Earnings Call: Q1 2019

Apr 24, 2019

Greetings, and welcome to the FirstEnergy First Quarter 2019 Earnings Conference Call. And as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Irene Prezel, Vice President, Investor Relations for FirstEnergy. Thank you. Please go ahead. Thanks, Brenda. Welcome to our Q1 earnings call. Today, we will make various forward looking statements regarding revenues, earnings, performance, strategies and prospects. These statements are based on current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from those indicated by such statements can be found on the Investors section of our website under the earnings information link and in our SEC filings. We will also discuss certain non GAAP financial measures. Reconciliations between GAAP and non GAAP financial measures can be found on the FirstEnergy Relations website along with the presentation which supports today's discussion. Participants in today's call include Chuck Jones, President and Chief Executive Officer Steve Strah, Senior Vice President and Chief Financial Officer and several other executives in the room who are available to participate in the Q and A session. Before I turn the call over to Chuck, I'll note that we updated our investor materials with the goal of making it easier for you to find the information you need on our website. Our former consolidated report has been merged into our quarterly earnings package with additional materials provided in our fact book. As always, we welcome your feedback on these changes. Now I'll turn the call over to Chuck. Thanks, Irene. Good morning, everyone, and thanks for joining us. We're off to a very good start in 2019. Last night, we reported GAAP earnings of $0.59 per share, along with operating earnings of $0.67 per share, which is above the midpoint of our guidance range. As Steve will discuss later, our results reflect the continued success of our regulated growth strategies. Let's begin with an update on our progress so far this year. In our transmission business, we are on pace to implement a planned $1,200,000,000 investment in our Energizing the Future program in 2019, with most of that work in our ATSI and MAIT service territories in Ohio and Pennsylvania. Just a reminder, Energizing the Future is a multiyear program to improve the reliability, resiliency and security of FirstEnergy's portion of the bulk electric system that is shared by our entire nation. It's working. Just one example is that we have reduced transmission outages due to equipment failures on our ATSI system during the 1st 4 years of the program by 37%. And while we are still finalizing year 5 results, it looks like that will increase to eliminating more than half of the equipment related outages in ATSI. We expect similar results in May as we move forward. We currently have about 1,000 projects underway in stages ranging from engineering and project development to project management and construction. Many of these are multi year endeavors and we expect to bring 600 to 700 projects in service in 2019, which is consistent with our pace during the last several years of this customer focused initiative. To support our Energizing the Future initiative, this month we opened our Center For Advanced Energy Technology or CAIT in Akron. This 88,000 square facility is one of the most comprehensive grid technology testing and training centers of its kind in the country. We designed it to be a centralized hands on environment where our engineers and technicians can develop and evaluate new technologies and grid solutions and simulate a variety of real world conditions. It also includes classroom space where we can train our workforce to safely use new equipment and processes as we upgrade, maintain and ensure the security of the grid. In addition to supporting our grid modernization program, Kate also creates opportunities for us to advance best practices across the industry. We hope to collaborate with peer utilities, research institutes and key stakeholders such as device manufacturers who could potentially utilize our state of the art facility. Turning to our distribution business. As we mentioned last quarter, our Ohio utilities filed a request with the Public Utilities Commission in early February for a 2 year extension to the distribution modernization rider. Again, while we believe we have a strong case to continue this rider, I will remind you that it is not factored into our current earnings growth projections. Also in Ohio, our supplemental settlement regarding tax reform and grid modernization is pending with the PUCO. This proposed settlement addresses how customers will benefit from savings associated with federal tax reform and seeks approval for the initial phase of our grid modernization program with investments of $516,000,000 over 3 years. In New Jersey, we were very pleased to reach a settlement yesterday with the staff of the Board of Public Utilities, the Division of Rate Council and the New Jersey Large Energy Users Coalition for our infrastructure investment program. Our JCP and L Reliability Plus program builds on the service enhancements we have made in our New Jersey footprint in recent years with an additional $97,000,000 investment. Through this program, we plan to implement more than 1400 targeted