Ladies and gentlemen, thank you for standing by. My name is Lisa and I will be your conference operator today. Welcome to the Fortis Q3 2019 conference call and webcast. During the call, all participants will be in a listen-only mode. There will be a question-and-answer session following the presentation. At that time, those with questions should press star followed by the one on their telephone. If at any time during the conference you need to reach an operator, please press star zero. At this time, I would like to turn the conference over to Stephanie Amaimo. Please go ahead, Miss Amaimo.
Thanks, Lisa. Good morning, everyone, and welcome to Fortis' third quarter results conference call. I'm joined by Barry Perry, President and Chief Executive Officer, and Jocelyn Perry, Executive Vice President, Chief Financial Officer, other members of the senior management team, as well as CEOs from certain subsidiaries. Before we begin today's call, I want to remind you that the discussion will include forward-looking information, which is subject to the cautionary statement contained in the supporting slideshow. All non-GAAP financial measures referenced in our prepared remarks are reconciled to the related US GAAP financial measures in our 2019 third-quarter MD&A. Unless otherwise specified, all financial information referenced is in CAD. With that, I will turn the call over to Barry.
Thank you, Stephanie. Good morning, everyone. Fortis delivered another successful quarter, both operationally and financially, positioning us well to achieve our goals in 2019. Adjusted EPS was CAD 0.66 for the third quarter, and we reported adjusted EPS of CAD 1.93 to the end of September. These earnings results were in line with our expectations, and Jocelyn will speak to this in more detail shortly. Through September, we invested CAD 2.6 billion in our energy delivery businesses across North America to improve reliability, modernize the grid, and deliver cleaner energy to our customers. On the shareholder front, our board declared a fourth-quarter common share dividend of CAD 0.4775 per share, representing a 6.1% increase in our quarterly dividend. This increase aligns with growth we are seeing in our business and the guidance we have provided to our shareholders.
We have now increased our annual dividend pay to shareholders for 46 consecutive years. Last month was the three-year anniversary of closing the ITC transaction. As such, it was fitting that we held our Investor Day this year at the ITC headquarters near Detroit, Michigan. Investors were able to see firsthand the culture of operational excellence at ITC through tours of a critical substation, its operations control room, as well as its cybersecurity operations center. In addition, we showcased the Motor City and the efforts underway by the transportation sector to shift to electric vehicles and the important role of utilities to support electrification and a lower-carbon economy. Beyond highlighting ITC and the Motor City at Investor Day, we also highlighted innovation and the shift to cleaner energy across our businesses in support of our growth strategy. Fortis is committed to reducing greenhouse gas emissions and increasing renewable energy use.
Our teams are discovering innovative ways to deliver energy as clean as we can, as fast as we can, with customer affordability and reliability top of mind. As you may recall, the Wataynikaneyap Power Transmission Project in northern Ontario includes building 1,800 km of transmission lines to connect 17 remote communities to the Ontario grid. We are excited about this project as it will reduce greenhouse gas emissions associated with diesel generation currently used and will provide safe and reliable service to the communities. The project continues to progress with the engineering, procurement, and construction contract being awarded during the third quarter. The project recently achieved a significant milestone with the finalization of financing and the issuance of the notice to proceed. The project is targeted to be completed in 2023.
Turning to the Caribbean, CUC in Grand Cayman recently received regulatory approval for a 20-megawatt utility-scale battery storage project, which will result in lower fuel usage and reduced greenhouse gas emissions. This battery storage will also enable more renewable generation to be connected to the island's power system. In Arizona, you will recall that Tucson Electric Power set a goal to deliver 30% renewable energy to its retail customers by 2030. We are proud that we are approaching this goal sooner than expected in 2021, almost nine years ahead of schedule. They are now working with key community partners, including the University of Arizona, to develop new targets for the utility's 2020 Integrated Resource Plan. Lastly, we are excited about the initiatives underway in British Columbia as part of its Clean Growth Pathway.
Fortis BC has set a target to reduce GHG emissions associated with its customers' energy use by 30% by 2030 for its gas business. With respect to Fortis BC's electric business, 95% of the energy delivered to customers is sourced from renewable generation. Turning to slide six, I want to spend some time this morning to review a few of the exciting initiatives our BC team is working on to achieve this 30% target. Fortis BC's Clean Growth Pathway is focused on four key areas. First is energy efficiency. As you might recall, earlier this year, Fortis BC announced a significant increase in its energy conservation and efficiency program expenditures over the next four years. The nearly CAD 370 million program will be focused on customer initiatives to lower energy use and reduce energy bills.
