Steven Fleishman: So nothing’s really changed in your planning range. Okay.
Lynn Good: That’s exactly right.
Steven Fleishman: My other question is on the rate cases in North Carolina under the new law, the new multiyear rate plan, how are you thinking about whether you’d be able to settle those cases or that they likely need to — because they are kind of the first under the law and need to go through a full litigated process most likely?
Lynn Good: Steve, I think it’s too early to tell exactly. And you may — if you think back on our history, we have, from time to time, entered into partial settlements where you feel like there are elements of this case that can be agreed and then there are others that the parties believe ought to be put in front of the commission. You should know we’ll explore discussions with all intervening parties through this process. And as we get closer to dates when testimony gets — is ready to be heard and testimonies been filed by all the parties, we’ll begin those discussions. But it’s too early to tell the shape that it will take.
Steven Fleishman: I guess one last thing. The $300 million of O&M reductions, I know that’s, I think, a number that you’ve had before, the 75% sustained. Can you just remind me, is that the same that you said before? Or does that number get
Lynn Good: It is, Steve. No, it’s the same. It’s the same as what we said before. So thank you.
Operator: The next question is from the line of David Arcaro with Morgan Stanley.
David Arcaro: Just on that topic of cost management, could you give your latest level of confidence in hitting the $300 million this year, what you’re seeing in the backdrop in terms of it becoming more challenging, easing up of any of those inflationary pressures this year so far?
Brian Savoy: That’s a good question, David. This is Brian. When we looked at the opportunities across the board last year to really position 2023 in a good spot, we identified areas in our corporate costs and business support that we felt like we could really align service levels with work prioritization. And we did this across the board, but a good example is in IT, right? We have about 1,300 IT systems. Well, not all are mission-critical don’t need to be — have the same level of support as others. So we really stratified our support levels. And we did that across IT, HR, legal, finance, we looked at across the corporate areas and found really structural opportunities that will remain for the long term. And that’s why we feel like a lot of the 75% of the $300 million is sustainable.
And another area that was also very important to the cost reductions was our real estate footprint. In Uptown Charlotte, we’re moving from 4 buildings into 1 new tower. That’s reducing service costs on those assets as well as lease cost and depreciation. So inflationary pressures are not impacting our ability to hit that $300 million target. We’ve contemplated inflation in certain pockets in the portfolio as we look into the spin in 2023 in our planning horizon and feel good about the $5.65 target we have.
David Arcaro: Okay. Understood. That’s helpful. And then I was wondering if you could just talk to — what gave you the confidence in knocking up the CapEx plan for the ’23 to ’27 period. But then also on the rate base outlook, it looked like the 2027 rate base forecast had ticked up a decent amount versus the prior expectations. So I’m wondering if there are any other drivers behind that, too.
Lynn Good: David, as we come to capital planning every year, we take into account where we are with regulatory approval, where we are with integrated resource plans, et cetera. And so we have seen an increase in transmission and distribution investment. If you look at the carbon plant in particular, there’s transmission that’s been approved in order to open up more potential for renewables. And as we get out into ’26, ’27, those numbers also reflect what we expect to mature in subsequent IRP updates and subsequent regulatory approvals. So that’s how I would answer. I don’t know, Brian, would you add anything further?
Brian Savoy: No, I think as we move deeper into the clean energy transition, we expect the capital plan to increase year after year as well. So this is in line with our expectations as we move through the ’20s.
Lynn Good: And I think that’s an important point. As we were talking — thinking back to the generation transition day kind of showing those charts about the 10 years. As we get deeper into the plan, more generation investment begins to show up earlier in the plan, more transmission and distribution. So you’re beginning to see that and you’ll see more of it in ’28, ’29, ’30.
Operator: The next question is from the line of Nick Campanella with Credit Suisse.
Nicholas Campanella: A lot of good questions so far. So I guess conceptually, Brian, when you updated this plan in the third quarter, we were kind of at the height of inflation, interest costs, gas costs, et cetera. And now we’ve obviously seen some of those things roll over here since you’ve given the 5% to 7%. Does that put you in a better spot in the range now, given that dynamic? I’m just thinking long term through the plan here? Any comment that you could give on that?
Brian Savoy: Nick, it is a good question around long-term growth rate. And we feel good about our 5% to 7% growth. And we have a lot of things to figure out. I mean interest rates have moderated to some degree, but they’re still moving up, right? The Fed is still moving it. Fuel costs have been on the downward trend, and we — that’s really good for our customers. But they could move up just as fast as they did in 2022. So right now, we’re sticking to the 5% to 7% growth range and not signaling inside it anymore.
Lynn Good: I think the commodity price is coming down, Nick is a real positive for customers because you think about we still have deferred fuel to collect, but our estimates for cost of fuel in 2023 is coming off and that’s a good thing. So we’re pleased to see that. It’s good for customers. It also takes a little pressure off of interest in financing. So we’ll continue to take advantage of every bit of that.
Nicholas Campanella: I appreciate that. And to your point on the deferred fuel, 80 bps hit to the FFO and the ’23 time frame here, and I acknowledge you have a path to get back to the 14% long term. I guess my question is, do you see sufficient headroom in your metrics at this point for unforeseen events like storms? And just how should we kind of think about the ability for the current plan to just handle any more kind of transient credit hits here?
Lynn Good: We feel very comfortable. The fact that we’ve absorbed $4 billion of deferred fuel and $0.5 billion of hurricane in 2022 alone, I think, is a strong testament to where we are, our scale, our ability to manage resources, et cetera. So we feel comfortable with it. We care deeply about maintaining these credit ratings. We think they’re important and at the right level for the degree of risk in the business, but this is an opportunity that presents itself with the size and scale of our company where we can manage our way through blips of this type. More than a blip actually, $4 billion.
