California Water Service Group (CWT) 2014 Q1 法說會逐字稿

(Operator Instructions) Good day, and welcome to the California Water Service first-quarter 2014 earning results conference call. I would now like to turn the meeting over to Mr. Thomas Smegal, Vice President and Chief Financial Officer. Please go ahead, sir.

Thank you, [Kyla], and welcome everyone to the first quarter 2014 results call for California Water Service Group. With me today are Martin Kropelnicki, President and CEO; and Paul Townsley, who's our Vice President of Regulatory Matters and Corporate Relations.

A replay of today's proceedings will be available beginning today, May 1, 2014, through June 30, 2014 at 1-888-203-1112 or at 1-719-457-0820 with a replay pass code is 866-7775.

Before looking at this quarter's results, we would like to take a few moments to cover forward-looking statements. During the course of the call, the Company may make certain forward-looking statements. Because these statements deal with future events, they are subject to various risks and uncertainties. Actual results could differ materially from the Company's current expectations.

Because of this, the Company strongly advises all current shareholders, as well as interested parties, to carefully read and understand the Company's disclosures on risk and uncertainties found in our Form 10-K, 10-Q, and other reports filed from time to time with the Securities and Exchange Commission.

Just as a reminder, we expect to file our first quarter 10-Q later today.

Now, let's get into looking at this quarter's forward-looking statements. I will go over the financial results on the income statement. In the revenue side, we reported $110.5 million of revenue for the quarter. That's down 0.8% or $0.9 million. The big factor here is our unbilled revenue accrual. Because $2.6 million less than in the first quarter of 2013.

As a reminder, unbilled revenue is an accrual that we perform at the end of each reporting period representing water which was used but not yet billed for. Unbilled revenue is not included as a component of the RAM mechanism.

Now, that's the decoupling mechanism that we have in California. It can vary significantly, particularly in the spring and fall as the weather changes here in California. Recorded sales once they occur are reflected in the RAM balances. Our production costs for the quarter, $45.4 million. That's up 8.9% or $3.7 million.

The primary drivers here are increased wholesale water prices and a 6% increase in water production over the same period last year. These costs are booked to the MCBA. In addition, our mixed changed, I think favorably. Marty will get into that a little bit later. But our water production from wells increased.

The Company pumped 46% of its production from wells as compared to 43% in the first quarter of 2013. Our purchase water declined from 52% to 50% in production while our surface water sources declined from 5% to 4%. While looking at the expense side now, for administrative in general, we recorded $25.1 million for the quarter. That's down 0.6% or $0.1 million.

As we indicated at year-end, and anticipated, our pension costs are lower by about $1.8 million. That reflects a different interest rate, discount rate environment. This benefit flows into a recorded balancing account and it does not effect our overall earnings. The employee medical costs were up $1.4 million for the quarter compared to the quarter last year. That reflects several cases with high hospitalization and drug costs.

The Company maintains a self-funded medical plan for most employees. There is variability from quarter to quarter in these expenses. Our wages were up $0.6 million or 3.5%. That affects the A&G and also the other operations. Other operations were $16.4 million for the quarter up 4.7% or $0.7 million. That reflects again the labor cost and is offset somewhat by our plan reduction and conservation expenses due to the success that we've had in the last three years meeting the governor's 20 by 2020 conservation targets in California.

On the maintenance side, we've recorded $5 million for the quarter. That's up 21.1% or $0.9 million due primarily to increases in the cost of maintaining our well production facilities and pumping equipment. Our depreciation costs, $16.1 million for the quarter, an increase of 9.7% or $1.4 million. This is driven by last year's capital additions, 23 capital additions and raising the amount that we're depreciating on.

Our net other income, it decreased $0.6 million to $0.1 million during the first quarter as compared to the prior year. That's a combination of the lower revenue from our unregulated contracts as well as our insurance plan and benefit obligations. Our net loss for the quarter was $5.5 million compared to a $1.1 million loss in the same period last year.

Our net loss per share was $0.11 on a fully diluted basis for the quarter as compared to a net loss of $0.03 per share in the first quarter of 2013. Now, I'd like to turn it over to Paul for a regulatory update.

Thank you, Tom. As I previously reported, last October 30th, we filed a rate settlement agreement with the California PUC. This settlement agreement was signed by CalWater, the Office of Ratepayer Advocates, and ten other parties to the case.

