Paul Patterson: Just wanted to go over just a few quick things on the quarter. First of all, the decrease in labor capitalization. Can you elaborate a little bit more on what’s driving that and how that’s going to impact the rest of the year?
Kirkland Andrews: It’s Kirk. The decrease in labor capitalization is really a function, but we had a little bit of a change in our transformer labor capitalization approaches in the first quarter. There’s a little bit of a catch-up there. So now what you’re seeing is just the ongoing effects of that as we move forward.
David Campbell: Paul, you get the product for both in-depth reading and materials.
Paul Patterson: But what — how much was that I guess?
Kirkland Andrews: We’ll have to — I have to get back to you offline on that. Paul will be happy to do that.
Paul Patterson: No problem. Then the sales growth numbers for the quarter, does that reflect leap year?
Kirkland Andrews: Yes, it does.
Paul Patterson: And then the PISA legislation, it sounds like you guys in Missouri, I’m talking about. It sounds like you don’t see much opportunity for the House Bill. I think there’s also a Senate Bill. I mean I know it’s going to end soon, but is that — is that pretty much how you feel? Does I hear you right, I guess?
David Campbell: I think, Paul, yes, you heard me right. We’ve had the PISA provisions, PISA language and changes to PISA relating to natural gas investments to 90% and extending the date past of the house. There’s very good discussion around it. There’s broad-based support. It’s just hard — given the tight time line in the session, overall session dynamics. It’s going to be hard to get anything past. So we think this is no different. Wouldn’t rule it out, we certainly think it will be beneficial, but the session dynamics is the time line on the real constraint, not support for the provisions. We think it’s broad-based support.
Kirkland Andrews: Sorry, Paul, that transformer labor just to come back to you is about $0.02 year-over-year.
Paul Patterson: Then just on Missouri, if I’m correct, if you — if it ends — the session ends, the floor action ends tomorrow, is that right?
David Campbell: The 17th, I think, is when it formally ends. Paul?
Paul Patterson: But I thought there was a floor action deadline or something. Okay. But okay, the 17th, okay. Okay. I appreciate that. And then finally, you mentioned that your next IRP will reflect the impact of the EPA rules. Do you think that — how do you think about depreciation with these EPA rules? And when — I mean you mentioned litigation and the uncertainty that’s associated with it. How should we think about depreciation potentially changing with certain assets given these EPA rules. And when that when you guys might have to deal with that regulatory or not? I mean just how are you sort of big picture, how are you thinking about the issue of asset life depreciation and these rules and how those would sort of figure out. How this would sort of pencil out if you follow me?
David Campbell: Well, Paul, it’s a great question and one that is going to take a lot of work on our part and a lot of work with our stakeholders because the affordability and reliability impacts of the rules are ones that were really all have to dig into. And there are some provisions in the rules that give some potential outs on those, relatively short term in nature. But to your point, we’ll have to assess carbon capture and sequestration is required for any unit that’s operating beyond 2038 but does that apply if that technology is not commercially proven today. I do not want to get ahead and analysis we’re going to do in any discussions we have with our regulators around it. That provision, in particular, is around carbon capture and storage, there is no doubt going to be to focus a lot of discussion by a lot of parties, but the affordability and reliability impacts are certainly to the forefront and any change in depreciation schedules — along with any incremental investments that might be required would have impacts on the affordability side.
So under the provisions of the rule, you can look at our RFP and it would imply absent CCUS, It’s going to have some impacts in the out years. But we’ve got some time to analyze. I’ve got some time to work through with parties, but you’re noting an important issue is that these rules are consequential and the affordability and reliability impacts are real and significant, and we’ll be analyzing them over time. And we’ll do that on a systematic basis because something that’s important we won’t rush into and we’ll absolutely be working with our regulators and stakeholders in Kansas, Missouri as we do that analysis. And we’ll be tracking the litigation closely.
Operator: Our next question comes from Ryan Levine of Citi.
Ryan Levine: On the one slide, you highlight over $10 billion worth of new development projects in Kansas and Missouri. But you provide a little bit of color around what industries are most represented in that $10 billion number in which service territories is there waiting towards? And any color around the loan opportunities that, that may enable?
