Ladies and gentlemen, thank you for standing by. My name is Michelle, and I will be your conference operator today. Welcome to Fortis Q4 2020 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 this time, I would like to turn the conference over to Stephanie Amaimo. Please go ahead, Ms. Amaimo.
Thanks, Michelle, and good morning, everyone, and welcome to Fortis' 4th quarter and annual 2020 results conference call. I'm joined by David Hutchins, President and CEO Jocelyn Perry, Executive VP and CFO 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 to the discussion will include forward looking information, which is subject to the cautionary statement contained in the supporting slide
to the
questions included in the forward looking information presented today. All non GAAP financial measures referenced in our prepared remarks are reconciled to the related US GAAP Financial Measures and our 2020 annual MD and A. Also, unless otherwise specified, all financial information referenced is in Canadian dollars. With that, I will turn the call over to David.
Thank you, and good morning, everyone. I'm happy to be hosting today's call from snowy St. John's to Fortis' new President and CEO following Barry Perry's retirement at the end of 2020. Before we get started today, I hope you are all staying safe and healthy to the operator. As we look back on 2020, it proved to be a successful year at Fortis on many fronts Despite the challenges that the year presented, the value of our locally driven business model has never been more evident.
Our teams across North America leaned on our shared values and each other to find the best solutions to navigate through the year. We continue to demonstrate our commitment to safety, while delivering essential service to our customers with the high level of reliability that they have come to expect, Even with the pandemic and record weather impacts at several of our subsidiaries and we kept moving our business forward. We invested $4,200,000,000 in our systems, our largest annual capital spend to date, increasing our rate base by 8%. On the sustainability front, we announced a corporate wide target to reduce our carbon emissions 75% By 2,035 compared to 2019 levels. We also saw the constructive resolution of key regulatory proceedings, Including TEP's recent general rate application, which Jocelyn will speak to shortly.
2020 was a Strong safety and reliability year for Fortis. In fact, we recorded the best safety performance in our history with safety incidents Decreasing 25% over the prior 3 year average. This was a significant accomplishment during a pandemic And the execution of our record capital investment plan. On the reliability front, we remain consistently in the top quartile relative to our Canadian and U. S.
Peers. This continued focus on reliability doesn't go unnoticed. Last month, 2 of our utilities, ITC Central Hudson were presented with the Edison Electric Institute Emergency Response Awards. ITC was recognized for its quick and safe restoration Following the derecho windstorm in Iowa and Central Hudson was recognized for its outstanding storm recovery performance following tropical storm Isaias. We are incredibly thankful for the crews and customer service teams as this would not have been possible without their hard work and dedication.
In 2020, our management teams were able to tap into a vast network of expertise across the Fortis Group to stay focused on what matters most to our employees, customers and local communities. Approximately half of our 9,000 employees transition to working from home. While our field operations and critical on-site functions adapted operations to ensure we safely kept electricity the Q4 of fiscal 2020 and natural gas flowing to our customers. We supported our 3,000,000 customers during the pandemic by offering flexible payment options, suspending disconnections, waiving late fees and deferring scheduled rate increases. And in the communities we serve, We donated over $15,000,000 throughout the year, including $5,000,000 specifically for COVID-nineteen community support.
As we have noted in the past, our sales are trending consistent with the industry. Generally speaking, we continue to experience higher residential sales to the Q1 of 2019. Tempered by lower commercial and industrial sales. In 2020, 83% of our revenues were from residential sales to the Q4 of 2018. We are now in the Q4 of 2019.
We are now in the During the Q4, retail sales at these segments increased by 1%. Favorable weather in Arizona contributed to higher sales at UNS. But excluding weather related impacts, sales at UNS were still up 2% over the same timeframe in 2019. For our other electric segment, sales were down 3% in the quarter driven by reduced tourism in the Caribbean. During the year, our utilities invested $4,200,000,000 into our energy systems.
This record level of capital was $400,000,000 higher than 2019, increased rate base by 8% and represents investments to support delivering a cleaner energy future. Notably, we invested $500,000,000 during the year in the Oso Grande Wind Project in Arizona. This 250 Megawatt Wind Generation Facility is owned by Tucson Electric Power and will complement their existing solar generation portfolio. Commissioning is expected to be completed in the first half of twenty twenty one. In 2020, we Establish a corporate wide carbon emissions reduction target of 75% by 2,035.
All of our utilities will contribute to the corporate wide target With the majority being underpinned by TEP's Integrated Resource Plan. This plan calls for an additional 2,400 megawatts of wind and solar And 1400 megawatts of energy storage to support the closure of all of TEP's coal generation assets by 2,032. TEP alone will almost quadruple the current renewable energy generation capacity the Q1 of 2019. By 2,035, we expect 99% of our assets will be dedicated to energy delivery or carbon free generation. We remain focused on continuously improving our already highly ranked ESG profile.
