This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk02: Northwestern Corporation's Financial Results webcast for the quarter ending September 30, 2022. My name is Travis Meyer. I'm the Director of Corporate Finance and Investor Relations for Northwestern. Joining us today to walk you through the results and provide an overall update are Bob Rowe, Chief Executive Officer, Brian Byrd, President and Chief Operating Officer, and Crystal Lael, Vice President and Chief Financial Officer. All participant lines are currently muted. After the presentation, we have allowed time for a Q&A session. I will provide instructions for asking questions at that time. However, if you intend to ask a question or are joining us by computer, please set your Zoom identity to your first and last name so we can call on you by name to let you know that your line is open. Northwestern's results have been released, and the release is available on our website at northwesternenergy.com. We also released our 10Q pre-market this morning. Please note that this company's press release, this presentation, and comments by presenters and responses to your questions may contain forward-looking statements. As such, I'll direct you to the disclosures contained within our SEC filings and the safe harbor provisions, including on the second slide of this presentation. Please also note this presentation includes non-GAAP financial measures. Please see the non-GAAP disclosures, definitions, and reconciliations also included in the presentation. The webcast is being recorded. The archived replay of today's webcast will be available for one year beginning at 6 p.m. Eastern time today and can be found in the financial results section of our website. With that, I will hand our presentation over one last time to Northwestern CEO Bob Ruhl.
spk03: Thank you very much, Travis. We're meeting this week in Sioux Falls, South Dakota. There's some great economic development activities over the weekend, and we're just delighted to be part of one of the most dynamic economies in the country. Highlight of the board meeting was a presentation by PUC Chair Chris Nelson, and Chair Nelson reminded us of our responsibility to focus on the reliability of our system. And Chair Nelson is very, very clearly focused, as are his colleagues, on reliability and affordability. It's a message that he also delivered very eloquently at the ribbon cutting for the Bob Glanger generating station. So we were really honored and appreciated that he made time for us. I want to say a couple of things about the ongoing renewal of our leadership at both the board and the executive level. At the board level, as probably most of you know, Kent Larson is a new member of our board of directors. Many of you probably know Kent. He was a key leader at Excel until his retirement and one of the key contributors to Excel's growth, sustainable growth. over a number of years. So TANF is already providing great contributions to the board of directors. At the executive team, our general counsel, who also leads our regulatory affairs efforts, Heather Graham, has announced her retirement in early January, along with me. Heather will be, among other things, pursuing her passion for triathlon, where she is world-ranked. Heather's been a great leader for the company, key in all of our legal regulatory compliance works and also a key contributor to our corporate strategy. Because Heather is as good as she is, we will be elevating two people to take her place. Shannon Heim coming in as general counsel and Shannon Fang becoming vice president for regulations. In addition, Kirk Bull, our Vice President for Distribution, has already moved into a new position focused on business development, and Jason Merkle has taken over the role of Distribution Vice President. So Ryan is going to be leading a great team with veterans, and some new faces, but very much aligned with the direction that Brian and the board and the executive team will be taking the company over the next few years. Turning to financial results, net income for the quarter was 27.4 million 47 cents of diluted EPS. Non-GAAP EPS was 24.3 million 42 cents diluted EPS. Our expected long-term EPS growth rate is 3% to 6% off a 2020 base. As you know, we filed a Montana rate review on August 8th. This was seven months into the year as opposed to the nine-month cadence that we're typically on. Very impressively, the Montana Public Service Commission issued an interim order on October 15th on October 1st. So basically two months after the filing was a unanimous order based on a staff recommendation. The order will significantly mitigate regulatory lag and under recovery of our purchase power costs and will certainly reinforce our credit metrics. And then that will also provide the retroactive date for a final order. A couple of other notable items in the rate case, and Brian's going to come back and talk to this in much more detail. First of all, some key procedural steps. The commission has issued a procedural order, and we're past the period during which the application could be deemed inadequate, which could have triggered a refiling or modification to the filing. We're doing some interesting and very constructive things in this case, including Brian kicked off the filing process with a very well-attended webinar. Cindy Fang will be leading a series of technical discussions on key points. The case is obviously driven by recovering our substantial investments in capital, electric and gas infrastructure since our last filings, cost recovery of flow-through costs, and then a set of about four important policy proposals. And Brian's going to be providing you more detail on that. But we're very, very pleased to be where we are right now and appreciate the professionalism of the Montana Commission and staff. We filed our South Dakota Integrated Resource Plan on September 6th. Look forward to implementation of the actions under that plan. We are on track. for our $582 million capital plan for this year. And the board has voted a 63 cent per share dividend payable on December 30th of this year. So first I will turn it over to Crystal and then Crystal will hand it off to Brian.
