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PPL Corporation (PPL) Q4 2022 Earnings Call Transcript

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PPL Corporation (NYSE:PPL) Q4 2022 Earnings Conference Call February 17, 2023 11:00 AM ET

Company Participants

Andy Ludwig - Vice President, Investor Relations

Vince Sorgi - President & Chief Executive Officer

Joe Bergstein - Chief Financial Officer

Conference Call Participants

Shar Pourreza - Guggenheim Partners

Durgesh Chopra - Evercore ISI

Paul Patterson - Glenrock Associates

Angie Storozynski - Seaport

David Arcaro - Morgan Stanley

Greg Orrill - UBS

Paul Zimbardo - Bank of America

Neil Kalton - Wells Fargo

Operator

Good greeting and invited to nan PPL Corporation Fourth Quarter and Year-end 2022 Financial Results Conference Call. All participants will beryllium successful listen-only mode. [Operator Instructions] Please note, this arena is being recorded.

I would now for illustration to move nan convention complete to Andy Ludwig, Vice President of Investor Relations. Please spell ahead.

Andy Ludwig

Good greeting everyone and convey you for joining nan PPL Corporation convention telephone connected 4th fourth and twelvemonth extremity 2022 financial results. We provided slides for this position connected nan Investors conception of our website.

We'll statesman today's telephone pinch updates from Vince Sorgi, PPL President and CEO; and Joe Bergstein, Chief Financial Officer. And we'll reason pinch a Q&A convention pursuing our prepared remarks.

Before we get started, I'll tie your attraction to descent 2 and a little cautionary statement. Our position coming contains forward-looking statements astir early operating results aliases different early events. Actual results whitethorn disagree materially from these forward-looking statements.

Please mention to nan appendix of this position and PPL's SEC filings for a chat of immoderate of nan factors that could origin existent results to disagree from nan forward-looking statements.

We will besides mention to non-GAAP measures, including net from ongoing operations and adjusted gross margins connected this call. For reconciliations to nan comparable GAAP measures, please mention to nan appendix.

I'll now move nan telephone complete to Vince.

Vince Sorgi

Thank you, Andy and bully greeting everyone. Welcome to our 4th fourth and twelvemonth extremity investor update. We'll support our remarks little this greeting fixed nan broad update we shared pinch you connected January 11th. We proceed to beryllium highly excited for PPL's agleam early and nan worth we intend to present for our customers and shareowners.

Turning to descent four, 2022 was a singular twelvemonth successful PPL's history, 1 that has wholly redefined our company. It marks nan opening of a caller era arsenic we are now positioned arsenic a premier pure-play US regulated inferior holding company.

Our strategical repositioning began pinch nan waste of our UK business successful 2021 and concluded successful May of 2022 pinch nan summation of Rhode Island Energy and its almost 800,000 customers. I'm very proud of nan execution from our squad to adjacent this transaction and complete nan modulation activities to-date pinch National Grid.

We are connected schedule to complete each of nan TSAs successful 2024 arsenic primitively planned. The acquisition of Rhode Island Energy besides enhances our standard and enables PPL to beryllium a leader successful our assemblage for years to come. This includes positioning our institution to present top-tier 6% to 8% net and dividend maturation done astatine slightest 2026, pinch 1 of nan champion in installments profiles successful our sector, our equilibrium expanse tin support our maturation without equity issuances passim nan readying horizon.

And while we executed connected our strategical repositioning, we stay patient successful our pursuit of delivering fantabulous financial and operational results successful 2022. First and foremost, we achieved ongoing net of $1.41 per share, beating nan midpoint of our forecast, which we had accrued successful November.

This is simply a awesome accomplishment considering each nan other activity our teams completed this past twelvemonth successful relationship pinch our strategical repositioning. In summation to delivering coagulated financial results, we besides laid nan groundwork for superior investments we request to make for years to come, successful our pursuit of delivering an exceptional customer acquisition astatine an affordable price.

Specifically, we presented a balanced finance scheme successful Kentucky to switch astir 1,500 megawatts of retiring ember generation. This scheme champion positions our utilities successful Kentucky to service our customers pinch safe, reliable, affordable and sustainable power while nan authorities fosters important economical improvement and growth.

We besides designed a bid of plans for our recently acquired Rhode Island Energy, strategies to present nan power grids basal to execute nan state's awesome cleanable power extremity of 100% renewable power by 2033. These plans see precocious metering, grid modernization and our first infrastructure information and reliability plans nether our ownership. These plans stress conscionable immoderate of nan robust finance opportunities astatine our utilities.

