Pinnacle West Capital Corporation (PNW) Q2 2019 Earnings Report, Transcript and Summary

Greetings, and welcome to the Pinnacle West Capital Corporation 2019 Second Quarter Earnings Conference Call. At this time, all participates are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.It is now my pleasure to introduce your host Stefanie 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 second quarter earnings, recent developments, and operating performance.Our speakers today will be our Chairman and CEO, Don Brandt; and our CFO, Jim Hatfield. Jeff Guldner, APS's President; and Daniel Froetscher, APS's Executive 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 Web site, 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 the actual results may differ materially from expectations, we caution you not to place undue reliance on these statements.Our second quarter 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&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 Web site for the next 30 days. It will also be available by telephone through August 15th.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 first quarter, and significantly below average revenue in the second quarter. Before Jim discusses the impacts of weather on our expectations for 2019 and details our second quarter results, I'll provide a few updates on our recent regulatory and operational developments. I have repeated many times over the years that our 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 Costello, 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 9th. Additionally, the Ocotillo modernization project was completed on budget and with all five units in service by May 30th. 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 of 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 that educate the public on how to protect their property from wild fires.As you know, on April 19th, we experienced an equipment failure at the McMicken substation battery storage facility. We're looking into the cause of the failure. At the site, discharge 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 at APS.com/mcmicken. 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 batter storage had been put on hold.I want to reinforce that we remain committed in 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 and informed manner. Although storage facilities are delayed, we will be issuing two 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 250 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 1st, 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. It 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 need will both increase at a compounded annual growth rate of more than 2% from 2020 through 2035.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, incentive, 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 30th, 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 report with the Arizona constitution, put reliability in jeopardy required the creation of the regional transmission operator or Independent System Operator and conflict with the interest in establishing clean energy rules.It report sponsored by Arizona energy policy group and prepared by concentric Energy advisors analyzing retail competition over the past 20 years was filed with the commission on July 26th, the report illustrates it states with three paled competition higher residential rates than traditionally regulated states recognizing the potential negative impact on residential customers and the challenges I discussed, we, no doubt, believe that retail electric competition is in the best interest of our customers are 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 September we temporarily stopped residential tower disconnects for non-payment. Subsequently the Arizona Corporation Commission issued a temporary rule proposing a statewide moratorium on disconnects through the warmest months into mid October. Addressing the needs of vulnerable Arizona and 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 Arizona 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 Americas public lands.In addition, we are in the AEI Advocacy Excellence Award for our efforts around the defeat of the 2018 ballot initiative. This award highlights of Public Policy engagement of DEI 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 second quarter of 2019. We earned $1.28 per share in the second quarter of 2019, compared to $1.48 per share in the second quarter 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's second quarter period. Higher sales the LCR 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 accruals May since 1980 in the Memorial Day high temperature and Phoenix slide for the coolest on record.Additionally, June was accruals in the last few years. Also contributing to lower gross margin work lower other margin and refund 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 rate plan to customers, which was implemented in June of last year.Continuing with the drivers lower adjusted operations 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 lean principal initiative to continue our track record the past management discipline and streamlining our processes.This process of 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 within five ways to streamline our processes deploy technology and ultimately reduce costs while this effort will take time to mature. We continue to manage cost, consistent with our historical track record.Turning now to Arizona's economy, as you can see on slide three, the state's focus on growth is continuing to pay dividends. In particular, we continue to see datacenter and other manufacturing development on the West side of Metro Phoenix. Last week, Microsoft confirmed plans to build three world-class datacenter campuses in Goodyear in El Mirage. Construction on all three sites has begun and Microsoft tends to power the facilities with a 100% renewable energy.In addition, Nike announced plans to build a multi-million dollar manufacturing plant in Goodyear bringing approximately 500 jobs to the area. Last month, Compass datacenters announced the construction of its first of two data centers, which are projected to be completed in the fourth quarter of 2019. The two datacenters are expected to utilize 72 megawatts of new load. Going forward Compass datacenters expect to campus grew up 350MW with the non-side 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 in easily be seen and downtown Phoenix. Numerous job sites equipped with cranes and staffs 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 its upward 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 no low mortgage rates should allow the Metro Phoenix housing market in the economy more generally to continue to expand faster than the national average.Reflecting the stay improvement in economic conditions, APS' retail customer base grew 1.8% in the second quarter 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 on our financial outlook, as we look to the second-half of 2019 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 forecast period remain the same. We have reallocated the capital that would have been on energy storage to accelerate other distribution and parcel projects.Also, with the change in timing of for our next rate case, we have reevaluated our financing plans. As a result, we will not require any additional equity or parent 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 here 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 third quarter represents over 60% of our full-year results and as we have experience whether in the third quarter can vary significantly keys to success we'll be managing our costs, the impact of increases in customer load primarily from the data center as 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 six and seven of the materials.We expect to issue up to $600 million of long-term debt at APS during the remainder of 2019. This excludes any funding for the refinancing of APS with $250 million at 2.2% senior notes which mature in January 2020. Overall liquidity remains strong and that concludes our prepared remarks.I will now turn the call back over to the operator for questions.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from line of Michael Weinstein with Credit Suisse. Please proceed with your question.

Hi, guys.

Hi, Michael.

Hi, Michael.

Thanks. 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?

Michael, it's Jeff. So the -- as you know, we've got a recommended opinion and order out on that. It went through a hearing process. It has not moved to the commission yet, and I think given the timing of the upcoming rate case, there's three potential as you could see. It could go before the case gets filed. It could be decided some time while the case was 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 it. 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 paid, it normally takes about six 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 is sort of déjà vu all over again with this. This commission thinking about the efficacy of retail competition 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 that we get to a point where we know sort of that commission has been fully educated on this and we might get a better view as to the next steps.

