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spk02: Standing by and welcome to the F2G Corporation's second quarter 2022 earnings release. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1. As a reminder, today's program may be recorded. And now I'd like to introduce your host for today's program, Bill Abler, Vice President, Investor Relations. Please go ahead, sir.
spk04: Good morning, and thank you for joining us. We will begin today with comments from SRG's chairman and CEO, Leo Denault, and then Drew Marsh, our CFO, will review results. In an effort to accommodate everyone who has questions, we request that each person ask no more than two questions. In today's call, management will make certain forward-looking statements. Actual results could differ materially from these forward-looking statements due to a number of factors which are set forth in our earnings release, our slide presentation, and our SEC filings. Entergy does not assume any obligation to update these forward-looking statements. Management will also discuss non-GAAP financial information. Reconciliations to the applicable GAAP measures are included in today's press release and slide presentation, both of which can be found on the investor relations section of our website. And now, I will turn the call over to Leo.
spk07: Thank you, Bill. Good morning, everyone. Today, we're reporting strong second quarter adjusted earnings of $1.78 per share. Robust economic activity and supportive fundamentals drove favorable sales trends in our commercial and industrial sectors, and hot weather drove increased residential and commercial sales. We are also seeing growing residential customer counts, supported by strengthening wage and employment data. Given results to date, as well as our view of the balance of the year, we are tracking towards the upper half of our 2022 guidance range, and remain squarely on pace to achieve our longer-term 68% growth outlooks. While we're pleased with the strength of our business, I want to acknowledge that due to global factors impacting natural gas prices, together with high electric usage caused by extreme heat, our customers, like many across the country, are receiving electric bills that are much higher than is typical, even for this time of year. This is top of mind as we continue to achieve outcomes that build upon our proven track record of results. We executed on the important customer, regulatory, operational, and financial deliverables that continue to improve quality across our business. As we discussed at Analyst Day, the attributes of Entergy's business align well with premium utilities. Given the build pressures customers are facing, we continue to take strong and meaningful measures to help ease the burden of electric costs. Many of our past actions and investments are mitigating the impacts of high natural gas prices for our customers today. The investments we made over the last eight years in more efficient generation and renewable resources have lowered fuel costs by nearly $500 million annually compared to what they would otherwise have been. Going forward, Investments in renewables and highly efficient generating resources like the Orange County Advanced Power Station will further reduce customer exposure to natural gas prices. Our ongoing participation in MISO has provided more than $250 million per year of savings for customers, and these savings increase during periods of higher fuel prices. Our top quartile O&M performance and customer-centric investments have delivered meaningful value for customers. We place extra importance on helping customers who need it the most with programs like the Power to Care and initiatives that get LIHEAP assistance to customers that qualify. Other ways we help customers manage affordability include products like level building, deferred payment plans, as well as analytics and AMI-driven usage alerts. To further address bill challenges today, we are working with our regulators on additional solutions. We've agreed to deferred fuel recovery to mitigate fuel price impacts on customers' monthly bills. We are also waiving late fees for eligible customers and credit card fees for all residential customers. We've committed $10 million in shareholder donations for residential bill payment assistance programs. Additionally, given our strong industrial and commercial sales and hot weather, we are utilizing our FLEX program to increase spending on initiatives designed to lower customers' costs and improve reliability. As I mentioned, one of the largest drivers of higher customer bills has been the increase in natural gas prices. Looking ahead, the forward NYMEX curve indicates significant gas price declines over the next 12 to 24 months, and we are seeing fundamentals that support that trajectory. While weather across the nation has driven up natural gas demand this year, causing inventories to be tight, U.S. gas production is tracking roughly 3 BCF per day ahead of last year. The U.S. has ample natural gas resources that can be produced in shale plays at prices consistent with the long-term NYMEX curve. Over the last year, we've seen independent producer activity ramp up in Haynesville and Permian Basin shale plays. Haynesville gas rig counts have increased nearly 50%. Increased gas production is also reflected by higher oil rig counts in West Texas, where high levels of associated gas from Permian Basin shale represent significant natural gas supply additions. The old adage that nothing solves high prices like high prices is certainly true, but while we can't control commodity prices, we see relief for customers in sight. Our recent CERI settlement represents another way we have worked with our regulators to mitigate risk while also helping reduce customers' bills. In late June, we announced a settlement with the NPSC that resolves Entergy Mississippi's 40% economic interest in complaints against CERI. The settlement is a big step forward in resolving risks surrounding system energy and improving our overall regulatory environment. The settlement also comes at an opportune time to provide much needed bill relief to Mississippi customers. Entergy Mississippi will use the cash payment from this settlement to provide immediate bill relief and help offset fuel impacts on customer bills. The Mississippi Public Service Commission recognized the opportunity to deliver meaningful value to customers today rather than wait for an uncertain outcome potentially years down the road. Looking beyond Mississippi, this settlement sets a marker and represents a catalyst opportunity to drive progress with the other commissions on broader CERI litigation resolution. Beyond CERI, regulatory progress was made at all of our utilities. We have submitted our annual FRP filings in Arkansas, New