Portland General Electric Co
NYSE:POR
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Portland General Electric Co
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Good morning, everyone and welcome to Portland General Electric Company’s First Quarter 2021 Earnings Results Conference Call. Today is Friday, April 30, 2021. This call is being recorded. [Operator Instructions] For opening remarks, I will turn the conference call over to Portland General Electric’s Senior Director and Investor Relations, Mr. Jardon Jaramillo. Please go ahead, sir.
Thank you, [Rand]. Good morning, everyone. I am pleased that you are able to join us today. Before we begin this morning, I would like to remind you that we have prepared a presentation to supplement our discussion, which we will be referencing throughout the call. The slides are available on our website at investors.portlandgeneral.com.
Referring to Slide 2, some of our remarks this morning will constitute forward-looking statements. We caution you that such statements involve inherent risks and uncertainties, and actual results may differ materially from our expectations. For a description of some of the factors that could cause actual results to differ materially, please refer to our earnings press release and our most recent periodic reports on Forms 10-K and 10-Q which are available on our website.
Leading our discussion today are Maria Pope, President and CEO and Jim Ajello, Senior Vice President of Finance, CFO and Treasurer. Following their prepared remarks, we will open the line for your questions.
Now, it’s my pleasure to turn the call over to Maria.
Thank you, Jardon and thank you all for joining us today. Our financial results this quarter were strong. We reported net income of 96 million or $1.07 per share compared to net income of $81 million or $0.91 per share in the first quarter of last year. In light of the strong quarter and positive outlook, we're reaffirming our 2021 earnings guidance of $2.55 to $2.70 per share, as well as our long term earnings and dividend growth rates.
Jim will cover first quarter results in more detail, provide regulatory and capital updates as well as discuss the outlook for the rest of the year.
This quarter again presented significant weather driven operational challenges. And I'm proud of how our teams came together responding to the most severe ice, wind, and snow storms in our history, improving our operations and achieving important customer focused results. In February, we restored over 750,000 customer outages, as nearly half of our customers were without power, many of whom experienced multiple outages over more than two and a half week period.
I want to recognize the hard work of our co-workers, mutual aid crews, and assistance from as far away as Southern California, Utah, Montana to Alberta, British Columbia, all of whom, in the midst of a pandemic went above and beyond to restore power quickly and most importantly, safely. Even as we speak, crews continue to repair equipment and clear downed trees as damage is still extensive.
As of March 31. The cost of the February storm were $87 million, which Jim will discuss in detail. The recent storms and wildfires last fall on top of the pandemic with so many people living, working and learning remotely underscore the importance of our ongoing system hardening and reinvestment programs combined with the deployment of digital capabilities, AI and smart grid technologies.
Today, versus a year ago, customers are experiencing about 16% less planned outages. Average outage restoration times are about 7% faster, and outage text notifications and digital payment options are making a difference in customer satisfaction. And equally important to note is what did not happen during the February weather events. Our generation plants as well as wind and hydro facilities operated seamlessly. And power was generated across the region throughout the harsh conditions.
Turning to low growth in the economy. For the last couple of years we have discussed the strength of our service territory. Overall year-over-year customer count increased more than 1% and load growth was up 1.2% on a weather adjusted basis, and 2.3% after accounting for the harsh winter conditions. Residential usage was up 3%, weather adjusted offsetting commercial declines of 5%. Industrial uses grew an impressive 8% powered by the strength of the tech and digital sectors.
Expansion within our region of several digital companies and the global semiconductor shortage are expected to continue and solidify our positive outlook. Overall, Oregon's economy is recovering with nearly two thirds of the state's pandemic driven job loss recovered. Unemployment currently stands at 5.7% across our service territory.
ESG, Portland General has long been an ESG leader. And this quarter we joined the Amazon Climate Pledge in keeping with our commitment to reduce carbon by 80% by 2030 over 2010 levels, and our aspirational goal of net zero by 2040. We also know that to make real progress on climate, we need to partner in addressing the admissions from transportation and other sectors.