projects to enhance the reliability and resiliency of overhead power lines, replace existing equipment with smart technology devices and expand the vegetation management program to reduce tree related outages. Upon final approval from the BPU, the work will take place between June 1, 2019 December 31, 2020. Once the projects are complete, customers will experience fewer sustained outages under normal conditions as well as a reduction in outage duration. While there was a difference between our original IIP request and the settlement amount, we have plenty of opportunities to make those capital investments in other parts of our system, both in distribution and transmission. We will also contemplate filing a subsequent IIP in New Jersey to continue our investments there beyond 2020. In Maryland, the Public Service Commission issued a final order in our Potomac Edison rate case on March 22. The order fully resolved tax reform in Maryland calls for a final bill credit to customers to return prior period tax savings and allows Potomac Edison to increase base distribution rates by $6,200,000 net of tax reform to invest in safety and reliability enhancements. In addition, the Public Service Commission approved a 4 year electric distribution and infrastructure surcharge rider. That program will be used to recover incremental costs related to 3 reliability programs, which include installing more distribution automation equipment, accelerating an underground cable replacement program and utilizing new substation reclosers that can minimize the number of customers impacted by service interruptions. Potomac Edison is required to file another distribution rate case at the end of the surcharge period. In January, the Public Service Commission also approved Potomac Edison's 5 year $12,000,000 pilot program to install electrical vehicle charging stations in Maryland and offer rebates for charger installations. As part of the program, Potomac Edison plans to install 59 public charging stations at locations across our Maryland service territory, including 9 fast chargers. Residential customers will be eligible for rebates for the installation of EV charging stations at their home and rebates also will be available for charging stations installed at multifamily properties. We're proud to support Maryland's efforts to encourage the adoption of electric vehicles, which is an important step for a cleaner, healthier environment. We see projects like this as a natural fit for FirstEnergy as we fulfill our mission to become a forward looking utility committed to making our customers' lives brighter, the environment better and our communities stronger. Our environmental, social and government strategy is built on the pillars of our mission statement. In 2019, we are continuing our efforts to offer greater transparency and engagement with our ESG goals. Late this year, we will produce a new corporate responsibility report to examine our efforts on issues as wide ranging as diversity inclusion, our environmental footprint, corporate governance and community support. This will complement our first climate report, which we published earlier this month. The climate report looks at how our strategies as a fully regulated utility are aligned with the emerging technology trends that support a lower carbon future and examines the business risks associated with a carbon constrained economy. It also reviews our significant progress towards the carbon dioxide reduction goal we announced in 2015. We pledged to reduce CO2 emissions from our generating fleet by at least 90% below 2,005 levels by the year 2,045. At the end of 2018, we had already achieved a reduction of 62% with about 3 quarters of that reduction related to plant retirements. We expect to reach a CO2 reduction of 80% later this year, well on our way to achieving our goal. I want to express our experience with plant decommissioning activities. Over the past 12 years, we safely and responsibly retired and remediated 7 coal plants and successfully anticipated the economic and environmental concerns for each site. This is just one of the ways in which we have demonstrated our commitment to corporate responsibility. It is a core value that we stand by at all times and that includes during the FES bankruptcy. That is why a key component of our settlement agreement was our substantial support for FES to both emerge from bankruptcy and meet any legacy and future obligations. This includes all environmental responsibilities that could occur when the plants are eventually retired. Following the judge's decision on the FES bankruptcy earlier this month, FES committed to engage with the Department of Justice and other concerned parties. In light of the commitment by FES, our previous assessment of the obligations and the surety and funding that are already in place, we see no increased risk to removing the broad third party releases from the comprehensive settlement. While these releases would have served to bring finality to FirstEnergy's involvement with these legacy assets, removing the releases does not in our assessment and experience increase liabilities or obligations to our company. We are pleased that FES has submitted a revised disclosure statement and believe they will continue to work constructively with all