Firstenergy Corp (FE) — Q1 2018 Earnings Call Transcript

Thank you, Brenda, and good morning. Welcome to FirstEnergy's first quarter earnings call. Today, we will make various forward-looking statements regarding revenues, earnings, performance, strategies, and prospects. These statements are based on current expectations and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from those indicated by such statements can be found on the Investors section of our website under the Earnings Information link and in our SEC filings. We will also discuss certain non-GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures can be found on the FirstEnergy Investor Relations website along with a presentation that supports today's discussion. Participants in today's call include Chuck Jones, President and Chief Executive Officer; Steve Strah, Senior Vice President and Chief Financial Officer; and several other executives in the room who are available to participate in the question-and-answer session. Now, I would like to turn the call over to Chuck Jones.

Thanks, Megan. Good morning, everyone. Today, we are reporting earnings for FirstEnergy as a fully regulated company for the first time. We had a strong first quarter with GAAP earnings of $2.55 per share and operating earnings of $0.67 per share. Our GAAP earnings included a $1.2 billion gain related to the deconsolidation of FirstEnergy Solutions and its subsidiaries, as well as FirstEnergy Nuclear Operating Company. As you know, the boards of directors of FES and FENOC approved a Chapter 11 filing for these entities on March 31st. The filings do not include FirstEnergy or our distribution, transmission, regulated generation, or Allegheny Energy Supply subsidiaries. We acknowledge that recent events, including FES's plans to sell or deactivate two nuclear power plants in Ohio and one in Pennsylvania over the next three years, have been difficult for our employees, as well as for the communities that rely on these plants for jobs and economic benefits. We recognize the significance of these plants to the regional economy and understand that more than $5 million of our utility customers are still exposed to market uncertainties. Thus, I will continue to advocate for regulatory or legislative solutions, including FES's application for an emergency order under the Federal Power Act, to acknowledge the importance of fuel secure baseload generation and to ensure our customers have a stable and reliable power supply. I believe we are causing long-term harm to our nation's infrastructure, and I will consistently push for more integrated policies and decision-making. Today, we are pleased to announce that we have reached an agreement in principle with two ad hoc groups of key FES creditors. The first group represents a majority of all outstanding secured and unsecured funded debt at FES and its subsidiaries, while the second includes most Bruce Mansfield certificate holders. The agreement confirms previously announced guarantees related to certain employee obligations at FES, such as unfunded pensions and other benefits, and waives certain intercompany claims held by FirstEnergy, including the $500 million secured credit facility, $200 million surety support, and the rail settlement guarantee. It also provides vital assistance from FirstEnergy on key business matters while FES and FENOC continue their restructuring. Other major terms effective at emergence include a full release of all claims against FirstEnergy and related parties; a $225 million cash payment from FirstEnergy, which includes a reversal of an $88 million NOL pre-filing purchase; a tax note from FirstEnergy of up to $628 million due on December 31, 2022, bearing interest at the prevailing treasury rate; the transfer of the Pleasants Power Station currently owned by Allegheny Energy Supply to FES for creditor benefit; and FirstEnergy's right to share in recoveries after a predetermined threshold is met. The agreement must be approved by the boards of directors of FirstEnergy, FES and its subsidiaries, FENOC, and Allegheny Energy Supply, as well as the Bankruptcy Court, and certain other conditions must be met. The ad hoc group has also agreed to do their best to include the official committee of unsecured creditors and any remaining key creditors in the settlement by June 15th. This agreement marks a significant step towards FES emerging from bankruptcy and addresses a key issue in the bankruptcy process, allowing creditors to focus on a restructuring plan. Our 2018 operating earnings guidance and long-term growth rate, which we introduced in February, incorporate the guarantees that we have