From a governance perspective, we are consistently recognized for our practices that are grounded in local leadership and independent board oversight. In 2020, we launched our corporate wide inclusion and diversity council, signed the BlackNorth initiative to and continued our focus on gender diversity. Today, 60% of our utilities have either a female CEO or Board Chair And women represent 40% of the Fortis Board. Turning to Slide 11, this past September we rolled out our new 19 point the $6,000,000,000 5 year capital plan, reflecting approximately $4,000,000,000 of annual investment in our utilities. Virtually all of our planned investments are regulated and consist of a diverse mix of highly executable low risk projects to the next question.
The capital plan is expected to grow rate base from $30,500,000,000 in 2020 to over $40,000,000,000 in 2025, an increase of $10,000,000,000 or nearly 1 third. This yields a 5 year compound annual growth rate to the Q1 of approximately 6%. Within our portfolio of utilities, there are several opportunities to expand and extend investments the call today. Thank you. Thank you.
Thank you. Thank you. Thank you. Thank you.
Thank you. Thank you. Thank you. Thank you. Thank you.
Thank you. Thank you. Thank you. Thank you. Thank you.
Thank you. Thank you. Thank you. Thank you. Thank you.
Thank you. Thank you. Increasing investments in energy efficiency and expanding low carbon transportation. Additionally, the Biden administration has proposed a sustainable infrastructure and equitable clean energy plan calling for net zero emissions in the U. S.
By 2,050 Carbon Free Power from the Electricity Sector by 2,035. This could accelerate capital investments at our U. S. Utilities to the Q4 of 2018. Through transmission interconnections of renewables at ITC, clean generation and energy storage in Arizona and electric vehicle infrastructure in the 9 U.
S. States the Q4, we increased our quarterly dividend by 5.8%. This marked 47 consecutive years of dividend increases. With our low risk energy delivery business and strong growth outlook, We remain confident in our ability to execute on our 6% average annual dividend growth guidance through 2025. I will now turn the call over to Jocelyn for an update on our Q4 and annual financial results.
Thank you, David, and good morning, everyone. For the quarter, adjusted net earnings was $320,000,000 or $0.69 the Q4 of 2019. The call. For the year, adjusted net earnings was $1,200,000,000 or 7% higher than 2019. Adjusted earnings per common share was $2.57 This represents a $0.02 increase compared to last year, Despite the significant equity issuance at the end of 2019, I'll get into the details of the drivers of earnings and EPS growth on the next two slides.
Slide 15 highlights the EPS drivers for the quarter. Starting with our largest utility, ITC contributed $0.05 EPS increase for the quarter. The increase related primarily to rate base growth and timing of earnings associated with the November 2019 FERC ROE Decision. Our U. S.
Electric and gas utilities contributed a $0.03 EPS increase for the quarter. Our Arizona business contributed a $0.02 EPS increase driven by higher retail sales and an increase in the market value of certain assets held in trust to support retirement benefits. The increase was tempered by rate base growth not yet included in rates and incremental credit losses associated with the pandemic. In New York, Central Hudson increased EPS by $0.01 driven by rate base growth. And the $0.02 EPS increase for our other electric segment was mainly attributable to timing of purchase power costs at Newfoundland Power.
Our Energy Infrastructure segment contributed a $0.02 EPS increase driven by production at the Belize hydroelectric generating facilities to the Q1 of 2019 due to higher rainfall. As you might recall, Belize experienced drought like conditions for most of 2019. The $0.01 EPS decrease for our Western Canadian Utilities was mainly due to timing of operating expenses at FortisBC. And in our Corporate and Other segment, the $0.01 EPS decrease was mainly due to a lower income tax recovery offset by lower finance charges and operating costs. And lastly, a higher number of shares contributed a $0.03 EPS decrease for the quarter.
Now to Slide 16. Adjusted 2020 EPS increased $0.02 to $2.57 compared to 2019. EPS contribution from ITC was $0.06 higher compared to last year, driven by strong rate base growth as a result of record capital investments of 1 point to $2,000,000,000 made in 2020. A higher base ROE and lower business development expenses also contributed to the increase. Our U.
S. Electric and gas utilities contributed a $0.03 EPS increase compared to last year. A $0.02 EPS increase in Arizona was driven by higher retail sales, mainly due to favorable weather. And as you recall, Tucson experienced its the Q1 of 2019. The increase was offset by similar items we noted for the quarter, including regulatory lag and incremental the Q1 of 2019.
