Portland General Electric Company (POR) Q2 2018 Earnings Report, Transcript and Summary

Good morning, everyone, and welcome to the Portland General Electric Company Second Quarter 2018 Earning Results Conference Call. Today is Friday, July 27, 2018. This call is being recorded. [Operator Instructions]. For opening remarks, I will turn the conference call over to Portland General Electric's Director of Investor Relation and Treasurer, Chris Liddle. Please go ahead, sir.

Thank you, and good morning, everyone. We're pleased that you're able to join us today. Before we begin our discussion this morning, I'd like to remind you that we have prepared a presentation to supplement our discussion, which we'll be referencing throughout the call. The slides are available on our website at investors.portlandgeneral.com. Referring to Slide 2, I'd like to make our customary statements regarding Portland General Electric's written and oral disclosures. There will be statements in this call that are not based on historical fact and, as such, constitute forward-looking statements under current law. These statements are subject to factors that may cause actual results to differ materially from the forward-looking statements made today. For a description of some of the factors that may occur that could cause such differences, the company requests that you read our most recent Form 10-K and Form 10-Q. Portland General Electric's second quarter earnings were released via our earnings press release and the Form 10-Q before the market opened today, both of which are available at our website. The company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. This safe harbor statement should be incorporated as part of any transcript of this call. Leading our discussion today are Maria Pope, President and CEO; and Jim Lobdell, Senior Vice President of Finance, CFO and Treasurer. Following their prepared remarks, we will open the lines for your questions. Now it's my pleasure to turn the call over to Maria Pope.

Thanks, Chris, and good morning, everyone. I'd like to start with how pleased we are that we've settled the Carty Generating Station litigation. We anticipate the proceeds will fully offset the incremental construction costs and partially offset other damages. From the onset, protecting customers' interests drove our thinking, starting with decision to require significant financial assurances from the general contractor, to taking decisive action in 2015 to replace the contractor who is in default, the unrelenting dedication of our employees in bringing the plant into service safely and on time. Since going into service in 2016, Carty has provided customers with safe, reliable and cost-effective energy and is operating at rates that are exceeding expectations. With the settlement reached, we intend to withdraw our deferral application at the Oregon Public Utility Commission. We are increasing our full year earnings guidance by $0.15 to $2.25 to $2.40, $0.12 of which is associated with the Carty settlement, and the balance of which is attributable to improved gross margin due to temperatures that are better than expected this past winter when we initiated guidance. Now I'd like to provide an update on our financial and operating performance and the status of our renewable request for proposal. We will then turn the call over to Jim, who'll provide more details on our financial performance and guidance. Turning to Slide 4. We reported net income of $46 million or $0.51 per share compared with net income of $32 million or $0.36 per share in the second quarter of 2017. Results were driven by lower natural gas prices, lower plant and distribution O&M and higher production tax credit generation. These were partially offset by warmer-than-normal temperatures and increased administrative expenses. Overall, our operating performance from generation to transmission and distribution was very strong this past quarter. We are moving forward with offering customers more renewable and lower carbon options, including our renewable power option for large businesses and municipal customers, our transportation electrification plan and our energy storage pilots. Thanks to customers' preference for green energy, PGE is once again #1 in the nation for our voluntary renewable power program. I'm also pleased to report that PGE continues to be ranked in the top quartile for customer satisfaction for residential, business and key customers according to TQS Research and Market Strategies International. Now turning to Slide 5. The bids are in for our renewable request for proposal regarding our need for 300-megawatt nameplate capacity. The process is expected to be highly competitive. We are evaluating proposals alongside an independent evaluator. We plan to submit a shortlist of proposals to the OPUC in October, with final negotiations expected by the end of the year. And now I'm pleased to turn the call over to Jim.

