康涅狄格電力 (ES) 2009 Q1 法說會逐字稿

Good morning, Ladies and gentlemen.

Welcome to the Northeast Utilities 2009 Q1 earnings call.

(Operator Instructions)

I will now turn the call over to Mr.

Jeffrey Kotkin.

Mr.

Kotkin, you may begin.

Thank you very much.

Good morning and thank you for joining us.

I am Jeff Kotkin, NU's Vice President for Investor Relations.

Speaking today will be Chuck Shivery, NU's Chairman, President and Chief Executive Officer.

David McHale, NU Executive Vice President and Chief Financial Officer and Lee Olivier, NU Executive Vice President and Chief Operating Officer.

Also with us today is [Jim Muntz] , head of our transmissions segment.

Before we begin, I'd like to remind you that some of the statements made during this conference call may be forward-looking as defined within the meaning of the Safe Harbor Provision of the US Private Securities Litigation Reform Act of 1995.

These forward-looking statements are subject to risks and uncertainties, which may cause the actual results to differ materially from forecast and projections.

Some of these factors are set forth in the press release issued yesterday announcing our earnings for the first quarter of 2009.

If you have not seen that news release, it's posted on our website at www.nu.com.

Additional information about the various factors that may cause actual results to differ can be found in our annual report on form 10-K for the year ended December 31, 2008, additionally, our explanation of how and why we use certain non-GAAP measures is contained within our news release and in our most recent 10-K.

Now, I will turn over the call to

Thank you, Jeff.

Thank you all for joining us on this busy day for earnings calls.

I would like to begin with a few overall comments on the quarter and certain of our recent initiatives and then turn over the call to Lee and David who will provide you with additional detail on the operational and financial aspects of the quarter.

First, we were pleased with our performance in the first quarter of this year.

Our systems operating reliability A cold January provided us with some additional sales volumes and our financial performance was ahead of last year measured by earnings, earnings per share and cash flow.

From a financing standpoint, we were able to take advantage of several windows of opportunity raising nearly $700 million of equity and debt.

Our entry into the S&P 500 in March provided us with a unique opportunity to upsize our equity issuance and experience a rise in our share price during the marketing period.

Sale mp is marketed debt twice since February, both times experiencing very strong demand and attractive coupons.

We interpret this interest in our securities as a vote of confidence by the financial community in our plans to continue to build out the energy infrastructure New Englanders need.

Since our last call in February, we have also advanced a number of initiatives that are very consistent with energy policy emanating from both Washington and New England state legislatures.

We believe that FERC is nearing a decision on our request for a declaratory order on our proposed property with NSTAR and Hydro-Quebec to build a new 1200 megawatt direct current transmission line from Quebec to New Hampshire.

When that decision is positive, as we anticipate, we will continue negotiating long-term purchase power agreements that can bring significant amounts of competitively priced, low-carbon power into New England.

We're also continuing to work on the design of the line which would be built mostly along the existing right-of-ways in northern and central New Hampshire.

The FERC ruling on our application is a critical path item to the successful conclusion of these negotiations and assuming we're successful, we hope to have a power purchase agreement and a transmission service agreement filed with state and federal agencies by the end of this year.

We continue to work on two smart grid pilots.

In Connecticut, we have signed up 3,000 customers, half residential and half commercial or industrial for a three-month time-based pilot that will begin June 1.

The pilot will test customer response to a variety of rate options.

Most of the smart meters to support the pilot are now installed.

In Massachusetts, when MECO filed an application with regulators at the end of March to commence a pilot for 600 to 800 customers in the greater Springfield area, that we focus on smart metering and two products specifically tailored for lower-income customers who may have fewer options than other residential customers to manage their electricity loads.

Those options include a prepaid program and inverted block rates under which the per kilowatt hour charge would start at a relatively low rate but rise as monthly usage increased.

Also at the end of March sale and (inaudible) MECO and the Connecticut clean cities correlation filed a grant application with US Department of Energy seeking nearly $700,000 to develop a limited-scale pilot program for charging electric vehicles.

The grant would help pay for vehicle charging infrastructure, workplace charging infrastructure and home-base charging stations as well as the required metering capability.

CLMP and MECO together expect to contribute approximately $600,000 for the pilot, which is part of emerging partnerships we have with EPRI and several domestic auto manufacturers.

We anticipate the first generation of plug-in hybrid vehicles to be introduced late in 2010 and we're positioning New England to be one of the focus markets for that introduction.

