar that you see at the beginning of the waterfall. If you kind of normalize this... last year and this year, you'll come to about two, call it two point, between two and a half and three percent.
Speaker Change: One time nonrecurring item, that's coming through the balance sheet here as a result of the conclusion of the Aqua, Pennsylvania rate case.
Speaker Change: If we look and we had the same question.
Speaker Change: So we look end to end here and say well if we didn't have some of these one time ish effect, including the customer.
Speaker Change: Customer assistance rider that $8 5 million bar that you see at the beginning of the waterfall, if you kind of normalize that.
Speaker Change: From last year and this year, you'll come to about two two.
Speaker Change: Two.
Speaker Change: It's between two and a half and 3% I think a quick Matt gave a two 8% or so there.
Dan Schuller: I think our quick math gave us two point... So that's what I think about O&M expenses. And as you know, we spent a lot of time really focused on keeping our own expenses under control, you know, kind of remaining below 3% or closer to two and a half percent is really our objective.
Speaker Change: So that got it okay.
Speaker Change: O&M expenses and as you know we spent a lot of time really focused on keeping our O&M expenses under control.
Speaker Change: Kind of remaining below 3% or closer to two 5% Israeli our objective then to work that.
Chris Franklin: Yeah, Dan, the work that, you know, we're just beginning here at the company, much like other utilities around lean should bear fruit over the next few years. Although, you know, we're in the investment stage of that at this point, just getting our people trained up and getting people focused on that kind of an approach. But that's next level, Ryan, for us is really focusing on that lean approach and then seeing results over the next few years. Yeah, so I think as we talk about that, probably this year and first part of next year, Ryan will be investing in that program and spending some money in order to get people trained up.
Speaker Change: We're just beginning here at the company much like other utilities around lean.
Speaker Change: You should bear fruit over the next few years, although we are in the investment stage of that at this point just getting our people trained up and getting people focused on on that kind of an approach to but thats next level Ryan for us is really focusing on that lean approach and then seeing results over the next few years, yes, I think as we've done that.
Speaker Change: And probably this year and first part of next year.
Speaker Change: Brian will be investing in that program and spending some money in order to get people trained and then beyond that we look for some efficiencies to come out of that it is really you've got the whole of the employee base looking at doing things efficiently, eliminating waste and and taking action on those <unk>.
Chris Franklin: And then beyond that, we'd look for some efficiencies to come out of that as really you've got the whole of the employee base, looking at doing things efficiently, eliminating waste and taking action on those items. So we're really excited about it. Got it.
Speaker Change: So we're really excited about it.
Speaker Change: Got it now.
Ryan Connors: Now, Mike, one for you on, has the company disclosed a rate based dollar value associated with that Intellis meter rollout? No, we have not at this point. No, no. Okay, got it. Okay.
Speaker Change: Mike one for you on.
Speaker Change: The company disclosed a rate based dollar value associated with that and tell us.
Speaker Change: Meter rollout.
Speaker Change: No we have not at this point no.
Ryan Connors: And then lastly, Chris, I want to just get your take on on the Beaver Falls. I know it's not a massive deal, but interesting sequence of events there. I mean, you reach the settlement, OCA was on board, and then you get an adverse recommendation from the ALJ. So just curious what you can give us your take on that why we seem to continue to see these ALJ decisions go sometimes the wrong way. And then also, when do you think we could expect to see Beaver Falls actually come before the PUC? Could it be as soon as this month?
unknown: Got it Okay, and then lastly, Chris I wanted to just get your take on.
unknown: On the Beaver Falls I know, it's not a massive deal but interesting sequence of events. There I mean, you you reached a settlement OCA was onboard and then you get an adverse recommendation from the ALJ. So just curious what you can give us your take on that why we seem to continue to see these ALJ decisions go.
unknown: Times the wrong way.
Speaker Change: And then also when do you think we could expect to see Beaver falls actually come before the PUC because it be as soon as this month or would it be further out than that.
Ryan Connors: Or would it be further out?
Chris Franklin: Yeah, all good questions, Ryan. I wish I had a good answer for you as to why the ALJs in Pennsylvania continue to put the commissioners in a place where they need to overturn it. I'm hopeful that there's a philosophy emerging here that will make this a little bit easier of a process. In some cases that's what it is, it's a philosophy. Now I do think, you know, given the settlement negotiated, I do think we have a favorable chance at the commission level. We expect this to be on an agenda in June this year, so about a month away maybe.
Speaker Change: Yes, all good questions Ryan.
Speaker Change: I wish I had a good answer for you as to why the ALJ is in Pennsylvania continue to.
Speaker Change: To put the commissioners in a place where they need to overturn it.
Speaker Change: I'm hopeful that.
Speaker Change: There was a philosophy emerging here that we'll.
We'll make this a little bit easier of a process because I think.
Speaker Change: In some cases, that's what it is it's a it's a philosophy.
Speaker Change: Now I do think.
Speaker Change: Given the.
Speaker Change: Settlement negotiated I do think we have a favorable chance at the commission level.
Speaker Change: We expect this to be an agenda in June this year, so about a month away maybe and.
Chris Franklin: And you know, listen, we're hopeful, we're going to do all the work and we've done all of our filings and everything to support this case.
Speaker Change: Listen we're hopeful we're going to do all the work and we've done all of our filings and everything to support. This case. This is one this is a primary example of a troubled system needs assistance. The mayor came back lower.
Chris Franklin: This is one, this is a primary example of a troubled system that needs assistance. The mayor came back, lowered her price, we're taking a little bit of goodwill, the OCA got comfortable with it. This is one that should get done. This is, you know, we need to make sure that deals like this get done in Pennsylvania for the water supply in this state.
Speaker Change: Her price, we're taking a little bit of goodwill.
Comfortable with it. This is one that should get done this is.
Speaker Change: We need to make sure that feels like this get done in Pennsylvania.
Speaker Change: The water supply in this state.
Ryan Connors: Got it. Thanks for the help, but we'll definitely keep an eye on it. Thanks for your time. You got it. Thank you.
Speaker Change: Got it thanks for the helpful. We'll definitely keep an eye on and thanks for your time you got it. Thank you.
Speaker Change: Yeah.
Unknown Executive: This concludes our question and answer session.
Speaker Change: This concludes our question and answer session.
Chris Franklin: I will now turn the call over back to Mr. Chris for closing remarks. Thanks everyone for joining us this morning. And as always, we stand ready to answer any of your follow up questions.
Smith: Now I'll turn the call over back to Mr. Smith for closing remarks.
Smith: Thanks, everyone for joining us this morning, and as always we stand ready to answer any of your follow up questions and look forward to hearing from you.
Unknown Executive: Look forward to hearing from you and have a great day. Thank you for joining today.
Smith: Have a great day.
Smith: Thank you for joining today you may now disconnect.
Unknown Executive: You may now disconnect.
Smith: Okay.
Smith: Yeah.