Last week in partnership with Daimler Trucks North America, we celebrated the opening of the first of its kind heavy duty electric truck charging site. This site aligned with the West Coast Clean Transit Corridor initiative to electrify along the I5 corridor from the borders with British Columbia to Mexico. And finally, I'd like to address the ongoing social unrest and importance of our diversity, equity inclusion work.
In these tumultuous times, corporations have an opportunity for change. At Portland General, our DNI priorities are focused on recruiting, retaining, training, and promoting from our front lines to our board of directors. We are committed to transparency and have published for three years running our workforce and pay equity statistics. We've made good progress, but we know that there was still much work to do. As we look to the year ahead, we're excited to lead a clean energy transformation and humbled by the challenges as we work seamlessly to integrate ever increasing amounts of renewable and distributed energy resources into a growing, reliance and resilient grid, meaning customers needs for safe, affordable, clean energy.
I'll now turn it over to Jim.
Thanks, Maria. I too was impressed with the efforts of our teams across the company to restore power safely to customers during the February storms. As we turn to economic conditions, it's clear that we're beginning to see recovery take hold approximately 40% of Oregonians have had at least one vaccine shot and as of mid April K to 12 public schools reopened for in person education, either hybrid or full time.
As of March 2021 the unemployment rate in PGE service territory was 5.7% compared to a 14% peak in April 2020. In the first quarter, Oregon saw accelerated job growth, and as of March had recovered over half of the jobs lost last spring. Harder head segments, such as leisure and hospitality have posted the noteworthy gains after experiencing a second wave of job losses in late 2020. While there are green shoots of recovery, we appreciate that many of our customers are still facing challenges and we embrace our role as an essential service provider and partner to Oregon communities.
Turning to Slide 5, I'll cover our financial performance. As Maria said, we reported $1.07 per share compared to $0.91 per share in the first quarter of 2020. First, we saw a $0.06 increase in total revenue. This is composed of $0.04 due to higher loads which increased 1.2% year-over-year, weather adjusted in a $0.02 positive impact from weather.
Additionally, there was $0.02 from the earnings power associated with the Wheatridge renewable energy facility, which was placed in service in the fourth quarter of 2020. Next, a $0.03 decrease in net variable power costs driven by lower hydro wind production in 2021. While our wind production exceeded our expectations it was still less than the unusually high levels of production experienced in 2020.
A 0.07 decrease was associated with higher operating and maintenance administrative expense which consists of $0.05 of favorable fixed plant O&M, primarily due to lower maintenance expense that are generation facilities. This was offset by $0.12 of unfavorable administrative expenses which included $0.03 of higher employee benefit expenses, $0.03 of higher legal and professional expense and $0.03 from the timing of bad debt recognition under our COVID deferral and $0.03 from other items.
A $0.05 increase was associated with lower depreciation and amortization expense largely as a result of asset retirements, which were partially offset by capital addition. There was a $0.04 increase in other income primarily attributed to market returns on the non qualified benefit trust. There was an $0.11 increase from lower tax expense, primarily driven by a onetime recognition of a benefit from a local flow through tax.
Turning to the regulatory update, we are continuing to evaluate our cost structure to ensure that we're providing safe, reliable and affordable service to our customers while making investments that leverage the use of technology and advance our strategy. We are still assessing our need and the appropriate timing to file a general rate case with the Oregon Public Service Utilities Commission for a 2022 test year.
This last week, we requested a docket to be open to select an independent evaluator with stakeholders for our upcoming RFP. This is the first step towards the RFP, the process of which is expected to continue into 2022 before finalizing potential selections. The RFP will seek both renewable energy and dispatchable resource bids.
PGE has identified a roughly 500 megawatt capacity need that it will seek to fill as part of this 2021 all source RFP. For the 2019 acknowledged IRP PGE is permitted to have 150 megawatts of energy producing resources like renewables to fill a portion of this capacity need.
