Eversource Energy (D/B/A)

Welcome to the Eversource Energy Second Quarter 2020 Results Conference Call. My name is Vanessa, and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press star, then 1 on your touchtone phone. Please note that this conference is being recorded. I will now turn the call over to Mr. Jeffrey Kotkin. Sir, you may begin.

Thank you, Vanessa. Good morning and thank you for joining us. I'm Jeff Kotkin, Eversource Energy's VP for Investor Relations. During this call, we'll be referencing slides that we posted last night on our website. And as you can see on slide one, some of the statements made during this investor call may be forward-looking as defined within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and are subject to risk and uncertainty, which may cause the actual results to differ materially from forecasts and projections. These factors are set forth in the news release issued yesterday. Additional information about the various factors that may cause actual results to differ can be found in our annual report on Form 10-K for the year ended December 31st, 2019, and our Form 10-Q for the three months ended March 31st, 2020. Additionally, our explanation of how and why we use certain non-GAAP measures and how those measures reconcile to GAAP results is contained within our news release and the slides we posted last night and in our most recent 10-K. Speaking today will be Phil Lembo, our Executive VP and CFO. Also joining us today are Joe Nolan, our Executive Vice President for Strategy, Customer, and Corporate Relations, John Marrera, our Treasurer and Senior VP for Finance and Regulatory, and Jay Booth, our Controller. Now I will turn to slide two and turn over the call to Phil.

