Q2 2025 Sempra Earnings Call
Good day and welcome to SAS's second quarter earnings call. Today's conference is being recorded. At this time, I'd like to turn it over to Louise Bic. Please, go ahead.
Good morning and welcome to Sempra's Second Quarter 2025 Earnings Call. A live webcast of this teleconference and slide presentation are available at our website under the Events and Presentations section.
Many of you may know me, I'm Louise Vic, vice president of investor relations.
Glenn has recently taken on other financial responsibilities at Sarah and I'm excited to be leading our IR program. Now, I look forward to seeing you more on the road in the coming weeks and months.
We have several members of our management team with us today including Jeff Martin chairman and chief executive officer.
Karen Sedwick, Executive Vice, President, and Chief Financial Officer, Justin Byrd, Executive Vice President of Sarah and chief executive officer of separate infrastructure. Caroline, when who I'd like to know is a new Executive Vice President of SRA with over 35 years at our California utilities, Caroline brings extensive safety and operational expertise to her role. Overseeing separate California's dual utility platform, both sdg and SoCal Gas.
Alan and I, Chief Executive Officer of Encore; Don Clevenger, Chief Financial Officer of Encore; Diane Walled, Vice President, Controller and Chief Accounting Officer; and other members of our senior management team.
Before starting, I'd like to remind everyone that we'll be discussing forward-looking statements within the meeting of the Private Securities Litigation Reform Act of 1995.
actual results May differ materially from those projected in any forward-looking statements, we make today
The factors that could cause our actual results to differ materially are discussed in the company's most recent 10K and 10q filed with the SEC.
Earnings per common share amounts in our presentation are shown on a diluted basis, and we will be discussing certain non-GAAP financial measures.
Please refer to the presentation slides that accompany this call for a reconciliation to GAAP measures. We also encourage you to review our 10-Q for the quarter ended June 30, 2025.
I also like to mention that forward-looking statements contained in this presentation speak only as of today, August 7th, 2025, and it's important to note that the company does not assume any obligation to update or revise, any of these forward-looking statements in the future with that, please turn to slide 4. And let me hand the call over to Jeff.
Thank you all for joining us today. Earlier, this morning, we reported second quarter, 2025, adjusted, EPS of 89 cents, which is in line with the prior periods results.
Our goals for the year.
As a result, we're also affirming our full year 2025 adjusted EPS guidance range of $4.30 to $4.70. Additionally, we're affirming our 2026 EPS guidance of $4.80 to $5.30.
Next, I'd like to provide an update on the progress we've made on the 5 value creation initiatives announced earlier this year.
as a starting point our current capital plan targets, the investment of roughly 13 billion dollars this year, with over 10 billion dollars allocated toward our growing us, utilities
To the first half of the year, we've already deployed more than $5 billion of new capital, while continuing our efforts to strengthen the regulatory compacts in the jurisdictions where we operate.
This includes advocating for constructive Regulatory and legislative Frameworks to better serve, all of our stakeholders.
the recently passed house bill 5247 in Texas is a great example and Karen will touch on that development later in today's presentation,
Next, I want to mention that we're making steady progress on our Capitol recycling initiatives.
In the equity, sell at simpler infrastructure. We've executed an extension to the right of first offer process, that is outlined in the limited partnership agreement.
With the benefit of that extension, Simply is entered into a non-binding letter of intent with KKR.
The letter of intent contemplates an equity sale within or even above the 15% to 30% range, depending upon valuation and other considerations.
Given that we're in ongoing negotiations, where Limited at this time and what we can disclose, but we'll look to provide additional updates once reaching a definitive agreement.
During the quarter, we also advanced the Eco gas sales process and have received substantial interest from both strategic and financial parties. I'd refer you to slide 10 for more color on both transactions.
As previously mentioned, we expect these transactions to close sometime in the middle of 2026, and in combination, we expect these transactions will be accretive to the company's EPS forecast as well as credit.
as is our convention, we don't provide any details on m&a, transactions, until definitive Agreements are in place
Subject to the transactions being completed next year, we expect a notably higher contribution of earnings from our regulated utilities, which we expect to improve our overall credit and business risk profile.
In that regard, I'd like to refer you to slide 12 of the appendix, which highlights our changing business mix.
As we continue our transition toward a more utility-focused business model, this slide demonstrates two key points. Number one, our utilities are anchored in the two largest economic markets in the United States: California and Texas. And number two, our regulated investments provide investors with broad exposure to both electric and gas utility investments in different markets, with constructive regulatory compacts.
