Firstenergy Corp (FE) — Q1 2019 Earnings Call Transcript

Thanks, Brenda. Welcome to our 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 the 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 Q&A session. Before I turn the call over to Chuck, I’ll note that we updated our investor materials with the goal of making it easier for you to find the information you need on our website. Our former consolidated report has been merged into our quarterly earnings package with additional materials provided in our fact book. As always, we welcome your feedback on these changes. Now, I’ll turn the call over to Chuck.

Thanks, Irene. Good morning, everyone, and thanks for joining us. We're off to a very good start in 2019. Last night, we reported GAAP earnings of $0.59 per share along with operating earnings of $0.67 per share, which is above the midpoint of our guidance range. Steve will discuss later; our results reflect the continued success of our regulated growth strategies. Let's begin with an update on our progress so far this year. In our transmission business, we're on pace to implement a plan to invest $1.2 billion in our Energizing the Future program in 2019, with most of that work in our ATSI and MAIT service territories in Ohio and Pennsylvania. Just a reminder, energizing the future is a multi-year program to improve the reliability, resiliency and security of FirstEnergy’s portion of the bulk electric system that is shared by our entire nation. It’s working. Just one example is that we have reduced transmission outages due to equipment failures on our ATSI system during the first four years of the program by 37%. And while we are still finalizing year 5 results, it looks like that will increase to eliminating more than half of the equipment-related outages in ATSI. We expect similar results moving forward. We currently have about 1000 projects underway in stages ranging from engineering and project development to project management and construction. To support our Energizing the Future initiative, this month we opened our center for advanced energy technology or KATE in Akron. This 88,000 square foot facility is one of the most comprehensive grid technology testing and training centers of its kind in the country. We designed it to be a centralized hands-on environment where our engineers and technicians can develop and evaluate new technologies and grid solutions and simulate a variety of real-world conditions. In addition to supporting our grid modernization program, KATE also creates opportunities for us to advance best practices across the industry. We hope to collaborate with peer utilities, research institutes, and key stakeholders such as device manufacturers, who could potentially utilize our state-of-the-art facility. Turning to our distribution business, as we mentioned last quarter, our Ohio Utilities filed a request with the Public Utilities Commission in early February for a two-year extension to the distribution modernization rider. Again, while we believe we have a strong case to continue this rider, I will remind you that it is not factored into our current earnings growth projections. Also in Ohio, our supplemental settlement regarding tax reform and grid modernization is pending with the PUCO. This proposed settlement addresses how customers will benefit from savings associated with federal tax reform and seeks approval for the initial phase of our grid modernization program with investments of $516 million over three years. In New Jersey, we were very pleased to reach a settlement yesterday with the staff of the Board of Public Utilities, the division of Rate Council, and the New Jersey large energy users coalition for our infrastructure investment program. Our JCP&L Reliability Plus program builds on the service enhancements we have made in our New Jersey footprint in recent years with an additional $97 million investment. Through this program, we plan to implement more than 1400 targeted projects to enhance the reliability and resiliency of overhead power lines, replace existing equipment with smart technology devices, and expand the vegetation management program to reduce tree-related outages. On final approval from the BPU, the work will take place between June 1, 2019 and December 31, 2020. Once the projects are complete, customers will experience fewer sustained outages under normal conditions as well as a reduction in outage duration. While there was a difference between our original IIP request and the settlement amount, we have plenty of opportunities to make those capital investments in other parts of our system, both in distribution and transmission. We will also contemplate filing a subsequent IIP in New Jersey, to continue our investments there beyond 2020. In Maryland, the Public Service Commission issued a final order in our Potomac Edison rate case on March 22nd. The order fully resolved tax reform in Maryland, calls for a final bill credit to customers to return prior period tax savings, and allows Potomac Edison to increase base distribution rates by $6.2 million net of tax reform, to invest in safety and reliability enhancements. In addition, the Public Service Commission approved a four-year Electric Distribution and infrastructure surcharge rider. That program will be used to recover incremental costs related to three reliability programs, which include installing more distribution automation equipment, accelerating an underground cable replacement program, and utilizing new substation rate closers that can minimize the number of customers impacted by service interruptions. Potomac Edison is required to file another distribution rate case at the end of the surcharge period. In January, the Public Service Commission also approved Potomac Edison’s five-year $12 million pilot program to install electric vehicle charging stations in Maryland and offer rebates for charger installations. As part of the program, Potomac Edison plans to install 59 public charging stations at locations across our Maryland service territory, including nine fast chargers. Residential customers will be eligible for rebates for the installation of EV charging stations at their homes, and rebates will also be available for charging stations installed at multi-family properties. We're proud to support Maryland's efforts to encourage the adoption of electric vehicles, which is an important step for a cleaner, healthier environment. We see projects like this as a natural fit for FirstEnergy as we fulfill our mission to become a forward-looking utility committed to making our customers' lives brighter, the environment better, and our communities stronger. Our environmental and social governance strategy is built on the pillars of our mission statement. In 2019, we are continuing our efforts to offer greater transparency and engagement with our ESG goals. Late this year, we will produce a new corporate responsibility report to examine our efforts on issues as wide ranging as diversity inclusion, our environmental footprint, corporate governance, and community support. This will complement our first climate report, which we published earlier this month. The Climate Report looks at how our strategies as a fully regulated utility are aligned with the emerging technology trends that support a lower carbon future and examines the business risks associated with a carbon-constrained economy. It also reviews our significant progress towards the carbon dioxide reduction goal we announced in 2015. We pledged to reduce CO2 emissions from our generating fleet by at least 90% below 2005 levels by the year 2045. At the end of 2018, we had already achieved a reduction of 62% with about three-quarters of that reduction related to plant retirements. We expect to reach a CO2 reduction of 80% later this year, well on our way to achieving our goal. I want to express our experience with plant decommissioning activities. Over the past 12 years, we safely and responsibly retired and remediated seven coal plants, and successfully anticipated the economic and environmental concerns for each site. This is just one of the ways in which we have demonstrated our commitment to corporate responsibility. It is a core value that we stand by at all times, and that includes during the FES bankruptcy. That is why a key component of our settlement agreement was our substantial support for FES to both emerge from bankruptcy and meet any legacy and future obligations. This includes all environmental responsibilities that could occur when the plants are eventually retired. Following the judge's decision on the FES bankruptcy earlier this month, FES committed to engage with the Department of Justice and other concerned parties. In light of the commitment by FES, our previous assessment of the obligations and the surety and funding that is already in place. We see no increased risk to removing the broad third-party releases from the comprehensive settlement. While these releases would have served to bring finality to FirstEnergy's involvement with these legacy assets, removing them does not, in our assessment and experience, increase liabilities or obligations to our company. We are pleased that FES has submitted a revised disclosure statement and believe they will continue to work constructively with all parties to ensure both timely approval of their plan and their bankruptcy exit. At the same time, we will remain focused on delivering clean, safe, reliable, and affordable electricity to our 6 million customers with a commitment to environmental stewardship, corporate responsibility, and implementing our regulated growth strategy. We are affirming our 2019 full-year operating earnings guidance of $2.45 to $2.75 per fully diluted share, including this year's DMR. In addition, we are introducing a second-quarter operating earnings guidance range of $0.55 to $0.65 per share and affirming our long-term compound annual operating earnings growth projection of 6% to 8% from 2018 through 2021. Thank you. Now I'll turn the call over to Steve for a review of the first quarter and other financial developments.