We plan to file a benchmark resource into this competitive process. Additionally, as it relates to capacity, we are continuing to pursue cost competitive agreements for existing capacity in the region. If PGE is successful in these negotiations, it might reduce the size of the 2021 RFP, depending on the contracting dates for an existing capacity resource.
Regarding the deferral related to our storm costs, detailed on Slide 6 through March 31, 2021, we've incurred an estimated $87 million in incremental costs due to the February storm, of which $33 million were capital expenditures and $54 million were operating expenditures associated with our transmission and distribution system.
We have a storm deferral mechanism that collects $4 million annually from retail customers to cover incremental expenses related to storm damages and we defer any amount not utilized in the current year.
In response to the February storms, we exhausted our storm collection balance for 2021 of $9 million to offset operating expenses. This brings the cumulative incurred costs from the February storm to be estimated at $45 million net as of March 31, 2021. We have filed an application for authorization to defer emergency restoration costs for the February storms. We expect a decision from the PSC on this in 2022. We're confident these costs were incurred prudently in response to this unique and unprecedent storm. Although there are comparable storms of similar size and duration in other regions at a similar expense, the OPC has significant discretion in making the final determination of recovery and their conclusion of the overall prudence.
Turning to slide 7, which shows our updated capital forecast through 2025. We've increased our 2021 capital expenditures by $45 million this year, the majority of which relates to the capital expenditures and the recent storm restoration. Our capital plan remains on track and we continue to invest primarily in projects that enhance the resiliency and reliability of our system for the benefit of customers while maintaining affordability.
Given our guidance today we raised our O&M guidance by $20 million. This is a response to several factors. $12 million of this increase is associated with the February storm response expense, which is ultimately offset in revenue and the remaining $8 million is associated with additional initiatives to address wildfire risk, improve our outage restoration estimation and outage response processes.
On to slide 8, we continue to maintain a solid balance sheet, including strong liquidity and investment grade ratings, accompanied by a stable outlook. Based on our strong financial condition we do not expect to issue additional equity in 2021. We expect to fund 2021 capital expenditures and long term debt maturities with cash from operations during ‘21 which is expected to range from $600 million to $650 million. We've also increased a long term debt issuance later this year up to $350 million which will refinance the short term note closed earlier this year and satisfy our 2022 requirements. Total liquidity is $780 million, all of which is available.
Earlier this week, our board approved the dividend increase of $0.09 per share on an annualized basis, which represents a 5.5% increase. This increase is consistent with our long term dividend growth guidance of 5% to 7% while observing a dividend payout ratio of 60% to 70%.
Turning to our 2021 outlook, our first quarter performance was strong. We are on track to achieve our guided range and finish within the long term growth guidance of 4% to 6% from the 2019 base year. We expect continued impacts from the pandemic on the economy and regional power picture through the second quarter. We anticipate a similar load competition to the trends that we've experienced over the last two quarters. Our commercial customers face risks associated with economic impact of the pandemic in Oregon. But the strength of our residential and industrial energy deliveries has mitigated this decline.
Right now, we're still under the cap of our decoupling mechanism. Residential customer usage on a weather adjusted basis is above the established threshold and is expected to be refunded to customers. As I settle in, I can see excellent fundamentals on the business. Load growth is strong and we continue to see opportunities to drive efficiency in our operations mostly through an investment in technology and developing a smarter, more resilient grid, all of which will result in better outcomes for our customers.
Overall, we are continuing to reaffirm our full year 2021 earnings guidance of $2.55 to $2.70 per diluted share, based on the assumptions outlined in our press release and our long term growth target of 4% to 6% over time.
And now operator, we're ready for questions.
Thank you, sir. [Operator Instructions] We have our first question from the line of Insoo Kim from Goldman Sachs. your line is now open.
