California Water Service (CWT) 27 Jul 232023 Q2 Earnings call transcript

Thank you for your patience, and welcome, everyone, to the California Water Service Group Second Quarter 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions.] Thank you.

I would now like to turn the call over to Marty Kropelnicki, Chairman, President and Chief Executive Officer. Mr. ahead. go please Kropelnicki,

Jack. Apologies everyone. We for our through. problems you, us had for this with getting line morning. the telecommunication Good Thank Thanks morning, joining some Great. technical difficulties.

that. sincere So, for apologies

statement it me financial go for Financial and forward-looking Regulatory the you going Chief on Affairs. quarter, is President Rates getting through to please. turn Vice Officer; Healey, Interim into I'm Greg our jump With Dave, Vice results to today And into to and the why Prior President, our quarter, Milleman, for Dave Healy and Dave statements. the to results don't the

Thank results be September XX, you, can quarterly release, call which this XXXX. was available until today. dial-in Marty. will information issued for replay our be found in earlier Replay The

begin, a afternoon www.calwatergroup.com. company quarter. this an the website also slide before As slide the company's accompany deck earnings X-K has we is with the furnished call reminder, to at yesterday deck was The available and a at

Before looking forward-looking results, take to statements. to like few we'd moments a cover at this quarter's

releases company's press on and Exchange and XX-Q, uncertainties Securities risks advises all our to other current could and may and company of and events, XX-K, time shareholders of as from well strongly time Form are as company statements risks call, to the deal disclosures the forward-looking the materially differ read they company's understand found interested parties certain the current the course expectations. various Because During reports Commission. with statements. results to the the with carefully Form future actual from filed this, in make and subject these uncertainties, Because

their with Our presentation priorities. Slide and starts on values X

discuss Slide to quarter X, on second the moving And I'll results.

XXXX. net $X.XX the and of compared of second was XX, the million attributable $XX.X group ended and was net diluted diluted So, quarter group quarter XXXX, share $X.XX earnings earnings to as for income during to share per attributable to of June $X.X million income per

mechanisms discussed results XXXX primarily reflect temporary the we general included absence our general quarter, rate As last XXXX second regulatory quarter in California of and increases rate case.

delayed result in As revenue year. to the period second same last operating case, the of as there a a general compared California quarter decrease was XXXX rate

authorized $XX.X rate decreased operating customer with our the California during were XX.X% approximately XXXX, X% our XXXX the the districts GRC revenue general a the added along by million, $X to decrease authorized the million approximately of to for are X, California, operating This in due the until rate usage. million it to increase most GRC, general final a increases second of Additionally, May $X.X commission. commission with case most quarter. General increases in effective during rate revenue delay quarter

year. governor This XX California, to million, the bills. operating water same to pay during state's last year. second capital record program second last to or XXXX. was In $XX XX.X% the rates $X.X million expenses period for delinquent of $XX.X The period increase million credits. XX, over a XXXX a and decreased of customer the invested covers our to due second off past as monthly compared period from Total extended interest quarter increased increase to the program company. borrowings the struggling quarter customers improvements same the an balances December written due quarter help arrearage the days short-term mid-June mostly in lines expense We on XXXX our during slightly of of in XXXX, Net interest additional in

file to these our funds September. plan Resources Water State with Our the application end of for the Control at is Board

revenues, $XX.X offset California costs. to annual California water operating letter advice known increases July increase production the One last item. We to in million filed in

the temporary XXXX it turn Our general And to California discuss Rate XX. rate increases Page General over regulatory Greg on absence and EPS I'll mechanisms. of now is Milliman bridge Case, to

Dave. Thank you,

first Looking Page X, the quarter. consistent with at

the Commission same Utility decision. available this mechanisms revenues are We the The mechanisms using whilst from the to three California shown impact track are primary from on delayed Public of slide. the revenues temporary