spk01: Thank you, Bob. I'll speak to slide four and discuss a bit further details of our financial results and then hand it over to Brian here. So for the third quarter of 2022, you'll see net income of $27.4 million. As Bob said, that's $0.47 on a diluted EPS basis, and that compares with third quarter of 2021. Net income of $35.2 million, or $0.68 on a diluted basis. Slide five lays out a bit of the significant drivers of that performance for the quarter, with a bridge from the $0.68 for the quarter on a gap basis in 2021 to $0.43. 7 cents on a gap basis or 42 cents on a non-gap basis in 2022. With that, you'll see utility margin 3.2 million or 5 cents after tax of detriment there in a quarter where we had favorable weather. I'll speak to that in a little bit more detail on the next slide. The next few columns you'll see are the impacts of our operating costs, which are in line with our expectations for the year. When we laid out our guidance for the year, we talked about a sustainable operating cost structure. Certainly we're seeing pressures there, but in line with our expectations, they're manageable. So you'll see six cents on those items or 4.1 million on a pre-tax basis. The next column you'll see is interest rate pressures, which I think everyone's experiencing. Three cents of impact to the quarter from that perspective. And then, of course, dilution from the share counts of the equity issuance that we announced and transacted last year in November on a forward basis. The impact of that dilution this year funding the amount of investment capital As Bob mentioned, on track for another record year capital investment in 2022. And then on a gap basis, 47 cents, you'll see adjusted. We're reducing five cents on a non-gap basis driven by weather. Utility margin is detailed on slide six in a bit more detail on that Q3 margin impact. Overall, a $3.2 million detriment when you consider that versus prior period and what impacts net income from a utility margin standpoint. First impact there is transmission margins seeing lower revenue, both driven by lower formula rate there and also volumes that is in line with what we expected to see on the transmission side. But importantly, a bit outside of what we expected to see is the next column, which is your PCAM impacts. As a reminder, that's the supply cost mechanism where we recover our costs in our Montana jurisdiction. And you'll see that that's $1.3 million versus the prior period, but importantly, 4 million to the quarter of negative impact on an absolute basis. We certainly saw higher market prices overall, but Certainly price spiking, think at the end of August, early September, we saw over $1,000 in megawatt-hour prices on the market to deliver to our customers. And when we see that sort of exposure, certainly provides headwinds for us at the margin line basis. I would also mention on the electric retail volumes, $2.1 million of favorable there. And while that's certainly a solid performance at that piece, you'll see that we have show favorable weather 4.2 million versus normal for the quarter. So that's what we're backing out on an on-gap basis. So when you only see 2.1 million of favorable versus the prior, we would expect to see a bit better performance there with the retail volume line and certainly including commercial loads. We're seeing lower commercial volumes for the quarter on 2% customer growth and a bit of warmer weather. So a bit of headwinds there in how we're seeing the commercial load shape up for Q3, all that leading to 224.1 million of utility margin falling to net income. And again, that's 3.2 million lower than the prior period. Slide seven shows you the look of our gap to non-gap adjustments. So for Q3, the only non-gap adjustment we have is weather. And again, I just spoke to the impacts there, but $27.4 million on a gap basis, adjusting out $4.2 million of favorable weather versus normal, or $3.1 million on an after-tax basis, resulting in $24.3 million on a non-gap earnings basis, and that compares with $33.6 million in the prior quarter. And again, you'll see the prior quarter, we had very warm weather in Q3 of 2022 broadly across our service territory. But we also had very warm weather in Q3 of 21. So you see 4.2 million free tax favorable weather we've adjusted out versus 3.4 million in the prior period. With that, I would move you to cash flows and impacts there on slide eight. While operating cash flows show significant improvement of 87.7 million from the prior year to date. You'll see that FFO actually decreased by 15.6 million. That's definitely driven by the lower net income. The other thing I would mention there is that while we are collecting significant costs from the prior period, think the winter storm URI gas costs that are still coming through and a significant amount of PCAM under collection from prior period that we are collecting currently, you also see the significant impacts this year of continued high market electric supply costs. And then what we're seeing is higher cost of bill storage in the off season and higher natural gas prices. All of that