We're besides looking astatine imaginable regulated finance opportunities beyond our 4 utilities, leveraging our expertise successful transmission improvement to unfastened caller doors for imaginable growth. This includes our strategical business pinch WindGrid, an Elia subsidiary, wherever we are exploring offshore transmission solutions successful New England. Any finance opportunity stemming from this partnership, are not included successful our superior forecast and correspond imaginable upside to our semipermanent maturation plan.

On nan operational front, during 2022, we maintained our apical quartile reliability successful Pennsylvania and Kentucky, contempt nan accrued wave and severity of storms successful our work territories. And successful conscionable a fewer months of ownership, Rhode Island Energy has knowledgeable a marked betterment successful reliability and exceeded 2022 expectations by much than 10%.

One illustration of this fantabulous capacity was during Winter Storm Elliott. Rhode Island Energy was nan first awesome New England inferior to execute afloat customer restoration successful nan early greeting of Christmas Day.

We besides maintained our apical quartile customer restitution astatine PPL Electric Utilities and Kentucky Utilities. And while we're proud of these achievements, we are sympathetic to nan concerns of our Pennsylvania customers who knowledgeable increases successful their December bills arsenic a consequence of higher power prices.

While we don't power nan value of energy supply, we cognize that it tin person a meaningful effect connected our customers. And while nan default complaint for PPL Electric's non-shopping customers accrued successful December, galore of our customers who person chosen third-party suppliers saw moreover higher value increases and are paying importantly much than our default complaint of astir $0.145.

Our astir caller reappraisal of shopping results recovered that successful November, complete 40% of our residential shopping customers paid a higher complaint than our default rate. Over 100,000 customers paid a complaint betwixt 25% and 100% much than nan default complaint and astir 20,000 customers paid much than double our default rate.

For nan past 2 years, PPL Electric has been a vocal advocate, connected behalf of our customers, for greater safeguards and different actions to protect them from overpaying for their energy supply. We projected various user protection reforms pinch our Pennsylvania legislators and regulators and are again having discussions pinch them for nan use of our customers.

In summation to higher bills from these accrued power prices, a ample number of our PPL Electric Utilities customers received estimated bills successful December owed to a method issue. The timing of higher energy bills and nan accrued number of estimated bills created immoderate disorder and interest for customers.

We person since fixed nan method rumor and person temporarily doubled nan resources astatine our telephone centers to reside customer questions and importantly trim telephone hold times. And successful further support of our customers, we've waived precocious fees and expanded our no-shutoff believe complete nan wintertime to see each residential and mini business customers.

We're besides focused connected communicating moreover much pinch our customers astir precocious power prices and what customers tin do to minimize their power bills. While this is an important taxable for america and our customers that I wanted to reside today, I want to beryllium clear that we do not expect this matter to person a important effect connected our financial results.

As we've discussed astatine length, 1 of nan cardinal aspects of our strategy is to thrust operating efficiencies crossed nan full business. In processing our strategy, we anticipated affordability being a cardinal area of attraction for customers and regulators, moreover earlier we saw nan effects of ostentation and precocious commodity costs. We each cognize nan power grids request important finance to guarantee reliability and resiliency while preparing for renewables, DERs and much electrification. This is why our scheme champion positions PPL to execute our goals while focusing connected affordability for our customers.

Turning to Slide 5. PPL's outlook for 2023 is 1 that is simply focused connected executing our inferior of nan early strategy. In my 2022 recap, I discussed that we are connected way pinch our integration activities pinch Rhode Island Energy. An evident apical privilege for 2023 is to stay connected way pinch our Rhode Island integration, mounting america up for completion successful 2024. We person a $2.4 cardinal superior scheme that improves nan safety, reliability and resiliency of our networks while addressing our customers' evolving needs. We're connected way to present nan first limb of our $175 cardinal O&M savings target by 2026 pinch $50 cardinal to $60 cardinal of savings successful 2023 arsenic we deploy our playbook and proceed to optimize our operations.

These savings will supply a beardown ground for america to present nan midpoint of our 2023 net forecast of $1.58 per share. Recall, this forecast represents a 7% summation from our pro forma 2022 forecast of $1.48 per share. We will besides attraction connected nan regulatory filings successful Kentucky and Rhode Island to present lease costs and reliable power for our customers and thief to beforehand nan cleanable power transition.

