Good afternoon, and thank you for joining NorthWestern Corporation's-
Recording in progress
Financial results webcast for the Quarter Ending September 30, 2022. My name is Travis Meyer. I'm the Director of Corporate Finance and Investor Relations for NorthWestern Energy. Joining us today to walk you through the results and provide an overall update are Bob Rowe, Chief Executive Officer, Brian Bird, President and Chief Operating Officer, and Crystal Lail, Vice President and Chief Financial Officer. All participant lines are currently muted. After the presentation, we have allowed time for a Q&A session. I will provide instructions, excuse me, for asking questions at that time. However, if you intend to ask a question or are joining us by computer, please set your Zoom identity to your first and last name, so we can call on you by name to let you know that your line is open.
NorthWestern's results have been released, and the release is available on our website at northwesternenergy.com. We also released our 10-Q pre-market this morning. Please note that this company's press release, this presentation, and comments by presenters, and responses to your questions may contain forward-looking statements. As such, I'll direct you to the disclosures contained within our SEC filings and the Safe Harbor provisions, including on the second slide of this presentation. Please also note this presentation includes Non-GAAP financial measures. Please see the Non-GAAP disclosures, definitions, and reconciliations also included in the presentation. The webcast is being recorded. The archived replay of today's webcast will be available for one year beginning at 6 P.M. EST today and can be found in the financial results section of our website. With that, I will hand our presentation over one last time to NorthWestern CEO, Bob Rowe.
Thank you very much, Travis. We're meeting this week in Sioux Falls, South Dakota. There were some great economic development activities over the weekend, and we're just delighted to be part of one of the most dynamic economies in the country. A highlight of the board meeting was a presentation by PUC Chair Chris Nelson. Chair Nelson reminded us of our responsibility to focus on the reliability of our system. Chair Nelson is very clearly focused, as are his colleagues, on reliability and affordability. It's a message that he also delivered very eloquently at the ribbon-cutting for the Bob Glanzer Generating Station. We were really honored and appreciated that he made time for us.
I wanna say a couple of things about the ongoing renewal of our leadership at both the board and the executive level. At the board level, as probably most of you know, Kent Larson is a new member of our board of directors. Many of you probably know Kent. He was a key leader at Xcel Energy until his retirement and one of the key contributors to Xcel Energy's growth, sustainable growth over a number of years. Kent is already providing great contributions to the board of directors. At the executive team, our general counsel, who also leads our regulatory affairs efforts, Heather Grahame, has announced her retirement in early January, along with me. Heather will be, among other things, pursuing her passion for triathlon, where she is world-ranked.
Heather's been a great leader for the company, key in all of our legal regulatory compliance works, and also a key contributor to our corporate strategy. Because Heather is as good as she is, we will be elevating two people to take her place. Shannon Heim coming in as General Counsel, and Cyndee Fang becoming Vice President for Regulatory. In addition, Curt Pohl, our Vice President for Distribution, has already moved into a new position focused on business development, and Jason Merkel has taken over the role of Distribution Vice President. Brian is going to be leading a great team with veterans and some new faces that very much align with the direction that Brian and the board and the executive team will be taking the company over the next two years.
Turning to financial results, net income was for the quarter $27.4 million, $0.47 diluted EPS. Non-GAAP EPS was $24.3 million, $0.42 diluted EPS. Our expected long-term EPS growth rate is 3% - 6% off a 2020 base. As you know, we filed a Montana rate review on August 8. This was seven months into the year as opposed to the 9-month cadence that we're typically on. Very impressively, the Montana Public Service Commission issued an interim order on October 1, so basically two months after the filing. It was a unanimous order based on a staff recommendation.
The order will significantly mitigate our regulatory lag and under-recovery of our purchased power costs and will certainly reinforce our credit metrics. That will also provide the retroactive date for a final order. A couple of other notable items in the rate case, then Brian's gonna come back and talk to this in much more detail. First of all, some key procedural steps. The commission has issued a procedural order, and we're past the period during which the application could be deemed inadequate, which could have triggered a refiling or a modification to the filing. We're doing some, I think, interesting and very constructive things in this case, including Brian kicked off the filing process with a very well-attended webinar.
