Earnings Call: Q3 2018

Oct 26, 2018

Greetings, and welcome to the FirstEnergy Corp. 3rd Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Irene Prezel, Vice President, Investor Relations for FirstEnergy Corp. Thank you. Ms. Prezel, you may begin. Thanks, Melissa. Welcome to our Q3 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 Investor 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. Now, I'll turn the call over to Chuck. Thank you, Irene, and good morning, everyone. We had a great quarter, and I'm pleased to have this chance to speak with you about our results and our progress on key initiatives. Since our last call in August, we have successfully carried out several of the critical steps necessary to complete our transition to a fully regulated utility. As I'm sure you know, on September 25, the bankruptcy court approved our definitive settlement agreement in the Chapter 11 proceedings of FirstEnergy Solutions, its subsidiaries and Phenoq. This very positive development marks perhaps the most important milestone in our exit from competitive generation. While you may occasionally see news about the progress of FES, Phenoc and their affiliates as they work with the bankruptcy court, to be clear, we expect that none of this will impact our ability to execute our regulated strategy. We are also in the final stages of implementing our FE Tomorrow initiative, which will align our cost structure and shared services workforce to efficiently and effectively support our regulated businesses going forward. In total, 9 60 positions in our shared service organization were impacted by this effort. In addition to the nearly 500 employees who accepted our voluntary enhanced retirement package, we eliminated nearly 230 open positions, transitioned some employees into opportunities in our utility business and created a flatter, leaner management structure by reducing layers and increasing spans of control. As part of this streamlining effort, there are nearly 45% fewer leadership positions in our shared services organization, including 46 Director, Executive Director and Vice President positions and 163 Supervisory and Manager level positions. The majority of these organizational changes went into effect during the Q3. As part of the FE Tomorrow effort, our teams identified opportunities that will eliminate the $300,000,000 of costs that were associated with our competitive operations. In addition, we expect to fully offset the $30,000,000 associated with common systems shared with FES. We also identified an additional $20,000,000 of O and M and interest and $35,000,000 in capital reductions for total incremental cash savings of $85,000,000 The expected savings include reductions in labor costs and less reliance on contractor work and will be reflected in the 2019 earnings guidance we will provide at EEI next month. The FE Tomorrow initiative has been an outstanding effort by our teams across our corporate functions. In fact, the level of projected operating expenses associated with our shared services organization benchmarked solidly within the top quartile of our industry and we are confident that we have the proper organization and cost structure to support our fully regulated business. Past 2 years and this year in particular have been a period of rapid change in our company. I'm extremely proud of our employees' ability to remain focused on the execution of our objectives. As you saw in the results we posted last night, our regulated businesses continue to perform very well. We reported strong 3rd quarter results and exceeded our guidance largely due to the hot summer weather that has lingered through the end of September. Steve will discuss our earnings drivers in more detail, but we were very pleased that in addition to the benefits from the heat, we saw a second consecutive quarter of growth in residential weather adjusted usage and at the same time industrial usage was up 2.5% compared to the Q3 of 2017 marking the 9th quarter of growth in that class. On the regulatory front, we continue to execute on our plans. In August, we filed the 1st base rate case for Potomac Edison in Maryland in nearly 25 years. This week, we supplemented the filing to update the partially forecasted test year with a full 12 months of actual data. The $19,700,000 request addresses recovery of the investments we have made in our Maryland distribution system to ensure continued safe and reliable service. The request is net of $7,300,000 in customer savings related to federal tax reform. The Maryland Public Service Commission provided a procedural schedule that includes evidentiary hearings beginning on January 22. We expect a final order by March 23. In Ohio, our application for a $450,000,000 distribution platform modernization plan is pending at the PUCO. The 3 year plan would focus on distribution automation, voltage control and preparing for the grid of the future. Now that the commission's power forward initiative is complete, we believe that PUCO will be able to focus on the distribution platform modernization proceeding and grid modernization issues. In New Jersey, our 4 year $400,000,000 JCP and L Reliability Plus infrastructure investment plan