The $0.01 EPS increase at Central Hudson was driven by rate based growth, offset by an increase in costs associated with COVID-nineteen. Central Hudson continues to track all COVID-nineteen related costs in conjunction with the generic proceeding the Q1 of 2019. Our Western Canadian Utilities contributed a $0.03 EPS increase driven by rate base growth, the Q1 of 2019. Offset by the impact of the PBR efficiency carryover mechanism recognized at Fortis Alberta in 2019. Our Energy Infrastructure segment contributed a $0.03 EPS increase driven again by increased hydroelectric production And the $0.01 EPS increase for our other electric segment was mainly attributable to higher income from Belize Electricity, the Q4 of 2018.
Next, a higher U. S. Dollar to Canadian dollar foreign exchange rate favorably impacted annual results by $0.01 Lastly, a higher weighted average share count from the advancement of our equity funding in late 20 the Q1 of 2019, lowered EPS by 0 point Citi. This mainly related to the decline in tourism in the Caribbean as well as incremental pandemic related costs at UNS Energy in Central Hudson. As you can see on Slide 17, the bulk of our 5 year capital plan is expected to be funded with cash from operations and debt issued at our regulated utilities with the remaining 6% funded through our dividend reinvestment program.
With the recent reinstatement of the 2% discount on the DRIP program, participation has increased to approximately 35%, We continue to remain strong liquidity with over $4,000,000,000 available on our credit facilities. Our utilities were active in the debt capital markets in 2020, taking advantage of favorable pricing and issuing approximately $3,500,000,000 of long term debt, Including the issuance of green bonds at both FortisBC and TEP. Our funding plan and strong liquidity positions us well to the Q and A session. As we continue to work through the pandemic and execute on our capital plan. In 2020, we to cash flow to debt ratio just over 12% and a holding company debt ratio of 34%.
Back in 2018, we indicated that U. S. Tax reform was expected to temporarily impact our cash flows and credit metrics. Since 2018, our cash flow and holding company debt ratios have improved by 170 and 500 basis points respectively. These improvements mainly reflect actions we took in 2019, including the accelerated equity issuance and the sale of the Waneta Expansion, to the Q1 of 2019.
And even through the pandemic, we've maintained a strong the financials and financials and regulatory mechanisms that serve to stabilize cash flow and earnings the conference call. In addition, a number of our key regulatory proceedings have concluded with constructive outcome. Overall, our credit metrics coupled with Fortis' low business risk profile positions us well within our existing investment grade credit ratings. Turning now to the recent changes in the U. S.
Dollar to Canadian dollar, about 2 thirds of our earnings and a similar portion of our 5 year capital the U. S. And as a reminder, our 5 year capital plan is currently based on a foreign exchange rate of 1.32. To To help mitigate foreign exchange exposure, we do use natural hedges, including approximately $2,000,000,000 in U. S.
Denominated corporate debt the Q4 of 2018. With our hedging strategy, every $0.05 the Q1 of 2019. The change in the U. S.
Dollar to
Canadian dollar exchange rate is expected to impact annual EPS by approximately $0.06 on average
to the Q4 of 2018. And would result in
a $400,000,000 change in our capital 5 year plan. On balance, we remain comfortable with our hedging strategy, but we'll continue to to the Q1 of 2019. As David mentioned earlier, 2020 was a busy year as many to the Q3. Most recently, the Arizona Corporation Commission issued a constructive rate order the Q1 of 2019. Overall, we were pleased to bring the rate case to conclusion the acquisition at the end of 2020.
The new rates effective January 1 reflect the requested rate base of approximately US2.7 billion dollars equity thickness of 53 percent and allowed ROE of 9.15 percent plus a return on fair value increment of 20 basis points. TEP also received approval of 2 new adjusters. The first is a tax expense adjuster mechanism and the second to the next question. It's a transmission cost adjuster, both help to reduce regulatory lag at the utility. Now turning to an update on some of our ongoing regulatory proceedings.
At ITC, the notice of proposed rulemaking on transmission incentives remains outstanding. This item was on FERC's January open meeting agenda, but was deferred with no clear visibility on timing of next steps. In August, Central Hudson filed a general rate application with the New York Public Service Commission as its current 3 year rate plan concludes on June 30, 2021. Settlement discussions commenced last this week and we expect a decision in 2021. Last month, the British Columbia Utilities Commission announced that a generic cost of capital We will be initiated in the spring for all regulated utilities in BC, including our gas and electric businesses to set cost of capital parameters the Q1 of 2019, effective January 1, 2022.