These conservation and efficiency enhancements are expected to decrease carbon dioxide emissions by 50,000 tons annually, which equates to taking close to 11,000 gasoline-powered cars off the road. Additionally, these expenditures will increase FortisBC's rate base over the four years. Another key area of focus is renewable natural gas. FortisBC is at the forefront of using renewable natural gas from landfills and agricultural sources and has established a target to obtain 15% of its gas supply from renewable sources by 2030. We currently operate five RNG facilities in B.C., and two of these facilities are owned by FortisBC. Just last week, FortisBC announced it received regulatory approval to produce renewable natural gas at the City of Vancouver's landfill site in Delta. This landfill will become FortisBC's largest RNG project to date, and the supply will support their cleaner energy goals.
The third key area includes expansion of our LNG facilities to lower greenhouse gas emissions both locally and globally, including the establishment of the first ship-to-ship marine bunkering service on the West Coast of North America. Last week, the provincial government announced its support for the marine bunkering in British Columbia. Delivery of clean-burning LNG to vessels in the area will reduce greenhouse gas emissions through the replacement of diesel fuel. Lastly, FortisBC is focused on the needed infrastructure to support the shift to lower-carbon transportation by investing in fast-charging stations across the province. The utility also owns and operates five compressed natural gas stations, and approximately 25% of its fleet can be fueled with compressed natural gas. These initiatives, along with progress at our other utilities, demonstrate our commitment to providing cleaner energy. Sustainability remains an important part of everything we do at Fortis.
At Investor Day, we rolled out our new five-year capital plan of CAD 18.3 billion. This new plan reflects a CAD 1 billion increase from the prior year's plan. Driving this increase is the industry trend towards recognizing that renewables and natural gas are foundational energy sources. Specifically, ITC's five-year capital plan increased CAD 400 million over the prior plan. About half of the incremental capital was driven by customer interconnections required to connect cleaner energy sources to the grid. Over the next five years, ITC expects to connect approximately 2,000 megawatts of wind and another 600 megawatts of solar across its footprint. The balance of the increase was driven by changes in foreign exchange assumptions and infrastructure investments required to support reliability improvements. At FortisBC, the five-year capital plan increased CAD 300 million over the prior plan and is largely driven by the expansion of the Tilbury LNG facility.
This project supports B.C.'s Clean Growth Pathway that I just discussed and includes additional liquefaction and piping to the marine jetty. As a regulated project, it already has Order-in-Council approval from the B.C. government. We are currently working through the environmental assessment process for the marine jetty. Our business in Grand Cayman is growing nicely, with CAD 200 million of capital added to the 5-year plan. The Caribbean utility expects to invest CAD 600 million over the next 5 years to enhance the grid and invest in alternative energy and utility-scale solar projects. These projects were outlined in an Integrated Resource Plan, which was approved by the regulator earlier this year. The 5-year capital plan is virtually all regulated, with 99% of our investments expected in our regulated businesses. The plan consists of a diverse mix of highly executable, low-risk projects.
Only 20%, or 10 projects, have a total project cost of only CAD 200 million. Geographically, the capital plan is weighted towards the U.S., with 54% to be spent at our U.S. utilities. This is followed by 41% in Canada and 5% in the Caribbean operations. Turning to slide nine, the capital plan will grow rate base by approximately CAD 10 billion over the next five years, or CAD 1 billion every six months. The CAD 28 billion of rate base in 2019 growing to CAD 38 billion in 2024, this yields three- and five-year compound annual growth rates of approximately 7%. In addition to announcing the fourth-quarter dividend increase of 6.1% at Investor Day, we also announced that we extended our average annual dividend growth guidance of approximately 6% to 2024. Our steady growth profile, coupled with our highly regulated transmission and distribution businesses, gave us the confidence to extend our dividend guidance.
I'll now turn the call over to Jocelyn for an update on our third-quarter results.
Thank you, Barry. Good morning, everyone. As Barry mentioned, third-quarter results were in line with our expectations. Reported earnings for the quarter of CAD 278 million, or CAD 0.64 per common share, were comparable to earnings of CAD 276 million, or CAD 0.65 per common share, last year. On a year-to-date basis, reported earnings of approximately CAD 1.3 billion, or CAD 3.02 per share, were significantly higher than last year. You will recall that our second quarter 2019 earnings included a CAD 484 million net gain on the sale of our 51% interest in the Waneta Expansion. Adjusted EPS of CAD 0.66 for the quarter was CAD 0.01 higher compared to the previous year. This increase reflects rate base growth in our regulated businesses, partially offset by decreased production at the Belize hydro generating facilities due to lower rainfall and a higher weighted average number of common shares outstanding.
