Ladies and gentlemen, thank you for standing by, and welcome to the Avista Corporation Second Quarter 2020 Earnings Conference Call. At this time, all participant lines are in a Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, John Wilcox, Investor Relations Manager. Please go ahead, sir.
Good morning, everyone, and welcome to Avista's Q2 2020 earnings conference call. Our earnings were released pre market this morning and are available on our website. Joining me this morning are Avista Corp. President and CEO, Dennis Vermillion Executive Vice President, CFO and Treasurer, Mark Theiss Senior Vice President, External Affairs and Chief Customer Officer, Kevin Christie and Vice President, Controller and Principal Accounting Officer, Ryan Krasil. I would like to remind everyone that some of the statements that will be made today are forward looking statements that involve assumptions, risks and uncertainties, which are subject to change.
For reference to the various factors which could cause actual results to differ materially from those discussed in today's call, please refer to our 10 ks for 2019 and 10 Q for the Q2 of 2020, which are available on our website. To begin this presentation, I would like to recap the financial results presented in today's press release. Our consolidated earnings for the Q2 of 20 20 were $0.26 per diluted share compared to $0.38 for the Q2 of 2019. For year to date, consolidated earnings were $0.98 per diluted share for 20.20 compared to $2.14 last year. Now I'll turn the discussion over to Dennis.
Well, thanks, John, and good morning, everyone. We hope everyone is staying safe and healthy during these uncertain times. It's hard to believe that we've been managing through the COVID-nineteen pandemic for 5 months now. And every day I continue to be inspired by how our employees continue to rally on all fronts to respond to the crisis. I couldn't be more proud of how we're staying vigilant and adapting across the organization to the new policies and procedures that can quickly change in the states where we serve.
I appreciate their patience, their persistence and professionalism as we all navigate through these uncharted waters to seek out our new normal, all while still providing the energy that is so essential to our customers. As always, our top priority is to preserve the health and safety of our customers, our employees, contractors and our communities. As the regional economies across the areas we serve move forward with fits and starts, we're doing our best to support those customers who we know are struggling. You may have seen recently the Avista Foundation provided more than $500,000 to support 37 different organizations throughout our service area. And so far in 2020, our foundation has provided more than $1,500,000 to help those in need.
Although the majority of our employees are still working from home, it hasn't impacted our ability to complete important work across our business. Wildfires continue to be an important topic for our industry and our company, especially this time of year. Before the wildfire season arrived, we enhanced our 10 year wildfire resiliency plan to expand our current safeguards for preventing, mitigating and reducing the impact of wildfires to help minimize the possibility of wildfires and the related service disruptions. Our team spent the last year developing our plan through a series of internal workshops, industry research and engagement with state and local fire agencies. The plan has certain key areas that include grid hardening, vegetation management, situational awareness, operations and emergency response in worker and public safety.
In total, we expect to spend approximately $330,000,000 implementing the planned components over the life of the 10 year plan. We're also excited for construction to be completed on the Catalyst building and the Scott Morris Center For Energy Innovation. We can hardly wait for the buildings to open next month and when they do, Scott Morris' vision to create the 5 smartest blocks in the world will become a reality. Avista will be able to continue to innovate and test new ideas about how to share energy in a shared economy model and what we learned could not only shape how the grid of the future will operate, but also could provide a transformative new model for the entire utility industry. Last year, we established a goal to serve our customers with 100 percent clean electricity by 2,045 and a 100% carbon neutral resources by 2027.
Consistent with our goal in our 2020 integrated resource plan, we are seeking proposals from renewable energy project developers who are capable of constructing, owning and operating up to 120 average megawatts. Our intent is to secure the output from the renewable generation resources, including energy, capacity and associated environmental attributes. This will allow us to offset market purchases and fossil fuel thermal generation, which is a key step to achieving our goals. With respect to results, our 2nd quarter consolidated earnings were in line with expectations, and we are on track to meet our 2020 earnings guidance at Avista Utilities, AEL and P and our other businesses. As such, we are confirming our 2020 consolidated earnings guidance a range of $1.75 to $1.95 per diluted share.
And finally, one last point, our Senior Vice President, Chief Legal Counsel and Corporate Secretary, Marion Durkin, just retired on August 1. I'd like to take this time to thank Marion for her 15 years of service to Avista. During her tenure, Marion defined our business needs and built to build our legal department from the ground up to the robust team that it is today. As the focus and scrutiny on compliance has grown across many different industries, Marion also centralized the company's compliance efforts and has taken our compliance department to a new level. Also under Marion's leadership, earlier this year Avista was named as one of Ethisphere's World's Most Ethical Companies.
It's a tremendous honor to receive this designation. Thanks to Marion. We wish Marion all the best as she begins her retirement and transitions into this new chapter. And now I'll turn this presentation over to Mark.