Good morning everyone. It's my pleasure to join you today. As usual, I'll begin with a couple of reminders. First, reconciliations and other detailed information about the quarter are available on our website in the strategic and financial highlights documents. Also, we continue to present operating results and projections on a fully diluted basis. This provides the best comparative view of our performance. With that, let's take a look at our results. First quarter GAAP earnings were $0.59 per share. Operating earnings were $0.67 per share. As Chuck mentioned, this is above the midpoint of our guidance. In our distribution business, our results benefited from higher weather-adjusted residential load, and lower interest expense related to debt refinancing. I'll spend more time on that topic in just a few minutes. These factors were offset by higher depreciation expense related to our rate base. Total distribution deliveries were essentially flat compared to the first quarter of 2018, with a slight increase on a weather-adjusted basis. Heating degree days were close to normal for the quarter and comparable to the first quarter of 2018. Residential sales were a bright spot for us this quarter. Sales increased about 1% on a natural basis; when adjusted for weather, the increase was almost 3% with growth in both customer counts and average usage. The upturn in weather-adjusted residential sales over the past 12 months is an encouraging sign. In the commercial customer class, sales increased about 1.5% on a national basis and about 1% when adjusted for weather. In our industrial class, load was flat, marking the end of a long 10-quarter run of growth in that segment. The results reflect lower demand from steel and automotive manufacturers, which offset continued growth in the shale and chemical industries. Turning to our transmission business, earnings increased as a result of higher rate base, which reflects our continued investment in the Energizing the Future initiative. This was partially offset by higher operating expenses at our stated rate transmission companies. And finally, in our corporate segment, first quarter results reflected higher net financing costs in the absence of commodity margin from the Pleasants Power Station. As a reminder, we began to exclude Pleasants from our operating earnings in mid-2018 due to the court-approved settlement that transfers economic interests of the plant to FES. These factors were partially offset by a lower effective tax rate. Touching on the underlying strengths of our distribution and transmission companies, we have recently seen positive credit ratings actions for several of our subsidiaries. Near the end of March, Moody's issued one notch upgrades to ATSI, MAIT and JCP&L. And last week, Fitch issued one notch upgrades to JCP&L, Manpower, Potomac Edison, and Allegheny Energy Generation Company. We believe these positive actions are a testament to our overall improved risk profile and we expect to see continued positive momentum. Before I close, I'll take a moment to review our financing activities this year. At our utilities, we refinanced $300 million of maturing debt at both JCP&L and MAIT during the quarter. We issued new senior notes totaling $900 million to repay borrowings and fund capital expenditures at these utilities. We also issued $500 million of new debt at FirstEnergy Transmission and $100 million at ATSI, primarily to repay short-term borrowings and fund continued investments in our Energizing the Future program. Lastly, from a liquidity perspective, as of Friday, April 19, we had approximately $3.7 billion of liquidity, of which $200 million was cash. Thank you for your time. We had a very solid quarter, and we're off to a great start this year. Now let's take your questions.

