埃克西爾能源 (XEL) 2015 Q4 法說會逐字稿

Good day, everyone, and welcome to the Xcel Energy forth-quarter 2015 earnings conference call. Today's conference is being recorded. At this time I would like to turn the conference over to Mr. Paul Johnson, Vice President of Investor Relations. Please go ahead, sir.

Good morning and welcome to Xcel Energy's 2015 year-end earnings release conference call. Joining me today are Ben Fowke, Chairman, President and Chief Executive Officer, Teresa Madden, Executive Vice President and Chief Financial Officer. In addition, we have other members of the Management team in the room to answer questions if needed. This morning we will review our 2015 results and update you on recent business and regulatory developments. Slides that accompanies today's call are available on our web site. In addition, we'll post a brief video of Teresa summarizing our results later this morning.

In addition, we recently launched an IR Investor Relations app that you can download for free in the app store. The app allows you to use as a mobile devices to conveniently access our Investor Relations material.

As a reminder, some of the comments during today's conference call may contain forward-looking information. Significant factors that could cause results to differ from those anticipated are described in our earnings release and our filings with the SEC. With that, I'll turn it over to Ben.

Well thank you, Paul, and good morning, everyone. I'll begin by reviewing some of the highlights from 2015.

We had another successful year at Xcel Energy, delivering ongoing earnings of $2.09 per share despite some challenging weather, weak sales and some regulatory setbacks. We have now met or exceeded our earnings guidance for 11 consecutive years.

We also increased the dividend 6.7% and raised the dividend growth objective to 5% to 7% and this marks the 12th consecutive annual dividend increase. Finally, we maintained our strong credit ratings and delivered a 3.8% total return in 2015, outperforming most other utilities and moving to a premium valuation.

We had a busy and overall successful regulatory calendar, resolving rate cases in Minnesota, Colorado, South Dakota, Wisconsin and Texas in addition to the Monticello prudence review. In 2015 we continued to pursue multi-year compacts which support our strategic plan and provide certainty to the Company, our customers and our shareholders.

We were successful in implementing a second three-year plan in Colorado and we filed a comprehensive multi-year plan in Minnesota. We were also encouraged by the legislation that was passed in Minnesota and Texas which provides us with additional tools to reduce regulatory lag.

In Minnesota we filed a bold resource plan that will achieve a 60% carbon reduction by 2030. This plan advances the addition of renewables on our system, preserves reliability while insuring customer benefits and affordability, creates ownership opportunities for us and positions us well to meet the requirements of the EPA's clean power plan. We are encouraged by the broad stakeholder support that we've received.

In 2015 we continue to demonstrate strong operational performance, particularly in storm restoration. For example, in December SPS experienced an horrific winter storm with sustained winds between 50 to 80 miles per hour, below zero wind chill, white-out conditions, and inaccessible roads due to 6- to10-foot snow drifts. Now even with these challenging conditions, we were able to restore service to 84% of our customers within 12 hours and 98% of our customers within 24 hours.

This remarkable feat was accomplished as a result of our proactive planning, which began days before the event, and of course our dedicated employees who sacrificed time with families during the holidays. Our industry-leading storm response was recently recognized by EEI, which gave us their emergency recovery award for our response towards severe weather in Minnesota that impacted 250,000 customers just last summer.

In 2015 our employees not only provided best-in-class storm response but also achieved record levels of safety, resulting in our eighth consecutive best year ever. Safety is a critical priority to Xcel Energy and we're committed to sending all employees home every day without injury. Clearly, we believe there's a strong correlation between safety and employee engagement and productivity.

We also had an excellent start to the construction of the 200-megawatt Courtenay wind project in North Dakota. We expect the wind farm to be in service by year end, ahead of schedule and on budget.

Moving to 2016, earlier this week PSCo filed an application with the Colorado Commission to establish a frame work for potential investments and natural gas reserves. This filing proposes a plan to take advantage of historically low natural gas prices, provides a long-term hedge against market fluctuations, and offers predictable natural gas prices for the long-term benefit of our customers.

The Colorado Commission will have 240 days to reach a decision on the regulatory framework. If the Commission approves the framework, we would then seek approval for a potential investment, assuming it is beneficial for our customers. It's important to recognize that market conditions need to be conducive for an investment to be made, but having an established framework in place will allow us to be opportunistic. As a reminder, the potential investment for rate basing of natural gas reserves is not included in our base capital forecast and represents another growth initiative as part of our upside capital forecast.

