Earnings Call: Q2 2019

Aug 8, 2019

Greetings, and welcome to the Pinnacle West Capital Corporation 2019 Second Quarter 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, Stephanie Layton, Director of Investor Relations. Thank you. You may begin. Thank you, Christine. I would like to thank everyone for participating in this conference call and webcast to review our Q2 earnings, recent developments and operating performance. Our speakers today will be our Chairman and CEO, Don Brandt and our CFO, Jim Hatfield. Jeff Goldner, APS' President and Daniel Futchier, APS' Vice President of Operations are also here with us. First, I need to cover a few details with you. The slides that we will be using are available on our Investor Relations website along with our earnings release and related information. Note that the slides contain reconciliations of certain non GAAP financial information. Today's comments and our slides contain forward looking statements based on current expectations and the company assumes no obligation to update these statements. Because actual results may differ materially from expectations, we caution you not to place undue reliance on these statements. Our Q2 2019 Form 10 Q was filed this morning. Please refer to that document for forward looking statements, cautionary language, as well as the risk factors and MD and A sections, which identify risks and uncertainties that could cause actual results to differ materially from those contained in our disclosures. A replay of this call will be available shortly on our website for the next 30 days. It will also be available by telephone through August 15. I will now turn the call over to Don. Thanks, Stephanie, and thank you all for joining us today. Our operating performance and financial management remain in line with our expectations for the year. As you know, weather provided above average revenue in the Q1 and significantly below average revenue in the 2nd quarter. Before Jim discusses the impacts of weather on our expectations for 2019 and details our 2nd quarter results, I'll provide a few updates on our recent regulatory and operational developments. I have repeated many times over the years that top priority every day is safety. The safety of our team, our customers and our communities takes priority over all other objectives. Recently, we experienced the loss of an APS team member, Rico Castillo, from an event that occurred while performing planned underground construction work in downtown Phoenix. This event is being fully reviewed and we continue to keep Rico's family in our thoughts and prayers. Turning to our operations, Palo Verde Generating Station completed its planned refueling maintenance outage for Unit 1 on May 9. Additionally, the Ocotillo modernization project was completed on budget and with all 5 units in service by May 30. This valuable asset in the Metro Phoenix load pocket has been performing well and is available to serve our customers through the summer peak. In preparation for summer, we not only ensure we have adequate generation resources to meet our peak demand, we also prepare for the summer wildfire season. In fact, we work year round to minimize the risk of wildfires. Our fire mitigation efforts include maintaining safe clearances, removing vegetation around equipment, physical pole inspection, coordination with Fire and Forest Service authorities and partnering with community organizations failure at the McMicken Substation Battery Storage Facility. We're looking into the cause of the failure. At the site, charge of the batteries has been completed and we have now begun a forensic analysis. The review is progressing, but will take time to complete. We will continue to post updates ataps.com/mcmican. Because safety is our top priority, we will temporarily be delaying our investments in new battery storage resources to incorporate our learnings from this incident. Accordingly, the request for proposals issued in April for 60 megawatts of storage on our existing solar facilities and a new 100 megawatt solar facility paired with 100 Megawatts of battery storage had been put on hold. I want to reinforce that we remain committed to investing in new clean energy resources, including battery storage. This delay simply reflects a thoughtful and responsible pause to ensure we move forward in a safe informed manner. While the storage facilities are delayed, we will be issuing 2 new requests for proposals. The first RFP is for up to 150 megawatts of APS owned solar generation to be in service by 2021. This solar generation will be designed with the flexibility to install energy storage in the future. The second RFP is for up to 2 50 megawatts of wind generation to be in service as soon as possible, but no later than 2022. These new RFPs will expand our renewable energy portfolio to about 2,500 Megawatts by 2021. On August 1, we filed a preliminary integrated resource Plan or IRP, which includes a 15 year forecast of electricity demand and the resources needed to reliably serve our customers in the future. The IRP is designed to explore a variety of options that can provide reliable and affordable power for our customers. In drafting the IRP, we worked closely with a diverse group of stakeholders. The stakeholder group was engaged, provided constructive input and valuable feedback. We appreciate the collaborative effort of this group and look forward to participating with interested stakeholders in the future. Going forward, we project that our annual peak demand and energy needs will both increase at a compounded annual growth rate of more than 2% from 2020 through 2,035. This forecast incorporates future demand side management and distributed generation. The future growth is primarily driven by population growth, economic growth and changing customer trends related to electric vehicles