California Water Service Group (CWT) Q1 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Water Service Group First Quarter 2020 Earnings Results Teleconference Call. [Operator Instructions]. I'd now like to hand the conference over to your speaker today, Mr. David Healey, Vice President and Corporate Controller. Thank you. Please go ahead.

Thank you, Jimmy. Welcome, everyone, to the 2020 first quarter results call for California Water Service Group. With me today, Martin Kropelnicki, our President and CEO; and Thomas Smegal, our Vice President and Chief Financial Officer. Replay dial-in information for this call be found in our first quarter results release, which was issued earlier today. The replay will be available until June 30, 2020.As a reminder, before we begin, the company has a slide deck to accompany the earnings call this quarter. The slide deck was furnished with an 8-K this morning and is also available on the company's website at ww.calwatergroup.com.Before looking at the first quarter results, we'd like to take a few moments to cover forward-looking statements. During the course of the call, the company may make certain forward-looking statements. Because these statements deal with future events, they are subject to various risks and uncertainties, and actual results could differ materially from the company's current expectations. Because of this, the company strongly advises all current shareholders as well as interested parties to carefully read and understand the company's disclosures on risk and uncertainties found in our Form 10-K Form 10-Q, press releases and other reports filed from time to time with the Securities and Exchange Commission.Now I'm going to pass it over to Tom to begin.

Thank you, Dave, and good morning, everyone. I'm going to start the presentation going through the slide deck. And so if you can find that on our website or attached to the press release this morning, that will be helpful to you. And I'm going to start on Slide 6, where we have a table of our financial results for the first quarter. As you probably have seen already, our net loss for the quarter was $20.3 million or $0.42, and that is a larger net loss than in the same quarter last year. Where the loss was $7.6 million or $0.16 per share.We had flat operating revenue and our operating expenses were up. One note here, and we'll talk about this in greater detail later, is our capital improvements were better than they were in the first quarter of 2019.Flipping to Slide 7, our Q1 financial highlights. And really what we're mainly going to be talking about today is the effect on the quarter of the California General Rate Case, which as we've talked about before, the decision has been delayed. And that delay has meant that we cannot record the rate increase that we expect due to the settlement, and we cannot determine whether the commission will grant us regulatory mechanisms that we have had for many years, but which have been litigated in this case and were not part of the settlement.So we estimate that $15.4 million of pretax income would have resulted from a timely favorable resolution of the California GRC, and that breaks down as follows: $7.9 million represents delayed pretax income that would result from the approval of the settlement and would be accruing to the benefit of the company regardless whether the disputed items were granted in the company's favor. And then in addition to that, $7.5 million in the quarter, represents income that would have been booked had the regulatory mechanisms been active in the quarter. And as I mentioned, we - we're not booking the regulatory mechanisms as we have in past years. The other things that are affecting the quarter, the other - one other large one is that our benefit plan investments. These are the nonqualified benefit plans. We had a loss in the quarter due to the stock market, and that was a $7 million lower result than in the first quarter of 2019. A couple of other points. We had an increase in our unbilled revenue accrual. That's largely because that was a very negative number in 2019. It came kind of back to normal due to dry weather, increased demand. And then more general increases in cost, depreciation expense and maintenance expense and $1.1 million decrease to our operating income from deferral of RAM revenues, which I think we'll talk about in detail in a little bit.So flipping to Slide 8. I'm going to take a pause on the quarter just to give everyone a full update on the expectations for the General Rate Case for the year. That is the top bullet on this slide, and there's a table there that shows if this settlement is adopted, which the company anticipates that the settlement will be adopted, what we see is an increase in top line revenue, which is not very large, about $12 million in the best case and minus $12 million in the worst case - in the lower case, rather. And this - the reason that the company feels that the rate case is successful, even though this top line revenue growth is not very large, is that it represents a reduction in water sales quantity estimated, and so you see a large reduction in the adopted production costs. And you also see that the rates in the rate case incorporate the giveback of the excess deferred tax as it results from the Tax Cuts and Job Act.And so that $9.4 million is in the top line rate to the customer and then is also backed out as a reduction in expense. And so if you look at the bottom of the table on Page 8, you'll see that we anticipate that if the settlement is adopted, the net increase to 2020 pretax operating income is about $40 million in either the high scenario or the low scenario. And the difference between the high scenario and the low scenario is primarily a dispute over depreciation expense. And so you get lower revenue with lower depreciation and those wash one another out. The result is the impact on the first quarter. And so we estimate in the first quarter, as we said before, that the revenue gain in the first quarter would be $7.9 million in the high case, $3.5 million in the low case. But remember, in the low case, we're getting a lower depreciation expense. So those neutralize one another.Flipping to Slide 9 and talking in detail about the disputed GRC items. As we mentioned above, the depreciation is a pass-through that's a disputed item. We do have a dispute over the decoupling mechanism, which we call the RAM and the MCBA. And just as a reminder, this mechanism is designed to make the company indifferent to water sales. And that allows the company to promote water conservation. It's been a really favorable mechanism for the State's policy goals for last 11 years that the company has had it. And we do anticipate that, that is - continues to be needed. In other words, the state still has conservation policy goals. And we really hope that the commission continues to adopt that mechanism.In the quarter, the recognition of the RAM and the MCBA would have added about $4.5 million of additional revenue. The third bullet here on Slide 9 has to do with the pension and medical cost balancing accounts. And there's approximately $3 million that would have been credited here if we'd recognize these accounts. Our pension costs were higher because the discount rate used to value the future liabilities of the pension was quite a bit lower as measured this year. And our medical costs actually were down. So they offset one another slightly.And again, these balancing account mechanisms have been in place for the company for 3 rate case cycles. And they're very standard across the industry. And again, we're very hopeful that the commission adopts these. But in both of these cases, we did not feel that we met the criteria for booking these regulatory assets and liabilities at the present time.The company is highly confident that past amounts properly recorded and balancing accounts continue to be recoverable from customers. And so that's the RAM balance that we have from prior periods and the other balances that we have in the other balancing accounts. Our other disputed items from the rate case include a small number of capital projects, construction financing costs and working capital requirements, we don't believe those would have a - had a significant impact in the quarter regardless of the direction that the commission takes in those disputes.On Slide 10 is just a summary of earnings per share bridge, which you can see, and those are the factors that we've been talking about. And I'm going to turn it over to Marty to talk about COVID.