Thank you. As Maria mentioned, and as shown on Slide 6, we're increasing full year 2018 guidance to $2.25 to $2.40 per diluted share. The increase is based on weather that was better than expected when we initiated -- established the guidance in February of this year; strong customer growth of 1.3%, which is helping increase our weather-adjusted forecast to relatively flat loads for the year; and the settlement of the Carty litigation. The settlement contributes $0.12 per share to 2018 EPS. In addition, $120 million of the $130 million settlement will offset the underappreciated investment on our balance sheet in excess of what was included in customer prices. The residual $10 million or $0.07 per share will flow to A&G, along with another $0.05, now that we no longer are incurring further depreciation, interest and litigation costs associated with the excess costs to complete the Carty facility. The proceeds from the settlement will also partially offset our need to issue long- and short-term debt. Turning to Slide 7, which shows earnings drivers for the quarter. First, gross margin increased earnings by $0.01 due to the following, a $0.06 increase as a result of lower natural gas prices, which contributed to improved economic dispatch of our generating plants; and a $0.05 decrease due to warmer than prior year's spring temperatures. Second, a $0.05 decrease in generation maintenance costs and three -- at three of PGE's thermal plants. The third driver is a $0.04 decrease related to distribution costs as no major storms occurred in the second quarter of 2018 as compared with the major storms we experienced in 2017. The next driver is the $0.03 increase due to production tax credits as a result of higher wind generation. And finally, a $0.02 increase in other miscellaneous items, including outside services and administrative expenses. Moving on to Slide 8. As we discussed on our first quarter call, our 2019 General Rate Case has been filed, and we are currently in the testimony phase. Several settlement discussions have been held with parties, and we have reached agreement on all power costs-related matters as well as some nonpower-cost items, such as cost to capital. Stipulating -- stipulations regarding these agreements are in progress and will become available in the coming weeks. We filed our reply testimony on the remaining items on July 13 and held additional settlement discussions on July 23 and 24. We expect the final order from the commission by the end of the year, with the price change effective January 1, 2019. On Slide 9, we have provided a summary of the company's current capital expenditure forecast for 2018 to 2022. These expenditures are related to investments we are making to support our continued customer growth and build a more efficient, reliable and secure system. As stated in our previous calls, we have not included any capital expenditures in our forecast related to the potential projects pursuant to our renewable RFP or energy storage proposals. Based upon cost projections and the regulatory process, we now expect storage expenditures to be approximately $45 million. Onto Slide 10. We continue to maintain a solid balance sheet, including strong liquidity and investment grade credit ratings. I'm pleased to say that on July 18, S&P Global upgraded PGE's issuer credit rating one notch from BBB to BBB+, and Portland General will be kept on positive outlook. As of June 30, we had cash, available short-term credit and letter of credit capacity totaling $704 million; first mortgage bond issuance capacity of $1.1 billion; and a common equity ratio of 49.9%. In 2018, we expect to fund estimated capital requirements with cash from operations, debt issuances up to $75 million and commercial paper as needed. And now operator, we're ready for questions.

[Operator Instructions]. Our first question comes from Paul Ridzon with KeyBanc.

Jim, I'm sorry, I was distracted when you gave the breakout of the $0.12 related to the Carty litigation settlement. Can you -- what's the $0.07?

The $0.07 associated with Carty? When you look at the Carty, we have avoided costs -- actually, I didn't go completely through that in the script. But when you look at the Carty settlement, we -- originally, when we set guidance for the year, we assumed that we had about $0.05 -- or we had $0.12 worth of costs associated with it, so it was the drag. Now that we have a settlement, we're going to avoid some of those costs for the balance of the year, so I put that about $0.05. And then if you look at the settlement itself, the $10 million that's going to drop to the bottom line, that $10 million really represents about $0.07. And we're going to push that towards the A&G line, so if you're looking forward in the income statement.

But a few were -- I thought you -- that's less than you expected, so I thought there would be a net negative.