is impacting cash flows here in the near term and certainly will be rolling through and impacting customer bills and how we think about that in the future. So with that, I'll transition a bit to expectations. For closing out the quarter and looking to the full year 22 results on slide nine, we are narrowing our guidance range. As you all know, we started with a guidance range of 320 to 340 or a 20 cents range. And we're narrowing that to a 15 cent range of 320 to 335. While results in the quarter, certainly were lower than we expected. They were impacted by headwinds at the high level of market supply pricing in Montana. Certainly that PCAM impact that I mentioned and talking about utility margin for the quarter, it's the gift that keeps on giving because while it also impacts us at the margin line, it also drives higher unrecovered supply costs with pressure on our revolver balance. And of course, then ultimately the interest rates on that and then also timing of the draw on our forward equity. So with that, I will say what offsets that a bit is, and the most significant item for the quarter, other than this being Bob's last earnings call for you all to ask him very intriguing and interesting questions, would be that we filed our rate review in Montana. Obviously that's critical to how we think about the growth of the business going forward and resetting to a reasonable cost structure and recovering the amount of investment that's serving customers currently The NPSC, as Bob mentioned, held a substantive work session and authorized interim rates for both the base rates piece and PCAM. Thus, you'll see our updated guidance assumptions here looking to reflect those impacts. And with that, I will turn it over to Brian.
spk04: Thanks, Crystal. On page 10, we speak to capital investment. Historically, over the last five years, we invested $1.7 billion, as you can see, from under $300 billion. million in 2017 to over 400 in 2021. That's a compounded annual growth rate of 12%. 22 is we saw even a much larger capital plan, primarily as we continue to build up Yellowstone County. We have 582 million capital plan, and that does remain on track. You may recall some time ago at the beginning of, I'd say, the supply chain crisis and rising costs, we suggested that our plan is likely to come on track. due to two variables. One, we do expect higher costs, but we also expected some delays in projects. And we definitely have seen both during the year, but net-net, our plan remains on track. In essence, of that $2.4 billion that we're looking to invest over the next five years, including 2022, a substantial amount of that is for our delivery business, Think T&D, I think to modernize the grid in an increased capacity and also on the supply side, we obviously continue to invest in capacity, but also resources to integrate continued renewables added into our business. This sustainable level of CapEx is expected to drive an annualized rate based growth of approximately four to five percent. And the best way we think about it from financing all of this capital spend is really to achieve a 14% to 15% FFO to debt at the end of the year. So capital continues to grow at the company, and we need to invest in critical resources on a going forward basis. And when that occurs on slide 11, periodically you need to come in for a rate case. In Montana, it's been some time, 2015, since the last gas case from a test year perspective in 2017, since the last time from the electric perspective. And during that time, we've invested over a billion dollars in both our combined electric and gas business in Montana. And 49% of this rate case is the recovery of the cost of capital and depreciation of that over a billion dollar investment. 42% of the request for both the total electric and natural gas increase is driven by flow-through costs, including the market power purchases and property taxes. And even with the increases here that we would acknowledge, it's a pretty big increase for both electric and gas customers, but it's been a long time coming for many, many years. Even with those increases, they will be in line with inflation over that time period since we've last filed a rate case. Moving forward on page 12, as Bob mentioned earlier in the call, in late September, we received approval effective October 1st for interim rates to go into effect. And again, the good work by the commission to acknowledge our issue of not having sufficient cash flow to manage our business and the importance of an interim rate. That interim rate allowed us to collect base electric rates of $29.4 million. improve where we stand from a PCAM perspective by 61.1 million, and then base natural gas rates of 1.7 million. In terms of what we asked for and what we received, we're pretty happy with, we received approximately 80% of the interim request on the electric side, approximately 60% on the gas side. And equally important is in terms of a good outcome there is that October 1st, Once final rates are approved, that will be the retroactive date or the effective date of an outcome from the final rate case. So