disclosed, along with other relevant assumptions. Therefore, we affirm our 2018 operating earnings guidance of $2.25 to $2.55 per share, alongside our long-term operating earnings growth projection of 68% through 2020. I would also like to emphasize that we have no plans for additional equity beyond the annual $100 million investment in employee benefit plans through 2021. We anticipate this agreement in principle to be credit positive, and we are introducing a second quarter operating earnings guidance range of $0.47 to $0.57 per share. Let's turn now to our business going forward as a fully regulated utility. In our transmission business, we continue to implement our Energizing the Future investment program. More than 600 projects either underway or in the pipeline for 2018. We are on track to invest $1.1 billion in our transmission system this year, consistent with the capital plans we announced in February. One of these is a $45 million transmission project in McKean County, Pennsylvania that will help maintain service reliability following the retirement of generating plants in the region. The project includes a new 230,000-volt transmission line that extends about 15 miles between existing substations in Bradford and Keating townships, as well as new equipment to help reduce the frequency and duration of power outages. This project, which began late last year, is expected to be completed by mid-May ahead of the June 1, 2018 in-service deadline. Another project nearing completion is a new 28-mile, 138,000-volt transmission project in Erie and Sandusky counties in Ohio that is needed to maintain service reliability during periods of peak demand. We expect to energize the new line in late May. FERC approved our settlement agreement for JCP&L's transmission rates in February. New rates were effective January 1 and are retroactive to June 1, 2017. This agreement also offers JCP&L the opportunity to file for forward-looking formula rates to be effective in 2020. The MAIT settlement filed in October remains pending at FERC, and we expect the ruling in the second quarter of 2018. In our distribution business, the first quarter weather-adjusted load results closely matched our expectations, as Steve will discuss in more detail. During March, a series of Nor'easters brought high winds and heavy wet snow that caused extensive damage to the eastern portion of our system. Collectively these storms resulted in outages for millions of people in the Northeast. A total of 1.2 million FirstEnergy utility customers experienced outages as a result of these three storm events, with our JCP&L and Met-Ed service territories hardest hit. In New Jersey alone, we replaced nearly 51 miles of wire, more than 750 poles and cleared trees at more than 5,400 locations during the restoration effort for the first two storms. Restoration for those storms involved more than 6,200 line workers, hazard responders, assessors, forestry crews, job dispatchers, and electrical contractors. We know that being without power is difficult for our customers, and we're proud of the efforts by our employees, contractors, and outside utility crews to efficiently and safely make repairs in challenging conditions. We're working with Utility Commissions in both New Jersey and Pennsylvania to review our preparation and response to the outages. While we're confident that we met our commitments, we work with the Commissions to identify and implement any additional best practices that can help enhance the experience of our customers in these situations. In total, our utilities spent more than $355 million on restoration efforts during the first quarter, including $250 million in New Jersey and $80 million in Pennsylvania. Approximately $230 million of the total was O&M, with all but $10 million being deferred for future recovery. In Ohio, our application for a $450 million Distribution Platform Modernization plan remains pending at the PUCO. The request is for the Commission's approval for this three-year plan to redesign and modernize portions of our distribution system, which will help our Ohio utilities restore power faster, strengthen the system against adverse weather conditions, and enhance system performance by allowing remote monitoring of real-time grid conditions. Elsewhere, our plans include a filing midyear for our JCP&L customers under New Jersey's Infrastructure Investment program, and we anticipate a rate case filing in Maryland during the second half of the year. Now I will turn it over to Steve, who joins us for the first time in his new role as Chief Financial Officer for a review of the first quarter and other financial developments.

