Alliant Energy Corp (LNT) — Q4 2020 Earnings Call Transcript

Good afternoon. I would like to thank all of you on the call and on the webcast for joining us today. We appreciate your participation. Joining me on this call are John Larsen, Chairman, President and Chief Executive Officer, and Robert Durian, Executive Vice President and CFO. Following prepared remarks by John and Robert, we will take time for questions from the investment community. We issued a news release last night announcing Alliant Energy's fourth quarter and year-end 2020 financial results and affirmed our 2021 earnings guidance. This release, as well as supplemental slides that will be referenced during today's call, are available on the Investor page of our website at alliantenergy.com. Before we begin, I need to remind you that the remarks we make on this call and our answers to your questions include forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters discussed in Alliant Energy's press release issued last night and in our filings with the Securities and Exchange Commission. We disclaim any obligation to update these forward-looking statements. In addition, this presentation contains references to non-GAAP financial measures. The reconciliation between non-GAAP and GAAP measures are provided in the earnings release and our 10-Q, which are available on our website. At this point, I will turn the call over to John.

Thank you, Susan. Hello everyone and thank you for joining us. 2020 was a year we will all remember. It was also another successful year of growth and solid operations for Alliant Energy. We continue to consistently deliver on our purpose to serve customers and build stronger communities. I am proud of what our team accomplished and how we delivered on our purpose in a year filled with many challenges from the ongoing global pandemic to racial injustice and a destructive derecho windstorm. In the face of these challenges, we finished near the top of our original earnings guidance range with a 2020 consolidated earnings per share of $2.47. Our non-GAAP temperature-normalized earnings grew more than 7% over 2019. This was the 10th year in a row of achieving our 5% to 7% growth objective. This consistent growth, solid execution, and operational results showcase the resiliency and flexibility of our company. I will highlight a few of our many strategic and operational achievements from the year. Then I will turn it over to Robert, who will provide more details on our solid financial and regulatory outcomes. I would like to start by mentioning a few of our recognitions from 2020. I mentioned earlier the August derecho windstorm. I am proud that our efforts to restore electricity to our customers were recognized by receiving the Edison Electric Institute Emergency Response Award. Alliant Energy was also included in Bloomberg's Gender-Equality Index, highlighting just 380 companies from around the world who are committed to supporting gender equality in the workplace. We were recently named to Newsweek's Most Responsible Companies list, where we ranked 12th overall for our social responsibility efforts. To top it off, for the fourth year in a row, Alliant Energy has earned a perfect score in the Corporate Equality Index issued by the Human Rights Campaign Foundation. As I reflect on these achievements, they each showcase how we live our values as we care for others, do the right thing, and act for tomorrow. I am proud of our Alliant Energy team and thankful for all they do. From an ESG perspective, we made incredible progress on our goals and objectives. We ended 2020 with a 42% reduction in carbon emissions compared to our 2005 levels, well on our way to our goal of a 50% reduction by 2030. This result was largely driven by the completion of our major wind expansion, making us the third largest owner-operator of regulated wind in the U.S. It was also achieved by building our highly efficient West Riverside Generating Station. To further support our efforts to advance a clean energy future, we joined the Low-Carbon Resource Initiative through the Electric Power Research Institute. This initiative is designed to identify, test, and develop technologies to enable a low-carbon future. The results of this important work will help guide our company and our industry as we look toward our aspirational goal of net-zero carbon dioxide emissions from electricity we generate by 2050. 2020 was another great year in advancing our clean energy blueprints, which serve as our guide to create a cleaner energy future for our customers and communities. Last fall, we advanced our Iowa Clean Energy Blueprint with our announcement to add approximately 400 megawatts of new solar energy by 2023. This follows our very successful 1-gigawatt wind energy expansion in Iowa, all delivered on time and on budget. When the 400 megawatts of planned new solar is combined with our 1,300 megawatts of owned wind, our existing solar farms, and purchased renewable resources, we are on a path to have more than 50% of Alliant Energy's Iowa generation come from renewables by 2030. We also continue to advance battery storage in the state with plans to add 100 megawatts of distributed energy resources in the next several years. The additional distributed energy resources follow from the successful completion of battery storage systems near Marshalltown and Wellman, Iowa, and a storage facility in Decorah, Iowa that includes a partnership with the United States Department of Energy and the Iowa Economic Development Authority. Turning to Wisconsin, our clean energy blueprint helps advance the Badger State to a clean energy future. Our plans to add at least 1,000 megawatts of new solar power are on schedule. Last spring, we announced our first phase of this effort, identifying six future solar sites, totaling 675 megawatts. That's enough to power 175,000 homes. Later this spring, we plan to announce the second phase of our solar expansion, which will include three projects we purchased in the last five months, as well as our self-developed sites. As we carefully plan the closure of our remaining coal-powered units in Wisconsin, our plans will include ways to support our employees and our communities. Our clean energy blueprints are comprehensive and transparent, designed to follow our proven track record of a thoughtful energy transition. And our solar story in Wisconsin doesn't stop there. We recently announced a community solar project in Fond du Lac County where a portion of the energy generated from the 1-megawatt site will be donated to Habitat for Humanity to reduce electric bills for residents. We are also partnering with Dane County on a 17-megawatt solar development that will help bring the county to 100% renewable offset to the electricity consumed at their own facilities. Additionally, we are partnering with the City of Sheboygan to install a 1-megawatt solar facility in the Sheboygan Business Center. As we advance our clean energy blueprints, we will continue to seek solutions that serve our customers' growing demand for sustainable solutions to help build stronger communities. We also remain focused on our continued investment in our connected energy network across Iowa and Wisconsin by advancing the deployment of an advanced distribution management system, a fiber-optic network, and expanding the use of smart energy systems and automated metering. In addition, our customer-focused investments in the energy grid will result in more of our electric lines being placed underground. A major part of our effort is to improve grid resiliency, energy efficiency, and reliability. Speaking of reliability, I am proud of the efforts by our team during the extended polar vortex that gripped much of the country these past two weeks. Our customer-focused investments are designed to ensure that we will continue to provide our customers with safe, reliable, and affordable energy for decades to come. We remain committed to advancing our clean energy vision through this balanced approach. In summary, 2020 was an excellent year for our company, and we look forward to building on that momentum in 2021 as we focus on continuing our role as a leader in advancing renewable energy, completing customer-focused investments on time and on budget, delivering solid returns for our investors, and living our values. Thank you for your interest in Alliant Energy. I will now turn the call over to Robert.