Hey, good morning guys. Good quarter. Thank you.

Hi Greg.

Can you talk a little bit about the settlement in New Jersey? I think you guys had asked for approximately $400 million of Electric Infrastructure investment over four years. I think you settled on $100 million over two years. How did we get to that deal, and do you think that's adequate to provide the safe and reliable power to those customers, and how does that proceed after that?

So first of all, from our perspective, Greg, we're very happy with this settlement. It's now the second time we've been able to reach a settlement in New Jersey with the main parties that influence our ability to do our business over there. Very happy with the settlement. To put it in perspective, it's $97 million over an 18-month period, which begins in June of this year and ends at the end of 2020. So just to give you a little perspective, where we talk in Ohio about $516 million over three years, let's double the number of customers. So if you have that, it's $258 million, and it's double the number of years, three versus one and a half. So if you have it again, it's $129 million. So we're spending $97 million in New Jersey versus $129 million in Ohio on an apples-to-apples basis. It's a good start, and we're very happy with it. And I believe if we execute to perfection and we deliver the results that we intend to deliver in New Jersey, we won't have any problem negotiating an addition to this that goes beyond 2020.

Great. Thanks for the perspective. Second question. When I look at the new agreement that you've made to move forward with the disclosure statement that FES bankruptcy approved and get this thing done. What's the critical path now for the FES bankruptcy to be fully and completely resolved, voted on, and for them to exit? Is it that we're waiting for the nuclear license transfers or is it some other issue? And what's your best guess as to sort of the timing window for when this is wrapped up?