Page We currently that X. and of $XX GRC delayed parties to impact million revenues XXXX second temporary the quarter the on to filings current be positions Moving estimate mechanisms. of regulatory consumption-driven a in between and $XX million operating XXXX on decision based

information, $XX I'd year-to-date in revenues on million. where the call the Slide activities this temporary estimated is which your same topic, is to $XX attention million I'm While to to except XX, the delay for be

you, to it back X. With I'll that, Dave, for Slide turn

Greg. you, Thank

Slide quarter XX on second is earnings XX. Slide The to bridge and moving

For $X.XX six-month loss the diluted was $XX.X group or income compared XX, share period million or XXXX, attributable ended June loss per group the period $X.XX net to $XX.X of per net to for six-month common common XXXX. million June to earnings share XX, diluted attributable ended

a case, XXXX, rate Operating As general XXXX XXXX, and million for million revenue $XX.X general $XXX.X XX.X% to decrease period usage, and in which deferral, million six-month million. the temporary customer XX, MCBA in was increases, for $XX.X of was The $X reflect partially XXXX Greg same increases million XXXX case. of by RAM the decrease or revenue discussed, mechanisms million absence $XXX.X $XX.X rate six-month in a compared period rate due XXXX. and decrease increase general the June for -- general rate regulatory XX, ended revenue results in decrease to ended California a the offset June included revenue the $XX.X was our period million in

compared were a of million million. $XX.X attributable XX.X% Other ended or XXXX, six-month to $X.X million to period $XX.X for compared revenue $XX million. Total decrease operations the June to the in deferral. XXXX, operating XXXX, primarily were $XX.X related for The of deferral decrease in XX, $XX.X a decrease expenses costs of ended million the was period million in June XXXX, expenses million the million XX, to $XXX.X $XXX.X six-month or

general $XXX.X The in and taxes decrease offset to were and XXXX. $X.X of Water in customer administrative compared million, $X.X in decreases amortization production of costs million. or to costs other production in in a X.X% water expenses to million million $X.X primarily and attributable X% of increases and decreased XXXX property was $X.X usage. depreciation million These $XXX.X partially by decrease million

months the program the of company the XXXX, first the During for a million months $XXX.X $XXX.X infrastructure during cash first invested of The six million in ATM by also is This company's record improvements. six XXXX. company. increased

The of I'll Milliman on program, results the Slide a with Greg XX. or for to EPS bridge continue at pleased will program, XXXX. it update. are the over ATM regulatory ATM and we of our our through year-to-date is March now turn And market, We

Thank if and July have X.X% key you, to After it of the this XXXX, point regards our and to XXXX. of cost current increased will effective as decision capital actual the -- perspective an lower from the comps at to up Dave. with trends, following cost of implementation mechanism In water index beginning that X.XX%, ROE forward. of is end going from will is January of XX, capital the trued cost be will to the our capital again proceeding, borrow our is the we and bond have debt increase mechanism, related current of be its Further, to it October expect or triggered X.XX%. continues the water

a the decision assigned XXXX the after our extending the XXXX, December of on the we had a June it our now rate is update. XX, Slide have two year. long judge second judge proceeding. Shortly working our started XX to case, decision considering end proposed on end the GRC the commission, to XX, that This a will hopeful year, California On the on with have career commission of general has and case, before we're he's we already ALJs the that

I to Marty. over it turn will Slide XX, to forward Moving

Thanks, Greg. Great.

PFOS, Just that a the happening. are PFO quick update on events

frame. ways] out XX operate, we I the it's EPA in approximately approximately treat draft think Based needed it wells five adopted standards the it quality is working the of draft we'd in $XXX the we those on in we now. bit California, think started came back wells of this and draft on by in regulations tight water quarter a the regulations, states have million last was as in investment we as confirmed. time XX is, that That's deck, incremental having that, million has right XXXX. to to as from XXXX. of states, But a in be the Yet put strictest compliance California regulation [four said the

we we those here judiciously So, curve and see get well ahead when the continue are ahead of adopted. wait move to to as

of treaty We've the Companies. Water the a the is for to this gone Association National and big pivot us polluters. that -- rate NAWC, after all noteworthy, belong all of Also

and courts a number you may ready Journal, have there Street finalized. gone seen of be settlements in before some The that proposed the have of been And to Wall has

