Essential Utilities, Inc.

gas will be available for a really long time in the Pittsburgh, Pennsylvania area. Now, if you've not spent time in Pittsburgh, you might not know that Pittsburghers are proud of their natural gas history and understand its importance not only to their local economy, but also to national energy independence. Next, our natural gas service territory is really in middle-class America. So to switch a home from natural gas to electric, solar, or wind would cost in the range of $8,000 to switch, and would also mean paying higher monthly energy costs. I think it's fair to say our customers are unlikely to switch. Now, if we aggregated all of the greenhouse gas from all of the residential natural gas consumption in the country, we would only equate to about 4% of the country's total greenhouse gas emissions. So minor in the scheme of things, and I think that sometimes gets lost in the discussion as well. I think those of you who know us well know that at Aqua America, we were always an environmental leader. Over many years, we've demonstrated our commitment to be responsible stewards of the environment. We specialize in rehabilitating underground infrastructure, and People's Gas is really no different than Aqua America was before we were combined. We believe as the new owner of the business, we can modernize its infrastructure and apply industry best practices to aggressively reduce emissions and adopt advanced technologies. As essential utilities, we plan to set a credible and aggressive intermediate term emissions reduction target by early next year. and will continue to evaluate technologies and strategies to further reduce emissions in the longer term. So in summary, while the media may have you believe that natural gas will go away over the next decade or whatever they're saying today, that clearly does not line up with the objective reality of energy use in the United States. In fact, it's quite the opposite. I'll say this as clearly as I can. We are very pleased with our purchase of Peoples. It's performing extremely well, and we believe we have a long and successful future with Peoples and Aqua as essential. Now, I'm really pleased to introduce our new leader of our natural gas business, Mike Hewler. Mike is our new president of the People's Gas Company and joined us in August, concurrent with the retirement of Joe Gregorini, who was our longtime leader of the People's Operations over there. Joe did a great job, and we wish him well in his retirement. Mike's a native of Pittsburgh, comes to us from Columbia Gas, where he spent 34 years, a 34-year career there, and most recently was president and COO of Columbia's PA and Maryland operations. I've asked Mike to provide some of his early observations about Peeples and to provide his perspective on the natural gas business in Pennsylvania where 690,000 of our 740,000 customers reside. Mike?

Thanks, Chris. It's truly a pleasure to be with you today. You know, as a native of Pittsburgh, I must tell you that I have long respected the Peoples Gas Company for its leadership in the community, and I'm absolutely thrilled to have the opportunity to lead the utility. Although I joined Peoples just three months ago, I've been in the natural gas business for a few years now, and while there's always opportunity for improvement, I'm happy to tell you that I'm impressed with our management, our safety culture, and our safety record at Peoples. The team is well-trained and maybe equally important. They're very committed to both employee and customer safety. In fact, Peoples was honored by the American Gas Association in 2019, receiving an industry leader accident prevention award for achieving total days away, restricted or transferred, which is DART, rate lower than the industry average. I have found the depth of management to be remarkable. If you count the years of service for my senior team alone, we have nearly 263 combined years of service in the natural gas industry. The team is well prepared to take the company to the next level, including the ramp-up of our capital plan. In fact, we are preparing to invest nearly $1.4 billion of capital in the replacement of aging gas distribution infrastructure over the next three years. And over the next 15 years, we will replace nearly 2,700 miles of distribution facilities. You know, any time you combine two companies together, you have a melding of cultures, and that's going to take care and effort. My early observations of the combination of aqua and peoples as now essential indicate the cultures are very similar to start. which will make integration much easier. I've been pleased with the spirit of cooperation among the teams and the full integration of the management teams. I believe we are developing a strong combined culture that will provide a strong and resilient company. You know, People's has always been a part of the fabric of the Pittsburgh community. The company's visibility and community assistance has been particularly important during the pandemic I should also mention that the customers have access nearly to $27 million in customer assistance through the use of programs like LIHEAP, the low-income heating energy assistance program, and CAP, the customer assistance program, so that customers in need can find help to paying their bills and remain safely in their homes. Natural gas is by far the most effective energy source to heat homes and businesses in colder climates. And let's remember that our LDC, our local distribution company, Peoples, has access to an abundant, low-cost supply of natural gas, given our position directly above the magnificent Marcellus Utica supply basin. Low-cost commodity in this region have also presented Peoples the opportunity to make investments and modernize our distribution system with limited impact to the total bill of our customers, all while enhancing safety, and reliability. As a native to southwestern Pennsylvania, it's hard to underscore how much natural gas is a part of the fabric of this community. I see this as a region where business leaders, legislators, regulators, and communities work together to protect our environment and keep our economy vibrant as well. While parts of the country mandate to move away from natural gas more quickly than others, for example, the West Coast, Peeples is located in a geography where I would expect natural gas to remain an essential part of the energy picture for generations to come. Taking a look at the slide here, I'd like to make a few points that further the discussion on the sustainability of natural gas. I won't make every point on the slide, as you can read those on your own, but I believe natural gas will remain a vital part of the nation's long-term energy solution. as natural gas remains an affordable, abundant, safe, and reliable solution to our energy needs. The United States is natural gas rich and has supply to fulfill the country's energy needs for the next century. As Chris mentioned, eliminating the direct use of natural gas in homes and in businesses would be an expensive and impractical way to address greenhouse gas emissions. You know, in fact, As the demand for natural gas has never been greater, it's estimated that one new customer connects their home to the natural gas distribution system every minute now, providing service to 179 million Americans, or roughly half our country. Conversions to alternatives are expensive and would result in an increase in households of nearly $1,000 annually in their utility bills. You know, the reality is when you add up potential equipment conversion costs, higher operating costs, the impact of moving away from natural gas would be profound on every household. In addition to existing technologies which have dramatically reduced emissions, the emissions profile of the natural gas industry in recent years, there are opportunities for further improvements. For example, RNG, renewable natural gas, This is a climate-neutral, pipeline-compatible, gaseous fuel derived from biogenic or other renewable sources. The industry and our company are looking at opportunities to do more RNG. Today, as we said, Peoples acquires over 1.5 billion cubic feet of renewable natural gas annually within its portfolio, and we plan to do more. In closing, I look forward to leading the Peoples team and we believe we can do great things together as we look to continue to provide quality service to the communities that we serve. With that, I'll hand the call back to you, Chris.