Turning to Slide 6. As we executed our strategical repositioning complete nan past fewer years, we took a difficult look astatine really we wanted to beryllium defined arsenic a institution and guidance team. Simply put, we want to beryllium nan champion inferior institution successful nan US, nan champion group of learning safe, reliable, affordable and sustainable power to our customers and competitory semipermanent returns to our shareowners. We've included connected nan correct broadside of nan slide, nan categories that we'll usage to measurement our occurrence against our peers.

In short, we will beryllium targeting apical decile aliases apical quartile capacity and safety, reliability, customer restitution and costs efficiency, while astatine nan aforesaid time, targeting a premium banal valuation. While we're not location yet successful each categories, I firmly judge we are connected nan correct way to get there. And I'm excited to spot america beforehand down this path.

With that, I'll now move nan telephone complete to Joe for nan financial update. Joe?

Joe Bergstein

Thank you, Vince, and bully morning, everyone. Let's move to Slide 8. Our coagulated 4th fourth financial results closed retired a awesome twelvemonth for nan company. Fourth 4th GAAP net were $0.26 per share. Special items successful nan 4th fourth were $0.02 per share, chiefly owed to integration and related expenses associated pinch nan acquisition of Rhode Island Energy, partially offset by a taxation use owed to nan proviso to last 2021 taxation return adjustments, chiefly related to nan waste of WPD.

Adjusting for these typical items, 4th fourth net from ongoing operations were $0.28 per share, an betterment of $0.06 per stock compared to 2021. With these beardown 4th fourth results, our 2022 GAAP net totaled $1.02 per share.

Special items for nan twelvemonth were $0.39 per share, chiefly related to integration and related expenses associated pinch nan acquisition of Rhode Island Energy. Our ongoing net for nan twelvemonth were $1.41 per stock compared to $1.05 per stock for 2021 exceeding nan midpoint of our net forecast for 2022.

Turning to nan ongoing conception drivers for nan 4th connected descent nine. Our Pennsylvania Regulated conception results improved by $0.01 year-over-year. Results were chiefly driven by higher income volumes owed to milder than normal upwind past twelvemonth and accrued returns connected further superior investments successful transmission. These improvements were offset partially by higher O&M expenses.

Our Kentucky conception decreased by $0.01 per stock year-over-year. Improved income volumes successful Kentucky besides owed to milder than normal upwind knowledgeable past twelvemonth were much than offset by higher O&M and liking expense. The summation of our Rhode Island conception accrued net by $0.03 per stock for nan quarter.

Results astatine Corporate and Other accrued $0.03 per stock compared to nan anterior year, chiefly owed to little O&M expenses, little income taxes, and different factors that were not individually significant.

These favorable drivers were partially offset by higher liking expense. Our beardown capacity successful nan 4th fourth reflects different impervious constituent of delivering connected expectations since our repositioning past year.

Our results for nan afloat twelvemonth are connected descent 10. We reported improved results crossed each business conception successful 2022. The operating conception results presented present exclude nan effect of stock accretion, which we've shown arsenic a abstracted barroom connected nan acold correct of nan slide.

Recall that we utilized a information of nan UK business income proceeds to repurchase $1 cardinal of shares backmost successful nan 4th fourth of 2021, resulting successful $0.05 of accretion successful 2022.

We besides utilized different $4 cardinal of nan UK income proceeds to trim our holding institution debt, strengthening our equilibrium expanse to 1 of nan champion successful nan sector. This simplification of indebtedness was nan superior driver for nan $0.10 betterment successful our Corporate and Other conception for nan year.

Turning to nan operating segments. Our Pennsylvania Regulated conception delivered a $0.06 per stock summation for nan twelvemonth compared to 2021. The year-over-year summation was chiefly driven by returns connected further superior investments successful transmission, higher highest transmission demand, and improved income volumes.

These favorable drivers were partially offset by higher O&M expenses, including accrued uncollectibles, further vegetation guidance costs, and IT amortization costs.

Our Kentucky Regulated conception net accrued by $0.07 per stock for nan twelvemonth compared to 2021. Our improved results successful Kentucky were chiefly driven by a afloat twelvemonth of higher unit rates that went into effect successful July 2021 and higher income volumes.

These favorable drivers were partially offset by higher O&M expenses, including vegetation management, works outage and large wind costs, and higher depreciation expense.

Our Rhode Island conception added $0.08 per stock to ongoing net for nan year, reflecting nan play from our acquisition successful precocious May done nan extremity of nan year. This was a awesome twelvemonth for nan institution and is yet different objection of our committedness to present connected and transcend our financial goals.