On a year-to-date basis, adjusted EPS was CAD 0.02 lower than the first nine months of 2018. Rate base growth, again driven by our regulated businesses, was offset by unfavorable weather impacts in Arizona and Belize, as well as reduced earnings at Aitken Creek. Turning to slide 13, I'll walk through the EPS drivers for the quarter. Growth at our regulated utility businesses was led by ITC, which contributed a CAD 0.02 increase in EPS during the quarter and largely reflects rate base growth. Next, UNS Energy increased EPS by CAD 0.01 in the quarter, which reflects higher revenues due to operation of regulatory recoveries, offset by higher costs associated with rate base growth that are not yet included in rates due to their historical test year. Weather was not a significant driver of results for the third quarter.
At our non-regulated energy infrastructure businesses, EPS decreased by CAD 0.01 for the quarter. This was mainly driven by lower production in Belize as the country continues to experience drought conditions. With the lower rainfall, production in the third quarter was 11 gigawatt hours compared to 59 gigawatt hours in the previous year. Lastly, the CAD 0.01 EPS decrease in the corporate and other segment was driven by a higher number of weighted average common shares, partially offset by lower corporate costs. Higher average common shares reflect the shares issued under the company's dividend reinvestment plan and our At-the-Market Equity Program or ATM. The sale of the Waneta Expansion did not have a net impact on earnings during the quarter, as the earnings lost from no longer having the Waneta Expansion was offset by reduced corporate finance charges. Results of our other regulated utilities were comparable to last year.
Rate base growth at those utilities was offset by timing differences in the quarter, including a CAD 5 million favorable capital tracker true-up recognized at FortisAlberta in the third quarter of last year. Moving to slide 14. Adjusted year-to-date earnings per share for the first nine months of 2019 decreased CAD 0.02 compared to the same period in 2018. The key driver of this decrease was weather in Belize and Arizona, which I'll discuss shortly. ITC, our largest utility, improved EPS by CAD 0.05 compared to last year, again driven by strong rate base growth, partially offset by the reduced independence adder. A higher U.S. dollar to Canadian dollar foreign exchange rate for the first nine months of 2019 resulted in a CAD 0.04 EPS increase. The year-to-date average rate was 1.33 compared to 1.29 last year.
At Central Hudson, EPS increased CAD 0.01, driven by higher delivery rates and lower storm restoration costs. Our Western Canadian utilities improved EPS by CAD 0.01, largely reflecting rate base growth at our gas business in BC. The non-regulated energy infrastructure businesses reduced EPS by CAD 0.06 year-to-date. Lower rainfall in Belize resulting in lower production reduced EPS by CAD 0.04 for the first nine months of the year. As I noted earlier, Belize has been experiencing drought conditions. Production for the first nine months of 2019 was 50 gigawatt hours compared to 179 gigawatt hours in 2018. Lower realized margins at Aitken Creek in 2019 also negatively impacted EPS for this segment. EPS contribution from UNS was CAD 0.05 lower for the first nine months of 2019 compared to last year.
This was largely driven by cooler temperatures in Arizona during the second quarter, as well as higher costs associated with rate base growth, not yet in rates, again, due to the historical test year. Lastly, EPS was lowered by CAD 0.02, reflecting a higher number of weighted average common shares, partially offset by lower corporate costs. The decrease in corporate costs was mainly driven by lower financing costs and timing of tax expense. Turning now to our regulatory outlook. At ITC, we await a final decision from FERC on the MISO base ROE and next steps on two notice of inquiry issued in March. The first NOI sought comment on FERC's policies for determining the ROE used in setting rates, and the second on how to improve its transmission incentive policies to ensure it appropriately encourages the development of needed infrastructure to the benefit of our customers.
You'll also recall, FERC issued an order in 2018, which determined ITC was no longer fully independent and subsequently reduced the incentive adder included in rates of ITC's utilities operating in the MISO region to 25 basis points, down from the approximate 50 basis points that ITC was earning in rates. ITC has appealed this decision to the U.S. Court of Appeals, There's no designated time for the court to decide on this matter. Tucson Electric Power filed its rate case on April 1 using 2018 as the test year. TEP's current rates are based on a mid-2015 test year, Therefore, requested rates include approximately $700 million of additional rate base investments that have been made since then. Additional requests in the rate filing include an ROE increase of 60 basis points to 10.35% and increased equity thickness to 53%.