Thank you. Good morning Maria. First question on just the great performance in the quarter and setting up for the rest of the year. Could you just run through maybe the FLV items like the tax benefit this quarter some point for some increased L&M and how much of that you had already anticipated? How much do you think maybe above the plan just more detail there?
Yes. Thanks Insoo. So the tax benefit, the $0.11 I mentioned here on the earnings walk bridge is really $0.09 associated with a local pass through tax. That's a onetime adjustment. So of course that wasn't in the plan as we go forward here. So and the rest of it, call it a couple of cents miscellaneous items on the tax side. So that is really the tax side of a local pass through tax that should have been booked earlier and overtime. Very simple.
Okay. Got it. And if that's the case, does that mean just based on when you were giving the original 2021 guidance, all else equal, I know you're $0.09 of it is it's more one time but you're trending towards that upper half.
I wouldn't necessarily say that at this point in time. So we're really not altering guidance for the balance of the year. But this particular item wasn't included in the guidance that we offered earlier in February or today for that matter.
Understood. And one more for me I did see in the 10-Q that I think the futures trading commission has an investigation to the August trading incident. I'm just not familiar with the process with that agency and what typical range of outcomes result from something like this. But I don't know if there's anything I can shed in terms of what we could expect over the next coming months?
Really nothing to shed in the way of predictions. These are very early days in the process like that. I would say it's not unexpected in matters such as this. Of course, we're going to fully collaborate with any review that's done by the agencies. And I will tell you were fully disclosed on the matter. So in terms of the trading matter from last year and obviously the board concluded its special review on the issue.
Got it. Thank you so much.
You're welcome.
Thank you. Our next question is from the line of Julien Smith from Bank of America. Please go ahead.
Hey good morning team. Thank you for the time and opportunity. If I can kick this off, just on the rate case timing super quickly here. You just said you don't necessarily know when or if still but I presume that the positive results in the first quarter drive delayed some of the timing here or how are you thinking about this in terms of the latest updates on factors if at all.
Julien it's Jim. How are you? So I would say to you that we're continuing to look at it literally all the time. We're constantly examining our cost structure, how we're managing through it, we're looking at community impacts. COVID is still with us, of course. But we're managing well I think through the period of time and if we can be sure to manage and provide good customer care and pricing that gives us a little more opportunity to delay the filing.
Excellent. Okay. And then if I can, I think also in the 10-Q there is some discussion around this, I think it's called the green future impact program. But that seems like it might have some incremental opportunity. Can you talk about that relative to plan here and how you think about that against other generation needs.
Yes. It's pretty early on. We've just received the order. It's an incremental 200 megawatts you probably have noticed. And there is an opportunity for us to provide more green power which is in great demand in our region and territory. But at this point in time I couldn't be very specific about how we're going to roll that out. We're still examining our options on that one. But we've got the largest volunteer renewable energy program in the U.S. still this will add to that opportunity but the details we don't quite have yet.
Julian it’s really important that we're able to serve customers with the clean energy that they want whether that is small municipal customers. Jim just noted our voluntary renewable program, which is largely a residential and small commercial program but we also to our largest customers they're increasingly wanting 100% green energy. And it's important that we're able to deliver that to them.
Right, then maybe to clarify this, on this program, your ownership opportunity or perspective ownership opportunity?
Yes. I mean that's a possibility but it all depends on what's competitive and what's the best thing for customers.
yes. You will have noticed the prior, Julian, you probably noticed the prior announced a transaction with 17 C&I customers earlier a number of months ago. So I would just leave it as such that this could be a buy/build opportunity. We're not sure yet.
Got it. excellent. And then if I can squeeze it since I know that you in particular we're at some Senator [indiscernible] and this Wyden tax bill certainly is novel in terms of how we would sort of rewrite the renewable tax code. I'm curious if you have any perspective to add to that certainly early days all together on tax reform and the subject of renewable tax reform is something that we haven't really broached meaningfully yet. So any thoughts on that I know, for instance, it includes a nuclear PTC. There is a few other pieces there that certainly are novel to the industry.