Thanks, John. Good afternoon everyone. Yesterday, we announced 2020 GAAP earnings of $2.47 per share compared to $2.33 per share in 2019. Excluding non-GAAP adjustments and temperature impacts, earnings per share were up more than 7% year-over-year, driven by higher revenue requirements due to increasing rate base, partially offset by the higher depreciation and financing expenses from these rate base additions. As John noted earlier, our dedicated employees rose to the challenge in 2020 by reducing O&M expenses to offset the impact of lower sales caused by the pandemic and derecho storm. These efforts allowed us to finish the year in the upper half of the earnings guidance range. We provided additional details on the earnings variance drivers on slides four and five. Our temperature-normalized retail electric sales declined 2% in 2020 when compared to 2019, primarily driven by the impacts of the COVID-19 pandemic as well as the August derecho storm in our Iowa service territory. While the pandemic-related sales impacts were heaviest in the second quarter, sales recovered quickly and were roughly flat to 2019 levels in the second half of the year. The sales recovery we experienced was a direct result of the strength and resiliency of the economies in the states we serve. Wisconsin's unemployment rate is a full percent less than the U.S. unemployment rate, and the state is experiencing population growth as neighboring states' residents are moving to Wisconsin. In Iowa, the economy has been recovering even faster, with an unemployment rate that is the second-lowest in the country, as well as strengthening grain prices due to increasing demand from foreign countries. Turning to our future year's earnings. We see a solid path to delivering our earnings guidance for 2021. As we look further into the future, we believe our strong capital investment plan will allow us to continue to deliver solid returns for our shareholders, including the expected 5% to 7% annual EPS growth rate through at least 2024. The key drivers of the 6% growth in our 2021 EPS guidance over 2020 levels are related to investments in our core utility business, including our recently completed wind projects for Iowa and Wisconsin customers. These investments were reflected in WPL's approved electric rates for 2021 and IPL's renewable energy rider approved with its test year 2020 rate review. Currently, renewables make up approximately 20% of our total rate base, which is one of the highest percentages of renewable rate base among all U.S. utilities. We expect renewables will make up an even larger portion of our rate base as we invest in solar projects for our Iowa and Wisconsin customers over the next three years. A walk from our 2020 non-GAAP temperature-normalized earnings to the midpoint of our 2021 earnings guidance range is provided on slide six. The 2021 earnings guidance assumes a 1% growth in retail electric sales over 2020 levels. This forecast assumes continued economic improvement and recovery from the COVID-19 pandemic. Additionally, our employees have been working to add new customers and load to our system. One recent example of success is our new wholesale customer in Wisconsin, Consolidated Water Power Company. This new customer came online at the beginning of this year and brings up to 60 megawatts of new load to our system. Alliant Energy's strategy focuses on providing affordable energy to our customers while continuing our decade-long track record of growing earnings 5% to 7%. As a reminder, we reached a settlement in our Wisconsin jurisdiction to hold rates flat in 2021 by using excess deferred taxes and fuel savings to offset a higher revenue requirement due to growth in rate base. This settlement enables us to earn a return on our investments we have made on behalf of our Wisconsin customers without increasing their base rates in 2021. In our Iowa jurisdiction, we expect to manage our business to allow us to stay out of rate cases for the next couple of years. This has been made possible through a collaboration with our regulators and stakeholders in Iowa on key items such as deferring costs associated with the August derecho storm and the addition of the renewable energy rider. The renewable energy rider will allow IPL to recover costs of the incremental rate base from our recently completed one gigawatt