All right. Thanks, Tom. Good morning, everyone. Thanks for joining us during these unprecedented times. I'll just take a moment to call everyone's attention to our logo on the front page of the slides and solidarity with our customers who are sheltering in place. We've changed our logo where the states have been solid states. We've broken those into dots with a note that says, even though we're 6 feet apart, we are all on this together. So - and I think that is kind of the moral of the story with this first quarter.I want to talk about our pandemic response. As many of you know, Washington started off as the early kind of epicenter for COVID. And as a result, California and Washington took steps early on to limit public activity to help call - what they call blunt the curve. We had planned for pandemics, among other things, and part of our emergency response protocols that we follow. In fact, in 2016, we published our emergency response manuals, that every employee has a copy of and in that manual as a full section on pandemics and how to handle pandemics and flu outbreaks. So we continue with that. We actually did all of our updated pandemic training in the last week of January and early February. And we formed a task force in early February to monitor and figure out our next steps with the coronavirus. We also opened up our emergency operations center, and it's been in operation since March 9.So we were at - we think, a little bit ahead of the game in terms of preparing for our response. Our primary objectives were really simple, keep our employees healthy and provide uninterrupted water supply to our customers. And so far, we've only had two employee exposures, who've tested positive for COVID-19, and it was contracted when they were on vacation and they did not come back to work. We took a number of steps to protect our employees starting in February, including travel restrictions, we've placed social distancing, use of personal protective equipment, PPE in a higher frequency of cleaning, including wiping down vehicles, wiping down common workplaces, desktops, et cetera. We've received excellent support from the Utility Workers of America on our safety program. We have an excellent safety program, and I want to give a shout out to them for their excellent support and working with us with our pandemic response. We also retained a nationally recognized infectious diseases expert from Stanford University, who has been advising us on our employee protocols. The protocols we take to screen employees when they have an illness at home and how we look at their transition in and out of the workplace when they have someone sick at home.We begin protecting our customers in March by doing 4 major things. One, we suspended all collection activities on delinquent accounts. Two, we closed our customer walk-in centers and three, we started to manage our rate filings to defer any rate increases during the year of 2020.And then four, we've been managing our construction activities, so we do not disrupt water supply for neighborhoods that are at home sheltering a place. We've also set up a program where we're matching employee contributions donating $500,000 to local charities in this service areas that we support that provide pandemic type of relief. So food banks, meals on wheels, et cetera. So our hearts go out to our customers who have severe job loss, who have been stuck at home, and we're doing everything that we can to help them get through this pandemic crisis.Turning the page, I want to talk about the business impacts from COVID-19 and the pandemic. As I mentioned, we suspend all our collection activities in March. So it's still too early to tell what the impact is going to be. But one thing that is noteworthy as we learned in the downturn and the recession of '08 and '09 financial crisis, that our bad debt expense typically runs about 25 basis points of revenue during the last economic downturn, it went up about 20 basis points to 0.45% of revenue. So obviously, this is a different situation with so many people unemployed when the recent unemployment numbers came out this morning. So you have new claims in excess in total in excess of over 30 million claims in the U.S.So we'll watch this and see, but we - based on what we see in the past, people have continued to pay their water bills. In addition, because it was a nationally declared emergency and a state declared emergency, our California utility, Cal Water was able to activate a catastrophic event memorandum account, this is standard protocol in the state of California for catastrophic events. And this account allows us to record the incremental costs associated with the crisis and while we expense it during the period, we can apply for collection at a future date. So, so far in the first quarter, we did not have a lot of expenses that we incurred but I anticipate, as we move into the second quarter, those expenses will start to show up, in particular, the extra PPE, the extra sanitizers, things like that, that we had to procure. In addition, increases in uncollectible expenses and the potential lost revenue can be recorded in the memorandum account for recovery at a future date. Our liquidity as of March 31 remained strong. We had $140 million of cash, up from $42 million at year-end, and we had additional capacity under our lines of credit in excess of $200 million and $100 million.Tom, I'm going to turn it over back to you to talk about the General Rate Case.