Orleans, and Louisiana. And as planned, Entergy Texas filed a rate case reflecting the significant investments we've made across transmission, distribution, and generation resources to better serve our Texas customers. We also demonstrated strong operational quality in the quarter. We have a flexible, diverse, and reliable portfolio of generation and grid infrastructure that allowed us to reliably deliver power to customers during extreme weather. In fact, all the states we serve recorded triple-digit temperatures during the month of June, and Entergy's system set a new peak load in MISO. Consistent with the accelerated resilience plan we laid out in Endless Day, Entergy New Orleans made its initial resilience and hardening filing. The filing included $1.5 billion of hardening projects over the next 10 years, including options for several microgrids spaced in neighborhoods throughout the city. All projects proposed create customer benefits. We will work with the city council and other stakeholders to identify the optimal set of projects for Entragy New Orleans, and we'll make a formal filing later this year to seek approval for these projects. We are working towards similar resilience filings at Entragy Louisiana in the fourth quarter and at Entragy Texas next year. These filings and stakeholder engagement are important steps toward our 10-year accelerated resilience plan. Our plan will reduce risk for our customers and for Entergy, both in terms of reduced outages and lower storm costs, and further improve our operational and balance sheet quality. Another important accomplishment is the sale of Palisades to Holtec. This represents the last major milestone in our multi-year plan to exit the merchant nuclear power business. Turning to growth, overall economic activity in our region was vibrant during the second quarter. Our commercial customers continue to show strong recovery from the pandemic. We've seen positive economic indicators for our residential customers. For example, Louisiana wages increased more than 6% in 2021, which exceeded the national average. Further, Louisiana's unemployment rate hit a 50-year low of 3.8% this past June. Economic development and expansion across our region is robust, and as we've discussed, Entergy is a major facilitator of this growth. Across our system, residential customer accounts continue to grow and show energy efficiency gains. Both of these trends drive improved affordability. We had significant industrial growth this past quarter, which drives economic gains for the regions we serve, and the load growth helps keep bills low for all customers. As we discussed at Analyst Day, Entergy has a robust and unique growth story stemming from our industrial customers with an expected 6% compound annual growth rate over the next five years. Commodity spreads and geopolitical conditions combined with the inherent Gulf Coast stability and competitive advantages are driving new customers to locate in our regions and our existing customers to expand their businesses. Over the next five years, we have line of sight to the growth we outlined with a robust pipeline of projects. As we sit today, there are 100 identified projects in the pipeline. Roughly half of these projects have already made final investment decisions comprising almost 10.5 terawatt hours of annual load potential by 2026. Further highlighting our growth opportunity, Semper Infrastructure enters into an MOU with EntryG Texas for its Port Arthur LNG plant. Phase 1 of this facility includes two LNG trains with gas turbine compression representing 270 megawatts of new load. Phase 2 would add two additional trains with plans for electric compression that would represent approximately 600 megawatts of new load. The Port Arthur project demonstrates the strong basis for the industrial load growth we expect over the next decade. As outlined in the MOU, Entergy Texas is developing options to accelerate the deployment of new renewable generation and to increase power supply resiliency. If Semper's Port Arthur energy were to be supplied with 100 percent solar, it would represent more than 2,500 megawatts of new solar generating resources. Projects like Semper of Port Arthur highlight industrial expansion with customers striving to grow in a carbon neutral manner. For a broader industrial customer base to achieve their decarbonization goals, it goes well beyond mitigating emissions from business growth. They must decarbonize their existing operations. As we've previously discussed, Entergy's industrial customers have significant carbon emissions representing 15% of the nation's industrial emissions, and the majority of our customers have aggressive decarbonization goals. For utility investors interested in driving decarbonization, Entergy represents a unique rate of change investment opportunity. Over the last quarter, we continued to make decarbonization progress for Entergy and our customers. Construction of Entergy Mississippi's Sunflower Solar Station was completed. This 100-megawatt facility represents the first step toward NRG Mississippi's 1,000-megawatt EDGE program, which will support economic development in the state. In May, the Arkansas Public Service Commission approved our Green Promise Tariff that offers 100 megawatts of capacity from NRG Arkansas' Searcy and Chico solar resources for allocation to customers who sign letters of intent. We've seen robust customer demand for green products, and this program is already fully subscribed. We intend to grow this tariff to accommodate the demand. Entergy Texas continued to move the Orange County Advanced Power Station through the regulatory review and approval process. When it comes online, OCAPS will have the lowest heat rate of any combined cycle plant in our fleet and will immediately provide fuel savings, reliability, and environmental benefits for our customers. This hydrogen-capable facility will provide further benefits over time through fuel diversity and long-duration clean energy storage. At our analyst day, we laid out a clear plan and path to support our customers' significant growth potential over the next decade. This plan calls for greater investment in clean resources and accelerated resilience to meet our customers' demands while we maintain our focus on affordability and drive continued quality gains across all aspects of our business consistent with our premier utility objective. Entergy has an excellent near-term growth opportunity. When considering the broader electrification and decarbonization potential, our long-term growth opportunity is even better. We are excited about our future and proud of the progress we are making towards achieving it. I will now turn the call over to Drew to review our first quarter results, as well as our financial strength and outlooks.