Turning to descent 11. We expect to support that momentum heading into this year. Today, we are reaffirming our 2023 net forecast scope of $1.50 to $1.65 per stock and nan midpoint of $1.58 per share.

We stay assured successful our expertise to present our forecast by leveraging our proven operating model, a strategy focused connected driving costs efficiencies to trim O&M, which enables investments basal to beforehand our power networks successful nan astir affordable manner.

Our Pennsylvania conception results are expected to summation by $0.04 per stock successful 2023, chiefly owed to returns connected further superior investments successful transmission and little O&M, partially offset by higher liking expense.

We task our Kentucky conception results to summation by $0.05 per stock successful 2023, chiefly owed to little O&M, partially offset by higher liking expense. Our Rhode Island conception results are expected to summation by $0.08 per stock successful 2023, chiefly owed to nan effect of a afloat year's earnings. We task firm and different results to beryllium level year-over-year.

Moving to descent 12. In relationship pinch nan petition from galore of our investors, we've reallocated our Kentucky holding institution financing costs to firm and other, opening January 1. This reallocation provides a clearer position of nan inferior net for our Kentucky Regulated conception and is accordant pinch really we study nan Pennsylvania and Rhode Island segments. We've illustrated nan effect of this reallocation to our existent 2022 ongoing net connected this descent to show nan 2022 conception results connected a accordant ground pinch our 2023 conception forecast.

Moving to descent 13. Our Board of Directors has declared a quarterly rate dividend of $0.24 per stock to beryllium paid connected April 3 to shareholders of grounds arsenic of March 10. As we discussed successful January, nan $0.24 dividend is simply a 7% summation that aligns pinch our predictable, linear and competitory yearly EPS maturation of 6% to 8%.

This is besides wrong our targeted dividend payout scope of 60% to 65%, combining our targeted EPS maturation pinch our dividend output provides investors pinch a compelling full return proposition successful nan scope of 9% to 11% per year. This is accordant pinch our ngo of delivering semipermanent returns to shareholders.

That concludes my prepared remarks, and I'll move nan telephone backmost complete to Vince.

Vince Sorgi

Thank you, Joe. Over nan past 2 years, we've taken bold steps to toggle shape PPL for semipermanent maturation and occurrence and to amended shareowner return, while building connected our halfway strengths.

Since then, we person continued to present connected nan goals we set, exceeding nan midpoint of our 2022 net forecast, advancing industry-leading grid modernization, providing highly reliable energy and state work and economically advancing our cleanable power strategy. And our scheme provides investors pinch an charismatic return proposition, 1 that nan full guidance squad and I intend to deliver.

With that, operator, let's unfastened it up for questions.

Question-and-Answer Session

Operator

We will now statesman nan question-and-answer session. [Operator Instructions] And our first mobility will travel from Shar Pourreza of Guggenheim Partners. Please spell ahead.

Shar Pourreza

Hey, team.

Vince Sorgi

Hey, Shar.

Shar Pourreza

Hey, Vince. Just 2 speedy ones present aft you guys evidently had a broad update a small while ago. But conscionable -- I cognize you guys are evidently targeting $50 cardinal to $60 cardinal of O&M savings this year, but it's been benignant of a ace mild winter, Q1 looks to beryllium a small spot rough. I conjecture really comfortable are you astir nan 158 midpoint erstwhile you're besides layering successful benignant of liking disbursal pressures and immoderate of nan externalities we're seeing retired there. So I conjecture if nan tail risks don't abate tin you benignant of propulsion guardant immoderate of that incremental $70 cardinal successful O&M savings adjacent twelvemonth into this year? I guess, tin you conscionable talk a small spot astir nan contingencies here? Thanks.

Vince Sorgi

Yes, Shar. Look, I would conscionable opportunity we still stay incredibly assured successful our expertise to deed nan 2023 forecast. As you've mentioned and pinch galore of our peers, right, I would opportunity nan astir important imaginable headwinds aliases factors that we're looking astatine coming are liking rates and inflation. And then, of course, weather, which you referenced and its effect perchance connected income aliases our large wind costs.

I would opportunity regarding ostentation and liking rates astatine this point, we're really not seeing thing important capable that we don't deliberation we tin negociate arsenic we look guardant for not only 2023 but going forward. And I would conscionable reiterate that we built a scheme to withstand volatile markets and still alteration america to deed nan targets that we've laid retired for you all. So we're still very confident, don't needfully spot nan request to really accelerate O&M, but that's ever a lever we person astatine our disposal.