is pending at the BPU. As we discussed last quarter, this plan is designed to enhance the safety, reliability and resiliency of the distribution system for the benefit of our customers in New Jersey. We are hopeful that we will receive a procedural schedule soon to facilitate timely approval by the BPU. Finally, we continue to execute our Energizing the Future transmission plans across our footprint and we remain on track to invest $1,100,000,000 in our system this year. Consistent with our eastward expansion of this initiative, this summer we completed the $51,000,000 East Towanda South Troy line rebuild project in Bradford County, Pennsylvania. This project, which is part of our Mid Atlantic Interstate Transmission subsidiary, involve rebuilding an existing 19.6 mile 115 kilovolt transmission line using 230 kilovolt construction standards. The rebuilt line was designed to allow for the construction of a second 230 kilowatt circuit when needed in the future. Also in May, earlier this year, we finished rebuilding a 7.2 mile section of a 115 kilowatt line on an existing right of way in Bedford County in South Central Pennsylvania. This will connect to a new 10.6 mile span of line that stretches into neighboring Somerset County. When this $50,000,000 reliability project is complete in 2019, it will connect several substations and address the risk of thermal overloads and low voltage conditions that could impact service reliability in that region. We have updated our full year 2018 GAAP earnings forecast to $1.68 to 2 point $6.0 per share, which reflects the deconsolidation and quarter proved bankruptcy settlement with FES and Phenoc and an estimate for the annual pension and OPEB mark to market adjustments. With our strong performance and the impact of favorable weather through the 1st 9 months of the year, we are raising and narrowing our full year 2018 operating earnings guidance range to $2.50 to $2.60 per share from the previous range of $2.25 to $2.55 per share. We are also reaffirming our longer term operating earnings growth projection of 6% to 8% through 2021. Now Steve will provide a review of our strong Q3 results and our financial developments. Thanks Chuck and good morning everyone. It's great to speak with you today. Our results are very straightforward for this quarter, so this will be a quick discussion with plenty of time for your questions. Starting with our GAAP results, yesterday we reported a 3rd quarter GAAP loss of $1.02 per share. This is due to a pre tax charge of $1,200,000,000 representing the expected obligations under our current agreement with FES and Phenoc bankruptcy cases. And with the court's approval of that settlement, we moved the Pleasants plant to discontinued operations to reflect its upcoming transfer to FES and excluded the plant from operating earnings starting in the Q3. Before I move on to the discussion of operating earnings drivers, I'll remind you that we continue presenting operating earnings and projections on a fully diluted basis. This allows us to show preferred shares as fully converted and it eliminates the impact of conversion timing. For your reference, about 56% of preferred shares had been converted as of September 30. In accordance with the terms of the equity issuance, we expect the majority of the remaining preferred shares to be converted by the end of July 2019. As always, we provide reconciliations and detailed information about the quarter in our consolidated report to the investment community, which is posted on our website. Our 3rd quarter operating earnings of $0.80 per share surpassed the top end of our guidance, with weather driving the bulk of the $0.17 per share increase compared to the Q3 of 2017. Results in our distribution business benefited by higher deliveries along with lower expenses, lower financing costs, and higher regulated commodity margin. These factors more than offset costs related to increased vegetation management work in Pennsylvania, higher depreciation expense, and general taxes. Total distribution deliveries across all customer segments increased 6.3% compared to the Q3 of 2017. This was largely due to cooling degree days that were 28% higher than last year and 29% above normal. Sales to residential customers increased 12.9%, while commercial deliveries were up 2.7%. On a weather adjusted basis, deliveries to commercial customers were down 0.7% compared to last year. The decrease primarily reflects the continued impact of energy efficiency measures in that sector. However, as Chuck said, we continue to see positive developments in our residential customer class, where 3rd quarter weather adjusted sales increased 1.7%. This is the 2nd consecutive quarter where we have seen a meaningful uptick in weather adjusted residential load. Paired with the continued modest increases in our residential customer count, we are cautiously optimistic that these promising metrics will form a trend. In the industrial sector, total deliveries increased 2.5% compared to the Q3 of 2017 for 9 straight quarters of improvement over the prior year period. The increase in demand primarily came from our customers in the shale gas and steel industries, but we also saw higher