Thanks, Marty. So just a couple of other quick updates related to the General Rate Case, which I talked about extensively at the top of the call. But from a procedural standpoint, parties, and that would be Cal Water and the Public Advocates Office, jointly met on April 9 with the assigned commissioner's office and asked them to expedite the processing of the General Rate Case at that time. And we think that there are benefits both for customers and for the company from getting a resolution of the rate case. As you probably saw in a press release yesterday, on Monday, we issued a motion in the case, actually a combination and series of motions, which asked the commission to delay the rate increase component of the rate case until January 1, 2021.And we believe that we are covered by the interim rate memorandum account, which means that we're tracking the lost revenue that would be associated with the rate case for 2020, and that we don't want the commission to be raising rates during 2020. And so that's why we ask for that delay. As a reminder, that cash, if you will, is estimated at between $12 million and negative $12 million in terms of the overall rate increase that would accrue to the company. But within that, there are big differences in certain customer classes and different types of customers. And that's because we're kind of changing our rate design a little bit to better enhance conservation. And so really, we don't want that surprise from any customers saying, why is my bill gone up 10%? Or why is my bill changing during this crisis? And so we elected to make that motion to the commission. We do have the support of the ratepayer advocate in making that motion. However, we don't know if the commission will adopt that approach. They may choose to adopt that approach or reject that approach.I mentioned earlier, and I wanted to add here that we did defer a portion of our annual RAM surcharge filing, and that's what resulted in a reduction in an income of $1.1 million. And that, again, has to do with the idea that we only wanted to file for the surcharges that would continue rates at their same level, and we did not want to raise rates by adding surcharges during this period. And so the expectation that we have is that we would file for those rate surcharges in 2021 at the normal time, but by deferring that, our accounting recognition of those revenue amounts is delayed and therefore, is reduced for the current period.That is - sorry, I did want to add one thing, and it wasn't on here. But earlier in the quarter, we did get permission from the commission to delay the filing of our cost of capital proceeding, which was scheduled to be filed on May 1. And is now scheduled to be filed on May 1, 2021. And so what that means is the authorized cost of capital and capital structure for the company, for this is for California Water Service Company, will remain the same throughout the year 2021 and will be adjudicated during that year with an effective date of 2022. So from a standpoint of risk for the customer and for the company that, that's good news for us there.I'm going to turn it back over to Marty to give an update on capital investment.