Taken together, regulatory and geographic diversity across both electric and natural gas investments improves the consistency of our earnings and cash flow, while also reducing financial risk.
Moreover, because our 5-year capital plan increasingly prioritizes growth at Encore, we expect our business mix to become more weighted toward Texas through the end of the decade, a proposition that we feel strongly will enhance Sempra's value over time.
Moving to our Fit for 2025 campaign, we continue to make solid progress. The focus here, you'll recall, is on improving customer affordability by reducing internal costs.
Improving productivity and aligning simpas. Call structure to its future business needs to date. We've adopted new technology. Found innovative ways to streamline processes and realigned, our organizational structure to better serve our customers.
Finally, I'd like to discuss our continued progress and mitigating Enterprise risk.
SDG has long been a leader in operational excellence and has made significant investments.
In data science, technology and Wildfire mitigation measures.
Moreover, we're pleased to report that STG has hardened 100% of its transmission system, with still structures in the highest fire threat areas, or what we call Tier 3 zones. SDG&E expects to achieve its medium-term goal of fully hardening Tier 2 zones by the end of 2028.
For the last 24 months, our engineering and project management teams, working alongside our vendors, have been successful in reducing the cost per mile of undergrounding by 40%. This demonstrates, once again, our commitment to operational efficiency and safety, while also improving the affordability of our future services.
and with that, please turn to slide 5 where Karen will walk through additional business and financial updates
Thank you, Jeff.
Across our businesses, we have a number of updates to share that demonstrate the progress we've made during the quarter.
Starting with some for Texas, Encore continues to present a truly compelling investment opportunity. As the company continues to execute on its $36 billion 5-year capital plan.
Encore is also evaluating incremental capital opportunities for the 2025 to 2029 period, as we've previously outlined.
These opportunities are critical to supporting Texas's strong growth and are further reinforced by a series of constructive legislative bills that were recently passed and are designed to enable continued infrastructure expansion across the state.
In particular HB 5247, which established the unified tracker mechanism for UTM. For short, with signed into law by Governor Abbott in June.
This will allow us qualifying Electric utilities such as Encore to record costs to a regulatory asset arising from eligible Capital Investments and apply for interim rate adjustments through an annual UTM filing.
This filing occurs in place of the existing tacos in dcrf processes.
We expect this legislation to help reduce regulatory investment lag and improve the earned return on equity, particularly during sustained periods of higher capital investment necessary to support high-growth areas in Texas.
OnCourse earned ROE is anticipated to increase by 50 to 100 basis points over time versus the existing recovery mechanisms.
Encore is begun recognizing revenues related to assets, placed into service from an after January 1 2025.
And expects to make its initial UTM filing in the first half of 2026.
Other legislative outcomes from Texas are summarized on Slide 14 in the appendix.
Next, due to higher levels of growth in other drivers, oncore rate cases are also important as the company looks to align its cost structure with the current operating environment.
in June Encore filed a request for a comprehensive base rate, review seeking to recover, past storm related costs,
Increase amounts recovered and rates for future storm-related costs to better reflect historical costs.
Mitigate the impact of rising expenses and inflation and improve its credit metrics and financial strength during a time of unprecedented growth.
In its filing Encore requested among other items. A 45% Equity layer compared to the currently authorized. 42.5%
A 10.55% roe compared to the currently authorized 9.7%.
And a 4.94% cost of debt compared to the currently authorized 4.39%.
A key component of the base rate review is that it updates, on course, onm expenses which are currently based on a historical 2021 test year to the level experience throughout 2024.
This is intended to work closely. Align the costs included in rates to the realities of today's operating environment.
And help improve OnCourse cost, recovery and financial strength.
In terms of timing.
OnCourse expecting to receive a final order in the first quarter of 2026.
I'd also refer you to slide 13 in the appendix where we present additional information relating to OnCourse base rate review.
Turning to simpler California, we're pleased to announce SDG&E has been awarded an estimated million dollars in transmission projects. As part of the CAISO 2024 to 2025 transmission plan, it was finalized during the quarter.
While most of the related investments are expected to occur beyond the period of our current capital plan, we're excited to continue to support California's transmission system, hinge, and reliability across our service territory.
Next, I'd like to acknowledge the significant initiatives currently underway to enhance customer affordability.