On January 6th of this year, the evidentiary process was completed with a filing of briefs by the various parties to the case. The hearing officer took the case -- took the settlement agreement and all of the other evidence presented to him. It has been working on a draft decision for subsequent Commission action.

On March 28th of this year, the hearing officer sent out a handful of questions to the parties to further clarify parts of the settlement agreement. The parties responded to his questions last week. The case is now back in the hands of the hearing officer.

Since the final decision on the case has been delayed past January 1, California Water Service has approval to retroactively charge customers the new rates approved by the Commission back to January 1 once the new rate case decision is final. In the meantime, we are planning and preparing for our next general rate case, which will be filed in the middle of 2015.

Last month on April 1, we filed two memorandum accounts with the California PUC related to the ongoing drought. The first memorandum account updated our drought management plan, which is known as Rule 14.1. In this plan, we are asking our customers for a 20% voluntary reduction in water usage. The second memorandum account we filed on the same day requests Commission to approve recovery of incremental operating and administrative costs associated with the implementation of Rule 14.1.

Both of these memorandum accounts need to be -- we are awaiting Commission approval on them. Also, as I previously reported in January of this year, the Hawaii Public Utilities Commission approved the settlement agreement we reached with the consumer advocate on our Pukalani Waste Water system. We've now reached settlement agreements with the consumer advocate, the Hawaii consumer advocate on all three Waikoloa Water and Waste Water systems we own. These include the Waikoloa Water System, the Waikoloa Sewer System, and the Waikoloa Resort Utilities System.

These settlements have been filed with the Commission. We are now awaiting an action on these settlements. In the meantime, in Hawaii we're gearing up for our next rate case filing there which involved the Kukio Water and Wastewater System. Overall, I believe that California Water Service is doing well in executing our rate case strategies in both Hawaii and in California. That's the end of my report.

Thanks, Paul. Now, I'd like to cover some highlights on the balance sheet. For plant, our net utility plant grew to $1.523 billion during the quarter. A work in progress increase from $109 million to $115 million compared to year-end. Our Company funded CapEx was $23 million for the quarter.

The Company still plans to meet its CapEx target of $110 to $130 million as previously disclosed and previously discussed on the prior calls for the Calendar Year of 2014. For our cash management, the Company at the end of the quarter had $21.7 million in cash and $64 million outstanding on its revolving credit facilities. That's a combination of California Water Service companies, the credit facility, as well as that for the Group.

Our balance in the major balancing account, the RAM and [MCBA decoupling] account remains stable this quarter, at year-end, and at the end of the first quarter. It is at $44.5 million foreseeable balance.

We do anticipate as I mentioned before that as we get a new decision and a new adopted quantities, that amount should decline. We should see that regulatory balancing account shrink. Now, I'm going to turn it over to Marty for some general comments.

Thanks, Tom, and good morning, everyone. I have three things I'd like to cover this morning. One just to take a moment to reflect on the first quarter and a couple of things that I see in the financial statements and the Company's performance.

Two, provide you an update on the drought conditions in California. Perhaps more importantly talk about what we're doing as we prepare for the longer summer months. Three, talk about our next steps as we wait for the proposed decision from the CPUC adopting this settlement in California. First, let's talk about the quarter.

As most of you know, Q1 is always our leanest quarter. Overall, lower demand driven by the winter months coupled with the fact that approximately 70% of our cost is recovered through the quantity change. It means that any time you have a -- the quarter that has the lowest amount of demand. It's going to be difficult.

This is especially true, we were waiting for the CPUC approval of the all party settlement to establish new rates and deal with the regulatory lag. Some of our costs that we're dealing with like medical, et cetera.

They are in the fourth year without being reset. The previous four years we had inflationary increases. But anything that has grown faster than inflation is certainly having an effect on our bottom line.

Having said that, the results were in line with our expectations for the quarter. We, as we talked about on the year-end earnings call, with the delay going past January. We thought we might be a little late. Our results are in line with managed expectations for the quarter. A couple of key points in the financials that I think are noteworthy.

First and foremost, A&G expenses when you strip everything out and just look at pure A&G. They're down slightly despite the increases in the healthcare and higher wages. The company has done a good job and remains keenly focused on cost management practices. It will do so accordingly as we go through the summer months.

Now that we have a number of balancing accounts looking at the controllable aspects of what we can control, A&G become very important. We're very focused on doing that. As Tom mentioned, we did have a $900,000.00 increase in maintenance expense. That directly corresponds to higher water production for the Company.