Thanks, Tom. As you saw in the press release, our investments in the first quarter increased 9% from the first quarter of 2019. So we completed $65.3 million of capital in the first quarter. Really, one of the big things that was working to our advantage is the rather mild winter that we experienced in California that allowed us to continue working on projects that may have been shut down in different weather conditions if we had a lot of bad weather. As we previously announced, we think our range is $260 million to $290 million in 2020 that may move around a little bit based on the current pandemic that we're going through. And there's good and bad and associated with that, first and foremost, water employees are deemed as essential services employees. And so that's enabled us to continue working on things like our main replacement projects as we get ready for fire season, things that improve fire flows, et cetera, we've been able to continue to move forward on.In fact, we completed 28,000 feet of main in that first quarter, which is about 5.3 miles in domain in the first quarter. We may have to shift some of the work around, again, to deal with water supply for people that are at home sheltering in place, obviously, with the pandemic and the need to constantly be washing your hands, your clothes, et cetera. We do not want to have any of our customers go without water at home. We've had to adjust some of our processes on our construction projects to deal with social distancing and the increased use of PP&E. And again, big kudos for the union for helping us with that. And some cities just flat out on closed down. So some of the permits and permitting processes have taken a little bit longer in some of the areas that we serve. However, having said all that, traffic has been very light, and we've have had cities also say, hey, now is a good time to do more things. And on the largest project that we have, in our company's history, 3 of which is the Palisades pipeline replacement project, we've been able to speed that up a little bit due to the low flow of traffic. So capital spending, more to come on that. First quarter, strong, looking to see what the impacts are going to be during the second quarter. But overall, we're staying focused on our infrastructure improvement plan, especially projects that help prepare us for a fire season going into the fall.On the next page, I want to take a moment to talk about our business development and what's been happening there. On March 27, the Washington Utilities Transportation Commission, also known as the UTC approved our acquisition of Rainer View Water Company. So we are finalizing the transaction and transition plans and we anticipate this closing sometime late in the second quarter, during the month of June.So Rainer View Water has approximately 18,000 service connections, and they serve about 30,000 to 35,000 people near our existing franchises in the state of Washington. So it'll almost double the size of Washington for us from a customer connection perspective. This is the largest transaction we've done in the company since 2000, and we look forward to closing this transaction in June.Tom, I'm going to hand over to you on the capital investment history and the projections.

Great. Thanks, Marty. So these are, again, relatively unchanged charts on Slide 16, which is our capital investment history. It's just marking the CapEx that we've done in the quarter and the midpoint of our estimate of $275 million for the year. And the regulated rate base has not changed. And again, the uncertainty with respect to the rate case is still there, and we should hopefully get some resolution on that soon.And with that, I'll turn it over to Marty for wrap up.