The electric vehicle grant application was submitted under a 2005 D.O.E program, not under the federal stimulus bill.

We continue to study that stimulus bill to determine how it can benefit our customers and have focused on several areas.

One key area is boosting the energy conservation initiatives.

Currently, we believe that more than 9 million additional dollars will be available to CLMP customers through the bill.

This is in addition to approximately $7.3 million that will be available through the auctioning of a mission allowances through the regional green house gas initiative.

We are also reviewing opportunities for federal loan guarantees on debt we issued to build transmission projects that access renewable energy, as well as opportunities to expand our smart grid pilot efforts.

It is as yet too early to tell which projects meet qualify for stimulus support as the Department of Energy is still working on criteria, terms and conditions.

Our intent; however, is to find opportunities to benefit our customers and leverage our own capital and human resources through supplemental federal funding where such opportunities exist and make sense.

We will continue to update on you these programs as we move forward throughout the year.

David will discuss the sales trends in detail but it's clear our region continues to be impacted by the economy, along with the rest of the country.

Although we must be cognizant of the economic backdrop, we will need to approach our regulators about current subpar distribution returns.

As you know on April 17, we filed an application with New Hampshire regulators to implement a $36.4 million annualized temporary increase in our distribution rates.

But it was paired with a projected $63 million annualized decrease in our energy rates, so bills will actually decline if the New Hampshire commission accepts our application.

The decreasing energy component in our electric rates is largely a result of lower natural gas prices, which lower PSNH purchase power costs.

This months filing was the first of two steps.

Within a few months, PSNH expects to file for new permanent distribution rate effective in the middle of 2010.

I would now like to turn the call over to Lee Olivier.

Thank you, Chuck.

For the first quarter of 2009, we had very strong performance.

Distribution and transmission reliability was significantly better than target and our New Hampshire generating facilities performed well exceeding our capacity and availability goals.

We also continue to move ahead in our $457 million Merrimack clean air project.

We now pour in the major foundation for the chimney, absorber and flue gas conditioning system.

The chimney will be constructed this year.

PSNH currently has all the permits it needs to install the scrubber that will eliminate more than 80% of the mercury emissions and more than 90 % of the sulphur emissions from Merrimack's two coal-fired units.

We continue to receive strong legislative and regulatory support for the project.

In March, the New Hampshire House of Representatives rejected on a voice vote a proposal to cap the amount of capital that would be recoverable through rates at $250 million.

And earlier this month, the New Hampshire senate rejected on the 21-1 vote a bill that would have had the state public utility commission review alternatives to the scrubber.

Over the course of the year, the New Hampshire Supreme Court will hear arguments under an appeal of the PUC decision declining to conduct the kind of cost benefit analysis the senate bill would have required.

We believe the PUC was on firm legal footing when it made that decision and that the court will uphold it.

By statute, the scrubber must be operational by July 1, 2013; however, our plan is to complete the project in 2012.

In the first quarter, our total capital expenditures across all of our business segments were $183 million, including $17.7 million for the clean air project.

We expect that by the end of 2009, total spending on the project will have exceeded $150 million.

As spending on the scrubber is ramping up, our electric transmission capital program has decreased as expected due to the completion of major southwest Connecticut projects last year.

Transmission spending in total $57 million in the first quarter of 2009 as compared with $200 million in the first quarter of last year.

We expect transmission capital spending to remain at reduced levels until we begin constructing our New England east-west solutions or NEEWS projects.

As you may recall, we filed for approval of the largest part of the NEEWS project, the greater Springfield reliability segment about six months ago.

Public hearings on the proposal are scheduled to begin in May before Massachusetts citing regulators and in June before Connecticut citing regulators.

We're currently anticipating a final citing decision in the first half of 2010.

We expect the greatest Springfield project to cost $714 million.

A supporting project in Connecticut also now before regulators would cost another $14 million.

Last month, the NRG corporation asked the Connecticut citing council to consider a 500 megawatt combined cycle unit it wants to build as an alternative to the greater Springfield project.

We don't believe that this proposal, which NRG says would require a purchase power contract with utilities before it can be built, would resolve the significant reliability issues we're facing today in the greater Springfield area and we believe citing regulators will concur.

We expect to file in Connecticut for approval of the interstate reliability project in the third quarter of this year.

This is a project that we plan to build with national grid, which would construct the Massachusetts and Rhode Island portions of this line.