As many people know, the water we produce is significantly cheaper for our customers than purchased water. More importantly as we go into the drier summer months, the Company is doing everything possible to ensure our water supply, treatment, and distribution systems are in place and meet customer demands as we deal with the drought this summer in California.

Moving on and talking about the drought. The current drought in our state of California continues to get national attention since our last discussion at the end of February. Various parts of the state have received a decent amount of rain over the last 45 days.

While the amount of rainfall is still well below normal, it's been enough to help increase reservoir levels and approve part of the snow pack. As of the middle of April, reservoir storage in the state of California, it's averaging about 66%. That's up significantly from where we were at the year-end earnings call.

Compare that to the drought of 1976, 1977; at this time in '76 and '77, they were about 48%. You've seen some runoff go into the reservoirs, which has helped us. In addition today is the last kind of sampling of the snowpack in the Sierras. We're waiting to see what the snowpack levels look like.

As of the last reading of the snowpack, which was a few weeks ago, the average across the state was about 19% of normal. We did get rain. It did go in the reservoirs. But the snowpack is still fairly light. That means we're going to be in for some long summer months with that snowpack not being in place to help recharge some of the water systems. But things have improved.

The Department of Water Resources in the State of California and the State Water Project has increased its allocation about a week and a half ago from zero to 5%, which is a move in the right direction. While they did increase it, assuming it stands at 5%, two thins kind of stand out to me.

One, it's still the lowest allocation since the state water project begin in the '60s. Two, the allocations really don't start until the end of September. Again, looking at the summer months, that's going to be kind of the crunch zone, I think for the state of California. Making sure we do everything we can to make sure our systems are ready to deal with the drought.

Again, that maintenance number that you saw an increase on. The increase that you saw in the Company's production. That's all planned from the Company in terms of getting ready to deal with the drought over the summer months. What are we doing to deal with the drought? One, we have fully ramped our conservation programs that are focused on outdoor water use.

You've had a hardening of demand in the state of California as we've aggressively gone after conservation over the last four or five years. As you put more conservation devices in homes, the demand becomes harder. We're now moved to outside the house looking at irrigation, et cetera.

Things that we think have a bigger bang for the buck in terms of reducing water consumption immediately here in the short-term; and having a nice, long term payback. Next week the Company's [Radio and May Day] campaign kicks off across the (inaudible) -- across the state and throughout our service territories.

In addition, we've been closely partnered with our cities, counties, and communities we've served to ensure that a consistent message. While that's a very simple phrase to say, the fact is there are numerous water agencies and water wholesalers, and cities, and counties involved with the drought.

There are a lot of inconsistencies in the messages being and going out to customers. The Company has been very proactive in our higher risk districts and working with the cities and counties; and making sure that we have a consistent message and joint unified front working with the cities and counties, and having them work with us.

A lot of co-branding and delivering the same material; and working together to get the overall results of bringing consumption down; and going into the summer months. In addition, we have fully enacted our drought team. Our drought team consists of our engineers, our conservation experts, our operations people, our rates people, and our accounting people working together to coordinate all aspects of the drought.

It's a very busy team. We meet with them on a normal basis. They're in charge of coordinating all of the drought activities and conservation programs within the state; including corresponding with the state and local officials. As Paul mentioned, we've filed the update to our drought management plan, 14.1.

In addition, we fought and we requested a drought memorandum account for incremental costs associated with the drought as we move into the summer months. Overall, we think we have positioned ourselves well. We feel that we're ahead of the game right now and moving into the summer months. But depending on how warm it gets this summer, we could have a long couple of months here.

Moving forward, there's really three things that we're keenly focused on. First and foremost is the drought. Making sure we do everything. They work with the customers and to work with the communities. To make sure we're doing everything to ensure water supply. That all the needs of the customer are taken care of. That's first and foremost.

That's our focus point is staying focused on cost management and operational efficiency. Making sure that as we're waiting for a rate relief to come in that we continue to manage our budget and our bottom lines to the best of our abilities. Then three, continue working with the PUC to conclude the 2012 general rate case in the state of California.

That's our focus point, our three focal points going into Q2. The Company has tried to be as transparent as possible in the press release. It included a lot of information about the pending settlement. Tom, I think you want to take a couple of minutes and give some clarity around those elements.

