Eversource Energy (D/B/A)

Good morning and welcome to the Eversource Energy first quarter 2021 results conference call. My name is Brandon and I'll 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 which you may dial star 1 if you have a question. Please note this conference is being recorded and I will now turn it over to Jeffrey Kotkin. You may begin, sir.

Thank you, Brandon. Good morning and thank you for joining us. I'm Jeff Kotkin, Eversource Energy's Vice President for Investor Relations. During this call, we'll be referencing slides that we posted this morning 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 this morning. 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 31, 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 this morning and in our most recent 10-K. Speaking today will be Joe Nolan, our new President and Chief Executive Officer, and Phil Lembo, our Executive Vice President and CFO. Also joining us today are John Marrera, our treasurer and senior VP for finance and regulatory, and Jay Booth, our VP and controller. Now I will turn to slide two and turn over the call to Joe.

Thank you, Jeff. We hope that all on the phone remain healthy and that your families are safe and well. Over the past couple of years, I've spoken to many of the investors who were on this call when I've joined Jim, Phil, and Jeff. at various industry conferences, including the last couple of EEI finance conferences. I'm looking forward to meeting many more of you over the coming years and sharing my optimism and enthusiasm for Eversource's future and excellent investment thesis. I'm grateful to the Eversource Board of Trustees and to Jim for allowing me to lead an incredibly dedicated and high-performing organization. I'm also thankful that Jim will remain a full-time employee of Eversource as Executive Chairman. In approving these executive-level changes, the Eversource Board is signaling its confidence in our long-term strategy that focuses on our core regulated business with an exciting investment in offshore wind. We are in a world where customer service, safety, and reliability have never been more important. We will never forget that we would not be in the business without our 4.3 million customers. They are our top priority. Customers pay the bills, and they deserve the reliable and safe utility service that we must provide. Over the coming decades, the tens of billions of dollars we will invest in our energy and water delivery systems will be critical in helping New England prepare for a clean energy future. And we expect to be a central catalyst for that clean energy transition. This morning, I want to cover a couple of topics associated with Eversource's energy initiatives and then turn over the call to Phil. But first, I need to address our company's relationship with Connecticut. We have thousands of employees in Connecticut who work hard each day to provide our 1.7 million natural gas, water, and electric customers with the most reliable and responsive service possible. During emergency situations, which we have had far too often over the past year due to the historic storm levels, they are working up to 16 hours a day for as many days as it takes to ensure that our customers have their service restored promptly and safely, even in a pandemic. So I cannot tell you how painful it was for me to read certain elements of the tropical storm Isaias decision that was released on April 28th. It did not reflect the hard work of our dedicated employees in the company I've been chosen to lead. Our customers, Pura, and our company all want the same thing. Great service each and every day of the year. And when there's a storm event, power restoration as safely and quickly as possible. The women and men of Eversource work hard each and every day to meet these expectations. The Pura order on storm response clearly identified areas for improvement. We know we have to work to do not only our response plan, but also on our relationship with Pura. This was apparent from the April 28 decision and a subsequent notice of violation. I can assure you that we hear this loud and clear and already doing all we can to improve on both counts. Turning to our clean energy initiatives, you are probably aware of the climate legislation that Massachusetts Governor Baker signed into law earlier this spring. Among many elements, the law will allow each of the state's utilities to build up to 280 megawatts of solar generation. Enstar Electric will be able to increase its level of solar generation in rate base from 70 megawatts to 350 megawatts. As Phil mentioned during our year-end earnings call, we have budgeted approximately $500 million for this initiative from 2022 to 2025. The other item with direct impact on us is the 2400 megawatt expansion of Massachusetts offshore wind authorization from 3200 megawatts to 5600 megawatts. This expansion will help keep the state at the forefront of offshore wind development in the United States. As you can see on slide two, there are now more than 10,000 megawatts of unawarded offshore wind authorizations in southern New England and New York, with Massachusetts set to award up to 1,600 megawatts later this year. In fact, Massachusetts RFP was just issued on Friday of last week. Our offshore wind partnership with Orsted is very near and dear to my heart, since I have always seen that relationship and worked closely with our partner in recent years. It is an important element of our clean energy growth strategy, and we have had a number of positive offshore wind developments already this year. Starting with slide three in early January, the Bureau of Ocean Management, or BOEM, released its draft environmental impact statement on south walk project comments received by late february and we expect to see a final eis late this summer home is scheduled to rule on our final federal permits for that project in january of 2022 assuming that the january date is met we expect to begin construction early next year and complete the project in late 2023 Additionally, in late March, the New York Public Service Commission approved the necessary New York State siting permit for the project, while the local town and trustees of East Hampton approved the local real estate rights required for the project. Turning to Revolution Wind. Late last month, BOEM released a schedule for reviewing the 704 megawatt project. The schedule calls for a final environmental impact statement to be issued in March of 2023 and for a final decision on construction and operating plan by the end of July 2023. The release of that schedule represents a significant step forward for this project. Revolution Wind and South Park are two of only three projects in the Northeast that have achieved that milestone. Over the coming months, we in Orsted will be reviewing the BOEM and the State of Rhode Island permitting process to develop a projection for the Revolution Wind construction schedule. Finally, we expect to receive BOEM review schedule for our 924 megawatt Sunrise Wind project later this year. We continue to make significant progress in preparing for the commencement of construction. Over the past couple of months, we have announced agreements with two critical ports that will serve as staging grounds for construction. New London, Connecticut will serve as a hub for turbine construction, and Providence, Rhode Island will be the center for foundation construction. Enormous economic benefits will accrue to these communities as a result of their role in our construction activities, including hundreds of direct jobs. We are also very encouraged by the extremely positive signs we see from Washington. President Biden has underscored his support for offshore wind construction along the Atlantic seaboard and has marshaled multiple members of his cabinet to support it. Their goal was to have about 30,000 megawatts of offshore wind turbines operating in the U.S. by 2030. We expect to be a significant contributor to that output through our partnership with Orsted. Already, more than 1,750 megawatts are under contract to serve load in Connecticut, New York, and Rhode Island. Again, I look forward to speaking with many of you at the AGA virtual conference later this month. Now, I will turn over the call to Phil.