Thank you, Jeff. And good morning, and I'll start off by wishing all and hoping that everyone on the phone remains healthy and that your families are safe and doing well. This morning, I will cover several items, talk about the results of the second quarter 2020, review the impacts of COVID-19 on our customers and their energy use, I'll discuss recent regulatory developments, including new grid modernization proposals in Connecticut and the status of our application in Massachusetts to purchase the assets of Columbia Gas of Massachusetts. And finally, provide an update for you on our offshore wind investment partnership with Orsted. So, let's get started on slide two, noting that recurring compared with recurring earnings of 74 cents per share in the second quarter of 2019. GAAP results, which include a charge of one cent per share relating to our pending acquisition of the assets of Columbia Gas, totaled 75 cents per share, compared with earnings of 10 cents per share in the second quarter of 2019. And last year's results included a $0.64 per share impairment charge relating to Northern Pass. So in the first half of 2020, our recurring earnings, excluding Columbia Gas, totaled $1.77 per share, compared with recurring earnings of $1.71 per share in the first half of 2009. According to our business segments, our electric distribution segment earned $0.34 per share in the second quarter of 2020, compared with $0.33 in the second quarter of last year. Improved results were driven by higher revenues, partially offset by dilution and higher O&M costs, depreciation and interest expense. Our electric transmission segment compared with recurring earnings of 37 cents per share, again, excluding the NPT charge in the second quarter of 2019. Improved results were driven by a higher level of investment in our transmission facilities, partially offset by dilution. Our natural gas distribution segment earned one cent per share in the second quarter of 2020, compared with a slight loss in the second quarter of last year. Improved results were due to higher revenues, partially offset by O&M and depreciation, as well as dilution. Our water distribution segment earned three cents per share in the second quarter of 2020, compared to earnings of two cents per share in the second quarter of 2019. Improved results were largely due to higher revenues and lower depreciation expense. At the Eversource Parrot, we lost one cent per share in the second quarter of 2020, excluding the Columbia Gas of Massachusetts asset acquisition cost compared to earnings of two cents per share in the second quarter of last year. The primary driver of the change was a lower mark-to-market earnings this year in a clean energy investment we made a number of years ago. As you may recall, this is an investment fund that matures soon, and each year we mark that investment to market in the second quarter. As you probably noted in our news release, you can see on slide three, we are reaffirming our 2020 earnings per share guidance of $3.60 to $3.70 range, as well as reaffirming our long-term EPS growth rate of 5% to 7%. We expect that our existing core business will allow us to grow earnings per share around the midpoint of that range through 2024. Earnings from offshore wind and Columbia gas asset acquisition would both be incremental to that growth, though they would have somewhat of a different profile. As we've said before, offshore wind earnings would commence in the latter years of the forecast as the turbines enter service. while we expect Columbia gas asset acquisition to be accretive to our earnings per share starting in 2021. From second quarter results, I'll turn to slide four and our continued progress and success in operating the business during COVID-19 pandemic. A very strong safety and reliability performance continued through the first half of the year. We've responded promptly and effectively to all the storms we've encountered, and the vast majority of our employees who either had tested positive for COVID-19 or were self-quarantined are now back to work, providing superior service to our 4 million customers. We remain on target to executing our $3 billion capital program. Through June, our capital expenditures have totaled $1.44 billion, about $30 million ahead of last year's pace. In terms of usage, kilowatt-hour sales in the second quarter were down about 1.4% overall compared with last year. But in New Hampshire, which is not decoupled, they were actually up 1.8%. New Hampshire residential sector sales were very strong due primarily to more customer And we see that throughout the company. We had cooler than normal weather in the first half of the quarter and hotter and more humid than normal weather in late May and June. On the natural gas side, where both Yankee Gas and Enstar Gas are decoupled, sales in the second quarter were up about 1.7% compared with last year. And this was due to colder April and early May weather. So on a weather normalized basis, sales were off about 7% due to lower commercial and industrial usage. In our water segment, which is also decoupled in Connecticut, unit sales were up 7.1% in the second quarter this year. Lastly, due to customers irrigating their properties during a very hot and dry month of June. We are not shutting off customers for nonpayment. We continue that program. Connecticut and New Hampshire have implemented varying schedules for when shutoff moratoria will be lifted. In Massachusetts, we're part of a group that's working now to review policies regarding payment plans and shutoffs for nonpayments, and there are no due dates for ending the moratorium at this time. So despite the moratorium in place across the company, the impact of COVID-19 on our overall receivable balance has been manageable to date. COVID-19 and sales, I'll now turn to slide five, the recent developments around our ongoing rate reviews. With two general reviews pending, hearings in the NSTAR gas rate review in Massachusetts concluded a month ago. And final reply briefing will take place in August. We continue to expect a decision by the end of October with new rates effective November 1st. In New Hampshire, hearings and the public service of New Hampshire rate review start later, I guess, in the month of August with the final decision in November. New rates would be effective December 1st, we expect. but would be retroactive to July 1st, 2019, when a temporary rate increase of $28 million took effect. From the rate reviews, I'll now turn to grid modernization and the filing we're making in Connecticut today, later on today. As I've mentioned on past calls, the Public Utilities Regulatory Authority, or PURA, has opened 11 dockets to look at modernizing the electric grid in Connecticut to accommodate customers' higher expectations for reliability and technology and to provide both increased resilience and a path to help the state reduce its carbon footprint by at least 80 percent by the year 2050. Today, we and other parties are filing proposals in three of the 11 dockets. As you can see on slide six, The most capital-intensive proposal we're making is related to automated meter infrastructure, or AMI, for our Connecticut Light and Power customers. Our filing will present a comprehensive analysis of the cost as well as the technological, operational, and environmental benefits of implementing AMI. Moreover, as I've said in the past, our current AMR metering technology is ending nearing the end of its useful life and will need to replace about 800,000 meters one way or another over the next five years. It would involve capital investments that would be reviewed by PURA as part of their ongoing evaluation. In addition to AMI, we're seeking to support the state of Connecticut and targeting to have about 125,000 electric vehicles on the road by the year 2025. Our proposal combines rebates and infrastructure investments over a three-year period, enabling 2,500 homes to be wired for electric vehicle charging and for 3,000 additional charge ports to be enabled in multifamily dwellings, commercial centers, various destination locations, and other places. We would not own the charge ports themselves, but we would invest in the backbone to get the power to the vehicles. Finally, we're proposing a program to incentivize the installation of 30 megawatts of storage among CLMP's residential customers and 20 megawatts on the commercial industrial side. This program would not involve capital investment by CLMP, We expect PURE to facilitate an extensive review and public comment period over the balance of this year on all our proposals, as well as other proposals that are likely to be submitted by utility and non-utility parties today. In Massachusetts, we continue to implement the grid modernization plan authorized by regulators more than two years ago. We expect to complete the authorized projects, including infrastructure to connect 3,500 charge ports and utility storage projects on Cape Cod and Martha's Vineyard in 2021. In mid-2021, we'll be filing a new three-year plan for implementation in the 2022 through 2024 time period. In addition to the regulatory proceedings I just reviewed, we've made significant progress on our acquisition of the assets We'll pay $1.1 billion in cash for the assets. The cash will come from the combination of the issuance of new parent equity and debt. We raised the equity portion in mid-June when we sold 6 million shares and netted just over $500 million in proceeds. We're very pleased with the investor interest in the issuance, which was nearly three times oversubscribed and priced without price without a discount until the prior day is closed. We'll fund the debt portion of the purchase price from a future parent long-term debt issuance. We're very confident that the transaction will be accretive to Eversource shareholders in 2021, the first full year after closing, and be very positive for Columbia Gas customers. Slide 8 reviews the principal elements of our DP ownership to one of the largest gas delivery systems in Massachusetts and a pathway for 330,000 customers to benefit from Ebersource's award-winning energy efficiency program, a strong safety record, and high level of customer service and reliability. We truly believe it is a win for Columbia Gas customers, the communities, and for the state as a whole. The DPU filings, which are available on our investor website under the rate case update section, includes a settlement between the State Attorney General, Governor Baker's Department of Energy Resources, a low-income coalition, NYSource, and Eversource. We've asked the DPU to approve the application by September 30th. The GPU has scheduled virtual public hearings August 25th and August 27th to take up the matter. The settlement structures an eight-year rate plan with modest rate increases on November 1st of 2021 and 2022, respectively. There are additional base rate resets on November 1st of 2024 and in 2027. and unprotected steel pipe. And we expect Columbia to continue to replace about 45 miles of its older pipe annually. The agreement maintains Columbia's currently authorized equity component of its capital structure of 53.25%, but raises the authorized return on equity from currently at 9.55% to 9.7%. Based on the integration planning we've undertaken to date, we also remain confident that the transaction would be very beneficial to Columbia Gas customers and communities. As you can see on the slide, we'll provide the DPU with a status report on the Columbia system by September of next year. That report will provide a blueprint of enhancements we'll make to ensure that Columbia's 330,000 customers receive the same level safe and reliable service that our existing 550,000 natural gas distribution company customers receive in Massachusetts and Connecticut. Turning now to slide nine, in our offshore wind partnership with Orsted, on June the 9th, the Federal Bureau of Ocean Energy Management, or BOEM, released its cumulative impact study concerning potential development of about 22,000 megawatts of offshore wind generation along the Atlantic seaboard. This was an important step in BOEM's evaluation process for the different applications that have been filed to date, including two joint proposals with Orsted, one of those being Self Work, the other Revolution Wind. The study reviewed the impact of the projects, which BOEM expects to be developed over the next decade. Impacts were graded from major to negligible, I guess, on their scale. The level of impact identified in the report were anticipated by the offshore wind industry. They were primary reason that the four developers in the six ocean tracks off of Massachusetts, including our partnership with Orsted, proposed a one nautical mile by one nautical mile spacing for all turbines in the region. fisheries and navigation. The cumulative impact study was supported by the Coast Guard's earlier conclusion that the proposed turbid basin, which is the widest in the world for offshore wind, was adequate to support safe navigation in search and rescue efforts. Fisheries mitigation plans proposed through other agencies, such as the Rhode Island Coastal Resource Management Commissioner, will further mitigate impacts on wind farms. The response to the analysis by the public was, I'd say, largely positive, with renewed emphasis on the very significant contributions these turbines will make to carbon emission reductions in the Northeast. Five public comment sessions on the impact study were held in the summer, and written comments were due on Monday this week. BOEM is expected to make a final decision on the Vineyard Wind application on December 18th. And as you recall, Vineyard Wind is the first New England project in the queue. We expect that later this summer, BOEM will release its schedule for federal agency review of South Fork. And as we disclosed in the Q1 earnings call, we believe it is very unlikely that South On the other projects, we were able to resume survey work in June in New York State to support our sunrise wind filing with BOEM. We continue to expect that filing to be made later this year. And finally, last week New York issued an RFP for up to 2,500 megawatts of offshore wind. Bids are due on this RFP. by October the 20th, with awards to be made by the end of this year to ensure the winners can benefit from expiring federal tax credits. We and Orsted expect to bid into that RFP. Sunrise wins. And I'll turn the call back to Jack for Q&A.