We expect to file for approval of the third project, the Central Connecticut Reliability Project in 2010.

Transmission capital spending will be driven by a number of factors, including the federal reliability requirements of the North American Electrical Liability Corporation and peak load growth.

As those NERC requirements evolve and as projections of peak load growth are updated, the timing of some of our principle projects continues to be evaluated by us and ISO as part of its regional system planning profits.

Our transmission spending is driven not only by the need for new poles, wires and substations it is also driven by physical and cyber security needs.

We received a number of inquiries last month about cyber security following immediate reports about efforts to hack into the networks of the nation's transmission grid operations.

We have spent millions of dollars in recent years protecting our equipment from those potential threats and will spend more capital over the coming years.

We already have been audited by NERC on our transmission operations, including our physical and cyber security and have received very favorable marks.

This is something we take very seriously.

Finally, I will turn to our distribution capital segment in the first quarter of this year.

Distribution capital spending amounted to $101 million.

$91 million in our three electric distribution systems and $10 million at Yankee Gas.

We continue to project $470 million of electric and natural gas distribution capital expenditures in 2009.

But that number could be influenced by the current economic conditions.

Additionally, we continue to rigorously review our operations of maintenance costs with the particular focus on reducing non-emergency premium time paid to workers and the use of contractors in our business.

Now, I would like to turn the call over to David.

Thank you, Lee.

As Chuck mentioned, we were pleased with our performance in the first quarter when we earned $97.7 million or $0.60 per share.

Earnings were up by 10.8%, excluding last year's litigation charge.

Earnings per share including the impact of our margin share issuance were up 5.3%, also excluding the 2008 litigation charge.

The regulated earnings rose to $94.6 million from $86.3 million up about 9.6% Competitive results rose from $1.9 to $5.8 million, mostly reflecting the absence of a $3 million net charge we recorded in 2008, when we adopted FAS 157.

Transition earnings rose to $35.4 million from $32.5 million an increase of 8.9% There were a couple of factors in play here in 2009, we had more rate base on which to earn.

Due primarily to the completion of our Southwest Connecticut projects last year, our transmission rate base ended the quarter at $2.5 billion, compared with just over $1.5 million at March 31, 2008.

That was partially offset by the fact that as expected, our AFUDC earnings were down significantly in 2009, since we no longer had any major projects under construction.

Additionally in 2008, we recorded a non-recurring gain associated with a March 2008 FERC ruling which approved several changes to the methodology for calculating returns on equity for transmission investments in New England, one of which increased the base ROE by 20 basis points, retroactive to 2005.

That change add $3.5 million to our first quarter 2008 earnings.

As expected, we're also seeing a leveling of our rapid earnings growth that we have witnessed in our transmission segment over the past several years, coming off the completion of our southwest Connecticut projects.

This is a function of the reduced capital investment levels we will experience until we commence construction of the NEEWS projects.

We continue to project transmission segment earnings of between 85 and $0.90 per share in 2009.

Our distribution segment earned $59.2 million in the first quarter of 2009, up 10%, from $53.8 million we earned in the same quarter of 2008.

(Inaudible) distribution segment earned $21.6 million in '09, compared with $18.9 million in the first quarter of last year.

The distribution rate increases effective February 1-- in February 1 of 2009, were partially offset by higher depreciation and pension expense.

Despite the increase, sale MP distribution regulatory ROE was 7.1% over the 12 months ending March 31, '09, compared with our loud return of 9.4%.

We continue to study the filing for the distribution rate case later this year for an early 2010.

PSNH's distribution and generation segment earned $13.5 million in the first quarter of '09, compared with earnings of $11.5 million in the first quarter of 2008.

The increase was due to some additional earnings in generation business and higher distributions revenues partially offset by higher operating expenses.

On the PSNH distribution side of the business, excluding generation, our regulatory return was only 6.26% and well-below our 9.67%.

As Chuck noted on April 17th, we filed a request to implement temporary distribution rate increase of $36.4 million, effective July 1st.

If approved by earning commission regulators, this temporary increase which would be subject to refunds will allow us to begin the process of steadily improving our underlying returns for the company.

The filing is available to you in the investor's section of our website.

In the coming months, we will follow up this request for a temporary rate relief with a permanent-- filing for permanent rate increase.

The request for a permanent rate increase is expected to be decided by July 1, 2010, retro active back to the date at which temporary relief was granted.