and distributed generation. The final integrated resource plan will be filed with the commission in April of 2020. Turning to our regulatory updates at their June open meeting, the Arizona Corporation Commission implemented a requirement that APS file a rate case no later than October 31, 2019 using a June 30, 2019 test year. At the July open meeting, the ACC resolved a customer complaint and ordered APS to implement additional customer education and outreach programs. The commission also approved an electric vehicle policy implementation plan at the July open meeting. The EV policy implementation plan is intended to support EVs, EV infrastructure and the electrification of the transportation sector in Arizona. The plan encourages utilities to propose EV pilot programs focusing on infrastructure, incentives and cost recovery among other items to the Commission by September 1, 2019. We're aligned with the commission in exploring the opportunities electric vehicles present to advance our clean energy objectives. Our goal is to make driving EVs more convenient by reducing range anxiety through access to charging infrastructure. Our new Take Charge AZ pilot program does just that. Take Charge AZ provides charging infrastructure for fleets, workplaces and multifamily housing communities as well as highway fast charging infrastructure. We're also exploring innovative strategies to own and operate the fast charging stations, while partnering with local businesses to identify the most useful locations. On July 30, the commission held a workshop discussing both staffs draft retail competition rules and Commissioner Olson's recommendations on retail competition. Among other challenges, the proposed retail competition rules conflict with the Arizona Constitution, put reliability in jeopardy, require the creation of a regional transmission operator or independent system operator and conflict with the commission's interest in establishing clean energy rules. A report sponsored by Arizona Energy Policy Group and prepared by Concentric Energy Advisors analyzing retail competition over the past 20 years was filed with commission on July 26. The report illustrates that states with retail competition have higher residential rates than traditionally regulated states. And recognizing the potential negative impact on residential customers and the challenges I discussed, we do not believe that retail electric competition is in the best interest of our customers or the state of Arizona. As I mentioned at the beginning of this call, safety is our top priority. After we recently became aware of a customer's passing last temporary rule imposing a statewide temporary rule imposing a statewide moratorium on disconnects through the warmest months into mid October. Addressing the needs of vulnerable Arizonans is a statewide objective. That's why we have committed to work with a broad range of Arizona stakeholders to develop solutions that help ensure Arizonans have access to assistance when they need it most. In closing, as a company, we have so much to be proud of. In 2019, Public Lands Alliance awarded APS the Corporate Stewardship Award for our support of the Grand Canyon Conservancy. The annual award recognizes a company that demonstrated exceptional achievement to enhance the quality of visitors' experience in America's public lands. In addition, we earned the EEI Advocacy Excellence Award for our efforts around the defeat of the 2018 ballot initiative. This award highlights the public policy engagement of EEI member companies like APS. I'm continually honored and proud to work with such a dedicated and talented team. We remain focused on preparing to meet the future needs of our customers and continuing to deliver long term value to our investors. I'll now turn the call over to Jim. Thank you, Don, and thank you again everyone for joining us today. This morning we reported our financial results for the Q2 of 2019. We earned $1.28 per share in the Q2 of 2019 compared to $1.48 per share in the Q2 of 2018. The lower results were largely due to unfavorable weather. As shown on Slide 2 of the materials, adjusted gross margin was down $0.53 per share compared to the prior year Q2 period. Higher sales, VLFCR and transmission revenues were more than offset by unfavorable weather, which negatively impacted gross margin by $0.31 per share. To understand the magnitude of weather, May was the coolest May since 1980 and the Memorial Day high temperature in Phoenix tied for the coolest on record. Additionally, June was the coolest in the last 8 years. Also contributing to lower gross margin were lower other margin and refunds to customers due to tax reform. This quarter, we had a negative net impact from tax reform due to the timing of the FERC corporate tax refund to customers, which was implemented in June of last year. Continuing with the drivers, lower adjusted operation and maintenance expense positively impacted earnings $0.20 per share, primarily due to lower planned outage costs and lower parent level costs. Last quarter, I shared that we will be implementing to continue our track record of cost management discipline and streamlining our processes. This process is part of a larger effort, what we are calling customer affordability to identify sustainable savings that have a positive impact on customer bills by simplifying the way we work. Over the past few months, we have engaged many employees from across the enterprise and hosted workshops to identify ways to streamline our processes, deploy technology and ultimately reduce costs. While this effort will take time to mature, we continue to manage costs consistent with our historical track record. Turning now to Arizona's economy. As you can see on Slide 3, the state's focus on growth is continuing to pay dividends. In particular, we continue to see