spk04: Thank you, Leo. Good morning, everyone. As Leo said, we've had a strong start to 2022, supported by our second quarter results. As you can see on slide three, our adjusted earnings were $1.78 per share. Our results included retail sales growth fueled by industrial growth and much hotter than normal weather. This strong start to the year is enabling us to flex our spending to benefit customers. and we are affirming our guidance in longer-term outlooks. For 2022, we expect results within the top half of the range. In addition to EWC results, which included the sale of palisades, the quarter's results had adjustments that rose out of two issues you've been following closely, storm cost recovery and the partial settlement on system energy cases at FERC. These developments included specific benefits for customers and reduced regulatory risk, while the receipt of securitization funds also strengthened our balance sheet. We provide more details on these items in our earnings release. On slide four, you'll see the adjusted EPS drivers for the quarter. Retail sales were strong, partly driven by hot weather. Within our service area, cooling degree days were 15% higher than normal. All states in our service area saw above normal temperatures, with Texas experiencing record heat. We also saw strong growth even after excluding the effects of weather. Industrial sales grew approximately 6.5% for the second straight quarter, including higher sales to existing as well as new and expansion customers. For this quarter, many of our major industrial customer segments increased with Chlor, Alkali, and LNG seeing the largest increases. Sales to cogeneration customers were also higher, comprising one-third of the total growth. You can see on slide five that the fundamentals underlying our industrial growth outlook remain strong. In addition to industrial sales being higher than last year, they were also higher than our guidance expectations. The largest driver was cogeneration sales. As a reminder, we don't rely on above-average cogeneration sales in our outlooks. For the quarter, we also saw higher operating expenses from the effects of our ongoing customer-centric investments, as well as higher other O&M, driven in part by increased spending on power delivery and customer service. This represents the beginning of the flex spending that Leo referenced to achieve customer outcomes for improved affordability, reliability, and customer experience. The results for EWC are summarized on slide six. The drivers for that business continue to be the shutdown and sale of our merchant nuclear plants. Moving to slide seven, operating cash flow for the quarter was $278 million, a decline compared to last year. The most significant driver was natural gas prices, which were more than 150% higher than the same quarter a year ago. our deferred fuel regulatory asset increased by more than $600 million in the quarter. We have taken steps to help customers manage fuel costs in their bills, including delaying more than $300 million of fuel collections and a serious settlement in Mississippi, among other things that we have discussed. As Leo also said, the good news is the forward curve calls for natural gas prices to decline, and we are seeing fundamental indicators that support this outlook. Turning to credit and liquidity on slide eight, I'll start with our net liquidity, which is strong at $3.7 billion. That includes $323 million in storm escrows, which is important as we move through the summer. During the quarter, we received securitization proceeds in both Louisiana and Texas. As we have done with previous Louisiana securitizations, we have guaranteed savings for our customers, sharing value created from the efficient securitization structure. The guaranteed amount is about $100 million, and that could eventually be higher. As you know, we've reached the settlement with the Mississippi Public Service Commission for their 40% share of the Siri cases. If you're able to settle, if we are able to settle with all parties on the same terms, that would total $588 million, including Mississippi's share. Those refunds would temporarily impact FFO when cash moves to customers. The financing costs and other elements of the settlement, such as ROE and capital structure, would remain on an ongoing basis. We have not reached settlement with all parties, so without knowing the details, we have yet to decide how a full settlement would be funded. Regardless of how it's funded, our long-term objectives remain the same, achieving or ceding 15% cash flow to debt and 6% to 8% growth in our adjusted EPS. And any amount that we were to fund through equity could be easily achieved quietly and cost-effectively through the ATM program. I would also like to highlight that we have published a sustainable financing framework, which allows us to issue green social and sustainability-directed financings to fund eligible projects that drive our business objectives. including our energy transition and resilience strategy. We engaged S&P Global to provide a second-party opinion, and they have affirmed the framework's alignment with accepted principles for these types of financing instruments. Both the framework and opinion can be found in the investor relations section of our website. A summary of our progress against our equity plan is shown on slide nine. In the second quarter, we reduced our equity needs by $250 million through our ATM program. That leaves a little more than $300 million remaining in the equity plan to be executed between now and the end of 2024. Slide 10 shows our guidance and outlooks, which we are affirming today. We provided a thorough update at our analyst day in June, which offered a clear picture of the significant opportunities in front of us. In 2020, we reduced spending significantly in response to lower revenues from the pandemic. For 2022, as noted, we have had a strong first half of the year. Now we are flexing to increase our O&M and other costs to benefit our customers. This includes spending to improve reliability, affordability, and the customer experience. Even with these initiatives, we expect results for the year to be in the top half of our guidance range. consistent with where we've been the last several years. Regarding longer-term outlooks, one recent item of note not yet reflected is the Inflation Reduction Act. Like everyone else, we are a week into the review. Overall, we are optimistic about the Act's ability to create long-term economic benefits for our customers. The production tax credits will support renewable development and nuclear, which will help our customers decarbonize and reduce their exposure to natural gas prices. By leveling the playing field for renewable development with production tax credit transferability and avoidance of normalization, the Act will allow for greater customer economic benefits through utility ownership that provides long-term operational flexibility and investment optionality. And the Act encourages emerging technologies like hydrogen and carbon capture that will help our industrial customers decarbonize. CCS and green hydrogen are part of Entergy's sizable clean electrification potential, and our region is uniquely positioned to support these technologies. Finally, we expect that after the first year, most of our customers should see a benefit in their bill from production tax credits in excess of the alternative minimum tax. For Entergy, It looks largely cash flow neutral after the first year, but we'll need to see the final law and work with the federal authorities and, of course, our retail regulators on implementation. In summary, we see the Act as a positive. At Analyst Day, we discussed how we are demonstrating strong financial quality. We have a unique and significant sales growth opportunity due to organic industrial growth and decarbonizations. We have a robust plan to invest in clean and renewable resources and improve the resilience of our grid. We also have a plan to achieve 6% to 8% EPS growth. And at the same time, we're focused on balance sheet quality and reducing risk. While our employees will always remain focused on our customers in all that we do, they remain world-class at getting stuff done with a track record of delivering on our commitments to prove it. We plan to continue that success. And now the Intergy team is available to answer questions.
