Portland General Electric Co

Good morning everyone and welcome to Portland General Electric Company's first quarter 2022 earnings results conference call. Today is Thursday, April 28, 2022. This call is being recorded and as such, all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. If you do intend to ask a question, please avoid the use of your speaker phones. For opening remarks, I will turn the conference over to Portland General Electric's Senior Director of Investor Relations, Finance and Risk, Mr. Jordan Hadamio. Please go ahead, sir.

Thank you, Ruel. Good morning, everyone. I'm happy you can join us today. Before we begin this morning, I would like to remind you that we've prepared a presentation to supplement our discussion, which we will be referencing throughout the call. The slides are available on our website and investors.portlandgeneral.com. Referring to slide two, some of our remarks this morning will constitute forward-looking statements. We caution you that such statements involve inherent risks and uncertainties, and actual results may differ materially from our expectations. For a description of some of the factors that could cause actual results to differ materially, please refer to our earnings press release and our most recent periodic reports on Forms 10-K and 10-Q, which are available on our website. Leading our discussion today are Maria Pope, President and CEO, and Jim Agello, Senior Vice President of Finance, CFO, and Treasurer. Following their prepared remarks, we will open the line for your questions. Now, it is my pleasure to turn the call over to Maria.

Good morning, and thank you, Jordan, and thank you, everyone, for joining us today. Turning to slide four, for the first quarter, we reported net income of $60 million, or $0.67 per share, compared with net income of $96 million, or $1.07 per share, in the first quarter of last year. To start, I would like to address the 2022 general rate case order issued earlier this week which finalizes customer prices and resolves all remaining regulatory issues. Including power costs, customer prices will increase an average of 3.2%. The order also establishes an earnings test for the treatment of certain deferrals arising in 2020 and 2021. The application of these tests resulted in the reduction of 2020 wildfire and COVID deferral expenses. As such, we are reducing earnings by $17 million or 14 cents per share. While we were surprised by the establishment of an earnings test for these items within the GRC, rather than via separate deferral dockets, the rate case in its entirety is positive with key elements that include our previously discussed 50-50 capital structure, unchanged 9.5% return on equity, an average rate base that is now 5.6 billion. And as you will recall, we filed this case last July with a revenue requirement request of 59 million, which was reduced through settlement proceedings. Key aspects of this include the removal of the Faraday facility, as it's now expected to be complete around the end of the year. lower costs of debt to reflect our very attractive $400 million long-term debt issuance, increased load forecasts, and keeping the collection for level three outages. All but about $5 million of these settlements were constructive, representing operational improvements and the delayed timing of the Faraday repowering. Ultimately, we achieved a $10 million revenue requirement increase. Reflecting our shared interests with the OPUC in keeping customer prices low while providing clarity and certainty as we continue to invest in advancing the reliability and resiliency of our system. Unfortunately, as a result of the establishment of the earnings test for major deferrals and the subsequent reversal, as well as wildfire and vegetation management and other operating costs, which Jim will cover later in the call, we've revised our guidance from $2.75 to $2.90 down to $2.50 to $2.65 per share. Overall, we are reaffirming our long-term earnings growth of 4% to 6% off of the 2019 base year and dividend growth of 5% to 7% annually. Turning to operational highlights and the RFPs, we continue to experience strong growth in energy deliveries, which increased 4.4% weather-adjusted, led by high-tech and digital customers. Our regional economy continues to trend very strong, with in-migration, commercial recovery from the pandemic, and new cloud computing and semiconductor operations, all driving rising demand. Today, our unemployment rate is 3.5%. Our investments in transmission and distribution infrastructure improve reliability and support this growth. We're also seeing operational improvements and significant efficiency gains resulting in getting more work done, especially in our reliability and, in particular, compliance work. Through advanced data analytics and smart grid technologies, we're increasing the reliability of our system and even under uncertain and extreme weather conditions. Over the last couple of years, we've also made increasing investments in technology that enables the integration of greater amounts of renewable energy, increasing system flexibility and resiliency. We are pleased to announce that the shortlist for the RFP that we initiated in 2021. Final bids were submitted in January, and the shortlist is included in today's press release. As expected, the RFP process was extremely competitive with over 8,000 megawatts of energy and over 3,000 megawatts of capacity. These bids include a variety of technologies, including wind, solar, batteries, and pump storage. Throughout this competitive process, we remain focused on keeping costs low as possible while selecting bids that improve the best possible mix of reliability and zero emissions power. The shortlist will be submitted to the PUC on May 6th, and the process will turn to finalizing the bids with the selection of the winning bids later this year. This RFP represents the first of several stages of resource acquisition as we seek to reduce our greenhouse gas emissions to meet the 2030 admissions targets and beyond. Following the completion of this RFP, we expect to issue an updated integrated resource plan in spring of 2023. Finally, last month, we released our 2021 Environmental, Social, and Governance Report, our ESG report, which demonstrates our progress towards a more equitable, sustainable future for customers, employees, and the communities we serve. As we look to the future, we anticipate a more focused, and elements around our cost structure to get them in line with the realities of our Commission's expectations. We're also looking at ongoing focus on digital solutions to help drive improvements and mitigate cost pressures. We have this continuation of strong economic growth and long-term growth expectations of 1.5 percent. We're also developing resource plans to move to a decarbonized future and meet our commitments under the state's rules and our own decarbonization goals, and continuing to serve customers with reliable, affordable, clean energy. Now I'll turn it over to Jim. Thank you.