David Campbell: Sure. So the — it’s — you won’t be surprised here. It’s data centers, but also advanced in large manufacturing that can range from semiconductor, auto, food, products, food service industries are all pretty big presence in our space. So we, like others, we’ve got a pretty big presence in data centers already with Meta and Google, and there’s a number of those are data centers, but there’s also a lot of advanced manufacturing. And we’re excited about all of them. We have been quantified, but the exact megawatts, the $10 billion, obviously add up to a very material increase in potential load, but — and it’s across — [indiscernible] , it’s across all of our jurisdictions. There are a number of those parties that are interested in the Metro region and our Missouri West area.
So Meta, for example, Missouri West, Googles and Metro and the Panasonic data plants in Kansas Central. So I think you’ll continue to see a broad-based interest across those. I think I also left that aerospace. We’ve got a very large aerospace presence in the central part of Kansas, and that’s also an area of high interest. So it’s an exciting time, and we’re glad with the big new customers will be able to land. It’s been a mix of data centers and large manufacturing. I think we continue to see that kind of mix across those and are not exclusively data centers. I know there tend to be a lot of focus of the discussions recently, but we’re big fans of advanced manufacturing coming in our territories too because they’re bringing a lot of jobs and incremental benefits.
Data centers are also big positive. They don’t bring as much jobs, of course. But it’s an exciting time in terms of the pipeline.
Ryan Levine: As you’re working through your resource planning and with the favorable legislation passed in Kansas, are there any nonfinancial constraints to be able to serve incremental load in your service territories, i.e., particularly on the gas generation side that we should keep in mind that may constrain your growth?
David Campbell: I mean, I think for all of us, all utilities and for us, when you look as far as our system, adding the 3 customers I mentioned today, we said approximately 750 megawatts of load. That’s a nearly — between a 5% or 10% increase in our overall demand peak. So you add several hundred megawatts in a location, you’re going to run into where the valuation is on transmission and distribution infrastructure. So what do you have adequate transmission, you’ve adequate substation infrastructure in place. And with Southwest Power Pool requirements getting tighter, there’s certainly capacity issues as well. So it’s — when we’re looking at sites and sites that are opportunities for our customers, a lot of them — we’re being responsive to where they’re interested, but to the extent they’re flexible, then it’s all about how do you work through the grid constraints, so transmission, distribution and then capacity constraints.
So it absolutely is factored into our overall resource planning. That’s part of why you see more resources in our plan. Some of that is higher requirements in the Southwest Power Pool, but some of that is a reflection of higher demand. So there are grid constraints and capacity constraints you need to work through and it’s an opportunity. I think we’re not unique in that. I think it’s a general phenomenon across the U.S. We’re seeing a higher level of demand than we’ve seen in decades.
Ryan Levine: What I was trying to get at is if you’re building new gas plants, are there any pipeline constraints or anything else that [indiscernible] more onerous to overcome or permitting or any other challenges that we should keep in mind?
David Campbell: Yes. I think that the — I think the EPA rules are structured. The new efficient gas turbines can meet the requirements, so there will be capacity factor rotations. Our team’s evaluation of new gas sites that we’ve not announced where the new gas sites are certainly taking into consideration existing gas and grid infrastructure. So we think we’ll be able to work through those. There’s always a permitting an interconnection process. So it takes years to get these things done, and that’s a reflection of why the big gas plants are appearing in the years. They appear that really reflects the lead time that we expect to be required to work through all those various issues. But we do think we’ll be able to get it done.
Operator: Our final question comes from Michael Sullivan of Wolfe.
Michael Sullivan: Just wanted to ask on the mild weather to start the year and how you’re thinking about levers to offset that?
David Campbell: So it’s welcome to 2024, same as 2023 because we had a mild start to 2023 as well. Like we look across various levels of our business, but the important part of that, obviously, is cost management. We mentioned that the new legislation in Kansas in the first year following rate case provides a benefit. So obviously, we’re in the first year following a rate case. So we’ve got a relatively large enterprise. We got a range of levers that we typically work through. It’s — it’s not — the first quarter is not our biggest quarter. So we’ll be watching to see how second and third quarter go in particular. But I put it — I view it as that’s sort of in the routine category things to manage. So we always prefer to be normal weather, but we’ve got some levers that we can work on and some positives that we’ve seen also already manifested.