parties to ensure both timely approval of their plan and their bankruptcy exit. At the same time, we will remain focused on delivering clean, safe, reliable and affordable electricity to our 6,000,000 customers with a commitment to environmental stewardship, corporate responsibility and implemented our regulated growth strategy. We are affirming our 2019 full year operating earnings guidance of $2.45 to $2.75 per fully diluted share, including this year's DMR. In addition, we are introducing a second quarter operating earnings guidance range of $0.55 to $0.65 per share and affirming our long term compound annual operating earnings growth projection of 68% from 2018 through 2021. Thank you. Now I'll turn the call over to Steve for a review of the Q1 and other financial developments. Good morning, everyone. It's my pleasure to join you today. As usual, I'll begin with a couple of reminders. First, reconciliations and other detailed information about the quarter are available on our website in the strategic and financial highlights document. Also, we continue to present operating results and projections on a fully diluted basis. This provides the best comparative view of our performance. With that, let's take a look at our results. 1st quarter GAAP earnings were $0.59 per share. Operating earnings were $0.67 per share. As Chuck mentioned, this is above the midpoint of our guidance. In our distribution business, our results benefited from higher weather adjusted residential load and lower interest expense related to debt refinancing. I'll spend more time on that topic in just a few minutes. These factors were offset by higher depreciation expense related to our rate base. Total distribution deliveries were essentially flat compared to the Q1 of 2018 with a slight increase on a weather adjusted basis. Heating degree days were close to normal for the quarter and comparable to the Q1 of 2018. Residential sales were a bright spot for us this quarter. Sales increased about 1% on an actual basis. When adjusted for weather, the increase was almost 3% with growth in both customer count and average usage. The upturn in weather adjusted residential sales over the past 12 months is an encouraging sign. In the commercial customer class, sales decreased about 1.5% on an actual basis and about 1% when adjusted for weather. In our industrial class, load was flat, marking the end to a long 10 quarter run of growth in that segment. The results reflect lower demand from steel and automotive manufacturers, which offset continued growth in the shale and chemical industries. Turning to our transmission business, earnings increased as a result of higher rate base, which reflects our continued investments in the Energizing the Future initiative. This was partially offset by higher operating expenses at our stated rate transmission companies. And finally, in our corporate segment, 1st quarter results reflected higher net financing costs and the absence of commodity margin from the Pleasants Power Station. As a reminder, we began to exclude Pleasants from our operating earnings in mid 2018 due to the court approved settlement that transfers economic interest of the plant to FES. These factors were partially offset by a lower effective tax rate. Touching on underlying strengths of our distribution and transmission companies, we have recently seen positive credit ratings actions for several of our subsidiaries. Near the end of March, Moody's issued 1 notch upgrades to ATSI, MATE and JCP and L. And last week, Fitch issued 1 notch upgrades to JCP and L, Mon Power, Potomac Edison and Allegheny Energy Generating Company. We believe these positive actions are a testament to our overall improved risk profile and we expect to see continued positive momentum. Before I close, I'll take a moment to review our financing activity this year. At our utilities, we refinanced $300,000,000 of maturing debt at both JCP and L and MedEd during the quarter. We issued new senior notes totaling $900,000,000 to repage short term borrowings and fund capital expenditures at these utilities. We also issued $500,000,000 of new debt at First Energy Transmission and $100,000,000 at ATSI, primarily to repay short term borrowings and fund continued investments in our Energizing the Future program. Lastly, from a liquidity perspective, as of Friday, April 19, we had approximately $3,700,000,000 of liquidity, of which $200,000,000 was cash. Thank you for your time. We had a very solid quarter and we're off to a great start this year. Now let's take your questions. Our first question comes from the line of Greg Gordon with Evercore ISI. Hey, good morning guys. Good quarter. Thank you. Hi, Greg. Can you talk a little bit about the settlement in New Jersey? I think you guys had asked for approximately $400,000,000 of electrical and electric infrastructure investment over 4 years. I think you settled on $100,000,000 over 2 years. How did we get the ask to the deal? And do you think that's adequate to provide the safe and reliable power to those customers? And how does that proceed after that? So, first of all, from our perspective, Greg, we're very happy with this settlement. It's now the second time we've been able to reach a settlement in New Jersey with the main parties that influence our ability to do