usage of hospitals and universities, which was weather related. Moving on to our transmission business, 3rd quarter earnings increased $0.02 per share compared to last year. This reflects the higher rate base at our meat and chassis subsidiaries as well as higher revenues at JCP and L. And in our customer segment, our results reflected higher operating expenses and the impact of lower federal tax rate compared to the same period in 2017. Finally, I want to give you a quick update on our liquidity facilities. As a fully regulated company with stable, predictable earnings and cash flow, we have a much improved risk profile that comes with lower liquidity requirements. On October 19, we reduced aggregate commitments under our revolving credit facilities to $3,500,000,000 from $5,000,000,000 and extended their maturity dates to December 2022. We also entered into 2 new term loans totaling $1,750,000,000 to refinance our revolver borrowings. These credit facility changes reduced interest expense in connection with our FE Tomorrow initiative. We had an excellent quarter with strong financial results. We also achieved very important milestones in our corporate transformation, including an upgrade to investment grade by S and P. We remain focused on execution, and we are committed to positioning FirstEnergy for stable, predictable and customer service oriented growth to benefit our shareholders, customers and employees. Thank you for your time and your interest in FirstEnergy. Now let's take your questions. Thank you. We will now be conducting a question and answer Our first question comes from the line of Julien Dumoulin Smith from Bank of America Merrill Lynch. Please proceed with your question. Hey, good morning. Congratulations. Thanks Julien. Hey. So maybe to just follow-up here, what are the ramifications of the cost savings here is potential additional latitude from a balance sheet perspective. Can you talk about how you're thinking through the additional FFO to debt latitude? What kind of metrics you want to be targeting? And ultimately, given perhaps the litany of opportunities you already described on the call, where you're trending within your own CapEx budget? And if you would see yourself being in a position to increase that CapEx budget, whether because of the additional FFO to debt latitude or simply because you wanted to pursue external financing to raise external funds to finance some of the additional CapEx? All right. So that's like 5 questions in one there, Julien, but I will try to take them all on. So first, FE tomorrow, the obvious first objective was to deal with the $300,000,000 of shared services costs, which has been supporting the competitive business throughout basically the history of our company in a way where none of that became a drag on our ability to execute our regulated plan. We accomplished that. 2nd was to deal with the $30,000,000 of depreciation associated with common systems that we shared with FES, we accomplished that. On top of that then $20,000,000 of O and M and interest and $35,000,000 of capital. That isn't going to be difference. Where we're targeting is 12% to 13%, which keeps us above the Moody's 12% guideline and the S and P 9% guideline. And we expect to be there for the foreseeable future. And did I get them all? Well, what about just pursuing external financing? I mean, I know a few months ago, you all committed to perhaps staying away from the capital markets and living within your means, if you will, with respect to hitting your CapEx. But obviously, there's a lot of different opportunities and many continue to materialize here. Is there any chance that you all are looking at or would contemplate raising your CapEx budget to reflect some of these beyond the ranges that you've already articulated? Okay. So first of all, we've said we don't contemplate any new equity through 2021 and we'll evaluate it at that point. Between now and then, we'll invest $7,500,000,000 in infrastructure at FirstEnergy and at some point, equity might be a necessary component, but not through 2021. As far as that CapEx plan today, I do not see increasing it. The plan we have generates 68% per year combined growth for our company. I don't see any reason to take it above that. And I think that's an appropriate number for FirstEnergy at this time. Got it. And if I can clarify quickly, just with respect to the costings identified, 2019 run rate Or how do you think about that flowing into 2020 onwards, right, as you think about the various pieces there? Annualizing year over year, if you will. More of a timing question. We'll see it in 2019 and beyond. The full year 2019 to be clear? Yes. Okay, great. Yes. And Julien, this is Steve Strah. And I would also just say those savings are in support and blended in within our 6% to 8% growth rate. Right. But there's not an annualizing factor such that perhaps that that's a more of a 20 figure than a 19 figure or to the extent which that you okay, great. I'll leave it there. Thank you. Thank you. Our next question comes from the line of Steve Fleishman with Wolfe Research. Please proceed with your question. Thanks. Could you give a little more color on what you're seeing in terms of the local economy and whether normalized sales and how it looks for next year too right now? Well, the good news is we are seeing some positive developments when we adjust out the warm weather that we had this summer. 