And I will return the call to Vanessa just to remind you about how to enter the Q&A queue.

And thank you. We will now begin our question and answer session. To queue up with your question, please press star then 1 on your touchtone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. And if you're using a speakerphone, please pick up the handset first before pressing the numbers. Once again, with your question, please press star, then 1.

Thank you, Vanessa. Our first question this morning is from Char from Guggenheim. Good morning, Char.

Good morning, Jeff. Good morning, Phil. Good morning, Char. So just a couple of questions here. Focusing on the core business, I mean, you provided an in-depth slide on the Connecticut grid mod filing you had this week. And you've also stated in the past that the total AMI opportunity in Connecticut and Massachusetts is a little over a billion of capex that would be incremental to plan. So if we sort of take this incremental opportunity, pair it with the accretive Columbia gas deal, does it support sort of the top end or are we in a situation where the actual growth guide can actually change to maybe 6% to 8%? So I guess how should we sort of think about that shape that you kind of highlighted in especially, you know, when you're layering an offshore wind and you're rolling growth forward. So, you know, is it a function of supporting a higher end of that growth or does the actual CAGR change in time?

Thanks for your question, Shari. The answer to that is, you know, the grid modernization program in Connecticut is really still categories. And really the goals are to, you know, eliminate the barriers to grow in the state's green economy, transition into a decarbonized future, you know, enabling customers to access resilient, reliable, secure energy. So the PURE process is underway and the exact details of that, you know, won't be developed until we move through the entire process. So depending on I guess it's premature to provide a guidance there, but, you know, as we move through the process with PURA, you know, the programs would become clear, the spending levels would become clear, sort of the time periods would become clear, and then it would be, you know, we'd be able to kind of slot those into the plan. But certainly, if you're making smart investments in growing the rate base to benefit customers like we do? And are we able to keep your cost under control and you have a benefit of an accretive transaction that should help bolster your earnings potential and grow prospects going forward?

Okay, got it. And then just one last question is, you know, the Connecticut Assembly members sent a letter to Pura saying, earlier this week requesting they suspend the rate increases that went into effect that you guys suspend on July 1st. Puritific is like a formal motion for reconsideration and we'll rule on the motion after considering sort of comments. Any thoughts there and expectations on this development?