our business over there. Very happy with the settlement. To put it in perspective, it's $97,000,000 over an 18 month period, which begins in June of this year and ends at the end of 2020. So just to give you a little perspective, we're talking Ohio about $516,000,000 over 3 years. That's double the number of customers. So if you have that, it's $258,000,000 and it's double the number of years, 3 versus 1.5. So if you have it again, it's $129,000,000 So we're spending $97,000,000 in New Jersey versus $129,000,000 in Ohio on an apples to apples basis. It's a good start and we're very happy with it. And I believe if we execute to perfection and we deliver the results that we intend to deliver in New Jersey, we won't have any problem negotiating an addition to this that goes beyond 2020. Great. Thanks for the perspective. The second question, when we look at the agreement that you've made to move forward with the get the disclosure statement in the FES bankruptcy approved and get this thing done. What's the critical path now for the FES bankruptcy to be fully and completely resolved, voted on and for them to exit? Is it the we're waiting for the nuclear license transfers and or is it some other issue? And what's your best guess as to sort of the window of timing on when this is wrapped up? A Chuck Jones Well, with the caveat that I am not the CEO of FES and FEG, I would suggest that I think the nuclear license transfer is probably on the critical path. Now that we've kind of moved forward beyond the court ruling, I believe, with regard to these nonconsensual third party releases. And let me just comment on that a little bit more. I would say that that caught us by surprise with the focus of the court being solely on the releases and not on the actual settlement, because we believed in the actual settlement that we have provided substantial value to make sure that FES can emerge, operate these assets and deal with any retirement obligations when those come down the road. So we felt like the deal because of the substantial settlement that was on the table. But since the focus was on those, we decided to remove those and move forward. So now the next step in the process is for the court to move or to approve the disclosure statements and allow the process to continue moving forward. We're hopeful that will happen on May 20th and then they will continue to make their case for emergence and we expect that to happen sometime later this summer. And then the license transfers would be on the critical path if it all flows that way. Okay. So later this summer would be great, August or September. Appreciate the color. I think it's later in the year than that, Greg. It's probably November October, November. With the transfer. Q A Chuck Jones Got you. October, November. Thank you for being clear. Have a great day. Q A Chuck Jones Okay. Q A Chuck Jones Our next questions are from the line of Julien Dumoulin Smith with Bank might be a tad detailed, but just if you could give us a little bit of sense, obviously, you've posted a surety bond already specifically against some of the assets here and one of the larger coal ash assets. Can you talk about just where that number came from? Just to firm it up in terms of I know you said in your prepared remarks, this doesn't change the metrics as far as you see it. How did you come up with that surety bond number and how do you think about that relative to the obligation today? Because obviously that came from somewhere. So I just want to provide a little bit more confidence out there. Well, first of all, those the surety bonds have been in place for quite a while now, all the way, way back to the beginning of our negotiations with FES. And they were of closing it in steps part by part every year. So we've got a good track record of what the cost to do that are. And the surety bond is was put in place to ensure that there's surety for those costs should we at some point not decide to do it, but we're not going to do that. And I want to say very clearly what I said in my prepared remarks, we are going to stand behind any environmental commitment that we have. If we sell a power plant, we're still in that chain of ownership at some point if the new owners would default. But the other thing I want to say very clearly is we're not afraid of that because we've shut down, retired, remediated, tore down and turned over sites in some cases for 7 coal fired power plants already. The cost the benefit that you get out of the scrap steel, iron, copper, aluminum, the property value, etcetera, This is not any big deal for FirstEnergy. And so we're going to move forward fine. But as I said before, and I want to repeat, we provided substantial benefits to FES that they're going to have the ability to take care of this on their own. Excellent. Thanks for the clarity there. If I can briefly here on credit overall, obviously that's a little bit tied to this process. How do you think about continued added latitude in your metrics, as it stands today given the timeline you just talked to Greg about as well, if you don't mind? Well, I think if you've been watching, we've seen nothing but positive action out of the credit rating agencies, positive action in particular down at some of our utility levels. But I don't expect that that's