Cyndee Fang will be leading a series of technical discussions on key points. The case is obviously driven by recovering our substantial investments in CapEx electric and gas infrastructure since our last filings, cost recovery of flow-through costs, and then a set of about four important policy proposals. Again, Brian's gonna be providing you more detail on that. We're very pleased to be where we are right now and appreciate the professionalism of the Montana Commission and staff. We filed our South Dakota Integrated Resource Plan on September sixth. Look forward to implementation of the actions under that plan.
We are on track for our $582 million capital plan for this year, and the board has voted a $0.63 per share dividend payable on December 30 of this year. First, I will turn it over to Crystal, and then Crystal will hand it off to Brian.
Thank you, Bob. I'll flip to slide four and discuss a bit further details of our financial results, and then hand it over to Brian here. For the Q3 of 2022, you'll see net income of $27.4 million. As Bob said, that's $0.47 on a diluted EPS basis, and that compares with Q3 of 2021 net income of $35.2 million or $0.68 on a diluted basis. Slide five lays out a bit of the significant drivers of that performance for the quarter with a bridge from the 68 cents for the quarter and on a GAAP basis in 2021 to 47 cents on a GAAP basis, or we're at 42 cents on a Non-GAAP basis in 2022.
With that, you'll see utility margin, $3.2 million or $0.05 after tax of detriment there in a quarter where we had favorable weather. I'll speak to that in a little bit more detail on the next slide. The next two columns you'll see are the impacts of our operating costs, which are in line with our expectations for the year. When we laid out our guidance for the year, we talked about a sustainable operating cost structure. Certainly, we're seeing pressures there, but in line with our expectations and manageable. You'll see $0.06 on those items, or $4.1 million on a pre-tax basis. The next column you'll see is interest rate pressures, which I think everyone's experiencing. $0.03 of impact to the quarter from that perspective.
Of course, dilution from the share counts of the equity issuance that we announced and transacted last year in November on a forward basis. The impact of that dilution this year funding the amount of investment capital, as Bob mentioned, on track for another record year of capital investment in 2022. On a GAAP basis, $0.47 you'll see adjusted. We're reducing $0.05 on a Non-GAAP basis driven by weather. Utility margin is detailed on slide 6. A bit more detail on that Q3 margin impact. Overall, a $3.2 million detriment when you consider that versus prior period and what impacts net income from a utility margin standpoint. First impact there is transmission margin, seeing lower revenue, both driven by lower formula rate there and also volume.
That is in line with what we expected to see on the transmission side. Importantly, a bit outside of what we expected to see is the next column, which is your PCCAM impact. As a reminder, that's the supply cost mechanism where we recover our costs in our Montana jurisdiction. You'll see that that's $1.3 million versus the prior period, but importantly, $4 million to the quarter of negative impact on an absolute basis. We certainly saw higher market prices overall, but certainly price spiking. Think at the end of August, early September, we saw over $1,000 a MWh prices on the market to deliver to our customers. We see that, when we see that sort of exposure, certainly, provides headwinds for us at the margin line basis.
I would also mention on the electric retail volumes, $2.1 million of favorable there. While that's certainly a solid performance of that piece, you'll see that we show favorable weather, $4.2 million versus normal for the quarter. That's what we're backing out on a Non-GAAP basis. When you only see $2.1 million of favorable versus the prior, we would expect to see a bit better performance there at the retail volume line and certainly including commercial loads. We're seeing lower commercial volumes for the quarter on 2% customer growth and a bit of warmer weather. A bit of headwinds there in how we're seeing the commercial load shape up for Q3, all that leading to $224.1 million of utility margin, falling to net income.
Again, that's $3.2 million lower than the prior period. Slide seven shows you the look of our GAAP to Non-GAAP adjustments. For Q3, the only Non-GAAP adjustment we have is weather. Again, I just spoke to the impact there, but $27.4 million on a GAAP basis, adjusting out $4.2 million of favorable weather versus normal, or $3.1 million on an after-tax basis, resulting in $24.3 million on a Non-GAAP earnings basis, and that compares with $33.6 million in the prior quarter. Again, you'll see the prior quarter, we had very warm weather in Q3 of 2022 broadly across our service territory, but we also had very warm weather in Q3 of 2021.
