Eversource Energy Q1 2024 Earnings Call Transcript

Thank you, Shahriar. Over the past decade, we've spent a significant amount of money on electric reliability for our Connecticut customers. Our best-in-class engineering has moved months between interruptions from 10 months to nearly two years. So clearly, our investments have paid huge dividends for our Connecticut customers. However, the regulatory decisions over the past few years are misaligned with the law and the state policy. And without a secure and predictable cost recovery path, we cannot continue to put additional capital resources on the table.

So our investment objectives in Connecticut have been centered around safety and reliability. As you'd expect, we will not reduce our safety spending. Therefore, the reduction will likely come from reliability areas. As John has mentioned, we have ample opportunities for capital deployment on our system. So we are -- we feel very, very good about that. And yes, it would be accretive.

Well, we are going to be very thoughtful and deliberate about it. Obviously, we've had a great track record down there. I will tell you that the reliability numbers in that state are best-in-class. I don't think you'll find it. You'll find it really anywhere else around the country. So I'm very proud of that. But if we continue to see this negative regulatory environment, we're going to have to look at everything.

I would also add, Shahriar, that as a reminder, we do have a resiliency program in place which we get timely recovery of up to $300 million of distribution investments at CL&P, which has been very, very critical for us to achieve this performance level that Joe just mentioned.

Our view that will continue to be. Our position is to be opportunistic in exploring utilizing our ATM program to accomplish that. As I've said time and time again, an ATM program gives us tremendous flexibility. And we were very successful in executing at least through month $75 million. We've done quite a bit more over the past couple of weeks.

Sure. So the under recovery as highlighted on Slide nine, Carly, for 2023 across all of the utilities with the biggest impact being CL&P and Connecticut was approximately $600 million. So if you were to normalize where we landed at the end of 2023 from an FFO to debt use at Moody's was approximately 9%. So that would drive that up as we've indicated on the slide, about 200 basis points. So with the favorable order that we received a couple of weeks ago on the annual rate adjustment mechanism, we feel good that cash plus more related to 2024 costs will start to come in the door effective July one through April 30 of next year.

So a 10-month recovery which is very, very helpful to us. And then the other items, what we've tried to do is to highlight where we -- as it relates to our offshore win, what we have already identified and have disclosed to you all, that would significantly move us up closer to the 14% to 15% range by the end of 2025, but certainly building up towards that range towards the time period.

Sure. So I'll start with Massachusetts. So hearings on that docket just basically concluded. So now we get into the briefs and reply briefs. But one thing I want to point out to, based on the legislation that was passed a couple of years ago, the Clean Energy legislation, the DPU does have to render a decision by that August time frame that I stated in my formal remarks. So as we move forward, the $600 million that I highlighted in my formal remarks is really what will materialize if we do get a favorable approval from the GPU that will materialize within our forecast period, but there's further investments that will be needed beyond our current forecast period that we also have highlighted in our filing.

So obviously, Massachusetts continues to be very proactive in identifying opportunities to really make sure that the goals that the state has established is realistically and proactively accomplished. In Connecticut, as Joe mentioned, we would love to support their Clean Energy strategy. But as we have both indicated in our formal remarks, it will require collaboration and cooperation by us, by the utilities in Connecticut as well as the authority. And then lastly, in New Hampshire, as we mentioned, we are having discussions with the state on utility-owned solar. We will likely be proposing an investment opportunity in the months to come. As you -- as I mentioned in my formal remarks, we do plan to file for a rate review this summer.

In all of that solar investment, just to keep in mind would be regulated investment -- solar investment, utility-owned very similar to the model that we have here in Massachusetts, Carly.

Good morning.

Well, the appeal process, obviously, we would love to have a positive data point. But the appeal process will continue to make its way. You're probably looking at at least a year in the making, but we are continuing to move forward with launching Phase one of the process relatively soon. And then we'll make the decision at that point.