going to change going forward. I think we were in constant communication with the rating agencies. They know where we're at in this process. When we had the little speed bump with the bankruptcy court, we communicated with them and I don't see anything that's going to affect it on the downside. As we emerge and as we get this process completely behind us, I'm thinking we can make a case that we're a much less risky company and that we ought to be able to move forward with all of them in a very positive direction. Do you think it's more than a percent or so of FFO to debt latitude as it stands today? Hi. Too early. Yes, Julien, this is Steve. At the end of the day, the rating agencies are viewing this year as $225,000,000 payment and issuing the tax note of $628,000,000 for 2022. So I think they understand it's transitional. Once again, we believe that beyond that we'll be at our 12% FFO to debt ratio going forward and that's the expectation we have going forward. We don't see those baseline expectations changing. As Chuck said, we're working very closely with all three agencies to ensure they're fully aware of where we're at. All the positive movements been great so far. We want them to do their jobs and further consider. And I know they are cognizant that our risk profile is lowering at every point in this process as FES gets through their bankruptcy. Excellent. I will leave it there. Thank you all very much. Thanks, Julien. Our next questions are from the line of Jonathan Arnold with Deutsche Bank. Good morning. And I think a couple of my questions were just asked, but I'd like just on the FBS and the release change. Is there any accounting implication of that, any AROs that you'd have to recognize that you wouldn't have had to recognize with the releases? Just wanted to just tie up any loose end there. I'm sitting here watching my chief accounts head say no. [SPEAKER JULIEN DUMOULIN SMITH:] Perfect. That's good to hear, Chuck. Thank you. That was it. Our next questions are from the line of Praful Mehta with Citigroup. Thanks so much. Hi, guys. Good morning. Good morning. So unfortunately, I will also ask a little bit on this FES and the environmental side. If you could, could you dimension for us and given all the experience you've had and clearly the risk seems low here and you've clearly helped FES kind of stand on their own in terms of the remediation. But just to understand, what is the risk? Like if there is a look back period on the environmental side, how what are the factors that could kind of increase the liability from an FES perspective that could flow up to FE? If you had to kind of look at worst case scenarios, what are the scenarios that we should be thinking about in that case? Well, I think it's pretty simple actually Praful. It's FES would have to go bankrupt the second time without having dealt with these environmental legacy issues that would then if they fall to FirstEnergy, we will deal with them. But as I said earlier, we've got already experience with what that means from an economic perspective and from an environmental perspective to take these plants down, return the land to a greenfield status and move forward and get it certified that way by the state EPAs that have jurisdiction over these sites. So there's just not that much risk. The value of the scrap and the value of the property offset and there's a cottage industry that has developed as a result of the number of power plants closing around this country to take these plants off their hands. They actually offer to pay you in some cases for the opportunity to deal with this legacy issue on your behalf. So it's just not something we're concerned about. Got you. Again, very helpful color. But just to clarify, how good can that environmental cost be? Like is there a coal ash? If they were, like what can that number be before you get to the remediation and then obviously the scrap benefits? But is there a ballpark number that we can think about as a potential liability if FES does go bankrupt the second time? With regard to any coal ash liabilities, the surety bonds that are in place already protect us on that front. So there aren't any beyond that that we're worried about. And as I said, the economics are such that there's nothing there that I'm worried about in terms of an ongoing financial obligation to our company that of what you get out of the scrap in the property. Got you. Again, super helpful color. Maybe a final question just on the DMR. In terms of timing of a decision, is there any clarity on when a decision will come on the potential extension of the DMR? No timing. We've asked for them to get moving and potentially have hearings as early as August. Obviously, the existing DMR expires at the end of this year. So we would push hard for an answer sometime this year. So we know what the impact is going to be next year. Understood. Again, thank you so much. Okay. Thank you. Our next questions are from the line of Shahriar Pourreza with Guggenheim Partners. Hey, guys. Good morning. It's actually James on behalf of Shahriar. Okay. Hey, James. How are you? Good. How's it going? I just had a follow on question to Greg's question regarding New Jersey. I know you've mentioned in the past that you've had conversations regarding EV infrastructure. And