And as we litigation any customers personally we treatment are the go states drinking that from for water. that in. recovery We will costs offset our to for PFOA involved in remove the operate to and cost PFOS necessary implement

want the I talk Moving ahead next to business to take to about a slide, development. moment

sides another Skylonda the customers. end announced system. on that's of had a closing really system the last is a of the big it's busy quarter, small XXX, Mutual, QX, California is since in in at approved which past, has not Commission both Area. [BD] Public us the As It's talked we our the but on we time Bay That Utilities number of

of it and the us the improve own an the and build allows Skylonda So, in resiliency one parts Bay, Area. by reliability two parts that to the we three interconnect part between Skylonda and that acquiring Bay

Water the in system And close the adding of the Hawaii with In Stroh closed Washington got me, addition, HOH on excuse Pacific that's our -- we ahead Washington to company approval Commission in state service Utility. the Northwest. move to our XXX to we connections the

KSSC on and HOH Island the So, both of are Hawaii.

on be on will the of fourth island us wastewater That means X,XXX we're now we'll and gets moving this system Hawaii. big that island, in wastewater we'll Oahu Hawaii. approximately We're our Maui, add into a be it's connections. So, on

to for The of that acquire customers was certainly, existing there's overall, reduce few development scale continues and service. So acquisitions. it the bring pretty that team to on our really full. costs our existing our be and business space, Again, of and in we busy achieve businesses water can business and between. we're team But enough busy. parallel and help that big They're really, of close to seeing improve there's complement is are things our pipeline bolt-on that quarter system far a kind economies not to or for

and on slide, next investment capital slide. ahead on the Looking the depreciation

ground million Coast. As on was Dave of quarter $XX.X terms long up in new the of a and out some a West out we're the of the capital getting ground. making Clearly, wet record for said, it us for winter

$XXX.[XX] was million. team also the year-to-date, job think done was good XX.X%, has I And a up. that it which speeding up at

on So, for are XXXX. targets for we track our

I California. peers some think give of the pull more you an complex case our importantly, a of back you is in idea little state our why of probably little a bit, than if rate more

For invested and that's XXXX of $X XXXX, in that XXXX, have we our system. will over capital billion

pay So, $X billion sets the a delayed, rate rate case. it's

to gets I'm through. big the work details continuing. the that, and is I'm with deal we So, thing with good investment capital a it's move glad the all as Milliman, to is Greg complicated commission it's forward. but But news he not work the of

continue we're our improve with and resiliency sustainability. We stay track to the investment taking on to dollars and steps

get a rate proposed sense grow. look give is. slide a is just as the of This group, of growth when rate this and we is like our update obviously this slide, the what change case rate will snapshot this continues the decision, for you like the earnings regulated what base at to will will next assuming But accordingly. looks as adopted base Looking a we'll

in once kind it and mentioned, the second decision say are just of in moved rate will a So, we're that out. I complicated. very adopted decision cost the very with quarter we of happy quickly general proposed where the step that California. Obviously, while was is capital that in holding I came taking disappointing, came a delayed pattern as the were is case the and out And back at quarter. we still looking with

this by added As I general being the schedule-driven, very judge. familiar ALJ case. And by We're We've very we're second with our this he's before encouraged he's rate very Greg mentioned, kind you good think of cases judge. it had to think think more than in which the new the help process. I that. of objective, adding is he's anything And don't I book, and ALJ. terms can facilitate want hopefully, other will very

growth ground our into through delays and business the make the progress was record despite Obviously, the for the it continue was put we was this whether State to capital significant case, that business quarter, with California, development. our published the we're continued customers it climate our part and the sustainability And do plan, our Hawaii in doing to we of ESG emissions and what and reliability. Scope to we're report, and including our X on Washington. in X doing third annual what also of combat behalf change improve In Scope

as not that's the give now. we numbers can't the before the sense proposed you mechanisms as So, year. right a is low that that executing rate provided why the high and keep business that what out, we mechanisms the ranges case we're the plan. and we comes decision wait, hopefully Once we of we're case, going on based optimistic that share a right we're to Greg will us book allow to now, the said, those rate get book of a a that building end that number to and And of are shared

to moment a Directors. new of a member talk to joined I about who our Lastly, take want Board board

Some have of Board. Patton Charles you joined that. may our seen

Some know, lucky of may first is leader. XX-year you very him an very, our Charles, get veteran his he and with rates. to who in on with operations external and board outstanding and outstanding in an affairs us He utility governmental background a We're yesterday. meeting board had he's

the Charles Service Board. to welcome California So Group Water

for up that's now. Why we open the it please? Jack, update for don't So, questions,

the first comes Certainly. with question [Operator of Instructions.] Angie Storozynski Seaport. Our from line