Hey, thanks, Mike, and nice job. Great to have you on the team. I would just leave you with one final thought on this topic before we move on, and that is that given our natural gas utility, People's, Given its rate-based growth, its position geographically, and its access to gas, among many other reasons, it should be thought of differently than many other gas LDCs across the country for regulatory reasons and everything else, and especially should be thought differently than natural gas utilities in, call it, Pacific regions or some of these coastal communities. All right. Now, let's take a look at the highlights from the quarter. We have invested already $607.6 million in infrastructure in the communities we serve during the first nine months of the year, of which $377 million was invested in our regulated water segment and $230.6 million was invested in our regulated natural gas segment. I just always want to point out that about $53 million was invested by peoples in the first quarter pre-closing. So bottom line, we remain on track for record capital spending of $950 million in 2020. Now in the box, you also see that on a non-GAAP basis, adjusted income per share decreased to 23 cents from 48 cents when compared to the same period last year. And Dan's going to take in more detail on those financial results in just a moment. Our municipal acquisition program, remains strong with signed municipal transactions, municipal agreements, I should say, totaling over $360 million in expected rate base and over 212,000 customer equivalents. We just recently closed the water and wastewater acquisition of Rockwell Utilities, that's in Illinois, and announced the signing of Lower Makefield in Bucks County, Pennsylvania, which was a $53 million acquisition with 11,000 wastewater customers. Finally, in the last box, we're excited to point out that our latest ESG report that was just published just a few weeks ago, and I'd encourage you to take a look at it. You can find it through our website. It's our new ESG site, really, really strong ESG site, I would say. And with that, let's use that as a segue to the next slide here and talk a little bit about ESG. Sustainability has always been a core part of our corporate culture, and it's been a personal priority of mine as well. Since I became CEO in 2015, we've really made an ESG priority. We started with board refreshment. Our board is nine members. About a third of those, or exactly one-third of those, are women, and another two members are black. Our diversity helps to facilitate better discussion and and better outcomes, and I firmly believe that. As I mentioned, we've been ramping up our ESG communications since last February, and even before the People's Transaction, our ESG team published the first ESG tear sheet and dramatically enhanced our 2021 proxy last spring. Since then, to ensure we provide transparent and comprehensive reporting on our work, we hired a full-time in-house ESG manager. Most recently, we issued a new and more detailed ESG report, as I just mentioned, and a digital microsite format, really easy to navigate. Our ESG website will be the home of all of our future related news and disclosures. Now, on the water side, We made some important announcements earlier this year, and we've talked about these. We said that by 2022, 60% of our energy would be sourced from renewable sources. We also said that we believe we stand alone as a multi-state water utility in our commitment to test every source of water in our eight states and treat any source negatively. that detects PFAS above 13 parts per trillion. You'll recall that the federal health advisory level is at 70 parts per trillion, so this is a sizable improvement from what the federal government provides as their guideline. This is really a significant commitment. On the natural gas side, as I mentioned, in the first quarter of 2021, we'll announce an aggressive but achievable set of targets for emissions reduction. We want to do this before we reach the one-year mark of ownership, so looking at probably the January timeframe. Remember, we have significant pipe to replace at Peoples, and each length of pipe that we tighten up quantifiably reduces methane emissions. We plan to report those reductions in our ESG reports in the future. To give you a sense, each mile of pipe replaced is expected to reduce fugitive methane emissions by the equivalent of 50 metric tons per year of CO2. This is the same as taking 11 cars a year off the road for every mile of pipe. That's pretty important. Let's not forget that while this effort reduces methane emissions, the Pipe Replacement Program also contributes about 8 to 10% rate-based growth annually over the 15 years. So with that, let me pass it over to Dan for the financial results.