We have not yet determined what level we will require but it's most likely higher than the $36.4 million figure.

Fortunately as Chuck mentioned, the temporary rate request will be considered with the backdrop of declining generation prices, so overall, customer bills will be flat to lower if our request is approved.

Higher permanent ratings once approved would be billed starting around January 1, 2010, or an earlier date if the commission approval is received sooner.

AMECO earned $4.8 million in the first quarter of 2009 and 2008.

AMECO's distribution ROE was 6.9% for the 12 month ended March 31, 2009 and we continue to expect to file a distribution rate increase in the middle of next year.

Overall, retail electric sales dropped by 1.5% in the first quarter of 2009, compared with the first quarter of '08, despite a much colder January.

On a weather-adjusted basis, retail electric sales were down 3%; however, year-over-year changes vary considerably by rate class.

Residential sales actually rose by 4.1%, 1.3%, weather adjusted, while commercial and industrial sales were weaker.

Commercial sales were off by 2.2% and industrial sales were down by 18%.

These changes in sales did not have the same effect on our revenues because the proportion of distribution revenue recovery through volumetric charges also varied by customer class.

For our residential electric customers who represent nearly 50% of (inaudible) total retail sales, a greater portion of the revenue or recovery from volumetric charges stand from our commercial or industrial customers.

In fact, some of our large business rates are structured to recover nearly 100% of the distribution revenues through non-volumetric charges.

As a result, our rate designs significantly mitigated the impact of the declining commercial industrial sales had on our distribution revenues.

From a revenue perspective, our distribution revenues actually increased in the first quarter of 2009, as compared to the first quarter of 2008.

We're seeing a very different dynamic at Yankee Gas, declining natural gas prices to increase in natural gas fired distributed generation increases in conversions to natural gas in colder weather resulted in a 12.8% increase in firm natural gas sales in the first quarter of '09 compared with last year.

On a weather-adjusted basis, sales rose 7.2%, 9.9% among industrial customers, 8.5% among commercial and 4.3% among residential customers.

As a result of those sales increases, Yankee Gas earnings rose to $19.3 million in the first quarter of 2009, from $18.6 million in the same period of '08, despite higher interest and pension costs and no increase in rates.

Yankee's distribution ROE over the past 12 months was 8%.

I noted our competitive business performance earlier by turning to our parent and other company segment, we posted a net expense of $2.7 million in the first quarter of '08.

Last year, we had net expenses of $29.4 million due to the litigation charge.

Absent that charge, we were break even last year.

The results this year were due primarily to higher-interest expense.

For the year, we continue to project met expense of a parent of $0.05 per share.

Overall, we expect to earn toward the lower end of our $1.80 to $2 per share guidance in 2009, although there are a number of changes that have occurred since we first discussed this earnings range at EI in November, the one with the greatest impact is the size and timing of our equity issuance.

Our entry into the S&P 500 on March 16th provided us with a unique opportunity to accelerate our equity issuance to take advantage of the heavy demand that index fund had for our shares.

The transaction was extremely well-received and total institutional and retail demand was several times the number of shares we expected to sell and as a result, our share price actually rose during the one-day marketing period.

The upsize, the issuance relative to plan and-- we upsized the issuance relative to plan and underwriters exercised the option to sell additional 15% of the offering, resulted in the sale of nearly 19 million shares.

The 371 million of equity we realized after underwriting commissions provides us with a great deal of financial flexibility as we approach the coming years and it was very well-received by the credit rating agencies with whom we met earlier this month.

The total debt as a percent of our capitalization is now 58% comfortably under our target of 60%.

Other key factors that could affect our guidance are storms, interest and pension expense, uncollectibles and sales.

For the first quarter, the storm activity and related expense were relatively low.

Interest expense is actually tracking somewhat below what we had anticipated for '09.

In February, (inaudible) issued $250 million of ten-year first mortgage bonds at a 5.5% coupon, well below our budgeted level.

Additionally, affixed to floating interest rate swap on $263 million of NU debt is solidly in the money and right now, continues to help us manage interest expense levels at NU parent.

On April 2, we completed the remarketing of a $62 million COP tax exempt bond.

The 5.25% rate was on plan And we are currently before the New Hampshire regulators seeking approval to issue $150 million of taxable first mortgage bonds later this year.

At this time, we expect the coupon to be well within our guidance and perhaps provide a little upside to PSNH's earnings.