Sure. Certainly there's been some press related to customer concerns about high bills in Connecticut and I can assure you that we have in the past and we continue to work with our customers in a broad sense and one-on-one really to reduce bills. We have a variety of customer care programs. We have extensive and we are extending financial assistance programs to help customers manage and reduce future bills. We have award-winning energy efficiency programs and support for that. As I mentioned in my script that there's a moratorium, there's no shutoff. We're not shutting off customers and we're working diligently to help customers in this pandemic situation. I will say that the bills in general are due to much, the higher bills are due to much hotter weather this June really, and more customers working at home. I think we're all doing that. Residential sales at Connecticut Light and Power spiked in June. Really, the residential kilowatt hours were 26% higher this June versus last June, and 36% kilowatt hour usage was 36% higher than May. So, you know, a customer gets bill and they see it, then they get the next bill and they see an increase. But there's been a 36% increase in usage that's really driven by, you know, I'd say 85% or more is driven by this record level of usage. In fact, anecdotally, you know, the weather has still been hot afterwards So really, you know, there's some additional items. You know, we have a contract to provide a payment, a subsidy, some might say, to Millstone Nuclear Plant. You know, we had some transmission true-ups that we do that's really, you know, just to reflect an under-collection of transmission. So overall, sort of on a rate standpoint, the rate overall the impacts of the millstone, you know, without that, if we didn't have that contract, the actual rate would have been about $5 lower for a typical customer. So, you know, I think certainly there's a reaction. You know, people are hurting. You know, we want to help be a part of the solution here. And usage is the driver, so our energy efficiency programs and other programs that we have are going to come to the forefront. So we're working closely with all our customers, with the regulators, and other folks to get the message out about the drivers and what can be done to help mitigate usage in the future.

Got it. Thanks for that elaboration. See you guys soon. Thank you.

All right. Thanks, Shaq. Next question is from James Thalicker from BMO Capital Markets. Good morning, Jeff.

Good morning, Jeff and Phil. How are you guys? All right. Great. How are you? Good. Real quick question on Columbia, and I don't want to put the cart before the horse or get too granular, but as we're thinking about the accretion, I know you've spoken about it being accretive in the next 12 months post the close. But as we think about, you know, kind of, say, maybe a mid-30s kind of net income that was being booked when NYSource was running it, and then there's some shared services, can you talk a little bit about how quickly you think those shared services will sort of roll off any sort of guidance you can give us on kind of what the magnitude of that was and, you know, and finally, I guess, just when do you think you could get at least approach that kind of allowed ROE that you guys have settled on in that 9-7 range?

All right. or oil that's being used for heating. So in terms of expanding the gas footprint, we believe that the gas delivery infrastructure is critical to own in the state going forward. So this transaction is very positive from a customer and a company standpoint. As you can imagine, we're in the midst now of our integration efforts with Columbia. You know, we did enter into, I'd say, a very constructive settlement agreement with the parties. I discussed, you know, that the approval is expected by the end of September. You know, we're still in the process of parsing out, you know, what functions we can take over on day one, what functions we're going to need to have a transition agreement, how that transition agreement will work over what time period. So as you say, I'm not putting the cart before the horse, but I think our expectation, and I'd be disappointed if we weren't able to earn our authorized returns within

Okay, great. Thank you. And just one last, I guess, question, just rounding that up. The amount of debt that you guys have to do to sort of complete the transaction is pretty de minimis, but I was just wondering if you guys had put any sort of interest rate swaps or sort of locked in the interest rate on that at this point?

We use a variety. You can hedge some rates. You could just try to debt profile in terms of identifying times to go. So I'd say that in general, we're not big on swaps, and we do a little bit more plain vanilla sort of, I'd say, long-term debt financing.

Got it. More part of your sort of omnibus debt financing you do for the corporation.

Yeah, exactly. It's just kind of similar to how we

Perfect. Thank you, guys. I really appreciate it. Have a great weekend. Thank you.

You too, Jim. Thanks. Our next question is from Sophie Karp from KeyBank. Good morning, Sophie.

Good morning, Jeff. Congrats on the quarter. Thank you for taking my question. Thanks, Sophie. Yeah, so I wanted to chat maybe a little bit about the offshore wind and the progress there and just – Are there any concerns with everything that's been going on in the supply chain with, you know, the availability of equipment? Or has anything changed, I guess, with respect to how the supply chain is developing in the U.S. and how much equipment is available from outside of the U.S. given all of the disruptions we are seeing from the pandemic?

Good question, Sophie. We certainly – You know, step one in this process is, you know, putting together a compelling bid to win an ROP that is both, you know, at an appropriate level to achieve our mid-team's return target. Sort of step two is, you know, getting through all the, you know, getting through the permitting application processes that we were saying, but, you know, a key element of the construction plan is certainly the supply chain that you point out. And I can assure you that from the joint venture standpoint, from, you know, our team working on the project, Orsted's team, that that is a priority to stay connected to suppliers to understand, you know, what the cues are, you know, how we can manage those cues to effectively a supplier or a supply date that somebody might not be able to make because of COVID-19, but I'd say overall I'm comfortable that we've had a high degree of high-level interest and oversight over the supply chain so that we're on top of the current situation.