In Alberta, we received a decision on the 2021 generic cost of capital proceeding. Current cost of capital parameters remain in place on a final basis for 2021. In December, the AUC to the Q1 of 2019. We initiated a new proceeding to establish post-twenty 21 parameters with a decision expected by the end of the year. And lastly, in November, the AUC issued a decision on the Alberta Independent System Operator tariff application, resulting in Fortis Alberta retaining the company's call.
A new proceeding was initiated by the AUC to assess whether the to the Q2 of 2019. The first question comes from the line of Robert W. Baird. Please go ahead. Thank you, to the call.
And with that, I'll now turn the call back to David.
Thank you, Jocelyn. Our 2020 results are a testament to our business model and our people, demonstrating what we can achieve when we come together as one strong company. Personally, I'd like to express my sincere thanks to our 9,000 employees. They have shown tremendous commitment and dedication in serving our customers to throughout this pandemic and I'm proud to be part of this team. As we move forward, safety, affordability and reliability will continue to be front and center in everything we do as we grow our premium energy delivery business.
With the tremendous potential in our company, to Coupled with our low risk growth platform and strong ESG profile, I couldn't be more excited to be leading Fortis. I will now turn the call back over to Stephanie.
Thank you, David. This concludes the presentation. At this time, we'd like to open the call to address questions from the investment community.
Thank you. Ladies and gentlemen, we will now conduct a question and answer period. And your first question will come from Ben Pham from BMO. Your line is open.
Hi, thanks. Good morning. I know you mentioned the $0.05 impact from COVID-nineteen. Does that include the expected impact of the delay in the TEP rate case? And if not, are you able to actually quantify what that impact was for 2020?
Yes. No, that doesn't include the TEP the delay impact and Jocelyn can fill in the second half of that question.
Yes. No, Ben, it just includes the I guess the lost earnings in the Caribbean due to tourism and also credit losses mainly for Central Hudson and UNS. The TEP rate KCS was effectively delayed because of COVID, but it was substantially offset by the hot weather that they had. So we didn't Classified that, TEP was disadvantaged because of COVID because they made up for it in warm weather.
Okay. So if you look at the impact of the warm weather, that gives you there actually what the impact of the
Yes, for sure. I mean, it was delayed because of the pandemic. And so yes, you are right. It is a COVID related the impact for TEP. It's just that it was offset by the fact that they had obviously the hottest temperatures on record.
I know from your slides you mentioned 99% assets regulated and that's your target for 1035. What is your appetite for non regulated assets in this environment, whether it's EV vehicles, hydrogen, Renewable assets non regulated. I mean is there any appetite for you guys in this market?
Yes, Ben. So I think there's a lot to unwrap there in that question because there's a whole bunch of different sort of unregulated investments that you listed there. When you think about hydrogen or some maybe even renewable natural gas that we might be doing out that we could be looking at doing out to in BC, there are some things around the edges of our normal business that we continue to look for and look at. Obviously, our priority is executing that $19,600,000,000 capital budget and then also looking at how we can extend and expand that Based on the drive for more renewables in the U. S.
And across Canada. So our main focus is execution to on the regulated rate base that we have and adding to it where we can. As far as unregulated to Assets, we will look at doing them if they make sense, right? They have to have the right risk and return. We have to have the expertise and being able to execute it.
If those things match, then we'll look at doing it. Other than that, we won't.
Okay, very good. Thank you.
And your next question will come from Robert Kwan from RBC Capital Markets. Your line is open.
Good morning. Just wondering if you've got some thoughts on the early actions out of the Biden administration and the impact on your utilities, including any commentary on FERC policy and how you think that might play out?
Yes, Robert. Good to hear from you. Yes, this is obviously a big item of conversation across our industry. We're trying to all figure out what all of the executive orders mean, the policy changes, the new Commissioners at FERC, the new Chair at FERC. I think we all get the fact that directionally where this is going.
Obviously, with the Biden administration coming in very, very focused on reducing greenhouse gases, A very strong push towards electrification of things like transportation. It means that there's going to be a lot more In our electricity sector, that's going to be need that's going to need to be invested in over the next years. I mean, when you think about not just the regular the transition that has already been laid out by so many utilities from coal to renewables, including us in Arizona. Now you're looking at not just that transition, particularly in ITC's footprint, there's big utilities in their footprint that are looking at doing the same thing, Not just that transition from coal to renewables, which needs renewables and of course then needs the transmission to connect those Renewables to where the customers are. But also it's going to be driving a lot of electricity demand as we look at electrification efforts.
So directionally we know it's going up. It's really hard to determine at this point what the magnitude and the speed of those changes will be. And that's what we're working hard on doing across our different jurisdictions. This could mean acceleration of the the transition plan that we have at TEP from coal to renewables as you'll recall and we've talked about quite a bit. We have A lot of investments, dollars 4,000,000,000 to $6,000,000,000 level of investments that we would need to do in order to get to that transition.