Thanks, Joe. This morning, I'll cover a couple of topics. I'll review the results of our first quarter 2021. and discuss and add to some of the regulatory developments in Connecticut and at FERC. So I'll start with slide number four and noting that earnings were $1.06 per share in the first quarter, compared with earnings of $1.01 per share in the first quarter of 2020. Results for both years included after-tax costs associated with our recent acquisition of the assets of Columbia Gas, Columbia Gas of Massachusetts, And that's $0.02 per share this year and $0.01 per share in 2020. Results for our electric distribution and natural gas distribution segment showed the most significant changes year to year. Electric distribution earned $0.27 per share in the first quarter of this year, compared with earnings of $0.39 per share in the first quarter of 2020. Lower results were driven by a couple of principal factors. The first is that we recorded a charge of $30 million, or 7 cents per share, primarily to reflect customer credits of $28.4 million and an additional penalty of $1.6 million to be paid to the state of Connecticut. These credits relate to a notice of violation that Connecticut regulators announced last week. as a result of our performance in restoring power following the catastrophic impact of Tropical Storm Isaias last August. The docket established by Pura to review the penalty is scheduled to run through mid-July of this year. Additionally, electric distribution results were negatively affected by approximately $20 million of higher storm-related expenses in the first quarter of 2021, And that's compared to a pretty quiet and warm first quarter in 2020. In fact, in this quarter, we experienced 31 separate storm events across our three states versus fairly limited activity in Q1 of 2020. So by contrast, our natural gas distribution segment showed a sharp increase in earnings because it's now about 50% larger than it was a year ago. It earned $0.43 per share in the first quarter of 2021, compared with earnings of $0.26 per share in the first quarter of 2020. Improved results were due primarily to the addition of Eversource Gas of Massachusetts, which earned $0.14 per share in the quarter. In addition, we had higher revenues at Enstar Gas and Yankee Gas, and these were partially offset by higher O&M and depreciation expense. I should note that the transition process for Eversource Gas of Massachusetts continues to progress extremely well as we continue to migrate off of NiceSource business systems and onto Eversource platforms, reducing costs and improving service. To date, more than 80% of the business processes have been transferred to Eversource from NiceSource. Great progress has been made. Evisource ownership of the distribution system is being well received by customers, communities, and employees, and we continue to meet or exceed the financial and operational targets we've set for ourselves. On the electric transmission segment, we earned 39 cents per share in the first quarter of 2021, compared with 38 cents per share in the first quarter of 2020. Improved results were driven by a higher level of investment in transmission facilities, and this was partially offset by dilution of additional shares issued. Our water distribution segment earned $3.6 million in the first quarter of 2021, compared with earnings of $2.1 million in the first quarter of last year. Improved results were due largely to lower interest expense and a lower effective tax rate. As you may have noticed, last month Aquarian announced an agreement to purchase a small investor-owned water system that is based in Connecticut, but also serves portions of Massachusetts and New Hampshire. New England Service Company, as it's called, serves about 10,000 customers in the three states and has a rate base of about $25 million. This acquisition is consistent with the growth strategy we've discussed for our water delivery business. And assuming timely regulatory approvals, we expect to close the transaction by the end of this year and for it to be accretive right away in 2022. Rounding out the reconciliation, Eversource parent lost $0.02 per share in the first quarter of 2021, and that's excluding the Eversource gas of Massachusetts transition costs, the same as during the first quarter of last year, so $0.02 each year. As you probably noted in our news release, and you can see on slide five, we are reaffirming our long-term earnings per share growth rate in the upper half of the 5% to 7% range. However, we modified our current year, 2021 earnings guidance, to reflect the customer credits I mentioned earlier. We now project EPS towards the lower end of the 381 to 393 range, and this includes the 7 cents per share impact of the credits. On the regulatory side, while our primary operating companies don't have any base rate reviews pending, we have several regulatory dockets open in Connecticut, and I'll summarize the status of a few of them. In addition to the penalty I described previously, PURE also identified a 90 basis point reduction in our authorized distribution ROE. This is likely to be addressed in the current CLNP interim rate decrease proceeding. Given the revised schedule that PURE released last week, we believe any ROE reduction would not take place or take effect until October 1st of this year. To help besides that impact, currently CLNP's authorized ROE is 9.25%. And we have approximately $5 billion of rate base at CLMP. Also on April 28th, Pura finalized an interim decision on the recovery of certain tracked costs by CLMP. This decision would result in a number of changes to those tracked costs that would be implemented on June 1st, with other modifications deferred until October 1st. The interim decision implemented a number of positive modifications to an earlier draft, and we appreciate PURA making those decisions, making those changes in its decision. PURA also continues to review several other dockets, including potential for grid modernization initiatives, including AMI, electric vehicle programs, and storage. And the status of the major open PURA dockets is listed in an appendix to our slides. Turning from Connecticut to Washington, we were disappointed last month in the developments around the ongoing notice of proposed rate making concerning incentives that FERC has granted for many years to utilities that participate in regional transmission organizations or RTOs. FERC will be taking comments and replies on the proposed changes over the next several weeks before deciding on a final order. I would expect that the New England transmission owners and others will file comments opposing the change, which some see as being inconsistent with the Energy Policy Act of 2005 and with President Biden's focus on building out the nation's electrical infrastructure to bring more clean energy resources to market. As a helpful rule of thumb, A 10 basis point reduction in our transmission ROE affects consolidated earnings by about a penny per share. In terms of financings, we completed $450 million of debt issuances so far this year, primarily to pay off maturities at Eversource Parent and at the Aquarium Company in Connecticut. We've not issued any additional equity this year, other than through our ongoing dividend reinvestment and employee incentive programs. However, as you know, and we've stated in the past, we continue to expect to issue approximately $700 million of new equity through some sort of active market program, and that would occur at various points in time over our forecast period. In terms of our operations, we've gotten to a very strong start this year. Electric reliability continues to be in the top quartile of the industry versus our peers. Through March, our above average safety record improved even further with fewer employee injuries than we experienced in the first quarter of 2020. All three of our natural gas utilities are outperforming on their emergency response requirements. And Aquarium's water quality is solidly exceeding its target. So thank you for joining us this morning. I'll turn the call back to Jeff for Q&A. Thank you, Phil. And I'm going to turn the call over to Brandon just to remind you how to enter questions.