Good morning, everyone. I’m happy to join you today. Before we talk about the first quarter results, I have a few housekeeping items regarding our earnings presentation. First, nearly all operations that were part of our Competitive Energy Services segment are now classified as discontinued operations within our corporate and other segment for both 2018 and 2017, and they are excluded from our operating earnings as a special item. This is due to the deconsolidation of FES and FENOC, the completed sale of AE Supply's gas plants, and the pending asset purchase agreements for Bath County Hydroelectric and Bay Shore plants. The remaining competitive business activities, mainly associated with AE Supply's Pleasants plant, are included in the corporate and other segment for reporting purposes. As we will discuss later, Pleasants had some impact on our first quarter earnings, but we anticipate its results will be flat for the year. Second, as we mentioned in February, all our operating results and projections are being presented on a fully diluted basis. This includes the equity issued in January as fully converted, or about 538 million shares, and excludes the effects of preferred dividends. We believe this method offers the most accurate comparison of our performance. Reconciliations for items, along with detailed information about the quarter, can be found in our consolidated report to the financial community, which is available on our website. As Chuck mentioned, our first quarter GAAP earnings of $2.55 per share included a $1.2 billion gain from the deconsolidation of FES, its subsidiaries, and FENOC. This compares to GAAP earnings of $0.46 per share in the first quarter of 2017. On an operating earnings basis, first quarter earnings were $0.67 per share, compared to $0.52 in the first quarter of 2017, on a fully diluted basis and reflecting only our continuing operations in regulated distribution, regulated transmission, and corporate other segments. In the Distribution segment, operating results increased $0.15 per share primarily as the result of colder weather this year as compared to 2017, the impact of new rates that went into effect in Pennsylvania in late January of 2017, as well as the Ohio DCR. Heating-degree-days were normal for the first quarter, but 17% higher than the same period of 2017. This drove a 5% increase in total distribution deliveries compared with the first quarter of 2017, including an 8% increase in residential sector and a 3% increase in commercial sales. On a weather-adjusted basis, first quarter residential deliveries were down less than 1%, while commercial deliveries were slightly up. Looking at industrial sales, the positive trend continued for the first quarter with growth of nearly 3% compared to that of last year, driven by the shale gas and steel sectors. This marks the seventh consecutive quarterly increase in industrial sales. In the Transmission business, first quarter operating earnings increased as a result of the higher rate base in MAIT and ATSI due to our continued investment in the Energizing the Future program, as well as higher revenues at JCP&L from the FERC settlement that Chuck mentioned earlier. At our Corporate and Other segment, first quarter results reflect the higher interest expense and lower tax shield. This was partially offset by higher commodity margin at Pleasants, primarily due to higher wholesale prices in the first quarter of 2018, but as I mentioned earlier, we're expecting its earnings contribution to be neutral for the year as compared to 2017. I will also note that we continue to expect our consolidated effective tax rate to be about 28% for the year. Finally, we continue to receive questions about our approach to passing tax reform savings to customers, so I'll take a moment to discuss this process. Let me reiterate that for our guidance for 2018 does not include any benefit of taxes. On January 1, we began deferring these amounts as a regulatory liability until we work through the regulatory process in each of our jurisdictions. This is a complex issue that will be addressed uniquely in each regulatory jurisdiction. We have already implemented the tax change for the DMR and DCR in Ohio where we filed proactively to lower the rate to reflect the impact of tax reform saving customers nearly $40 million. Our Ohio utilities also filed comments that base rate distribution rates are not impacted by the Tax Act changes, because they’re frozen through May of 2024. In Pennsylvania, we estimate that the combined net annual effect of the tax rate will be about $116 million across our four utilities. Our companies filed comments presenting arguments that single issue rate-making was not appropriate and provided support for implementing a reconcilable rider to be in effect 90 days of the final commission order. The PUC issued an order making all rates, including rider rates, temporary as of March 15, 2018 for six months potentially the earliest date that the PUC would go back for tax savings. JCP&L reduced rates by $28.6 million on April 1, 2018 to reflect the tax rate change. These interim rates are subject to final BPU review and the BPU is expected to make a decision regarding the treatment of excess deferred taxes going forward by July 1. JCP&L is seeking authority to continue to defer regulatory liability from the impact of tax reform during the BPU proceeding until the next base rate case. In West Virginia, Mon Power and Potomac Edison will file testimony by May 30, proposing the treatment of tax reform-related savings. And in Maryland, while the estimated Tax Act impact would be approximately $7 million to $8 million annually for customers, Potomac Edison will file a base rate case in the third quarter of 2018 where the benefits of tax reform will be realized by customers through a lower rate increase than would be otherwise have been necessary. On the transmission side, FERC issued a show cause order directing Mon Power, West Penn, and Potomac Edison and 45 other utilities on stated rates to propose revisions to those rates effective March 21, 2018 to reflect the changes in the federal corporate tax rate. JCP&L was not included on the list of stated rate transmission utilities required to file likely because the settlement at JCP&L's recent transmission rate case already took into account and addressed many tax impacts. ATSI, MAIT, TrAILCo, and PATH will adjust rates as part of the normal annual true-up process. We will continue to work with the regulatory commissions in each of our jurisdictions to determine the appropriate approach for our customers. Thank you for your time. Now let's take your questions.