Finally, while Theresa will go into more detail, I wanted to address the high-level impact of the Extender bill. Based on our initial analysis, we find it to be a net positive despite some reduction in rate base growth and here is why. First, we don't anticipate a material act -- rather, a material impact on EPS for the 2016 to 2018 time frame. This is due to multi-year plans and existing NOL tax positions at our major jurisdictions.

Second, beyond the 2018 time frame, the bill reduces revenue requirements and lowers bill increases for our customers. This reduces regulatory risk, which increases our ability to close the ROE gap. Frankly, I believe it gives us an opportunity to go beyond the 50 basis points of ROE improvement. It also increases head room for additional capital investment.

Finally, we view the extensions of PTC and ITC favorably, as it makes large-scale renewables become even more affordable for our customers. As a result, we continue to be very confident in our ability to deliver ongoing earnings consistent with our 4% to 6% EPS growth objective.

So with that I'll turn the call over to Teresa to provide more detail on our financial results and outlook in addition to our regulatory update. Teresa?

Thanks, Ben, and good morning. My comments today will focus on full-year 2015 results. We had another strong year and delivered 2015 ongoing earnings of $2.09 per share compared with $2.03 in 2014. The key take away is that we implemented significant cost initiatives and Management actions to offset negative weather, sluggish sales, and certain unfavorable regulatory outcomes, allowing us to deliver earnings within our guidance range.

The following key drivers positively impacted earnings, electric rate increases and riders, a lower earnings test refund in Colorado, and reduced O&M expenses. These positive factors were partially offset by several items. We experienced unfavorable weather, which reduced earnings by $0.07 per share compared with last year and reduced earnings by $0.04 per share when compared to normal weather conditions. In addition, we had higher depreciation, property taxes, and interest expense as well as lower AFUDC.

Turning to sales, our weather normalized electric sales were down 0.2% for the year. The decline was primarily attributable to the impact of lower oil and natural gas prices and lower use per customer. This was partially offset by strong customer additions of nearly 1%.

The economies in our service territories remain healthy, with average unemployment of 3.4% compared to the national rate of 5%. While sales declines slightly in 2015, we are expecting modest sales growth of 0.5% to 1% in 2016.

Our projections are based on the following factors. 2016 is a leap year and the extra day accounts for 0.3% of growth. In addition, growth in the number of customers is projected to outpace the decline in use per customer, providing positive growth in residential sales.

Finally, several large C&I customers experienced reduced load in 2015 that we expect to stabilize. We did see growth for other C&I customers but at a slower rate.

O&M expenses decreased $4.7 million, or 0.2% in 2015, exceeding our guidance range of an increase of 0% to 2%. As I previously mentioned, we experienced some headwinds during the year and the Management team responded by reducing cost to deliver earnings consistent with investor expectations. These actions demonstrate our commitment to bending the cost curve and meeting our financial objectives.

Now I'll provide an update on several regulatory proceedings. Additional details are included in our earnings release. Yesterday, the Commission ruled in our Colorado natural gas rate case. While a written order has yet to be issued and we haven't had a chance to fully analyze the results, we wanted to give you a high-level overview of the verbal decisions.

The Commission largely approved the ALJ's recommended decision with a couple of changes. Key decisions include a single-year rate plan versus our request for a multi-year plan, a three-year extension of the PSIA rider and ROE of 9.5% and an equity ratio of 56.5%. We will file an 8-K with more details after we have fully analyzed the results.

In our Texas electric rate case, the Commission ordered a rate decrease of $4 million compared with our request for a rate increase of $42 million. The Commission decision was very disappointing and significantly lower than the ALJ recommendation. Key elements include rejection of SPS's request for post test year capital additions, disallowance of SPS's proposed known and measurable adjustment for updated allocation factors between customer classes related to load reductions of a wholesale customer effective June 2015, disallowance of incentive compensation, and a reduction in the equity ratio.

We've been very up front that the earned ROEs need to improve at SPS, and while we've made improvements in the earned ROE, we are still not earning at an acceptable level. As you know, it is a high priority for us to close the ROE gap.

We have filed for rehearing and plan to file a new rate case this quarter that will incorporate provisions of the recently passed legislation designed to reduce regulatory lag. As a reminder, this new legislation provides for inclusion of post test year capital additions, timelier implementation of new rates, and enhanced recovery for new natural gas plant investments. We believe this will help us achieve a more constructive outcome in the upcoming case.

In November we filed a multi-year rate case in Minnesota that provides for various implementation alternatives. In December, the Commission approved our 2016 interim rate request of approximately $164 million.