STG recently filed a request with the CPU targeting savings of approximately $300 million by phasing out certain regulatory programs that are no longer economically beneficial to customers.
for call 2. This amount is incremental to the million dollars of federal tax credits. That STG is passing on to customers over the course of this year. Further reinforcing, our efforts to improve customer affordability.
Start with operational updates.
Cameron LNG Phase 1 recently celebrated the successful production and export of its 1,000th LNG cargo.
Marking a significant, just 6 years after its first commissioning Cargo in 2019.
Elsewhere, we're steadily making progress on major construction projects at ECHA LNG Phase 1, Simmeron Wind, and Port Arthur LNG Phase 1.
Together these projects should help drive a step change in cash, flows at September infrastructure.
I'm pleased to note steady progress continues at ECA LNG. Phase 1.
Now that the company is closer to commercial operations, we're tracking several key near-term milestones that are expected to help us meet our financial commitments for next year.
As of July, the project is more than 94% complete.
We expect to reach the mechanical completion later. This year followed by substantial completion in the spring of 2026.
At that time, the facilities expected to begin generating revenues from LNG commissioning and cargos.
we now expect sales to our long-term, SBA customers to start shortly thereafter, and the summer of 2026,
The Simmer on Wind project is on time and on budget, with overall project completion exceeding 85%.
We continue to target commencement of power generation later this year, with a commercial operations plan for the first half of 2026.
We also continued work towards delivering Port Arthur LMG Phase 1 on time and on budget.
Targeting commercial operations for Train 1 in 2027 and Train 2 in 2028.
Current construction is advancing the foundations steel installation LNG tank, construction, ground piping, and dredging activities with the overall project. Now, surpassing 50% complete,
I'm also excited about some of the recent developments at Port Arthur LNG, Phase 2.
And may the project receive the Department of Energy non-FDA export authorization.
At this point in time for Arthur LNG Phase 2 has received all major permits necessary for taking fid.
Phase 2 also made significant commercial progress. Recently, in July, we executed a 20-year SPA with JERA for 1.5 mtpa of offtake capacity.
This Milestone helps Advance the project towards reaching FID and underscores Seer. Infrastructures commitment to supporting energy security for our customers through stable long-term LNG Supply
We're pleased with additional strong, offtake, interest and remain focused on advancing, commercial progress, and financing the project.
I conclude that business update by saying there's plenty to be excited about at Sempra for infrastructure. This segment continues to advance growth in LNG energy networks and clean energy while posting strong financial performance.
Please turn to the next slide while our review, the second quarter Financial results.
Earlier today, a separate report announced Gap's second quarter 2025 earnings of $461 million, or $0.71 per share.
This compares to second quarter 2024 Gap, earnings of 713 million or $1.12 per share.
On an adjusted basis. Second quarter 2025 earnings were 583 million or 89 cents per share.
This Compares for our second quarter of 2024, earnings of 567 million, which also equated to 89 cents per share.
For the first half of the year, we're pleased with our execution, and Sempra is well positioned to deliver a year of solid financial performance on behalf of its shareholders. Please turn to the next slide.
Variance in the second quarter of 2025 adjusted earnings as compared to the same period last year can be summarized as follows.
At temporal California. We had million dollars primarily from higher regulatory Awards, electric transmission margin and afdc Equity, partially offset by lower, cpuc base, operating margin and lower authorized cost of capital.
S for California. Also had 37 million of lower income tax benefits and higher net, interest expense.
As you may recall, we received our final GRC decision for the California utilities at the end of last year.
Since then, as part of our Fit for 25 initiative, we continue making progress in managing costs within the authorized base GRC revenues.
We're also prioritizing safety and reliability initiatives. Based on the outcome of our GRC decision, we'll be advancing efforts aimed at further reducing the cost of service.
It's in for infrastructure. We had $26 million of higher revenues, primarily from a contract modification and higher power volumes.
At the parent. The 16 million increase is primarily due to timing of higher income tax benefits higher net investment, gains partially offset by higher net. Interest expense.
To the next slide.
To conclude our prepared remarks, we've made steady progress on our 2025 value creation initiatives and delivered solid financial results for the first half of the year.
At Seer Texas. We saw important Milestones as Encore filed to comprehensive bait race review and the regulatory compact significantly improved with the passage of HB 5247.
Within separate California, we continue to focus on safety, reliability, and customer affordability.
And its Emperor infrastructure is advancing $2 billion in important sales transactions and steadily progressing on 5 significant construction projects.
All, while moving forward on commercial development, support Arthur LNG Phase 2.