What was in the press release and try to fill in some of the gaps with a pending settlement? What would it look like if the settlement was completed?

Great, thanks Marty. Yes, let me give you all some detail on the potential outcome of the delayed rate case decision in California. In our press release, we noted that if the settlement were adopted as proposed, we would have tracked around $8 million this quarter in service charge and flat rate, and prior service revenue; which would have to be recovered through future surcharges.

In the past, these types of surcharges have ranged from 12 to 24 months. Our Company's revenue recognition policy is to book surcharge revenue when it is billed. Therefore, in addition to uncertainty over whether the settlement will be adopted, there is still uncertainty about the timing of both the decision and the surcharge revenue.

As you know, with the high water sales that we have in the summer typically, it's going to be -- when the rate case gets decided. If it's before the summer months, we're likely to see a lot of that revenue come back in at 2014. If the rate case gets decided after the summer months, it's more likely that surcharge revenue is going to come in future years.

In addition, we also noted that the proposed medical cost balancing account, had it been adoptive and effective, it would have shown a $1.6 million receivable balance after a Commission decision in the case. If it adopts the proposed balancing account, the Company will record amounts in that account in accordance with the Commission's order. We would hope to see that when the Commission adopts the decision assuming they adopt that.

Finally the proposed rate case settlement should impact the sales and production costs balancing mechanisms known as a RAM and an MCBA. We estimated that if the Commission adopts the settlement, the change in net operating revenue due to the changed RAM adopted quantities would have been a negative $0.2 million and $200,000.00 in the first quarter. That will change from quarter to quarter as we go through.

One of the big aspects of the rate case, I think as we've mentioned over the course of these calls is a more realistic sales forecast so that we don't have the large RAM balance going into the future. I think the settlement does adopt a reasonable sales forecast.

We do hope that when the Commission approves its decision, not only will it adopt the settlement in full. But in particular, it will adopt the sales forecast that's embedded into that settlement. That ends our prepared remarks for this morning. Kyla, we're happy to take questions at this time.

Thank you. (Operator Instructions) We'll take our first question from Ryan Connors with Janney Montgomery Scott.

Great, and thank you. I had a question in regards to the general rate case in California. Just I'm trying to understand what the hold up is, I guess. Obviously, this is becoming a bit of a pattern as some of your peers are having a similar kind of delays.

What do you think the problem is? Why is it taking the Commission longer to work through these things? Do you see that becoming a pattern going forward? You mentioned, you're getting ready to file your next subsequent case.

Thanks, this is Paul responding. I do not know what the particular hold up is in our case. I sure can't speak to the hold up in other cases. One of our strategies in this case was to attempt to reach an all party settlement in order to make this easier on the Commission and to make it a more streamlined process. That's why we worked very hard with the other parties to reach this all party settlement, which we filed.

We are still within the normal timetable for the Commission issue, a proposed decision in this particular case. Remember that the delay in the case was not because of a Commission slowdown. But because we spent more time working on a settlement agreement. We do not believe that our case is delayed because of Commission action. But we are continuing to pay close attention to what goes on there.

Then, I'm kind of switching gears. You touched on this at the end of your presentation a little bit. But obviously last time we had a drought of this severity. There were issues with the RAM, both for yourselves, and others in the collectables, and deferrals, and this sort of thing.

You mentioned a more realistic forecasting. Is there any chance that there's any kind of issue that develops either similar or different from last time around in terms of the RAM balances and collectability creating noise in the P&L over the balance of the year?

Ryan, this is Tom. I think that we have a really solid collection process now with the RAM and with the change that was made back in 2012. You will see temporary differences. More, potentially, if there's a decline in water sales due to the drought; you will see a larger balance throughout the year.

But that will be recovered more quickly because of the new amortization policy that the Commission adopted a couple of years ago. We don't anticipate it leading to more deferral of RAM revenue as we head back in 2011 and 2012.

OK, that's helpful. Then my last question is a related one in the sense that being that the rate case has taken longer. Being that we have the drought situation, yes, we kind of have a backlog of sort of potential issues here impacting rates; including the rate case, and potential RAM collection. What's the likelihood of a kind of rate shock, so to speak? How do you manage layering those rates in, in a way that doesn't create quote, unquote, rate shock?

Paul and I are looking at each other. We can definitely both answer the question. But I'll let Paul take the first crack at it.