spk02: Certainly. Ladies and gentlemen, if you have a question at this time, please press star 1-1 on your telephone. One moment for our first question. And our first question comes from the line of Chariza Perez from Guggenheim. Your question, please.
spk08: Hi. Good morning, Leo and team. It's actually Constantine here for Char. Congrats on a great quarter.
spk02: Good morning. Good morning.
spk08: I wanted to start off on the strong results for the quarter and some of the changes and assumptions for 22 guidance. You're now in the top half, obviously, and you have a big EPS offset for the remainder of the year in the O&M flex category. But, you know, weather keeps looking strong. And how does that potentially set a base for growth in 23? And maybe just curious on the recurring elements in this flex and how that carries into 23 assumptions and contingency.
spk04: Sure, this is Drew, and I'll start, and Leo can add in. So I think, you know, we're planning to, as you say, we would expect to be in the top half of the range. As we're thinking about the impact of that and the things that we are doing, certainly it's encouraging to see a lot of the growth from our customer base. Not all of that, I would say, is growth that we would expect on a continuing basis. As I referenced in my remarks, some of that is cogeneration, and we would expect a more normalized cogeneration rate on an ongoing basis. In terms of the line items you specifically referenced, the O&M, obviously, we do have a bunch more sales. We do have some higher costs that come along with that. That's a chunk of what you're seeing there. We also talked about customer initiative last week we had the press release talking and Leo referenced some of the things that we're doing to help our customers out that is in the works and as part of what you see reflected in the 22 outlook and guidance there and also in the O&M we have a couple other operational items vegetation management is a big piece of it as well as some investments to help for reliability, the O&M components of those incremental investments, as well as some investments to improve our customer experience, working in the contact centers and things like that to help our customers out, particularly at this point in time. So there's a number of investments that, while I would say aren't specifically pulling out 2023, although there is a little bit of that, They are working to continue to de-risk 2023 and beyond by creating more continuous improvement opportunities today that should be lasting on an ongoing basis. And so I don't know, Leo or Rod, if you all have anything you want to add to that.
spk07: I think that's fair. We're encouraged by the beginning of the year. We're using those results to make sure that we're doing the right things for our customers and here and now and certainly see a lot of reasons why that industrial load growth should continue not only this year, but for years to come to support our outlooks.
spk08: Excellent. That's helpful. And on the litigated process for CERI at FARC, The Mississippi settlement obviously took care of a large portion of the dispute. I think they're one of the major parties, but other parties have been less willing to accept the terms in their comments. How should we think about the process and kind of options going forward here? Whether the settlement currently, as currently structured, fit within that longer term 6% to 8% guidance, i.e., are the impacts kind of above or below the midpoint as they're currently set?
spk07: Rod, why don't you give them the process and then, Drew, you can help out a little bit.
spk06: From a process standpoint, the conversations and negotiations with the other jurisdictions are ongoing. They made their public stance in response to the Mississippi filing, but we're not in a position to opine or disclose anything further as it relates to where those negotiations stand. You should know that we are We're in active conversations with each of those jurisdictions, notwithstanding their public position on the Mississippi settlement. I will note that the FERC trial staff, and we thought this was constructive, stated that the settlement was fair and reasonable and in the public interest. And it is our position that that's a constructive framework for our ongoing conversations with each of those individual jurisdictions.
spk04: And then regarding the financials, you know, we have, in our outlooks, we've reflected a collective of the Mississippi settlements on an ongoing basis. And once we do have some sort, since we're on ongoing discussions with everyone, we wouldn't comment on ROEs or capital structures or anything else beyond that at this
spk02: okay perfect thanks for taking our questions thank you thank you and our next question comes from the line of paul zimbardo from bank of america your question please hi good morning and thank you good morning paul and just to make sure i understand correctly it sounded like under the draft ira
spk10: you believe the regulated nuclear assets would be eligible for the production tax credits? And just if you could talk about how that could work in the regulated construct, that would be helpful.
