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spk09: Good day, and thank you for standing by. Welcome to the Avista Corporation's Q3 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during that session, you will need to press star 1-1 on your phone. Please be advised that today's conference is being recorded, and I would now like to hand the conference over to your speaker today, Ms. Stacey Wentz, Investor Relations Manager. Ms. Wentz, please go ahead.
spk01: Good morning, everyone. Welcome to Avista's third quarter 2022 earnings conference call. Our earnings and our third quarter 10Q were released pre-market this morning. Both are available on our website. Joining me this morning, I have Avista Corp President and CEO, Dennis Vermillion, Executive Vice President, Treasurer, and CFO, Mark Thies, Senior Vice President, External Affairs, and Chief Customer Officer, Kevin Christie, and Vice President, Controller, and Principal Accounting Officer, Ryan Crasselt. Today, we will make certain statements that are forward-looking. These involve assumptions, risks, and uncertainties which are subject to change. For reference to the various factors which could cause actual results to differ materially from those discussed in today's call, please refer to our 10K for 2021 and 10Q for the third quarter of 2022. Both are available on our website. I'll begin by recapping the financial results presented in today's press release. Our consolidated loss for the third quarter of 2022 was $0.08 per diluted share, compared to earnings of 20 cents for the third quarter of 2021. For the year to date, consolidated earnings were $1.06 for diluted share for 2022 compared to $1.38 last year. Now, I'll turn the call over to Dennis.
spk07: Well, thanks, Stacey, and good morning, everyone. After an unusually warm and sunny October, it definitely feels like our typical fall weather has now settled into our region. We're getting some pretty good precip, and it looks like our first big mountain snow of the season, so that's a good thing. With the summer season behind us, we're happy with how our system handled this year's peak summer months. The significant investments we continue to make in our system to harden our grid and bolster the reliability and resiliency of our substations and distribution system allow us to better serve our customers. We're also making good progress in achieving our clean energy goals We're evaluating opportunities in our recent RFP, and we're implementing our Washington Clean Energy Implementation Plan that was approved in June. Turning to rate cases, we continue to work our way through the regulatory process for Washington general rate cases following the multi-party settlement we reached earlier this year. We expect a decision by the Commission in December of 2022. In Idaho, we expect to file both gas and electric rate cases in the first quarter of 23. We also plan to file a general rate case in Oregon during the first half of 2023. In Alaska, our interim and refundable rate base rate increase of 4.5% was approved by the Commission and was effective in December of 22. Now for earnings, as we previously communicated, our strategy is to achieve our 2023 guidance included adequate rate relief and cost management, and we've made significant progress on both fronts. Our Washington general rate case settlement demonstrates progress toward attaining the needed rate relief we're striving to achieve, and we have identified opportunities to manage our costs for 2023. Despite these great efforts, the goalposts have simply been moved on us. And as a result, we are lowering our 2023 consolidated earnings guidance by 15 cents to a range of $2.27 to $2.47 per diluted share. The combined upward cost pressures from inflation and rising interest rates, which accelerated in the third quarter, proved too much for our cost management efforts to offset in 2023. In particular, we expect increases in borrowing costs, pension expense, and depreciation. Higher borrowing costs and operating expense also impacted 2022, and therefore, we are lowering our 2022 guidance by 5 cents per diluted share to a range of $1.88 to $2.08. At this time, I'll turn this presentation over to Mark to get into some of the details. Mark.