of wind while also passing on significant incremental production tax credits and fuel cost savings to our customers. Additionally, our Iowa customers began seeing savings in the fall of 2020 as a result of our decision to terminate the purchase power agreement relating to the Duane Arnold Energy Center five years early. IPL is forecasting to get recovery of and a return on the buyout payments associated with this termination through a rider over the next five years while customers benefit from tens of millions of dollars in energy savings each year. Slide seven has been provided to assist you in modeling the effective tax rates for our two utilities and our consolidated group. We estimate a consolidated effective tax rate of negative 20% for 2021. The primary drivers of the lower tax rates are the additional production tax credits from the new wind projects that were placed in service throughout 2020 and the return of excess deferred taxes from federal tax reform to our customers. The production tax credits and excess deferred tax benefits will fall back to customers, resulting in lower electric margins. Thus, the decreases in the effective tax rate are largely earnings neutral. Turning to our financing plans. In November 2020, we accelerated a $200 million debt offering at our Alliant Energy finance subsidiary, originally planned for 2021, to capture historically low interest rates. As a result, our 2021 financing plan is currently limited to one long-term debt issuance of up to $300 million at our Wisconsin utility. The only common equity activity we are expecting in 2021 is approximately $25 million to be issued ratably during the year through our shareowner direct plan. Lastly, some key regulatory developments in our two states. In Iowa, current Chair Geri Huser was recently appointed for an additional six-year term and Josh Byrnes was recently appointed as a new member to the Iowa Utilities Board. We welcome Board member Byrnes and Chair Huser on her additional term. In Wisconsin, the PSCW recently issued its final written order approving WPL's rate stabilization plan in December. The PSCW also issued a procedural schedule for our first solar Certificate of Authority filing in late 2020. The docket for our solar CA filing is proceeding as expected, including the constructive public hearing held yesterday. We anticipate a decision on this first 675 megawatts of solar from the PSCW in April. Our 2021 key regulatory initiatives are listed on slide nine. In the first half of this year, we expect to make an advance rate-making principles filing in Iowa for our planned 400 megawatts of solar generation for IPL. As a reminder, the key benefits of the advance rate-making principles process in Iowa is the certainty it provides for the authorized returns we earn on these investments. In our three most recent advance rate-making filings, we were authorized an 11% ROE for new generation assets. The ROE decided with these filings is fixed for the life of the assets. In Wisconsin, we expect to file our second certificate of authority request in the first half of this year for the remainder of our announced solar generation at WPL. Additionally, we expect to file a retail electric and gas rate review in Wisconsin in the second quarter for years one, two, or three starting in 2022. We are thankful for the privilege to work in two states that are well-known for constructive regulatory outcomes and plan to continue our long-standing practice of working collaboratively with stakeholders towards constructive regulatory outcomes on these key regulatory initiatives in 2021. As we conclude another successful year, I am excited about our flexible and thoughtful strategy at Alliant Energy. As John described earlier, we are a leading utility in renewable energy and environmental stewardship, and we look forward to maintaining that leadership status into the future. We will continue to deliver on our clean energy vision that will best serve our customers, shareholders, and our environment. We greatly appreciate your continued support of our company and look forward to meeting with many of you virtually in the coming months. As always, we will make our Investor Relations materials available on our website. At this time, I will turn the call back over to the operator to facilitate the question-and-answer session.