Okay. Now that sounds fair. I guess overall the expectation would be that the, uh, development costs would decline as, uh, you know, as we have more of these projects, uh, under development and more coming online and turbines are getting larger. Is this trend sort of something that can be accelerated even more by COVID, you think, because of greater industrial capacity availability, maybe? Is that something that we talk about or is that fair?

Yeah, I think that, uh, COVID, COVID or no COVID, I think the supply chain costs are, you know, are coming down. And I think that the trend, you know, over the last several years has been, you know, costs, you know, on the down slope, turbines getting larger, you know. So I'd say that that's been a trend that's been there, you know, despite the pandemic and whether or not there's additional manufacturing or industrial capabilities to, you know, who are doing something else that now can be tool to move into offshore wind. I think that could only be even more helpful. So I think there's an underlying trend of bigger and less expensive.

Well, thank you. I'll jump back in the queue.

All right. Thank you, Sophie. Thanks, Sophie. Our next question is from Durgesh from Evercore. Good morning, Durgesh.

Good morning, Jeff. Thanks for taking my question, and good morning to you, Phil.

Good morning, Durgesh.

Good morning. Just can you perhaps comment on what kind of bill increases I'm thinking are percentage bill increases are you proposing in the ATR plan in Massachusetts?

I didn't catch the last in the what plan?

Uh, in the ATR rate plan in the Columbia gas of Massachusetts settlement that you filed. Just wondering if, uh, if you can share with us what impacts, uh, you know, are you proposing to customer bills?

Okay. So, um, about, there's no change until 2021 and 2022. So there's really, in the near term, for Columbia Gas transaction, we're not proposing to make any change, that those changes get implemented over the following year and the year after that. So really, the normal course of business in terms of Massachusetts gas activities is that aside from the base distribution rate, we have this accelerated pipe replacement we call GSEP, you know, gas system enhancement program. And that's where I mentioned that I would expect that Columbia will continue with about 45 miles of pipe replacement, you know, over the course of, you know, over the, you know, as annual pipe replacement. So really, there's no increase until November of 21 and November of 22, and I'd say those increases are modest at that point.

Understood. Thank you. Very helpful, Collar. And then just can you remind us of your current consolidated taxpaying status, and then if that changes with the Columbia Gas acquisition?

We are a taxpayer. We had... We've always talked about being a taxpayer in the neighborhood of $100 million in that standpoint, so we still continue to be that. We might be in 2020 more in the $150, $160 million range in terms of federal and state taxes combined. With Columbia, certainly if you have If there's net income there, that could change your tax position, but that's the position we're in. We've been a taxpayer, and in 2020, slightly elevated from where we had been before, so we might be in the $150,000, $160,000 range in terms of cash tax.

Perfect. And just one really quick one. Anything in particular on the – I appreciate water businesses decoupled and small portion of your earnings power, but anything in particular – in terms of COVID trends there, which are different from the electric gas? I mean, are you seeing the same dynamic, residential being higher, commercial industrial being lower, but anything in particular different on the water side than compared to electric gas real quick?

No, there really isn't on the COVID front any difference. You know, the same safety protocols in place, the same kind of people working from home, you know, issues of usage. The only thing we've seen, again, it's not COVID related, is just because of the hot, humid weather and lack of rain, you know, people have been using more water for irrigation purposes, but nothing on the COVID side that's different.

Thanks so much, guys. Appreciate all the time today. Thank you. Thanks, Jeff. All right.

Thank you, Durgash. Our next question is from Jeremy Tenet from J.P. Morgan. Good morning, Jeremy.

Hi, good morning. Good morning. Just wanted to start off with offshore wind again here. New York recently upped the RFPs and is now seeking 2,500 megawatts of capacity here. um, the, the deadline seems like it's coming up this fall for proposals. I imagine this could be of interest to Eversource. And just wondering if you could comment on the market dynamics on how you see that, uh, they've evolved, um, in these types of competitive bidding processes over time. Um, you know, it seems like they've been pretty aggressive bids and just wondering what your thoughts are on here and what's your strategy.

Um, thank you for the question. Uh, our strategy is one that, um, targets financial discipline and financial returns that are at the higher end of our return profile, so that would be in the mid-teens level. So we work actively with Orsted, and we develop joint proposals. I can assure you that we, in our proposals, we look to uncover every rock, so to speak, in terms of what's included in that proposal, both from a a financial and non-financial economic development standpoint. Most of these proposals have a financial element to them and an economic development element to them. We work effectively with our partners to do that. Certainly there have been other participants. There are some players who purchased leases in the recent lease auctioned by the federal government that are now in the game, I'd say, to prepare RFPs. Our approach has not been to chase those to win a bid, but to be disciplined and to focus what we do well and bid accordingly.