Great. Well, thank you Julian. And yes, what Senator Wyden is trying to do is really rationalize and modernize a lot of the tax incentives that go to our industry and the energy industry in total and really focus those on clean energies on new technologies. His bill is unique in a couple of ways. First it's technology neutral. So all technologies is to the extent that they reduce carbon are on the table. The other is as it does not pick winners and losers. So there's some fixes for the normalization issues that utilities have faced in the past, creating a much more level playing field and allowing for acceleration of a clean energy future.
It includes transmission. It includes transportation sector and it does not include nuclear at this point in time although there's a lot of discussion taking place around that, as you know, 20% of the energy generated in the country is nuclear and that's an important source of clean energy as we move forward if we're going to hit the aggressive 2030 and then 2035 goals as laid out by the administration.
Got it. Thanks guys. I'll pass it on from here. All the best.
Thank you.
Thank you. Our next question is from Anthony Crowdell from Mizuho. Please go ahead.
Hey, good morning. Hopefully just two quick ones. One is any contribution this quarter from the PKM mechanism? I apologize if you guys went over that already.
So in general when we look at the PKM, we look at how it whether it's over or under versus our baseline is calculated on a full year basis and this year, in the quarter, we were about $13 million under the baseline. However, it's just really too early days. As you probably have noted the West is having an overall drought. Our hydro conditions remain pretty good in the Pacific Northwest right now. So the biggest mover of power prices from a hydro perspective is the Columbia River Basin measured at the Dallas, which is right about 89$ - 90%. But we are, I think it's just too early to call for the year.
Okay, great. And then if I could follow up on Insoo's question. I think it was an $0.11 benefits tax rate this quarter. Jim went over the details between them and I think $0.09 of the $0.11 was more of a one time in nature. How does that correspond to also the rise in guidance meaning are you using the tax benefit maybe it's an opportunity to maybe pull forward guidance for some wildfire risk. I know you had the storms, but also maybe pulling forward and doing some interim wildfire risk to give you some headroom later in the year or maybe in 2022?
Yes. No. As Jim noted, we've not changed our guidance and we're not picking any side of the ranges of our guidance. Again, it's just too earlier in the year. We did increase our O&M costs as Jim outlined. And we had the one time issue literally from the accounting adjustment we had on it and it's a relatively small tax on it. It just was overtime.
Yes. Anthony, I just want to point out that there is really no necessary connection between that tax item recognition and the O&M increase. All it has to do primarily with the storm and the 8 is prepares better for outage and other uses of technology on the grid. So apple and an orange, I would say.
Yes. I would say overall we are investing in reliability particularly as we look at significant weather events potentially fires and others, making sure we are best prepared as possible.
Great. And then just lastly also into addresses on the investigation with the SEC and then also in the Q. I think there's several lawsuits that have been filed relating to the trading incident last year. Just because I'm not familiar with the process is an investigation something you could settle, like you meet with the SEC and you settle or that's not how an investigation works?
We're entirely unsure of the direction this will go. As I said, it's very early days and so I wouldn't want to speculate on the outcome of that. There's just no way to predict the outcome. So I'll just leave it at that.
Great. Thanks for taking my questions.
You're welcome.
Thank you. Our next question is from Brian Russo from Sidoti. Please go ahead.
Hi, good morning.
Good morning.
So just to follow up on the PCAM, as you mentioned, you’re $13 million below as of March of this year. I think the commentary in the Q is that you expect to be below the baseline for the full year of 2021. But it's basically just extrapolating what's recorded as of the first quarter or is it kind of projecting for the remainder of the year based on hydro conditions and power prices, etc and then does your guidance assume a zero PCAM balances?