In February, I noted that pension expense that is not tractor-rates, (inaudible) CL&P, PSNH and Yankee will cost us about $0.10 more per share in 2009 than it did in 2008.

Our projections for expense remains the same.

We continue to study funding requirements for our defined benefit plan going forward and may need to make a $150 million contribution to our pension plan in September of 2010, although, recent IRS guidance regarding underlying discount rates to apply against the plan's liability could allow us to defer making that contribution and any additional contribution until 2011.

We will continue to update you on this important topic as we move forward.

As to uncollectible expense, I will remind you that a significant amount of our uncollectible expense is tracking and doesn't affect earnings.

I said in February, that we expect pretax uncollectible expense that affects earnings to increase from approximately $27 million in 2008 to $30 million in 2009.

First quarter results were consistent with our expectations.

Before turning the call back to Jeff, let me touch briefly on cash flow.

Net cash flows from operation after rate reduction bond amortization totaled $78 million in the quarter, up from $37 million the first quarter of last year.

That improvement was due to a number of factors, including the absence of the 2008, $49.5 million litigation payment.

Also, you'll notice that a decrease in accounts payable resulted in a $174 million reduction of cash flow in '09.

In addition to a tax payment, that decline was partially due to paying bills that were received in the first quarter associated with last December's severe ice storm in New Hampshire and Massachusetts.

We continue to expect to recover the vast major of ice storm-related costs through insurance and rates.

In fact, we have included $6 million a year in storm recoveries at PSNH's request for a temporary rate increase.

However, paying those bills did have a significant impact on first quarter cash flows.

Let me turn the call back to

And I'll turn the call back to Jamie just to remind you how to enter your questions.

Jamie?

Thank you.

We will begin the question-and-answer session.

( Operator Instructions) I will now turn call back over to Mr.

Jeffrey Kotkin.

Thank you, our first question this morning is from Jonathan Arnold from Merrill Lynch.

Jonathan, good morning.

Good morning.

Just wondering if I could ask about, and I may have missed this.

I apologize if it's repetitive.

Where we are in the current prospectives on the FERC proceeding regarding the Hydro-Quebec line and what happens next and how soon that is likely to get resolved, I guess, in the first phase.

Jonathan, this is Chuck.

Good morning.

We mentioned in my remarks that we fully anticipate that we will get a positive ruling from FERC and we expect that to be in the second quarter of this year.

Although there is no specific time frame when they have to rule.

That decision is part of the critical path.

Assuming that is a successful decision, we would expect to have PPA and a transmission service agreement in shape to file with both the states and before the end of the year.

You have any -- if I'm not wrong, it was pushed back in terms of timing a little, the last meeting.

Any insights into what is going on behind the scenes there?

It was on the agenda, as you recall for the last meeting and it was taken off that agenda and again, no specific reasons were given why they would do that.

As I said, we anticipate getting that response to FERC in the second quarter of this year.

Thank you.

Thank you, Jonathan.

The next question is from [Steve Fleischman].

Steve, good morning.

Hi, guys, can you hear me okay?

Yes.

Okay, great.

Thanks.

Question on trans-- on your transmission project from the standpoint of potentially lower demand growth, is there any reason that NEPOL would potentially want to delay any of your projects?

I think they're mainly for reliability needs.

I'm not sure that really would make a difference, but--

Steve, there this is Lee Olivier.

You're aware of the ISO has the regional system plan and every year they redo the regional system plans.

It's a living document and during that process what they do is look for things they have the [Conner] metric models they look at.

They look at what is the peak demand growth and, of course, that has lessened a little bit from what we have seen in the past.

It's down to -- projected to be about 1% a year versus 2, to 2.5.

And they look at other things like how much a capacity is in place, will be built and retirements and so forth.

So, as part of their current review, they're looking at all of those issues.

There is also the issue of how the system actually works in terms of the current load flows, electricity load flows, how they actually flow.

We believe based upon all of our analysis that the projects as currently scheduled should proceed on those schedules.

We have as other transmission operators do an on going dialogue with ISO about those needs.

And that continues, but we believe the current scheduled dates are valid at this time.

When do they come out with their annual change?

Their annual plan usually comes out in the draft form in the September time frame.

Prior to that, they have a series of meetings which reviews the elements of the draft plan.

That is usually over the summertime frame, June, July, August and then they issued the draft in September.

Okay.

One other question.