Got it. That's helpful. Thank you. In the first scheduled... a technical conference to explore whether existing policy can accommodate future offshore wind growth. And just wondering if you could refresh us on your thoughts on how you see your transmission asset position here, and do you think you can accommodate future growth? Just any thoughts on that in general would be helpful.

Sure. I think it goes in phases. And certainly, you know, in our region, so in New England, As you know, there's been many large power plant retirements, whether they be nuclear or coal or oil plants that have retired over the last several years. And those retirements happen to be in locations that are very conducive for offshore wind to make landfall to connect into. So there's good... you know, onshore interconnection capabilities as a result of those, I'd say, robust switch yards, things like that. We've invested a considerable amount of money in our transmission system, you know, over the last decade to upgrade and make it more resilient. So I'd say, you know, in the near term, you know, for what's on the drawing board, I think that, you know, The interconnection points, the transmission system in this region is capable of handling the RFPs that are out there. X years down the road, if there's more and more and more desire for offshore wind and more interconnection points needed, you may run into constraints where the interconnection locations that have capacity now may get used up. So I guess from a timing standpoint, in the near term, I'd say, you know, the transmission investments are more localized depending on, you know, the landing place and what that substation might look like. So in a big picture standpoint, you know, we're in good shape, but as time goes on, the capacity could be used up and require additional transmission investment.

Got it. So fair to say in the near term, don't see any sizable transmission project needs, maybe at some point over time, but nothing sizable transmission in the near term?

Well, as I said, there could be a specific substation when you say sizable. There's not billions of dollars, but you could have substation upgrades, 50s, millions, hundreds of millions of dollars, or something like that. where the landing interconnection point is. So I'd say it's kind of location-specific and not a broad investment.

Got it. That's helpful. Thank you for taking my question.

All right. Thank you, Jeremy. Our next question this morning is from Mike Weinstein from Credit Suisse. Good morning, Mike.

Hi. Good morning, guys. Good morning, Mike. Great quarter. Hey, I just wanted to ask about the – As you think about the new gas business from Columbia, is that additive to the 6% to 8% growth rate over time, or is that in line with that growth rate, considering the accretion that's going to happen off the bat and bringing up the ROE?

Yes. Well, Mike, as you know, our growth rate is 5% to 7%. I'm sorry, 5% to 7%. I'm glad you think you can do – that's why we're such a high-performing company there. 5% to 7% growth rate. Going to get more sleep. Yeah, thank you. But as I may have said earlier, that certainly, you know, as that property gets to be, I'd say, hitting on all cylinders once we can get you know, all the integration efforts done. We're no longer using transition service agreements. You know, we're able to move all the functions over to an Eversource system, et cetera, that, you know, we feel very good about being able to get to the allowed returns that are in the settlement. And as you know, the settlement hasn't been approved yet. So, but, you know, my... If you look at our history of being able to operate effectively, our operations team does a fantastic job in terms of keeping our system up and running, whether it be, as we say, a blue sky day or whether it be trouble on the system, keeping the gas flowing, investing appropriately so that we can reduce O&M debt. you know, that right now the contribution from Columbia is not in our guidance number. So, you know, that is going to be helpful. It's going to add to whatever number we had having Columbia in there because it's a creative transaction.

Do you think it will be, you know, additive to that growth rate, though, going forward as you roll, you know, especially as you roll forward your TAPEX plans and your growth rate when you do that next year?

Yeah, I think it's more probable to be additive, right, to either move it up in the range or help it go above that. But we're not making any determination of that at this time. to the story.

Great. And on Connecticut grid mod, how has the financing for that program been? Is that reflected in your current plans? Especially since some of that goes out beyond the current five-year plan. Has all that been already reflected in the plan or is that going to require some more financing if the plan is approved?

So just to be clear on the grid mod across the three states, the only grid modernization investment that is in our current plan is in Massachusetts, where we have approval to spend $233 million on a variety of programs, including battery storage, EV infrastructure, technology enhancements, et cetera. So there's nothing in our plan right now for New Hampshire or Connecticut. We don't have anything in the plan right now for grid modernization of the Massachusetts. If, in fact, we go through the processes in the various states and programs develop and spending gets identified, then we'll have to, you know, determine what that does to the investment plan, whether, you know, how we're going to finance that, et cetera. But right now there's nothing in the plan, so there's no financing associated with it.

Okay. Well, great. Thank you very much.

Thanks, Mike. Next question is from Paul Patterson from Glenrock. Good morning, Paul. Hey, good morning, guys.

Good morning, Paul. So back to the Connecticut grid mod, I apologize if I missed this. How should we think about that impacting rates? I know you've got some capex there, but also maybe there might be some savings with AMI. Can we get a little bit of a sense about how that works?

Yeah, I think that it depends on what the size of the programs are that the pure would approve going forward. So it's really difficult to answer specifically what that is. I mean, some of the spending we're going to have to do, as I mentioned, we're going to have to replace our meters anyway. So if we work on an AMI program, that we'll be buying AMI meters instead of other meters. So how much of that is incremental? What level of battery storage or EV infrastructure does the state want? So right now, it would just be hypothetical. it right now okay um again you know overall i say overall if you look at the massachusetts uh example um it's modest in the in the sense of the spending um you know it's 233 million dollars over over a multi-year period so it's you know less than 100 million dollars a year type of thing so impact.