Intervenor testimony, including the ACC staff testimony, was filed in October. Next steps in the rate case include TEP filing rebuttal testimony later this month, with hearings expected to commence in early 2020, and we anticipate a decision in the second quarter of next year. As discussed during the last quarter, FortisBC filed its multi-year rate plan earlier this year as the current term expires at the end of 2019. The proposed plan seeks approval for a rate-setting framework for 2020 through 2024. As we do not anticipate a decision until next year, the utility has filed for interim rates to be effective January 1st, 2020, and to remain in place until the rate plan is approved. In September, the Alberta Utilities Commission issued an order proposing to change how the Alberta Electric System Operator customer contribution policy is accounted for between distribution owners, including FortisAlberta, and transmission owners.
The decision prevents these transmission-related investments by the utility in the future and directs that unamortized balance, which forms part of FortisAlberta's rate base, be transferred to the transmission facility owners. Currently, FortisAlberta has approximately CAD 400 million of rate base associated with these investments. We were surprised and disappointed with the decision and immediately filed for a review and variance. The filing is currently being reviewed by the AUC. We will continue to contest both the AUC's unprecedented treatment of the unamortized balance, as well as future ongoing customer contributions. Before concluding, I wanted to review the funding plan associated with the five-year capital plan that Barry just discussed. Most of the required funding is coming from cash from operations and regulated debt at the subsidiaries. A small portion of the funding, or 3%, will come from our ATM program.
As you'll recall, we currently have a CAD 500 million ATM program and commenced using the program in the second quarter to fund the increase in the 2019 capital. Through the end of September, we have issued 3.5 million shares under the ATM program, equating to gross proceeds of approximately CAD 181 million. Fortis is well-positioned to execute on the new five-year capital plan and improve the credit profile of the company. Specifically, we expect to improve CFO to debt to an average of 12% over the next five years and decrease the ratio of holdco debt to total debt to low 30s by 2024. We remain committed to our investment-grade credit rating and are focused on improving our credit profile. This concludes my remarks, so I'll now turn the call back to Barry.
Thank you, Jocelyn. We believe Fortis is a strong value proposition supported by our organic growth strategies, our improving credit profiles, unique business model, and long track record of delivering on our plans. As another year wraps up and we look ahead to 2020, we are optimistic about our growth trajectory and the important role our businesses play in shifting to cleaner energy in the communities we serve. Sustainable practices have remained front and center, and we are committed to doing even more in the future. Now I'll turn the call back over to Stephanie.
Thank you, Barry. This concludes the presentation. At this time, I'd like to open the call to address questions from the investment community.
Thank you, ladies and gentlemen. We will now conduct the question and answer period. If you would like to now register a question, please press the star followed by the one on your telephone. If your question has been answered and you would like to withdraw your registration, please press the pound sign. If you are using a speakerphone, please lift your handset before entering your request. One moment, please, for the first question. Our first question comes from the line of Robert Kwan from RBC Capital Markets. Your line is open.
Great. Good morning. If I can maybe start with TEP. You had mentioned some of the other filings that have gone in, particularly the staff recommendation. I'm just wondering if you could give some kind of higher-level thoughts on what the staff put forward, particularly just on the cost of capital parameters, ROE, fair value return, equity thickness, and the like.
Thank you, Robert. I'm going to ask David to comment on that. David?
Yeah. This is David Hutchens. Good morning, Robert.
Good morning.
Yeah. Without getting too much into the details of what we'll be putting in our rebuttal here at the end of the month, we are a little disappointed with the ROE that staff came out with, as well as a little bit lower fair value increment than what we were expecting. Those are things that we're going to address in our rebuttal testimony and obviously in the hearings itself. We're generally pretty positive about overall where we're at from a process perspective, but we've got some work to do.
Okay. Maybe just turning to the Alberta side and the decision from the AUC, just wondering, how are you accounting for this while you've got the RNV outstanding?
Jocelyn?
Robert, we've not done anything different with respect to recording these transmission investments. Until we get an order and further clarity, but particularly an order, we will not be making changes to how we account for our transmission investments.