spk06: Thanks, Dennis. Good morning, everyone. And while our news on our earnings is down, I do have a positive Blackhawks comment. I know you're all waiting for that. We're a point out of first place nine games into the season. Still very early, but a lot better than I thought it would be. So compared to the third quarter of 21, our utility earnings decreased primarily due to rising interest rates, higher depreciation. We have had some higher capital and increased operating expenses. These increases were partially offset by benefits from increases from rate cases that we completed in both Idaho and Washington. And we also had retail customer growth of about 1.5%, which helps our utility margin as well. The energy recovery mechanism in Washington was a $4.5 million expense in pre-tax expense in the third quarter compared to $3.8 million in the prior year of an expense. Year to date, we've recognized 7.3 million of expense compared to 7.1 million last year. And we do expect to continue to be in the 90% customer, 10% company sharing band for 2022. With respect to capital, we continue, as Dennis mentioned earlier in his remarks, we continue to invest necessary capital in our utility infrastructure. And we expect our capital expenditures to be about $475 million. in each 22 and 23 at Avista Utilities. We expect AEL&P's capital to be $10 million in 22 and $13 million in 23, and we expect to invest about $18 million in our other businesses in 22 and $15 million in 23. With respect to liquidity, as of September 30th, we have $102 million in available liquidity under our committed lines of credit, and in the fourth quarter, we expect to end short-term credit facility for up to $50 million to provide additional liquidity going into next year. During 2022, we expect to issue $135 million of common stock, including the $93 million we've already issued in the first three quarters. And in 23, we expect to issue up to $140 million in long-term debt and $120 million of common stock to fund our planned expenditures. Getting to guidance, as Dennis mentioned, we are lowering our 2022 guidance by $0.05 to a range of $1.88 to $2.08, and we're lowering our 2023 guidance to $0.15 by $0.15 to a range of $2.27 to $2.47. These increases are all related to EVISA utilities, and as Dennis mentioned, while our regulatory and cost management efforts have been successful, You know, we don't believe they're going to be sufficient to overcome the, you know, as he said, the goalposts, the increase, the continued increase in inflation and those costs going up. Interest rates continue to rise, driven by the Federal Reserve, aggressively raising interest rates, you know, five times this year, and we anticipate another, you know, tomorrow, I believe, another increase continuing that. We expect those borrowing costs to continue to increase next year. We forecast... based on forward curves, and that's included in our guidance. A portion of our operating expense is also related to the pension expense, and our pension asset values have decreased significantly as a result of poor market performance, causing increases to our pension expense to outpace the potential decrease due to a rising discount rate from interest rates. Finally, we've increased our capital expenditures, primarily due to inflation in certain new projects that we believe are in the best interest of our customers. which results in an increase in depreciation expense. We do expect these costs to be recoverable through future rate cases. As Dennis mentioned earlier, we have settled in Washington a two-year plan, so that, assuming the Commission approves it, which is the Commission still has to approve it, if the Commission approves it, Washington rates will be set for December of 22 through December of 24, but we do plan to file in Idaho and Oregon in the first quarter and first half of next year, respectively. We expect Avista Utilities to contribute in the range of $1.66 to $1.82 per diluted share in 2022. And the midpoint does not include any benefit from the IRM. Our expectation, as I mentioned earlier, the IRM would be in the 90-10 sharing band and is expected to reduce our earnings by $0.09 per diluted share. Primarily due to the impact of the IRM, we do expect to be at the bottom of the range for Avista Utilities. Looking to 2023, we expect Vista utilities to contribute $2.15 to $2.31 per diluted share and our guidance assumes appropriate rate relief in all of our jurisdictions including the approval of the 2022 Washington general rate cases and for 2023 we anticipate just to give you a sense of where we are on our earned ROE we anticipate unrecovered structural costs to reduce the return by approximately 60 basis points. That's what we'll call structural lag, my term. And then we have timing lag of about 90 basis points. So we anticipated originally trying to get back to earning our allowed return, but with the increase in interest, pension, and depreciation, we're not going to get there for 2023. We expect that to be about 90 basis points, so that gets our total return on equity to be 7.9%. We expect AEL&P to contribute in the range of $0.08 to $0.10 in 2022 and 2023. And our outlook for AEL&P assumes, among other variables, as always, normal precipitation and hydroelectric generation. We expect the other businesses to contribute $0.14 to $0.16 per diluted share in 2022. And in 2023, we expect those businesses to contribute in a range of $0.04 to $0.06 per diluted share. Our guidance generally includes only normal operating conditions and doesn't include any unusual or non-recurring items until the effects are known. And that's the end of the discussion on guidance. So I'll turn it back to Stacy and we can get to questions.
spk01: Thank you, Mark. We are happy to take your questions.
