Firstenergy Corp (FE) — Q1 2025 Earnings Call Transcript

Good morning, everyone, and welcome to FirstEnergy's First Quarter 2025 Earnings Review. Our Chair, President, and Chief Executive Officer Brian Tierney will lead our call today. He will be joined by Jon Taylor, our Senior Vice President and Chief Financial Officer. Our earnings release, presentation slides, and related financial information are available on our website at FirstEnergyCorp.com/IR. Today's discussion will include the use of non-GAAP financial measures and forward-looking statements, which are subject to risks and uncertainties. Factors discussed in our earnings news release, during today's conference call, and in our SEC filings could cause our actual results to differ materially from these forward-looking statements. The appendix of today's presentation includes supplemental information along with reconciliation of non-GAAP financial measures. Please read our cautionary statement and discussion of non-GAAP financial measures on Slides two and three of the presentation. Now it's my pleasure to turn the call over to Brian.

Good morning, everyone. Thank you for joining us today and for your interest in FirstEnergy. We're off to a strong start this year, with results that reflect solid execution on our regulated strategies, robust capital investments, and financial discipline. We're on track to meet our 2025 core earnings guidance we provided in the fourth quarter call. Today, we will review our financial performance and highlights for the quarter, provide updates on regulatory and legislative matters, detail some growth opportunities, and review the value proposition we offer to shareholders. For February, the company delivered GAAP earnings of 62 cents per share, compared to 44 cents per share in 2024. Core earnings for the first quarter of this year were 67 cents per share, a significant improvement over 49 cents in the first quarter of last year. Core earnings benefited from execution across our regulated businesses, including the impact of base rate cases that were approved last year in Pennsylvania, West Virginia, and New Jersey, as well as a return to more normal weather for the first quarter of this year. In addition, the team did a nice job of managing operating expenses in the first quarter. Operations and maintenance are in line with our plan, slightly lower than last year, and leadership continues to pursue further cost reductions. Consistent with our plan, we implemented organizational design changes in the first quarter aimed at creating a more sustainable and efficient operating structure that moves management and decision-making closer to our customers, employees, and regulators. These changes, which allowed us to reduce headcount, involve flattening layers of management, consolidating functions, and better aligning work across the company. We are focused on becoming an agile and effective organization with continuous improvement as a part of our DNA going forward. Jon will provide more details later in the call. Our investment program is on track, and we are making a positive impact on system reliability and resiliency. In the first quarter, we invested more than a billion dollars in our system through our Energize 365 capital program. This is an increase of 15% compared to last year. We remain confident in our plan to deploy $5 billion of customer-focused investments this year, an 11% increase compared to 2024, as well as the $28 billion of investments in our plan through 2029. We are pleased to make these investments that will deliver value and reliability improvements to our customers. Our refreshed and experienced leadership team is now in place, and they are bringing new energy to the company. Together, we are committed to executing our strategies, meeting our commitments, and making FirstEnergy a premier electric company. Reflecting our confidence, last month, the board approved a 4.7% increase in our quarterly dividend. Subject to continued board approval, the new quarterly payment of 44.5 cents per share equates to an annual rate of $1.78 per share. This represents an increase of 11% in annual declared dividends since 2023. Moving to slide six, I'll discuss current regulatory and legislative activity. First, in Ohio, we are pleased that our base rate case is progressing. Last month, our Ohio companies and various interveners filed responses to the independent audit report that was published in late February, and public hearings were held earlier this month. We initiated settlement discussions in the base rate case and hope to continue those through the pendency of the case. Hearings are scheduled to begin on May 5, and we look forward to the case proceeding expeditiously. On the legislative front, there has been a tremendous amount of activity in Ohio with House Bill 15 and Senate Bill 2. We expect legislation to be sent to the governor in the May or June timeframe that will provide a transparent and predictable regulatory structure for Ohio utilities. Key provisions of the house incentive bills include establishing