Yes. Our guidance has a little bit of a balance as we noted in the Q below the baseline. This time last year we were $20 million below the baseline. And you'll look at the prior year we were actually above the baseline in 2019. I just, it's just too early days to tell we're going to very interesting energy markets in the Pacific Northwest. The market prices are clearly higher than anyone would have expected this time last year or even a couple of months ago. And I think we just have a good solid balance of the year to work through and I don't think we'd want to call it until we are clearly past the third quarter time period.
Okay, understood. So and then also just a follow up the $0.03 decline or headwind on net variable power cost is basically the delta of the $20 million below in first quarter ‘20 that you mentioned, versus the $13 million below that you are in this first quarter. Yes. Okay.
Exactly. One of the things I think is really important to point out last year was in 2020 a remarkably good wind year. We had good hydro, but we had significantly above average wind conditions. It was a terrific wind year.
And then on the RFP, you mentioned you hope to finalize the independent auditor process sometime in 2022 and then start the RFP. Any idea on timing first half of 2022 or second half of 2022?
Yes. It's hard to tell exactly. But I would say by the end of the first half we'll be relatively set to go there. But the main driver here is to get [indiscernible] capacity in service by 2024. So everything will be sort of solved from that end point and go backwards. So whether we're one month or one quarter and 2022 is another issue but we're really all about getting it in service by 2024.
One thing I would note in our past processes is the independent evaluator discussions and selection processes, criteria has been particularly time consuming as we work through it with parties and everyone involved. So I would expect unless something changes for this to take longer than many states, many other states probably.
Understood. And then lastly, Portland General is clearly a leader in electrification, in decarbonisation and made a number of announcements including the truck battery, charging stations a couple of weeks ago with Daimler. Just wondering when might this materialize into investment scenario that gets layered into CapEx that you're able to earn a return of and on future investments?
Yes. That's a great question and it's one we're asking ourselves as well. The investment categories come in a couple of different buckets. The first one is just in terms of charging stations themselves and just the ability to charge whether that's in the right away whether that is a residential whether that is industrial, commercial, whatever but next is really what I call the infrastructure, and in particular, what we call the make ready.
So all the cabling that leads to those charging stations that also includes upgrades to substation so in many instances there's a twofold as it enhances reliability and upgrades aging infrastructure to accommodate more charging.
And then I think third is really energy usage but really flexible energy usage so that we're able to charge batteries or maybe even in the future vehicle, the grid that optimizes more renewable energy allowing us to not only charge when the sun is shining and the wind is blowing, but when prices are at their lowest.
So we really see the opportunities here as very synergistic with our regular utility operations and enhancing reliability and the grid performance overall. So we look forward to the day when there is that much more volume as much as anyone does.
Okay, great. Thank you very much.
Thank you.
Thank you. The next is from Sophie Karp from KeyBanc. Your line is now open.
Hi, good morning. How are you?
Good morning.
So couple of questions here, maybe, first on how you’re thinking about the timing of the GRC in the context of also having to ask for the storm recovery. And maybe along those lines, if you could comment on what kind of mechanisms you envision maybe you could you do something like securitization for the storm costs or is it just going to be [indiscernible] rates. How should we think about this?
Thanks Sophie. It's Jim. So we're laying out the strategy right now. So we don't have it quite done to talk about today. But obviously we have a number of deferrals. So the wildfire existing, COVID existing, this new deferral that we've applied for on the recent storm is there and then the possibility of a rate case. So we'll collaborate with our regulators to determine whether or not we bring those all together or we talk about those deferrals on a separate track.
One clarification we don't have the opportunity to do a securitization. But I believe we'll talk to the regulators, of course, about how we amortize these deferrals over some period of time. It could very well be wrapped up in the rate case as well. So the options are open and they're subject to conversations with the regulators which haven't happened yet. I would say.
Got it. Thank you for the color here. And then on the RFP process. So I think I heard correctly that you expect to bid the benchmark resource into that. Is that accurate? And if so, can you give us any color on what kind of resource could that be and sizing of that?