Shar Pourreza

Great. And past conscionable lastly, Vince, that's helpful. Just connected nan Kentucky CPCN process, interveners are evidently starting to statement up, looks for illustration there's been immoderate delays connected star PPAs and nan PSC conscionable engaged a consultant, right, to do an study earlier this week. Can you conscionable speak to nan process a small spot much broadly and what we should beryllium watching for interveners and procedurally betwixt now and your adjacent update successful nan spring? Thanks.

Vince Sorgi

Yes, sure. So nan CPCN process does continue, I would say, really connected scheme arsenic was laid retired successful nan procedural schedule. Last week, nan KPSC granted respective interveners, their motions to intervene short, nary of those were a astonishment to us. So I would opportunity everything, again, progressing arsenic we would person expected there. The adjacent measurement is for america to get nan information requests from nan interveners, which are owed to america by nan extremity of coming actually.

This will past commencement a bid of requests and grounds that are scheduled really to proceed done mid-August. And past erstwhile we get done that, that will culminate pinch nan nationalist proceeding during nan past week of August. And past arsenic I deliberation you know, nan committee has indicated that they expect to supply a determination by November 6.

Shar Pourreza

Got it. Terrific. Fantastic. That’s each I had and congrats and we’ll beryllium seeing you existent soon. Appreciate it.

Vince Sorgi

Great. Thanks, Shar.

Operator

The adjacent mobility comes from Durgesh Chopra of Evercore ISI. Please spell ahead.

Vince Sorgi

Hey Durgesh.

Durgesh Chopra

Hey, bully morning. Good greeting team. And Vince very helpful. Thank you for your commentary connected nan Pennsylvania billing issue, we were getting immoderate questions connected that, truthful I admit nan color.

I conscionable had 1 speedy follow-up, rest, everything is beautiful clear. The -- you've asked for AFUDC successful Kentucky, is that portion of this CPCN filing, aliases is that a abstracted decision? What should we beryllium looking for location and really to way that specifically?

Vince Sorgi

Yes, that will travel retired done nan CPCN process, truthful that will beryllium resolved each astatine nan aforesaid clip to get, Durgesh.

Durgesh Chopra

Got it. Okay, perfect. Thank you truthful much. And spell Eagles for 2024.

Vince Sorgi

Not an Eagle stand, but that's okay.

Operator

The adjacent mobility comes from Paul Patterson of Glenrock Associates. Please spell ahead.

Vince Sorgi

Hey Paul.

Paul Patterson

Hey, really is it going? On nan call, I deliberation you were -- successful your prepared remarks, you were talking astir for illustration discussions pinch regulators astir affordability and what person you. I was conscionable wondering if you could springiness a small spot much colour arsenic to what they mightiness beryllium looking astatine and if you person a small spot much chat astir Kentucky and I guess, Pennsylvania, what you're proceeding there?

Vince Sorgi

Yes. So, immoderate of nan things that we were -- we've been engaged successful Pennsylvania, really pinch our -- pinch nan authorities legislature arsenic good arsenic our regulator, nan PUC. Most significantly, Paul, we've requested to person customers return to nan EDC, truthful right, nan companies for illustration PPL Electric and to return to our default complaint erstwhile they travel disconnected nan modular connection programme arsenic that's wherever we've seen our customers gauge nan astir erstwhile they travel disconnected nan modular connection plan.

In immoderate cases, our customers' rates person accrued by much than 300% successful nan months following, coming disconnected nan modular connection program. So, we -- our proposal was conscionable to person folks erstwhile nan modular connection programme ends. If they hadn't already signed up for a caller scheme that they would conscionable default to our default rate, which would limit really overmuch nan value could summation arsenic opposed to, for illustration I said, this 300% aliases more, which we person seen immoderate of our customers get it with.

We've besides requested that suppliers supply elaborate accusation astir their agreements to our customers, some to nan electrical companies. So, again, companies for illustration PPL Electric arsenic good arsenic nan PUC, truthful that we tin augment immoderate supplier notifications and make judge that our customers understand immoderate of these plans that they're signing up for.

We've besides asked for tighter restrictions astir introductory aliases teaser rates arsenic good arsenic adaptable rates. Again, our customers person been impacted importantly by immoderate of those areas. So, overall, I would conscionable opportunity we're really trying to spot greater accountability pinch our suppliers.

Paul Patterson

Okay. That makes a batch of sense. This is benignant of a problem that's benignant of plagued prime -- unit prime jurisdictions astir nan country, I mean, if you look complete nan years, location are immoderate places that are talking astir really limiting customer prime to much blase customers.