multi-year rate plans with forward test years, which we view as constructive. We have been in active discussions with the governor, legislators, and other policymakers to offer perspective on certain aspects of the legislation. As it makes its way to being a final bill, our focus is on ensuring a reasonable transition to the new regulatory framework. In New Jersey, we recently reached a settlement in our infrastructure investment program Energize New Jersey, which was approved by the BPU yesterday. The plan includes investments of $335 million over three and a half years, of which approximately $202 million have formula grade treatment. It includes capital investments in grid modernization, system resiliency, and substation modernization work. Work that is designed to upgrade JCP&L's distribution grid in targeted neighborhoods with an expansion of smart grid technology. We are pleased to move forward with these investments which are included in our capital plan. Turning to slide seven, there are a number of opportunities for continued growth in our regulated footprint. In West Virginia, we are preparing our integrated resource plan which is due by the end of this year. The IRP covers a ten-year period and includes new load forecasts for the state, as well as our proposals to address West Virginia's future generation needs. As we prepare for this filing, we continue exploring options to build new dispatchable generation in the state which would allow for expanded growth and economic development. West Virginia's fully integrated regulatory framework provides it with a competitive advantage for economic development and a path for investment in new dispatchable generation. Under the existing regulatory framework, we would be prepared to make these investments to meet West Virginia's economic development aspirations. As I discussed in our last call, we remain excited about the data center development we are seeing across our footprint. Our plan through 2029 includes 2.6 gigawatts of data center demand that is active or contracted, with more in the project pipeline that would be incremental to our base plan. Earlier this month, Meta announced an investment of more than $800 million to build their new Bowling Green data center in our Toledo Edison service territory, which is expected to come online by the end of the year. This data center will be optimized for Meta's AI workloads. The transmission capital expenditure associated with this facility is included in the current capital plan. In the first quarter of this year, we received 15 large load study requests for data centers representing approximately nine gigawatts of load. Eleven of these studies are for locations in Pennsylvania and Ohio. We have not experienced any slowdown of data center interest in our service territory. We are also excited about the significant growth opportunities for transmission investment. In February, the PJM board approved approximately $3 billion of investment for the ValleyLink joint venture between FirstEnergy, AEP, and Dominion. We believe this innovative collaboration will enhance our competitiveness in future open windows. Our investment in ValleyLink, which will be owned by FirstEnergy Transmission, recently filed for a forward-looking transmission rate at FERC requesting a 10.9% base return on equity with a 50 basis point incentive and a capital structure targeting 60% equity. The ValleyLink investment, when combined with another $300 million recently approved for FirstEnergy subsidiaries, represents a new total company investment opportunity of approximately $800 million. Turning to slide eight, today, we are reaffirming our 2025 core EPS guidance range of $2.40 to $2.60 per share, and we continue to target the top half of that range. This growth, when combined with our current dividend yield, represents a total annual shareholder return proposition of 10 to 12% with potential upside through price-to-earnings expansion. We are also reaffirming our 6% to 8% core earnings compound annual growth rate based on our $28 billion capital investment program through 2029. As you would expect in a fully regulated domestic business, our tariff exposure is minimal, representing less than two-tenths of a percent on our $28 billion capital investment program. Proactive management of our supply chain since COVID has resulted in a diversified supplier base with little exposure to single-source suppliers. In addition, the majority of our operations and maintenance expense is labor, which has no tariff exposure. We expect any meaningful increases in our capital expenditure program to be driven by increased investment opportunity rather than supply chain pricing. We are off to a good start in 2025, and we remain steadfast in delivering on our commitments with stable growth fueled by our strong organic investment program. I'm excited about the progress we are making to become a more efficient and customer-focused organization. We are committed to executing our strategy, delivering value, and driving results. With that, I will turn the call over to Jon.