that's very, very helpful. From a procedural schedule standpoint, the next key date is 12-19, I guess an early Christmas present of receiving intervener testimony. And then into early March, we'll have our rebuttal testimony and cross-intervener testimony. And then in early April, the hearing will actually commence. Moving to slide 13, on the supply side of our business and looking forward, we continue on our construction at Yellowstone County. That construction began back in April of this year. We've invested just under $100 million to date of the $275 million project, and our current schedule anticipates commercial operation during 2024. From a resource plan perspective, we've already filed our South Dakota plan. We filed that in September of 2022, and it identifies 43 megawatts from a retire and replace candidates with a potential for a competitive solicitation during the 23-24 time period. And in Montana, we expect to file by the end of the year. our IRP, if you will, to be followed by an all-source competitive solicitation request for capacity available in the latest 2026. The last thing I'd just say on this page is upper right, we were so pleased not only to get the Bob Glanzer station built and on time, on budget, and in advance of the supply chain issues and rising costs, But more importantly than that is the plan has been dispatched even more than our expectations. So it's added capacity, 24-7 power that offsets the intermittency. It's doing exactly what it should do to help us move forward with our needs from a supply perspective. And lastly, it's my pleasure and honor to acknowledge Bob, and I will do that on behalf of the executive team and the more than 1,500 employees at this company, To acknowledge, I'd be remiss not to acknowledge during his tenure what he has helped this company achieve. And under his watch, through the investment in critical energy infrastructure, dedicated to serve our customers, we've tripled the size of this business and the value of this business. He's done that. Through his leadership, we've invested more than a billion dollars in clean energy resources that have put us approximately 60% of our electricity provided is carbon-free and certainly better than industry average. That billion dollars of energy resources, primarily that was our 456 megawatt Montana hydro system. And I can't imagine how we'd be serving our customers today if we didn't own those resources. Plus 131 megawatts of owned wind in our total system, and also three gas plants that are critical to provide the 24-7 reliability that we need to serve our customers. In addition to that, or I guess I'd add, in addition to that, it's also reduced our customers' exposure to volatile regional energy markets that we participate in every day. We also invested during his tenure here over a billion dollars in our T&D infrastructure to modernize it and increase the reliability and flexibility of that system. Bob was having us do that long before people were talking about hardening their systems. What I'd also add from my perspective is our safety culture when Bob arrived wasn't as good as it should have been, and during his tenure, it's improved vastly, and we're sending our employees home just the way they came in the morning. And we're happy to see that our safety has improved vastly under his leadership and the tone of the top he's set. And speaking of tone of the top, I think the most important thing Bob's done in this company is set a culture of high integrity and respect in a family-like environment.
spk03: And with that, I'll pass to Bob. Brian, thank you very much. I can't imagine you. Anyone I would have rather worked with than you or this entire group of people, but I will reserve my rebuttal until after we get to the questions here. Thank you, Brian. Questions?
spk02: And I would just remind you, if you're joining us by computer and would like to ask a question, please signal your intent by using the raise a hand button found at the bottom of your toolbar. You can also simultaneously press alt and Y on a PC or option Y on a Mac to raise your hand. Please make sure your microphone is unmuted if you're in the queue. If you're dialed in by phone, you can press star nine to raise your hand and star six to unmute your line to ask a question. Again, star nine to raise your hand and star six to unmute. We will take our first question from the line of Char Pereza at Guggenheim.
spk05: Char, can you hear us? There it goes. Can you hear me, guys?
spk07: Yes, we sure can. All right, Travis, you're getting way too technological here. Guys, and just on, as we're thinking about, you know, next year, I mean, obviously, you know, you're not issuing 23 guidance right now, but I think it would be helpful, you know, maybe just give us a sense on the 22 headwinds you just highlighted in your prepared remarks as we look to bridge into 23, like, you know, the lower usage interest, you know, interest rates, PCAM recovery, I guess, is the GRC enough to offset sort of these 22 impacts as we look into next year? or can we see some drag with these items into 23? Thanks.