Hi. Good morning.

Hey, Steve.

Hi. I have a couple of questions regarding the agreement. Could you provide more information about the percentage of creditor support and any known opposition we should expect?

Well, I can't give you specifics on the percentages of total creditors. I can tell you this, 100% of the creditors that were in these ad hoc groups have signed on to both agreements. And so there was no opposition within the ad hoc groups and they’ve, as I said in my remarks, committed to work with us to get all the other signatories on by June 15.

Okay, great. On the overall plan, I know you mentioned that your strategy regarding earnings per share growth and equity remains unchanged. Could you provide more details about how your credit metrics appear? You indicated that the credit agencies are expected to have a positive reaction; can you elaborate on their feedback regarding this?

We’ll let them express their views, Steve. However, I want to emphasize that we've examined the settlement with both parties, which informs my belief that it will have a positive impact on our credit. The metrics will change as we progress in this process, but we anticipate staying well within the guidelines set by all the major rating agencies.

Okay, great. Congratulations.

Thanks, Steve.

Hi, good morning. Congratulations.

Thanks, Julien.

Yes. So perhaps to follow-up on Steve's question a little bit more precisely, can you comment a little bit on the credit positive nature of this with respect to where exactly pro forma for the settlement, your FFO to debt ends up through the forecast period and how you see this changing versus your prior expectations? It would seem that largely the tax note and the 225 here would be the two key items to watch in terms of the evolution, but let me know your thoughts?

Hey, Julien, this is Jim. Let me jump in here. When we get out into our planning period post-emergence, we see our credit metrics being solidly in the 12% to 13% range, which is well above S&P and the Moody's threshold. So we feel very good about that. On the second point, yes, you're right, we have the $225 million plus the $628 million tax note that we talked about, but that was well within the parameters of our planning period. As you see, the tax note $628 million, that's not due until December 31, 2022, which is essentially financing, which will be at the risk-free treasury rate that’s prevailing at the time of emergence, so that will have what I would say a minimal impact on our FFO. So, all in all, it is well within the guidelines of what our plan was and we feel still very confident that we're going to be within that range.

Got it. Excellent. And then just with respect to Ohio, New Jersey, you alluded to upcoming infrastructure filings et cetera. How do you feel about being within the range or the distribution CapEx range you talked about earlier, and if you were to get these filings where would that put you, just to kind of make sure we're in the same zip code?

If we would get what’s in Ohio and New Jersey, I would suggest that that would probably put us in the upper end.

Good morning, guys.

Hi, Jonathan.

Hi. Just a quick one first, this date of June 15, is there any particular significance to that as part of the bankruptcy process or is that just a date that you're targeting?

No, it's just a target date. There is no significance, but clearly this agreement in principle is a major step forward, and hopefully we can get the rest of the creditors onto it also.

But does the agreement hold if you don’t achieve that by June 15?

Yes.

Okay. So there's no particular time frame whereby you would have to resolve to keep this agreement intact or is there?

No.

I wanted to go back to the tax slide. You mentioned that you haven't factored in any benefits from tax reform in your guidance. Is it correct that you have the advantage of a lower tax rate in Ohio due to the rate freeze, but you consider that part of the freeze itself and therefore not a benefit on its own? I want to make sure I understand that correctly.

Jonathan, we’re deferring everything at this point. So we’re also deferring that in Ohio, and as Steve and Chuck have mentioned earlier, we're not going to make any adjustments to those deferrals until we have what I would say final authorization from all the Commissions.

So guidance and first quarter earnings also defer the Ohio piece as well as everything else?

That's correct.

That’s correct.

Thanks. Good morning.

Hi, Greg.

I have a couple of follow-up questions. The $810 million in pension and postretirement and other costs was reported as closer to $1 billion in your most recent update. Can you confirm if this decrease is partly due to the pension funding exercise related to the equity raise earlier this year, or are there other factors contributing to this change?

I believe we have consistently stated that the pension and other post-employment benefits would be around $800 million. This figure includes the pension, executive deferred compensation, accrued vacation, and a portion of our long-term incentive program. Additionally, we included some guarantees amounting to about $140 million, which brings the total to approximately $1 billion.

Okay, my bad. Sorry about that. Second question, as I look at the terms of this deal, new money to the FES creditors is about $225 million, you got the tax note, you’re transferring Pleasants. So other than the opportunity for you guys to participate in the value of the bonds, if they agree ultimately to more than $0.60 on the dollar, this is sort of definitively a clean break with FES with you having some optionality if they get recovery above $0.60, is that a fair summary?

I think that’s a very fair summary. I think you got it figured out.

Hi, how are you doing?

Good, Paul.

Greg already touched on my question. I just want to clarify, after the bankruptcy situation, do you anticipate that FirstEnergy Corp. will continue to provide any support regarding employee benefits or other forms of assistance to the generation company?

No. The entire arrangement will be handled through this settlement process with the creditors, and that will be the end of it. We removed the entries from our books upon the filing of FES, and we don't plan to offer any further support to that part of the business, apart from some shared services and governmental affairs support during the restructuring process. All these services will be reimbursed by FES.

Thanks so much. Hi guys. Just wanted to clarify on earnings, the 6% to 8% earnings growth, that’s still off of the earnings excluding the DMR, so like 2018, 2.15, is that right?

Correct.