The Commission deferred a decision on our proposed 2017 interim rate and indicated NSP Minnesota could resubmit its interim request in the third quarter for consideration. The procedural schedule has been established which provides for a final decision in June of 2017; however, as part of the schedule, we have outlined a path for meaningful settlement discussions, which may shorten the timeline to reach resolution in the case.

Next I'd like to discuss the impact of the recently passed five-year extension of bonus depreciation. At our Analyst meeting in December, we provided our updated five-year base capital forecast of $15.2 billion. The extension of bonus depreciation will reduce the rate base CAGR by approximately 70 to 80 basis points, resulting in rate base growth of about 3.7% for our base capital plan.

While bonus depreciation reduces rate base growth, it also reduces the impact on the customer bill and creates more head room for potential investments. At our Analyst meeting, we also presented an upside scenario to our capital forecast, which included incremental investment for renewables related to the Minnesota resource plan, distribution grid modernization, and natural gas reserves in Colorado.

In addition, earlier this week we announced our energy future plan in Colorado, which creates some further investment opportunities. As a result, we have increased our upside capital forecast to $2.5 billion. This forecast reflects potential investment having a reasonable probability of coming to fruition over the next five years. The upside capital forecast of $17.7 billion over the five-year time frame results in an annual rate base growth of approximately 5.5%, including the impact of bonus depreciation. As a result of our robust capital investment opportunities and our actions to improve our ROE, we remain very confident in our ability to deliver on our 4% to 6% earnings growth objective, even with the impact of the bonus depreciation extension.

In summary, 2015 was another excellent year for Xcel Energy. We delivered earnings within our guidance range for the 11th consecutive year. We increased our dividend for the 12th straight year. We initiated cost management actions which resulted in a decline in O&M expenses. New legislation was passed in Minnesota and Texas which will provide more tools to reduce regulatory lag. We resolved regulatory proceedings in numerous jurisdictions. We filed a bold resource plan in Minnesota with significant carbon reductions. We are reaffirming our 2016 ongoing earnings guidance of $2.12 to $2.27 per share.

Finally, we are well positioned to deliver on our value proposition which includes earnings growth of 4% to 6% annually and dividend growth of 5% to 7% annually, with a payout target of 60% to 70%. Operator, we'll now take questions.

(Operator Instructions)

Our first question comes from Ali Agha with SunTrust.

Thank you good morning.

Good morning, Ali.

As you mentioned, in 2015 on an ongoing basis, the Op Co (inaudible) normalized 9.07%. Can you just remind us what the weighted average authorized ROE is just to get a sense of what is the lag as we've exited 2015? And then what's baked into owned ROE in your 2016 guidance?

Well, we'll start with the weighted average. In terms of authorized ROE it's about 9.8% and when we look to 2016, we see the three of our utilities earning right around the 9%, low 9%s, some a little stronger than that. I will say we have some lag in Texas, our Texas or the SPS Company. Somewhat related to what came out of that case. But we're filing a new case and so we do still think we're on target to achieve our 50 basis point closure by 2018, Ali.

Okay. But in general though, is 2016 earned ROE on average similar to 2015 when you put it all together?

We would expect to see some improvement in it.

Okay. And then separately, just for 2016, as you mentioned, the Texas case was disappointing. It looks like Colorado case, if they followed the ALJ to the large extent seemed to be below what you'd been asking for. What kind of headwinds does that create for us for 2016 and at this point, does that put us more in the lower half of the range or how should we be thinking about the implications?

Ali, we're pretty pragmatic when it comes to handicapping what we put out on a forecast so it doesn't have much of an impact at all.

Okay. Last question, when at the earliest should we start to see some of the growth CapEx and rate base implications start to move into your current base case plans?

Well, we filed the energy -- we're going to file a resource plan later in the year in Colorado and that's where you're starting to see the energy future plans but it will probably be -- most of it will probably be in the back end of our capital forecast. But Ali, let me just reiterate. You've got solid transparency for the first three years. Bonus depreciation is not having an impact on us in the first three years and we explained the reasons why for that.

You look at years four and five and what I see, and why I'm bullish on what happened with the Extenders bill, is I see reduced regulatory risk, which I think gives us upside to exceed our GAAP closure on ROE of 50 basis points. I see more affordable customer bills. I think that plays well to our multi-year plan discussions here in Minnesota, but then, as an environmental leader that we've been and with the amount of renewables that have now been made so much more affordable by the ITC and PTC extension, I think we're being conservative but I think we can capture with credibility that capital upside.