Well, with the caveat that I am not the CEO of FES and FEG, I would suggest that I think the nuclear license transfer is probably on the critical path. Now that we've kind of moved forward beyond the court ruling I believe, with regard to these non-consensual third party releases. Let me just comment on that a little bit more. I would say that caught us by surprise with the focus of the court being solely on the releases and not on the actual settlement, because we believed in the actual settlement that we have provided substantial value to make sure that FES can emerge, operate these assets, and deal with any retirement obligations when those come down the road. So we felt like the non-consensual releases weren't a big deal because of the substantial settlement that was on the table. But since the focus is on those, we decided to remove those and move forward. So now the next step in the process is for the court to approve the disclosure statements and allow the process to continue moving forward. We're hopeful that will happen on May 20th, and then they will continue to make their case for emergence, and we expect that to happen sometime later this summer. And then the license transfers would be on the critical path if it all flows that way.

Okay. So later this summer would be great, August or September. Appreciate the color. Thank you.

I think it's later in the year than that, Greg. It’s probably November or October with the transfer.

Got you. October, November. Thank you for being clear. Have a great day.

Okay.

Hey, good morning.

Hi, Julien.

Thank you for taking the question. So maybe just to start where Greg just left off. Might be a tad detailed, but just could you give us a little bit of a sense? Obviously, you've posted a surety bond already specifically against some of the assets here and one of the larger coal-fired assets. Can you talk about where that number came from just to firm it up in terms of how that relates to the obligations that you think about? Because obviously that came from somewhere. So I just want to try to be a little bit more confident out there.

Well, first of all, those surety bonds have been in place for quite a while now, all the way back to the beginning of our negotiations with FES. They arrived at because we have already begun the process, for example, with Little Blue Run at the Mansfield plant of closing it in steps part by part every year. So we've got a good track record of what the costs to do that are, and the surety bond is to ensure that there is a surety for those costs, should we at some point not decide to do it, but we're not going to do that. And I want to say very clearly what I said in my prepared remarks: we are going to stand behind any environmental commitment that we have if we sell a power plant. We're still in that chain of ownership at some point if the new owners would default. But the other thing I want to say very clearly is we're not afraid of that, because we've shut down, retired, remediated, torn down and turned over sites in some cases for seven coal-fired power plants already. The cost and the benefit that you get out of the scrap, steel, iron, copper, aluminum, the property value, etc. This is not any big deal for FirstEnergy. And so, we’re to move forward fine. But as I said before I want to repeat, we provided substantial benefits to FES that they're going to have the ability to take care of this on their own.

Excellent. Thanks for the clarity there. If I can, briefly here on credit overall, obviously that's tied to this process. How do you think about that continued added latitude on new metrics as it stands today, given the timeline you just talked to Greg about if you don’t mind?

Well, I think if you've been watching, we've seen nothing but positive credit rating actions for several of our subsidiaries. Near the end of March, Moody's issued one notch upgrades to ATSI, MAIT, and JCP&L. And last week, Fitch issued one notch upgrades to JCP&L, Manpower, Potomac Edison, and Allegheny Energy Generation Company. We believe these positive actions are a testament to our overall improved risk profile, and we expect to see continued positive momentum.

Do you think it’s more than a percent or so versus the debt latitude as it stands today?

Yes. Julien, and this is Steve. At the end of the day, the rating agencies are viewing this year as a year of transition for us. Okay? So upon emergence of FES, we will be responsible for putting forward the $225 million payment and issuing the tax note of $628 million for 2022. So I think they understand it’s transitional. Once again, we believe that beyond that we’ll be at our 12% FFO to debt ratio going forward, and that’s the expectation we have. We don’t see those baseline expectations changing. As Chuck said, we’re working very closely with all three agencies to ensure they’re fully aware of where we’re at. All the positive movements have been great so far. We want them to do their jobs and further consider. And I know they are cognizant that our risk profile is lowering at every point in this process as FES gets through their bankruptcy.

Excellent. I’ll leave it there. Thank you very much.

Thanks, Julien.