Yes. So out of, so it'll be about 150 megawatts. It'll be a non-emitting resource may include batteries as well. And so at this point in time we're focused on picking the independent evaluator that's just kicked off. As Maria just said it could take many months to accomplish that. And so in the meantime we're evaluating what our options are for the RFP. We will bid a benchmark resource into that campaign.
Got it. Thank you. And lastly from me, maybe on the wildfires, like you've correctly pointed out the West is still in the state of drought this year and is there anything that you're doing maybe differently this year ahead of the wildfire season given the experiences from 2020 to preemptively mitigate some of the potential damages that may ensue?
Sure. Thank you. As you know we've been thinking about preparing and learning from our utility peers from California, Arizona, Colorado and actually also those from Australia in terms of wildfire mitigation, the detection of wildfires and then how we handle them should that occur in our service territory. Right now we're doing a tremendous amount of vegetation management. We're also working in collaborating with our community partners at the very local level and overall enhancing our preparedness. It's really around continuous improvement and we learned a lot from the wildfire season last September and continue all of the work that we have been doing over the last number of years.
Thank you. That’s helpful, thank you.
Thank you. Our next question is from Travis Miller from Morningstar. Your line is now
open.
Good morning. Thank you.
Good morning.
Just a real quick one on the dividends. Confirming this is the with the [indiscernible] you had this quarter, this is the typical cadence that you expect to get back to going forward all else equal. Is that that just want to confirm that.
That's right, Travis. The board adopted a increase 5.5%, $0.09 a share $1.63 to $1.72 and that would put us on our cadence, our regular cadence.
Okay. Great. And then you got my EV question that I was going to ask, but let me ask a little follow on to that as you talk about these different areas I understand that the infrastructure as you characterize it in terms of the 123, then infrastructure part would be kind of your thing. What's your long term strategy in terms for lack of a better word, outsourcing, the charging the energy management parts, the in home energy management, all of that stuff? Obviously, we've seen a lot of companies come out with services like that and with plans to grow like that. What's your long term strategy in terms of owning that energy service part whether it's the charging stations or the actual usage?
That's a great question and actually, if you go on to our website, you can see a marketplace where you can buy thermostats with ETO Energy Trust of Oregon credits and participate in a distributed energy program through Portland General. We're building out an integrated operation center which will enhance our capabilities of managing a bi-directional grid. And we remain very focused on serving customers. As an example, we have distributed energy resource test beds where we're actually interacting with customers on their cell phone. They can opt in to energy events and reduce their energy usage during critical peak times and shave off almost 10% on their bills during those months. And so for us, there's a tremendous amount of opportunity. We're also partnering with number of technology partners. We don't expect to do at all and many companies have terrific technologies that will enhance the capabilities of reliably managing the grid as we go forward.
Okay. And then if we think about just in terms of accounting and cash flow, would you think about that as kind of a recoverable O&M such that over time we would see O&M go up but then kind of EV related charges would flow through regulatory rates?
Yes. We would expect that the work that we're doing is all within the utility. It's to enhance customer's experience, particularly as customers expectations change quite dramatically. And all of those actions really contribute to a more reliable grid. We have used our distributed energy system, our standby generation system which is quite significant several times during critical peak times to shave off those peaks creating less stress on the overall reliability of the system and enhancing our resource adequacy. So we expect to only continue. We see all of these things as synergistic and most importantly as we add more renewable variable resources they're not just synergistic, they're essential to maintaining reliability of the system and serving customers with the clean and affordable energy they want.
Okay, great. I appreciate it. Thanks.
Thank you.
Thank you. I'm showing no further questions at this time. I would now like to turn the conference back to Miss Maria Pope.
Thank you very much. We appreciate your questions and interest and joining us for today's call. We invite you to follow up as well as to join us after the second quarter in July. Thank you very much. Bye-bye.
Ladies and gentlemen this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect. Have a great day.