You mean less than -- if you look at the overall costs associated with the above construction costs and the cost to settle, yes, we didn't cover 100%. What we did cover with the $130 million is we were able to cover the underappreciated amount of that overage that was currently on our books that we're not covering from customers. So the amount is above the $514 million that are in customer prices.

We're very pleased with the settlement and, as such, are reflecting an improved outlook and guidance.

Our next question comes from Julien Dumoulin-Smith with Bank of America.

So I wanted to follow up on a couple of comments. Maybe, Maria, turning to you first. Can you elaborate a little bit on -- if you can? Of those bids that have come in for the renewable opportunity, what proportion are rate-basable ownership, build-and-transfer type opportunities relative to straight and more linear PPA opportunities as these are the list of projects that have come in today?

So Julien, thank you for your question. We have a very competitive process and received a number of bids. And I'm sorry, but unfortunately, we're not able to talk about any of them in any detail and are currently in the beginnings of the evaluation process with an independent evaluator. We will be presenting in October to the OPUC the results of those evaluations, along with the independent evaluator. We hope to be finished with the process by the end of the year as we're targeting, capturing the production tax credits for the benefit of customers with this project.

Got it. Fair enough. Turning to some more detailed questions. As you look at the issues in the docket and the rate case, how do you think about adjusting some of the questions around the rate base number? Just a high level. It seems like a number of the issues in the docket seem to be pending around that.

This is not going to be a good day for you, Julien, as far as giving you some additional information. As I mentioned in my remarks, we've settled cost of capital, we have settled our net variable power costs, and we've had settlement discussions associated with a great deal of other items in the case. That -- those settlements will come out in a testimony here very, very shortly. So we're going to hold until we see that testimony filed with the commission and stipulations.

Got it. When is that filing?

It should be any week now. We're just waiting for the parties to finish and put their pens down.

Great. All right. I think I got one that you can answer. Can you talk about -- can you speak about how you think about load improving, given 0% load forecast you gave for 2019 in the testimony?

Sure. We are still seeing the implications of traditional industries in the Pacific Northwest using less energy while we are seeing new industries, particularly data centers, even a synthetic diamond manufacturing company come into our area. We do have a gap in terms of timing as many of those industries coming in need to finish their procurement of property, of construction and begin operations. Long term, we're very optimistic around our growth rate of about 1%, and that is a result of strong growth in the region. As I mentioned in the last call, we have more cranes per capita than any reporting city in the country, and you can feel it in terms of the construction, in Portland in particular. We also have growth in apparel, footwear manufacturing as Nike, Columbia and Adidas all have construction under process. But near term, we expect to see flat load growth as we are forecasting for the balance of the year.

I'd actually add to Maria's comments there. You got to keep in mind that in 2017, we had a large paper company, and we have a solar manufacturer that was also operating at that point in time. And so for us to come out and say that we're going to flat-load and we're absorbing that decrease is just -- underlines the comments around the growth that we're seeing.

That's good. Good point.

All right. Excellent. Can I just go back real quickly to clarify on the settlement, too? Are all the issues up for settlement here right now? Just to make sure I understand your last comment, just in terms of expectations once something's found here. Or is this -- is the expectation basically to be able to arrange a settlement around a piece of the -- a number of issues? I don't want to put any words in your mouth.

We are settling a number of issues. As I have mentioned, we settled cost of capital, and we settled net variable power costs. And that testimony is pretty much complete, and we're expecting it to be filed here very shortly. On July 23 and 24, we had additional settlement discussions, and we were able to come to agreement on several other items. It's is going to take a little bit longer to get that testimony together and get it filed, but we're making good progress. There are some stills, some big differences between the company and the parties regarding what we do with the full letter decoupling and what we do with our storm-balancing accounts. So a lot more work to be done on those particular issues.

The next question comes from Paul Fremont with Mizuho.

My question is, would there be alternatives for additional spending if you were not successful in winning the RFP later this year? And if so, what types of alternatives would you potentially see?