Thanks, Brian, and good morning, everyone. We feel very good about the start to the year and our ability to deliver on our commitments with all of our key financial metrics through Q1 in line with or, in some cases, better than our plan. You can find more details on our results, including reconciliations for core earnings, in the strategic and financial highlights document we posted to the IR website yesterday afternoon. Looking at our first quarter results, core earnings of 67 cents a share is a 37% improvement from 49 cents a share in the first quarter of last year. Our solid results reflect strong top-line revenue growth and financial discipline as a result of the capital investments we are deploying on behalf of our customers. Our rates and investment strategy significantly impacted our Q1 results, mainly from updated base rates in Pennsylvania together with the full-year impact of new base rates in New Jersey and West Virginia, which went into effect during the middle to latter part of Q1 of last year. Additionally, as I'll speak to in a minute, we continue to see the benefits of our strong formula rate investment program, reflecting solid regulatory outcomes that not only contribute to meaningful customer-focused investments but also provide for solid regulated returns for our investors. This winter weather impacts were on balance consistent with our normal expectations. By contrast, 2024 temperatures were significantly milder than normal, with heating degree days 15% below normal. The return to a more typical winter in the first quarter of this year resulted in much stronger customer demand as compared to last year, with total customer demand increasing more than 4%, led by a 10% increase in the high-margin residential sector. On operating expenses, operations and maintenance were in line with our plan and three and a half percent lower than last year, largely due to our continuous improvement and cost-saving initiatives across the company. Turning to our segment results for the first quarter. In our distribution business, core earnings increased 10 cents a share, reflecting new rates in Pennsylvania and stronger customer demand. As a reminder, in December, new base rates in Pennsylvania were approved for a net annual increase of $225 million beginning in January, which includes the recovery of deferred costs and additional maintenance expenses. In our integrated segment, core earnings also increased 10 cents this year, resulting from approved base rates in New Jersey and West Virginia in Q1 of last year, strong rate base growth of 19% in formula rate transmission programs, higher customer demand, and lower operations and maintenance expenses. In the standalone transmission business, core earnings were 14 cents a share, compared to 18 cents a share in February. Rate base increased 10% year over year resulting from our Energize 365 investment program. But this was offset by the final quarter of dilution from the 30% interest sale of FirstEnergy Transmission to Brookfield, which closed in February. Finally, in our corporate segment, results improved 2 cents a share compared to the first quarter of 2024 due to lower financing costs associated with lower holding company long-term debt of approximately $760 million and lower average revolver borrowings of $450 million. Overall, we feel very good about execution against our plan, which resulted in an improvement in our consolidated return on equity of 40 basis points since Q4, up to 9.8% on a trailing twelve-month basis. Looking at the full year, we are reaffirming our 2025 core earnings guidance of $2.40 to $2.60 a share, and targeting the upper half of the range. Our $28 billion investment plan is on track with capital deployment of over $1 billion in the first quarter. This is 15% above last year with the majority of the increase in formula rate programs. Our investment program is funded with internally generated cash flow and utility debt issuances. As discussed on our Q4 call, we plan to issue approximately $3.6 billion of debt, of which $2 billion is new money to fund our capital programs. We completed the first of these transactions earlier this month, pricing $600 million of five-year senior unsecured notes for Trans Allegheny Interstate Line Company or Trail at a coupon of 5%, representing a hundred basis point spread to the five-year treasury rate. We continue to see strong investor demand for our debt offerings, reflecting the attractive profile of our fully regulated diversified business combined with our strong balance sheet. And on financial discipline, as Brian mentioned, the team is very focused on driving more efficiencies and cost reductions compared to our $1.365 billion base operations and maintenance plan for 2025. These opportunities include lower back-office spending through the use of existing and new technology, optimizing our maintenance costs through more targeted capital investments, and various supply chain initiatives. We are embedding this type of continuous improvement thinking into our culture and into the expectations of leaders across the organization. All of our leaders are highly engaged in ensuring that our operating costs support and enable the long-term objectives of the company. So to close out our prepared remarks, we're happy with the start to the year. With solid execution against our regulated strategies, our investment plan, with financial discipline, our earnings and financial performance across our key metrics are where we expect them to be, or even better. Our first quarter core EPS of 67 cents a share is aligned with our plan, and significantly stronger than last year. With over $1 billion in capital investments during the quarter, we're on track with our plan, and 15% above Q1 last year. Our base operations and maintenance of $340 million reflect strong financial performance and is in line with our plan, and first-quarter cash flow of $637 million is better than our plan and significantly better than our results from Q1 2024. This is the type of performance that supports our value proposition, including the total shareholder return opportunity that we are focused on delivering for our shareholders. Thank you for your time this morning. We are highly focused on delivering on our commitments to all of our stakeholders. Let's open the call to your Q&A.