data center and other manufacturing development on the Westside of Metro Phoenix. Last week, Microsoft confirmed plans to build 3 world class data center campuses in Goodyear and El Mirage. Construction on all three sites has begun and Microsoft intends to power the facilities with 100% renewable energy. In addition, Nike now plans to build a multimillion dollar manufacturing plant in Goodyear, bringing approximately 500 jobs to the area. Last month, Compass Data Centers announced the construction of its first of 2 data centers, which are projected to be completed in the Q4 of 2019. The 2 data centers are expect to utilize 72 megawatts of new load. Going forward, Compass Data Centers expect the campus could grow up to 3 50 megawatts with an on-site 230 kV substation. As a result, the Metro Phoenix area continues to show strong job growth and has consistently been above the national average. Through May of 2019, employment in Metro Phoenix increased 3% compared to 1.7% for the entire U. S. Construction employment increased by 11.6% and manufacturing employment increased by 4.5%. The strong job growth in the construction sector can easily be seen in downtown Phoenix. Numerous job sites equipped with cranes and staff of construction crews are visible across the downtown area. We expect business expansion and related job growth to continue to support economic development. The Metro Phoenix residential real estate market has also continued a separate trend. In 2019, we expect a total of 30,000 housing permits, an increase of about 2,900 compared to 2018 driven by single family permits. We believe that solid job growth and income growth and relatively low mortgage rates should allow the Metro Phoenix housing market and the economy more generally to continue to expand faster than the national average. Reflecting the steady improvement in economic conditions, APS' retail customer base to 1.8% in the Q2 of 2019. We expect that this growth rate will continue to accelerate in response to the economic trends I just discussed. Importantly, the long term fundamentals supporting future population, job growth and economic development in Arizona remain. Turning to guidance and our financial outlook. As we look to the second half of twenty nineteen, we continue to evaluate our financial expectations and opportunities. As Don mentioned, we are temporarily delaying investment in new energy storage. Although the projects are delayed, our total projected capital expenditure levels through the forecasted period remain the same. We have reallocated the capital that would have been spent on Energy Storage to accelerate other distribution and fossil projects. Also with the change in timing for our next rate case, we have reevaluated our financing plans. As a result, we will not require any additional equity apparent level of long term debt for the remainder of 2019. However, we will continue to have a strong equity layer. The equity ratio at the end of the test year was approximately 54.7%. Despite the mild weather in the first half of the year, we continue to expect Pinnacle West consolidated earnings for 2019 will be in the range of $4.75 to $4.95 per share. However, I would guide you to the low end due to weather today. The 3rd quarter represents over 60% of our full year results and as we have experienced, weather in the Q3 can vary significantly. Keys to success will be managing our costs, the impact of increases in customer load, primarily from the data centers I mentioned earlier and normal weather for the remainder of 2019. A complete list of our key factors and assumptions underlying our guidance is included on Slide 67 of the materials. We expect to issue up to $600,000,000 of long term debt at APS during the remainder of 2019. This excludes any funding for the refinancing of APS's $250,000,000 at 2.2 percent senior notes, which mature in January 2020. Overall, liquidity remains strong. And that concludes our prepared remarks. I'll now turn the call back over to the operator for questions. Thank you. We will now be conducting a question and answer session. Thank you. Our first question comes from the line of Michael Weinstein with Credit Suisse. Please proceed with your question. Hi, guys. Hi, Michael. Hi, Michael. Hey. Thanks for the update. Do you have any kind of update on what's going on with the Four Corners SCR step up order at this point? Hey, Michael, it's Jeff. So as you know, we've got a recommended opinion and order out on that. It went through a hearing process. Has not moved to the commission yet. And I think given the timing of the upcoming rate case, there's 3 potential paths you could see. It could go before the case gets filed. It could be decided sometime while the case is pending or it could end up just being consolidated with that rate case and then both the rate case and that decision being voted out, but we don't have clarity as to which of those passes on. Got you. And on the rate case filing, there was some discussion, I remember at the commission meeting about that it's a tight deadline to get done by October 31. I'm just wondering if you guys are or how you're coping with that deadline at this point? Yes. It is tight. Normally it takes about 6 months to put a case together, but we just had to accelerate the work that we're doing on it. So it's in process of being prepared right now and we'll hit the target. Okay, great. I'll get back in the queue. Thank you. Our next question comes from the line of Greg Gordon with Evercore. Please proceed with your question. Thanks. Good morning. Good morning, Greg. It's sort of deja vu all over again with this commission thinking about Ultimately, based on my history of looking at the state, I would tend to agree with your view of the outcome. But what is the timeline and the next milestones that we should look forward to over the