Thank you.

your mean, moving just I earnings many there's pieces So, so power. in

X/X/XXXX. in correct? One, have the final to this need one? all things. you to And I'm just these actually were a revenue of retroactively hoping adjustments back or year decision a to book couple proposed a Is GRC assuming that a final just So decision that of you to

enough are have book items a to departments and with a proposed provide by the accounting we to confidence been ahead that Angie, proposed the should decision for the the decision of that year have go hoping deferred. various end

-- earnings, mean of percentage what pension. the had have a But all the revenue for of apply can can for there power? we I sense have happened were roughly obviously first Okay. we mean, would just ballpark I the of I adjustments a of is the based even us that you show a is on And rule thumb to half have first if that gain of the the is the like adjustments assume Like you earnings earnings showed earnings of example, us. the half infer -- would the distribution total I can been to what XXXX? certain on contribution

high gave we the the we range why that’s Angie, you Yes. is what the lower. and believe

to especially two of You’ll is we’ve cases. thing out best can those goal Historically, well we cases, kind our rate the But obviously, the one look. point in that in And is two the have kind come do done last to we show two we’ve between best think determine rate what range goal we’ll very thought post. done, posts. you of the

three and really upped to team in Cal the putting Public getting Water of case their with cycles successful has quality game together terms the a Commission resolution California. Utilities think rate that in I a the last

is thing harder decoupling. decoupled are The we officially from

old show at the a had under now you XX consumption it of over what in consumption it’s haven’t obviously, little case. we look really our that rules, the really of to way pattern rate decoupling going in curve the kind could – was move demand-driven, bit, was, that follow business And and we’re around we that the to curve think that years. or So,

based wet on obviously, and first this had around quarter. decoupling, the consumption second And jump heat consumption. a a getting through we’re wave, very, the I this based down, will a So, to quarter. but had which seasonality fairly would is third and hitting now year, U.S., quarter and move based was wet all we’re the up massive happening on away earnings very and We going weather we on in what the bit over quite consumption expect from

not So, on know as are do variables those we that the deal the that’s internally rate answer, work clear accounting cases. a but I our with and super we

Fargo. Wells with Reeder Jonathan

usage year, in not against given weather Can the Angie's year to included the it's in settlement difficult kind expand weather GRCs you or moving there. pieces how know half, those usage the guess, to first is to the it's usage against levels Obviously, year, agreement? to very maybe on you discuss, I half question influenced how some degree, tracking first expect the maybe are in it that of of I this customer is full degree partial in come the the some levels? influenced but just

that of But future predicted into we're right I Jonathan, and that in about consumption now, the lost drought mechanism lost drought for as of mechanisms conservation that's the related revenues mechanism the left reported on to with drought happen. And the as how to at lost related will the drought, the Dave other governor rate the conservation place one from removed decoupling, uncertain the with but XX%, that continuing for -- what would is still capture a consumption continue XX% predict that the associated And executive in case. for based will that, to but long time believe challenging the of drought from having without state. because the is revenues mechanism all mechanisms the to the efforts and consumption. period or revenues orders to are related memoranda actual mandatory

those in get conservation like early mandatory looked measures when it April? was And did at, Right.

April. It was in

Okay.

XX% settlement, is the settlement? included that So partial in against what's GRC actually

Correct. right. That's

you. Got Okay.

be a supply to the I with you and to it So, or I the those a going Monterey-Style help tailwind kind loss headwind Or more you. the Do to of you lower as decoupling? favorable costs, be line? they supply are trends going I to should account of guess, headwind having this amount taking by in RAM decent Is much that usage it EPS? bottom guess, to of potentially still the as, expect, into the a guess, water year, decoupling flow cost full coming a is to loss that given these the well to

can for that I you. take Jonathan, question

So, mechanism.. be Monterey-Style we're in in is half will there is to the the if the But it if going second -- know year. don't RAM be value what positive XX%, still small at I a of consumption the

revenue Okay. And the impact the I guess, that's netting, supply? against

It's quantity there's a the single XX%, quantity And Yes. not at level. a And certain tracks now, at actual rates a going not -- rate be But to value. filled. we're it to it's just right we're XXX%. big