And most of that is outside the 5 year capital plan. So maybe some of the things, some of the incentives that the Biden administration does Brings that closer in. Maybe there's incentives that can go for the impacted communities where those power plants are that could allow us to accelerate some of that the big EV push, there's a conversation on social cost of carbon, where is that going to go? So we can't quantify it unfortunately at this point, Robert, but we are working on figuring out how that will drive our business going forward. Yes.
On FERC policy, I mean, I just actually I was reading an article last night, on an interview with Chairman Glick. And I think that article was saying all the right things. I won't interpret it For you, but I mean it's out there. It was an SNL article. But in that interview, he was talking about the importance of things like incentives obviously, and trying to figure out how we get power lines permitted.
We're back to having the conversation again in the U. S. To the not just the transmission that we needed, but how can we build it better. And back in the day in the Energy Policy Act of 2,005, There was a requirement for the Department of Energy in the U. S.
To create these national interest corridors. I think that thing has to be kick started again, So that we can figure out how to build the bigger backbone that our transmission system is going to need to interconnect markets And to go long distances to connect the regional renewable energy resources to where we need them. So I think that policy is all going in the right direction. It's going to be a Democratic led FERC. I'm sure they'll end up with a Democratic majority to Later this year and in that they're going to have to be addressing the policy and the incentives that are needed to increased transmission.
That's everybody is aligned with that thesis. And that's aligned with the Biden Energy transition plan. So, I expect, to see some good things coming out of FERC on a going forward basis.
Great. And I guess maybe
just to finish, Dave, now that you're in the CEO chair, While the valuation differentials have narrowed, just what are your thoughts on payout ratio and leverage? And I guess ultimately, do you view the Canadian utility stocks or the U. S. Utility Stocks as your peers.
So, yes, we look at them both, right? I mean, we obviously have both Canadian and U. S. Utilities. And from a peer perspective, we look at everybody.
And my goal as CEO is For them to all be looking at us, right? So at the end of the day, we want to be the peer that they're looking at, how are they doing so well, how are they getting the trading multiples they are, because We have the right story from a growth perspective. We have the right story from a greenhouse gas ESG perspective. We got to get out there and tell that story more. So I'm not necessarily as concerned comparing us to them.
I just want to make sure that we're looking Behind us to see them.
Just any specific comments on payout and leverage?
Say that again?
Any specific comments to addressing payout ratio and leverage?
Yes. Robert, with payout ratios, what we've said is that we're comfortable in the 60 to 75% payout ratio, which is pretty consistent with the Canadian utilities, the Canadian utilities are higher and U. S. Ones are a bit lower. We've said around 65 to 75 we're comfortable with.
To And as we look like David talked about with respect to the capital plan that we have and the opportunities that we have in front of us, We're comfortable with that range.
Okay. That's great. Thanks very much.
Thanks, Robert.
And your next question will come from Rob Hope of Scotiabank. Your line is open.
Yes, good morning everyone. Just one question for me. How are you thinking about the potential Arizona legislation that would take away generation planning away from the regulator and put it kind of more in the hands
to
Would it
be fair to say that your generation investments in the region may not be altered given that it's not necessarily being driven by, We'll call it the regulator stated goals, but your own internal economics and where you want to take that business?
Yes, Rob, you nailed it in your note this Power. It was all about what we needed to do, from an economic standpoint, from affordability, clean energy, reliability. We got everybody in the room When we developed that integrated resource plan, it was what our customers, our community, our regulators, to The consumer advocates, this was something that we all circled on and said that's the right plan. Had nothing to do with the energy rules because there weren't any energy rules at that And it was substantially greater than the existing renewable portfolio standard that exists in Arizona. So, Which is actually a very low standard.
It's 15% by 2025. We're already we've already passed that. So in my mind and our team's mind in Arizona, it doesn't matter. It was we built that plan and stood it up before the energy rules. This is all about us executing on that plan, because it's the right plan.
All right. That's great. Thank you. Thank you.
And your next question will come from Michael Pollard from Wolfe. Your line is open.
Hey guys, good morning. Good morning, Michael.
Good morning.
Yes. I wanted to circle back to the FERC transmission question there. I know It's hard to really predict, but as you mentioned, there's been a lot of talk around it. Just any thoughts on On timing, is it going to take until we get a democratic majority at FERC? And then How does it get effectuated?
Is it something from higher up within the Biden administration? Just maybe a little more context there would be helpful.
Yes, that's a great question, Michael. The timing on what can be done and what will be done is obviously still to the U. S. And I will be your conference operator today. Welcome to the U.