Bottom line. The key takeaway from my perspective is this is certainly an exciting time for sea 2026. Should Branch inclusion to The Encore base rate review. And I'd like to take a moment to list several other potential catalysts that can provide upside including
Number 1 continued Improvement in earned Roi at Encore due to the UTM.
2 incremental CapEx opportunities that are expected to materialize in Texas.
3, Mecca, LNG, Phase, 1 and simran wind earnings contributions. Coming online at Seer infrastructure and
4. In conclusion, the two sales transactions that Sarah Infrastructure has executed are expected to unlock value and strengthen our balance sheet, while also providing investment capital for our growing utility platforms.
With that, we'll now take a moment to open the line and answer your questions.
Thank you.
This concludes the prepared remarks. We will now open the line to take your questions. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad,
Please make sure your mute function is turned off to allow your signal to reach our equipment. We will pause for just a moment to allow everyone to signal for questions.
In our first question will come from Ross. Fowler from Bank of America. Your line is open,
Morning, Jeff Carrie. Good morning morning and uh, Louise could graduations on uh, the full responsibilities of our IR. Well, that's it. Well deserved
Um, Jeff, I wanted to dig in a bit on the KKR LOI around the Seer infrastructure partner sale process. As you said in your comments, the LOI is within or potentially above the 15% to 30% range depending on valuation conditions. So,
Does that mean, to the extent you will or are discussing stake sales with third parties beyond, um, the current investors?
That the Strategic approach here on business mixes. Is that the full stake is beyond that 30% level? Or how are you seeing that? And where we actually go at the end of the day?
Sure. Let me just start uh and I trust you understand that in any m&a deal. Ross we're we're fairly Limited in what we can say. Obviously, we're trying to have a great Transaction. What I'll try to do is recap what we've said publicly and then maybe provide a little bit more color to the latter part of your question. Uh, we indicated that we've executed an extension to the right of first offer process under the existing limited partnership agreement.
And similarly we've executed a non-binding letter of intent with KKR.
And also that I would note that Loi contemplates. The LOI with KTR, by the way, and contemplates, an equity sale in that 15 to 30% range. And we've also indicated that it could be within or above that. And I would just note that's consistent with. Uh, what I said on the q1 call in May that the ultimate amount of equity being sold, will be dependent upon a number of considerations, including valuation.
Ation.
I also talked about, in May, Ross. I think this is probably important, you know, for the listening audience that we're focused on four value drivers. So we're looking to, obviously, optimize the implied equity value of Si from the transaction.
Make sure that we're maximizing driving the most value to our owners.
Let me touch on that for a second. Um,
The incremental capital and Encore in Texas and the transmission Awards. Uh that you talk about in the deck. Those are still outside the base plan with ccm's coming in 27. How do you see the timing of a capital Plan update related to those and given that it's still outside? The plan, can you just kind of give some call around your level level of confidence? That that spending can be executed?
I would uh do a couple things 1 is in OnCourse, press release today, they go through kind of the process and recap of how they approve and roll forward. Their Capital plan and I'll try to touch on a little bit of that in my, in my remarks this morning. But you recall that earlier this year, they announced a base plan at the 100% level of 36 billion dollars and you're correct. They articulated an opportunity in 202728 and 29 for an improvement to that Capital plan by roughly 12 billion dollars. What's important? I think is Encore has been very clear, they're seeing an upward pressure on their Capital plan. Uh so we're feeling more confident, obviously about that 12 billion. And here's the 3 drivers, they've identified they've had recent legislative developments that have been constructive. They've had some supportive regulatory decisions and they're obviously.
Making really good progress, Ross on the thing we identified in February, which is that 12 billion was associated with projects. They needed additional permits on, they're continuing to make steady progress on permits. So, I think in combination we're quite comfortable, uh, confirming that we expect them to be at the high end of that 12 billion or more. And the way the process will go is uh at their board meeting in October, we'll recap that roll forward. 5 plan with the board and remember they're in the middle of a base rate review, obviously and and often as well. So sometime in 2026, we'll look to update that plan. It could be on our February call, but it's going to be driven by resolution of their base rate review.
Maybe I might, if I was going to say, if I could. You know, it might be helpful to your question if you allow me. Let's let Allan provide just a little bit more context.
On the key drivers of that capital plan, because I think the growth story continues to get better, including tailwinds beyond the 5-year plan. But it might be helpful to Ross if you just cover off on what you're thinking about from a growth standpoint and how that 765 overlay will help you. You bet, you have, and yeah, thanks Ross. Um, the growth continues to be very, very strong.