1.7 percent growth in the residential segment is probably the most positive. Now we did add 35,000 new residential customers between the Q3 of 2017 and today. So that's contributing to the growth. In the past, as we were adding customers, we were seeing that kind of eroded by energy efficiency and fuel switching to natural gas and other things. But I think 35,000 new customers and 1.7% growth and it's the 2nd quarter in a row where we've seen some growth is a good thing. 2.5% growth in the industrial sector, that's now, as I said in my opening remarks, 9 quarters where we've seen growth in that sector. So I think what we're seeing is some of the growth in the national economy is starting to move into the FirstEnergy footprint. Okay. And then just any thoughts on the Ohio tax reform order earlier this week and it seems to get flexibility in addressing any thoughts on it? Yes, I'll give you my thoughts. Obviously, tax reform is an issue we've been dealing with across the board. We're done in Pennsylvania. We're done in West Virginia. We're done in New Jersey. We'll be done in Maryland with the result of the rate case there. In transmission, the formula rates adjust automatically. We filed a case for the Aye stated rates to make the appropriate adjustments there as FERC requested. That only leaves Ohio left to deal with. And we have frozen rates for several more years in Ohio. But despite that, I expect we'll be able sit down and work with the Public Utilities Commission on some type of a settlement that makes sense for them, for us and all the interested parties. Great. And then just lastly, I might have missed this at the beginning, just at the upcoming Edison conference, what if any incremental disclosures are you providing? The only thing on the plate right now is 2019 guidance. Okay. Thank you. Thank you. Our next question comes from the line of Stephen Byrd with Morgan Stanley. Please proceed with your question. Good morning. Hey, Stephen. I wanted to step back and talk about changes to the generation mix in Ohio. I guess you have a number of moving pieces. You have numerous potential shutdowns as well as I guess there's a possibility of legislation that it could increase the amount of renewables in Ohio. So I'm thinking about this from an opportunity set in terms of both additional changes to the grid over time that would be needed if there is a number of shutdowns, possibility of FirstEnergy directly investing in renewables, if the targeted renewables amount goes up? Just generally, I know this is longer term, but I'd love to hear some of your thinking around what that might require in terms of incremental spending, incremental changes to the grid or involvement in renewables, anything else on Ohio that you might comment on? So right now in Ohio, FirstEnergy is a fully regulated transmission and distribution company. We have no generation regulated or competitive any longer and we're focused on what the needs of customers are from a T and D perspective. Should there be additional closures in Ohio, there a process within PJM to review those closures and identify any changes in the transmission networking capability to handle those. Those would be dealt with through the RTEP process and of course we would make those changes on our transmission system as necessary. At this point in time, under Ohio law, regulated utilities aren't allowed to invest in generation. So, I'm not spending any time worrying about generation in Ohio at this point in time. We're worried about the T and D infrastructure and serving our customers the right way there. Understood. And then just switching over to your cost cutting and making great progress there. I was I was curious as part of that cost cutting effort, did you do any kind of a benchmarking of your cost structure relative to neighboring or peer utilities just in terms of how your cost structure looks? And just curious if there's any commentary you could provide on pro form a what your cost structure looks like relative to peers? Yes, we did. And we used Accenture to help us with this process, Stephen. And they brought a number of benchmarks to the table to assist us, including benchmarkings of marks to the table to assist us, including benchmarkings of costs at a high level with our peers, but also things like layers of management between me and the people doing the work in the corporate office spans a control for our leadership in the corporate office. That's what drove the entire reduction. As I said in my opening remarks, now that it's all done, our corporate structure costs are in the top quartile within our industry. Understood. And Chuck, just at the utility level, are there any of your units that are noticeably high in terms of the cost, whether it be just because of lack of scale or any other drivers. Just I appreciate at the parent level, you've gotten your cost down pretty massively. Just curious if sort of any of the subsidiaries stand out as having a cost structure