S. And I think the Biden administration wants to move things as quickly as possible. So we're hoping it's quicker. But you got to remember too that As you said policy, it takes a long time for it to basically roll out through the industry. We are hopeful that At the end of the day, we see some action on the big things, right?
There's things to that we're looking for from FERC in order to streamline things like planning and siting that I mentioned on the National the quarter conversation, looking at how we better manage queues within the RTOs for interconnecting renewables, cost allocation is always the big deal incentives, all of those things have to be addressed. And frankly, in our mind, the sooner the better, because like I said, we know the direction. We'd like to see, 1, get the pace of that direction and 2, what's the magnitude for us and how do we get in there. And that's why we're working to behind the scenes and pushing to get some of these things done through the various trade groups as well.
Great, thanks. And then my other question was just on, I know you guys don't give official guidance for 2021, but just any Help on key drivers we should be thinking about. I think the earnings growth has been relatively muted in recent years and now that you've got this Arizona rates in effect, should we be expecting a pretty material step up? Any other context you could put around that?
Well, Michael, you're right. We don't give earnings guidance. So my fallback is always that over the long term earnings should proxy where our rate base is over the long term. But it's not linear, as you say, with things like the UNS rate case That was concluded. They had a decent year, mainly because of weather.
So as they Head into next year with new rates, then I would say that we all have to make our own assumptions with respect to weather because it's tough for us to sit here and make those calls. But I would say that all of our utilities have cleared the slate on certain regulatory proceedings. There's no cost of capital hearing for 2021 with the exception of Central Hudson, and I don't expect any material change there. So I would say all utilities are set up for good growth. And we've also level set with respect to the equity that we've done.
So that was 2019. So no major drag there from an equity perspective. So we're looking forward to 2021.
Okay, great. Thank you. Thank you.
And your next question will come from Mark Jardee from CIBC Capital Markets. Your line is open.
Thanks. Good morning, everyone. Maybe yes, come back to the transmission incentives. I don't want to beat a dead horse, but just that article that came out last night you referenced David. And just maybe just reconcile what you think in terms of prior dissent from Chairman Glick around participation adders, but supportive of to Seems like supportive of incentive.
So if you had to stand here today when you kind of square it all up, is your view still that it's upward bias on the total incentive to ITC. Yes.
So you guys aren't liking my answer, so I'm going to kick this one over to Linda to provide a little bit additional color because she's obviously got this topic front and center. Linda, obviously Linda is our CEO of ITC.
Yes, great. Thanks, Dave, and thanks, Mark, for the question. Look, I would Put it in sort of this context. I mean, clearly, we don't know, right, in terms of exactly what May specifically want to do with respect to the NOPR and certainly I think as time moves on, we'll learn a little bit more In terms of at least what next steps are with respect to the timing of the NOPR and ultimately, kind of the decisions therein. What I guess I would say or what I would emphasize, I mean, I know Glick has been certainly public in comments in the past.
He's probably not the biggest fan of specific ROE incentives. But I would say, Glick clearly understands the need for investment in transmission infrastructure, Particularly to facilitate renewables. And so my belief is and I remain very to the next question. In terms of the kind of the actions that FERC will take to continue to drive investment in transmission to the call. And while it may not be what I would to It could modify slightly from sort of the typical all in ROE adders to really what I think ultimately is really going to be making the transmission pie bigger.
And So I think as Dave did a nice job alluding to, we're going to see the transmission landscape and the transmission pie Get significantly bigger because I think everyone recognizes that transmission is the key enabler to the Biden kind of Clean Energy Plans. And so may it be, will it be exactly what we've seen in the past? We don't know. But what I do know is that Glick, it does understand both the role of incentives to In driving investment in transmission, as well as, as I think Dave alluded to, the Energy Policy Act, he's mandated, he's required to offer incentives for transmission investments. So, obviously, we'll have to take a wait and see approach to see what comes out of there, but I am more optimistic than ever in terms of sort of I think how the landscape is evolving.
I've never heard I think so much focus and conversation about sort of the central role that transmission plays in meeting our future decarbonization goals and the transmission incentives NOPR plays a huge role in that. So I'm Extremely optimistic about how that NOVER can help drive future investment in transmission and frankly make the transmission pie Realizable quicker, faster, sooner than it otherwise maybe could have been.
Yes. Mark, I would just add. I I know we're talking about the same article, so it seems that you read it. But I think it was clear and I'd hate to quote an article on an earnings call, but it said to That Chairman Glick said that the incentives in the NOPR, the reason that he dissented from it before is that it didn't go far enough to incentivize lines Built pursuant to state and federal policies. Well, guess what, we're looking at a whole bunch more state and federal policies in order to get renewables where they need to be in order to get transmission built, how it needs to be to meet the policy requirements of states and federal governments.