Okay. Deceptive Millstone, did I hear you correctly, that's $5 a month effectively of the bill increase that's causing such a stir in Connecticut right now?

Well, what I said was in Connecticut, you can imagine that we're all working from home. I'm working from home. I'm sure you're working from home and Yeah, so people are not used to having their air conditioner on all day. I know that, you know, before I left in the morning, I'd adjust my temperature on my thermostat or have your nest adjusted, you know, because you're not there. And now people are there 24-7, and it's been really hot. And I said that weather is really the – has caused the increase in usage. I mean, in the bill, I mean, 36% more usage from our, you know, having our residential customer segment than the previous month. So, you know, you were using 36% more than you were using in May and June. And if you want to go back to last year, June to June, you're using 26% more. So either way, you're using a lot more. And really, the rate, you know, it's So what I said was millstone, we have requirements to buy power out of millstone. There's a charge on the bill for that purchase. And what I said in terms of the $5 was if that wasn't there, if we weren't buying that power, transmission, you know, under collection that, you know, you move into the next period to collect. So all those things combined, you know, are impacting a customer's bill. And, you know, we're trying to work with the customers and regulators, whatever, on this. I know you are.

I know you guys take it very seriously. I guess all I'm sort of wondering, though, is that this is a little unusual in that, We've had legislative leadership, we've got this letter, we've got the PURRA almost immediately responding. You know, we're seeing, you know, we look, as you know, we're looking around the country and what have you, and when we see this, it is rather, one of the things that's come up in the media is this focus on Millstone, but then also, as you know, we've got offshore wind, we've got other calls coming in, and I'm just wondering, you know, I'll just lay it out here, how do you guys see I know you guys are trying to manage it. I know you guys are doing energy efficiency and what have you, but how should we think about when we see something like this? Is it just sort of a blip? In other words, all the things that you're talking about is a perfect storm here thing, or should we think about perhaps other efforts or issues to manage the situation over time, if you follow what I'm saying?

I do. I follow what you're saying. We take bill impact very seriously. Any decision we make for an investment opportunity, we fully assess the bill impact. So at the end of the day, you know, customers are paying for these investments and, you know, we have a responsibility and we take it very seriously to make sure that the impacts there are not is worth it. And if you really, if you look at our history, you know, I'd put our track record up against anybody in terms of ability to take costs out of the system. You know, post-merger, we took, you know, 5% O&M out of the business every year, you know, over $250 million. When we've been in for recent rate reviews, you know, the headline story has been our O&M costs today as part of the rate filing are less So we take it seriously to keep our costs down, and if we're putting capital in, that O&M comes out. But it is something that we look at impacts on a custom bill. But I do think, to your kind of analogy, it is a bit of a perfect storm in the sense of everybody's home, the weather has been extraordinarily hot And I think the usage is really what the driver is. And I think as people see what the real components of the change were that, you know, the governor, the legislature, the regulators, the customers will have a better appreciation that it's more related to usage than anything. Eighty to 90% of it is usage related.

Okay, great. Thanks so much, guys.

Hang in there.

All right, thanks.

All right. Thanks, Paul. Next question is from Ryan Levine from Citi. Good morning, Ryan.

Good morning. Do you see any green hydrogen or other hydrogen-based opportunities to leverage your platform? And have you started to pursue any of these potential opportunities?

Thanks for the question. And certainly hydrogen has been sort of in the news or it's a topic. And And I'd say we're in the phase now where, you know, evaluating, you know, the possible usage of hydrogen. We're tracking its progress globally, and we'll keep an eye on it, but we have not, I'd say, identified any specific applications at this stage.

Okay. Thank you. And maybe just one follow-up. On that point, are you looking at anything to integrate some of your wind development opportunities with hydrogen, or is it more for the LDC and transportation fields?

Well, as I said, we're tracking all possible applications there, but there hasn't been any specific identified on the offshore wind side at this stage.

Okay. Thank you. Thanks, Ryan. Our next question is from Julian from Bank of America. Good morning, Julian.

Okay, good morning, team. Thanks for the time, guys. I'll try to make it quick. So just to wrap up the start of the call here, on the timing for updates with CMA and otherwise, would the expectation be rolled in CMA accretion into the 4Q roll forward? And then if you think about some of these other CapEx items, those probably make it into the next iteration in 22. I'm just thinking about the Connecticut and Mass both on the AMI and the EV storage process. When do you expect to make these updates and roll forward and integrate it all at once, if you will? Perhaps going back to the core of Char's question, if you will.

Yes. Thanks for your question, Julian, and I hope you're doing well. The timing lines up just as real finalization of programs, et cetera, out of it in the Connecticut grid modernization, you know, we'll be, you know, getting approval for Columbia at the end of September. So it all sort of neatly times up times together so that we can roll it into the update that we do in the, in the fourth quarter. So that, that would be my thinking at this stage. It's something where to happen to change that. But, but I think the, The base thinking is that they would all be rolled into the next update.