spk09: Thank you. As a reminder, to ask a question, you will need to press star 1 1 on your phone. Please stand by as we compile the Q&A roster.
spk00: One moment, please, for our first question.
spk09: Our first question will come from Julian Dumoulin-Smith of Bank of America. Your line is open. Hey, good morning, team. Thanks for the time. Hope you guys are well.
spk07: Good morning, Julian.
spk11: Hey, thank you. So I want to come back to the 23 Guidance. You guys spent a good chunk of time here, but can we break down some of the pieces you alluded to here? You know, obviously you talk about cost management efforts. You guys have been talking about that for a bit here. Can you talk about the ability to kind of recapture some of that in some of these subsequent cases, as well as some of the discrete breakout of the other items that you flagged here on the 23 Guidance, just to quantify the three or four specific points that you called out?
spk06: Well, I mean, it really is rising interest rates. We do borrow money under our, you know, it's largely our short-term credit facility. We will issue some bonds later in 2023 on a long-term basis. We have $140 million of debt we expect to issue on a long-term basis. But really, the short-term interest rates have increased significantly. As I mentioned, you know, we have a four, just to give a sense, we have a $400 million credit facility, and we have $100 million at September of available liquidity. If that liquidity goes consistent, you assume we have you know, $300 million borrowed, and interest rates have moved substantially, you know, over the course of where we were to now in 23, where we expect to be. And we're just looking at forward curves there on interest rates. We borrow very short term, week to two weeks under that credit facility. So that has caused it to go up. Our pension expenses, I mentioned, you know, our asset values went down significantly. You know, we see the market values, right? What's happened in the stock market, we have you know a certain portion equity we do have some fixed income as well on that but interest rates rising there hurts the returns on the fixed income portion of the portfolio so we're down in our assets over 20 percent in our pension and that's too much to overcome relative to the increase in the discount rate and I'm not trying to get into Julian to pension accounting because I don't want to and nobody wants to hear it but that's overall our pension expense is expected to be higher for 23 based on that, you know, based on what we see today. And that's what we have to go on for our guidance. The increase, you know, we mentioned earlier we had, you know, on an earlier call, we had some increase in inflation in our CapEx, and our CapEx is higher than what we have filed for in Washington. We will expect to file in, you know, in Idaho and Oregon in 20, early in 23, first quarter for Idaho and first half for Oregon. So there's an opportunity there to pick up some amounts, you know, in those future rate cases, all subject to that process. And, you know, in Washington, our cases before the commission right now, we've reached a multi-party settlement. One party did not settle, public council, that's still being, going through that process. But we, you know, we expect that we will be able to get approval on the Washington case, but that still has to be determined by the commission. So that's not up to us. So those are the three primary drivers. Our other cost management efforts really offset the other impacts of inflation. We've seen inflation in wages. We've seen inflation in goods and services in different contractors that we use to do a lot of our work. We were able to offset that with our cost management. I'm not going to go into specific details there, but the effort we did offset all that. And it was just the faster rise, and I guess I'd attribute it to, you know, higher inflation for longer that the Fed has had to then move, and the market reaction to that, those are really the drivers we were not able to offset in our expectations. We do believe that that will all be recoverable in future rate cases, assuming we can demonstrate that we did this prudently, and I believe we absolutely can.
spk11: Actually, can we try to quantify a little bit more on the pension impact reflected here in 23, as well as if you don't mind going back to the cost management equation, like how do you think about maybe 24 at this point in reflecting some of these pieces? Maybe also, if you don't mind, on interest expense, thoughts on refinancing, trimming that out, et cetera, such that, again, how you think about that on a more structural basis in the 24? Again, I know that you keep trying on cost management. I've heard this ever for a while. How do you think about, you know, kind of giving another college try, if you will, into the 24-time period?