spk04: Sure. Paul, this is Drew. We do think that they are eligible based on our reading of the act. As you know, our nuclear units do compete in the MISO markets. They bid their power in every day. And And so we have a bus bar price, a wholesale market price. And that's the revenue that comes to the company every day because it ultimately gets netted off in rates and stuff like that through the normal regulatory process. But we do participate in the wholesale power markets every day. And so that's how we believe we'd be eligible.
spk10: Okay, I understand. That makes sense there. And then... Shifting over to coal, and if you could talk about the Texas rate case filing and the new target dates for Nelson and Big Cajun. It seems like you're accelerating there. And just broadly, how could some of the more stringent EPA NOx requirements lead to changes in coal timing, renewables, and the related? Thank you.
spk06: Hey, it's Rod. I can frame up the Texas rate case filing. Between October and, you know, through the end of the year, you'll see the procedural schedule laid out. And I'll direct you to page 34 of our materials just for some context. But it's about $131 million base rate change in our case. And our proposed ROE is 10.8, reflecting a 10.5 midpoint with a 30 BPS performance data with equity ratio around 51%. And the procedural schedule is laid out as is and certainly reflects the continuing benefit of our transmission, distribution, and generation riders as we as we move to incorporate OCAPs and other assets in our capital plan.
spk04: Yeah, and this is Drew. On the coal piece, I'll say it's not really much of a factor in the Texas case right now. And of course, as you know, Paul, with high gas prices, you know, there's not a lot of economic appetite to accelerate retirements right now. But I would say that, and you referenced it, the new rules that could come out soon that could cause us to make some significant investments in our coal facilities in order to become compliant with that. If those do materialize and they come in within the timeframe that we're already contemplating, then that could be an accelerator of retirement. We certainly would make significant large capital investments in those coal plants. to satisfy those things on a very short timeframe of benefit. So, that would be a consideration on the timeline of our coal plants if and when those rules come about.
spk10: Okay. Thank you.
spk04: Thanks, Paul. Well, I have one more thing. that we do not have a lot of control technologies on our coal plants today. And so they would be a lot of incremental investment for us. So I just make sure that that's clear as well.
spk10: Yes. Thank you.
spk02: Thank you. And our next question comes from the line. It's from JP Morgan. Your question, please.
spk03: Hi. Good morning. Good morning. Just want to start off with Entergy New Orleans and the Brazilians filing there. Have there been any initial reactions that you could share with us or other takeaways, especially as we think about Louisiana and Texas on this front?
spk06: Initial reactions to the actual filing has been constructive. Obviously, the details are all in the pace of the investment and certainly given the the current economic environment, what's the bill impact. We expect the council is going to set additional technical conferences, if you will. We have one scheduled later, I believe on the 18th of this month. But the council will ultimately direct us to make a filing more in line with where the thinking is that might show up. later on, probably in the end of the third quarter into the fourth. But the reaction's been constructive. But let's be clear, our efforts right now are focused on addressing some of the near-term challenges that our customers are facing with inflation and the impact of the gas prices in New Orleans. And that's taking up at least the near-term uh... mind share for the council but uh... we're where we think it's a constructive reaction thus far and uh... you'll you'll see in the fall uh... the council's uh... procedural schedule kind of laying out where we go from here got it yeah that was kind of the next part of the question here just conversation conversations in louisiana talking about higher customer bills as you talked about in your prepared remarks there and so
spk03: What type of role do you see this playing against conversations for CapEx at large, and particularly on the resiliency front, given the inflationary pressures that you talked about there?
spk06: We are aligned on the objectives and why we've been focused on the resiliency conversation. We moved back the resiliency filing in Louisiana to October. to give us an opportunity to better refine the benefit case that we expect to make with the Commission. But Louisiana, the same with New Orleans and our other jurisdictions, they are very much focused on providing relief to our customers in the near term, but we are very much aligned with the Commission on this resiliency conversation. And also I'll make this point. There's nothing about the timing of our October resiliency plans for Louisiana that changes our current plan. So both the timing and the way in which we laid out our capital plan for near-term resiliency spend in Louisiana is unchanged by that. So more to come as we work through the summer and get further into the through the form of the rate plans and hurricane season, but the early indications are we still remain very much aligned with the regulators on the objective of resiliency.
spk03: Got it. That's very helpful. And just the last one, if I could here, as it relates to equity needs in 25 and 26, While the ATM can satisfy these needs here, just wondering how you think about asset recycling at this point, if this is on the table, or could you speak to broader considerations here?