Well, we're focused, if -- irregardless of the RFP results, we're focusing on the aging infrastructure that we have in our service territory, whether it be underground cables, whether it be switches, whether it be transformers that have PCBs that are greater than levels that we think are necessary. We're continuing to deal with the customer growth that we had been mentioning a little bit earlier. We're seeing it across all classes, and that's causing us to rebuild substations and add substations and so on and so forth. And then on top of that, we've got the reliability upgrades associated with seismic. And then we're also -- we haven't included anything in our CapEx numbers regarding storage. And then we're looking at the integration of our operations and further visibility into our distribution network as well. So we've got a lot on our plate ahead of us, and we're moving as fast as we can.

We will have further guidance with regard to capital expenditures for 2019 and beyond on our October earnings call, which is traditionally when we update our capital forecast for the Street.

Great. And then I guess, my other question is, you guys historically have had some fairly significant below-the-line expenses. Is there any action that you can take to potentially mitigate some of that expense?

We're always -- look at that, Paul, what we call it as a structural drag. It's about 80 basis points. And with the change in the tax law, it became -- it actually moved up because we lost some of the tax shield associated with that. The expenses didn't move up, but the tax shield decreased. So we're continuing to focus on it and trying to see what progress we can make.

And over the years, we have a really good track record of reducing that amount. I think most importantly is reducing the risk that we see from different weather, whether it is storm, restoration costs, whether it is hydro, wind and other expenses. And you'll see it in our current rate case filing. We've tried to address a number of those to be more similar to other utilities across the country.

Our next question comes from Michael Lapides with Goldman Sachs.

Maria, you talked a little bit -- and I know you always give guidance on CapEx in the third quarter call. But just curious, a few quarters or so ago, you talked about kind of the aging of substations, and it's been a little bit quiet on that front. Can you give an update or give some color or insight on -- are you talking about just transmission? Or are you talking about both transmission and distribution substations? If so, how many are we talking about? Like, is this just a one-off, 1 or 2? How many do you actually have? And is there a way -- I know you'll give -- you'll quantify and update the plan. But if I wanted to just kind of do a back of the envelope a way to start thinking about sometime -- maybe not in the next 1 or 2 years but a much, much longer horizon, how much incremental work needs to be done to upgrade or replace those?

Sure. Jim has commented on this for a number of quarters. And what we're seeing is the compounding issues of technological change and a need to be able to accommodate distributed generation throughout our service territory, the aging infrastructure that we have and then the very substantial growth. In particular, the very substantial growth puts pressure not only on our substations and our distribution system but also on our transmission systems, so you'll see opportunities for investment in both areas. In terms of the total number of substations, we have just under 200 substations throughout our system. And we'll be focusing on those that are the oldest, those that are in the areas where you'll see more distributed generation soonest and then also areas of significant growth, which tends to be either in the inner core of the Portland downtown area or in some of our very fast-growing regions that are driven by a lot of technological companies coming in.

Got it, Maria. And then one question on battery or storage. Can you remind me, what was it the legislator -- legislation said about, a, how much of that has to be or could be utility-owned versus has to be contracted or PPA-ed? And b, what's the time frame for when you have to have it implemented by?

Sure. They didn't specify ownership in the legislation. What they specified was to really move on and better understand batteries' implications into our system and to start with some pilots. We've announced projects totaling about 39 megawatts and have settled on 4 or 5 points with all of the parties. And as Jim mentioned in his opening remarks, we're looking at capital expenditures of about $45 million, which is not reflected in our guidance.

And then when is that? Is that a 2018 number? Or is that something further out in the horizon?

No, it would be 2019 as the earliest, and that actually is something that we need to begin to address. Technology and the cost of storage is moving faster than our regulatory processes in some instances.

That's not covered by the tracker? Like, you have a wind tracker when you do new wind plants. You could get incremental revenue relatively quickly. And by the way, my apologies, Jim, I didn't mean to cut you off there. But does storage not fall onto that?