Thank you. And we'll now begin the question and answer session. If you have a question, please press star 1 on your phone keypad. If you'd like to be removed from the queue, please press the pound sign or the hash key. If you're on a speakerphone, please pick up your handset first before dialing. Once again, if you have a question, please press star 1 on your phone keypad.

Thank you, Brandon. Our first question this morning is from Angie Starosinski from Seaport Global. Good morning, Angie.

Good morning, guys. Thank you. So my first question, you maintain the growth projections beyond 21, off of 2020. So what is the offset to the lower earnings in Connecticut related to the 90-bit ROE reduction?

Thanks, Angie. Thanks for your call. And as you can imagine in any forecast, It incorporates our best results on a lot of key assumptions, you know, so rates and ROEs, interest rates, CapEx forecasts, what we're looking forward on in terms of O&M, et cetera. So incorporating each of those elements into the forecast, we're comfortable in that upper half of the 5 to 7 percent range going forward.

Okay. And then the incremental capex that you guys had proposed, AMIs, et cetera, in Connecticut, in light of this reduced ROE, should we expect that you will potentially shift some of the regulated spending on the regulated electric side away from Connecticut?

i mean if you could comment on your projections for capex in connecticut sure our um our goal is to provide safe and reliable uh service and outstanding customer service to all our customers whether they be electric for gas or water whether they be in connecticut massachusetts or new hampshire so you know our investment profile is geared to um ensuring that that those high standards can be met you know we've We're very proud of the results we've been able to put up year after year in terms of where our reliability ranks. And then usually it's in the top decile versus our peers. So we're continuing to focus on our vegetation management and making investments there to ensure that we have a reliable system. So that's the primary focus of how we determine the investments as to how it impacts in a positive way our customer service.