You see $4.2 million pre-tax favorable weather we've adjusted out versus $3.4 million in the prior period. With that, I would move you to cash flows and impacts there on slide 8. While operating cash flows though show significant improvement of $87.7 million from the prior year to date, you'll see that FFO actually decreased by $15.6 million. That's definitely driven by the lower net income. The other thing I would mention there is that while we are collecting significant costs from the prior period, including the Winter Storm Uri gas costs that are still coming through and significant amount of PCCAM under collection from prior periods that we are collecting currently. You also see the significant impacts this year of continued high market electric supply costs.
What we're seeing is higher cost to build storage in the off-season and higher natural gas prices. All of that is impacting cash flows here in the near term, and certainly will be rolling through and impacting customer bills and how we think about that in the future. With that, I'll transition a bit to expectations for closing out the quarter and looking to the full year 2022 results on Slide nine. We are narrowing our guidance range. As you all know, we started with a guidance range of $3.20-$3.40 or a 20-cent range, and we're narrowing that to 15-cent range of $3.20-$3.35. While results from the quarter certainly were lower than we expected, they were impacted by headwinds at the high level of market supply pricing in Montana.
Certainly that PCCAM impact that I mentioned and talking about utility margin for the quarter, it's the gift that keeps on giving, because while it also impacts us at the margin line, it also drives higher unrecovered supply costs, with pressure on our revolver balance and of course, then ultimately the interest rates on that, and then also timing of the draw on our forward equity. With that, I'll set that aside a bit, and the most significant item for the quarter, other than this being Bob's last earnings call for you all to ask him very intriguing and interesting questions, would be that we filed our rate review in Montana.
Obviously, that's critical to how we think about the growth of the business going forward and resetting to a reasonable cost structure and recovering the amount of investment that's serving customers currently. The MPSC, as Bob mentioned, held a substantive work session and authorized interim rates for both the base rates piece and PCCAM. Thus, you'll see our updated guidance assumptions here, looking to reflect those impacts. With that, I will turn it over to Brian.
Thanks, Crystal. On page 10, we speak to capital investment. Historically, over the last five years, we invested $1.7 billion. As you can see, from under $300 million in 2017 to over $400 million in 2021. That's a compounded annual growth rate of 12%. 2022, you saw even a much larger capital plan, primarily as we continue to build out Yellowstone County. We have a $582 million capital plan, and that does remain on track. You may recall some time ago, at the beginning of, I'd say, the supply chain crisis and rising costs, we suggested that our plan is likely to come in on track due to two variables. One, we do expect higher costs, but we also expected some delays in projects.
We definitely have seen both during the year, but net net our plan remains on track. In essence, of that $2.4 billion that we're looking to invest over the next five years, including in 2022, a substantial amount of that is for our delivery business, think T&D, to modernize the grid and increase capacity. On the supply side, we obviously continue to invest in capacity, but also, resources to integrate continued renewables added into our business. This sustainable level of CapEx is expected to drive an annualized rate-based growth of approximately 4% -5%. The best way we think about it from financing, all of this capital spend is really to achieve a 14%-15% FFO to debt at the end of the year.
Capital continues to grow at the company, and we need to invest in critical resources on a going forward basis. When that occurs on slide 11, periodically, you need to come in for a rate case. In Montana, it's been some time, 2015 since the last gas case from a test year perspective, and 2017 since the last time from the electric perspective. During that time, we've invested over $1 billion in both our combined electric and gas business in Montana. 49% of this rate case is the recovery of the cost of capital and depreciation of that over $1 billion investment. 42% of the request for both the total electric and natural gas increase is driven by flow-through costs, including the market power purchases and property taxes.
Even with the increases here, that we would acknowledge it's a pretty big increase for both electric and gas customers, but it's been a long time coming for many, many years. Even with these increases, they will be in line with inflation over that time period, since we've last filed a rate case. Moving forward on page 12, you know, as Bob mentioned earlier in the call, in late September, we received approval effective October 1 for our interim rates to go into effect. Again, acknowledge the good work by the commission to acknowledge our issue of not having sufficient cash flow to manage our business and the importance of an interim rate.