Great. Thanks, Tom. In closing, I just want to take a minute to recognize the unprecedented times that we're living in, and particularly the role that we play as an essential service employee - excuse me as essential in service utility with essential service employees. While the regulatory contact is never perfect in the short run, we know that the process does correct itself, and I have confidence that in the intermediate and long run, the process works. Given the pandemic crisis we're currently facing, staying focused on our customers now more than ever is the right thing to do, and I'm certain our regulators would agree with that. As we move into the second quarter, we look forward to helping our customers transition from a shelter in place order back to work and hopefully back to somewhat of a normal life. Likewise, we look forward to working with the California Public Utilities Commission on wrapping up our General Rate Case and moving forward with our infrastructure improvement plans and getting ready for fire season.So this, coupled with closing Rainer View is going to be our focus of the quarter, for the second quarter.And with that, Jimmy, we're going to hand it over to you to start Q&A, please.

[Operator Instructions]. And our first question comes from Durgesh Chopra with Evercore ISI.

Thanks for all the color today. I appreciate it. I just wanted to - I have a couple of questions, and I wanted to start with just a quick clarification. Do you guys - as it relates to your deferral filing and do you guys have interim rates in place in the first quarter or no?

So we do technically have interim rates in place, but the interim rates are set as the existing rates. So there is - there was no actual increase upon filing for interim rates.

Got it. Got it. That makes sense. Perfect. And then maybe, obviously, this - the [indiscernible] dispute is a big one, pretty material. And the rate case timing is uncertain here. So in light of those elements, can you comment on your capital markets needs for this year? How are you thinking about your liquidity position? And then your capital markets need for 2020?

Certainly. So we have a great team in finance, customer service, IT and accounting that is looking very carefully at any changes to our customer collections and cash position. We're looking at that on a very regular basis. Probably to some extent every day as we see the cash collections coming in and we monitor delinquencies. We currently don't anticipate a critical need for new capital for the company. The lines of credit are adequate to meet the need, even with a decline in our cash collections. If that cash collection need gets more severe, then obviously, we'll take additional actions. But from what we're seeing right now, we don't anticipate that being a need. As far as a long-term financing, I think there's an expectation that with the capital program that we have, and a remainder of about $275 million this year and about $285 million next year. There is going to be a need for additional capital to support the capital program, and that's regardless of the COVID pandemic and other things going on. So we do expect - we're currently running the ATM program, and we currently expect to have a debt offering sometime in the period. The timing of which is uncertain at this point.

Got it. And then just in terms of - and this is my last question. In terms of timing? I know and you said you were communicating with the commission, but what is it - could we see a decision sometime here in the second or third quarter this year as it relates to the General Rate Case and some of the disputed items? Or any color that you can share with us on timing would be helpful. And I understand you probably don't have all the answers, but I appreciate any color.

Yes. We're going to find out when everyone else finds out exactly when that proposed decision comes out in public. Our communication with the commission is, frankly, that they have set for themselves the July 1 deadline. That's the statutory deadline, which they extended late last year to July 1. There's, I think, some indications that they're working on it. I think we're feeling though as though they are writing that decision. And so it's not as though it's on a back burner or that the people working on it are not working because of the COVID pandemic. It's definitely being worked on. I just don't think we have a good sense. I think we would love to see a proposed decision in the second quarter. And that would certainly give us a lot more confidence in understanding where the commission is going with the regulatory mechanisms and the disputed items. But no guarantees at this point, obviously.

Got it. And that is July 1, 2020, the date that you just mentioned?

Yes. Correct. Correct. Yes.

And our next question comes from David Katter with Baird.

So I guess, first of all, a clarification question. Do you guys see the delay in the rate case is primarily related to the disputed items that you outlined? Or is your sense there's something else kind of driving the slow decision?