Good morning. And I think a couple of my questions were just asked, but I’d like just on the FES and the release change. Is there any accounting implication of that? Any AROs that you’d have to recognize that you wouldn't have had to recognize with the releases? Just wanted to tie up any loose ends there?

I’m sitting here watching my chief accountant say no.

Thanks so much. Hi, guys.

Good morning.

So, unfortunately I will also ask a little bit on this FES and the environmental side. If you could dimension for us and given all the experience you’ve had and clearly the risk seems low here, and you clearly helped FES kind of stand on their own in terms of remediation. But just to understand what is the risk, like if there is a look-back period on the environmental side, what are the factors that could kind of increase the liability from an FES perspective that could slow up to FE?

Well, I think it’s pretty simple actually, Praful. FES would have to go bankrupt a second time without having dealt with these environmental legacy issues that would then, if they fall to FirstEnergy, we will deal with them. But as I said earlier, we’ve already experienced what that means from an economic and environmental perspective to take these plants down, return the land to a greenfield status, and move forward and get it certified that way by the state EPAs that have jurisdiction over these sites. So there's just not that much risk. The value of the scrap and the value of the property offset, and there's a cottage industry that has developed as a result of the number of power plants closing around this country to take these plants off their hands. They actually offer to pay you in some cases for the opportunity to deal with this legacy issue on your behalf, so it's just not something we’re concerned about.

Got you. Again, very helpful color. But just to clarify, how good can that environmental cost be? Is there coal ash? If they were like what can that number be before you get to the remediation and then obviously this scrap benefits. But is there a ballpark number that we can think about as a potential liability if FES does go bankrupt the second time?

With regard to any coal ash liabilities, the surety bonds that are in place already protect us on that front. So there aren’t any beyond that that we’re worried about. And as I said, the economics are such that there’s nothing I’m worried about in terms of ongoing financial obligations to our company that of what you get out of the scrap and the property.

Got you. Again, super helpful color. Maybe a final question just on the DMR. In terms of the timing of a decision, is there any clarity on when a decision will come on the potential extension of the DMR?

No timing. We’ve asked for them to get moving and potentially have hearings as early as August. Obviously, the existing DMR expires at the end of this year. So, we would push hard for any answer sometime this year. So, we know what the impacts are going to be next year.

Understood. Again, thank you so much.

Okay. Thank you.

Hey, guys. Good morning.

Okay. Hi, James, how are you?

Good. I just had a quick follow-on question to Greg’s question regarding New Jersey. I know you’ve mentioned in the past that you’ve had conversations regarding EVM's restructure, and then we also just saw one of your neighbors propose a very large EE program. And I was wondering if we did see anything on either of these fronts in the near term? And then, would that be an addition to a 2021 IIP or is the bandwidth kind of limited there?

I don’t think there's anything ongoing there right now, James. We were focused on getting a settlement on the IIP through 2020. And what we plan to spend that $97 million on does not include anything to do with EV or what I said in my remarks. It’s improving the real-time reliability to customers. And beyond that, what we plan, what we would look at beyond 2020 we haven't even started to focus on that yet.

Okay. So, no conversations really on the EV at this point?

Not really.

Okay. Thanks.

Good morning. I had another follow-up on the New Jersey settlement. Could you give us a sense of your regulatory strategy going forward there? You mentioned filing another IIP in a year or two. Why would you maybe choose that route versus going in for a full general rate case, given I think you are under-earning in the state?

Let me just summarize our regulatory strategy overall, because I think it's the same everywhere. When we believe it's time for another base rate case, we will have a base rate case, and that's whether it's New Jersey, Pennsylvania, Maryland, West Virginia, or Ohio. Our rates are frozen for at least five more years. So we would have a base rate case whenever that makes more sense than using the IIP or using the DISC in Pennsylvania. We’re going to look at that and evaluate it at all times. I don't see any meaningful base rate cases in 2019. And then, we’ll evaluate, and we’ll let you know what we see is the plan for 2020 when we get out to 2020.

Okay. But for now, the kind of earned ROE trajectory there, plus your earnings from this settlement and the investment that comes from that are sufficient in your view?

Yes.