spk04: Yeah, well, we talked about that at Analyst Day, so I think there's not really anything different than what we discussed at Analyst Day. There is a valuation difference between the private capital markets and the public capital markets, which causes us to explore this idea. But it's not an easy track to go down. As we've discussed in the past, it's not like, you know, depending on how you go about it, it's not necessarily like financing equity in the public capital markets. So it could take a lot longer. There could be more risk to it. So those are things that we're thinking about when we think about what we're calling strategic financing, because they have to line up more strategically at the same time.
spk03: Got it. That's helpful. I'll leave it there. Thanks. Thank you. Thank you.
spk02: Thank you. And our next question comes from the line of Jonathan Arnold from Vertical Research Partners. Your question, please.
spk01: Hi. Good morning, guys. Good morning. I just ask about the – you mentioned that you've deferred $300 million of fuel, I think. Is that the extent of what you're – proposing to do on that particular tool, or is that just what you'd recognize through second quarter, you know, the June balance sheet?
spk04: That's what we have proposed to the retail regulators in terms of delaying collection of deferred fuel. So, on the balance sheet, the June balance sheet. That's what we have proposed to the retail regulators in terms of delaying collection of deferred fuel. So on the balance sheet, you know, we have at the end of the second quarter all the incremental $600 million of deferred fuel. And so some of it is being delayed until the fall. Some of it might be delayed until next year. And a bulk of it is in Louisiana. I think we're at about $130 30 million-ish in Louisiana and smaller amounts in other jurisdictions.
spk01: So that's sort of the current proposal across the portfolio, and so the rest of the deferred fuel from the first half of the year, we should see that sort of catch up a little quicker.
spk04: Well, I would say that that is pretty recent. You know, that's June and July. deferrals. I think maybe there's a little bit of August even in there. So we are pretty current on how we're thinking about that. I guess, Jonathan, if you're asking, are we going to see a whole bunch more of delaying, I think we're most of the way through the summer at this point, and I would not expect that to continue on into the fall.
spk01: Okay. And could you just sort of maybe help frame for us a little bit some of the other things you're doing to try and mitigate pressure on customers, you know, maybe sort of put some quantification around that in the context of, you know, the fuel deferral number. Is that the biggest thing? I'm guessing it probably is, but just curious about what are the other pieces of the strategy?
spk06: Yeah, and this is Rod. You know, Leo made reference. The fuel deferral would be, I believe, the biggest by way of, of single financial impact across customer classes. But what we're offering to do is, as Leo mentioned, $10 million towards bill assistance programs across our jurisdictions. There's a moratorium on disconnects coming out of New Orleans. We're voluntarily offering that up for our other jurisdictions. There's credit card fee waivers, late fee waivers that we're working our way through in different jurisdictions on top of the bill payment programs that Leo walked through in his opening comments. The objective being to give customers some relief during what we see as this convergence particularly in Louisiana and New Orleans, where the high usage is intersecting with the high gas prices, and where Louisiana and New Orleans is perhaps different than some of the other jurisdictions as the fuel recovery mechanisms are capturing that impact, that high gas impact, on a monthly basis. These are short-term relief efforts on our part to answer the call for our customers with the support of our regulators. And we expect that to sort of play itself out through the end of the cooling season. So in that October, November timeframe, we'll revisit with our regulators where we are on the relief package. And I don't want to to understate the significance of what Drew referenced in terms of our ongoing investment strategy on behalf of customers that have far greater long-term impact that lower customer bills in addition to the robust growth story in the industrial sector that also benefits that bill path for customers over the long haul.
spk07: The only thing I would add to that, Jonathan, is certainly for Mississippi customers, the series settlement is important. probably the biggest bang for the buck that we've had in terms of near-term bill release.
spk01: I was going to add, John, the securitization that we did. We got $100 million of benefits to Louisiana customers.
spk04: I mean, there's A number of things that we've done that have some big dollars associated with them. We haven't really talked about our gas hedging program that's been beneficial to the customers in these high gas price environments. So there's a number of things that we've done to help mitigate customer bills.
spk01: Great. Thank you. Could I just say that that settlement in Mississippi was into effect last year. Yeah, regardless of not having reached agreement with the parties, correct? And what's the timing on when that benefit flows?
spk06: Yes, that is correct. We're seeking – we're asking FERC, you know, essentially approve and ratify that settlement by November. But Mississippi is already taking steps to put that – the benefits to customers in place. So – But November is the timeframe from a FERC perspective.
spk01: Okay. And just maybe finally, you reflected the Mississippi aspect of the settlement in guidance. Is that the gross up impact, assuming others went down a similar trajectory, or is it sort of just the discrete Mississippi piece?
spk04: Right now, it's assuming sort of a grossed-up element. You know, an inclusive, everybody got the same as Mississippi, but we're not commenting beyond that about where it might end up, given we have ongoing discussions.
spk01: Okay, but you've got to lease that in black.
spk04: Yes. Great.
spk01: Thank you very much, guys.
spk04: Thank you.
spk01: Thank you, Jonathan.
spk02: Thank you. And our next question comes from the line of, David Acara from Morgan Stanley. Your question, please.