next, I don't know how long period of time, so we get to a point where we know sort of that the commission has been fully educated on this and we might get a better view as to next steps? Greg, it's Jeff. So this was discussed at the commission staff meeting yesterday. And I think what not surprisingly, what they're looking for is more information on what the potential impacts are, what the technical issues would be, all the analysis that you would need to make a decision on whether it's appropriate to move forward. I think it is clear on that that they're going to have another workshop on it and they're working on getting additional questions and whether that next workshop will provide enough information. As you know, this is a really complicated issue to work through, particularly in the situation that we're in without being already in an RTO or an ISO. And so I think watching for that workshop probably in October will be the next milestone. And then how it progresses from there is hard to see right now. Can you refresh my memory though? I mean last time we went through this process, there were very, very large number of educational sessions like that before they came to the conclusion that they shouldn't move forward. Can you refresh my memory roughly how long that last process took? The last process actually took multiple years and it started kind of similar to how the California Blue Book process started as they've broken into a number of different working groups, so legal working group, technical working group. And again, that was before you had retail competition in a lot of states. But it took multiple years of folks working through the different issues and then it took multiple years to move forward on the implementation path that we were pursuing then until the California energy crisis hit and that's what put everything on hold. And then we had to unwind some of the work that had been done during that process. So I don't know that it would take as long this time given that there's been more experience in retail competition. But as you know, if you're actually talking about standing up an RTO, there is a lot of issues that you'd have to work through, particularly how it would interface with California and what impact it would have since we're participating in the energy imbalance market and crediting customers with off system sales revenues that we get from that. If you stop doing that because you stand your own RTO up, that's going to affect all customers. And so they've got to work through a lot of these technical issues, I think, to come to the conclusion of whether to move into a formal rulemaking or how that formal rulemaking would develop. Last question for Jim. As I look at the guidance drivers on Page 6 and I think about you guiding towards the low end of the range because of weather and I think should I just be flexing the adjusted expected gross margin down towards the lower end of the range or are there other moving parts here? Share count is obviously a bit lower given the change in the financing package, but inside those guidance ranges, can you give us some sense of what the moving parts are? So, I would say that O and M would be toward the lower end, thinking about our 3 sort of things we have to focus on O and M. I think sales will be within the range. We had fairly strong residential sales in the first half. We had a commercial customer that had one time outage that hurt commercial sales, but I would think with pursuing the impact of data centers, depending upon the timing that they actually come on, since there is a little flex there. And then I think you'll see gross margin toward the lower end just due to weather as we go forward. Okay. Thank you, gentlemen. Yes. Thank you, Greg. Our next question comes from the line of Julien Dumoulin Smith with Bank of America Merrill Lynch. Please proceed with your question. Hi, good morning. This is Darius Losni on for Julien. Just had a question around the renewable RFPs that you said you will be issuing shortly. Any sense as to like what the associated CapEx spend with those will be? Well, I don't think there's no incremental CapEx associated with that. As we go forward, we had battery storage and we had other renewable based in our plan. So I'll we'll know more when we get to the actual RFPs back, but I don't see any incremental capital at this point. Far as energy storage? I know the investigation is ongoing, far as energy storage? I know the investigation is ongoing. Can you talk a little bit as to the sense of the timing of when you'll know more and when you'll be able to kind of proceed more on the plan there? Darius, this is Daniel. To your point, the first phase of the McMicken event investigation has been completed and we've moved on to the second phase. That's the forensic phase, if you will, of the actual equipment, the first phase involved discharging the remaining modules at the McMicken facility. I hesitate a little bit to speculate to specific time lines. I know that the 2nd stage forensic look will involve a couple of months. We're cautiously optimistic that we'll have some returns back in the late September, October time frame, but that is speculative at this point. In the meantime, I think to echo Mr. Brandt's comments in his remarks, we want to make sure we approach this prudently, safely and with full confidence in the technology. And so we're just on pause in that space at present. Okay. Thank you very much. Our next question comes from the line of Insoo Kim with Goldman Sachs. Please proceed with your question. Thank you. Starting with, I think, the recent consideration for extending the gas generation moratorium. I think the proposal or the consideration was that it would only be until early 2020. But if that were to happen and stretch out further, what other items do you have to offset