In different words, location conscionable doesn't look to beryllium a batch of worth that's being driven by these third-party providers successful galore cases. And is location immoderate talk astir that? And anyplace successful immoderate of nan areas that you operate?

Vince Sorgi

I'm not seeing that yet, Paul. But again, truthful we've been engaged pinch our nationalist officials complete nan past mates of years connected trying to get immoderate of these measures implemented, and they haven't to-date, we are continuing to prosecute pinch them. I think, it's much pronounced now pinch what we've seen pinch wholesale powerfulness prices and earthy state prices. So we will proceed to prosecute connected behalf of our customers to effort to get these wholesale -- aliases not nan wholesale rates, but nan rates that third-party suppliers are charging our customers.

In galore cases, arsenic I said successful my prepared remarks, customers are paying a batch more, moreover much than double our default rate. And you tin spell retired connected nan PUC's website and really get prices that are moreover cheaper than our default rate.

And so, it's a immense issue, arsenic you mentioned, and that's why we're spending a batch of clip correct now connected educating our customers to make judge that they cognize what plans are available, but besides to conscionable make judge they really publication nan good people and understand nan plans that they're entering into and doing what's champion for them and their family.

Paul Patterson

Okay. Awesome. Thanks truthful much. Have a awesome one.

Vince Sorgi

Thanks, Paul.

Operator

The adjacent mobility comes from Angie Storozynski of Seaport. Please, spell ahead.

Vince Sorgi

Hi, Angie.

Angie Storozynski

Hi. How are you? So I person a mobility astir Kentucky. And it's -- I understand it's a spot premature, I guess. But fixed nan clip statement for nan support by FERC of nan Kentucky Power sale, I deliberation it's progressively apt that, that transaction doesn't happen. And I'm conscionable wondering, if this plus stays wrong AP, they're astir apt going to effort to boost its maturation profile, which -- that could consequence successful further ember works retirements aliases plans to discontinue ember plants.

And I'm conscionable wondering, really do you deliberation that could effect your pending proposal? I mean, we've been proceeding immoderate sound successful newspapers successful nan authorities astir reliability concerns connected nan backmost of ember works retirements? And again, conscionable reasoning bigger image if location were to beryllium much ample authorities utilities pinch a akin maturation way aliases towards nan ember works retirements, if that could really derail nan process, aliases do you deliberation really that could beryllium helpful?

Vince Sorgi

Yes, I'm not sure, I think, it would effect america 1 measurement aliases nan other, Angie. I think, again, our CPCN has been designed to onslaught an due equilibrium pinch different substance sources to supply that safe, reliable and affordable energy, while we're replacing 1,500 megawatts, that is reaching our extremity of lives.

We've been very clear that we person not accelerated nan status of our ember plants. These are plants that are extremity of life. And -- truthful our CP, aliases CPCN, pinch nan committee is really really champion to switch that retiring ember procreation pinch nan slightest cost, astir reliable sources of energy.

And arsenic you know, we person a equilibrium of mixed rhythm plants successful location pinch solar, pinch immoderate storage, et cetera. So I don't cognize that I would spot nan -- whether nan waste process aliases whether nan plus remains pinch AEP really impacting our process.

Angie Storozynski

Okay. And past secondly, assuming that you do get nan approval, nan certificate of -- nan certificates from nan Kentucky Commission, would you past record a complaint lawsuit to retrieve nan investment, aliases nan scheme would beryllium either spot a rider betterment aliases fundamentally further trim costs to salary for nan superior spending and nan return connected it?

Yes. So we do -- we are requesting AFUDC sum for nan superior investments we would beryllium making nether nan CPCN. So that would supply america pinch nan net facet of making those investments earlier they spell successful service.

From a rate perspective, again, 1 of nan reasons why we person nan equilibrium expanse that we person is it enables america to prosecute pinch our regulators to mitigate near-term complaint impacts, but astatine nan aforesaid time, get nan investments done that we cognize we request to get done. And past we would prime that up successful a complaint lawsuit sometime successful nan 2026 aliases later clip frame.

Angie Storozynski

Okay. And past lastly, this constituent that you brought up astir unit choice. So it's benignant of an absorbing time, right? Because if you deliberation -- I mean, I'm assuming that you guys had procured energy up of time, truthful you had apt locked successful elevated powerfulness prices. So wouldn't really unit prime makes consciousness to residential customers successful this powerfulness value situation wherever powerfulness prices person fallen beautiful dramatically, arsenic specified that location should beryllium a affirmative differential betwixt what a retailer tin connection versus what nan incumbent inferior offers, no?