we also just saw one of your neighbors propose a very large EE program. And I was just wondering if we could see anything on either of these fronts in the near term. And then would that be in addition to a 2021 IIP or is the bandwidth kind of limited there? I don't think there's anything ongoing there right now, James. We were focused on getting a settlement on the IIP through 2020. And what we plan to spend that $97,000,000 on does not include anything to do with EV or it's what I said in my remarks. It's improving the real time reliability to customers. And beyond that, what we plan what we would look at beyond 2020, we haven't even started to focus on that yet. Okay. So no conversations really on EV at this point? A Steve Scherger Not really. [SPEAKER CHRIS STATHOULOPOULOS:] Okay. Thanks. Our next question is from the line of Chris Turnure with JPMorgan. Good morning. I had another follow-up on the New Jersey settlement. Could you give us a sense as to your regulatory strategy going forward there? You mentioned filing another IIP in a year or 2. Why would you maybe choose that route versus going in for a full general rate case given I think you are under earning in the state? Let me just summarize our regulatory strategy overall, because I think it's the same everywhere. When we believe it's time for another base rate case, we will have a base rate case and that's whether it's New Jersey, Pennsylvania, Maryland, West Virginia. Ohio, our rates are frozen for at least 5 more years. So but we would have a base rate case whenever that makes more sense than using the IIP or using the DISC in Pennsylvania. We're going to look at that and evaluate it at all times. I don't see any need for base rate cases in 2019. Then we'll evaluate and we'll let you know what we see as the plan for 2020 when we get out to 2020. Okay. But for now the kind of earned ROE trajectory there plus your earnings from this settlement and the investment that comes from that are sufficient in your view? Yes. Okay. And then my second question is on Holdco financing strategy. I think on the last call you said the holding company would be around 35% to 37% of consolidated debt this year. Can you just give us some flavor as to that amount? How much of it is kind of long term debt, short term debt, term loans, and how much of that separately might be variable rates? Yes. I'll let Steve Staub answer that in detail. But I would just say it's that's the level we're going to be at for the foreseeable future. And I continue to believe that as we get more financial flexibility as a company, we're better off investing it and serving our customers better and indirectly creating growth for our shareholders as opposed to retiring this debt. It's better and makes more economic sense I think for everyone involved. But I'll let Steve take you through the details of what constitutes that corporate debt. Sure. So in terms of the composition of our holding company debt at FE Corp, we have $1,750,000,000 term loans. That's our most cost effective debt. On an after tax basis, that's right around 2.5%. Then we have $5,350,000,000 in bonds. That bet on an after tax basis is anywhere from 3% to 3.5%. And then we have the $628,000,000 tax note yet to be issued. Once FES emerges, we will issue that note and that will be outstanding until the end of 2022. In terms of financing activity, I suspect that at some point in time over the next 12 months, we will most likely go out into the bond markets and refinance the term loan position and potentially do some liability management on some of the bonds that mature in 20222023. So you could see a sizable bond deal at some point in time at FE Corp over the next, let's say, 12 months. And as Chuck said, our holding company debt is going to be around the mid-30s, 35% to 37% for the foreseeable future and that's where we're going to be. Okay. That's helpful. And fixed versus variable rate is kind of embedded within that answer with the term loans being the variable component? That is correct. The term loans are the only variable debt that we have. Okay. Thank you guys for the color. Our next questions are from the line of Michael Lapides with Goldman Sachs. Hey, guys. Thanks for taking my question and congrats on a good start to the year. I have 2 for both a little bit on the regulatory side, obviously at the distribution business. First of all, West Virginia, how are you thinking, Chuck, about a multiyear goal in terms of potential rate base growth reemerging or reigniting in West Virginia in the coming years? Meaning, how do you think about what the opportunity set for investment in that state is? That's my first question. My second question is about Pennsylvania. If I look at the data on your Slide 31 in the fact book you guys put out last night, some of the subsidiaries' earnings, I don't know, trailing 12 months 2018, south of 8% or 7.5% earned ROEs. Just curious why I think 3 of them were below that. Why that wouldn't stimulate potential rate case filings in the coming months there? All right. Well, first of all, thank you for asking regulated questions. It's nice to be able to answer those instead of FES questions. But with West Virginia, here's what I'd say, we don't have any long term strategy for West Virginia. We had in place a tree trimming