Hi. Good morning. Thanks for taking my questions. Just wondering how you would characterize the settlement discussions in Ohio, with the hearing starting May 5, do you feel like you're close to reaching an agreement and what are the key areas that remain up for debate between the parties?

Thank you for the question, Michael. I characterize the settlement discussions as productive and constructive. We began them with a number of parties engaged. The key parties were engaged in the discussions. Those discussions will continue, and they're focused on the type of things that you would anticipate: capital structure, return on equity, and the like. So nothing that's unusual or surprising, and I think the parties came to the table interested in discussing settlement, hoping that we'd be able to get there. We're looking forward to the hearings beginning on May 5, and believe that will lead us to an expeditious outcome for the base rate case and look forward to continuing the settlement discussions through the case.

Great. Thank you. And then, you talked about a significant increase in large load studies since the last call. You know, and you highlighted no slowdown. The prior disclosure based on the data center pipeline was, you know, $350 million of incremental capital expenditure through '29. And beyond '29, you had highlighted $300 to $400 million of incremental spending opportunities. Just wondering, as we stand today, what would you say the upside is to these numbers?

Michael, I'd say it's about the same. So, you know, in terms of people seeing in other areas, data centers and hyperscalers and the like pulling back, we actually had the announcement from Meta of the Toledo data center that they specifically have said is associated with being ready for their AI complement. So people are not pulling back from our service territory but continuing forward. I would say there's no change to that long-term outlook for capital expenditure at this point.

Hey. Good morning, everyone. It's actually Alex on for Shar. Good morning, Alex. Good morning. So just wanna touch on the Ohio legislation. So you mentioned, you know, you expect the bill to be sent to the governor, in the May, June time frame. Obviously, a lot of positive momentum behind these bills, but do you see one bill being favored over another, or do you see the bills getting combined into one or more, as more of a likely scenario? Just sort of how should we be thinking about the overall process going forward? Thanks.

I can't say at this point, Shar. I think they are both moving forward. They've both been voted out of their respective chambers. And how leadership decides to handle that going forward, we still don't have any particular insight into. I think the key provisions of both bills that are of importance to us, things like the multi-year rate cases with forward-looking test years, are things that are in both. Our focus now is on moving from the current framework that we have that has base rate cases and EPS to the new framework that has the multi-year base rate cases with forward-looking test years, and trying to make that transition as smoothly as possible.

Great. Thanks. And just as a follow-up, you know, should the legislation pass as is and, you know, assuming you remain an ESP four, if the cap isn't unfrozen, how should we think about the timing of your next base rate case? Can you just talk about the different levers you can pull on to offset the potential impact of not having the cap lifted in the near term? Thanks.

Thank you for that, Alex. So there are a couple of things that could play out there. One is, of course, we would go back and try and seek to get the cap lifted. If that doesn't happen, we have opportunities to shift capital expenditure around both within Ohio and the other jurisdictions until we can get in for a new base rate case. I anticipate that we'd be going in for a new base rate case under the new framework as early as the beginning of 2026. We'd expect rates to be in effect for that as early as 2027. So a number of levers that we can pull between now and then; we're not giving up on the cap persisting in ESP four. But we have a number of levers to pull as we transition into that new framework.