It is an open issue that we have amongst the parties right now, Michael. That is one issue, and another issue is ownership of storage technology on utility property. So the thought of somebody else putting storage technology inside one of our substations and being able to control it is something that we're not amenable to.

You can imagine the cybersecurity and other security concerns that we end up having.

Safety and reliability concerns, yes.

The next question comes from Agostina Colaizzo with Mizuho.

I'm just curious about what are your assumptions in the updated guidance in terms of the NVPC, given that in the 10-Q, we can see that you're already at, like, $27 million below the baseline.

That has been factored into that guidance as we are looking forward.

Perfect. And that -- has that changed from previous guidance?

It has helped manage the guidance, some of the other costs that we're seeing. So it's balancing some other costs in there. So it is fully baked into the guidance.

Our next one comes from Travis Miller with Morningstar.

You answered most of my questions. I was going to ask on the CapEx, but I'll throw one more in there. Electric vehicles. When you look out to 2021, 2022, any kind of update in the last kind of 3, 6 months that would give you any more clarity in terms of whether there's material upside on the EV side apart from distribution?

Sure. No, absolutely. And we are really bullish with regards to electric vehicles. We're in a process of working through agreements on 6 electric avenues and have announced some. I will tell you we have much more interest than we have capability through the results of our docket at the PUC. We're also working very closely with our transit authority, who has looked on a all-electric bus route, and then further electrification of the TriMet bus system. I think most of our enthusiasm comes from what we're hearing from consumers and from municipalities as well as from car manufacturers in terms of their focus on improving electric vehicles and speed to delivery of those. I think we'll see a significant change, maybe not in the next year or 2 but certainly within 5, it should be very dramatic, and in particular in areas like Portland and the Metropolitan region.

Okay. And would that be incremental to that 450-type run rate that you talked about?

Yes, much of that would be incremental.

Okay. And then real quick on the cash flow timing for the settlement. What are the next steps in terms of cash flow?

Well, Travis, we are anticipating that we will receive the settlement dollars here very shortly. And as I mentioned, it will help offset some of the financing that we otherwise would have had to have done this year. So we've got $75 million -- we're up to $75 million that we do in the fourth quarter now. That is -- well, actually, it was higher. But now it's $75 million given the settlement.

Okay. The $75 million will be left to do?

Exactly.

Our next question is a follow-up from Paul Ridzon with KeyBanc.

Your capital forecast, this has nothing -- no placeholders for any RFP wins?

Exactly right. There's nothing in there for win nor storage.

So if you're successful, does -- would there be 100% additive? Or would there be a reshuffling of the deck and maybe pushing some capital out?

That is yet to be determined.

Okay. And then unrelated, I've been reading a lot about Northwest and crypto mining. I'm wondering if you're seeing any of that load?

No, we're not like what Mid-Columbias are seeing or even Idaho is seeing.

What we're seeing in distinct contrast is well-capitalized digital companies wanting to place data centers here as well as others wanting to place fulfillment centers in and other pretty stable operations.

Seems like a little more preferable to kind of a volatile crypto market.

Our next question comes from Paul Patterson with Glenrock.

So just really quickly. The SB 978, there's been a proceeding going on. And I've been reading your comments, which were actually interesting. And I wanted to sort of just get, a, sort of your senses to where that proceeding was going; and then b, you guys made comments about sort of support for PBR mechanisms, so you guys seem supportive of it. So I was wondering what you guys might be seeing there and what kind of opportunities maybe you guys see with respect to these proceedings.