There's a lot of renewables that are going to be built in our jurisdiction and if we follow good policy mandates and do it with large-scale renewables in mind, it's going to be very affordable and you're basically going to trade off natural gas expense for renewable. We're really excited about it and I think that its done a lot for us and so I guess you know, we were the first -- I think the first utility to talk about the impacts of bonus depreciation and we've been thinking about how we would turn that into an upside for us and I'm really confident in our plans.

Thank you.

The next question will come from Julian Dumoulin-Smith with UBS.

Hey, Julien.

Hi, Julien.

Hey. Good morning, guys. Well actually, let's kick it off just going back to that last question a little bit. Just kind of definitively in terms of timing there for the growth CapEx, is there kind of a year in which you would frame this? I mean, perhaps let me frame it this way. NOLs obviously in the near term limit the impact of bonus depreciation. Do you need a way for the cash tax benefits to extend outwards within the five-year period or how are you thinking about the timing of that growth CapEx given the cash tax position?

Julien, in terms of we don't think that this is dependent on the cash tax position by any means and we do think that CapEx probably would start in the middle, I would say, the 2018 time frame and we think we'll be well positioned. We have some time to, because of the NOL situation and the multi-year has been described, so we think that we have a lot of opportunity and that's probably when it would start.

Just to be clear, if I hear you right, it would also be dependent upon getting approvals and specifically in Colorado?

Well, yes, I mean--

The upside CapEx?

Well, it's not only in Colorado. It's also in Minnesota and remember, we talked about how we would pursue a capital upside forecast at our Analyst Day and what we've done is with the filing of the Colorado energy plan, have up dated that capital forecast because we didn't have renewables from Colorado in that Analyst Day presentation and we should. I'm confident you're going to see more renewables because of the ITC/PTC has been extended. In fact, if you think about it the PTC is, it does phase down quicker than the ITC, so if you were staging it you'd probably focus on more wind initially. You've got to look at the NOLs too, as I think Theresa was talking about, at the Op Co level specifically, then it rolls up to the hold co.

I think what you're referring to, Julien, is maybe some -- if you don't have a tax appetite, some of those things get put on the balance sheet for a period of time and they do, but that's okay. It turns around and we're very much prepared to wait for that turnaround because these opportunities, I think, are extremely compelling, realistic and they're right in front of us and in our backyard and it's organic growth.

Maybe just to supplement that in terms of your question about the regulatory process and if we just relate it to Minnesota, when we went through the last resource planning process of the four wind farms, we're owning three of the four wind farms so we think they are very supportive in terms of ownership in Minnesota. Colorado, more come but we're very confident.

Yes, I agree, Theresa.

Right. Actually just to get a little clarity on the renewable spend, are you feeling confident about your ability to continue to own solar rate-based projects as you propose the back of the Analyst Day?

Yes. Again, I think these things are affordable. We always pursue things with the impact on the consumer, and even with low natural gas prices what we're seeing with the wind and with the extension of PTC says, hey, it's a good deal for consumers. Same with solar. As you know, large-scale solar is a better deal for all customers than is roof top and I think there's an appetite for that.

Got it. But even relative the PPA option?

Well a PPA, in my mind, Julien, is kind of like the decision between whether you own a car or lease a car, right? Typically you can sculpt a PPA so it's the cost of ownership is lower in the early years, but as you know, that lease expires and then you go to reup it and it becomes more expensive. So when you do total revenue requirements over the expected life of the asset, it's typically more beneficial to own the asset. I think our Commissions recognizes that and I think they are supportive, to Theresa's point, of us owning more renewables.

Thank you.

The next question comes from Greg Gordon with Evercore ISI.

Hey, Greg.

Good morning. A lot of my questions have been asked. Getting a little bit more into the minutia of how bonus impacts you, can you repeat what your authorized return is in your electric deal in Colorado and how much regulatory lag you're currently experiencing there?

Our overall authorized return in Colorado is [983] and remember we have the band of about 65 basis points. Up to this point, we have been and through 2015 we have been in a refund position, but we will be entering our second year of the three year and we do think there's head room there. Anyway, that's where we are at.

Okay. So that -- in Colorado in particular, bonus depreciation wouldn't necessarily -- would only hurt you if it put you into a refund position vis-a-vis having a lower rate base number, right?