strategy in particular because we had a number of storms dating back to the derecho back in 2013, I think that was that showed that we had some exposure there. But beyond that, West Virginia is kind of a state that we're in a business as usual mode. We're spending money every year. We're seeing some growth in West Virginia as a result of it being a fully regulated state, industrial growth in the shale and chemical sector and as well as in the northeastern part of West Virginia in our Potomac Edison, West Virginia territory. We're seeing some growth there that's offsetting our costs. When we get to the point there where we think we need to have a rate case, we'll have a rate case. But right now, we just don't see any need to and I don't have any long term strategy because I think we're performing okay and there's nothing that needs immediate attention in West Virginia. With regard to Pennsylvania, we've made a concerted effort to improve our disclosures. And I think that means you all are going to be talking to Irene quite a bit. But I don't think we want to get into details about rates of return and so forth on this call. So, I'm just going to encourage you to talk with her offline about it. But I will point out that in Pennsylvania as of the 1st of this year, the disc is turned on in all 4 of our operating companies in Pennsylvania. We cannot turn that disc on unless we're underneath the threshold for allowed rate of return as the commission looks at it. So I think we're in good shape. We're using the DISC at all four companies. And I think we ought to take it offline to talk about the details because as we get more and more transparent, it's going to create a lot of questions that we just don't have time for on an earnings call. Got it. Thank you, Chuck. Thank you. Our next questions are from the line of Andrew Weisel with Scotia Howard Weil. Good morning, everyone. Chuck, you beat me to it. I was going to congratulate you guys in the IR team in particular for the new slide deck. I like the look of it. Two questions for you guys though, both regulated, so don't worry about that. First one is, I know you haven't updated the CapEx outlook in a little while, but given the DPM and JCP and L Reliability Plus settlements, should we expect results to trend towards the higher end of the ranges? Or is it more a function of improved visibility into recovery with less or no lag? Well, I think in what we said as far as our going forward 6% to 8% growth plan, We've said that the CapEx program in general is going to be in the $2,600,000,000 to $2,900,000,000 range combined T and D throughout that planning period. And I expect to continue to keep it in that range. That range contemplated the IIP in New Jersey. It contemplated where we were at with the grid mod in Ohio. And we provided a range there to allow for some movement in all of what we do. You can't plan down to the dollar $2,900,000,000 of capital spend. But I think you can count on it being in that range throughout the planning period and probably likely beyond the planning period. Should I take that as a no comment on high end versus middle versus low end? There's so much that moves around that it's going to be what it will be. We have capital costs related to storms that we expect to be able to cover within that range. If we have a heavy storm here, I'll move us to the high end. If we have a light storm here, there's just so much that moves around that I'm not trying to dodge your question. I just don't know the answer to your question. And that's why we provide a range. Okay, understood and fair enough. Next one I have is a little bit different direction than some of these other questions. 3 of your largest states are at least contemplating some sort of ZEC programs for nukes. I know you don't have any plans for rate cases in the near term as you talked about, but do you worry about affordability impacts on rates from these programs? And how do you balance the trade off of reliability versus cost, especially now that you're out of the generation business? I don't worry about it at all because I think these states that are stepping up to protect their nuclear plants are ensuring long term rate stability for their residents and their customers in those states. And it's providing a hedge against the most high beta fuel that we've ever had in this industry, which is natural gas. It's providing a surety that they have ample supplies of electricity during the most strained times of year in frigid climates where natural gas cannot meet all of its obligations. So I think it's providing and just take for example, the bill that's pending here in Ohio, it's $2.50 per month on a residential customer bill to provide that security. We all buy insurance for our homes, our cars and a lot of other things. It's a very cost effective insurance policy that these states are taken out. And it provides long term economic benefit and clean air benefits too. So I think these states are smart and I'm on record and I'll continue to say as long as I have this role, It's the states are making up for failed market policies that are not working correctly when you form a market on nothing but a lease cost, marginal cost, it's not going to ever take care of the fixed costs of these important assets. So I think the states