Hey. Thanks for taking my questions. I just wanted to follow-up quickly. Good to see you guys moving forward towards settlement. Is there just any chance that you could deal with ESP in that discussion or is that gonna be more up to commission interpretation, you think, since we're still waiting on the legislation to be finalized? Was just trying to see if there's a window where we can get more clarity on ESP sooner than later.

Yeah. Nick, I don't think it would be in that base rate case settlement. As you know, we have a current active open case for ESP six. We would try and handle as much of the base rate case issues as we could in those settlement discussions. Then I think there are three other ways for things to play out around the ESP. One is if there would be legislation that would direct the commission to have a smooth transition. Two, if not that, we still think that legislatively, they would expect there to be a transition. Transition between the current framework and the next one, and we think the commission would pick up on that and try and make that transition as smoothly as possible. Then, as I discussed earlier in response to a question, if we're unsuccessful in those, I think there are opportunities for us to move capital expenditure around, both within Ohio and in other jurisdictions, and then get in as quickly as possible as we could for a new base rate case under the new framework. So a lot of levers for us to pull, and we'll be pulling all of those as timely as we can, and communicating the results of that to the investment community as quickly as possible. At the end result, on all this, Nick, we're looking at investment between the end of our current base rate period of May 31st of last year and when we get new rates in effect. So if we have to go to a new base rate case under the new framework, there would be very little for the commission to review in time and magnitude and at the very worst, there would be an incremental, you know, fifteen months or so on the regulatory lag that we would face potentially on a reduced amount given the actions we could take.

Hi. Good morning.

Good morning, Jeremy. Maybe picking up on the last question if I could and appreciate the sensitive nature of it all. But is there any other color you could provide to frame, I guess, what you'd be looking to solve for if things kind of progress, you know, legislation as it is right now versus the size of the levers you have? Just trying to get a sense of how, you know, manageable, easy or not easy it is to kinda work around what the you know, these items could be. Yeah. So remember, we're just talking about the investment that we've made and are going to make since February. So it's a limited universe in a limited time frame. We had made assumptions about what would happen with ESP six. We've now modified those, not anticipating that would go forward, assuming that we will be in ESP four, and we will be modifying how we do this going forward. So it's a modest and manageable amount of dollars in a modest and manageable amount of time.

Jeremy, I would say, I mean, we would be looking to move capital around. We have plenty of opportunities to do that. We have the Grid Mod two capital expenditure that we could accelerate into 2026. We have the PAL tip where we could, you know, move some of the Ohio base capital into that capital expenditure program. We have opportunities in Maryland and West Virginia with transmission capital expenditure. So we have a lot of opportunities to redeploy capital if and when we need to do that. If you go back and look at the history of what we've done over the last two years with our capital program, I mean, we've moved a couple $300 million of capital around in a given year. So that's not something that we're overly concerned about at this point in time.

As we're talking to legislators and policymakers in Ohio, we see there is a strong desire to move from the current framework to the new framework. We're not seeing a signal from them that they don't want investment in Ohio. And that lends itself to a smooth transition either through raising the caps in the ESP four or some mechanism. The signals we aren't getting is not don't invest in Ohio. It's we're changing how we're doing regulation in Ohio, and we've heard from everyone that we that they expect a smooth transition.

Hey. Thanks so much. Good morning. I was wondering if you could give a perspective on New Jersey and the recent commission efforts to look at cost efficiencies. The affordability considerations there. Wondering your latest perspective on what strategy might be possible to address any affordability concerns in the state?

David, are you referring specifically to the PJM capacity auction?

That seems to be the driving factor behind what looked like a, you know, a specific effort from the New Jersey Commission to look for cost efficiencies among the utilities. But, yeah, think stemming from the increase in the capacity auction pricing.