Thank you, Dennis, and good morning, everyone. I have big news for you. Hockey is back. I am very excited about that. The Blackhawks, because of the pandemic, made the playoffs, and we're currently one-one with Edmonton with a game tonight.
So those on the East Coast, it's a 10:30 game, but I'd like you to stay up and root for my Blackhawks. For the Q2 of 2020, Avista Utilities contributed 0.26 dollars per diluted share compared to $0.32 in 2019. Compared to the Q2 of 2019, our earnings decreased due to lower electric utility margin from higher power supply costs and decreased loads related to COVID-nineteen, which was partially offset by rate relief and customer growth. We also had lower operating expenses in the Q2 of 2020. The energy recovery mechanism in Washington was a small benefit in this year of $400,000 compared to a much larger benefit in 2019 of $6,000,000 For the year to date, we recognized a pretax benefit of $5,600,000 in 2020 compared to $3,500,000 in 20 19, all with respect to the With respect to the COVID-nineteen impacts on our results, we recorded an incremental $3,300,000 of bad debt expense for the year to date and we expect the incremental amount to be $5,700,000 for the full year, including the first quarter as compared to our original net of any decreased costs and other benefits related to COVID-nineteen.
During the Q2, we deferred $1,100,000 of bad debt expense associated with this order. Compared to normal in the 2nd quarter, there was a decrease of approximately 6% on overall electric loads, which consisted of approximately 10% decrease in commercial and a 14% decrease in industrial, which was partially offset by about 4% increase in our residential loads. These loads decreased earnings by about $0.03 in the 2nd quarter and we expect to have continued lower loads throughout most of the year with a gradual recovery towards the end of the year. We expect to be able to mostly offset the lower utility margin through our cost management activities, and this is reflected in our consolidated guidance. We do expect a gradual economic recovery, but prolonged high unemployment that will depress load and customer growth into 2021.
We have decoupling and other regulatory mechanisms which help mitigate the impact of these load changes on our the impact on our revenues for residential and certain commercial customers. Over 90% of our utility revenue is covered by regulatory mechanisms. During the Q2, we began experiencing some supply chain delays due to the effects of the COVID-nineteen pandemic, with delays ranging from a couple of weeks to up to 6 weeks in some cases. However, we do not expect this to have a significant impact on our planned projects and we continue to be committed to investing the necessary capital in our utility infrastructure and expect our spending in 2020 to be still be about $405,000,000 With respect to liquidity, at June 30, we had $160,000,000 of available liquidity under our $400,000,000 line of credit and we had $100,000,000 in cash from our term loan. In the Q2, we extended our line of credit agreement a year to April 2022.
We expect to issue this year approximately $165,000,000 of long term debt and up to $70,000,000 of equity, and that includes $24,000,000 that
we have issued through June.
As Dennis mentioned earlier, we are confirming our 2020 guidance with a consolidated range of $1.75 to $1.95 We're expecting that COVID-nineteen impacts at Avista Utilities of increased operating expenses include bad debt expense, reduced industrial loads and increased interest will be mostly offset by expected tax benefits from the CARES Act and other efforts to identify cost reduction opportunities that we have implemented. We have filed for deferred accounting treatment in each of our jurisdictions. And as I said earlier, in Idaho, the Idaho Commission issued an order that allows us to defer certain costs related to COVID-nineteen net of any decreased costs and other benefits. The Idaho Commission will determine the appropriateness and prudency of any deferred expenses when we seek recovery. We continue to expect to experience regulatory lag until 2023.
We filed a general rate case in Oregon March of 2020 and continue to anticipate filing in Washington and Idaho in the Q4 of this year. We expect our long term earnings growth after 2023 to be 4% to 6%. Now with the specifics on the ranges for each segment, we expect Avista Utilities to contribute in the range of $1.77 to $1.89 per diluted share. The midpoint of our range does not include any expense or benefit under the and our current expectation is that we will be in the benefit of the ninetyten sharing band, which is expected to add $0.06 per diluted share. Our outlook for Avista Utilities assumes among other variables, normal precipitation, temperatures and hydroelectric generation for the remainder of the year and we have implemented the cost reduction measures to help mitigate the impacts of costs related to COVID-nineteen.
For 2020, we expect AEL and P to contribute in the range of 0 point $1.1 per share and our outlook for AEL and P assumes among other variables normal precipitation and hydroelectric generation for the remainder of the year. And we continue to expect our other businesses to have a loss of between $0.09 $0.05 per diluted share. Our guidance generally includes only normal operating conditions and does not include any unusual items such as settlement transactions or acquisitions and dispositions until the effects are known and certain. We cannot predict the duration or in severity of the COVID-nineteen global pandemic and the longer and more severe economic restrictions and business disruption, the greater the impact on our operations, results of operations, financial condition and cash flow. I'll now turn the call back to John.