I think that if you go back and look at the way that California has been regulating the water utilities, our case that we got the 2015 General Rate Case, which had a decision at the very end of 2016. It was about the only on time decision that the commission has rendered in a water utility case. Maybe there's been 1 or 2 others. Generally speaking, even though these cases are largely settled, the commission is taking extra time to finalize the work on proposed decisions and decisions in these cases. Obviously, if we'd had a complete full settlement in the case, that would have made it considerably easier for the judge. We did indicate to the judge what the disputed issues were in September of 2019. And we filed the settlement in October of 2019. So there's a lot of processes that go on behind the scenes there, and I don't want to throw anyone under the bus, so to speak, but there's administrative process that it could be held up in a variety of places within the commission's administrative framework. So that's the judge, the people that review the judge's work in that area, the commissioner's offices, the industry divisions, the California Commission is about 1,000 people. And so they do have a bureaucracy there that really checks their work, I guess, I'd say. And they're not always known for being the speediest.

Understood. And maybe a little bit related. You touched on this in your comments, but why do you think kind of the RAM and other accounts issues are at dispute now when they weren't historically. Do you have any sense of what's kind of changing in the attitude there?

There's probably a book to write about that. But to be honest, the ratepayer advocate has been taking the position really since a few months after their settlement with us in 2008. That they didn't like the decoupling mechanisms that they had agreed with us that we should be putting in place to promote conservation. And so ever since then, they've been taking a negative position on those items in our rate cases. It just happens that we were able to settle with them for a variety of reasons. And settlements are confidential, of course, and they're involved, give or take, of a lot of different items. In this case, we were unable to reach a settlement with them. If you look to other cases for other water utilities with decoupling mechanisms, even in the last couple of years. We have found, in some cases, they had no dispute with that company at all. In other cases, the commission said that it was not a - it was not - shouldn't be the subject of a General Rate Case.So in California Americans most recent rate case, the judge and the assigned commissioner actually threw that issue out of the case and said that would be something that the commission should decide on an industry basis. But at the same time, one of our peers, which does not have a full decoupling mechanism has been asking several times over the course of the last several years for a decoupling mechanism. And there's been actually commission rulings against them. And so maybe changing the attitude of the rate care advocate or maybe they're just weren't enough things to trade in the rate case to get to that. But they've been opposed to it for some time. And again, they've not been winning on that issue for some time.

Yes, David, it's probably noteworthy too, that decoupling has been around since the '70s in California, and it's been very effective on the electric and gas side. And likewise, I think we'd argue it has been very effective on the water side. In terms of promoting conservation. And even with the mild winter this year, you're starting to see publications talking about drought conditions in California, et cetera. So from a policy standpoint and price signal standpoint, we feel pretty strongly it's the right policy for the state of California because you got almost 40 million people in the state, and it's growing. And water is a very scarce supply. Likewise, we also know when - for properly recorded balances, and balancing accounts. There's never been a problem in the state of California with the recovery of those items historically. So it's really kind of a policy decision on the front side with the advocate. But we think from a drought preparedness, conservation management, it's the right thing to do. And the State Water Resources Control Board has been doing a lot of work on drought preparedness. And everything that they're doing it lines up quite well with what decoupling does in terms of price signals. So it's a pretty interesting debate between the advocates and us. So we all just have to wait and see now how the commission is going to rule on it.

And our next question comes from Jonathan Reeder with Wells Fargo.

I just wanted to make sure the catastrophic event memorandum account. So that covers the bad - like any bad debt expense increase above that 0.25% that's embedded in your rates, right?

Correct.

Okay. And then as well as those other items. So what are you kind of expect in the full year 2020 headwind might be from - [indiscernible] I know a lot of unknown, but just wondering if you're able to kind of ball park it at all because I'm assuming you aren't going to be filing for recovery until 2021?

