Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Operating earnings for the quarter increased by 19% to $0.56 per share compared to $0.47 per share last year.
- Customer demand showed positive growth with weather-adjusted residential and commercial sales up 4% and 7%, respectively.
- Capital investments to improve customer experience increased by 22% for the first six months of the year.
- The company reaffirmed its 2024 operating earnings guidance range of $2.61 to $2.81 per share and its CapEx plan of $4.3 billion.
- FirstEnergy Corp (FE, Financial) successfully completed the obligations under the deferred prosecution agreement, marking significant progress in resolving legacy issues.
Negative Points
- GAAP earnings for the second quarter were significantly lower at $0.08 per share compared to $0.41 per share last year.
- Higher planned operations and maintenance expenses partially offset the positive impacts on operating earnings.
- The 30% sale of FirstEnergy Transmission LLC to Brookfield resulted in expected dilution.
- The company faces ongoing regulatory challenges, including unresolved issues in Ohio's ESP5 case and pending rate cases in Pennsylvania and Ohio.
- The financial impact of legacy issues remains, with reserves of $100 million for SEC settlement and $19.5 million for Ohio matters.
Q & A Highlights
Q: Can you quantify the impacts of the 1% load growth figure and discuss potential upsides?
A: We are currently evaluating our future load growth rate. While we see positive impacts from data centers and EV adoption in Maryland and New Jersey, overall, we are still seeing modest, steady load growth. Data centers generally take service at a transmission level, which isn't as earnings impactful today but could positively impact rates for existing customers. We anticipate providing an update around EEI. (Unidentified Company Representative)
Q: Why haven't you filed a framework around the Susquehanna docket when most of your peers have?
A: It's not as business impactful to us at this point. We are interested to see what forecasts say about it and whether it takes capacity out of the market. We recently saw high prints on the PJM capacity auction, but I don't think it will solve the generation resource adequacy issue. (Unidentified Company Representative)
Q: What is the likelihood of reaching a settlement in the Pennsylvania rate case?
A: Settlement talks are in early stages, but we are optimistic about reaching a settlement before the hearings in August. (Unidentified Company Representative)
Q: Can you discuss the potential for new generation state to form a strategic reserve or other efforts to stem higher prices?
A: We are open to constructs that allow us to invest in capacity on a regulated basis. We are not looking to return to competitive generation but are willing to engage in discussions that benefit our customers. (Unidentified Company Representative)
Q: What are the drivers for the strong presence across both commercial and residential customer classes this quarter?
A: For residential, we see higher average usage per customer, especially in New Jersey and Maryland, due to progressive energy policies and economic activity. For commercial, we are seeing a rebound to pre-pandemic levels. (Brian Tierney, President and CEO)
Q: What are your thoughts on the potential for reaching a settlement in the Ohio rate case?
A: We always aim to reach a settlement in any rate case. This one is in early stages, and we will engage with interveners and other interested parties throughout 2024 and into 2025. (Unidentified Company Representative)
Q: How do you view the impact of higher capacity and energy prices on customer bills and potential efforts to address this?
A: We are analyzing the impact on a jurisdiction-by-jurisdiction basis. In West Virginia, we expect a wash due to balanced capacity needs. In other states, we are open to constructs that allow us to invest in capacity on a regulated basis. (Unidentified Company Representative)
Q: What is the status of the pension lift-out transaction and its impact on the balance sheet?
A: We are targeting a second pension lift-out transaction to eliminate the remaining $700 million in non-regulated pension liability. This would be funded through the pension plan and would not require external financing. (Jon Taylor, CFO)
Q: What is the earliest you think a NYSERDA-type agency could get started in any of your states?
A: It would require legislative changes and activation of a new entity, so it is not a short-term process. However, it could provide a sustainable solution for procuring incremental needs. (Brian Tierney, President and CEO)
Q: Do you think the current PJM construct will solve the generation resource adequacy issue?
A: No, I don't think the PJM construct will fix the issue even if it sends positive price signals. We need a sustainable solution that involves robust grid investments and constructive engagement with states and regulators. (Brian Tierney, President and CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