Yes. No, we certainly do, Nick, the tax equity. We actually think, as I stated, 24 months, that's probably a bit conservative. I think that will probably lead into 2026. We do have other tax benefits that we want to utilize for us before we tap into those ITCs. So that can be elongated a bit. which is great. And then longer term, yes, that does fall off the cliff. But we have other items that will certainly kick in. We are sitting on a pretty large deferred storm balance. So I see those costs coming in, potentially '26, certainly, '27 and beyond to really maintain that high level of FFO to debt.

It does. And that's really -- we have to follow the accounting rules and the accounting rules basically says that if you have a contingent gain, you have to wait to get your cash, right? So therefore, the transaction has to close. So we're probably, I would say, you should expect a true-up of those balances to occur likely in the third quarter of this year.

Yes. No, it's a mixed bag. So obviously, what's more critical is that we have the cash coming in, right, which will displace debt and obviously enhance our operating cash flows.

Sure. I would frame it this way. It's not about a mad dash to the finish line. It's about a thoughtful process that we will run for the greatest value that we possibly can harvest. So that's what's important to us is obtaining the greatest maximum value we possibly can. So if a transaction takes a bit longer, we are fine with that. The rating agencies are fully aware of the time frame that we've mapped out with them. And obviously, they are comfortable with that.

Absolutely, absolutely because it displaces debt.

We filed that early April that request. So we feel good that the supreme court will take the case and that it will just expedite the whole process. Once the court accepts that, then you're probably looking at a nine- to 12-month process, is what we're estimating.

No, we're not. I was going to say, Steve, in the meantime, we are expecting to implement the original rate change, and we actually accounted for that in the first quarter this year. Once we get that, then the company can move forward with the filing for their WIC program, which will give them much -- which will give about 35% of their annual capital program cost recovery on.

Yes. Steve, a couple of things. The governor has the ability to appoint five commissionists. He has vacillated over that, and I'm not really sure at this point whether he wants to take it up to five. As you know, all three commissioners remain in hold of the status and I'm not really quite sure what the current plan is around that. Obviously, we have grave concerns about the environment there. I think you know that -- I think everyone knows that. We enjoy a very productive working relationship in our other two jurisdictions where we are so aligned that no light shines between kind of the state's initiatives in our initiatives. And when you collaborate, I think you have tremendous outcomes.

You look at the benefits that Massachusetts is achieving. You look at the progressive moves that are taking place up in New Hampshire as we collaborate with those folks. And they really understand it. And it's going to take that type of collaboration as we look to electrify our system and move away from carbon fuels. But if we don't collaborate, it makes it very, very difficult. I mean we've have operated this way, in my 40-year history, we've always had strong work in relation.

So it's a disappointment to me and it's a priority to me as we try to focus on Connecticut and to see if we can't get aligned and get on the same page so that we can move the agenda or Connecticut has a phenomenal opportunity to be really a leader in Clean Energy. We built that port down there. We collaborated that Clean Energy port down there should put them on the map for Clean Energy. But unfortunately, it's been a real challenge. But I just want to assure you and all of our investors that this is something I take very seriously, and I will continue to work at it seven days a week until 6 times a week and we can get some constructive change.

Yes. I've got to tell you, one of the challenges -- first of all, we don't really have a sizing at this point. We're really in the first inning of this game, but the fact that they are interested around utility on solar, I take great company. But I will tell you the one thing there's no shortage of in the state of New Hampshire is land. And so that's where I see great opportunity. And I also see the proximity to our infrastructure, it makes it very easy as well. One of the challenges that a lot of folks early in the solar days was folks would want to build, but they'd be in rural areas where there wasn't ending load.

But we have opportunities in New Hampshire with sizable tracks of land that would allow us to obviously collaborate, it has to be a partnership. It has to be a community that's interested in this, but I do see great opportunity up there. So we're really in the first thing. I think we'll be able to update you probably on the second, third quarter calls around how that's going. But I think the most important thing for us is to get a model in place in New Hampshire for utility-owned solar. That is fair for us and it's fair for the customers.