any potential in a FIFO build that you have in your CapEx line? Insoo, this is Jeff. Just to clarify, if the gas moratorium is extended and if you look at the language of it, what it requires is that if we needed to construct, I just want to clarify this that if we needed to construct that we would have to go get commission approval essentially to do that, which I think that's something we would do irrespective of whether there was a moratorium in place. And it's limited to gas generation. That's going to be likely discussed on the September open meeting. I don't think it would have any impact on capital. Yes. Also, it wouldn't prohibit PPAs going forward to the extent that we needed to fill that need. Understood. And then in terms of the revised financing plan, you mentioned that the APS equity layer was around 54.8%, I believe, at the end of 2Q 2019. And with no plans for additional equities, does that just imply that will be likely the amount that's filed in the upcoming rate case? Yes, I would expect that at the end of the test year at June 30 that you'll see that equity layer of approximately 54.7%. 7%. Okay. Thank you very much. It's consistent and within our 53.8% to 55.8% that we've had historically. Understood. Thank you. Our next question comes from the line of Ali Agha with SunTrust. Please proceed with your question. Thank you. Good morning. Hey, Alex. Hey, Alex. Hey. First question, on Slide 18, you laid out the implications for the Four Corners SEP increase not taking place, all the pluses and minuses. I just wanted to clarify, Jim, when you talk about sort of guiding towards the lower end of the range this year, does that assume that the Four Corner Step increase does not happen this year? Or are you still counting on some earnings from that even within that scenario? Well, Jeff talked earlier about the path going forward. So again, we don't know the path, but assuming we get it or don't get it, we're still going to be towards the low end of guidance just based on the factors I talked about earlier. I got you. Okay. And then secondly, more general question, you've had a couple of new commissioners come on board this year. Just wondering your current interactions with the commission, in general, how are you seeing that today versus say 18 months ago, 12, 18, 24 months ago in general as you're dealing with the commission on various issues? The commission is dynamic. So you always have changes when other commissioners come in and they'll have different priorities. And so we're kind of in the process of trying to make sure we're open and explaining the issues and the policies as we see them. And in general, the interaction has been similar? It's similar. I mean, it's challenging because as you know, when you get into rate case issues and you get into ex parte situations, you can't discuss pending matters. And so depending on how busy your docket is that affects sometimes how much interaction that you can have. Right. And then lastly, Jim also wanted to clarify, as you mentioned, in this rate case filing, you won't need any equity. As you plan out long term and you've laid out some longer term CapEx plans, when are the earliest do you think equity comes back into the scenario for you guys? Don't really have a view on that today. In front of us is filing the right case and getting a constructive outcome and we'll go from there. Got it. Thank you. Our next question comes from the line of Charles Fishman with Morningstar. Please proceed with your question. Good morning. On the IRP, Don, if I could just make sure I got this right. The 2% CAGR in load growth between 2020 and 2,035 that is net of distributed generation? Yes. So that's like a wow, Yes, that's and I said it was both peak demand and energy. We expect to grow at that CAGR of 2%. So is this you had that one slide with all the data centers. That's some of what driving this, I guess, all of the above, but those things are huge energy users, correct? Yes, they are. We're a very attractive area due to low probabilities of natural disasters, reasonable price on energy, living conditions for their employees, very attractive for energy centers. But as we look out the window here, there's cranes all over Downtown Phoenix. And if you drive around the valley and other growth areas of the state, there's a lot of activity going on. And I continue to hear from developers that labor shortages is the only thing that's holding some of it back. So we're pretty convinced there's a lot more to happen here in Arizona. So when Microsoft says they're going to source it with renewables, is that the standard thing where those renewables could come from other locations. They're just saying that to offset what they use in Arizona? Yes, Charles, we did a special contract arrangement with Microsoft, which allows them to do something that in the industry is similar to what's called a contract for differences. So it lets them go out and construct renewable energy kind of wherever and we give them a market price. And so it gives flexibility to the customer to go out and achieve the energy objectives that they're looking for. And so that was a relatively unique tariff arrangement, but we're looking at again, it's a model that we can apply to other data centers. And we expect to see more data centers and we've tailored our rate designs to also be attractive to these high load factor customers. And just to underscore the benefit of this for all customers, when these customers come on because they're using the efficiency that we are able to use our system and it actually takes price pressure off of other customers. Right. Last question. I didn't slug my way through the IRP, just a little bit I read. I see where you talk about the importance of natural gas, but is there do you address the actual need to build some more natural gas in addition