that's quite a bit higher than peers? No. In fact, it's just the opposite. Our utility cost structure is generally benchmark in the top quartile and topdecile for both capital and O and M even at our current CapEx levels. Perfect. That's all I had. Thank you. Thank you. Our next question comes from the line of Jonathan Arnold with Deutsche Bank. Please proceed with your question. Good morning, guys. Hi, Jonathan. Hi. Could I just jump to the EEI question. If not at EEI, when would be reasonable for us to expect you to think about rolling forward your current outlook that if I'm not wrong goes through 2021? I don't think you'll see anything at EEI this year that goes beyond 2021. And is that something you think Chuck you would do sort of with your year end call or more sort of later in the year next year? I think it'll be sometime later in 2019. Okay. And I mean, if I can, what are you particularly waiting to see before adding another year to the outlook, let's say? Well, there's a number of things we're waiting to see. First of all, we've got a lot of things to focus on now that we're fully regulated. I want to see whether 2 months make a trend in terms of load growth in our territory or not. I think that could be a big factor. And beyond that, I just think given you 4 years out, what I'd like to do is give you plans that I know that we have nailed down and we can execute on. And 4 years out is a little bit outside the planning window that I think is prudent for us to go to. Okay. Thank you. And then just on transmission, do you any comments on the recent FERC order? I realize you have rates that are settled, but as you look at the potential shift to the new model, can you just give us some context of how you think that would sit versus where your earnings are? So here's how I look at it. Our formula rates of return are fairly new right now. The mate one was just set recently. I think that bodes well for those rates going forward. I think longer term, if there's much done to change FERC ROEs, it's going to compress them with the state ROEs and it's going to work against what FERC is trying to do to stimulate transmission investment because it's going to shift money, not just in our case, but probably in many other cases down towards this recent system and away from transmission. So I think that is going to kind of be a control rod in the process. But even if they decide to move forward, here's how I think about it. 0.5% change in the ROE is about a $15,000,000 impact on FirstEnergy's earnings. That is not significant and it's something we can make up within the rest of our plan and not something that will take us off track from a 6% to 8% growth rate in any way. Very clear. Thank you, Chuck. Thank you. Our next question comes from the line of Greg Gordon with Evercore ISI. Please proceed with your question. Thanks. Hey, guys. I think maybe we should all just email our questions to Julian and just ask him questions to Julian and just ask them all right now. Sorry, Julian, couldn't help myself. Talk to you later. So the just to rebase go back and rebase the conversation around earnings. If I recall correctly, your 6% to 8% growth target is based off of a $2,019.15 number. Is that am I remembering correctly? The 2018 fully diluted number ex DMR. Great. 2018 number? Yes. Okay. I just wanted to make sure I had that's right, 2018 number. So if I look at that, then where within the guidance that 6% to 8% guidance range and maybe you just you don't want to comment on this, would you sort of feel like you were trending now that you've got the CapEx plan sort of solidified, the cost cutting in the books, FES exiting, and if these types of load growth numbers were to be consistent, would you be confident in your ability to be sort of at the midpoint or towards the upper end of that range at this point? Are you is it too early for you to discuss that? So number 1, I'm not going to give 2019 guidance until EEI. So that number you'll hear in a few weeks. And beyond that, we give a 6% to 8% range. We expect to be within that range. And we don't guide right now to the bottom or the top of that range. So I think you can assume that we should be somewhere within that range And a lot of factors can affect that. As I said earlier, if 2 months of residential growth becomes a trend, that will drive more to the top end of that range. If something happens with FERC ROEs, that might move us a little bit down. There's going to be puts and takes throughout that. But I'm confident and we've reaffirmed that that 6% to 8% growth range over the next 3 years is something you can count on. Great. And you guys just paid the dividend at the same rate that you paid it since it was cut several years back. Can you give us some guidance as to when you think it's appropriate to go to the Board to recommend a policy that's more comparable to your peers both in terms of payout ratio and growth? Yes. So we've been a fully regulated company now for all of about a month since the filing was approved by the court. So I've said all along, if we expect to be treated in the market like our regulated peers at some point in time, we're going to need to have a dividend policy. In the immediate