Great. And just a question about the electric transmission ROE. So I understand the RTO adder is still up for debate. Now, how about the reset of the base ROE for New England, you know, in light of the proposed removal of the RTO adder? Do you expect now that the base ROE will also fall?

Well, Angie, that's a question that I've been asked for, I'd say, many years and many quarters now. And as you know, we have four open cases at the FERC that really go back a decade. Our oldest one, you know, in terms of open dockets there. you know, it's hard to predict the timing or the outcome of what those cases will show. So I'm not, you know, I'm not sure how exactly the FERC will look at the interplay between the incentive docket versus the base case docket. But certainly, I think the thing that folks should keep in mind is something I said in my comments, which, you know, is very publicly you know, policy desires by the Biden administration to electrification and to bring, connect clean energy resources. And there's no, there's no region of the US that's connecting more clean energy resources than New England. And obviously we serve, you know, the primary load centers in New England and can help deliver that clean energy, both from a offshore wind perspective, but also from a transmission perspective. So We'll have to wait and see, you know, the timing and how those play out. But, you know, I wish I had a crystal ball that could predict an answer at this stage, but I don't.

Understood. Thank you.

Thank you, Angie. Next question this morning is from Steve Leishman from Wolf. Good morning, Steve.

Hey, good morning. Thanks.

So just to clarify for 2021 guidance, Phil, are you incorporating the 90-bps reduction starting October 1st then in that guidance, the low end?

Yeah, that proceeding, you know, is underway now. And certainly we would incorporate that outcome into the guidance. So there's only – You know, if it was a quarter, if you say it's October, that might be a one cent impact for the year, Steve.

Yeah.

Okay.

Good.

And then Joe or Phil, you made, Joe, you made the comment about kind of areas to improve on your response plan and improving the relationship with TIRA and Could you just give a little more color on kind of how you're going to do that or just strategies there and just, you know, you had off on grid, obviously, settle a lot of issues with pretty much all parties in Europe.

How did you go about that?

Yeah, sure. Thanks, Steve. You know, I've spent a lot of time down in Connecticut. I spent several days there last week. We're engaged with all of the communities that we serve. We're really focusing in on their priorities, peerage priorities. We obviously took that audit to heart. It's a complex 150-page audit. There's areas that we know that that we could use some improvement on, and that's what we're focused on. But I also did remind folks that the storm that did question Isaias, we've never assembled that many crews, you know, 2,550 crews during a pandemic. It required double of everything, 6,000 hotel rooms, 14,000 meals a day, double the number of trucks. So it was quite a unique situation. And I think that we can always improve, and we will continue to work at that. And we want to win the hearts and minds of our customers back in Connecticut. And obviously, we're sorry if we let them down during that storm. Okay. Great.

Thank you.

All right. Next question is from Julian Dumoulin-Smith from Bank of America. Good morning, Julian.

Hey, good morning, Jeff and Tim. Thank you guys very much. Maybe if I can throw the first question your way. Pivoting off of Steve's framework, how do you think about performance-based rates here as an avenue to demonstrate change? And what's the timeline for implementation there? Do you see that as part of the next Connecticut case here? Just curious as to how you end this 90 basis point impact, if you will.

Thanks, Julian. It's Phil. In terms of just the mechanics, the performance-based rate docket is to be opened by June of this year. So right now, there's no docket number, but the expectation is that that would be opened by June of 2021. So, you know, we... We thrive on performance measures. I think one of the keys to our success over many years is we have a very aggressive performance management system. We measure and monitor all of our key performance metrics, whether they be reliability, how frequently a customer has an outage, how long the outage takes to restore. What's the safety performance of our employees? What's the diversity of our workforce? So we measure many, many different metrics, and we perform well on them, whether you look at comparison to kind of historical performance or where we fall relative to peer groups. So performance is part of our DNA, and I think we've delivered that. We have elements of performance-based rates in other jurisdictions. You know, in Massachusetts, for many years, they've had these SQI or service quality index measures where, you know, we've had to perform against, and we've been very, very successful there. So, you know, we, but, you know, as you know, the design of those measures is important, and we would hope to work in a collaborative and constructive way with PURE and other interveners during that process. But the idea of performance-based measures is something that we live with every day. And the docket for that is starting middle of this year.