to all the renewables and storage in the IRP? Charles, this is Daniel. We don't make the distinction, if you will, from a natural gas build standpoint. Given the deferral and the full status of our energy storage, we've obviously come forth with the interest for the additional solar and wind. Gas has been, will continue to be needed as a bridge fuel, as a peaking resource while we move through the next 3 to 5 to 7 years. And that will inform our decisions relative to additional gas acquisitions either through PPA or should we entertain it at some point having discussions about it. And Charles, this is Jeff again. Just to the policy issue to watch on that and how the IRP and the stakeholders are engaging. This is kind of a fundamental policy issue around this future of clean energy is do you have 100% clean energy? Is that the path that you move to with the understanding that getting that last 10% or 20% could be very expensive? Or do you move more quickly and have gas involved in the resource mix, but then electrify and move things on to a lower carbon system. And so that's going to be a policy issue as you get out further in past the 5 to 6, 7 year horizon that I know we're going to have that discussion. I expect we'll have it in Arizona, but it's similar to what you're seeing around the country, I think. Okay. Fascinating. Sounds like it's worth reading the rest of the IRP. Thank you. That's all I had. Our next question comes from the line of Paul Patterson with Glenrock Associates. Please proceed with your question. Hey, good morning. Hey, Paul. So there was this emergency moratorium on shutoff and I just was wondering where that stood. Is that still did they make this in final rule or not? And what's your experience been so far with, Averidge, if you follow me? Or sometimes when you have these moratoriums, you have these problems or people who have tight budgets stop paying their bills and then get behind and what have you. I'm just wondering if you guys have experienced anything like that or if you have any update on that? Yes, Paul, this is Jeff. The emergency rules are in place. The emergency rules are meant to be in place while the commission conducts a formal rulemaking on whatever the disconnect policy will be going forward. And so the emergency rules are in place through this summer and the formal rule making is likely to start fairly soon. We are seeing and we report to the commission what the arrearages are and they've asked for monthly reporting on that. And you're right, as expected, we're seeing the arrearages go up. And so one of the things that we're focused on is how we're going to engage and Don mentioned it, how we're going to engage customers with community support organizations in October 15 when the moratorium comes up and we know we're going to have circumstance where a lot of customers will be behind 4 months of summer bills. And so we're working forward with how we'll deal with that with the number of stakeholders who are engaged in supporting those customers. Okay. And then just back to Greg's questions regarding the Retail Choice issue. I mean, having been around long enough to remember when this was a fad in parts of the country and how it became not so much. It is a little bit surprising seeing sort of the enthusiasm. I mean, you guys have put forward a report and what have you. There's been considerable amount of process already. And there still seems to be at least on the part of a few of the commissioners it seems a lot of enthusiasm for this. And the staff I think seems to be sort of okay with everything but residential switching or at least they don't that seems to be where they seem to voice their concern. So I guess what I'm wondering is, if you could give a little bit more color as to why so much enthusiasm for something that we're hearing actually sort of unpopularity around, at least from consumer groups and what have you around parts of the country? You follow what I'm saying? Yes, I do. And certainly, you can read Commissioner Olson's letters and if you watch the workshops, he is certainly a proponent of broad retail competition. Chairman Burns, I'm sorry, has been a proponent since he's been on the bench. I think the staff's concern is let's make sure we do on the on the commercial side in our last couple of rate cases and putting some creative buy through provisions that allowed those customers some customers to go out and kind of working through us go out and secure power resources for themselves. It's a limited number of megawatts that can do that because of the need if you scale that up, you've got to get an RTO in place. And so that we've done it to where we can accommodate it. But there's interest in saying can you go do more. And I think you're right. I mean, this is primarily something that is of interest to the large commercial customers who see an opportunity to go out and buy on an energy only basis. And part of what you have to talk about is how do you barely reflect capacity value that the incumbent utilities fleets bring to the system. And so that's where a lot of the interest is. And residential, I think they're interested in talking about it, but that's a really hard one to do and certainly hard to do community choice aggregation. I think it's probably impossible to do community choice aggregation without being in an RTO and having some kind of underlying dispatch going on. Okay. I appreciate. Yes, I have been listening to the hearings. It's a little exhausting, but you guys have so much going on there. But thanks again and have a good one. Thanks, Paul. Thanks, Paul. We have reached the end of the question and answer session. I would now like to turn the floor back over to management for closing comments. Thank you for joining us today. This concludes our call. Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.