I'm wondering if Dave will bear with me and maybe just repeat the 12-month ROE's for the four utility subs that he laid out.

The earned ROEs.

Sure.

For CL&P this is all 12 month ending March, 7.1%.

For PSNH, distribution only, we'll exclude generation 6.26 and Steve, as you know, generation tracks at 9.81.

Western Mass Electric was 6.9 but I will remind you we had last year in that math a number of regulatory, small regulatory disallowances that have chewed away from that.

You should see that number increase as we work our way through 2009.

And then for Yankee Gas -- Am I ahead of you or --

No, I'm good.

8%.

8%.

Okay, great.

That was it.

Thank you.

Thank you, Steve .

Our next call is from [Zach Hersch from Goldman Sachs.

]

This is Zach Hersch from Michael (inaudible) Just a few things.

Have you all made a decision on the timing of the filing of the distribution rate case at CLMP.

Jack, this is a Chuck Shivery, No we haven't.

I think as we mentioned in the last call, we continue to evaluate that and haven't decided whether it would be toward the latter part of this year or early in 2010.

Okay, and one followup.

You definitely provided some great color on demand trends in the region, specifically total power demand and residential demand.

Can you provide any specifics on what you're seeing in commercial power demand in the region.

Given the environment that you're seeing, what is your outlook of demand for the rest of the year?

When you use the term demand, I will take by that you mean energy usage.

Correct.

So, what we have said going into the year around guidance was on average, we expected electric sales to be off about 1% and that varied by company for Western Mass Electric.

It was a little weaker, maybe about 1.6, 1.7%, a little better for PSNH down about 1 -- maybe 0.2%.

When we put that together, we never really talked about the individual customer classes within that, but what we're seeing now is not unexpected.

So weaker sales on the industrial side of the business.

Some of that driven by the move to DG some of that driven by, a lot of it driven by the economy and we're also seeing weakness in the commercial sector as well and that is coming true.

I will tell you that as we're looking at, say for the quarter, weather normalized numbers and I will look at the sales in New Hampshire -- excuse me, in Connecticut, we're off about 3%, off about 2% in New Hampshire, off about 3% in Massachusetts.

That is the type of erosion we're seeing in the commercial sector.

Not nearly what we're seeing on industrials, but that also is near our expectation.

I think going forward for the balance of the year, I have said to some that we might have been a little bit optimistic on what was going to be happening with employment in our sector, particularly manufacturing employment and the like.

But I think in aggregate saying that residential sales are actually so far holding up okay, in fact, a little ahead of trend, we're probably still right on expectations when you boil it all down.

We expect sales, in total would be off about a percent on a normalized basis and that's within our '09 guidance.

Great, guys, thanks.

All right, thank you, Zach.

Our next question is from Mike Worms from BMO Capital.

Mike?

Thank you, Jeff.

Good morning, everyone.

You partially answered the question I was going to ask just now, but--.

Dave, could you maybe give us a little bit more color as to why you think residential sales were up so strongly in the quarter?

This is color commentary.

A lot of it anecdotal here as we try to understand what is happening with our residential customers.

First of all, it's pretty clear that they, that that sector-- that definitely benefited from the weather effect But, if you strip away the weather effect, sales were still up across the board there about 1%, 1.5%.

The question is what is happening with residential customers.

This is a tough one for us, but it could be as simple as saying given the economy, people are not travelling to the extent that they would.

People are staying in their homes, people are watching their large screen televisions and all those underlying behavioral issues.

We're still seeing an average use per customer trend deteriorate.

Not to the degree we've seen it in the past.

I think it's early to say while the residential customers have really broken off a trend in purchasing lots of new equipment, electrical equipment and putting it in their homes, it might be that they're in their homes more often than that they would have been otherwise as we put into our econometric models.

So, Mike, not tons of tangible evidence but that is something we'll continue to watch.

I think the benefit for us is that when you look at what is on the margin still volume metric and where we are making the higher margins, it comes through on the residential side.

The same is true, of course, when we were losing residential sales.

You get hurt by that, but it did actually support year-over-year revenue growth in '09.

Thank you, Dave.

Well, I want to thank everybody this morning.

We don't have any more questions.

If you have followups and you want to get back to us, please give me a call and for those who are travelling to the AGA conference, we look forward to seeing you there.

Thank you very much.

Thank you, ladies and gentlemen.

This concludes today's conference.

Thank you for participating.

You may all disconnect.