Really, all across our system, you know, we already announced this morning that we added 20,000 new premises this quarter. That's fairly consistent with the number we've been seeing for many, many quarters now. Um, West Texas, we continue to see very, very strong growth out there. The Far West Texas Weather Zone had a new peak in May of this year, 9.2% above the prior peak.
And the two transmission loops by which we serve the Permian: the Culbertson and the Stanton.
Loops both continue to see, um, really increase peaks. Culbertson Peak was at 23.5, where it did in the prior June, uh, in June of this year, and Stanton was up about 6.9% over the same period. So West Texas continues to be really strong. The story remains, uh, transmission points of intersection and data centers and LSI. And I load.
Um and as we announced this morning in our our total new transmission piss are up about 47% year to date.
Uh, with total active piss, um, up about 38% year to date and breaking that down a little further. If you look at, just just traditional LC, Andy, taking data centers out of it. Um, that's up for new about 19% and total are about up 2% quarter versus the same quarter.
Breaking that down a little further, um, that entire queue. There are around 1,100 or so, a little over 1,100 total customers that we’re dealing with. It’s about 186 gigawatts of data centers, and about 7 gigawatts of what I would call traditional CNI.
About 5, gigawatts of crypto 4, gigawatts of kind of oil and gas activity, um, and then 3% or 3 rather gigawatts of of service to other utilities.
So that's what we're seeing there.
9 gigawatts of sine interconnection agreements with security provided.
And another 29.9 gigawatts of high confidence load that we submitted in our officer letter to Kott. Um, and finally, Jeff made mention of this. I would just refer everyone back to page 16 of the presentation that lists out the really kind of amazing transmission opportunities that a lot of this growth is providing us, both through the premium plan.
Uh, as well as through the Step Program or the 765 EHV Plan. Um, both of which we've said previously, we anticipate Encore will build a significant amount of that. Remains true. To the permitting question that Jeff mentioned earlier or stated earlier, I'd simply say this.
And I've said this before, I did these for.
17 years before I became General Counsel on court, I think I did 60 or so of them. Over about a 17 year period. We're finally 24 this year.
Uh, and that will continue for the next couple of years to come see Ross. I wanted you to have that background because it really feeds into that story about how that 12 billion incremental is probably going to be conservative.
That makes a lot of sense. Yeah, and Alan, thank you very much for the context. I really appreciate it.
Thank you, Ross.
Thank you.
Our next question will come from ski fleshman from Wolf. Your line is open.
Yeah. Hi uh thanks. Um hi Jeff. So uh I guess maybe just following on from there. Can you just remind us that your plan right now? Does not include that 12 billion or Does it include some of it?
uh, the
Yeah, it does not include that. You know, we're 80% of the $36 billion plan, and all of that represents the upside to our base plan, Steve.
Okay, so even like that business, mix the rate base mix.
Chart, that's correct. That does not. That does not include it yet. That's that's correct.
Okay, and then just, uh, thanks for the, uh, update on the, uh, sir infrastructure. Uh, just.
I don't know if you can can give this answer, but just any sense on
Timing of, uh, moving forward, this LOI with.
With KKR, is this something?
By the next call, or is it, you know, what's kind of going to drive the timing of that?
No, I would just say Steve, you know, it's a complex structure transaction obviously. We're dealing with a party. We know very, very well, they're in the boardroom at si. Uh, we're engaged on our side kkr's actively engaged. We're not going to forecast the time of it right now, but we're pleased with the progress we've made so far. And we'll continue to look to make an update. Once we reach a definitive agreement,
okay, and then
I guess, uh,
just how do you feel about being able to contact time?
the sale, uh, with the this kind of obviously Rising capex that Encore, do you feel like you can
Match that up.
Well it's a it it really is a a very insightful question. Obviously we've got a couple things going on where we're starting our fall planning process, where we're going to do a real bottoms up review of how we roll that Capital plan forward and the timing of that capital. And then obviously, we're balancing that Steve with not only the timing of potential closing with our counterparty in the transaction. But also how we structure, not only their proceeds, but our use of proceeds. So, you know, our goal is to make sure that as we roll this plan forward, we're obviously expecting our overall Capital program to increase it will continue to be increasingly weighted toward Texas, that's the priority inside of our company and what we want to do. We
Talked about this a little bit on the fourth quarter call is to make sure that this program is intended to accomplish several things.
