Shahriar Pourreza: I guess–not to paraphrase what you’re saying, but put all that together, you feel okay about tightening up that delta between rate base growth and EPS growth in time?
David Campbell: We like the drivers in our service territory and we know–you know, those–we’re certainly confident in our range through 2025, the 68%, and the long term drivers, we like the set-up in our territory and we look forward to going through 2026 and beyond when we have those details to share.
Shahriar Pourreza: Okay, great. Thank you guys, I appreciate it. Thanks.
David Campbell: Thanks Shahriar.
Operator: Thank you. Our next question comes from the line of Nicholas Campanella of Credit Suisse. Your question please, Nicholas.
Nicholas Campanella: Hey, good morning everyone. Thanks for taking my questions today. I wanted to just follow up on the IRP because absolutely a focus here. When you think about the opportunity set in front of you and the fact that you’re now showing a rate base CAGR of 6% out to ’27, does the IRP extend that 6% or could it potentially increase it? Just trying to understand the magnitude of what’s to come, thanks.
David Campbell: I feel like I’m your parents, calling you Nicholas. Nick, that’s a great question. The IRP update is in process. We include our expectations for new generation in our forward capex plans. There’s been a slight shift in our expectations regarding the mix of PPAs in renewables. We’ve got a very heavy weighting towards PPAs right now in our renewables and we think it’s beneficial for customers to have a balance, but in Kansas we’ve shifted to a two-thirds assumption of owned and one-third assumption of PPA, so that’s something that will play out in terms of what happens with the actual RFPs that we run and what’s going to be most competitive and what offers the most benefits for customers. That’s sort of an element no matter what’s in the IRP.
I do think there’s some factors, Nick, that could drive more attractive opportunities for customers in the IRP, and those relate to–you know, we now have significant benefits in the IRA that we didn’t have modeled in the IRP last year. Those are not only sizeable but we know that they’re going to be in place for a period of time. That clearly aids the relative cost of new renewables, which are pretty cost effective in our region, and relative to energy provided from fossil resources. We’ve got a lot of coal and the traditional ability to drive lower cost for customers by replacing high variable costs, high fuel cost generation with renewables is going to–I think the IRP will reflect that. Now, the wildcard is going to be what are construction costs.
My personal view is we may still be facing some bottlenecks that are driving higher cost for construction for renewables, but we’ve seen in the cycles over time that those do–those constraints are lifted and generally the supply responds robustly, and that helps driven down cost over time. I think that there are going to be opportunities given the amount of energy we still produce at a relatively high variable and high fuel costs and the tailwinds from the IRA that are going to benefit-you know, we’ll have incremental opportunities for renewables, but we’ll have to see how the math plays out. It may be that math is more compelling once we see construction costs, where they are and where they’re trending. The other piece is with capacity requirements tighter, we’re going to make sure–and solar is weighted more heavily towards capacity, gas peakers or potentially you could see capacity, with growth like what we’re seeing in Panasonic and with Meta coming in, there’s also going to be a growth dynamic that may help drive some incremental resource needs too, and that are weighted more towards capacity requirements.
That’s a long answer to your question, but hopefully that makes sense. Net-net, I do think there could be some tailwinds in the IRP.
