David Arcaro: Got it. That all makes sense. That’s helpful to frame it up. And I was curious what’s the latest that you’re seeing in Renewables economics in terms of LCOE? In your service territories there’s been market concerns about rising PPA prices inflationary pressures in the renewable supply chain. But just curious what your experience has been in terms of latest data points how attractive have renewables projects looked?
Bob Frenzel: Yes, David, look so the great benefit of the last couple of years is obviously the Inflation Reduction Act. We’ve definitively seen higher capital costs in wind and in solar the IRA and the tax benefits of 100% PTCs have been able to offset that at least in our jurisdictions on an LCOE business. So, probably I’ll give you some data points. I’d say we’ve seen probably 30 — from our last approved wind project, which would have been our Dakota Ridge project, we built that for around 1200, 1250 kW. We’ve probably seen capital cost increases on wind or 30% to 40% on top of that. But the IRA has offset all of the capital cost improvements as well as NCS improvements from better technology and the bigger turbines. Those two combinations have put our LCOEs on those projects in line with what we put wind into service for in 2018 and 2019.
So, we’re really favorable participants. Our customers are great beneficiaries of the Inflation Reduction Act keep the levelized cost of energy very, very affordable for our customers. And when I think about — I made the comment earlier around sort of economic development opportunities. We’re putting wind in — let’s say we’re putting wind in around $20, $22 a megawatt-hour. You compare that to offshore wind on the East Coast at north of $100 and we think over time lower cost energy will accrue an economic benefits to our regions of the country.
David Arcaro: Yes, excellent. Okay, that’s great to hear. Thanks so much for the update.
Operator: Thank you, sir. We’ll now move to Travis Miller of Morningstar. Please go ahead.
Travis Miller: Morning. Thank you.
Bob Frenzel: Hey Travis, good morning.
Travis Miller: Hi. Just a couple of quick follow-ups to some of the earlier questions in your comments. That 1% to 2% moving the sales number to 2% to 3%, what’s the approximate earnings impact there incremental all else equal?
Brian Van Abel: Just easiest rule of thumb is I’ll call it a 1% change in sales, there’s about a $25 million change in the revenue from our sales. So, that’s a good rule of thumb for you Travis.
Travis Miller: Okay. After-tax that’s earnings, right?
Brian Van Abel: No, that was revenue — sorry that’s revenue. And that takes into account our true-up in decoupling mechanisms.
Travis Miller: Okay. So, pre-tax. Okay. Got it. And then on the Heartland and some of the other projects you’ve mentioned in terms of new technology other hydrogen projects, is your thought for us is to put that through some of those things through the regulatory traditional regulatory process? Or do you foresee potentially coming up with another financing structure another corporate structure, is something that would house some of those projects that are say unusual in a positive way obviously?
Bob Frenzel: Hey Travis, it’s Bob. Good morning. Our proposed plan would certainly put the assets into regulatory rate base here in the Upper Midwest. If you think about our proposals at the DOE, we’ve got green hydrogen off of wind and solar. We’ve got pink hydrogen off of nuclear plants and the end users are going to help partners create green fertilizers, green ammonia to green urea to fertilizer, as well as some amount of blending into our gas plants and into our LDCs with some of the output. So the expectation is they would go through a regular state process around that capital investment and those ultimate uses for the fuel.
Travis Miller: Okay. Perfect. And then real quick, Minnesota, any update on the timing of your appeal process and?
Bob Frenzel: Yes, so sorry, thanks. We went through a reconsideration process in mid-September. I think our appeal plan would be early November.
Travis Miller: Okay. And then about how long does that take — would you think?
Brian Van Abel: Sometime into next year.
Travis Miller: Okay. Very good. Appreciate it.
Brian Van Abel: Thank you.
Operator: Thank you, Mr. Miller. We’ll now go to Ross Fowler calling from UBS. Please go ahead. Your line is now open sir.
Ross Fowler: Good morning, Bob. Good morning, Brian. How are you?
Brian Van Abel: Good morning Ross.
Ross Fowler: So Brian maybe one for you, since you guys are sort of on the leading edge of lets transferability and feel free to take us offline, if we can’t do it in seven minutes. But I’m just thinking through like how do you think about the accounting? Do you record the nonmonetary assets at fair value and then book a sort of gain and loss against that when you get to cash? Or there’s no FASB guideline here right if I’ve got it right. So how are you walking through the accounting of these source ones that you’re doing? And can we get clarification from FASB or the IRS at some point about how the accounting should work?
Brian Van Abel: Certainly, we work closely with our audit firm on this and the audit firm is working with the — the big four are working together. The way we look at — it’s an income tax model election for us. And so what that means is we’re going to run it through the gains and losses through income tax expense on the income statement. And so any discounts on the sales will run through that and then from a regulatory approval of regulatory mechanisms for that discount whether we’ll be able to have deferral treatment of the discount with our regulatory approval. So really because this is a benefit of our customers to be able to have that regulatory deferral mechanism is helpful. And then it will run through our cash from operations. So I think income tax expense line item and then cash from operations.
Ross Fowler: Got it. Okay. Thank you, very much.
Operator: Thank you, sir. We’ll now take questions from Paul Patterson calling from Glenrock Associates. Please go ahead.
Paul Patterson: Good morning.
Brian Van Abel: Good morning, Paul.