That interim rate allowed us to collect base electric rates of $29.4 million, improve where we stand from a CapEx perspective by $61.1 million, and then base natural gas rates of $1.7 million. In terms of what we ask for and what we receive, we're pretty happy with what we received approximately 80% of the interim request on the electric side, and approximately 60% on the gas side. Equally important is in terms of a good outcome there is that the October first. Once final rates are approved, that will be the retroactive date or the effective date of an outcome from the final rate case. So that's very helpful. From a procedural schedule standpoint, the next key date is 12/19. I guess an early Christmas present of receiving intervener testimony.
Into early March, we'll have our rebuttal testimony and cross-intervenor testimony. In early April, the hearing will actually commence. Moving to slide 13. On the supply side of our business and looking forward, we continue on our construction at Yellowstone County. That construction began back in April of this year. We've invested just under $100 million to date of the $275 million project, and our current schedule anticipates commercial operation during 2024. From a resource plan perspective, we've already filed our South Dakota plan. We filed that in September of 2022, and it identifies 43 MW from retire-and-replace candidates with a potential for a competitive solicitation during the 2023-2024 time period.
In Montana, we expect to file by the end of the year, our IRP, if you will, to be followed by an all-source competitive solicitation request for capacity available in late 2026. The last thing I'd just say on this page is upper right. We're so pleased that not only to get the Bob Glanzer station built and on time, on budget, and in advance of, you know, the supply chain issues and rising costs. But more importantly to that is the plant has been dispatched even more than our expectations. So it's added capacity, 24/7 power that offsets the intermittency. It's doing exactly what it should do to help us move forward with our needs from a supply perspective.
Lastly, it's my pleasure and honor to acknowledge Bob, and I will do that on behalf of the executive team and the more than 1,500 employees at this company to acknowledge it. I'd be remiss not to acknowledge during his tenure what he has helped this company achieve. Under his watch, through the investment in critical energy infrastructure dedicated to serve our customers, we've tripled the size of this business and the value of this business. He's done that through his leadership. We've invested more than $1 billion in clean energy resources that have put us approximately 60% of our electricity provided is carbon free. Certainly it's better than industry average.
$1 billion of energy resources, primarily that was our 456 MW Montana hydro system, and I can't imagine how we'd be serving our customers today if we didn't own those resources. Plus 131 MW of owned wind in our total system, and also three gas plants that were critical to provide the 24/7 reliability that we need to serve our customers. In addition to that, well, I guess I'd add, it's also reduced our customers' exposure to volatile regional energy markets that we participate in every day. We also invested during his tenure here over $1 billion in our T&D infrastructure to modernize it and increase the reliability and flexibility of that system.
Bob was having us do that long before people were talking about hardening their systems. What I'd also add from my perspective is our safety culture when Bob arrived wasn't as good as it should have been, and during his tenure, it's improved vastly. We're sending our employees home just the way they came in the morning, and we're happy to see that our safety has improved vastly under his leadership and the tone at the top he's set. Speaking of tone at the top, I think the most important thing Bob's done at this company is set a culture of high integrity and respect in a family-like environment. With that, I'll pass to Bob.
Brian, thank you very much. I can't imagine anyone I would have rather worked with than you or this entire group of people. I will reserve my rebuttal until after you field questions here. Thank you, Brian. Questions?
I would just remind you, if you're joining us by computer and would like to ask a question, please signal your intent by using the Raise a Hand button found at the bottom of your toolbar. You can also simultaneously press Alt and Y on a PC or Option Y on a Mac to raise your hand. Please make sure your microphone is unmuted if you're in the queue. If you're dialed in by phone, you can press star nine to raise your hand and *6 to unmute your line to ask a question. Again, *9 to raise your hand and star six to unmute. We will take our first question from the line of Shar Pourreza at Guggenheim. Shar, can you hear us?
There it goes. Can you hear me guys?
Yes, we sure can.