I don't think that's really entirely true, Greg, because we've been in a refund position. As Teresa mentioned, we just entered our second three-year approach our plan and that plan required us to do some work to earn that ROE and bonus depreciation under the multi-year will help us earn that authorized ROE more readily. And then of course -- (multiple speakers)

But no, that's exactly my point, that it's not necessarily going to hurt you if you were --

Oh, I thought you said (multiple speakers). I'm sorry, I misheard, Greg.

I misheard you too, so yes, exactly. That was the --

In that it's tougher to get into a sharing position now because the plan is a little more difficult because you've got more spending. It only puts you back into a refund position if you over earn, which is less likely under this plan and therefore you might not have this tangible an impact in Colorado as it would necessarily in Minnesota, where you're -- whatever the new rate plan is going to be, it will be in there, right?

Yes. Said another way, we think it makes it -- the bonus depreciation in Colorado makes it easier for us to achieve our allowed ROEs in Colorado. In Minnesota, you're in an NOL position for the next few years and then in years four and five you start to come out of that. Greg, what that says to me is I think it makes the five-year multi plan even more attractive today than it was prior to that extension. So we'll see where that goes. Again, that's why we think this gives us a positive versus a negative.

All right, thanks. Good luck in the Super Bowl.

Go, Broncos. I'm glad you brought that up, Greg, and I'm sorry about your New York Jets.

The next question will come from Steve Fleishman with Wolfe Research.

Yes, hi, good morning.

Good morning.

The $900 million for the -- I think that's for the Colorado that you added, can you give us maybe a little thought on what you're assuming in there in terms of off the thousand megawatt? Is it mainly for the thousand megawatts of wind? Are you assuming you win half of it or how are you getting to that?

You got it. You take the entire spend of the thousand megawatts, which I think is $600 million wind, $400 million solar and we assume we get half of it.

That's exactly right.

Okay. That's easy enough. Second question is just, and I apologize to beat this dead horse to a pulp, but I know you're talk about the benefits after 2018 of the bonus and rate head room and all those things but just to make sure I understand, if the NOL benefit is gone then the bonus impact is actually bigger out past 2018? Obviously, you have more rate head room but it impacts rate base more, or am I not right?

I think that's -- go ahead, Teresa.

I think you're right. In terms of if we tailor down in the latter part, but that -- two things, and I think Ben described it, since we're in the NOL and we're going to be in the NOL in Minnesota for the first couple years, we have time to work through some of these things and we have opportunity potentially for investments, upside investment, which we've talked about in terms of resource plans, grid modernization. We talked about it at Analyst Day. So yes, we think--

Then you have the -- so obviously your point is that you've got line of sight on project opportunities and then it fits well within your rate head room kind of limitations and all that stuff to fill that in and do things that you want to do? Okay.

Yes, I think that's exactly right and it goes beyond 2018, frankly beyond 2020. You just look at what we're doing in Minnesota. There's a tremendous amount of renewables, grid modernization; there's a lot of work to be done. Steve, I think the limiter has always been what is the pace of rate increases. We've always had more capital opportunities than we've executed on because we're mindful of what happens when you are in front of the regulator and asking for more than a modest rate increase. I think this actually is very much facilitates our strategic plans and keeps that affordability equation where it needs to be, so that's why we think it's a positive.

Exactly.

Okay, and then on the Minnesota rate case, could you maybe just give a little more color on how likely you see chances for settling that, given -- I know there was a lot of involvement in getting the legislation done to begin with.

Well Steve, it always takes two to settle, right? We do have times scheduled over the summer for that. I think that's a good sign. I think that if you look at the case, it's about as straightforward as you can get, so I'm cautiously optimistic that we can get something done. It would make sense to get something done. I've got Marvin McDaniel, Chris Clark here if you want to add anything to that. You're on the front lines.

I just agree with that, Ben. I think you're right. I think we have a great opportunity and we look forward to working with the parties to see what we can accomplish.

You said you agree with that.

I agree with you.

Thought I heard disagree. (Multiple speakers)

Okay. Last question just on -- I know you talked about the investment opportunities potentially in gas reserves. We are seeing more and more electric utilities also invest in gas midstream assets. I'm wondering if you're seeing anything in there as well that might fit.

Well, Steve, I think for us, when I think of midstream I think of pipeline type assets, ideally FERC regulated and not so much gathering and processing. I don't think that fits in our risk profile. I think for us the thing to do is twofold. One, there's anticipated to be a lot of shake out if the current oil and gas prices remain and maybe that will create some opportunities for us at reasonable cost, reasonable cost being underscored out there. We're continuing to look for organic type, pipeline type growth opportunities in our own regions in part due to the clean power plant and the need for more gas redundancy. But don't look for us to jump into what I would, which I think you would consider classic midstream assets.