Thank you. Good afternoon everyone.

Hi. Good afternoon Andrew.

My first question is, can you repeat that stat? I think I heard you say that Iowa will be 50% of generation from renewables by 2030. I know you have the overall target of 53% from renewables. So does that include both Iowa and Wisconsin? And does that include owned and PPA'd?

I think you got it all right on there, Andrew. So the first one, the 50%, was Iowa. And I think you got all the rest spot on.

Okay. Great. Are you able to break out how much of that is owned? Or said differently, what percent of your own capacity will be renewables?

You know, I will give you rough numbers: around 70% is owned and 30% purchased. Of course, that's going to change a bit as we bring units online and renew. But that's a high-level split for you, Andrew.

Okay. Great. Thank you. Next on O&Ms, impressive year after several other previously impressive years. What's your outlook for 2021 and beyond? And how much of the savings you identified in 2020 would you consider to be sustainable versus one-time?

Yes. It is a great question. This is Robert. First off, it's a key component to providing affordable energy for our customers. So we are very focused on that. And we are currently targeting sustainable O&M reductions of approximately 3% to 5% on an annual basis off of a 2019 baseline in order to support customer affordability. Our employees did an excellent job in 2020 as they captured some additional savings largely to offset the COVID and the derecho impacts. I would say, it's a pretty even mix between sustainable savings and temporary savings, at least on 2020. Some of the temporary items were things like travel, healthcare, and insurance. But we also saw some great progress with sustainable savings. Largely, I would put it broadly in the three main areas. One is technology. We continue to advance technology, including things like the AMI that we put into service in early 2020 that really helped reduce some of the metering costs. Some great improvements with automation and self-service to help us reduce some of our call center costs. Then we also, obviously, added some enhanced connectivity through the pandemic here that we think we will be able to leverage into the future. So that's one category. Second is probably on the generation side. Really, we have seen some pretty strong efficiency gains at some of our existing coal plants that allow us to operate with fewer employees. Finally, on the distribution side, as we talked about with our strategy, we continue to focus on trying to move from overhead to underground. That's really going to position us well for our O&M costs in the future. So back to your specific question, I would say it's probably a pretty even mix between the two. I think on a longer-term basis, we are looking to achieve maybe a 3% to 5% reduction in sustainable savings over the long term.

Great color there. That's very helpful and a very impressive target. Last question is, you had a very good track record in Wisconsin of keeping rates stable and you mentioned you are planning to file again in the second quarter. Is there any potential to further delay that or find creative ways to keep rates stable? And then you mentioned that the case could cover one, two, or three years. What would determine that? What will that depend on?

Yes. Andrew, great question. We entered last year, as you recall, well positioned for a rate filing which we had some CapEx and other things that we had to put forward and found a path for stabilization and executed quite well under that. We are well positioned again, but we have a very clear opportunity to put a filing in front of the commission. I guess I would say, will it cover one, two, or three years, that's still an area that we are continuing to evaluate. We will share more as we get closer to the second quarter call. So I appreciate that. Robert, anything you would like to add?

Yes. Maybe one thing to note, Andrew. One of the components of this case will be the expiration of some of the larger amounts of excess deferred taxes that we are giving back to customers currently. Those are pretty well set in stone, so we don't have a lot of flexibility with those and it’s fairly straightforward. I don't think it will be anything that will be controversial with the case itself. As John indicated, the other key component is the solar projects that we will be advancing. We will provide a bit more insight to that when we get the decision back from the PSCW in that April time frame for inclusion of that, most likely like we talked about, in a second-quarter filing. The third and probably last piece of that rate filing is really to address the anticipated recovery for the Edgewater coal facility that will be retired by the end of 2022. So we think this is the appropriate time for us to come in for a rate filing and we will give you some more indication of the one, two, or three years most likely when we get to the next earnings call in May.

Okay. Certainly a lot of issues to discuss there. Thank you very much. I appreciate it.

Yes. Thanks, Andrew.