All right, Travis, you're getting way too technological here. Guys, just on as we're thinking about, you know, next year, I mean, obviously, you know, you're not issuing 2023 guidance right now, but I think it would be helpful, you know, maybe just give us a sense on the 2022 headwinds you just highlighted in your prepared remarks as we look to bridge into 2023. Like, you know, the lower usage interest, you know, interest rates, PCCAM recovery. I guess, is the GRC enough to offset sort of these 2022 impacts as we look into next year? Or could we see some drag with these items into 2023? Thanks.
Shar, it's Crystal. A couple of things in that regard. One, the GRC is a huge driver. When you think about the impact of PCCAM on the quarter, and as I said, it has multiple impacts in our financial statements. Resetting that base and getting something that we can actually work with, I think is critical to how we think about our performance going forward, and that not being a brag. It certainly has caused under-earning for us in the past, and is something that we're working with the commission on resetting and moving forward on. I would say that's certainly a key piece of how the GRC will impact us. Broadly, it's us and everybody else in an inflationary cost environment, and we'll have to manage that. I would see strong growth.
We've talked about, you know, the need to take this year as a reset, essentially, and investing for the future in the sense of the equity that we issued. Still driving a net income increase this year. You know, your question is, will we continue to grow the business? Absolutely. I think the biggest platform to that is certainly, you know, getting back to earning our returns from a Montana basis, and the GRC is the most critical piece to that. I couldn't probably overstate the importance. That's the word I'm looking for.
Yeah.
of getting that rate review filed, bringing that investment in front of the commission, and moving forward quickly, with interim rates, as we talked about, and getting to a reasonable outcome there.
Got it. You don't just with some of the moving pieces, you don't, you know, depending on where rates shake out, we shouldn't assume the reset can continue into 2023? That's the key takeaway, I guess, there.
I would just say it this way. Us and everybody else will be dealing with the interest rate pressure, so I don't think that's gonna be determinative between us and others. We'll manage that along with the outcome from the rate review. Certainly what I would expect to see and what we talked about from a 2022 guidance is taking this year to get a solid rate case filed that gives us a sustainable amount of cost capture there, and then a platform from growth off of that.
Got it. Okay. That's helpful. Then how should we sort of think about the potential outcomes of the appeal you have right now that's in front of the, you know, the Supreme Court, Montana Supreme Court, regarding the pre-approval law? Is there a scenario where it could retroactively be applied to Laurel? Or how would winning the appeal impact sort of your plans going forward?
As you recall, we decided not to use pre-approval for the Yellowstone Station because we were concerned to get the plant in service as quickly as possible and to move ahead with construction before we got caught on the wrong side of the inflationary environment and supply chain challenges. The Supreme Court decision, one way or the other, will have no effect on that particular resource. I'll go beyond that to say that as you, I'm sure, recall, we had also identified a 50-MW battery project out of the RFP that was going to be a power purchase agreement. We had proceeded with a pre-approval application for that.
Based on the district court decision invalidating the statute, the commission closed that docket and, unfortunately, that project is not going ahead.
Got it. Great. Just one last one, just on Colstrip. I mean, obviously, your preference is for sort of fast-ramping generation like the RICE units. But at the same time, like, you know, obviously we've seen some major cost increases versus the plan that, for instance, led to Aberdeen getting canceled last year. If you were to acquire more of Colstrip than is currently planned, I guess, how would the cost of that capacity compare versus what you're seeing in the market right now for new builds? Thank you.
That's a hypothetical question I assume you're asking there. We continue to lean heavily on Colstrip. It's a valuable resource to us and will be for some time. You know, obviously, depending what that cost of acquiring that resource, I would tell you our biggest use for that capacity is on that peak day, of course, when we're seeing, you know, increased demand and higher prices, Colstrip would be extremely helpful to us, and I'd acknowledge even more of it than we currently have would be helpful.
Got it. Okay, great. Thanks, guys, I appreciate it.
Thank you.
Thanks, Shar. We will take our second call from the line that ends in 4377, 914 area code. Your microphone should be unmuted. All right, we're gonna skip that one, and maybe if you wanna get back in the queue. We will take our next call from Sophie Karp at KeyBanc.