And That to me was a real positive comment.
Got it. Thank you both, David and Linda. Follow-up question maybe is on Central Hudson. Just it sounds like you guys have entered some settlement discussions. Do you guys have timelines and give a sense on whether or not it's a Pursuit of a multiyear rate plan or would you go shorter term?
Sure, Michael or Mark, sorry. We're going to turn that over to Charlie to Freni, who is the CEO of Central Hudson. He is on the line to answer that one.
Good morning, Mark. Settlement discussions have just begun. So at this point in time, we're optimistic that we'll work through it. Hopefully, come to a settlement before the July timeframe, but We have been it has been signaled to us that it will probably be a process of those take more than 11 months and typically, we have a make whole provision If it goes beyond the end of our rate year. Whether it's multiyear or not, I mean that does come out of the settlement conversation as well.
It's quite likely it will be a multiyear. That's generally part of the conversation.
Okay. Thank you.
That's all I had.
Thanks Mark.
And your next question will come from Andrew Kuske from Credit Suisse. Your line is open.
I guess the question is really about alternative capital pools and it's something we've used in the past. But when we look at the Duke deal with GIC, Duke Energy in Indiana. How do you think about that from a standpoint of potential the use of servicing value in your portfolio as it exists today or just for capital deployment in the future?
So let me sum that up.
I don't think Jocelyn was able to hear the question. Looking at alternative capital pools like GIC and Duke and bigger picture of to How we look at that capital going forward?
Yes, Andrew, we're always looking at that. Every time we go through our capital planning exercise, to We've often said that everything goes back on the table. So it's interesting that these deals are being done to To, I guess, delay any further equity issuances, which for the right price, I think it's A fair thing to do. I mean, we clearly went to market with our equity requirements in 2019. So we're set up nicely for our 5 year capital plan.
But listen, if we can grow even further from where we are today, then everything goes back to the table. And all of those things are things that we consider every time we look at funding options.
Okay, that's helpful. And a bit different direction to my second question. It really relates to cyber to And just cybersecurity, and obviously that's an important industry issue. But in the pandemic environment with, I think you said, half your employees effectively working from home, to Has the cybersecurity changed over the period of time?
Yes, yes, definitely. Our attention from a cyber perspective was already ramping up extremely fast, I'll say even over the past More than 5 years, the conversations that we have in boardrooms, the conversations we have within our utilities, having CIOs at our large utilities, having to Chief Information Officer at Fortis to help coordinate all those efforts. And then to obviously add the complexity to And of course, there's world events too that obviously make you pay more attention to things, particularly to We do have the criteria, the critical infrastructure that we have meets the criteria for federal government Requirements. And so we keep a close eye on that, but we have to continuously go above and beyond that because there is nothing More critical than our infrastructure because at the end of the day, our infrastructure is what provides everybody else's infrastructure The ability to work. If you don't have the energy flowing, then you will not have an economy flowing.
So it is extremely important and right In the center of our bull's eye from a strategy conversation.
Yes, that's
great. Thank you. Thank you.
And your next question will come from David Quezada from Raymond James. Your line is open. Thanks.
Good morning, everyone. My first question here, Just on the Lake Erie Connector, I'm wondering if you've had any engagements with the Ontario government recently And what kind of timeline or hurdles you'd be looking at over the next year just in terms of potentially moving forward there?
Yes, I'll turn that over to Linda because she's the one who has her finger on the pulse on that project. Linda, hopefully you heard that question. It was about the Lake Erie Connector and Status thereof? Yes. Okay.
Yes, I did. And thanks, David, for the question. Yes, I mean, we're in continual engagement with the Ontario government, as well as the IESO with respect to the Lake Erie Connector project. And While I don't have any specific kind of status update that certainly I can share, I can continue to say that we continue to remain optimistic to Based on sort of what I would say are the conversations, the tenor of those conversations and the progress within those conversations, At the time, I'm not able to specifically say timeline wise when we will have any type of meaningful update, but I would say things remain optimistic for us.
Excellent. Thank you for that. And then, David, maybe just one for you. I guess you've been in your seat now for about 6 weeks.
I'm just
curious how you are planning to allocate your time over the next, I don't know, 100 days, say, And what will be your initial focuses now that you're in your role?
Yes. Thanks, David. It's actually great to be to Here in St. John's, and I've been here for as of today 30 days. So it was great to get here and do my Quarantine period, which you have to do when you come into Canada and particularly into St.