It's okay. Thank you. Good afternoon to the team.

Yes. It's all good. Thank you team. I appreciated it. So perhaps if I can circle back here on the Columbia announcement. Obviously a fairly large unit here. Can you talk about the recovery of undepreciated plant, securitization prospects and whether or not you see legislation as being part of that conversation? Obviously, some of your peers hadn't necessarily pursued that route. But I am curious how you think about that avenue specifically? And then also the timing and resource planning as part of the replacement, whatever that will eventually be around it?

Sure. Great to hear from you, Julien. Good afternoon. So that's clearly with the announced retirement, we look at the flexibility that we have in our CapEx plan. We do have some opportunities as we think about it between distribution and generation. There is no question there will be some additional need. We don't have the details of the size and timing of that quite yet. That's probably an area for later in the year. We do have an opportunity for additional renewables likely to be coupled with storage. We have been working on our development plans, anticipating that we will need additional renewables. As you know, we have a lot of development efforts in place for what we did on wind in Iowa and then our solar efforts plus storage in Wisconsin. We are going to lean heavily on a lot of great work we have done over the last few years on that. As it relates to securitization, there is a provision that currently exists and I am sure there is going to be discussion about the securitization and the potential for that to be another tool, if you will, in the process. But as we think about it, Julien, it's really about having the right balance between investor outcomes and customer costs and affordability. Our path forward with our tax equity, we see our solar projects to be perhaps the lowest, if not among the very lowest, cost projects that you are going to see in solar and renewables. So we feel very good about having that right balance with our tax equity. Certainly, the process going forward, I am sure all of that will be in discussion relative to what's the best path for that balance between customers and shareholders. We expect reasonable outcomes. We have for many years. We are very confident in the filings we put forward, but certainly more work to come on that. Robert, anything you would like to add on to those two items?

Yes. Maybe just one brief item to help with the clarification of the timing. We have obviously announced the timing for the Edgewater facility retirement by the end of 2022, and now the Columbia by the end of 2024. The other piece of the puzzle is the West Riverside options, and we are still working through the exact timing on those. So once we have that, like John said, we expect to have better clarity by the end of the year. I think we will get some more updates on the CapEx implications and the timing of the resources sometime in the second half of 2021 here.

Got it. Okay. So maybe to clarify that, would the stars align effectively to get that for the next 4Q 2021 call if you have all these elections in the course of the back half of this year? And then secondly, if you can clarify, sort of related to the long-term outlook, the 5% to 7% is off what base year? So what's the baseline for that again? Sorry for the details for the nuance here?

Yes. The first one, you got that. That's spot on with the timing. And the second question was?

Yes. I will take that one, Julien. For the base year, it's off of 2020.

Right.

That's normalized, that's $2.42. So the 5% to 7% is off that base.

Awesome. Thank you guys for the time. I really do appreciate it. Best of luck. Speak soon.

Yes. Thanks.

Hi everyone. Hope you are all doing well. First question is just following on the Wisconsin rate filing there. I think you alluded to one of the potential rate offsets that you may have in taxes which has been consistent with the past. Is there anything else in the form of regulatory liabilities? And can you help quantify those at all in terms of rate offsets?

Yes. Michael, good to hear from you. So yes, we do still have some regulatory liabilities remaining for the excess deferred taxes. They are just not at the same level that we are experiencing here in refunds through 2021. We do have some other, I will call them, regulatory liabilities that were actually approved as part of the rate stabilization plan that we received approval from for the WPL jurisdiction in December. One more notable one was some liquidated damages that we received as part of the West Riverside facility. I think that was roughly $35 million to $40 million. There are some various other benefits that we have been accumulating over time, whether it was from excess earnings above our authorized returns that we have a sharing mechanism for. But think of it as probably in the neighborhood somewhere between $60 million and $80 million of total regulatory liabilities that are available to us to be able to use over the next several years to help offset some of the rate implications.

Got it. Okay. That's super helpful. And then switching over to Iowa, I just wanted to check in. I thought in your last deck you had on the calendar there a filing related to the 2020 test period that was going to be made in Q2 of this year, and I didn't see that in the updated deck. So just wondering where that stands?