are all doing the right things. That's very clear. Thank you very much. Our next question is from the line of Angie Storozynski with Macquarie Group. Thank you. I will go back to FCS. So just taking a step back, I understand all of the explanation about the limited of any liabilities, but you did try to have this release of included in the FES settlement. So there must have been a reason why you wanted to have it there. So if you never thought that there is a risk, why did you have it in the settlement? [SPEAKER A. D. BAER PETTIT MSCI, INC.:] D. Baer Pettit MSCI, Inc.:] Well, Angie, I said in my prepared remarks, it was in there to try to create some finality, which is I think important in everybody's minds as FES exits that as much finality as we could create, we created. And that's why it was in there, never expecting it to be the focus that it became during the bankruptcy process and the focus it became with the Justice Department. So, we believed that it could be in there because the substantial settlement that we've worked out with FES provides for taking care of these obligations over the long term and provides for their ability to exit, operate and then eventually deal with any plant closure costs that come their way. So, we just didn't see it as a big deal one way or another, but it was in there to try to provide finality. And but once it became a speed bump, we have no issue with removing it. Okay. And then on Ohio DMR, so I mean is there are you engaged in negotiations? Is there any range of possibilities that you would consider? I mean, what is the pitch at this point in the sense that you're trying to say that your investment level in Ohio will increase commensurate, so that's basically humping $33,000,000 in extended DMR. I mean, what can you give us here on what the bid and ask spread is currently? A Chuck Jones Well, as I've said, we have nothing built into our forecast going forward for DMR. We've asked for the current level to be extended for 2 years, which is what the original filing gave us the ability to do. The bid ask is I guess is anywhere from 0 to the current levels. Our approach is that it has driven what the commission was trying to do, which is stimulated investment in our Ohio utilities in grid modernization efforts that will hopefully then be built upon with approval of our grid modernization program once the commission gets back to a full business schedule. Unfortunately, we had a change in chairs and it's taken a while for them to get the train back on the tracks and moving forward there. But I expect we'll get approval of the grid mod program and build upon it. So the basic premise for why we are saying it should be extended is to continue to stimulate the things that the commission was trying to do in the 1st place. Okay. Thank you. Thank you. Our next questions are from the line of Charles Fishman with Morningstar Research. Good morning. Transmission, memory serves me that MAIT and ATSI, a few years back, you agreed to a lower ROE in exchange for going to a forward rate making framework because of the hundreds of small projects you had and that obviously in hindsight appears to be the right decision based on the earnings growth there. But with all the with the discussion going on at FERC, the ROE review, because you're already at a lower ROE relative to some other systems around the country, Is that something that really we shouldn't even be concerned about that they're just not going to impact you? Well, first, we agreed to make that change with ATSI. ATSI was at a higher rate of return on a lagging formula rate, which as you said, meant that a project that got done in January of 2019, we wouldn't start earning on until June of 2020 under that old. So now when that project goes in a forward looking formula rate, it returns cash and earnings to the business much quicker. So the lower rate of return made sense for ATSI. When we founded MAIT, we founded MAIT from the beginning on a forward looking formula rate with a 10.38% return and MATE is not that old. So, I think it was set very recently. I don't think there's anything that we're worried about with regard to earned rate of returns in our transmission businesses. So I don't think there should be anything that you're worried about. And my read of the T lease or what it's worth at the FERC is while they're looking at rates of return, they're looking at them in ways to continue to incent investment in this grid across this entire country, not ways to disincent. So, I just don't think it's something that we should be Well Well, I think I've said before, we have $20,000,000,000 of transmission projects that our team has already identified that they believe need to be done. And so given that need, I would expect that it's going to continue to be something we focus on for the foreseeable future. So while I'm not telling you what our CapEx plan is, I think my expectation it's going to be in that range for quite some time. Okay. Like your new slide deck. Thank you. That's it. Okay. Thank you. All right. Well, I don't see any more questions in the queue here. So, I want to thank you all for your time today and thank you for your continued support of FirstEnergy and we'll talk to you next quarter. This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.