spk01: Charis, Crystal, a couple of things with that regard. So one, the GRC is a huge driver when you think about the impact of PCAM on the quarter. And as I said, it has multiple impacts in our financial statements. Resetting that base and getting something that we can actually work with, I think, is critical to how we think about our performance going forward. And that not being a brag, it certainly has caused under-earning for us. in the past and is something that we're working with the commission on resetting and moving forward on. So I would say that's certainly a key piece of how the GRC will impact us. And broadly it's us and everybody else in inflationary cost environment, and we'll have to manage that. But I would see strong growth. We've talked about, you know, the need to take this year as a reset, essentially, and investing for the future in the sense of the equity that we issued. So still driving a net income increase this year. But, you know, your question is, will we continue to grow the business? And absolutely. And I think the biggest platform to that is certainly, you know, getting back to earning our returns from a Montana basis. And the GRC is the most critical piece of that. And I couldn't probably understate the importance, overstate, that's what I'm looking for, of getting that rate review filed, bringing that investment in front of the commission and moving forward quickly with interim rates, as we talked about. and getting to a reasonable outcome there.
spk07: Got it. So you don't, you know, just with some of the moving pieces, you don't, you know, depending on where rates shake out, you don't, we shouldn't assume the reset can continue into 23. That's the key takeaway, I guess there.
spk01: I would just say it this way. Us and everybody else will be dealing with the interest rate pressure. So I don't think that's going to be determinative between us and others. And we'll manage that along with the outcome from the rate review. But certainly what I would expect to see and what we talked about from a 22 guidance is taking this year to get a solid rate case file that gives us a sustainable amount of cost capture there and a platform from growth off of that.
spk07: Got it. Okay. That's helpful. And then how should we sort of think about the potential outcomes of the appeal you have right now? That's in front of the, you know, the, the Supreme court, Montana Supreme court regarding the pre-approval law. Is there a scenario where it could retroactively be applied to Laurel or how would winning the appeal impact sort of your plans going forward?
spk03: As you recall, we, uh, decided not to use pre-approval for the Yellowstone station because we were concerned to get the plant in service as quickly as possible and to move ahead with construction before we got caught on the wrong side of the inflationary environment and supply chain challenges. So the Supreme Court decision one way or the other will have no effect on that particular resource. I'll go beyond that to say that, as you, I'm sure, recall, we had also identified a 15 megawatt battery project out of the RFP. That was going to be a purchase power arrangement. We had used, we had proceeded with a pre-approval application for that based on the district court decision in validating the statute and the commission closed that docket. And unfortunately that project is not going ahead.
spk07: Got it. Great. And then just one last one, just on coal strip. I mean, obviously your preferences for sort of fast ramping generation, like the rice units, but at the same time, like, you know, obviously we've seen some major cost increases versus the plan that for instance, led to Aberdeen getting canceled last year. If you were to acquire more of Coal Strip than is currently planned, I guess, how would the cost of that capacity compare versus what you're seeing in the market right now for new builds? Thank you.
spk04: That's a hypothetical question I assume you're asking there, and we continue to lean heavily on On Coal Strip, it's a valuable resource to us and will be for some time. Obviously, depending on what that cost of acquiring that resource, I would tell you our biggest use for that capacity is on that peak day, of course, when we're seeing increased demand and higher prices, Coal Strip would be extremely helpful to us, and I'd acknowledge even more of it than we currently have would be helpful.
spk07: Got it.
spk02: Okay, great. Thanks, guys. I appreciate it. Thank you. Thanks, Char. We will take our second call from the line that ends in 4377.
spk05: 914 area code. Your microphone should be unmuted.
spk02: All right, we're going to skip that one. And maybe if you want to get back in the queue, we will take our next call from Sophie Karp at KeyBank.
spk05: Hi. Sophie, there we go. We got you.