spk06: Well, we're always doing that. I mean, that will be consistent, and we will expect to continue those efforts. I don't have anything specific to report for 24, but, you know, we've done that. 23 wasn't an unusual. We had a little bit higher effort in 23 because we knew we had a little bit higher hurdle. But, you know, going into 23, you know, we always are trying to manage our costs to run it efficiently. And we need to demonstrate that, you know, as we, you know, go in for rate cases. We have to demonstrate how are you trying to manage your costs. So we do that consistently. Twenty-four won't be any different in that, with respect to that effort. With respect to the, you know, putting down the pieces, you know, we kind of laid out what our borrowings were. If that was an average borrowing, you can look at rates and determine what that is. The pension dollars, I'm not going to get into specifics because those can move around. Coming into 24, if interest rates come down a little bit, that could help 24, right? If market performs better going into the end of 23 or we get into 24 and the market performs better that our pension can have a lower expense, that's a future opportunity as well. But none of those things are known at this time. All we can give you is what we expect at this time, which is where we're at. So if you look at it, I won't say a third, a third, a third, but that's probably as close of an estimate without getting into great detail of depreciation, pension, and interest.
spk11: Got it. And a third, a third, a third of the delta in guidance reduction here. Delta, 15 cents. Yep, exactly. Thank you for qualifying that. And to be clear, on the 24-rate activity, though, how do you think about going back here to true that up? Just a second. I tried to ask that perhaps in code earlier, just to clarify that, and I'll pass it.
spk06: Well, so with respect to 24, we expect to file in 23 in Oregon and in Idaho. That's about 40% of our business. Washington represents about 60% of our Avista Utilities business. And so in Washington, we're not going to be able to refile until – um the you know in in 24 effectively 425 i mean it might possibly get into december it can't rates can't change before december so 24 really isn't going to be an option for washington in our expectations so it'll be it'll be oregon and idaho that will be able to you know look to recover and again we got to go through the process in oregon and idaho to demonstrate that these are These are approvals, and then we will continue to have our cost management. We'll continue to look at where the market goes.
spk11: Excellent. Thanks for your patience, guys. Speak to you soon.
spk06: Thanks, Julian.
spk09: Thank you. One moment, please, for our next question. Our next question shall come from Char Perez of Guggenheim Partners. Your line is open.
spk02: Hi, guys. It's Jameson Ward on for SHAR. How are you? Hi, Jameson. Good. Good. So I wanted to clarify, are you still projecting long-term growth of 4% to 6% off of 2023? Or how should we think about that aspect, the later years aspect in the forecast period?
spk06: Yeah, I think that's consistent. Again, that would be, that's our, you know, looking at our rate-based growth and as we would go in a normalized period. We are, as we you know, are going to be under earning and have some continued timing lag, we would like to see that we could chip away at that. But that's going to take a period of over 24 and 25 to have that opportunity. As I just mentioned earlier, really, because of the, you know, again, regulatory process in Idaho and Oregon, able to possibly chip away at 24 and then Washington for 25. So we would expect that to be a normalized growth based on current expectations of where our rate-based growth is. But we would look to add to that some incremental growth to offset this reduction we have and this timing lag that we have identified today.
spk02: Gotcha. So would a fair way to put it be sort of think of rebasing as four to six still off of 23, off of this lower 23, but maybe more of a bias to the top end of that rather than the midpoint as you look for incremental opportunities to to normalize, as you're saying, and to catch back up. Is that fair?
spk06: I think I would look at, you know, we have an incremental opportunity. The base that makes sense, right, go off of, you know, the 4% to 6% off of the revised 23. Okay. I would say that makes sense. The incremental opportunity is we're going to have to see. I would say, yes, there is an opportunity for, again, 40% of the business in Oregon and Idaho if you're going to look at that. versus the, you know, Washington. So 60% of that we don't believe, you know, we're going to continue to do cost management. We're going to continue to look at running our business efficiently. We'll have continued impacts of market forces as we go forward, but we can possibly pick up up to 40% of that in 24, and then the remainder in 25 is our opportunity, and we'll have to work through those processes with our commissions.
spk02: Got it, got it. And in terms of incremental opportunity, we've had four to six cents as the other businesses' initial guidance for the past couple of years. And then obviously that segment has exceeded expectations repeatedly. Understood that investment gains have driven that, but what's sort of the potential that we could see an upside surprise similar to what we've seen in the last couple of years?