So look. I think commissions, as well as FirstEnergy, are very concerned about the coming price increases associated with the capacity auction. It would be one thing if the capacity auction pricing that we're facing was bringing new capacity, new dispatchable capacity to the market, and the customers were actually getting some value out of that. We don't see that as being the case. So we think that commissions and the company are going to do everything that we can to try and mitigate that impact on our customers. The commission yesterday in New Jersey asked us to go back and take a look with our in-state peers about how we could postpone the impact of those capacity auction price increases for the next four months. We're going to do that, and we're gonna be as constructive and productive as we can in trying to make that happen. These price increases are real, and they have a real impact on our customers, and we're so concerned about that. Again, if it was addressing the problem, we could be supportive. But it's not bringing new capacity to the market.

Hey, good morning. Thanks so much for taking the questions. Maybe to start, just as you think about the current macro environment, and potential for an economic slowdown, is there anything that you're seeing or hearing from your industrial customers in particular that you think could pose potential risk or is worth watching around that 2% low growth forecast that's embedded in the plan?

It's a great question, Carly. I was just watching on CNBC earlier today. Beth Hammack from the Cleveland Fed talking about these issues. From a macro standpoint, she's saying, look, the tariffs add a fair amount of uncertainty to what's going on in the economy, and that makes it difficult for people to make incremental investments and know that those investments are gonna be either supported by tariffs or undercut by tariffs. So we're seeing that from a macro standpoint. Across our footprint, we're not seeing a huge impact yet. What we have seen is some steel manufacturers have been slowing some of their production related to automotive demand that has come down somewhat in the near term. And we're watching that. Would also remind you that industrial load is a much smaller portion of our margin than residential is. We have generally demand-type pricing on the industrial load. So we don't anticipate significant impact from an income standpoint in the near term associated with the near-term uncertainty that we're dealing with. But the quicker there's certainty from an investment cycle standpoint, I think the quicker we'll be able to see people make those investment decisions and get on with investing in their business, whatever the answer is from a tariff standpoint.

Carly, this is Jon. So I think we've laid out our base operations and maintenance plan for the year. We are targeting lower operations and maintenance performance relative to that target. We have teams in place and leadership in place that are driving towards a slightly lower number to give us flexibility around our operating costs. So that's what the team is working on, and that's what's gonna give us the flexibility as we think about targeting the upper half of the range.

Hi. Good morning.

Good morning, Bill. Just on West Virginia, can you just remind us what's in the plan, the base capital plan? And then what does the integrated resource plan represent, you know, I guess, there's a potential upside, and then how do you manage the affordability of some of the options that you may propose? Yeah. So there's a lot in play right now in West Virginia, Bill. What is in the current plan is current investment in transmission and distribution and investment for the current coal-fired power plants that we have, Fort Martin and Harrison. Just so people understand, and there were people misreported, not the investment community, but the general press misreported on my comments in the last call. When we put in place the investments for environmental compliance in those two plants, we had to put a terminal date on those plants when we made those investments and filings with the commission. For Fort Martin, that was 2035, and for Harrison, that was 2040. Investments in keeping those plants running through that period is in the current capital expenditure plan. What would be incremental to that would be the result of the integrated resource plan that we're putting together now and the parallel plans that we would put in place to add combined cycle generation for the state. The range of what that could be in the scenarios is very wide. So my proposal would be to start with a combined cycle that would be about a thousand megawatts. That would be a billion plus dollars. Then as you firm up plans for what would happen from an environmental standpoint, from a cost standpoint, from a rate standpoint, you could firm up the plans as to what would happen with Fort Martin and Harrison. You could add incremental plans that look like the first combined cycle that we added going forward. I could see us adding between one and four combined cycles of about a thousand megawatts that could ultimately replace Fort Martin and Harrison or be incremental to them and bring incremental economic development to the state of West Virginia. It would just add the flexibility that West Virginia would have in an uncertain environment and allow them to attract things like data centers, transformer manufacturers, and the like who are desirous to site in West Virginia. So, Bill, the short answer to your question is the IRP is a formal process that allows us to propose updates to how we think about our generation needs going forward. The IRP broadens the conversation and helps us think about our long-term generation strategy. We're engaging with various stakeholders and working collaboratively to understand the needs of our customers and the state. While affordability is a main concern for us, we want to ensure we are creating a balanced approach to generation that meets our needs and delivers value to our customers. The onus will be on us to articulate that value proposition clearly, knowing that some may be more concerned about immediate costs versus long-term sustainability.