I would answer the question a couple of ways, Ryan. First of all, as Tom mentioned, the sales forecast included in this particular settlement agreement we believe to be, even with the drought, to be much more reflective of what we think customers will be using in most of our districts.

The RAM build up that we've seen previously, we don't expect that to be as big on customers. The second issue that is depending upon how big the balance gets for the true up for the interim rates, the Commission will choose to either have a 12 month or a 24 month recovery periods in order to minimize the impact to customers.

My belief is that with a lower ongoing RAM surcharge, and a limit on the amount of the interim rate surcharge that we ought to -- we should be OK with the rate shock element to the customers. Tom, do you have anything to add?

The only thing I would add, Paul is that. We do get this as a point of confusion with our customers a lot. Remember that when we're talking about customer rate increase percentages and surcharges on units, we have had substantial conservation. Customers are experiencing lower bills as a result of their conservation.

The customer, if they're aware of this, should be looking at their total bill even though the components of their rates might be going up. Their usage is probably down. Their total bill is probably not up as much as they think it is.

OK, great, well that's very comprehensive. I appreciate it. Thanks for your time.

Thanks, Ryan.

Thanks, Ryan.

(Operator Instructions) We'll take our next question from Jonathan Reeder from Wells Fargo.

Good morning, gentleman. You mentioned the efforts to control the non-water production costs in the past few years and in particular, in Q1. Given that a GRC delay, did you do anything extraordinary in like Q1 to help mitigate the impact? Stuff that wouldn't be sustainable for the full year?

That's a good question, Jonathan. As you may recall, about two years ago now, we implemented an application called Hyperion. We basically gutted the old way that the Company was doing the budgets and adopted more zero-based kind of bottoms up approach. Then we'd drive that to tie into the regulatory rate case.

We didn't do anything differently that we haven't done over the last two years. I think like anything else with a new application and a new team that we put in place to help manage costs within the company. The team just gets better every day they keep doing it.

Overall, the Company has gotten very proficient at analyzing the P&L every month for every single district and for every single department looking at controllable versus noncontrollable. Looking at the rate case and reconciling numbers back to the rate case. It's a pretty complicated system in that every district is a separate rate case.

It's a separate budget. We've got to roll everything up. Then you've got to put your corporate costs on top of it, et cetera. But, we have a very good (FP&A) team. As important to that, we have a very good group of managers that have adopted the training very well. Part of the process every month is reviewing their P&L in detail.

Marty, the only other thing I would add is that we did have a number of positions that were authorized to be included with the rate case settlement. We are being very cautious with those new positions. We're waiting to hear what the Commission thinks of the proposed settlement before going forward with the bulk of those positions.

OK, so Tom based on that, once you would get clarity on the GRC, you could fill those positions. Then you might see a little more of a jump up in employee costs and stuff like that.

That is possible on the second half of the year assuming we get that re-trigger. You could see some of that.

Right.

Yes.

OK.

Part of the (inaudible). Part of the settlement that would include the new cost for the new employees. That's why we're not filling them right now.

Right.

Sure, no. What I'm kind of getting at is you have made the comment that if the settlement has been place in Q1, the quarterly benefit would have been like an $0.11 or $0.12 kind of pick up.

I am just trying to think of how we should be looking at the quarterly impacts over the remainder of the year; and kind of the full year impact. Is it $0.11 or $0.12 every quarter once we get the rate case? Or how should we think about that?

Well, the two components that the majority of components we talked about. The flat rate revenue and the service charge revenue, that kind of $8 million number. That would be relatively consistent throughout the year.

This healthcare number, the $1.6 million we mentioned that would have accrued to the healthcare balancing account. That's as a result of the higher costs that we experienced for medical in the first quarter. That would be quite variable. Then the RAM is going to vary. The difference between the adopted quantities that we now have and the adopted quantities in the new case is going to vary quarter to quarter.

I'm not sure that we've modeled that out yet, Jonathan. But the $8 million is the key number on the revenue side. But that's kind of pretty well known and a fixed revenue that's going to be the same every quarter.

OK, and then from an expense perspective, only a portion of that would get offset by incremental expenses once the case does come in?

That's right.

OK. Then a last question. Is there any reason to expect that the ALJ, and or the CPUC wouldn't adopt the settlement agreement at this juncture?

This is Paul responding. We do not believe there is any -- a good reason that it would not adopt the settlement. But we, at the same time, it is a Commission decision. We are hoping and anticipating that the judge will adopt the settlement. That the Commission will then adopt the judge's recommendation.