spk06: in say 23 that might uh if not close the gap but uh make up some of the 15 cent difference uh again we don't you know we look at we look at the forecast james on on with respect to where we see those market valuations they can go up and down we actually saw some you know third quarter wasn't a significant pot it was pretty flat so it's You know, we don't forecast significant market upsides in those. We just kind of forecast a normalized return that we see based on our investments there. Is there a possibility it could go up? Yes. Is there a possibility it could go down? Yes. I mean, there are valuations that can move there. So we try to, I think I would say we try to forecast conservatively in that area. But, you know, it can go both ways. Market valuations can go down as well. as we've seen in the stock market.
spk02: Certainly. The last two questions I have, well, one on that note of asset valuations declining. Now, in our pension survey back in the summer, you'd mentioned that you have regulatory mechanisms that allow you to record regulatory asset for the portion of the pension and other post-retirement benefit funding deficiency that you'd have relative to what you're recovering in rates. how does that play in here and is that something that can help to offset or it seems like it isn't if pension headwinds are going to be weighing on 2023 how should we think about the regulatory mechanisms and regulatory recovery that you have related to pension yeah we don't I mean that's assets versus liability for an unfunded component of it but that's not we're largely funded in our pension
spk06: And so I don't think that there's an issue there. It's not with respect to the expense. We get recovery of the ERISA expense based on an annual calculation there. And so that ability to change that, we don't have a tracker for that mechanism at all at this point.
spk02: It's a gap expense. This is more like you've exceeded... like the corridor and, you know, it pushes out into 2023 impact or, or could, or it looks like it might, is that more of the way to think about this?
spk06: Well, as we look at it, we can forecast what the market's going to do, what our pension is going to earn and what the discount rate is. And we can run a, an actuarial calculation on that that says, here's what pension expense would be forecasted based on what we know today. You know, those, those numbers change and we don't value it. We value it at the end of the year for the next year. But where we see it today is going to be a higher expense.
spk02: Yep, understood. That makes sense. And just to clarify as well on the IRM, obviously the midpoint of guidance does not include an impact from the IRM, and so we understand the $0.09 weighing this year. But just so we can understand when thinking about next year, Do you have any sort of early indication, given the components that go into the IRM, of essentially is it just a reset to zero at Jan 1, or is there any sort of early indication of whether things are looking more positive or negative relative to coming in flat or at zero, I should say, not flat?
spk06: We're really waiting for – so we've got a filed rate case in Washington, which is where the IRM is. We have a PCA in Idaho, but that's more of a 90-10, so that's not as impactful as a year from an earnings perspective. And in Washington, when we filed our case, we reset to December or January of that year. I don't remember the exact dates that we reset, but we reset our power supply costs in that case, but have not reset for any current amount. So until we get that case through the Washington Commission, you know, I'm not comfortable saying where we expect to be. We will come out in February because we will assume that in December we will have an order from the Commission. And so when we give our guidance, you know, when we refresh our guidance for 23 in our fourth quarter call next year, you know, we will have a view of where that IRM is based on the market conditions at that time.
spk02: Understood. Thank you very much. Appreciate you answering the questions. Thank you, James.
spk09: Thank you. And one moment, please, for our next question. Our next question will come from Sophie Clark of KeyBank. Your line is open.
spk04: Hi. Good morning. Thanks for the time. Hi, Sophie. A couple of questions. I'm looking closely at the numbers here in your 10Q, right? And it seems to me that your interest expense has gone up by about $3 million, so it would have been like $0.04. Delta, year-over-year, and your EPS. I just wanted to confirm that this is the totality of it, because you wrote it up as a major driver. It seems like O&M was a way bigger driver. Is there another interest expense somewhere, like buried in the line here?
spk06: Again, for 22, but also an interest expense in, you know, as we look at it, I'm looking more to 23 than 22 as we look at that. You know, 22, we just moved guidance in, you know, 22 by 5 cents, which included interest and operating expenses, but it really didn't move significantly in 22. 23 was what I was trying to address there, Sophie. So when I said the interest, pension, and depreciation was really a 23 expectation.