spk12: Hey, good morning. Thanks so much for taking my question. I was curious on... Good morning. Hi, good morning. I was curious on the Inflation Reduction Act. Do you have a view at this stage just how much that could improve your competitiveness on the renewables front and whether it could unlock additional opportunity to rate-based renewables within the play going forward versus the proportion that you've been assuming thus far?
spk04: Yeah, I don't have numbers that I can tell you right now, David, but I will say that we do believe that it does level up the playing field for us. We don't have to go through the normalization efforts. We can find, you know, assuming this all goes through, you know, we might not have to do the tax equity partnerships that we do to eliminate some of the frictions associated with that and allow us to go ahead and deploy more capital. So I think those are all positive from a utility perspective, from an ownership perspective. The customers, as I said in my remarks, will also benefit from that because, again, they'll get the benefit of ongoing operational improvements that we come up with. Those wouldn't necessarily accrue to a third party. They would accrue to our customers. It creates optionality around the assets, increases the operational flexibility. If there's a problem with the assets, we can respond more quickly, don't have to work through a third party storm situation, the like. So there's a lot of There's a lot of benefits associated with utility ownership that are harder whenever we were structurally disadvantaged before. But now, you know, the customers will get the full benefit of those things. So we think that that will be accruing to customers over the long term. But I don't have an exact number for you right now.
spk12: Great. Yep. Thanks. That's helpful. Thanks. You had also mentioned on the cash flow side of things, it sounded like it was neutral. Is there a way to think about that, that you're already kind of planning to see a cash tax bill that's at least at the level of the AMT that's been floated out there such that there wouldn't be an incremental cash flow drag as you see it?
spk07: David, this is Leo. I don't think that's the case. I think it's just the case that we'll be able to utilize the credits against the AMT plus the transferability of the credits allows for us to be able to get that to neutral.
spk04: Yeah, and I will add that that's an ongoing basis. I referenced the first year. There is a timing element that's out there that we have to pay close attention to between the AMT starting in 2023, and the bulk of our tax credits would be from the nuclear tax credit, and those would start until 2024. So there's that 23 gap that we'll have to figure out how to work through. The good news is it should be an offset to defer taxes, so that means our rate base should go up. But we've got to work through that. We've got to get the final bill, work through that with retail regulators, talk to the rating agencies and the like.
spk12: Yeah, okay, thanks. So that does assume essentially that you get the nuclear tax credits that you're able to collect them, and that's what helps you offset that AMT cash drag. Correct. Correct. Okay, great. Got it. Thanks so much. Thank you.
spk02: Thank you. And our next question comes from the line of David Pass from Wolf Research. Your question, please.
spk09: Hey, good morning. Just on Grand Gulf, you know, according to the NRC data, it's been down since July 12th. I just wanted to know, you know, why has it been down? When do you expect it to come back online? And then maybe just remind us in terms of the mechanisms you have in place for replacement costs and so forth. Thank you.
spk07: Yeah, as far as operationally, David, I won't get into the technical details, but we had a couple of pieces of equipment. that had issues, so we had to take the plant offline to fix those issues, and that's ongoing. Plants should be online pretty quickly and ready to roll after the, you know, recent refueling outage where we replaced a lot of equipment and on the backs of last year's record run. Kind of while we're talking about nuclear, I will just point out Because it happened today, the River Bend stations now had its longest continuous run online, too. So, congratulations to them.
spk06: As far as the mechanisms, Rod, I don't know if you want to… It's a monthly formula rate plan where the flow-through of costs of operating the plant are part of the FRP.
spk04: And the contracts back to the operating companies are unit contingent. Yeah, they would just replace the purchase power in the market as they do every day, and that would flow through the fuel causes.
spk06: Of each of the individual operating companies?
spk04: Of each of the individual operating companies.
spk09: Got it. Okay. Makes sense. Thank you.
spk12: Thank you.
spk07: Thank you.
spk02: Thank you. One moment for our next question. And our next question comes from the line of Michael Apides from Goldman Sachs. Your question, please.
spk11: Hey, guys. Congrats on a great quarter, and thank you for taking my question. I don't know if this is a Leo or a Rod one, but I'm just curious, process-wise, the grid hardening or the system hardening proposals in Louisiana and Texas, how do you think that will look from a docket perspective, and how will – what you're thinking about recommending there, how will that mesh or how will that interface with the existing rate-making structures that are already in place in those states, meaning the formula rate plans in Louisiana and the DCRF and the transmission recovery and the general rate case process in Texas?
spk06: Hey, Michael, it's Rod. We covered it at NLS today, but the point being, it depends on the timing of our agreement in, let's say, in Louisiana. How the state of Louisiana thinks about the capital plan around resiliency is going to determine whether we think we can flow through the capital cost through the existing FRP and recovery riders or if there's going to be a need for anything else. And again, that's a function of sizing because what we talked about on analyst day for our capital program was that we would go from two to four million dollars around accelerated resiliency where the larger chunk of that would be in Louisiana And we would do it through existing mechanisms. And whether we needed anything different would be dependent upon how the commission worked through with us around the pace and timing of capital spend. Texas is a little – and so that process will begin when we make the filing that we currently plan in October. In Texas, the way that we sequenced the – accelerated resilience filing in Texas, we pushed that back into 2023, given that the timing around the rate case and OCAPs shifted a bit, and we wanted to sequence the resiliency filing to fall in place behind both OCAPs and the rate case. And the dynamic is not radically different than the way we're thinking about it in Louisiana. Again, depending upon how the Commission thinks through and certainly our customers think through the pacing of resiliency spend in Texas, then the question becomes, can we accommodate that CapEx through the existing T and D recovery riders, or if there's a need for, as we described it, a tweak in the regulatory recovery mechanisms. And that remains to be seen, Michael, but the thinking is the same.
