Paul Zimbardo: Okay. Understood. That’s what I thought. And then shifting to the financing plan, so if I understand it right and correct me if I’m wrong, it doesn’t assume any litigation proceeds, state funding, federal funding for PFAS. Is there any sense of what that kind of offset could be to help out on customer bills?
Susan Hardwick: Yeah, it’s a good question. Obviously, the numbers that we have laid out here, as Cheryl outlined, continue to be our best estimates of the cost necessary to meet the current proposed rule. Obviously, we don’t have a rule yet. So finalizing those numbers will occur once we have a final rule and we do participate in the ongoing litigation around this whole issue. We’ve laid all that out in the Q. So you can look at that there and probably won’t talk much more about it than that since it is ongoing litigation. I think it is fair to say that our estimates today are the costs we would expect to incur. We have to see how the litigation ultimately works out to see what impact that may have. And I think Cheryl covered this well. We do believe, by virtue of our participation in the litigation, that polluters should be our first line here of responsibility. So we are quite involved in that to make sure that that is properly executed.
Paul Zimbardo: Okay. To make sure, it does have an assumption around getting external funding or it does not?
Susan Hardwick: It does not at this point, no. It is just the cost estimates that we have developed so far.
Paul Zimbardo: Okay, that is what I thought. Okay, great. Thank you very much.
Operator: The next question comes from Will Granger [ph] with Mizuho. Please proceed.
UnidentifiedAnalyst: Thanks for taking my question. Just wanted to ask, on the PFAS billion dollars that you have outlined today, how should we be thinking about the makeup of that over your service territories? Is it pretty radical? Yeah, if you could unpack the underlying assumptions there, that would be helpful.
Susan Hardwick: Yeah, I will ask Cheryl to comment on that. We hit on, I think, a pretty high level, but Cheryl, you might want to just reemphasize that.
Cheryl Norton: Yeah, as we have looked at this, as I mentioned in my comments earlier, we expect the bulk of the spend to be in our states where we have a larger footprint of customers, New Jersey, for example and the reason for that driver of that being the largest amount of spend is that there is more contamination there in general, but also these are large surface water plants that are very costly to add treatment to. We have Pennsylvania as a larger state, numerous locations there, but we really haven’t outlined everywhere that we’re going to add treatment, but anywhere that it’s a surface water plant as opposed to a groundwater source is going to be a lot more costly to add that treatment and so New Jersey is our biggest dollar state for sure.
UnidentifiedAnalyst: Got it. That’s helpful and then maybe just on the equity for your plan, is that the incremental equity is just $700 million, if I’ve got my math right? The $300 million that you’re planning to issue now and then an incremental $700 million, or is it an incremental billion?
John Griffith: You’ve got it right, Will. It’s an incremental $700 million.
UnidentifiedAnalyst: Okay. And we should expect the timing of that to come in towards the back half of your plan, or would that be issued like as an ATM and just kind of pretty radical?
John Griffith: What we’ve said is we’ll issue it in the middle of our new 2024 to 2028 plan, subject to market conditions, obviously.
UnidentifiedAnalyst: Got it. I’ll leave it there. Thank you very much for the time.
Operator: Our next question is from Jonathan Reeder with Wells Fargo. Please proceed.
Jonathan Reeder: Hey, good morning, team. Just kind of following up a little bit on that last question, despite the higher operating cash flows, it looks like the external capital needs increased more than the $2 billion CapEx increase. You’ve got the $700 million of equity, and then I think its $1.7 billion of debt. Anything unique going on there?
John Griffith: No, Jonathan. We really lead this analysis by looking at our credit metrics, and so a lot of it just goes back to what we’ve said in the past, where incremental CapEx will fund at 50-50 debt and equity. As we think about equity there, it’s internally generated funds as well as new issuance. So we think of it as lining up in that regard.
Jonathan Reeder: Okay. No, I was just thinking the debt portion was a little higher than I would have thought.
John Griffith: Yeah, that’s just a function of the capital spend as well as the maturity schedule.
Jonathan Reeder: Okay, yeah, maybe the maturity schedule. Okay. So, Cheryl, I know you said that California filed on 10-16 to increase the ’24 allowed ROE. Has there been any opposition filed to this request? I think there’s like a 30-day comment period, which probably ended maybe yesterday.
Susan Hardwick: Yeah, there is that 30-day period, and Jonathan, I am unaware of any kind of intervention or any kind of concern over that.
Cheryl Norton: Okay. It’s pretty formulaic, Jonathan. Yeah, we don’t expect there to be any issue with that. It really just follows a formula.
Jonathan Reeder: Yeah, no, I think investor concern is more on the electric side, whether you see some intervention than the water, but we monitor both. I think the 10-year CapEx plan, you bumped up the M&A placeholder by a billion. Is there anything specific driving that, or is that just kind of passage of time more than anything?
John Griffith: Yeah, I’d say, Jonathan, it’s certainly passage of time as part of it. We are investing in our capability across the system, starting with originations as well as due diligence and integrations. As we look at what happens when we make acquisitions and just our standards as a best-in-class operator relative to the systems that we acquire, we just continue to think that there’s a lot of momentum there and a lot of strength in us as continuing this program. So it is a capability that we’re investing significantly in and, yes, as you pointed out, as we move forward in time, we expect those numbers to become bigger to maintain that relative level of contribution.