Yes. I think what you are referring to is, there is a subsequent proceeding process. So as part of the 2020 rate filing, there are rules that are still being drafted. They are not completely filed yet. But the IUB recently decided that we will be coming in for what they call a subsequent proceeding. That's intended to make sure that the rates that we put into effect in 2020 were reasonable and just. We believe they don't expect any refunds or any potential changes in the future. That's largely going to be based on where our earned ROEs come out for the end of 2020. We actually under-earned in 2020, below the 10% authorized level. So we don't expect any impacts from that, but we will still be working through the process with the Iowa Utilities Board over the next several months. There will also be some processes to finalize those rules and exactly what needs to be filed over the next several months.

Okay. Great. And my last one was just, you gave that data point of, I think, 20% renewables in rate base right now. And parameters you can hopefully give on where that could potentially go over the next four to five years, given the plan that you have laid out?

I will give you a directional area of north, Michael, but probably no additional specifics right now, but it's certainly growing.

Okay. Great. Thanks a lot.

You bet. Thanks, Michael.

Hi guys. How are you doing out there?

Great.

Everything's running well, I hope, unlike Texas. But just a couple of questions. So first just on, in both Iowa and Wisconsin as you go through regulatory processes there, what's the opportunity and timing, if the answer is there is some, on potential settlements in both places?

Yes. Maybe think of Iowa as we are probably a couple of years away from a rate filing, a formal rate filing, if you will, in Iowa. So that's a little bit out there. In Wisconsin, we’ve had a good track record of working collaboratively and we will put a very solid case together. So there is always that potential. I don't want to handicap it beyond that. But we have had some very recent success in achieving that type of settlement outcome. Other than that, I’d say it’s as we have in the past years, I think that opportunity exists.

Okay. And then just focusing on the clean energy blueprint. The focus on investor calls or just in sell-side reports, juries will always be on the fleet transition and that obviously is a great opportunity. But then we talk to some of my peers and they are like, well, what happens after that? I guess in conversations that I have had with you guys in the past, there seems to be a lot of runway beyond the fleet transition that we can do that needs to be done to, one, help the fleet transition but also help your service territory, both in Wisconsin and Iowa, convert to a clean energy world. Can you kind of talk about the runway opportunities there and what is in the CapEx already and what is not in these longer-term opportunities?

Sure. Happy to. I’ll probably ask Robert to add any of the numbers there. But if you think about the clean energy future, it's really got to make sure that we think about how that fits transition, generation, and it really doesn't happen without considering the distribution grid. We have got, as I noted, opportunities for resiliency to convert our systems from more overhead to underground. We are starting that out and there is an opportunity to grow that area as well as having a stronger distribution grid at a voltage that allows for more distributed energy resources to connect. This is also an opportunity for us. It's in our current plans, but there is certainly an opportunity as we get more efficient for those two areas to grow. We do see the distribution areas having plenty of growth potential for us, but as we do in many cases, we start, kind of walk before we run and make sure that we get very efficient as we deploy capital. Maybe if there are any additional categories and growth numbers, Robert, I will ask you to weigh in.

Andy, good to hear from you. Yes. I would characterize our rate base growth to be much in line with our earnings growth. We are not expecting any new common equity for the foreseeable future. So we think we can manage the business appropriately to achieve our 5% to 7% EPS targets without having much of an impact on customer bills over the long run. And maybe just to add a couple more categories to the information John shared, we still have repowering on our insights that I would say is probably more in the second half of this decade. We really don't have much of any storage built into our CapEx plans at this point. We do have some smaller pilot programs that we are using but there is also some further opportunity there. And lastly, we have got a series of coal plants still in Iowa that we haven't announced the timing of any potential retirement. So if we think of that over the next 10 or 15 years, that will likely create some capacity needs for us that would provide some additional growth.

Yes. Can I ask you more questions? Actually, the storage tech, I am glad that you actually brought it up. I think you and I were discussing that a few weeks ago, actually debating it as far as timing. So I guess maybe what is your thinking on storage because obviously based on what you are installing as far as solar and wind, storage would be a good incremental addition to those assets? If you kind of look at what NextEra is already doing with storage, it's a great opportunity and also there's like software for storage has evolved, it’s really a benefit to customers. So, why have you guys not rolled out a storage plan yet, maybe a way to put it?