Improve our overall EPS forecast.
Improve our credit. And also make sure that we're minimizing Reliance on, uh, additional uh, equity issuances. And I think we're in a good spot to do this but you're right, we got time as well in the 2026. And our goal is to make sure we match up a really efficient use of proceeds and use those proceeds in a way, where we're making Investments at Wall, Street will value the highest. As I indicated earlier, we certainly think that's around the quality and growth in Texas.
consolidate, just could you talk to
how that might impact kind of maybe the
The metrics and the the risk view uh, from a credit standpoint.
Sure. We we provided a little bit of visibility to this the past uh Karen and her team have done a great job of meeting with all the agencies. I've also taken the time to go to New York and meet with all the agencies around, not only our Capital plan, but also the pending SI transactions and there's really an opportunity here based upon where we land in the equity sale. There's an opportunity to do a couple things. Number 1, 1 of the thresholds we're evaluating is that when you get to a point where roughly 90% of your earnings composition comes from regulated utilities.
That tends to be a signpost that could allow a reevaluation of what your downgrade threshold is. So there's an opportunity in this transaction to move our downgrade thresholds either, you know, 1 notch down or potentially 2 notches down; that's 1 point. The second point is that depending upon where you land and the equity sell, you also have the opportunity to decon your accounting as well as the debt from Si, from Simper's balance sheet. Now, this one's a little bit more complex because it really goes across 3 dimensions: it goes across the level of equity ownership, it goes across issues relating to governance—see the positive or negative control—and then it goes to issues of materiality. And as you would expect, Steve, each of the agencies has a little bit different tests as they look at that.
That's why we talk about having a little bit of flexibility as we go forward. In our transaction, we want to make sure that we're maximizing the overall value for our investors, and that will be one of the criteria we'll evaluate in the end.
Okay, great. Uh, thank you. I appreciate it.
Appreciate it, Steve.
Thank you. Our next question will come from Shay from Barclays. Your line is open.
Good morning, good afternoon. It's Nick Campanella. I hope everyone is doing well. So,
Hey. Hey, I just wanted to ask one follow-up on the LOI. Is there a point at which this row for extension expires?
No, we're not going to go into details on it, but the way to think about it is that the most important thing is that the extension is designed to give the parties adequate time to do a transaction. And that's something that I think would be evergreen or rolling forward until the parties reach a definitive agreement.
Understood. And then, um, just maybe on California, any high-level thoughts on your kind of participation in a potential AB 1054 solution this year? Um, as well as maybe just on some of the status of the authority affordability bills that are out there. Um, you know, I know that a lot of folks have seen the governor's proposal, um, but just how would you kind of characterize stakeholder?
Engagement beyond that, you know, do you see this the state ultimately getting to kind of a constructive outcome here in September.
Yeah, let me try to tackle, both these issues, I'll talk about uh, our view on the Wildfire legislation and I'll transition to affordability. And I would note, we're pleased to have Caroline win with us today, who, uh, oversees all of our operations in California and certainly Caroline. Please chip in as I go forward, what I would start with a wildfire legislation and we've taken obviously lots of questions on this when we've been on the road and on prior calls. Uh, but I I'm not sure I can get a lot to. I can't add a lot to it publicly, Nick except to say,
We have always thought that we'll get to some progress and stabilizing the ab 1054 framework this year. Um, it's in the draft bill that was leaked. You'll see that there's also a component to it that talks about a study bill. We also think that's important, we see that as part of any package that takes place this fall and there will probably be opportunities to continue to improve the ab 1054 framework going into 2026. There's several weeks left in the session. Obviously our team is very much engaged. Uh the 1 comment I would say is just as a matter of principle. You know we're not really supportive from a utility practice and procedure standpoint on the use of shareholder dollars. You may recall, this is important to separate because we haven't had a major wildfire in just over 18 years. I would, I would might just say, though, we're going to look at the totality of circumstances.
We realize there's a broader set of issues for all stakeholders, so that's something that we would continue to evaluate.
Caroline, do you want to add anything else on the wildfire side? Um, other than that.
Continued to expand and enhance.