future, what's keeping me is our yield on our dividend is nothing to be ashamed of. It's in the 3.8% to 4.4% range depending on where the stock price is moving. We began discussions internally with the leadership team to see what we might recommend to the Board and I think just be patient, It will come and I know we need to do it. Okay. Thank you, guys. Thank you. Our next question comes from the line of Praful Mehta with Citigroup. Please proceed with your question. Thanks so much. Hi, guys. Hi, Praful. Hi. So just maybe following up on the earnings side, thinking about the DMR and the extension to the DMR, how do you see that positioned? And if that doesn't come through in terms of an extension, what kind of EPS drop off do you see with the DMR going away? So all of our earnings projections that we've given you exclude DMR. So there would be no drop off whatsoever regardless. We expect to file a case for extension of the DMR early next year. We're hopeful that the commission will rule on it by the end of next year and we'll have the answer about what happens with those last 2 years at that point in time. But it can only be positive, it cannot be negative. Yes. No, fair enough. And that's I guess where I was going, which is, if you do get it, let's put it the other way, then what is the upside that you see for the DMR going forward? Well, if you can calculate what 2 years of it would be worth, I wouldn't see us taking that money and doing anything with it that would take us off track long term that we can't continue. That's why we've taken it out of the numbers that we're sharing with you now. Got you. Fair enough. And I guess, moving on to the credit side and the total debt, I was looking at Slide 31, which had your balance sheet debt and the Holdco debt has gone up to about $7,000,000,000 Just wanted to understand, is there a target of like what Holdco debt you would like to have as you go through this restructuring process? I know that there was a term loan that was taken as well. So just wanted to get a little bit more context on the Holdco debt and where do you see that going as a percentage of total debt as well? No higher than the $7,000,000,000 that it's at right now. Got you. And is there any target in terms of what proportion it will be of total debt going forward? Or will that only reduce as your rest of the balance sheet I guess grows with the growth of the utility side? Praful, this is Steve. So right now holding company debt as a percentage of total debt will be around 35% to 40%. Over time, we expect it to go down to about 30%. Got you. Thanks. And just to clarify, on Slide 31, it says it does not include the term loans that you have recently taken. Is that not included within the 7 or is it within the 7? So basically, our holding company debt over time will average to be about $7,000,000,000 There's going to be a little give and take. So it does include the term loans. I got you. Thank you. All right. Thank you, guys. I appreciate it. Thank you. Our next question comes from the line of Michael Lapides with Goldman Sachs. Please proceed with your question. Hey, guys. I'll ask them in an order. First of all, going back to Slide 4 in the FE tomorrow, the $300,000,000 of costs associated with competitive ops, who does that actually accrue to? Meaning, does that come back and benefit FE, the new FE, the regulated FE, does that benefit kind of FES on the way out in prep for emergence? I'm just trying to make sure I understand what's happening there and whether that's capital O and M or something else. It doesn't benefit anybody, Michael. It is the actual shared services costs that we've incurred in the past to support the FES and Phenak part of our company that have been traditionally shared with them through our shared services allocations. If we did not deal with it, it would have been a drag on our ability to execute our regulated strategy. So the goal was as FES ultimately says, we don't want these shared services anymore, we needed to make them go away. So it's basically a dollar for dollar elimination of the costs that were previously billed to FES so that there's no drag on our ability to move forward. Got it. A follow-up unrelated question. Chuck, you talked a little bit about the yield where your stock trades and we recognize that maybe on a valuation perspective, it trades a little bit differently than some of the other kind of pure play regulated utilities. Are there strategic thoughts you and the Board are having or discussions of whether there are other changes to the corporate structure that may be possible, meaning you've got a great transmission company, if you think the market doesn't value the transmission assets correctly, are there ways to monetize parts of that or to highlight or accentuate the value of that to the market? How are you guys thinking about the kind of the value inherent within FE and the FE business family? Well, how I think about it is it's much more valuable than a lot of you think it is based on a 6% to 8% growth rate and a dividend on top of that. But having said that, as I said, we're about 1 month into now being finally a fully regulated company. And me as a CEO being able to focus