Excellent. All right. Thank you. And then quickly on the offshore, I don't want to beat it up too much, but can you just define the parameters of what's the opportunity for you all just in terms of timing, the size of the project when you think about your own lease size availability and how that lines up against the resource RFP that they're looking for? I just want to kind of frame the timing, the synergies, and the total size as you see it today. Again, I'm not going to hold you to it. Just broadly the parameters.

Well, you know, a couple of the general parameters are our two lease areas can develop, say, $4,000. half of the lease areas are under contract right now. So in terms of what's available to us, you know, we have a kind of a 4,000 megawatt opportunity. We've identified up and down the New England states, you know, and then if you include New York into that, situated in terms of their proximity to shore. You know, our leases are well situated in terms of ocean depth. You know, our leases are well situated in terms of wind speed. So we think that and plus we're into those leases at a small amount of money compared to the 130 plus million that the recent lease owners So from a cost standpoint, from a lease location and size, I think the opportunity is still very strong for us in the future, and the RFPs that are out there are only going to get more as we go forward.

Timing settlements on New Hampshire, lastly?

So we have a rate proceeding in New Hampshire. It was delayed a bit, I'd say, from the COVID situation. But we're looking to finalize that later in this year, probably in November, with rates effective in December. But as you recall, in New Hampshire, it's kind of a two-phase process. So we received temporary rates in July of 2019. So whenever we get the final rate decision, they kind of go retroactive back to that point. But to answer your question directly, the final decision is we're looking at the November timeframe with rates effective December 1st.

Excellent. Thank you all very much. Take care. Thank you, Julian.

Thanks, Julian. Next question is from David Arcaro from Morgan Stanley. David?

Hey, thanks so much for taking my question. I was wondering if you could run through the equity needs in the forecast right now and was also curious if you would anticipate that CapEx associated with growing the Columbia Gas business over time and the kind of yet to be approved Connecticut grid mod CapEx would also potentially need any additional equity on top of the base plans.

in our plan right now is about $700 million of equity need to support our plan that we've laid out that goes through 2024. So in that plan, Columbia was not in that plan, so we did a separate financing for Columbia. But going forward, we'll have to incorporate Columbia into our plan going forward. And then, as I mentioned earlier, We do not currently have any spending for Connecticut or New Hampshire grid modernization in the plan. So, the 700 supports the current, you know, $14 billion CapEx plan that we have. As we, you know, look to update that going forward, we're going to have to, you know, consider, you know, cash flow, cash flow operations, what we, you know, have maturing, what we might need to do. So, I'd say that that disseminated when we update our plan at the Q4 call.

Okay. Got it. That makes sense. Thanks so much.

Thank you. Thank you, David. It looks like we have one more questioner in the queue. Travis Miller from Morningstar. Good morning, Travis.

Good morning. Thanks for squeezing me in here. I'll be real quick. Just two quick ones on Columbia. One, what is the pipe replacement system? CapEx as a share of the total CapEx. That's the first one. Then the second one, if you're able to close by the end of October, would there be any material earnings impact this year from Columbia?

So I'll answer the second question first. No, nothing material. We expect to close soon after getting approval from the DPU. There could be a few months of operations in the numbers, but I'd say nothing material is expected for that timeframe. In terms of the exact percentage of GSEP to total, I'm going to have to get you the information on that. I don't have that off the top of my head, Travis, but we can get back to you on that.

Okay, no problem. And then two quick ones on offshore wind. One, with the New York RFPs, is there any chance that you guys could be more competitive, either lower costs or better synergies with Sunrise Winds relative to other bidders who might have no stake there right now in New York? And then that was the first one. And then second, New Jersey's thrown out a whole bunch of big numbers on offshore. Would you be interested in doing anything in New Jersey?

So in terms of the second part of your question, our lease areas really are best suited for New England to reach any RFPs that go on in New England or into New York. So New Jersey would be a bit far for our lease area to be a truly effective lease area. position yeah I mean I'd like to think we'd be competitive anywhere whether we have a contract or even if we don't I mean that and certainly there are advantages of having contracts is there's advantages of you know having you know plans already in place and an understanding of the area but I think that our I am thrilled that our partner is the worldwide leader and in offshore wind development with Orsted. You know, we're the, I'd like to think the very, you know, leadership role in terms of our transmission and our local knowledge and ability. So I like our chances whether we, you know, already have existing contracts or don't have existing contracts to win RFPs that come out. But certainly, you know, there are advantages if you do have contracts in place, I'd say.

Okay, great. I appreciate it.

All right. Thank you, Travis. And that wraps up all the questions for today. So we want to thank you very much for joining us. And please follow through with any emails or questions by phone if you have any. Have a great day and a great weekend. Thank you.

And thank you. Thank you, ladies and gentlemen. This concludes our conference. Thank you for your participation. You may now disconnect.