I might point out that there were a handful of items that were not included in the settlement agreement. Those are the issues that the judge is probably working on at this point. I might also point out that under the Commission's rate case plan, the judge has 110 days after the close of the case to issue a draft decision.

We are still within that 110 days today. There is not really a delay on the Commission side as I pointed out earlier. The delay that we had which really is because we were working with the other parties to get a comprehensive settlement.

OK. Like the issues [they held] today, I guess is working on that weren't addressed by the settlement. Were they like [rate] design? I mean, stuff that doesn't truly impact, I guess the P&L?

That's correct. They were, I believe -- virtually all of them had to do with rate design.

OK. I mean, your best guess as far as timing the ALJ's proposed decision. I mean, it still could be any day now, essentially. Then, I think there's what, 30 days before the Commission can act where we still might have something in time to get the revenues in Q2? Is that fair?

I'm not sure I would say that it is any day now. In my comments I talked about the handful of questions that the ALJ asked of the parties. We responded to those questions last week. That shows that he is actively working on our draft decision.

As soon as he has digested those answers and addressed those issues, we would expect to see a draft decision from him fairly soon. But, I don't think any day is the right time frame.

OK. But I mean, is it something that a Commission final decision still could be before the end of the second quarter?

I think that's a reasonable (inaudible).

Or, that would be pretty aggressive?

No, I think that's a reasonable expectation.

OK, all right, well, I appreciate the additional clarity.

Thanks, Jonathan.

Thanks, Jonathan.

(Operator Instructions) We'll take our next question from Tim Winter with Gabelli.

Good morning, gentlemen. I just wanted to follow up on the accounting for the retroactive rate case. Let's say there was a decision by the end of the second quarter. How would you account for that in the second quarter results?

When there's a decision, we're going to have a higher rate revenue on a going forward basis. Then we will have a surcharge that's authorized by the Commission. We're going to book the revenue from that surcharge as its built.

Yes.

That, the $8 million component that we talked about that's the, kind of the revenue and direct revenue shortfall. That amount is going to get billed over time, most likely over 12 months to 24 months. The only other (inaudible).

Will that be a one-time catch up gain for reporting (inaudible)?

I don't believe that's the way that we're looking at it from our revenue recognition standpoint. We're going to take that surcharge revenue as its billed over that 12 month period or 24 month period, whatever it happens to be. It's going to vary district by district. It could be some (inaudible) - some over 12 months and some over 24 months.

Yes. It gets amortized in, Tim. If this is a real kind of complex quagmire to be in. Because we're under the old rate case settlement with certain balancing accounts. You have new balancing accounts coming in. you have revenue and you have expenses.

Right.

Things that are expense related like Tom mentioned, the healthcare balancing account. That would get booked.

Yes, (inaudible).

It's prospectively. But things where we're making up for the $8 million that Tom talked about. That will be a surcharge, the revenue piece of it. That will get amortized over the life of the surcharge based on our conclusion and agreement with the Commission.

Tim, what I mentioned before was the surcharges are most likely going to be a quantity based surcharge. Since we sell the bulk of our water in the summer months, July, August, September, and into October. If we can get that surcharge in place, we're going to see a lot more of that surcharge revenue coming in, in those months than we would if surcharge started in October or November. Then we'd be having to wait for the bulk of that revenue to come in the next summer. It's not a uniform.

OK.

It's not a uniform 12 month surcharge is what I mean.

OK. Just to clarify on Jonathan's question. You said that you mentioned 110 days from the closing that there was to be a proposed decision. Then is there a time frame? Is it 30 days from that point that we need a decision?

The Commission's rate case plan says that it is typically 110 days from the closing of the case to the draft decision. Then it is 30 days from the draft decision and the Commission action. The parties will have an opportunity to file comments on the draft decision.

It's possible that could be delayed. But if everything goes smoothly and with an all party settlement. It should go smoothly; it would be [ticked] the 30 day window.

OK, great, and thank you.

Thanks.

Thanks, Tim.

(Operator Instructions) We have no further questions in queue at this time. I would now like to turn the conference back over to our moderator for any additional or closing remarks.

Thank you, Kyla. I just want to thank everybody again for their continued interest in California Water Service Group. We look forward to talking to you again with our second quarter results around the end of July. Thanks very much, everybody.

This does conclude today's conference call. Thank you all for your participation. You may now disconnect.