spk04: Got it, got it. Okay, and so the increase in O&M versus, I guess, the prior run rate that we're seeing this year, this is basically your expectations that it stays the same going into 2023, or you're contemplating some kind of a acceleration or deceleration in the rate of inflation in the O&M?
spk06: Again, with respect to our cost management, we expected to try to keep our O&M relatively flat in 23 compared to 22, but we're going to see higher costs in our pension, and we are going to see some, the drivers really for the change in inflation guidance you know go back to again pension depreciation and interest costs you know we did have a higher debt in 22 compared to 21 we expect to continue that as we go forward into 23 it's a combination of the rate going up and plus you know our increase to fund our our capital budget we're you know we're funding 175 million dollar capital budget so that increases as well so that we are Some of that you don't see in there, Sophie, is the effects of our cost management. I mean, we are trying to manage our costs to keep that rate of growth below inflation.
spk04: Right. So let me ask you this. So you mentioned that you hope to recover. So you have a two-year settlement that hopefully will get approved, like in December in Washington. You mentioned that you hope to recover extra O&M costs, I guess, maybe above and beyond what was contemplated in this two-year rate case and future rate cases. So how does it work? Do you have some kind of mechanism to track those costs in excess of what's in the settlement? Because it's a black box settlement too, right? So can you help us understand how this would work?
spk08: So this is Kevin Christie. I'll jump in here and focus primarily on capital. The capital that we're incurring that creates timing lag will pull into the next case. when we build the test period and proform into the rate effective date. Any expenditures expense, operating expense, will be treated like it always is. We'll develop a test period. In that test period, we'll pull then, current, O&M, and we'll proform any additional O&M we think might be appropriate. So we have the ability to take what we expect to have from an expense perspective at that time in, and any capital that we're spending now that isn't recovered or might not be recovered in that case will be pulled into the next case as well.
spk04: Okay, so it's the capital. Your comment relates to capital, not on the O&M.
spk08: Yeah, not on O&M. O&M, unless it's covered in a tracker, like what we hope to have for insurance expense, that's part of the settlement in the Washington case, and anything related to wildfire, for example, which is a current tracking mechanism. We have that in the state of Washington as well.
spk04: Got it. One last one, if I may, mostly a philosophical question, I guess, with respect to your regulatory strategy here. So, you know, is there a way to have some kind of limited re-opener for this settlement to account for these, you know, incremental costs, which I'm assuming arose after you reached the settlement because of, you know, the timeline of this, it seems to me.
spk08: Yeah, I think you're right on. That's when we mentioned the goalposts moving on us in that what we had in test period and what we knew of at the time when we've reached settlement, a number of things have occurred negatively since then. And with the state of regulation in Washington, we really don't have an opportunity to go back unless it's captured in a tracker that I just mentioned and reopen. With the new legislation in Washington that we are utilizing here, if the case we filed was longer, three or four years, which is an option, we didn't do that here, then there's a re-opener if you're under earning below a certain level. But that doesn't really apply here given the timing of this case just being two years.
spk04: Okay, got it.
spk06: Thank you. It also doesn't necessarily make sense for us to withdraw from the settlement and re-file. Because it's an 11-month process. So we would effectively lose a year to do that just to try to come back. So we don't think that makes sense either. We think the settlement is, as we said earlier, we think the settlement is a good settlement. We think it's a fair settlement reached with all the parties. And, you know, will help us get towards earning our allowed return. Like we said, you know, it's just the market has changed since this time, so we don't have that opportunity. Washington, Idaho, and Oregon will file.
spk04: All right. Well, thank you. Appreciate the callers.
spk06: Thanks, Sophie.
spk09: Thank you. Again, to ask a question, please press star 1-1 on your phone. One moment, please, for our next question. Our next question will come from Brian Russo of Sedoti. Your line is open.