Hey. Thanks. Good morning, everybody. First, a question on Ohio. I know you can't get too specific on settlement talks, but my question is just on timing. I know hearings begin on May 5, and I know it'd be great to get a settlement done before that if possible. That's only ten, eleven days from now. My question is that the legislation is expected to be sent to the governor in the May, June time frame. Does one need to happen prior to the other? Does one depend on the other? And could a settlement happen before the legislation becomes official?

That's a good question, Andrew. I don't think those two things are gonna be related timing-wise. I think the new legislation will go forward on its own timeline, and the base rate case will go forward on its own timeline. I think the fact that the new legislation contemplates a base rate case and those are the issues that we're gonna be handling, in the hearing, in the adjudicated case if it goes that way, in settlement if it goes that way. I think would be fairly easy for those things to move forward on parallel paths. The timing of one doesn't have to impact the other.

Okay. Great. Next question is industrial sales trends. You talked a little bit about this earlier, but I noticed in the quarter, the industrial group was down 3%. And really, if I look back over the past several quarters, it's been a downward trend. Anything you can talk to either looking backward, or I'd also be interested in anything you've been seeing over the past few weeks since liberation day, obviously. It's been a little chaotic in general over the past few weeks, but any kind of trends you could point to overall would be very helpful. Thanks.

Andrew, just to clarify. The last two quarters have been impacted by the slowdown in the steel sector, as Brian mentioned earlier. We started to see that in the third quarter of last year. And so we're continuing to see that. That's kind of tied to the automotive sector. I mean, if you adjusted the year-over-year comparison for leap year, the extra day that '24 had in it, industrial sales are down about 1.6%. And that's primarily all steel. All the data centers that we had in our plan for 2025 are still on track, maybe a little bit delayed in terms of construction, and so some of that might push out a little bit, but they're still on track. They're still coming online. We anticipate some of the growth that we had anticipated in that industrial class to be more towards the back end of 2025.

To add to Jon's point, our industrial customers' demand remains steady overall, but the reality is that the steel sector is showing signs of weakness. However, as we look ahead, we are optimistic about the diversification of our service areas and industries we support, which should buffer against any short-term fluctuations associated with one sector.

Okay. Thanks. Good reminder on the leap day. Easy to forget that one. If I could just squeeze one clarifying thing in the PJM transmission stuff for ValleyLink and the 300 or I guess there's $800 million altogether for your company. Just remind me, was that already included in the capex plan? Is that incremental?

A couple of things there, Andrew. The component that's associated with ValleyLink is not in the capital expenditure plan. Because that's an investment that will be handled on the equity method. The $300 million is included in the capital expenditure plan.

Hey. Hey. Good morning, team. I wanted just two quick ones. One, if I follow-up from Carly's question earlier. Think it was more towards the drivers that get you to the high end this year. That something I could bake in post-2025 and maybe carry that through my forecast model?

Well, yeah. I mean, listen. We're driving towards more efficient operations and maintenance. We're trying to build in some flexibility into the plan. We have a team of people working at that. If we're successful in executing that, which I think we will be, we'll continue that momentum into 2026 and beyond. So that's kind of our target in terms of what we are aiming for as a company, and I feel really good about what I've seen so far and the momentum that we have for this year.

Anthony, some of the tailwinds that we've seen from this year associated with making investments, getting that converted into base rates through rate proceedings, as well as the operations and maintenance discipline that we've had, create the tailwind for 2025, and we anticipate being able to create those tailwinds in years beyond this one. Thank you again for the opportunity to share our updates with you all. This concludes our prepared remarks, and we appreciate your engagement today. Let's now open the floor to any further questions you might have.