Got it. And maybe to dovetail with that, just precisely, what is the expectation on when this 90 basis point impact would roll off, if you will? I presume in tandem with the rate review or PBR or what have you. But back to you on that.

Yeah, back to me. The decision itself said indefinite. So that's the only direction at this point, Julian, is that wording in the order said that the 90 basis points would be indefinite.

Okay. All right. Excellent. Well, I'll leave it there. Thank you all very much.

Thank you. Thank you, Julian. Our next question this morning is from Durgesh Chopra from Evercore. Good morning, Durgesh.

Hey, good morning, Jeff. I just had two kind of Connecticut-related questions, really quick, really clarifications more than questions. Just, Phil, there's a mixed bag in terms of the pass-through charges, some sort of going through or will be affected June 1st and October, and then the others October 1st. Just high level, the impact or the cash impact of that delay is pretty minuscule. Am I thinking about that right?

Yeah, I wouldn't say it's minuscule. I mean, it's probably, you know, $150 million that would be spread out into the future. So it's not insignificant, but it's not a, you know, larger than that.

got $150 million. And then just quickly, roughly, I think the number is close to $270 million in deferred costs, the storm access costs. When do we get a final ruling on that, the recovery of that?

So there's many states that have some costs that are deferred. With that, the largest is in Connecticut. It's about $230 million of deferred storm costs related to East IES. There were storm costs in Massachusetts and New Hampshire also, but at a smaller level. So each state has their own protocol for timing of when you go in and file for that. So we haven't developed that filing. We certainly have provided some information. on our cost during the previous docket you know pura had asked that we um uh get the best estimate of what we had uh seen to date but you know unfortunately we have some invoices that come in over time. And, you know, we have to gather them all, make sure they're all accurate. We don't pay anything unless we've viewed it three times and four, I guess it's four ways from Sunday is the expression. But so we don't pay for things that are inappropriate and we kick those back. So after we go through that process, then we do a filing. So, you know, that filing could come in a future proceeding. It could come in a base rate proceeding. It just depends on the various states. But, I would expect that those filings would be done over the next year or two, you know, in the various states.

Got it. Perfect. Thank you, Phil.

You're welcome. Thank you, Durgash. Next question is from Insu Kim from Goldman Sachs. Good morning, Insu. Hey, good morning, Jeff.

My first question is going back to Connecticut. In the interim rate docket, there's been some testimony filed about the allowed ROE, but also the equity layer and other parties suggesting that the equity layer should be decreased meaningfully from the current 53%. Just curious on your thoughts there and whether there's a way for you to potentially adjust the balance sheet to address this.

Sure, and two, thanks for your question. Certainly in, you know, ROE, capital structure, you know, all the revenue requirement elements are part of any sort of kind of analysis that you would do. So those capital structure is one part of it. And certainly PURE has broad authority in a rate-setting process. So, you know, that's the framework that we work within. You know, the... It hasn't been the practice in the past in Connecticut. It's been the practice to maintain the capital structure for each of the subsidiaries in a way that's appropriate for that subsidiary to finance its capital needs. You know, we do that in a very disciplined manner. Obviously, we have rating agency considerations, and any change in sort of capital structure could have, you know, a positive or negative effect on ratings, just as, you know, regulatory rulings could have a positive or negative impact on ratings. So we'll work collaboratively, constructively with Pura over, you know, whatever docket, you know, these issues come up in. But at this stage, you know, the precedent has been that the operating companies would have their unique capital structures that reflect their unique characteristics. Don't forget, too, that at a parent company, that there's things that have, you know, nothing to do with kind of the customer rate issues. You know, there could be investments like non-regulated investments. That's where our offshore wind is financed. You know, during construction, we financed that with debt. You know, if you recall sort of painfully, I know I recall that we had a write-off of our Northern Pass transmission project. That doesn't impact customers. That goes right to the parents. So there's things that... you know that the parent takes that you know you know so that protects the the capital structure of the operating companies but that'd be something that uh would get uh reviewed in any kind of rate setting process right okay thanks for that color my other question is on offshore wind and you know with also recently discussing some of the the structural improvements they need to make in front of the projects they have online.

Are there any read-throughs or implications on a cost or construction planning process for the planned projects in the U.S.?

Yeah, no, we're good on that. I think that, you know, In a broader case, if you look at, you know, we've been closely monitoring, you know, supply chain issues, and you've got a pandemic, and, you know, our teams, you know, both at our utility as well as on the project, you know, this is like priority number one in terms of the supply chain. And, you know, this is where I think size really matters. You know, having the buying power of a Norsted or having the buying power of another source and then having the combined buying power really helps us to have relationships and schedules and, you know, multi-year, you know, supply chain agreements that put us in good shape. So we haven't seen any

any uh significant impact at this stage got it uh thanks phil and congrats uh joe thank you thank you and so uh next question is from sophie carp from key bank good morning sophie hi good morning thank you for taking my question um i wanted to switch gears to uh new england guests and the results there and i'm just curious if the first quarter results were influenced by Any particular developments that are not typical of the usual sustainability experience in the future? It seems like it's a very strong result. So I was wondering if there was any one-offs or weather impacts there that we should consider going forward. Thank you.