spk07: And Michael, this is Leo. I'll just add that in addition to, as Rod said, kind of how do they fit size-wise underneath the existing regulatory mechanisms, there is a nuance around assets that we want to replace that are not yet fully depreciated. And that's a tweak, to use Rod's word, that we might need to look at. And as you recall, that's the same tweak we needed in the regulatory process for AMI across jurisdictions where we were taking out meters that worked, but we're replacing them with meters that we're going to lower costs and improve service levels to customers in the future. The dynamic here is the same. We've got the $2 billion, the $2.2 billion that we've got in the plan already that fits under the current regulatory mechanisms along that side thing, as Rod mentioned, as well as fully depreciated property mechanism. But as you know, our regulators have been publicly supporting replacing equipment that was built 15 years ago when the standards were different across the industry with the new standard equipment. We need to get that fleshed out as to how you're going to recover the dollars for that existing. equipment it's not fully depreciated again precedent across every jurisdiction with the meters same concept but that that's an added again to use rod's word tweak that we probably have to to make sure we're getting throughout those jurisdictions do you need to thank you for that leo and rod um just a quick follow-up on the louisiana side you have lag right now in louisiana right louisiana i would argue is
spk11: may be one of the harder places to earn authorized for you guys. Do you worry that if you don't get a change in rate making, meaning somehow a more forward-looking structure to the formula rate plan, that simply using the existing construct would simply add to the lag?
spk06: It's always a concern. And our primary objective is to match the CapEx for customer benefits with the recovery mechanisms for our other stakeholders, including you guys. So yes, that is a constant tension as we work through the forward-looking view of our capital plan and recovery mechanisms, Michael. So it is very much a part of the conversation.
spk04: And Louisiana has some good precedents around this. I mean, Leo was talking about AMI. In the AMI dockets in Louisiana, we were able to get more contemporaneous recovery And, of course, in the capacity side, you know, we have a long history of getting generation assets into rates when they get to COD. So I think there is, you know, examples of how this could work differently in Louisiana. But we certainly echo Rod's concern.
spk11: Got it. Thank you, guys. Much appreciated. Thanks, Michael. Thank you.
spk02: Thank you. And our final question for today comes from the line of Paul Patterson from Lenrock. Your question, please.
spk05: Hey, guys. Good to hear your voice. Just procedurally back to the series settlement, it seemed like no party, well, at least none of the state commissions, objected to the settlement at all. Is there any reason why the November approval can't happen any earlier, or how should we think about that, the potential for the FERC's approval, assuming that they approve it.
spk06: Yeah. It's the FERC that drives. We don't get to tell FERC, and I say this respectfully, we don't get to tell FERC, you know, what their procedural schedule needs to be. But we're certainly – they're usually sensitive to certainly us and other stakeholders when there's an objective to – particularly in this instance where we're trying to reduce the overall noise around Siri and the risks associated with it and the potential benefit for customers, that tends to resonate. It's as soon as possible as far as we're concerned, but we're always weaving in our interest with those of our other stakeholders in first docket, which, as you might imagine, has has more than energy to contemplate. So we're grateful for whatever FERC is able to do to accelerate the consideration of this customer beneficial settlement in Mississippi.
spk05: Awesome. And then in terms of the, some of the parties are suggesting sort of bifurcating or splitting up some of the proceedings or what have you, and I realize that what, you know, the public documents and the discussions you're having, but just in general, if my understanding, just correct me if I'm wrong, with the most favored nation, I'm not completely clear on this, With the most favored nation provision in the settlement, if there's a litigated portion, that portion is not subject to the most favored nation adjustment. Is that correct?
spk06: I think you got that right.
spk05: Okay. Okay, that's it for me. Thanks so much. Thank you, Paul. Thank you.
spk02: Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Bill Abler for any further remarks.
spk04: Thank you, Jonathan, and thanks to everyone for participating this morning. Our quarterly report on Form 10-Q is due to the SEC on August 9th and provides more details and disclosures about our financial statements. Events that occur prior to the date of our 10-Q filing that provide additional evidence of conditions that existed at the date of the balance sheet would be reflected in our financial statements in accordance with generally accepted accounting principles. Also, as a reminder, we maintain a webpage as part of Entergy's investor relations website called Regulatory and Other Information, which provides key updates of our regulatory proceedings and important milestones on our strategic execution. While some of this information may be considered material information, you should not rely exclusively on this page for all relevant company information. And this concludes our call. Thank you very much.
spk02: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
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