spk00: Good afternoon. Finally, I got how the system works. Thanks for taking my question. So I was just curious to hear your thoughts on how you could incorporate, I guess, a cold strip situation in your Montana IRP system. So is this, would you need a resolution of that one way or the other before you can move forward with the process? Or would that be a scenario analysis in the IRP that could contemplate various outcomes? So any color would be appreciated.
spk04: Yeah, I think the only scenarios associated with Cold Strip is here are closure dates. I mean, we don't have full control over When these units shut down at this point in time with our 30% interest in Unit 4, obviously we'd like to have the plan open as long as our depreciable period, in essence, provides service to our customers. But we also acknowledge that there's a possibility that it can shut down sooner. And so we're likely to have scenarios showing at least one alternative date from a shutdown perspective.
spk00: Okay. All right. And then maybe on the kind of looking into 2023, right, to follow up on the line of thinking that Char was asking you. So you've sort of narrowed, tightened your guidance for 2022, even though you got the interim rates due to all of the offsetting factors that you've listed. Do you expect those headlines to persist or abate, I guess, going into 2023 as you contemplate, you know, the outcome of the rate case here? Like how much of an, I guess, a drag would that be to the new rates impact? How should we think about it?
spk01: Sure. Sophie, it's Crystal again. And what I would just point you to is as we walk through the narrowing of our guidance, and I alluded to, you know, the multiple impacts of PCAM being both the 10% sharing and what we've seen from, you know, $4 million to the quarter on just a impact there. Also driving, you know, we filed our annual tracker, but I shouldn't use the word tracker. We filed our NLP cam filing. It's not a tracker. And that showed over $50 million of deferred costs on our balance sheet that I'll remind you, there's no carrying costs for that mechanism currently and, and rates. And obviously it's, you know, cost of capital used to be almost free. It isn't anymore. And, And so we're seeing those headwinds. And then that causes us to pull down that forward a little sooner. All that being said, to say a reset and the PCAM base, as we have proposed, that has multiple elements to both the design, et cetera, that GRC proposal would help alleviate that multi-factor implications of that PCAM as it's impacting our headwinds today. So I would tell you the GRC is critical to offsetting what... equals lag in our earned returns.
spk00: All right. Thank you. That's all for me.
spk02: Thank you, Sophie. It does look like the line of 4377 has unmuted now, so we'll try that one again. Yep. What do we got?
spk06: Is this working? All right. Sweet. There we go. We're figuring it out one day at a time here. Excellent, guys. Thank you very much. I mean, if I could ask just a little bit the inverse of the questions from the last couple. How do you guys think about O&M just operating budget inflation going into 23? Any way to think about that and put some context to it? I get you guys early in the earnings season. So I just want to hear how you guys are kind of tackling that conversation and also looking at offsets here, given that rate case won't be a full year in terms of offsetting the headwinds.
spk04: Julian, first of all, before Crystal answers, You can actually put your name in there somewhere. We'd take your question, even regardless if it was just your number, just so you know that. You guys are kind. I'm happy to pass it on to Crystal to answer.
spk01: So, Julie, a bit of your question on operating costs. I'll walk you back to when we laid out our 22 bridge. One of the things that we said when, you know, I have to say this improvement at the net income line, but impacts of dilution driving our lower earnings from this year was a sustainable amount of costs. So I will certainly tell you that there's headwinds there, but they're manageable. You see six cents for the quarter, certainly manageable and in line with what our expectations are. And as we get to 23, part of your question is for us and everybody else is some of this latent inflation and price impacts that I think haven't flowed through. that we'll be continuing to manage. But I certainly think the way the operating costs are today, we're able to do that. The other thing I would just highlight, and I think you guys know this, but we benchmark very well already on an O&M basis. It's part of the case we're making in our GRC that we manage the business efficiently. We'll continue to do so. But my other side of that is I don't think we have materially large cuts to be made there in the sense of how you manage other impacts. But again, the operating costs, you see impacts to the quarter in line with our expectation. And that piece of our, as we've narrowed our guidance range, you'll see we didn't adjust any of the operating costs assumptions.
spk03: Just a little footnote to your question, the rates that come out of the case, whether it's up arrow, down arrow or side arrow, are retroactive to October 1st. Again, that was one of the several reasons that getting the interim implemented as efficiently as the commission was able to do is valuable.