Got you. And then secondly, in terms of parent debt. I saw that the parent debt came down a little bit, I think $6.6 billion versus $7 billion, $7.2 billion last release. Just wanted to check is there anything specific that happen at the parent level in terms of deleveraging?

No, there isn't, Praful. I know that the parent level when we issued the equity, we took out some of the term notes, but that should've been the extent of it. Our short-term debt probably went up in the range of above $1 billion, may be a little more than that, that’s associated with the $500 million pension contribution we made. Also the revolving credit facility was drawn down by $500 million because FES drew that down and then we had about $300 and some million of storm cost. But I would say that’s what the primary changes are in any type of our consolidated parent debt.

Got you. Thanks. And that level is expected to remain at this level or is there any plan in the near-term to kind of pay it down or borrow further as needed?

I would say over the planning period that’s going to stay about in that range.

Great. Thanks, guys.

Thank you.

Hi. Good morning.

Good morning.

I wanted to discuss the current levels of costs. I know you’ve been working on cutting costs, but is there any further potential for initiatives or additional cuts as we evaluate your cost structure?

Well, Stephen, I think the way to think about it is we started the process of what we call FE Tomorrow about a year ago. Over the past year, we have been implementing changes to the parent in anticipation of this restructuring process. We are not going to disclose specific financial details of what we're doing. I don't think that would be in our best interest. I can tell you this: we are committed to resizing our corporate center to align with our future operations in a way that ensures we can fully recover those costs as we progress as a regulated business.

Understood. And, Chuck, just at a high level, you’re generally encouraged by sort of the progress that you’ve been making in terms of that cost-cutting efforts?

Yes, I'm very encouraged. And I think we set some targets that I'm confident we are going to meet and I’m also confident we’re going to exceed those targets. You'll see the impact on it as we deliver on the growth rates that we projected.

That's great. And then shifting gears just on the tax note, the $628 million, I know that’s basically sized to equal the cash tax benefit that you're going to realize. But I guess is it fair to say, I guess, your view is you would realize those benefits before the note is due in payables? In other words you will benefit from that cash flow and then ultimately you will need to pay that note off. But it's really designed to think up ultimately, but I would guess maybe some of that cash might come to FE before the maturity of the note, is that fair or how should we think about that?

Yes, Stephen, that’s correct. We could receive those funds prior to that. And the note also allows us to pay that off early without any penalty if we so decided.

Okay, perfect. And then just lastly, just on one element of the agreement in principle, I think there's a provision where FirstEnergy could share in recoveries. I was thinking about to the extent that there is federal support for baseload generation with those kinds of support payments be something that potentially FE could be sharing in or that be excluded?

I believe there’s a possibility we could share in that, but I want to emphasize that we are very committed to securing support for those generating assets because it would be a mistake for our country to shut them down. The main concern lies with the communities and employees. As of a few weeks ago, we have no commercial interest left in these generating facilities apart from what was mentioned regarding the settlement with creditors. I will continue advocating for support for those plants because it is the right thing to do. If the support surpasses the threshold specified in our agreement with creditors, then we would agree to share some of that, but that’s not our primary motivation.

Understood. That’s all I have. Thank you.

Hey, everyone. Congratulations on today's announcement. I realize it's been a bit of a long journey, but you've made significant progress, so well done. I have a question regarding the nuclear plants. If the creditor group proceeds with the retirement as announced, does that mean that FE Corp. will not be responsible for any liabilities linked to the retirement costs, such as decommissioning costs and dry cask storage, and that those responsibilities will be transferred to the new owners of the plants?

That's correct.

I appreciate that. One other thing regarding the distribution business, this is more of a housekeeping item. It appears that O&M increased significantly year-over-year. I'm unsure if I'm interpreting that correctly or if it just reflects a one-for-one pass-through in revenues as well. I wanted to verify that.

Hey, Michael. This is Jason Lisowski, Chief Accounting Officer. Actually the O&M cost is actually a benefit year-over-year. There was about $0.05 benefit and a lot of that is through the pension OPEB cost being reduced, because of the higher asset return and the contribution made back in January.

Got it. I may have misread that, I will follow up with you guys offline. Once again, congratulations, guys.

It's nice to get a distribution question.

Yes. Chuck, not being the expert in bankruptcy that you have reluctantly become, Exhibit A in the term sheet that was filed in the 8-K this morning. I just want to make sure my reading of that is correct. All that does is memorialize the Mansfield leaseholders as unsecured creditors of FES to the tune of, what $787 million, no obligation there to FE, correct?