Okay. And then my second question is on holdco financing strategy. I think on the last call you said the holding company would be around 35% to 37% of consolidated debt this year. Can you just give us some flavor as to that amount? How much of it is kind of long-term debt, short-term debt, term loans? And how much of that separately might be variable rates?

Yes. I'll let Steve Strah answer that in detail. But I would just say that's the level we're going to be at for the foreseeable future. And I continue to believe that as we get more financial flexibility as a company, we're better off investing and serving our customers better and indirectly creating growth for our shareholders as opposed to retiring this debt. It's better and makes more economic sense, I think, for everyone involved. But I'll let Steve take you through the details of what constitutes that corporate debt.

Sure. So, in terms of the composition of our holding company debt at FE Corp., we have $1.75 billion in term loans. That's our most cost-effective debt on an after-tax basis; that's right around 2.5%. Then we have $5.35 billion in bonds that, on an after-tax basis, is anywhere from 3% to 3.5%. And then, we have the $628 million tax note yet to be issued once FES emerges we will issue that note, and that will be outstanding until the end of 2022. In terms of financing activity, I suspect that at some point in time over the next 12 months we will most likely go out into the bond markets and refinance the term loan position and potentially do some liability management on some of the bonds that mature in 2022 and 2023. So you could see a sizable bond deal at some point in time with FE Corp over the next, let's say, 12 months. And as Chuck said, our holding company debt is going to be around the mid-30s, 35% to 37% for the foreseeable future, and that's where we're going to be.

That's helpful. And fixed versus variable rate is kind of embedded within that answer with the term loans being the variable component?

That is correct. The term loans are the only variable debt that we have.

Okay. Thank you, guys, for the color.

Hey, guys. Thanks for taking my question. And congrats on a good start to the year. I have two, both a little bit on the regulatory side, obviously at the distribution business. First of all, West Virginia, how are you thinking, Chuck, about a multi-year goal in terms of potential rate base growth reemerging or reigniting in West Virginia in the coming years? Meaning, how do you think about what the opportunity set for investment in that state is? That's my first question.

Well, first of all, thank you for asking regulated questions. It's nice to be able to answer those instead of FES questions. But with West Virginia, here's what I'll say. We don't have any long-term strategy for West Virginia. We had in place a tree trimming strategy in particular because we had a number of storms dating back to the derecho back in 2013. I think that showed that we had some exposure there. But beyond that, West Virginia is in a business-as-usual mode. We’re spending money every year. We're seeing some growth in West Virginia as a result of being a fully regulated state. Industrial growth in the shale and chemical sector, as well as in the northeastern part of West Virginia and our Potomac Edison West Virginia territory, we're seeing some growth. That's offsetting our costs. When we get to the point there where we think we need to have a rate case, we'll have a rate case. But right now, we just don't see any need to, and I don't have any long-term strategy because I think we're performing okay, and there's nothing that needs immediate attention in West Virginia. With regard to Pennsylvania, we've made a concerted effort to improve our disclosures, and I think that means you all are going to be talking to Irene quite a bit. But I don't think we want to get into details about rates of return and so forth on this call. So I'm just going to encourage you to talk with her offline about it. But I will point out that in Pennsylvania, as of the first of this year the DISC is turned on in all four of our operating companies in Pennsylvania. We cannot turn that DISC on unless we're underneath the threshold for allowed rate of return as the commission looks at it. So I think we're in good shape. We're using the DISC at all four companies, and I think we ought to take it offline to talk about the details, because as we get more and more transparent, it's going to create a lot of questions that we just don't have time for on an earnings call.

Got it. Thank you, Chuck.

Good morning, everyone. Chuck, I was going to congratulate you guys and the IRR team in particular for the new slide deck. I like the look of it. Two questions for you guys though both regulated, so don't worry about that. First one is, I know you haven't updated the CapEx outlook in a little while, but given the DPM and JCP&L Reliability Plus settlements, should we expect results to trend towards the higher end of the ranges? Or is it more a function of improved visibility into recovery with less or no lag?