John. So I was glad to get in the office and be able to meet with the team And have some good conversations. Our focus is beefing up the strategy that we currently have. We are very focused on our organic growth strategy and we basically have a whole lot more to
the opportunities that we
see that I mentioned
earlier coming from the push towards a clean energy transition. It's all about our business. It's all about what we do. When you're looking at electrification, it needs renewables, it needs transmission, it needs distribution. That's the business that we're in when we're looking at growing the demand, that's a great story for us.
When we're talking about electrification of transportation, that's a huge story for to Anybody who has anything to do with electrons, that's a way for us to pick up wallet share of our customers And reduce their overall net bills. So that's the focus that we have is to look now I think in a much more target rich environment to the Investor Relations segment. I will now turn the call over to Steve for investments on a
going forward basis and a
growing environment from a from, I'll say, a use per customer basis. I think that's been my focus. It's been the team's focus, and we're really getting after it.
And your next question will come from Matthew Weekes, Industrial Alliance. Your line is open.
Good morning. I just have one quick question about to the collection of COVID-nineteen related costs going forward. So you're tracking those costs and accounts and Sort of going through the proceedings, I was wondering if you'd be able to quantify sort of the upside there versus maybe downside that you see in costs That you're tracking that maybe aren't related to bad debt or that may not be recoverable going forward?
Yes. So Really the only company that we have that's focused on that is Central Hudson, and Jocelyn has got the numbers on that.
Yes, Matthew, Central Hudson is still accumulating and providing it to the commission. Potential upside, it could be 2p. Probably, so I would say that's the potential upside. I won't make any guess as to the success we're going to have, but that's the potential upside.
Okay. Thank you. That's it for me. Thanks,
Your next question comes from Julien Dumoulin Smith from Bank of America. Your line is open.
Good morning, everyone. This is Ryan Greenwald on for Julien. I appreciate you taking our questions. So just to follow-up on the earlier question around the unregulated assets. Can you provide a bit more color around the right risk return and potential assets you'd be looking at given how low the cost of capital is from renewable buyers?
It seems like it'd be tough to be competitive, but just curious how you're framing things? Yes, that's just it. It is tough
to be competitive and we'll know a good deal when we see 1, But we really haven't seen one yet. And frankly, the thing that we need to focus on is the supporting infrastructure around those investments. The actual investments in wind projects and solar projects, we can let other folks race to the bottom to the next question. On returns on those, what they need is all the good regulated infrastructure to get it from that site to a customer's door. And that's what we focus to the Q1 of 2019.
And there will be enough of that stuff to build around it that supporting infrastructure, whether it's Transmission, distribution, storage, ancillary services, all the things that we need to do and provide as utilities, That's going to be real fertile ground. So we don't feel it right now that we have the need to go into that last little bit. And so that's where I'd leave that.
Are you guys looking at actual RNG at all?
Yes, Yes. Up in B. C, Fortis, B. C, Roger D'Elantoni and his team have been looking at that. They actually have a goal already.
They were one of the first. I mean, they were out on this stuff before it was a topic really and set a 30 by 30 goal to reduce the greenhouse gas emissions from their customers and a lot of that has to do with focusing on things like energy efficiency, like renewable natural gas. They're looking at having, I think it's 15% of their supply from RNG, which opens a lot of opportunities to for us to invest in that, if we can do it within the regulated utility, we have we can always do that as a combination, which we have to date Of basically PPAs or purchases or have the opportunity to invest in. And of course, we're kind of We're around the edges on the hydrogen conversation too. We actually are very active in BC on those conversations looking at studies on how we would do it.
But of course, that's early days. Hydrogen is getting a lot of attention, but that's it's I think it's early days in that conversation, but all of that the U. S. And start getting into the supply a little bit.
Are you guys any particular focus on the non utility side Just in terms of exploring RNG more broadly as an unregulated asset?
No, no, no. To It's one of those things you got to get expertise and experience in before you want to do it outside, get out of your knitting. You got to get that to You got to create your own competitive advantage, then you see what you can do with it. So it's still early days on that too.
Got it. Fair enough. And then maybe just lastly on the FX. It seems like a wait and see from the status quo right now around Further hedging strategies, but any more color you can add there around your thought process given the unfavorable inflection?
Well, Brian, we did take advantage of the market earlier in 2020, and we did put in some additional hedges. So we continuously watch the market. Right now, we're comfortable with what we have, but we do continue to just watch it. And if the time is right and market conditions align, we may do a little more hedging.
Great. Appreciate the time, Stan. Thanks, Ryan. Thank you.
Thank you, everyone. I have no further questions in queue. I turn the call back over to Ms. Amaimo for closing remarks.
Thank you, Michelle. We have nothing further at this time. Thank you for participating in our Q4 and annual 2020 results call. To the operator.