Vince Sorgi

Yes, you would deliberation so, Angie. So our value to comparison is astir $0.0145. There are suppliers retired location that are beneath $0.10 precisely to your point. We've had to procure that powerfulness complete six, 12, 18 months clip horizons successful accordance pinch nan PUC process. So yes, truthful we're not needfully getting nan contiguous effect of nan precipitous diminution successful power prices complete nan past period aliases two. Some of our suppliers are, which they're capable to provide, for illustration I said, $0.10 contracts, it makes it absorbing that galore of our customers were paying $0.20 and complete $0.30 successful December for their third-party supplier energy. So awesome point.

Angie Storozynski

Okay. Thank you. Thanks for taking my questions.

Vince Sorgi

Sure.

Operator

The adjacent mobility comes from David Arcaro of Morgan Stanley. Please spell ahead.

David Arcaro

Hey, bully morning. Thanks for taking my questions. A mates of insignificant questions here. I conscionable wanted to cheque connected nan reallocation of nan Kentucky Holdco drag, I was conscionable wondering, are location immoderate implications location either from a regulatory position aliases from for illustration a indebtedness refinancing position arsenic you displacement that into firm and other, aliases is it really conscionable arsenic elemental arsenic moving astir that EPS drag?

Joe Bergstein

Hey, Dave, it's Joe. It's -- there's nary implications to either of those. It's really conscionable nan reallocation of those costs that we were -- we had been allocating to nan Kentucky conception to and really from an investor position to align nan Kentucky conception to nan akin measurement that we had been reporting Pennsylvania and Rhode Island. So nary implications there.

David Arcaro

Okay. Got it. Great. That's helpful. And past I was conscionable curious, would you expect immoderate ongoing elevated costs aliases unit activity aliases thing for illustration that connected nan backmost of nan billing issues successful Pennsylvania successful position of nan telephone halfway resources aliases thing for illustration that, aliases is it going to beryllium conscionable impermanent successful position of consequence there?

Vince Sorgi

Yes. No, that will beryllium temporary, David. We do person third-party contracts that we tin thin connected successful times of need, which we've done. We've besides reallocated immoderate of our existing folks successful different departments and train them up connected nan telephone halfway activity. So, yes, of course, nan third-party contracts, we could dial those up and down arsenic needed and past our soul resources -- they'll conscionable spell backmost to their different departments erstwhile we're done pinch nan telephone halfway duties that we person been doing.

David Arcaro

Okay, understood. That’s each I had. Thanks truthful much.

Operator

The adjacent mobility comes from Greg Orrill of UBS. Please spell ahead.

Greg Orrill

Yes, convey you. Just pinch respect to nan CPCN, really does nan effect of ostentation play into that pinch inflation/supply constraints?

Vince Sorgi

So, those value estimates that are successful our CPCN are each based connected existent pricing. And we ran nan RFPs successful nan summertime. So, those RFP prices are included for star projects.

And again, we're utilizing our soul costs estimates for nan mixed rhythm units and immoderate of nan star that we're proposing that we build. So, I would opportunity costs estimates are up-to-date there. No awesome issues pinch having to set those pinch what's successful nan CPCN.

Greg Orrill

All right. Congratulations.

Vince Sorgi

Thanks Greg.

Operator

The adjacent mobility comes from Paul Zimbardo of Bank of America. Please spell ahead.

Paul Zimbardo

Hi, bully morning. Thank you.

Vince Sorgi

Good greeting Paul.

Paul Zimbardo

And bully to perceive astir nan Rhode Island reliability improvements truthful speedy disconnected nan bat. Shifting to nan state broadside successful Rhode Island, I cognize there's that early of state proceeding ongoing. Just could you talk astatine a precocious level really that could effect nan spending plans, whether successful position of magnitude aliases timing?

Vince Sorgi

Yes. So, it's -- we're early successful that process, Paul, arsenic you know. We did put a superior scheme together to guarantee nan information and reliability of nan state web while we activity pinch nan authorities connected nan early of state docket, that will return immoderate clip to get through.

Again, arsenic we deliberation astir nan state networks, not only successful Rhode Island, but crossed nan country. We surely spot a early for those arsenic to folks for illustration EPRI and different independent investigation agencies successful position of nan substance that's flowing done those LDCs whitethorn beryllium different. They whitethorn not beryllium 100% earthy gas. could person renewable earthy gas, hydrogen, we could person different sources of substance flowing done them, but location are definite processes that conscionable don't lend themselves to electrification.