Sure, that's a great question. First of all, 978 is a senate bill that requested the Oregon Public Utility Commission to look into industry trends, new technologies and policy drivers that would be impacting the existing regulatory framework that we have in Oregon. And we've had a number of meetings centered around different areas of concern with a pretty extensive group of interveners and parties and commission staff and commissioners. The report is due to the legislature in mid-September, and there may or may not be drafts that are publicly available between now and then. We have thought that the process has gone very well, and it's been very inclusive and constructive. And with regards to performance-based rate, we did mention that in our testimony. We actually are already in front of the commission with an example of the sort of thing we're talking about, which is a green tariff to be able to sell 100% green energy to large corporations or other customers. In particular, the municipalities want to move 100% green faster. It would essentially be cost base program with a margin adder, and you can see that morphing off into other performance-based alternatives as we move forward.

Okay. So it sounds like it's kind of, I guess, somewhat modest in terms of what you're looking at, in terms of performance base. You're not thinking of anything really substantially changing the regulatory construct that you got -- currently have. Is that a right way to think of it? And do you see it more as potentially evolutionary as opposed to anything really significant?

Yes, absolutely. The current construct that we have serves parties really well. And in particular in Oregon, we're facing increasing concerns around equity, and we are addressing that very carefully. And I think that you'll see that traditionally in Aragon, we have an evolutionary process rather than a revolutionary process with regards to ratemaking. Jim, anything you want to add?

No. So there's a lot of time to run in that process and a lot more discovery to occur, so I would say there's not a lot at this point in time that we can to, but more to come.

And just to clarify. When you talk about equity, you're talking about -- in a social context, you're not talking about equity in terms of a financial commentary?

Yes, exactly, in terms of a social context, in serving all customers.

Our next question comes from Andy Levi with ExodusPoint.

Congrats on the settlement. That was really good.

Thank you.

I think I'm all set because people seem to ask really good questions. I think the only thing -- just on the regulatory process on the rate case. So there's actually, what, three items that we're still waiting for as far as -- well, there are five more settlement-wise but three major items, which were the decoupling, right, that's number one; the smoothing of the wind.

Storm-balancing account.

Right, and then smoothing of the wind. Isn't that also?

Not the smoothing of the wind. It's the weather decoupling; it's the storm balancing account; and then we've got we got what we call the hinge fitch model -- hinge fit model, which has to do with the load forecasting. And that's just looking at more recent trends that we have been seeing.

I thought there was something -- or maybe that's in the weather by where there -- that on the wind side where you wouldn't have as much volatility as far as wind resource. Or am I mistaken up here?

No. What we've been operating under -- what we used to do is we had a profile associated with the wind farm, and that profile would be used throughout time. We changed the regulatory construct around that, so we're now using a 5-year rolling average. So now it's tracking closer. It's moving closer towards that -- the average that we're seeing. And then the other thing that happened out there was the production tax credits used to only be set in a General Rate Case. And now the production tax credits are reset, and the annual update tariff filing every year...

Right, right, right. And that was actually really important actually because the contracts held off or -- okay. Or PTC has rolled off, I should say. So just on the 2 items that, I guess, I have the focus on, can you give any type of characterizations as far as how the negotiations are going? I mean, are you optimistic that you and the staff and the interveners can work out a settlement on this or whatever you want to say?

If the two that you're referring to, Andy, is the decoupling and the storm balancing account, I'd say that the parties have a long ways to go at this point.

Our next question comes from [indiscernible].

I wanted to kind of normalize the earnings, if I understood them correctly, if you can, just as we build for next year. So you had started off the year in your guidance, the old guidance, there we're going to be $0.12 of Carty stuff that was going to hurt you. So reversing that, say those $0.12. But starting for next year, those $0.12 would not have hurt you if the litigation had been settled and rewon, right? So in theory, the earnings power of the business is up $0.12 because of this settlement permanently as we look at the guidance. And if I'm correct, you also said, if you could remind me, the negative weather from normal impact was, like, $0.07. Is that correct for the year when you came up with the original guidance at the end of the year in the separate call?