Yes. Well, we're looking for preapproval, looking for our regulatory recovery a road map for the recovery of odd dollars that we have spent. As you know, the RAM filing that we just got approved there for $800-plus million. That was money we spent on behalf of the customers in Connecticut. These were state-mandated requests that we did. And so we expect to get paid for that. And if the state wants to have AMI, we expect to have an orderly recovery process for our investments, just like we have in Massachusetts, and that's how we're looking for that if we spend dollars, we want to know we're going to get the dollars back.

We don't want to be chasing those dollars. We don't want to have uncertainty around it. And I know that everybody on this call doesn't want uncertainty. And so you can have my assurance that we will not spend dollars until such time as we have a constructive regulatory environment that allows us to get fair treatment in the recovery of our dollars that we've spent on behalf of the customers in Connecticut to bring better service.

No, I think we can do it in regulatory arena. You certainly -- I mean, we're aligned with the governor. We're aligned with with its other agencies. So we can have a collaborative effort that we submit a filing for all on the same page. Even the Attorney General, we have very, very strong relations there. But we just have to get PURA aligned with all of the other interests around the state so that we can get a constructive road map to move forward.

Well, keep in mind that -- in that 300 to 400 basis point movement, it does include other cash flow items that we have not quantified in that $1.8 billion, Andrew, and then additionally, when the cash comes in, it's going to impact both the numerator and denominator accordingly. So it's not a one for one.

Thank you. Maybe the Bruins tonight.

No, you're thinking about it correctly. So it's where the maturity is listed on that slide. We do have $900 million that's due on June 27, and then we have another $450 million in the fall. Also, in January, early January, we have another $350 million -- $300 million coming due. So it's more of the prefund. And so with the proceeds from the transactions that I highlighted, we should be out of the debt and capital markets for quite some time.

Well, yes, we've had discussions about our investments. I mean we started talking about AMI three years ago, and we're all on the same page that everybody won an AMI. We talked about investment in EVs, electric vehicles, infrastructure. So we were totally aligned with certainly key leaders down there. So we continue to have that dialogue.

And right now, we have dialogue where we share with them that we can't keep moving forward unless we get the certainty around it. I mean, costs have increased since the time we began talking about AMI, if we get on with the show, that would have saved our customers money, but this delay doesn't help at us. We're kicking it off here in Massachusetts we're going to be putting in the AMI metas and infrastructure, and it's -- the customers are going to benefit from that.

Well, there's still a lot of things in flux. And I'm not -- we're not moving off of the $1.3 billion equity needs until we have more clarity. So as things evolve over the coming year. But right now, our position is to kind of work preparing the potential sale for Aquarion and get through Phase one and see what -- how that -- see what that looks like.

No, no. If you look at the left-hand side of that slide on the bottom, we have other drivers those other drivers are cash inflows that we have not quantified. But yes, yes. No, we have assumed, as I continue to reiterate, in our financing plan that we have assumed the sale of Aquarion.

Yes. No, it's too early right now, but we continue to stay close to it, and we'll keep you updated. We did start though. The good news is we're in the ground and construction is underway. So we're excited and we're going to utilize the same practices that we successfully deployed in the construction of the South Fork project. Durgesh,, as you all know, all 12 of the turbines are up and they're running. And we're very, very proud that we have the first offshore wind provider in the United States.

The biggest capex is the $300 million system honing that we've had in place for quite some time. So that has helped the timely cost recovery and has helped Connecticut get to a much better situation from a reliability standpoint. So I would say that a good chunk of the -- as you pointed out, the maintenance depreciation would be covered by that.

Yes. No. I mean the legislative session is going to end next week. So I don't expect that you could see anything at that point. But I think the dialogue will continue as we'll remain engaged for the rest of this year and into the future until such time as we are all on the same page and we can find out what's important to this state that we can invest in and get a fair return and a really a level playing field. That's all we're looking for.

Sorry, Elisa, I just want to thank everybody for their time, and please follow up with IR with any additional follow-up questions that we can help out with. And I'll turn it back over to Elisa.