Got it. I guess maybe just to follow at a higher level on the asset side, it's obviously not good if you end up losing and having to transfer it, I guess, net book value. In some ways, though, how would you look at this with respect to then effectively being an asset sale and boxing out common equity needs? Another way to think about it is you're reducing capital in a low return and questionable regulatory jurisdiction and being able to redeploy that capital into, say, U.S. utilities with better returns on invested capital.
Robert, it seems like you can find a silver lining in anything. We can't right now on this decision, frankly. Clearly, yes, if the transfer did happen at book value, we'd get the proceeds, and that would create a dividend from FortisAlberta back up to Fortis. We'd have to pay down some debt at FortisAlberta as well, with probably make-whole costs associated with it. These are some of the things we've identified for the commission to consider that were not part of their deliberations in making this decision. These issues generate other impacts. Our focus is to work to get this decision reversed. We have filed, I think, some strong arguments to do that. We continue to look at our Canadian business in a positive light. We have work to do on the regulatory compact in Canada.
I know that, but we're not redirecting capital from Canada to the U.S. We're not doing that.
Okay. That's great. Thank you.
Our next question comes from the line of Ben Pham from BMO. Your line is open.
Okay. Thanks. Good morning. I wanted to follow up on the customer contributions in FortisAlberta. I wanted to clarify, isn't the CAD 400 million, that's always been a no-cost of capital item for you guys? Really this is, you think about it, really it's just a CapEx recovery or depreciation recovery, maybe some cash tax impact?
No, Ben Pham, in the case of this investment, it's like any other rate-based investment. We actually fund it with equity and debt and earn on it. It's not a no-cost investment or anything like that. That's what's fairly unique about the decision to ask one utility to transfer its rate base to another utility at presumably book value. That's where we had to start. It should never happen at book value. If it's going to happen, it's got to be happen at fair market value. We paid 1.5, 1.6 rate base to buy FortisAlberta, and the regulator's asking us to transfer 12% of the rate base at presumably book value. That's just not I think it's a precedent-setting kind of request, frankly, and one that we do have to challenge.
Okay, this isn't the one where you basically get some contributions from transmission customers, and that cash goes in, and that's usually a deduction of CapEx when you book it. That's a separate item.
No. Ben, it's Jocelyn.
Yeah.
No, this is rate base similar to any other rate base that we have. We don't exclude it.
Okay. I gotcha. Okay. Then on the Belize hydro, thanks for providing some of the generation and whatnot. I can probably try to calculate the earnings impact. Can you share probably just the earnings impact on that for the quarter?
Yeah. BECOL, due to the low rainfall, was about CAD 0.01 in the quarter. We outlined that in the presentation. To date, BECOL is down about CAD 0.04 over last year for us, and all attributable to the lower rainfall.
Yeah. I would say.
Last year as well.
Yeah. I would say since I've been involved with Fortis, this is the driest year that we've had in that jurisdiction. They really have not had any rain, and we need to have a good tropical storm go through there to fill the reservoirs soon.
Okay. All right. That's just me. Thank you.
Our next question comes from the line of Julien Dumoulin-Smith from Bank of America. Your line is open.
Hey, good morning, team.
Good morning.
Morning.
Howdy. Perhaps just to backfill on these AUC questions, can you talk a little bit more about just the civil process that you talked about with this appeal? What kind of timeline could we be looking at with which you would be making this decision ultimately to take it out at the CAD 400 at net book or otherwise? Just to understand and think about how this could mesh with next year's update anyway.
Julien, we have Michael Mosher on the phone, our CEO from Alberta. I'm going to ask Michael to talk a little bit about the process from here. Michael? He's looking for his mute button. We lost him.
Motion has granted that.
Sorry, Mike. We weren't hearing you. Might want to start from the beginning.
I'm sorry, Barry?
I think you might want. It seemed like you cut in there. Maybe start again.
Okay. Can you hear me?
Yes.
Okay. Good morning, Julien. Yeah, as Barry said about the process, we filed for a review and variance, as well as a requesting a stay of the order immediately upon receipt of the order. The commission on their own motion has granted the review and variance and has set forth an expedited schedule, which essentially has a closing of the record in their review by November 7th. They have indicated that it is their intent to issue a revised decision prior to year-end.
Got it. Maybe just to think about it this way. How does this mesh into the longer-term update that you'll probably do as you will for next year anyway? This isn't that material against the overall outlook, across the range of utilities that you own, and especially if you have other moving factors in that rate-based outlook already.