Your industry-leading Wildfire mitigation program. And and you know, this is a team of employees who really have a growth mindset and a strong culture that we need to be better than we were yesterday. Uh, couple leadership areas in my mind, is superior situational awareness, they have strong Community engagement and service mindset. They're a leader in data science. Uh, but maybe a few, uh, enhancements that we've done this year is um, expansion of The Weather Network, and that includes camera and additional artificial intelligence and that's going to improve our forecasting and our monitoring capabilities. We've deployed a dual Blackhawk helicopter strategy at for rapid response and quicker. Inspections and patrols we've done. Enhanced inspection regime, that includes drone inspections of our Wildland, Urban interface areas, and we've expanded our Public Safety power, shut off preparedness and our capabilities. So we're ready for the season and uh, really pleased with
The conversations that we're having in Sacramento in terms of fund replenishment and Nick the reason I think this is important is obviously there's a big Focus today on, you know, Financial issues and insurers and the and the 1054 framework which we think is very important. But the thing that's important inside this business, every day, is to keep building a better operational program. A better ability to basically mitigate wildfire and I think you were going to continue to see this company.
Uh, extend the leadership position there, I'll transition real quickly, over to the affordability, issue with roughly 4 weeks left in the legislative session. My instinct here. Nick is, you're going to see some of these bills coalesce around a single Bill. And what we're focused on is most, these bills are talking about potential long-term impacts and I think, what Carolyn Caroline deserves, a lot of credit for is inside the company. We're pushing for things that have an immediate impact to customers that continues to be our message in Sacramento. So we've talked about earlier today filing for an opportunity to pull back about $300 million from regulatory programs that we think are not fully serving customers today.
You may recall from the rate case where we passed on about $200 million of tax credit benefits to our customers.
Caroline led a process with Nick to update our organizational structure in terms of improving how we officially serve customers. We obviously want to keep pushing the edge on innovation and new technologies. I think, Caroline, in terms of public policy advocacy that your team has led, we’re trying to remove the public purpose programs from customers' bills, which are important, as well as make continued improvements to that metering framework. Would you like to make any closing comments on affordability? Caroline: No, I mean, other than to say, you’re exactly right, Jeff. We are focused on immediate bill reductions that benefit customers. I think the transitioning of the public purpose programs to state.
Budget will save customers a hundred dollars annually, um, addressing the 1.3 billion, just annual cost shift as part of net energy metering. There's a bill going on on that. And we also believe that increasing the climate credit if we're able to double the climate credit, um, from the state and using ghg funds to do so. Especially during the summer months, when bills are the highest. We think there's just great opportunity to provide that affordability for customers. So Nick. I know that was probably a longer answer than you you anticipated, but we're very engaged on both issues here in the state.
Definitely appreciate your thoughts. Have a good day.
Thank you, Nick.
Thank you. Our next question will come from David Aro from Morgan Stanley. Your line is open.
Hey, thanks so much for taking my questions.
Um, wondering if you could give me on the
Morning. Um, I'm wondering if you could give an update on the LNG market and contracting opportunities that you're seeing for Port Arthur. Um, good to see the JERR agreement to move forward. But how is the, you know, how is the macro backdrop, and maybe the current administration's efforts been impacting those discussions?
Yeah, I would just start and I'll pass it to Justin. We certainly think this is one of the understated issues today in the market. The macroeconomic backdrop for LG continues to strengthen, in our view. And maybe Justin, you can provide a little bit more color for David.
Yeah, David. Hello. Uh, yeah, I think we still have a very bullish view on LNG, particularly from the U.S. We think there's probably growth for two primary reasons: energy security and affordability in Europe, and then growing demand for gas in Asia.
Here in Ukraine's rejection of a deal to extend their gas volumes through the pipelines reflects growing confidence in a future without Russian gas and therefore a greater reliance on U.S. LNG.
Uh, this is part of the reason why we think the Gulf Coast assets, Cameron and Port Arthur, are well positioned to meet that demand.
In Asia, over the long run, we, as well as many others, expect LNG to continue to penetrate the overall share of the energy supply by replacing coal and meeting the growing needs of end consumers.
Uh, demand is expected to grow through the expansion of natural gas pipelines and distribution systems in the developing markets.
And then also, gas-fired generation load is expected to grow to meet peak demands, uh, in the summer and winter, as well as support grid reliability. So, this we think supports the, uh, Pacific Coast location as you think about Eikka and future expansions of Eikka. Again, our overall outlook for demand growth has not changed. We continue to believe separate infrastructures and LNG assets are very well positioned to support these needs, and we're seeing that in the marketplace. The only thing I would add, David, is just to think about it too: it's the basis play, right? You know, we have historically had remarkable production of natural gas here in the United States, with very little price volatility. So, it's a combination of low price and low volatility relative to the markers in both Asia and Europe, and we continue to think that thesis is valid.