I'd also tell you, as we mention on the call, that while we're interested in rate base in gas reserves, in today's very low natural gas environment it's difficult to find those opportunities that make sense from a consumer standpoint. Our thought is as you know, things cycle, commodity prices change, and you've got to have a frame work in place so you can execute on it quickly, opportunistically, and that's what we're seeking to accomplish initially in Colorado.

Great, thank you.

You're welcome.

The next question comes from Paul Fremont with Nexus.

Thanks. How are you? I guess I'm a little, still a little confused on the first three years because you're showing about $600 million of less rate base in your base case and the tax position would have been the same either way in terms of whether you were not paying taxes because of bonus or not paying taxes because of the NOL, you're essentially in the same position of not paying taxes. If you could just help explain the offset to the lower rate base and the tax position sort of being the same. Is it because you're taking stretch spending and moving it forward and that's what's offsetting the lower rate base or is there something I'm missing?

No, it's -- and Teresa, correct me if I'm wrong but in Public Service Colorado, we're in a three-year plan so to the extent you see rate base reductions, which we do, you've got a fixed revenue stream and you're earning on a lower rate base, so your earnings doesn't change but the base you're earning on it does. In Minnesota, and again, you have to look at where -- you have to look at each operating utility in addition to where we are in a consolidated basis. In Minnesota at NSP, you've got -- they have an NOL position that is for the next few years is parked on the balance sheet. We're earning on that and when it starts to roll off, it reduces your -- the amount of revenue requirements you need. That's basically why it doesn't have an impact on us in the first three years. Does that make sense?

I think so. Yes.

I think you answered it fine.

The next question will come from Gayle Muers with Aviva Investors.

Hi, Gayle.

Hello, good afternoon. I'm calling from Aviva Investors, the asset management arm of the UK insurance company. We focus on material shorts and long term risk facing investing companies and policy action associated with controlling climate change is already under way, such as the Clean Air Act. Following the global agreement in Paris to limit climate change, we were wondering what additional steps Xcel Energy was taking to insure the business is resilient to this carbon constrained global outlook?

Well that's a great question, Gayle. I appreciate that. I think if you -- when you get more familiar with Xcel Energy, you'll see not only have we been an environmental leader for more than a decade and have reduced our carbon emissions in addition to many other emissions, but our carbon emissions specifically, by more than 20% off 2005 baseline, we'll reduce them by 30% by 2030, but we're going beyond that. As a leader in renewables, as a leader in converting aging coal plants to natural gas, if you take a look at what we're doing right here in the Upper Midwest with our plan, we'll have reduced carbon emissions by 2030 by 60%. That will exceed the Clean Power Plan targets. We recognize what you're talking about and what we believe is it can be done but you need to do it pragmatically and with affordability and reliability in mind and when you have a long term plan under a good policy framework, you can accomplish that. Thank you for your question and look forward from good things from Xcel Energy.

The final question will come from Paul Patterson, Glenrock Associates.

Good morning. How are you?

Hey, Paul.

Good morning, Paul.

Just -- you went over it and I apologize, I wasn't quick enough. You went over the sales growth forecast. I think it was 50 basis points. Was I right that, that included leap year?

Yes.

It did include leap year. What were the other things that were driving it as well?

Well let me start with our guidance is 0.1% to 1%. The leap year is 0.3%. We are seeing customer growth of about 1% across our systems and we are seeing, if we look at the last two quarters, while on the annual basis in terms of use per customers, particularly in our residential class, we are showing a decline in our larger jurisdictions. The last two quarters we have seen that plateau so we don't expect to see the continue. Two quarters is not necessarily a trend, but we do expect that to levelize. We're see some improvement. And then specifically to some of our large C&Is where we did see some decline, we see that going forward that we don't expect that to continue. We see stabilization with where they will be at in 2016 as well.

Okay. The rest of my questions have been answered. Thanks so much.

Thanks, Paul.

That concludes the question-and-answer session. At this time I would like to turn the conference over to Ms. Teresa Madden for any additional or closing remarks.

Well thank you all for participating in our earnings call this morning. Please contact Paul Johnson and the IR team with any follow-up questions. Thanks very much.

And go, Broncos.

Go, Broncos. Yes.

Thanks, everyone.

Thank you.

Thank you. That does conclude today's conference. Thank you for your participation and you may now disconnect.