Greg, it's Jeff. 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 they that last processed it?

So last process actually took multiple years and it started kind of similar to how the California, the California Blue Book process started as they'd broken into a number of different working groups, so a 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. But I don't know that it would take as long this time given that there's been more experience in retail competition, but as if you're actually talking about standing up in RTO. There is a lot of issues that you 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 hospice and 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 whether 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? Other 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&M would be towards the lower end. Thinking about R3 sort of things, we have to focus on O&M. I think sales will be within the range. We had really fairly strong residential sales in the first-half. We had a commercial customer at a one-time outage that hurt commercial sales. But I would think with pursuing the impact of data centers can depend upon the timing that they actually come on that there is a little flap there. And then I think you'll see gross margin towards the lower end just due to weather as we go forward.

Okay, thank you, gentlemen.

Okay. Thank you.

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 [indiscernible] on for Julian. 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 baked in our plan. So I'll -- we'll know more when we get to the actual art piece back by that I don't see any incremental capital at this point.

Okay, thank you. And maybe Can you talk a little bit more just about the plan going forward as 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 will know more and when you'll be able to kind of proceed more on the plan there?

There is Daniel. To your point, the first phase of the main event investigation has been completed. And we've moved on to the second phase as the forensic phase, if you will, of the actual equipment to the first phase involved to just charging the remaining modules at the mechanism, facility,I have to say a little bit to speculate to a specific timeline. I know that the second stage forensic look, will involve a couple of months. We're cautiously optimistic that we will have some returns back in the late September, October timeframe but that is speculation at this point. In the meantime, I think to echo, Mr. Brandt's comments, and 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 a 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 bill that you have in your CapEx plan?

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, so I just want to clarify to us that if we needed to construct that we would have to go get commission approval, essentially to do that, which I think and 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 September Open Meeting. But I don't think it would have any impact on capital.

Yes. Also, it wouldn't prohibit PH-14 to extent that we needed to fulfill 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 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 in the end of the test year, June 30, that you'll see the equity layer, approximately 54.7%.

Okay. Thank you very much.

For a consistent and within our 538 to 558 that we've had historically, so --

Understood. Thank you.

Our next question comes from line of Ali Agha with SunTrust. Please proceed with your question.

Thank you. Good morning.

Hi, Ali.

Hey. First question, on Slide 18, you laid out the implications for the Four Corner step 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 the Four Corners 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 that 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 practice 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's dynamic. So you always have changes when other commissioners come in and that they'll have different priorities. And so, we're kind of in the process, we try to make sure, we're open and explaining the issues and the policies we are seeing.

And in general, the interaction has been similar?

It's similar. I mean, it's challenging, because when you get into rate case issues, and you get index party 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 I 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 you think equity comes back into the scenario for you guys?

I don't really have a view on that today. And progress is found on the right case and gain a constructive outcome, and we'll go from there.

Got it. Thank you.

Our next question comes from a 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 low growth between 2020 and 2035 that is net of distributed generation?

Yes.

So that's like a wow, huh?

Yes, that's I said it was both peak demand and energy. We expect to grow at that bigger 2%.

So is this -- you had that one slide with all the data centers? That's some of what's driving this, I guess all of the above. But those things are huge. Energy users, correct?

Yes, they are. We're very attractive areas due to low probabilities of natural disasters and reasonable prices 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 is 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, or that 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 cost price. And so it gives us 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 a system, it increases 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 they IRP. Just a little bit I read. I see what 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 of 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 whole 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 three to five to seven years, and that will inform our decisions relative to additional gas acquisitions either through PPA or should we have better candidate at some point having discussions about build.

And Charles, this Jeff, just the policy issued 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. Do you have a 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 to get out further in pass the five to six, seven 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. It sounds like it's worth reading the rest of the IRP. Thank you. That's all I have.

Our next question comes from the line of Paul Patterson with Glenrock Associates. Please proceed with your question.

Hey, good morning.

Hi, Paul.

So there was this emergency moratorium on shut off. And I just was wondering where that stood? Is it still - did they make this a final rule or not and what's your experience been so far with a rear edge if you follow me or sometimes when you have these moratoriums you have these problems where 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 the summer and then the formal rulemaking is likely to start fairly soon. We are seeing and we report to the commission what the rear edges are. And they've asked for monthly reporting on that, and you're right. As expected, we're seeing the rear edges 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 on October 15th when the moratorium comes up and we know we're going to have circumstance where a lot of customers will be behind four 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 to 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 enthusiast -- I mean you guys have put forward a report and what have you. There has 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 that seems to be where they seem to voice their concerns. 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?

I do. And certainly you can read Commissioner Olson's letters and if you watch the workshops, he's certainly proponent of broad retail competition, commissioner Burns -- Chairman burns, I'm sorry, has been proponent since he has been on the bench. I think the staff's concern is, let's make sure we do understand all the consequences, all the potential impacts. And so it's not a new pressure, it certainly has more attention now. But we've worked - on the commercial side, in our last couple of rate cases and putting some creative by through provisions that allowed those customers and 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 we've done it to where we can accommodate it, but there is 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 fairly reflect the capacity value that the incumbent utilities fleet spring 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 mismatch going on.

Okay, I appreciate. Yes, I have been. I have been at the hearings. It's little exhausting, but you guys have so much going on there. Thanks again and have a good one.

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.