Thank you for your question, Sophie. And so the subsidiary, you know, when we purchased Columbia Gas of Massachusetts from NYSORS, We rebranded, renamed that Eversource Gas of Massachusetts. So that Eversource Gas of Massachusetts is kind of the former Columbia Gas subsidiary. You know, NSTAR Gas remains in Massachusetts, and Yankee Gas remains in Connecticut. So I'll answer the question for Eversource Gas of Massachusetts. There's nothing particularly noteworthy. It's just the operational results of that franchise delivered the 14-cent result. Just like our other gas franchise, you can expect that, you know, the first quarter is probably going to be the strongest quarter that you see out of, you know, because it's the heating, the heavy heating. quarter. And the fourth quarter is a heating quarter, not as strong as the first quarter, but is also a heating quarter. Not a lot of heating going on in the second and third quarters in the gas business, so those tend to be, you know, non, you know, does nothing, you know, even small or limited contributions or even, you know, negative contributions in those months. But The profile, the earnings profile is very similar to NSTAR gas and Yankee gas in terms of when the earnings come in, and it was just from regular ongoing operations in that business, nothing unusual.

Thank you. This was helpful. This is all for me.

You're welcome, Sophie. Thanks, Sophie. Next question this morning is from Jeremy Tenet from J.P. Morgan. Good morning, Jeremy.

Hi, good morning. Just wanted to turn to offshore wind a little bit more, if you might be able to provide a little bit more commentary. It seemed under the prior administration things had slowed. a bit as far as the process, and it seems like the opposite could be true with the new administration and things, you know, maybe moving a bit faster.

So just curious for your thoughts on that, if you see kind of potential for the things to move more smoothly maybe than what the current outline is.

And then just with what you've received with Revolution and, you know, just any thoughts on when we might get more color on CapEx or other project details, I guess, down the line, just looking for color on those thoughts.

Yeah, thanks so much for the question, and good morning. You know, we've been, obviously, it's been a breath of fresh air, the Biden administration. You know, we have weekly meetings down there with various administration officials. The White House hosted a meeting with the offshore wind developers probably about a month and a half ago. They had five meetings. the four cabinet secretaries and two of the climate sides on that call. And the focus down there is, you know, what can we do to help move this agenda? We're already seeing decisions that are coming out of there at a much faster pace than we've seen in previous administrations. And, you know, I just, you know, it's really, been a sea change for this business, and we're very, very optimistic that the process will move along much faster, and it will be much more orderly for all developers, not just for our projects. But yeah, it's been a sea change.

In terms of the second part of the question, in terms of construction investment You know, as you can imagine, and we've said before, working with our partners, sort of the construction strategy, the investment amounts, sort of your, you know, I don't want to say that, you know, I guess part of the competitive bid process is the best way to say it. So we've been giving limited funding. DISCLOSURE ON SORT OF THE CAPEX BASE. AND, YOU KNOW, THERE'S A RFP COMING UP IN MASSACHUSETTS. We want to be able to look at that and put ourselves in the best available position. So I'd say that we'd have to get a little bit further down the road in terms of RFPs that are sort of in the win column before we would give out too much information that we would consider to be kind of a competitive interest in these bids.

Got it. That's helpful. Thanks. And maybe just pivoting over to the water side. Curious, I guess, if you could refresh us, how deep do you see the opportunity set there?

Is this the type of pickup we should expect, you know, every year, every other year, or just looking for more, I guess, color on the strategy, how you see it coming together at this point? Well, our strategy in the water business, we've been consistent and we've outlined that for the last several years, that we like the water business. We think that it fits very well with our clean energy story. It fits very well in terms of our regulated infrastructure skill set. So we'd like to grow that business, and we can grow it in a couple of different, two or three different ways organically. through, you know, looking at the investments that we make in the system. We can, you know, accumulate small kind of roll-ups. You know, we've done, you know, a half dozen or ten or so of those over the last few years. Or you could do something that is, you know, larger in scale and scope. And, you know, not that this particular transaction is, you know, going to, you know, change the footprint so much of Aquarium, but it does add $10,000 customers into the to the aquarium family and we'll look for opportunities that that can do that we think there are opportunities that are out there and we're active um you know in evaluating those and then we're active in searching out other opportunities so we think that there's plenty of opportunities to be had um you know it may not be just in the six state new england region um There could be opportunities in adjacent states that would help increase the number of customers for Aquarium. But I can assure you that our goal is not to just add customers. Our goals are always to do, one, there has to be something in it for customers. You don't want to get bigger just for the sake of being bigger. What do you bring that can make for better customer service, that can lower cost to customers over the long period of time? and also be a deal that can be accretive, you know, on a financial side. So, you know, we carefully, we probably pass on more deals or lose out on more deals because of our discipline there, but we'll continue to maintain that discipline in any business opportunity that we look at. We don't want to get bigger just to get bigger. Got it. That's helpful. I'll leave it there. Thanks. Thank you. Thank you, Jeremy. Next question is from Paul Patterson from Glenrock. Good morning, Paul.