on a fully regulated company. Probably 2 thirds of my focus over the 1st 4 years in this job has been on the competitive business and what we were going to do about it and how we were going to exit it and the entire exit process. Now I'm able to focus on the fully regulated side of our company. A company with 6% to 8% growth isn't something that I think we want to that we need to necessarily do anything with at this point in time, strategically to restructure our company. I think it's perfectly structured. We have regulated distribution utilities across 5 states. We've got now 3 investment regimes in transmission that are under formula rates. Down the road, if it makes sense for the Allegheny transmission system to be moved to a formula rate, we'll look at that. But it's all going to be driven about how do we maximize investment for customers and Thank you. Our next question comes from the line of Charles Fishman with Morningstar Research. Please proceed with your question. Yes, good morning. I just had a quick housekeeping thing. When you initiated the 6% to 8% off the 2.15% base, you talked about shares growing to $545,000,000 in 'twenty one. Now you're talking fully diluted $538,000,000 in no equity. Should we just assume we're $538,000,000 flat through 2021 for our modeling? This is Steve Staub. No, we have a DRIP program that we issue shares under each year. So it's about $75,000,000 to $100,000,000 of equity value. So you can do your calculation based on that. Got it. Okay. That's all I had. Thank you very much. Thank you. Our next question comes from the line of Andrew Weisel with Howard Scotia Weil. Please proceed with your question. Thanks. A lot of these topics have been delved into pretty deeply. So I just have a couple more details I wanted to dig into. First on O and Ms, just a quick one on timing. Given the favorable weather this summer, were you able to accelerate some O and Ms from 2019 into 2018 that might support the guidance? No, there was none of that. And in fact, because of some reliability issues, we spent a little extra O and M in one operating company, Penilec, than what their original budget has. But when you get 9 months into a year and you start trying to move money around within a budget, it takes people and contractors to execute what we do in this regulated business. It's a very complex maneuver and I just want to keep the team focused on executing the plans that we have in front of them. So there was none of that done. Then two Then two questions on CapEx. First of all, how would you describe the conversations with regulators and intervenors around the IIP in New Jersey and the DPM and potential extension of DMR in Ohio? So IIP in New Jersey, we're having discussions with both the staff and interveners. We're waiting on the commission to issue a procedural schedule. I think those discussions will go on throughout the 1st part of next year and we'll be able to give you a little more guidance on where it stands. I think in general, the reaction to the IAP has been favorable in New Jersey and obviously lot of On the DMP, as I said, the commission in Ohio spent a lot of time on their Power Forward initiative this year. Now that that's done, I think they're going to have time to focus on DMR, we'll make our filing in early next year and we'll see where that goes. Obviously, we expect to make a case for why the last 2 years should be continued, but we haven't built any of that into our 6% to 8% growth. Okay. Thanks, would be incremental. So if they are approved, should we think about that? Ask the question again. Your voice was garbled and maybe get closer to phone. If I heard you correctly, you said that the current CapEx plan does not really have upside potential, I think you should think of the current CapEx plan as the CapEx plan for the next 3 years. And if we decide to make any changes to it beyond that, we'll let you know then. But I think you can count on it being what it is for the next 3 years. Our next question comes from the line of Paul Fremont with Mizuho. Please proceed with your Just a quick point of clarification, I guess, on PowerForward. Do they need to make determinations under that proceeding that seems to kick off in early December before they're able to actually act on your request, which looks like it would be sort of covered under the general topic that they're looking at? No. They're free to act on our request at any time. Okay. And so you would expect then that yours will move forward independently from that proceeding. When would you expect a scheduling order? Paul, as I said, I think the commission now has time to focus on it. We're having active discussions with the staff on it. I can't give you a date as when I expect an order, but I'm optimistic that we can get something done on it in the not too distant future. Terrific. That's it. Thank you. Thank you. Ladies and gentlemen, we have come to the end of our time allowed for questions. I'll turn the floor back to Mr. Jones for any final comments. Okay. Well, I'd like to thank you all for your support of FirstEnergy. We look forward to seeing you at EEI in a few weeks. Take care. Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.