Correct.

Sorry about that. Good morning, guys.

Hi, Shar.

I have a question regarding the tax note. In one of the draft terms, it mentioned that the tax note could potentially be lessened if there is a sale or partial sale of the fossil or nuclear assets. Does this also relate to whether decommissioning activities might be available for sale, and how does this all connect with the tax note?

What that means from that tax note is if they were to, say, sell the plant or deactivate that and FE pays them through the intercompany tax sharing agreement and in turn our work with stock deduction is reduced, that's really what that's intended to mitigate.

Okay, got it. So it's not related to potential sale of the decommissioning activities as you shut the plants down?

No.

Is there a process in place to sell the decommissioning activities?

You would have to talk to the creditors and FES about that one.

Okay, great. And then, Chuck, let me ask you a distribution question. So as you sort of think about tax reform and I know some of the stuff has been deferred, but as you sort of think about like the accumulated deferred income tax balance that you guys have, have you guys sort of thought about or have you broken out how much of that is sort of protected versus unprotected? And as you sort of think about the unprotected portion, is there an opportunity sort of credit that back sooner than later and potentially look at higher rate base opportunities?

I would be lying to you if I said I was an expert in that field, which I’m not. I know we had a question on that before the unprotected piece is relatively insignificant at this point, so we haven't focused much attention on that at this point.

Okay, great. Congrats, guys. My questions were answered. Thanks.

Thank you.

Thank you. So I have a question on this 6% to 8% EPS CAGR, so that was issued before. You knew how much money you will need to really settle with FES creditors, so now we’ve a sense. So can you give me an idea if there's any potential offset to those incremental costs associated with the settlement? And hence I’m roughly in the same place within that range and if not what is basically driving the difference between the 6% to 8% in that range? Thank you.

So, Angie, when we gave you that 6% to 8% in February, we're already in the middle of discussions with creditors and built into that our assumptions about what the costs to reach an agreement might be. So it's already included in the 6% to 8% and there's no need to adjust for it at this time.

So the difference, the 6% to 8% is simply the result of operating and maintenance attrition fees, capital expenditures, or possibly slow growth as well?

More investments such as the distribution platform, modernization in Ohio or the infrastructure investment in New Jersey. More investment would be what would drive us towards the top end.

Okay. Thank you.

Hey, guys. Actually, Chuck, I’m going to make your day, I’m going to ask you more questions about the distribution business. Can we go to the appendix please, the slide I think it's 23 where you talk a little bit about Pennsylvania and the slide before that when you talk about Ohio. In Pennsylvania, you've got two utilities that are earning healthy ROEs into utilities that look like they’re under earning. What’s the trajectory and plan to fix the ones that are under earning?

Yes, from our perspective, we always assess our projected capital investments alongside potential load growth or decline before deciding whether to proceed with a filing. You're correct that we have a couple of utilities with slightly higher returns on equity that currently prevent us from recovering through the distribution investment charge. However, there are additional expenditures that are starting to impact these utilities, which should bring their returns down below the 9.5% threshold. We consistently evaluate all of our distribution companies, considering our planned spending, expected revenues, and returns, to determine if we should initiate a rate proceeding. This is particularly evident in our plans for Maryland, where we intend to file later this year. That’s how we approach it.

Got it. And …

That's slightly below our threshold. We don't rush into decisions that might lead to rate fatigue. Instead, we strategically assess the best timing for making those filings.

Got it. I have a more strategic question. We have observed several years in this industry involving regulated companies, including today's announcement of M&A activity, where companies can reduce costs through mergers and acquisitions. These savings eventually benefit customers through the rate case process over time, enhancing company efficiency. I'm interested in your thoughts on the M&A landscape once you receive the FES results, which seem imminent, and what role FirstEnergy will play in that context.

We’re a result of three types of events. I am proud to say that when we compare our O&M costs across all our utilities, they perform very well against our competitors. I believe the synergies from those transactions have contributed to this. As a result, we have some of the lowest rates in the states we serve, which benefits our customers. However, I am cautious about M&A activities today due to the high costs and challenges in regulatory processes, which can hinder our ability to provide dividends to customers in the short term. We have positioned ourselves with 6 million customers across five states, and I believe that a growth rate of 6% to 8% along with a suitable dividend policy will create a positive story for our investors in the long run.

Got it. Thank you, Chuck. Much appreciated, guys.

Okay. Well, thank you for your questions and your time and thank you as always for your support. I think this was an important call for us as we move forward, and we'll talk to you in next quarter.