Hey, good morning. So can you hear me? Yes, Paul. So just to sort of come back to Connecticut, reading all these, and it's a myriad of filings and orders and what have you, I get the sense that there's sort of rate resistance there or concern about rates. And they also want good transformation, and they want a lot of investment. So, at least that's how I'm seeing it. They want both these things. And I'm just wondering how you thread the needle here, or how do you picture this if, on the one hand, there's a demand for more investment, on the other hand, there seems to me at least to be, whether it's what their comments on the take back the GRID Act, just a panoply of stuff here that they basically are apprehensive about rate increases or want lower rates. How should we think about that? How do you think about it?

Yeah, thanks for the question, Paul. I think when we look at the Price per kilowatt hour on the rates in Connecticut, I think it's important to highlight for folks just how clean and how carbon-free that power is that's delivered in Connecticut. You need to really strip out what portion of it is clean. kind of not green-related, if you want to do a comparison across the country. And I would say that the folks in Connecticut, really the folks in New England, are getting a very clean, green kilowatt hour. And these are initiatives that that administrations and regulators have taken upon themselves to bring to customers. And that's something that they need to balance. Obviously, there's other things that they want to do down there. And I think it would only be fair that you break out what really is the utilities and what is state mandates or regional mandates. And that's something I think we work every day at trying to tell that story. But we're certainly very proud of kind of our our initiatives as it relates to a carbon-free future.

Okay. But is there anything that we should think about in terms of potentially offsetting these rates? Or, I mean, is there any – I mean, it's one thing for them to be wanting green energy and everything. It's another thing they're actually wanting to pay for it. Is there any sense that we should get in terms of whether or not – you know, how that might fall out, I guess, the two competing interests, so to speak.

Sure. I mean, I think the other big, you know, The biggest lever on that side would be energy efficiency. And, you know, we are number one in the country as it relates to energy efficiency. And I think what we're doing is helping our customers, you know, use energy more wisely and reduce their consumption, which obviously will drive at that price issue. If you're paying a little bit more but we're helping you use less, at the end of the day the result is a net savings. And that's what I think we're very, very good at. And we've obviously been recognized nationally for that. Phil, why don't you want to add something, Phil?

Yeah, just one thing, Joe, on that, too, is our transmission investments, the investments we've made for increased reliability on our transmission grid really help to lower congestion costs in the region. So those are a direct savings to customers as it flows through the energy part of a customer's bill. forward capacity market is down, things like that. So those are, you know, the investments that we make in our transmission business are also, you know, helping customers. So that's another way that bills can go down. And certainly we don't, we are sort of out of the supply market, but, you know, certainly as supply costs move down, that's a helpful benefit to customers. Okay. Great. Thanks so much. Thank you, Paul. Next question is from David Arcaro from Morgan Stanley. Good morning, David.

Good morning. Thanks so much for taking my question. I was just wondering, could you run through your latest outlook for equity needs here in light of some of the moving pieces with earnings, with ROE, with track costs, et cetera?

Thanks, David. Our equity needs are the same as we've stated in the past, which is they total, let's call it, $1.2 billion over five years. It's about $100 million a year through our dividend reinvestment, you know, employee stock purchase type of issuances. That aspect's about $100 a year. So if our forecast is five years, it's $500 million. And as I said earlier, in my remarks and we stated before over the course of our forecast period we're looking to do about 700 million of new equity through you know maybe some sort of at the market type of program so those needs at this stage have not changed okay great thanks and i just wanted to double check um how much of the seven cents

from this quarter is one time, or is any of that recurring?

No, that's just that it's related to the $30 million penalty, one time.

Okay, great. Wanted to confirm. Sounds good. Thanks so much.

Thank you. Thanks, David. Next question is from Mike Weinstein at Credit Suisse. Good morning, Mike. Hey, good morning. Thanks for taking my question.