That's right, Julien. This is not really a material thing for Fortis. It's a disturbing thing, but not material for the company. Obviously, that's the benefit of Fortis in terms of being the diversified business that we are, is that having a poor decision in any one jurisdiction really doesn't show up on a consolidated basis, but it doesn't lessen our resolve to work to get it reversed, that's for sure.
Well, if we can talk a little bit further about the comment made earlier around Canada, just briefly, how do you think about further asset sales more broadly? You have some degree of future equity needs. I don't want to put a number out there per se, but certainly it's pretty clear-cut. How do you think about the fungibility in asset sales versus future equity and making decisions given this outcome and others?
Well, Julien, we're always looking at asset sales. It's part of any big public company's processes these days. We're always open to folks who are interested in some of our assets. If they want to make us an offer, then go ahead, frankly, and we'll have to consider it. That being said, I think we do have a very effective funding strategy with our DRIP program, our ATMs, and we're showing pretty strong improvement in our balance sheet over the next number of years. I think when you think about Fortis, and some folks would say, "Yeah, you guys got a great wires business." The only thing that rubs us a little badly is maybe your credit side of things. I can tell you that over the next number of years, that's going to go away as well.
You're going to see this company with adding CAD 10 billion in rate base over the next few years with a very much improving balance sheet over that period. If that generates more value, then we'll capture it.
Got it. No commitment as of yet?
No.
Okay. Excellent. Well, thank you for the time. All the best.
Thanks, Julien.
Our next question comes from the line of David Quezada from Raymond James. Your line is open.
Thanks. Morning. My first question here, just FortisBC on the LNG marine bunkering topic. Does the most recent proposal, and I guess the government's apparent support of it, change your timing or maybe just color on the next steps for a decision on further expansion at Tilbury?
I'll just make a comment. Again, I'll have Roger, our CEO of BC, jump in. I don't think it changes the timing. We do have it in our five-year plan, the bunkering facility. I would say having the province issue a press release supporting the project was a very positive development, and we very much appreciated that, and gives us strong confidence that this project will move forward. Roger, maybe you can provide some more flavor on it.
Thanks, Barry. Morning, David. Not much more to add to what Barry has said. The timing hasn't changed. To move the LNG bunkering business, it's going to need a number of layers of provincial government support. Port of Vancouver are federally regulated. Obviously, the province has a role in permitting things like that. Seeing the BC government supportive, it really helps us get the broader level support to put in place the various initiatives and approvals we need to get there. The timing hasn't changed, though, because of the announcement. It's just really an indication of growing support for what's going to be hopefully an exciting part of the business.
Great. Thank you. Appreciate those comments. My other question here, just on the general topic of renewable gas. Sounds like it could be a really interesting opportunity for you guys. Any comments on the scope and scale of that opportunity, and if you could deploy it or capitalize on that opportunity outside of BC at some point?
Well, I would say from my perspective, it's big news and a big opportunity, and it would take a lot to get to 15%. Roger, maybe you could comment on this ability to procure outside of British Columbia.
Thanks again, Barry. The 15% target will be about 30 petajoules of natural gas displacement by 2030. The plan for us, we anticipate probably a third of that in province, two-thirds coming from either out of province contracts or other forms of renewable gas, such as hydrogen. As far as what the shape of that portfolio looks like, it's still indeterminate. We plan to invest in facilities like we have already in the city of Vancouver landfill. The way we envision the program, it's really going to be a supply purchase arrangement. We're offering long-term contracts for renewable natural gas to allow third parties, such as agricultural sites, landfills, to build the facility, and then we'd enter into long-term contracts with those facilities, and those would be in BC, but as well, out of province.
Great. Thank you. Appreciate those comments.
Our next question comes from the line of Robert Hope from Scotiabank. Your line is open.
Morning, everyone. Just one cleanup question. Just on the backdrop of Woodfibre LNG inching forward, as well as the government being more supportive of LNG bunkering specifically. Can you update us on your talks with the regulator on gas security in the Lower Mainland and if there is something FortisBC could do there longer term?
Robert, we continue to work on that, and I think it will form a part of our plan going forward. We're not there yet in terms of that, but Roger, again, maybe you could update on exactly where we are at this point.
Thanks, Ken Barry. I appreciate the question, Robert. We are having high-level discussions on the issue, driven obviously by the Enbridge situation a year or so ago. No specific plans. We are looking at various options. We're looking at additional system storage. We are looking at potential pipe expansion. It's one of those things where there's interest from the provincial government. We've had some initial discussions with the regulator, but there's significant work still needs to go before we have any kind of plans that we're sharing with the regulator.