spk01: Yeah. And I think, so the other way of saying that, Jillian, is when we do give you 23 guidance, the key piece there is our new rates will have been in effect for the whole year.
spk06: Got it. Excellent. Well, thank you again. And if I can bring it back more to real time. Can we talk a little bit about the transmission outcome here? I would have thought that things would have been a little bit better just given the volumes and the volatility in the quarter and the power markets. And then related, can you talk a little bit more about the commercial volumes and what your expectations are going forward? I saw the commentary in the release on third quarter. What does that hold for fourth quarter versus plan? And then more importantly, again, as you think about 23, I know we're all asking for the same thing, but if you guys don't mind on both those pieces.
spk03: One thing we've seen, obviously, and let's just talk about Montana, for example, certainly a growth in new connects overall, including commercial, but it really doesn't seem that a lot of the commercial sector is back to fully staffed businesses. So at least part of what's going on seems to be the continued challenges in the labor market.
spk01: Sure, so I'll divide your question into two pieces of where we're not giving 23 guidance, but to tell you more about 22. So on the transmission side, your question was a good one, which is, hey, last year prices were high, markets were volatile. You had really great transmission revenues and margin impact there. This year, that's $4.7 million lower, and we've set in line with our expectation. The piece I would tell you about our formula rate there is there is a credit for short-term sales, and so part of what we knew is that rate would come down a bit, even though there's solid rate-based growth. So that's part of it's both price and volume. So I would think about it largely in the sense of maybe around half price driving that $4.7 in the quarter, and then the other half being we did see slightly less volumes in So demand to transmit over our lines. And there's a whole lot of things that go into that. You'll recall last year, there were some super dry conditions. I don't think quite as bad this year. So all of that, we watched that market closely. But again, that decline was something we did have an expectation for. Your question on the commercial side, and I would just point you to, if you look at our 10Q and the commercial volumes, the things that will pop out to you is really warm weather, both last year and this year. This year, even warmer. and more customer counts. So we've seen solid commercial growth, but you'll see a slight decline in volumes. So that's the piece of you would think on a 2% customer growth above that warmer weather that you would see volume throughput there, which obviously we're in a, as Bob always says, a fixed price world and a volumetric revenue world, or fixed cost world. And so when we see that sort of piece there, you know, over time, 86,000 customers. So they're not homogenous. But one of the things that Bob alluded to there is that you have certainly continued to see labor and staffing challenges with a lot of those businesses. All that being said to say, one quarter does not make a trend. So while we're watching that carefully, and certainly we'll be talking about that at Q4, we continue to see strong, broadly, commercial loads. And we'll update you on that next quarter and how we're thinking about it.
spk06: Excellent. Well, thank you, team. And Bob, best of luck. It's been a real pleasure.
spk03: Thank you. You as well.
spk06: Thanks, Julian.
spk05: Cheers.
spk02: Take care. And with that, we've exhausted our cubes. So, Bob. Okay.
spk03: Well, we will get to see a number of you either in the mosh pit at EEI or maybe in New York in December. as soon as Brian was finished with his eulogy and that was not, not everybody gets to be alive when they, when their eulogy is read. So I really appreciate, appreciated that. And it was even better than open casket. But anyway, Brian went to grab a box of tissues and it's not unusual after we finished these meetings that we need a box of tissues.
spk05: I, I,
spk03: Really, really appreciated it. So Heather is going to be biking, swimming, and running off into the sunset in January. And I'll be hopefully pursuing a number of other things, including particularly just spending more time with my wife. Hand me those tissues. Whatever. What I would say is the last not quite 14 and a half years have just been an incredible privilege to work with the very best group of people who become good, good friends, doing the most important work in places that are really, really special. So I've been incredibly lucky and I've enjoyed getting to know a number of you and visit with you about the industry and trends and try to help answer all of your really interesting probing questions. So again, it's been a real privilege for me and thanks to all of you for your long-term support of this very, very special company. Back to you.
spk02: Fantastic. Thank you for joining us. And that brings our webcast to a close. Thank you.
Disclaimer