Hey, I just wanted to clarify, does any portion of the Isaiah's penalty flow through the decoupling mechanism to be deferred to the next base rate case? And what time, what is the timing of the base rate case, the next one for CLMT?

So this is a direct credit to customers. There's no putting it back into the decoupling. This is a penalty charge that goes back to customers. So this flows directly back to customers. The timing of the next proceeding would be when that PBR sort of mechanism, maybe that kicks it off, but By statute, you know, sort of we're ending a three-year rate settlement that we had in place. We're required to file every four years in Connecticut. So the next filing that we would look to do is next year in 2022, you know, in terms of our expectations of when we would file for new base rates in Connecticut.

Gotcha. And to follow up on Paul Patterson's line of thinking, I was thinking the same thing. I mean, does this provide – do you think the storm provides a boost to grid modernization, you know, in Connecticut as the state continues to review that as maybe more of an opportunity for the utility going forward?

Yeah, thanks so much for the question. So it does. I mean, there's a lot of dialogue actually in – both Massachusetts and Connecticut, around grid mod, around AMI. We certainly have a seat at the table, and we are fully engaged. And I do think there's an opportunity to demonstrate some of the technologies that are available that would kind of, number one, empower our customers, but also enhance the grid to allow for greater reliability and, you know, cost savings for our customers. So, yes, I definitely agree that This should provide us the platform.

Got you. And what, can you remind us what you're assuming for first transmission ROE in the long-term guidance? I remember you're fairly conservative. I think you had the current, you know, what you're currently allowed. You're not, you don't have anything higher than that. Just curious what's in there. Yeah.

That's correct. The current allowed 10.57 base rate. Got you. And, you know, I'll tell you, it's striking, you know, just a year ago, right, the positive reaction from Massachusetts regulators, right, and the governor, right, towards the company when they wanted you to take control of Columbia Gas up there. And, you know, with what's happening in Connecticut, it's just a striking difference, you know, across the company. Hopefully you can, you know, figure out a way to – I guess get the Connecticut regulators to see you the same way that they see you in Massachusetts.

Yeah, we agree. We're always sought after during natural disasters and crises for our team to come in and take care of business for folks across the country. So it obviously is disturbing when that takes place. But rest assured that we will win back the hearts and minds of folks in Connecticut. It was a very unique storm. During a pandemic, folks had been kind of sheltering in place for many, many months. And obviously the loss of electricity and connectivity poses great challenges for folks. And we recognize that. And, you know, we are going to do all we can to turn that situation around and have the same level of confidence that folks have here in Massachusetts, certainly when we get called upon for the Columbia gas situation. And I think that we can do that. You know, I feel good about a path forward. So thank you for that question.

Great. And thank you very much.

Thanks, Mike. Next question is from Travis Miller from Morningstar. Good morning, Travis. Good morning, everyone. Thank you. You answered very comprehensively most of my questions, but two quick ones for me. One on Connecticut, the Pura activity, both the decisions and the ongoing stuff, does that Did it take away any legislative actions that were out there? Are there still any proposals on the legislation side?

So, yeah, thanks, Travis, for the question. So the legislature during this session has really allowed Pura to implement a lot of the stuff that they had done in the fall legislation. So we're not seeing any activity. And right now they are just trying to

uh put the rules in place and that's really what we're actively involved in so we have not seen any additional legislative activity uh other than you know some basic stuff around maybe solar or storage yeah okay great and then a quick one on offshore wind with the schedule that you now have what's the flexibility in terms of technology and we're seeing technology develop this almost daily in terms of offshore wind efficiency and turbine size and stuff What kind of flexibility do you have in the next two, three years before you start putting steel in the ground to change that?

Yeah, so, you know, another helpful question. It's interesting, you know, when you think of the way everyone always thinks cost increases, but I will tell you that in this business, the offshore wind business, it's been incredible the types of advancement in technology, turbine sizes, And I will tell you that our permits, all the permits that we have filed, have that level of flexibility to be able to upsize. So I will tell you that the way in these circumstances has been a very positive thing for our business, and we're very, very optimistic.

Okay. So the EIS doesn't lock you into any kind of technology or anything?

No, but it has caps on size. You know, they can take it up to maybe a 14 megawatt, but that's the level of flexibility up in that range.

Okay.

Great. Thanks so much.

All right. Thank you, Travis. I know a number of folks have already moved on to the 10 o'clock call, so we'll We'll end it here. Thank you very, very much for all your time today. If you have any additional questions, please let us know, give us a call, or send us an email, and we look forward to seeing you at the coming conferences.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for joining. You may now disconnect.

Thank you, Brandon. Thanks for all your help again.

Thank you, sir. Take care. All right. Take care. Bye-bye.