Okay. help decision there. Congrats of getting proposed cost the the luck results. in All I before outcome right. capital good No, case a appreciate at and year-end on the least good to rate

Sunderland Instructions.] is Baird, Davis open. your [Operator with line

proposed Good don't We morning. by And one end decision beyond deep should the in end the course, the there a going in isn't we think about CapEx too then follow-up. [indiscernible] event of the deployment risk have of year. get or this year but changes next the year, how XXXX? of I that [indiscernible] to

because, our approach takes Sure. capital And good is That's capital. case. obviously, to program a its general risk-based question a the company included prioritizing rate the in XXXX

in get case, change the case. up we our capital is and XXXX to step the case, will climate a to it that in will next in wildfire, things we're up is rate the necessary So, we've the had of get rate the system we are In maintain capital picked efforts -- up there doing the adaptation. XXXX approved project for like rate rate make [indiscernible], that spending the it improvements do case, picked feel event, not now, to order that things to have

depreciation going it period So, we rate to and interim any in pick financial how cycle. really exposure associated the the up next with be the in is

it. That's other And the just maybe question, Got about helpful. one PFOS legislation.

offset associated in benefits litigation polluters. And could -- called into time a against any of guys the some the other some of line maybe CapEx or portion going have out mentioned parties may that? of you sources that with there responsible potential I then some funding know that or the on costs. of million You these quantifying been $XXX Is

what applied? might Just may about any those other or those when funds detail be be

settlements. if group Yes. We the obviously, paper, don’t you there’s of settlement. know And these are yet. the follow litigation claimants that a to And multibillion-dollar and

We’re one those claimants. of

going is it’s how will it’s So, we in though, class active kind General representative out or don’t the I of and Counsel be know is lawsuit. going to you tell how our work very the to distributed.

understand we very will So, the the pieces counsel, work. closely to work with how group’s those counsel plaintiffs’

get judge and proposal people then the the will involved approves the the and more in a working the distributed with is into of those funds of them, the then and to So reps, the how judge then to position litigation once we’ll settlements made they clarity get judge a adopt distributing those has funds. start it be and

all and this millions a but it, going treatment. not will the dollars. associated main point to costs of with millions and because those standpoint funds go be just about help settlements I anticipate, offset anticipate opinion, personal going I the are is it’s those the from capital that to an to again, investor And

So, should that’s customer, where be. it and benefits really the it

capital that million much and this we so, then the that left invested going treatment, to cost for get that. talked And XXXX, try our capital But XXXX top PFOA to of doesn’t $XXX obviously, of billion to offset on as $X that and program, about it’s be want because PFOS treatment. incremental to rate-based that for is XXXX, over will that I cover what’s

you the try the customers. really effect And having run want of minimize rate shocks. the to We so, risk to of

I settlement very are likely. So, or in think XXXX, funds, XXXX very,

its or poorer get Valley, Area. when different same that, federal it’s the affluent in customers, not standards in we’re treatment from a the especially environment, to lower as the Bay the state of an that the for like same water thing of of It’s and and at economically area California looking trying In rural areas quality for communities. Area one PFOS money it’s addition funds Bay connections to lower grant and a put some the and much number to you number level, overall really go underserved of other to have much Silicon

offset funds litigation all grant those proceed will for to costs custome’s. and So, go dollars from the

was That final the Kropelnicki over back question. closing now Mr. remarks. our for call I'll turn to

all, first Jack, Hey name right. you my for All thank of right. getting

right. You're record, took just or till before my out XXX of who the about name for X it And the me I it get it right. about of say spell can age XX could

correctly. thank you my name So, for having

Everyone, thanks taking model that off a for on to the all and general XX. execute joining we're we're to Again, But eyes forward our case, while earnings the our avail us. can. point. talking be going that's business QX focal call rate plan business look October eyes full and not everyone doing to that, will our our we're the we to of We'll end on at

delays. you working with the this morning. with Apologies and for issues being We had technology thank technical correctly. So, us some for the lines

good Thank So, have and we'll a thanks day. us, later. for talk to bearing everyone and you with

your conference. This for thank We you concludes today's participation.

now may You disconnect.