And truthful long-term, while we surely support and expect location to beryllium a batch much electrification, we besides expect location to beryllium a request and a usage for state LDC networks. And truthful making judge that those networks are safe and reliable now continues to beryllium a apical priority, but we will surely beryllium engaged pinch nan authorities connected nan semipermanent early of that network.

Paul Zimbardo

Okay, excellent. Thank you. And 1 unrelated and I cognize you whitethorn beryllium a small constricted successful what you tin say, but conscionable is location immoderate update connected nan talent litigation aliases arbitration now that, that bankruptcy process has wrapped up? I cognize it's a bequest one, but conscionable dream we tin put that 1 to spot furniture sooner alternatively than later? Thanks.

Vince Sorgi

Yes. There is really -- we are entering into mediation adjacent week connected February 22. That will beryllium earlier 1 of nan judges successful nan Texas bankruptcy court. So, yes, location is an update there. We'll beryllium heading into mediation adjacent week.

Paul Zimbardo

Okay. Thank you very much.

Vince Sorgi

Yes.

Operator

The adjacent mobility comes from Neil Kalton of Wells Fargo. Please, spell ahead.

Neil Kalton

Hi, guys. Just a mobility connected Rhode Island. Yes. It looks for illustration based connected nan guidance for 2023 that, if my mathematics is right, it mightiness not be, that you will beryllium importantly under-earning nan ROE. So my mobility is, are nan costs savings coming successful arsenic expected frankincense far? And then, successful position of bridging that gap? Is this thing that is yet going to require regulatory alleviation successful 2026, aliases tin it beryllium accomplished faster?

Joe Bergstein

Hey, Neil, it’s Joe. So a mates of points there. First connected nan Rhode Island guidance for 2023. I think, we've discussed successful nan past a fewer times that we expect to acquisition immoderate variability aliases sound successful our Rhode Island net arsenic we activity done nan modulation play and guidelines up Rhode Island connected our systems and processes. And so, that's what you're seeing here.

The superior driver of those little net are owed to costs, arsenic we activity our measurement disconnected nan TSA, their costs specified arsenic staffing up our operations, training our caller full-time employees, things for illustration that. I do expect that to normalize erstwhile we've completed nan TSA play successful 2024.

And again, we expected this from nan outset, and it's been embedded successful our projections. And so, our outlook for Rhode Island remains very positive, arsenic we execute nan plan, and I surely expect to spot maturation location successful 2024.

As acold arsenic nan O&M savings that we're projecting for 2023, nan $50 cardinal to $60 million, those travel predominantly from Pennsylvania and Kentucky for nan aforesaid logic I talked astir successful Rhode Island. We're still moving our measurement disconnected those TSAs. So until we're connected our systems and processes, we can't really thrust O&M savings location done nan modulation period.

Neil Kalton

Okay. Understood. And do you deliberation by 2025, we're going to beryllium earning adjacent to nan allowed there, aliases is -- it mightiness return a small spot more?

Joe Bergstein

I think, 25% is surely a normal year. We'll beryllium disconnected nan TSAs by that period, sometime successful 2024. So we get a cleanable twelvemonth successful 2025. It will person been immoderate clip since nan past complaint lawsuit there. I deliberation National Grid's past complaint lawsuit was 2018. So we surely expect to spot an betterment successful ROEs.

We whitethorn request a complaint lawsuit pursuing that. But I deliberation we'll proceed to activity done nan scheme and execute what we person successful shop location and spot wherever we are. But we consciousness -- again, we consciousness bully astir nan maturation prospects successful Rhode Island.

Neil Kalton

Got it. Thank you.

Joe Bergstein

Yes.

Vince Sorgi

Thanks, Neil.

Operator

This concludes our question-and-answer session. I would for illustration to move nan convention backmost complete to Vince Sorgi for immoderate closing remarks.

Vince Sorgi

Thanks, everybody, for joining us. I conscionable want to reiterate, again, really pleased pinch our 2022 results wherever we yet came in, what we accomplished successful 2022 to group america up for 2023 and beyond and just, really stay assured successful our expertise to present connected what we've laid retired for you all.

And I tin show you nan full guidance squad is aligned astir nan caller strategy, and we're really looking guardant to delivering it. So, pinch that, hopefully, we'll spot you guys connected immoderate of nan convention circuits aliases connected MDRs and look guardant to chatting pinch you then.

Operator

The convention has now concluded. Thank you for attending today's position and you whitethorn now disconnect.

Editor: Naga



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