Hi.
Hey, Sophie. There we go. Gotcha.
Good. Good afternoon. Finally I got how the system works. Thanks for taking my question. I was just curious to hear your thoughts on how you could incorporate, I guess, the Colstrip situation in your Montana IRP. Right? Would you need a resolution of that one way or the other before you can move forward with the process? Or would that be a scenario analysis in the IRP that could contemplate various outcomes? Any color would be appreciated.
Yeah, I think the only scenarios associated with Colstrip are closure dates. I mean, we don't have full control over when these units shut down at this point in time with our 30% interest in Unit 4. Obviously, we'd like to have the plant open as long as our depreciable period, in essence, to provide service to our customers. But we also acknowledge that there's a possibility that it could shut down sooner. We'll likely have scenarios showing at least one alternative date from a shutdown perspective.
Okay. All right. Maybe on the kinda looking into 2023, right? In the follow-up on the line of thinking that Shar was asking you. So you've sort of narrowed or tightened your guidance for 2022, even though you got the interim rates due to all of the offsetting factors that you've listed. Do you expect those headwinds to persist or abate, I guess, going into 2023 as you contemplate, you know, the outcome of the rate case here? Like, how much of an, I guess, a drag would that be to the new rate impact? How should we think about it?
Sure, Sophie, it's Crystal again. What I would just point you to is, as we walk through the narrowing of our guidance, and I alluded to, you know, the multiple impacts of PCCAM being both the 10% sharing and what we've seen from, you know, $4 million to the quarter on a, just a-
Base impact there. Also driving, you know, I shouldn't use the word tracker. We filed our annual PCCAM filing. It's not a tracker. That showed over $50 million of deferred costs on our balance sheet that I'll remind you there's no carrying costs for that mechanism currently in rates. Obviously, as you know, cost of capital used to be almost free. It isn't anymore. We're seeing those headwinds. You know, that causes us to pull down that forward a little sooner. All that being said to say a reset in the PCCAM base, as we have proposed, that has multiple elements to both the design, et cetera, that GRC proposal would help alleviate that multifactor implications of that PCCAM as it's impacting our headwinds today.
I would tell you, the GRC is critical to offsetting.
What hopefully equals lag in our earned returns.
All right. Thank you. That's all for me.
Thank you, Sophie. It does look like the line of 4377 has unmuted now, so we'll try that one again.
Yeah.
There we go. Who do we got?
Is this working? All right. Sweet. There we go. We're figuring it out one day at a time here. Excellent, guys. Thank you very much. I mean, if I could ask just a little bit the inverse of the questions from the last couple. How do you guys think about O&M, just operating budget inflation going into 2023? Any way to think about that and put some context to it? I get you guys are early in the earnings season here, so I just want to hear how you guys are kind of tackling that conversation and also looking at offsets here, given that rate case won't be a full year in terms of offsetting the headwinds.
Hey, Julien, first of all, before Crystal answers, you can actually put your name in there somewhere. We take your question even regardless if it's just your number, just so you know that. But I'm happy to-
You guys are kind.
I'm happy to pass it on to Crystal then.
Julien, a bit of your question on the operating cost. I'll walk you back to when we laid out our 2022 bridge, one of the things that we said when, you know, I have to say this, it burdened the net income line but impacted dilution driving our lower earnings from this year was a sustainable amount of cost. I will certainly tell you that there's headwinds there, but they're manageable. You see $0.06 for the quarter, certainly manageable and in line with what our expectations are. As we get to 2023, part of your question is for us and everybody else is some of this latent inflation and price impacts that I think haven't flowed through that we'll be continuing to manage. I certainly think the way the operating costs are today, we're able to do that.
The other thing I would just highlight, and I think you guys know this, but we benchmark very well already on an O&M basis. It's part of the case we're making in our GRC, that we manage the business efficiently. We'll continue to do so. My other side of that is I don't think we have materially large cuts to be made there in the sense of how you manage other impacts. Again, the operating costs, you see impacts to the quarter in line with our expectation. That piece of our as we've narrowed our guidance range, you'll see we didn't adjust any of the operating cost assumptions.