Yes. If you look at the guidance that we provided back in February, embedded in that guidance was the implications of the second warmest January we ever experienced, and so we had about $0.11 in there for weather. In addition to that, we had $0.12 associated with continuing to pursue the litigation in Carty in trying to recover the excess cost of construction. And so as we look at 2018 full year guidance, now that we have seen better weather coming out of the first quarter, we have looked at the weather component, that $0.11, and we've said we really only experienced three, so we're going to put $0.07 back associated with weather. Then we turned to the Carty, and as we looked at Carty, as I mentioned, we had $0.12 in there associated with that. Well, now that we've settled Carty, we believe that we've got avoided costs for the balance of the year and then the repercussions of the actual settlement. And so the combination of those 2 had $0.12 back in the earnings well.

So what is the negative $0.04, right? So the $0.12 plus $0.07 would make it $0.19, right? So there came a negative $0.04 somewhere. Could you just elaborate where the negative $0.04 came in from?

We've got a lot of the years still to go, and so we are just making sure that we are -- got some safety and meeting our numbers.

One of the things that you should know by looking at last year's third quarter and even the beginning of the fourth quarter is just that peak power prices tend to be quite volatile during the heat of the summer in the Pacific Northwest and then in the entire West, and I would not consider that for $0.04 just to be sandbagging per se but to be really reflective of the environment of the third quarter and beyond.

Okay, okay, okay. Fair point. And then can I just -- this high O&M, is that something which is permanent? Or is it just being utilized this year for certain reasons and then it kind of like tracks back as I look into next year as I build my kind of models. Could you elaborate a little bit on that?

Can you clarify that a little bit?

You increased O&M guidance by $10 million, right, from what you provided in the February, right, if I'm correct. You increased your O&M guidance by $10 million this -- so I'm trying to understand whether that is kind of onetime in nature items this year or is it kind of something you projected not properly and you are now it's kind of a permanent increase. That's what I'm trying to get at.

No. That O&M is reflective of increased activity throughout our service territory. As I mentioned, we're in an area that's growing quite rapidly. And while near term, our low growth may not be growing, we're seeing e-migration in terms of about 1.3% and new connects that are higher than we've had in any previous recent years and are doing a lot of work along those areas. Jim also mentioned the repair work that we're doing to our systems. So we -- those costs are aligned with our most recent General Rate Case and are important meeting customer needs.

Okay, okay. And the last question, if I may ask. What is the impact of, say, right to improve your sales forecast by about 50 bps for the year? What is the earnings impact of that 50 bps increase? Could you give us some kind of a thought process on that?

Any changes that we have in our revenue forecast is all baked into the guidance that we've provided.

Okay. But you don't have some kind of a rule factor, rule of thumb or 1% equals in terms of earnings?

No, we don't.

No, we don't.

Our next question comes from [indiscernible] with Citadel.

Just a quick clarification on the battery storage CapEx, the $45 million. Have you guys already won that? Is that -- already been determined that, that's going to be company-owned?

No, it is not determined. And as Jim mentioned, that's -- there's current debate over that in particular in one of the projects.

And when should we have clarity on that?

Oh, I would expect sometime in the later third quarter, maybe fourth quarter.

Okay. And just the last thing on the deferral, the billing system. Where does that stand? And has that been flowed through the second quarter numbers?

The deferral is in the numbers, and we've got to wait until 2019 until the year has closed out before the commission can really address it.

And what's the capital associated with the billing system?

We actually -- Kevin, we changed out our complete billing system, our customer billing and collections system and the metering system, and so it's associated with that. It went into service in May of this year, and so it's effectively the D&A associated with it from the point in time that it went into place or went into commercial operations until the year-end.

And I'm not showing any further questions at this time.

Great. We very much appreciate your interest in Portland General Electric, and we invite you to join us when we report our third quarter earnings in late October. Thanks, and have a great weekend.

Ladies and gentlemen, that concludes today's presentation. You may now disconnect, and have a wonderful day.