And now we will open up this call for questions.
Thank you. Our first question comes from Richard Ciccarelli with Bank of America. Your line is open.
Hey, good morning.
How are you guys doing?
Good morning, Richard. Good morning.
All right. Just had a question about how you're thinking about positioning the rate case filing in Washington, where attrition adjustments were denied. Do you see an opportunity there for multiyear rate plans or attrition adjustments still to be implemented by the commission? Or is there an overall sense of rate fatigue?
Hi, there. This is Kevin Christie. Thanks for the question. We're still compiling our case and putting together all the information, taking into consideration the impacts of COVID-nineteen and, of course the Fugitive case. And I'd say it's too soon to say for sure.
We're contemplating a multiyear plan, but I can't say that we're going to file 1 until we get all our data together and a case in better shape, and then we'll be able to let you know.
Okay, got it. That's helpful. And then just around your CapEx program, you reiterated for 2020, but you had some commentary that the economic activity can potentially impact this. Just curious how you're thinking about the puts and takes there of that spending profile? And is that wildfire resiliency spending that you mentioned earlier included in this program?
Or is that not yet baked into your $405,000,000 per year?
So a couple of questions there, Richie. With respect to we continue to monitor supply chain and those impacts, but we as we mentioned, we have seen some disruption, but not enough to make us believe that we won't be able to achieve our capital spending for 2020. And then as we look at the wildfire resiliency plan, we are looking at it currently as if we will fit that into our $405,000,000 of expected capital spend over the next years and we'll constantly reevaluate that. But at this point, we expect it to be part of that $405,000,000 of spend.
All right, got it. That's very helpful. Thanks, guys. That's all I had.
Thanks, Richie.
Thank you. Our next question comes from Sophie Clark with KeyBanc. Your line is open.
Hi, good morning guys. How are you?
Good morning, Sophie. Good morning.
Couple of questions from me. First, the loss on equity investments, could you remind us what those are and how should we think about that going forward?
The equity investments?
Yes.
Our other businesses?
Yes. Exactly. Yes.
So our investments in a number of different small businesses that are really energy related. The largest amount of our other business investments really are to fund investments in Energy Impact Partners and they invest in a lot of other businesses as well. So we also have an investment in a restaurant and we own steam plant, which is in downtown Spokane and a number of other small businesses that are legacy businesses that have valuations that like the steam plant, that restaurant is really at this point shut down. We anticipate the ability possibly to reopen in the future, but we don't know that for sure. We put that off for now.
So we have just a number of equity investments. And then as we mentioned, as Dennis mentioned in his remarks, the Catalyst building and the Morris Center For Innovation, those are also investments, equity investments in 2 different buildings, again here located in Spokane.
Got it. So that's basically that's mostly, I guess, the restaurant and other COVID impacted business that drove the devaluation in the Q2? No.
The Q2, we didn't really have as much of a change there as the biggest impact to our other businesses was in the Q1.
Okay.
And Energy Impact Partners. Energy Impact Partners did have some lower valuations. But again, it wasn't a significant
All right. And then my second question is, I guess, when we think about future CapEx, right, and you mentioned that the sustained, I guess, economic distress might impact that. And I think we understand how those situations work out. Is there my question is, is there a way to reframe this conversation with your regulators in a way where this is infrastructure work that can actually help jobs recovery? It's something that's happening in some other states, right, where the regulators actually want the utilities to propose some infrastructure work that may lift the unemployment rate.
So I was wondering if that maybe could be an opportunity for you as well to frame those conversations in this way to make sure that your CapEx program stays intact?
Well, I think the way we position the CapEx program is as it's important work to maintain the safety and reliability of our infrastructure and our systems to serve our customers. I mean that's our main goal is to be able to serve our customers with the energy they need. And so we have focused our discussions with our regulators as that's how we're spending our dollars is we have to identify each of those projects when we go in for a rate case and say why this is important to provide benefits for our customers. An ancillary benefit, yes, is that we do maintain employment for people. A number of those are our own employees and there are some contractors that also work on our construction as well.
But we haven't really identified that as additional this is within our expected capital plan. It's not necessarily adding additional jobs. It's just not having more jobs reduced. So I don't think we can pitch it necessarily as we are adding additional jobs. We are just protecting the jobs that we have and our contractors have by continuing to deploy this capital, which does benefit the economy and does benefit the service territory in which we live and serve.
Got it. All right. Thank you. I appreciate your comments.
Okay. Thank you, Operator, any other questions?
Thank you. And I'm currently showing no further questions at this time. I'd like to turn the call back over to John Wilcox for closing remarks.
I want to thank everyone for joining us today. We certainly appreciate your interest in our company. Have a great day.