Yes. Great question on that, Andy. Certainly, as I had shared, we do have storage facilities, I will call them small. Again, we kind of prove those technologies out and then scale them up. We have done some great deferral storage work up to this point and tied it in with some of our community efforts and community solar side. So, think of that as a smaller size. We do have development work going on right now to size that up. As we are putting larger-scale wind and solar out there, we also have development plans to look at adding larger-scale storage to help with the front and back end of how those units are introduced into the market. We completely agree. We want to make sure that it always makes sense to our customers. We are eager to add those when it makes sense for our customers and we are in heavy development work right now.

So, what I guess maybe in the third quarter when you roll out your new CapEx plan, we may see the numbers around storage; is that possible?

Yes. You know as well, Andy.

Okay. And then the other thing just focusing on the line, isn't there a large opportunity, and maybe you can talk about it? Doesn't the voltage on your line could be increased from like 3KV to a much higher KV? Can you maybe talk about that and kind of where you are? So I think you have done the process on that. And maybe some numbers around how many, I don't know if you want to do miles, but how much of your system needs to be converted and if there is any type of measurement that you can give us as far as CapEx per conversion, whether it's mileage or whatever it may be?

Yes. Certainly as we think about that, Andy, I think you are referring to our efforts to put a 25 KV backbone system out there. That's what I had referred to earlier allowing us to put more distributed energy resources or customer connected resources to our grid. We are in the beginning stages of that. I think we are roughly, I will use numbers around 5% of our system. But think of that as that's something you want to have condensed to certain areas where you convert smartly. In certain areas as you are doing other work, it makes sense and as we look for areas that have higher growth for some of those DER penetration. The costs per unit and CapEx, I don't have those readily available. But that would refer back to our opportunities for additional distribution grid spend as we think about getting more and more efficient in that space. So think about it as the tail-end of our current CapEx. I think you will see more of that as we refresh our CapEx going forward.

Well, let me ask it this way, maybe Robert would nail it. So like, you said right now it's just 5% of your system that you are doing the work on for the upgrade. Robert, do you have any clue how much you are spending on that, just that one project? I don't know if it's one big project that equals 5%, but any type of numbers around that?

I mean right now we are probably replacing our system at a normal replacement rate of maybe 2% of the total system on an annual basis. We have roughly about 43,000 miles of line. About a fourth of it is underground, and about three-fourths of it is overhead at this point. Like John said, only about 5% of it is at the 25 KV level at this point in time. So when you think about costs for putting stuff, for example underground, you are probably talking a couple hundred thousand dollars a mile at least, depending on whether it's in town or in the country. A lot of opportunity for us. We don't absolutely set a quantification of the exact dollars that you will see in the future. But that's really part of the flexible plan we have that as we have all of this generation opportunities in the near term, we push some of that out. We see a great opportunity maybe in the second half of this decade into the following decade for those types of expenditures and a good long runway to the growth that we are targeting.

Thank you. Great. Thank you guys very much. I will stop asking questions because it's 1:45 on a Friday and people probably want to go skiing or something.

Yes. Thanks, Andy. Good to hear from you.

Thanks for the follow-up. After Andy trying to send everyone to happy hour, I feel kind of guilty for having one more question here. But if I may, you have got in the slide that your carbon emissions were down 42% in 2020 versus 2005. Do you have any way to quantify how much of that was due to the impact of the pandemic? Volumes obviously, dispatch was a bit abnormal last year, to say the least. Are you expecting that number to go up a little bit before it resumes the downward trend?

Yes. Andrew, when you think of that, it's one of those numbers that will cycle up and down a bit. We look at the overall trajectory of that getting to our stated goal when we reach 2030. We like the path that we are on. I am sure there is a contributor from several of those factors. We also look at the transitions we are making with some of our planned retirements of coal facilities to highly efficient West Riverside. I don't have the specifics. That number will bounce around a bit. We look at the overall trend line, and it's really on track with what our stated objectives are.

Okay. So on target for the 50% reduction by 2030 and then net zero by 2050, right? On target, not necessarily better?

Yes. I would say on target for right now. But appreciate the question.

Okay. Great. Thank you.

Thanks, Andrew.

This concludes Alliant Energy's fourth quarter and year-end earnings call. A replay will be available through February 26, 2021, at 888-203-1112 for U.S. and Canada or 719-457-0820 for international. Callers should reference conference ID 4175543 and PIN of 9578. In addition, an archive of the conference call and a script of the prepared remarks made on the call will be available on the Investors section of the company's website later today. We thank you for your continued support of Alliant Energy and feel free to contact me with any follow-up question.