And we feel very good about the backdrop.
Great. Yeah, thank you for that color. Uh, very helpful and then, um, had a follow up on the Texas side of things. Uh, appreciate all the details, as always Allan on, uh, the data center, um pipeline. Obviously that pipeline is increased, a lot, but the high confidence uh, numbers seem to be consistent versus uh last quarter. Uh, so I'm wondering what the dynamic is there. Are you kind of at a limit that you see in terms of what you can connect in through 2031? Um or what would you see as maybe the Cadence of projects getting into that high confidence? Uh band that you uh characterize.
Yeah, David thanks for the question. I should have clarified that earlier. It's, it's not that there are not more projects out there, it is not that we cannot meet those projects. It's just that those numbers are updated once a year, uh, with erat. And we continue to see increased demand in that queue. And we continue to work with those parties to execute, uh, fbas and get collateral and Advance those projects. So, um, we'll we'll see when we update it next, but I would anticipate those numbers. We'll continue to increase just remarkable too David and when he went through those, uh, numbers earlier on today is a call, he's got over 200 gigawatts.
Of interconnection requests. And he's got a peak load today on the Encore system of 31 gigawatts. So, the opportunity is really significant, and it's not just leveraging the data centers. I think what's unique about his story is how much it spans across a variety of different sectors in the CNI class of customers.
Yeah, very clear. Okay, great. Thank you so much.
Thank you, David.
Thank you. We have time for one last question today. This question will come from Kari Davenport from Goldman Sachs. Your line is open.
Hey, Jeff. How's it going? Thanks for taking the questions today.
Um, maybe just a quick follow-up on Port Arthur Phase 2. Obviously, a number of progress points there since last quarter, and it seems like you're still quite constructive on the macro. So, just wanted to get a pulse check on your views on the feasibility to reach FID on that project by the end of this year.
Sure. I'll provide some comments and Justin feel free to add on the back end of it but we're we're continuing to see a good Pro progress Carly. I think in the call today we kind of summarized 3 points. We've had progress in getting all the major permits for Phase 2 to go forward. We've obviously highlighted the marketing Pro progress with jira. That's a world-class buyer of LNG by the way and I think that adds a lot of credibility to the project and we've also with a fisa health and just and we've been advancing the financing plan which will also be ported for an FID decision. I think the
Takeaway from my perspective is solid progress in Q2, which I think you took away from our earlier comments. I think the project has momentum and we continue to think there's a few more remaining work streams. We're tracking to make sure we're in a position to take FID this year. Justin, you'll add anything to that? I think you covered it, Jeff. Thank you.
The cadence of that improvement coming to fruition to sort of play out.
Sure, let me, let me give you a little bit more color on the YouTube. And I'll pass it to Don. Clevenger, we've got the CFO from Encore here and he may be talking about how the timing unfolds. But what I'll try to tell most people Carly is we put forward a fairly wholesome AK on the UTM which I think does a pretty good job of explaining. You know our expectation that over time it should have an impact input uh a positive impact on the earned Roi of about 50 to 100 basis points.
I've said several times though that it will depend each year on the overall amount of invested capital as well as how much goes into service each year. Given that we don't anticipate Carly making our first filing until next year, we anticipate being on the low end of that 50 to 100 basis point range this year. But as you go further in that capital plan and more capital gets deployed, obviously, you're going to move toward the higher end or above that 100 basis points. But Don, just spend a minute maybe talking about how you're thinking about their timing and cadence of this going forward. Sure, thanks Carly. And if you remember, one of the benefits of the House Bill 5247 was rolling 6 FILs basically into 1, and so we would expect, like Jeff said, to file and make our first UTM filing in the first half of next year after our rate cases are resolved. And then annually, probably about the same time thereafter.
Great. Thanks so much for the color.
Thanks for joining the call. Carly.
Thank you. And that concludes today's question and answer session. At this time, I'd like to turn the conference back to Jeff Martin for any additional closing remarks.
Hey, brief. I just want to thank everyone for joining this morning. I know there have been a number of competing calls, and we appreciate everyone making time to join us. If there are any follow-up items, please reach out to our IR team with your questions. We look forward to seeing many of you over the next several weeks. We have a very busy schedule, including City, UBS, and Barclays investor conferences, as well as West Coast NDR toward the end of August. This concludes our call.
Thank you for your participation. You may now disconnect.