Right. Marty has been leading the emergency response team. Marty, I don't know if you have a sense yet of the cost of the extra PPE and the extra sort of safety precautions that we've been taking, that would probably be the biggest driver at this point. As I mentioned earlier, the - I think as Marty mentioned earlier, the uncollectible expense is really hard to tell at this point. We're just about 6 weeks into it in terms of customers' billing cycle. So it's very difficult to predict where that's going. And obviously, something doesn't necessarily become uncollectible even if it's a delayed payment because the customers might pay later. So that's something to factor in as well.

Yes. I think what I would add, Tom, is from a preparedness standpoint, the company was very well prepared. We had plenty of PPE, we had plenty of sanitizer, we had plenty of wipes. We had - the training was all done early in the process. We have - I think some of you know, we have an outstanding Vice President of Emergency preparedness and emergency response, Gerald Simon, who was a fire Chief for his whole career until he retired and joined us. So from a base stock perspective, we are very well prepared. It gets a little more challenging when you have to replenish that stock given the surge in demand that you've seen for PPE. Now again, we had very healthy supply stocks built up from our lessons learned during the fires. So we have not run out of PPE, but I think as we get in the summer months, and we have to replenish that PPE, that's where we'll start seeing those costs. And from what we're seeing or from what we've had with discussions with FEMA, you're seeing more PPE supply stock start to roll in. So that should bring the prices down. But you clearly had a price shock happened for like N95 masks. And luckily, we didn't have to participate in any of that because we had plenty of supply stock on hand of N95 masks.

I see. I appreciate the good commentary and all that. But in terms of like trying to quantify it, there's really no way for to kind of do it at this juncture? I mean I know you based on the financial crisis, the spike in the bad debt expense was really relatively modest. I mean, I think it's kind of $0.02 to $0.03 potential headwind there, but there's just really no way on your end to even kind of to frame it at this juncture?

No. Jonathan, I apologize. It's just too early to know that. Again, we haven't really recorded those costs much in March. We'll definitely have a lot more information at the end of the second quarter. I know that doesn't help right now.

Do you think Tom that be offsetting O&M expenses to potentially cancel out that headwind? I know a lot of companies with employees working on home, all kind of stuff like that. They're seeing some areas there as well as searching to find some other areas in the budgets, where they may be able to flex it to kind of offset that is. Is that than that Cal Water is going through too?

I think you'll see that as well. I know that we canceled all travel really very early in the pandemic crisis. And I normally would have traveled a bit as well as many others. So I suspect that will have some difference, but I guess I just don't know the relative magnitude. You'll probably see deferred training costs, for example, because if we had planned to have people come on-site and do training, that's not happened. We've had to do virtual training and things like that. Our bill for Zoom, I imagine, is a bit higher, but I think Zoom is pretty cost effective.

So it is - I think it's also worthy, Jonathan, that 90-plus percent of our employees are actively working every day. So while we have some corporate employees that can work remotely and some engineering staff that can work remotely, all of our front-line employees are at work every day, and they're incurring their costs they would normally incur in the ordinary course of business. Which is what we want, keep the water flowing at all costs to keep people healthy. So as Tom said, we'll have more visibility in the second quarter on that as some of these costs start to roll in.

I'm showing no further questions in the queue at this time. I'd like to turn the call back to Marty Kropelnicki for any closing remarks.

Okay. Thanks, Jimmy. Thanks, everyone, for going through our results for the quarter. First quarter for us typically is not a quarter we get too excited about. And typically, we do have a loss in the first quarter. Obviously, that was compounded by the delay in the General Rate Case. But we're working our way through that and staying focused on the customer and getting through the pandemic. And again, right now, the most important thing we can do is help our customers out as we get through these unprecedented times. And if we're successful at doing that, we think the regulator will be successful at getting the rate case wrapped up to a fair and equitable position for all parties involved. So with that, we're going to wrap it up. Thank you for your support during the quarter, and we'll look forward to talking to you in July. Thanks, everyone.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program, and you may now disconnect.