It's an ongoing discussion, but it's a new topic or a new area of interest from the government regarding the resiliency of the system.
All right. Thank you.
Our next question comes from the line of Mark Jarvi from CIBC Capital Markets. Your line is open.
Thanks. Good morning, everyone. I just wanted to come back quickly to Alberta and just one kind of cleanup question was around what the expectation around rate base growth for that transmission business. Was it going to kind of grow in line with the broader expectations for Alberta? Any kind of commentary around how much capital you thought you could deploy there?
Rate base growth in Alberta is tracking around 4%, which is a little low, I think, compared to what the industry across North America is growing at right now. That's a business that we've seen strong growth over the years. Right now, we're looking at about 4% growth.
I guess more specifically, I was just wondering on those transmission assets that might be transferred, would they grow in line with your broader expectations for Alberta? How much kind of CapEx was expected to be invested in that transmission assets?
Yeah, Mark, this is Jocelyn. Yeah, there's actually minimal future in our next five years. We don't have a lot for transmission investments in our plan. It's actually less than CAD 100 million.
Okay. That's helpful. Thanks. Turning to ITC, which has been performing really strong here. Anything you'd call out in terms of either short-term tailwinds or something that might be less recurring, like one thing you flagged is the effective tax rate. Just trying to help us understand if this sort of pace here of earnings growth for ITC can be sustained, if there's anything that's kind of boosted in the near term.
Putting Linda on the spot. No, I would say ITC is growing in sort of relation to the investment that it's making in rate base. We do still see a strong five years for them in terms of the capital they've laid out. Linda, maybe you could add some flavor. They're still being driven by the renewables push in the Midwest and sort of the integrity of the infrastructure overall, I would think. Maybe you could add some comments.
Thanks, Barry. That is absolutely right. I mean, primarily our growth is being driven by strong rate base growth. Certainly both in terms of last year, we had a strong rate base additions year, obviously we're seeing the reflection of that in our earnings this year. In addition to that, so far this year, we're continuing to have a strong year as it relates to capital additions. We also have had the benefit this year. We acquired some assets from the Dearborn Industrial Generation facility. Those are now reflected in rates. We've also closed on the acquisition of assets from CMS Energy, as well as we acquired some assets from Jo-Carroll Energy at ITC Midwest. Those are all helping our rate base growth.
I think more importantly, as Barry indicated, we are just continuing to see a lot of different need drivers on our system, both in terms of sort of baseline reliability projects, interconnections, both load interconnections that are primarily driven by our customers, particularly DTE Energy. We've got a lot of load interconnections to respond to the growth and shifting growth in the Southeast Michigan area. Ultimately the continued generator interconnections, both wind and solar. We're starting to see quite a large pickup in solar projects, and obviously, we are working with the various developers and utilities to sort of work out the plans to build the needed transmission for the generator interconnections. I think long-term, we just continue to see the ongoing shift to more and more renewables, which I think long-term is going to continue to drive needed capital investment in transmission.
We're very optimistic.
Okay. That's great. Thanks.
Our next question comes from the line of Andrew Kuske from Credit Suisse. Your line is open.
Thank you. Good morning. Maybe to save Barry's voice, I'll ask Jocelyn a question just on the ITC adder.
Thank you, Andrew. I think you detected I have a very bad head cold, so
I can hear you're struggling. I'll probably ask you something as a follow-up. First with Jocelyn, just on the ITC adder. I think you mentioned there's no timeline on the process. Court processes are seldom quick. If you looked at past precedents, to what degree do you believe you get a decision within? Is it a 2020 event, late 2020, 2021? What's the kind of ballpark do you think?
Yeah. It's a very difficult question, Andrew. You never can pinpoint exactly when the regulators are going to offer these final decisions. We're still hopeful we're going to get a decision on our lease side of ITC by the end of the year. On the independence adder, it's a tough call. There's been some noise and movement at FERC, and so again, that all adds to the uncertainty of when we're going to get it. We're hopeful that it's coming soon, but you never can tell. When things go to the U.S. Court of Appeals and with FERC, the uncertainty is obviously more.
I appreciate the color, I will ask Barry the next question. It's really just in the context of what we saw yesterday with the Encana announcement of redomiciling the company. When you look at the valuation delta across the border, a lot of the questions on this call have been about what's happened in Alberta for you. What do you think about redomiciling the company at some point in time? Is this effectively a move where you can actually push greater regulatory change in Canada in a positive fashion, because you've talked about that for multiple years now?