Just a little footnote to your question. The rates that come out of the case, whether it's up arrow, down arrow, or side arrow, are retroactive to October first. Again, that was one of the several reasons that getting the interim implemented as efficiently as the commission was able to do is valuable.
The other way of saying that, Julien, is when we do give you 2023 guidance, the key piece there is our new rates will have been in effect for the whole year.
Got it. Excellent. Well, thank you again. If I can bring it back more to real time, can we talk a little bit about the transmission outcome here? I mean, I would've thought that things would've been a little bit better just given the volumes and the volatility in the quarter in the power markets. Then related, can you talk a little bit more about the commercial volumes and what your expectations are going forward? I saw the commentary in the release on third quarter, but what does that hold for fourth quarter versus plan? Then more importantly, again, as you think about 2023. I know we're all asking for the same thing, but if you guys don't mind on both those pieces.
One thing we've seen, obviously, and let's just talk about Montana, for example. Certainly a growth in new connects overall, including commercial, but it really doesn't seem that a lot of the commercial sector is back to.
Fully staffed businesses. At least part of what's going on seems to be the continued challenges in the labor market.
Sure. I'll divide your question into two pieces of where we're not giving 2023 guidance, but to tell you more about 2022. On the transmission side, your question was a good one, which is, hey, last year prices were high, markets were volatile, you had really great transmission revenues and margin impact there. This year, that's $4.7 million lower and we said in line with our expectation. The piece I would tell you about our formula rate there is a credit for short-term sales, and part of what we knew is that rate would come down a bit, even though there's solid rate base growth. That's part of it is both price and volume.
I would think about it largely in the sense of maybe around half price driving that 4.7 in the quarter, and then the other half being we did see slightly less volumes, so demand to transmit over our lines, and there's a whole lot of things that go into that. You'll recall last year there were some super dry conditions. I don't think quite as bad this year. All of that, we watched that market closely, but again, that decline was something we did have an expectation for. Your question on the commercial side, and I would just point you to, if you look at our 10-Q and the commercial volumes of things that will pop out to you is really warm weather, both last year and this year. This year, even warmer, and more customer count.
We've seen solid commercial growth, but you'll see a slight decline in volumes. That's the piece that you would think on a 2% customer growth above that warmer weather that you would see volume throughput there, which obviously we're in a, as Bob always says, a fixed price world and a volumetric revenue world, so it's a fixed cost world. When we see that sort of piece there, you know, over 86,000 customers, so they're not homogeneous, but one of the things that Bob alluded to there is that, you know, you have certainly continued to see labor and staffing challenges with a lot of those businesses. All that being said to say, one quarter does not make a trend.
While we're watching that carefully and certainly we'll be talking about that at Q4, we continue to see strong, broadly, commercial loads and we'll update you on that next quarter and how we're thinking about it.
Excellent. Well, thank you, team and Bob, best of luck. It's been a real pleasure.
Thank you. You as well.
Thanks, Julien.
Cheers. Take care.
And with-
See you, Julien.
With that, we've exhausted our queue. Well, Bob, I'll turn it back.
Okay. We will get to see a number of you either in the mosh pit at EEI or maybe in New York in December. As soon as Brian Bird was finished with his eulogy, and that was not everybody gets to be alive when their eulogy is read, so I really appreciated that, and it was even better than open casket. Anyway, Brian Bird went to grab a box of tissues, and it's not unusual after we finish these meetings that we need a box of tissues, but I really appreciated it. Heather Grahame is gonna be biking, swimming, and running off into the sunset in January. I'll be hopefully pursuing a number of other things, including particularly just spending more time with my wife.
Hand me those tissues. What I would say is, the last not quite 14.5 years have just been an incredible privilege to work with the very best group of people, who've become good friends, doing the most important work in places that are really special. I've been incredibly lucky, and I've enjoyed getting to know a number of you and visit with you about the industry and trends and try to help answer all of your really interesting probing questions. Again, it's been a real privilege for me and thanks to all of you for your long-term support of this very special company. Back to you, Travis Meyer.
Thank you for joining us, and that brings our webcast to a close. Thank you.