Well, I think in what we’ve said as far as our going forward 6% to 8% growth plan, we've said that the CapEx program, in general, is going to be in the $2.6 billion to $2.9 billion range combined T&D throughout that planning period, and I expect it continues to keep it in that range. That range contemplated the IIP in New Jersey and had contemplated where we were at with the grid modernizations in Ohio. And we provided a range there to allow for some movement in all of what we do. You can't plan down to the dollar on a $2.9 billion capital spend. But I think you can count on it being in that range throughout the planning period and probably likely beyond the planning period.

Should I take that as a no comment on high end versus middle versus low end?

There are many variables at play, so it will be what it is. We anticipate being able to manage the capital costs associated with storms within that range. A significant storm could push us to the higher end, while a minor storm would have the opposite effect. There are so many factors to consider that I’m not trying to evade your question; I simply don’t have a definitive answer, which is why we will provide a range.

Okay. Understood and fair enough. Next one I have is a little bit different direction than some of these other questions. Three of your largest states are at least contemplating some sort of ZEC programs for nukes. I know you don't have any plans for rate cases in the near term, as you talked about. But do you worry about affordability impacts on rates on these programs? And how do you balance the trade-off of reliability versus cost especially now that you're out of the generation business?

I don't worry about it at all, because I think these states that are stepping up to protect their nuclear plants are ensuring long-term rate stability for their residents and their customers in those states. And it’s providing a hedge against the most high beta fuel that we've ever had in this industry, which is natural gas. It's providing a surety that they have ample supplies of electricity during the most strained times of year in frigid climates where natural gas cannot meet all of its obligations. So, I think it's providing a clear example with the bill that's pending here in Ohio, which is $2.50 per month on a residential customer bill. To offer that security, we all buy insurance for our homes, cars, and various other things. It serves as a very cost-effective insurance policy that these states are adopting, and it delivers long-term economic and clean air benefits as well. So, I think these states are smart, and I'm on record and I'll continue to say, as long as I have this role, these states are making up for failed market policies that are not working correctly. When you form a market on nothing but a least-cost, marginal cost, it's not going to ever take care of the fixed costs of these important assets. So I think the states are all doing the right things.

That's very clear. Thank you very much.

Thank you. I will go back to FES. So just taking a step back, I understand the whole explanation about the limited as any liabilities, but you did try to have this release included in the FES Settlement. So there must have been a reason why you wanted to have it there.

Well, Angie, I said in my prepared remarks, it was in there to try to create some finality, which is I think important in everybody's minds as FES exits. That is much finality as we could create we created. And that's why it was in there. Never expecting it to be the focus that it became during the bankruptcy process and the focus it became with the Justice Department. So, we believed that it could be in there because the substantial settlement that we've worked out with FES provides for taking care of these obligations over the long term and provides for their ability to exit, operate, and then eventually deal with any plant closure costs that come their way. So we just didn't see it as a big deal one way or another, but it was in there to try to provide finality. But once it became a speed bump, we have no issue with removing it.

Okay. And then on Ohio DMR, are you engaged in negotiations? Is there any range of possibilities that you would consider? I mean, what is the pitch at this point in the sense? Are you're trying to say that your investment level in Ohio will increase commensurate? So that's basically humping $33 million in extended DMR. I mean, what can you give us here? What’s the bid and ask spread is currently?

Well, as I've said, we have nothing built into our forecast going forward for DMR. We've asked for the current level to be extended for two years, which is what the original filing gave us the ability to do the bid ask, and I guess it’s anywhere from zero to the current levels. Our approach is that it has driven what the commission was trying to do, which is stimulate investment in our Ohio utilities in grid modernization efforts that will hopefully then be built upon with approval of our grid modernization program once the commission gets back to a full business schedule. Unfortunately, we had a change in chairs, and it's taking a while for them to get the train back on the tracks and moving forward there. But I expect we'll get approval of the grid modernization program and build upon it. So the basic premise for why we are saying it should be extended is to continue to stimulate the things that the commission was trying to do in the first place.

Okay. Thank you.

Thank you.