spk05: Yeah, hi. Good morning. Hi, Brian. Just to clarify, with the understanding that you expect the rate case settlement to be finalized next month, and then you've got a rate increase in late 22, and then again in late 23. When actually can you file again, assuming that 11-month time clock for a fully litigated rate case? Do you have to wait till December of 2023 when the second year of the rate increase goes into effect, or can you file any time after you reach the settlement agreement?
spk08: Well, it's easier to think about it this way. We can file 11 months prior to December 22, 2024. You can file sooner than that, but you're not going to have new rates into effect any sooner than that. So it's really up to the company to try to time it right up to that point in time, so if we are continuing to have lag to fill the gap there right at that 2024 time frame in late December.
spk05: Okay, got it. Thanks for the clarification. That's all I had. Thank you.
spk06: Thanks, Brian.
spk09: Thank you. Again, one moment please for our next question.
spk00: Our next question will come from Brandon Lee of Demi Huso Securities.
spk09: Your line is on.
spk10: Hi. So from the midpoint of – hey, how are you? So from the midpoint of $1.74 for 2022, if I reduce it by the arm of 9 cents, I get $1.65. And so far for the year, you've earned 90 cents. Am I thinking about this correctly, that you'd need to earn about 75 cents in the fourth quarter to hit the midpoint of your guidance for a VISTA utility?
spk06: Again, a VISTA utility, I look at it more on the consolidated, but at the end of the day, that's right. Fourth and first quarters are our largest quarters historically. and so that is an expectation that we would i you know i'm i'm trusting your math there that that's without confirming without confirming you know any models but that that sounds appropriate um for utility utilities to earn that in the fourth quarter and now that we're about a month into the quarter uh how is the fourth quarter looking so far don't i don't have a sense again it's early in the fourth quarter and you know as as as you look at the fourth quarter we're looking at earnings the second and third month of the quarter are the colder months of the quarter so i'm not going to try to guess that how is it looking for the quarter we do expect to make that you know in our quarter okay um then when we think of the drivers from 23 to 24 i mean you have rates set in washington i guess how do you improve 2024 from here
spk10: Is it the Idaho and Oregon rate cases? Are there other drivers?
spk06: Yeah, so that's part of it. As I've mentioned earlier on the call, that is part of it. We do expect to be able to file cases there, and we'll have to go through those processes and demonstrate that we should get recovery, but we do expect that. We're going to continue our cost management efforts. We're going to have to continue that as we go forward, as well as there are – Can interest rates slow down or reverse some? There are some forecasts out there that show that. We just continue to manage our business. We have a strong business. We've hit a timing issue here that's going to take some time to get through, but our business model is still very strong. We just have to work through these timing issues to get back to earning our allowed returns. that'll be through the regulatory process and we're not going to be able to get there in Washington as Kevin just mentioned until, you know, late 24 will be the opportunity to increase in Washington, which is 60% of our business.
spk10: Got it. And then, um, in 2024, um, assuming, you know, Idaho and Oregon go well and you get constructive outcomes there, that's about 40% of your business. Um, but you have cost pressures on 100% of the business. Should we be leaning towards the lower end of the 4% to 6% range?
spk06: No, I don't know that I'd say that. I haven't really thought that all the way through. We can continue to look at that. We've really focused on 23 and then incrementally as we go forward in 24. We expect to incrementally improve The 4% to 6% we expect to be able to achieve that. We included that even in our Washington case, and we will get some opportunity there as part of our second year in our Washington case. We're always going to have to continue to manage that 100% O&M, so we will continue to work for that. So I don't know that I'd say there's an upward or downward side of the range. We'll have to continue to look at those cost increases and continue our cost management efforts to help offset those. But I don't know that I'd say directionally I would give guidance on where we are with respect to any possible increase range for 24. Okay, great.
spk10: That's all I had. Thanks for taking my question.
spk00: Thank you.
spk09: Thank you. And I'm seeing no further questions in the queue. I would now like to turn the conference back to Stacey Wentz for closing remarks.
spk01: Thank you all for joining us today. We appreciate your interest in the coming weeks. We'll see a number of you at EEI in the coming weeks. Thank you.
spk09: This concludes today's conference call. Thank you all for participating. You may now disconnect and have a pleasant day.
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