Great question, Andrew Kuske. We're not considering redomiciling the corporation. I would say our focus, as you know, over the last couple of years, has been reducing the discount that we trade at versus a typical U.S. utility, and I think we've had a lot of success at that. We probably trade today at the level of the average U.S. utility. I always kid my team a little bit and say we should trade at a premium given that we're a wires business, a T&D business, very diversified and all that. We've made a lot of progress to close the gap. Now, listen, I have a lot of sympathy for the things that were outlined yesterday by the CEO of Encana in terms of some of the logic that they're using. There is a giant sucking sound of capital towards the U.S.
This issue around passive investing is a big issue. Typical U.S. utility has its top four shareholders are passive investors. They own about 30% of those businesses. In comparison, for us, we have about 15% maybe of our stock that's held by passive funds. We have to go find more institutions to own our stock. We have to almost be better than the typical U.S. utility. I've said for some time that capital in our sector in North America, it flows from Canada to the U.S. There is no capital coming from the U.S. up to Canada, and that's primarily because of Canadian regulation. I think that is not sustainable over time. We will have to have a change in some point in the quality of Canadian regulation.
The Alberta situation here, I suppose, is an added item to that that says, "Geez, that's another wrinkle now." That's not great. Now, I will say to you, we have some positives. We have a good retail following in our stock in Canada. About 30% of our stock is held by retail shareholders. In the U.S., a U.S. utility might only have 10% or 15%. It's not all negative, but this issue around passive investing is a big issue. I will say in Canada, we also have another issue in some of our very large pension funds have almost abandoned the Canadian capital markets, and they've used diversity as a reason. If one of your biggest pools of capital are not investing in Canadian stocks, then that's also a big headwind for Canadian public companies, right?
We have some problems at home that we can solve before we start focusing in other places, frankly, as well. I think these issues will continue to be very much front and center in Canada. We're going to have to figure them out to allow these great companies in Canada to prosper over time. Frankly, the other thing is strategy. Fortis has always had a good strategy, and I think fundamental to a business' success is execution of strategy. Over the long term, we've done well by moving into the U.S., and we've executed well. I can't argue that what we've created is wrong because it is an amazing corporation that's on both sides of the border, listed in both places. I don't think we should be tinkering with that.
We should just be trying to fix some of these more macro issues that we have in Canada.
Okay. I appreciate the color. Thank you.
Our next question comes from the line of Patrick Kenny from National Bank Financial. Your line is open.
Yeah. Good morning, guys. Just on TEP approaching 30% renewables by 2021. Obviously, that's a big accomplishment. If we zone in specifically on coal as a percentage of TEP's generation mix, correct me if I'm wrong here, but still over 40% or at least one-third. Can you remind me if there's a goal to bring down the percentage of coal to a specific target at some point over the next five to 10 years?
David, would you want to just jump in on that one?
Yeah. There is not currently a goal for that. We're in the middle of doing our Integrated Resource Plan. Some of those goals may come out of that process, but right now, actually the only state goal is to get to 15% renewables by 2025. We're obviously doubling that in our efforts, but a lot of that's still to be determined.
Okay, great. Just switching over to BC and the outlook here for your gas storage business up at Aitken Creek. I was just curious if the recent change from AGTL with respect to priority access into Alberta storage might have any impact on the outlook for the profitability of gas storage up in northern BC, at least on the 50% that isn't utilized by FortisBC.
I'm going to let Roger jump in, but I'll make a comment about generally that plant. I think as we think about all that's going to happen in that market in the next decade or so on LNG export and the amount of gas that's going to move through the system in BC and out. I think that asset just continues to get more and more valuable, going forward. We should see improving earnings from it over time. Roger, that's the challenge, right? Maybe you can add some quick color on that.
Yeah. Thanks, Patrick. The short answer is no real impact. I think that was addressing what's going on in the producer segment in Alberta. That decision really had support of the Alberta government, from what I understand. From our perspective, given the nature of our business, we think it might help a little bit with activity, but not sure it's going to make a big difference in the near term on profitability.
Okay. That's great. That's it for me. Thanks, guys.
As there are no further questions, I'd like to turn the call back to Stephanie Amaimo for closing remarks.
Thank you, Lisa. We have nothing further at this time. Thank you everyone for participating in our fourth quarter 2019 results call. Please contact investor relations should you need anything further. Thank you for your time, and have a great day.
Thank you for participating, ladies and gentlemen. This concludes today's conference call. You may now disconnect.