Operator:

Welcome to the Dominion Energy Second Quarter Earnings Conference Call. At this time, each of your lines is in a listen-only mode. At the conclusion of today's presentation, we will open the floor for questions. [Operator Instructions]. I would now like to turn the call over to David McFarland, Vice President, Investor Relations and Treasurer. Please go ahead.

Steven Ridge:

Thank you, David, and good morning, everyone. I'll start with quarterly results on Slide 3. Second quarter operating earnings were $0.65 per share, which included $0.03 of help from better than normal weather in our utility service areas, whether normal operating EPS was $0.62. Relative to Q2 last year, positive factors for the quarter included $0.11 from improved weather, $0.10 from regulated investment growth and $0.17 related to Millstone, including $0.13 from the absence of extended duration outages and $0.04 due to higher realized power prices. Recall that during the second quarter last year, we experienced both planned and unplanned outages at Millstone. The other material factor for the quarter was an $0.08 year-over-year hurt associated with the revenue reduction at DEV related to moving certain riders into base rates as a result of legislation that became effective in July of last year. A summary of all drivers for earnings relative to the prior year period is included in Schedule 4 of the earnings release kit. Second quarter GAAP results were also $0.65 per share. Adjustments between operating and reported results include the net benefit from discontinued operations, primarily associated with the sale of the gas distribution operations, as well as unrealized and non-cash market driven changes in the value of nuclear decommissioning trust funds and economic hedging derivatives. A summary of all adjustments is included in Schedule 2 of the earnings release kit. Turning to guidance on Slide 4. We're reaffirming all of the financial guidance we provided at our March 1, Investor Meeting. First, 2024, we continue to expect 2024 operating earnings per share to be between $2.62 and $2.87 with a midpoint of $2.75. Year-to-date operating earnings are consistent with the illustrative quarterly earnings cadence ranges that we provided on March 1. Looking ahead, we expect that better than normal weather during the first half of July, combined with the $0.03 of weather help in the second quarter will nearly offset the $0.06 of weather hurt we experienced in the first quarter. During the second half of the year, we expect to see some headwinds from higher than budgeted short term interest rates and backloaded O&M expense, which puts us on track for the midpoint of our guidance range. A summary of the year-over-year drivers and illustrative EPS cadence for the third and fourth quarters is replicated from our March 1 meeting in today's appendix. Turning to 2025 through 2029. We are reaffirming our guidance for 2025 operating earnings per share of between $3.25 and $3.54 inclusive of approximately $0.10 of RNG 45Z credit income with a midpoint of $3.40. We also continue to forecast an operating earnings annual growth rate range of 5% to 7% through 2029 of a midpoint of $3.30 which excludes the impact of the RNG 45Z credits. As a reminder, we continue to expect to see variation within our annual 5% to 7% growth range as a result of the Millstone refueling cadence, which requires a second planned outage once every third year. As it relates to 2025 specifically, earlier this week PJM published the clearing prices in the 2025-2026 planning year base residual auction. Elevated capacity prices at the RTO and DOM zone affirm what we've been saying for the last several years, that robust investment in an all of the above generation resources and new transmission infrastructure is critical to reliably serve the growing needs of our customers in Virginia. As a vertically integrated utility, we have a natural hedge in that the capacity purchases to serve our load are mostly offset by the capacity revenue, our own generation receives. As a result, customers do not have material exposure to the outcome of the capacity market and therefore higher prices do not automatically translate into higher customer costs. At the time of our most recent biennial rate review, net capacity expense represented only about 1% of customer bills. Since then, we've seen a variety of actual and potential bill drivers like the elimination of the regi rider that have the potential to significantly mitigate any net effect of higher capacity expense on customer bills. And remember currently DEV's rates are approximately 22% below the national average. We'll have a holistic view of customer bill impacts when we file our next biennial case next March with rates effective by the end of the year. Until those new rates become effective and as a result of a small short generation position, we expect the impact from higher capacity prices in the second half of 2025 relative to our prior assumptions to be about a $0.04 headwind in 2025, which we fully expect to overcome. That's a temporary impact, but big picture, this is a clear and forceful signal of the continued need for robust levels and investment in our system for many years to come. Finally, and for the avoidance of doubt, no changes to any of the financial guidance we provided on March 1, including earnings, credit and dividend guidance. Turning now to a status update on our business review debt reduction initiatives as shown on Slide 5. During the review, we announced transactions that represent approximately $21 billion of debt reduction. With the closings of the Cove Point, East Ohio Gas, Questar Gas and Wexpro sales and completion of the DEV fuel securitization, we've now achieved 72% of our business review target. We're making excellent progress towards timely closing of the two remaining debt reduction initiatives, the sale of public service company in North Carolina to Enbridge and the noncontrolling equity financing by Stonepeak in the Coastal Virginia offshore wind project. Let me provide a little more color about what to expect here. As it relates to PSNC, all parties reached a comprehensive settlement in late May, followed by an evidentiary hearing on June 11. On July 24, the joint proposed order was filed with the commission representing the final procedural step. We expect a final commission order during the third quarter with closing to follow shortly thereafter. And as it relates to CVOW, we received Affiliates Act approval, representing the first of two required Virginia approvals from the State Corporation Commission on June 26. Last week, SEC staff filed their comments on the Transfer's Act and financing partner petition, the second of two required Virginia approvals. No other parties filed comments, and we consider the staff comments to be constructive. A hearing is scheduled for August 27, and we expect the final order later this year. In North Carolina, the financing requires affiliates agreement approval. This week, the NCUC public staff were the only party to file comments and we consider their comments to be constructive. Next steps will be commissioned hearings, if requested, followed by a commission order. We continue to expect the CVOW financing partnership to be completed by the end of the year, and we look forward to continuing to work with all parties involved. Turning to financing on Slide 6. Since our last call, we successfully issued $2 billion in enhanced junior subordinated notes. These tax deductible securities received 50% equity credit from the credit rating agencies. We've also issued approximately $400 million of equity under our ATM program, representing 80% of the midpoint of our annual guidance as well as roughly $100 million under our DRIP programs. Consistent with our prior guidance during the remainder of the year, we'll complete ATM and DRIP issuance, complete a final long-term debt issuance at DEV, and utilized proceeds from the closings of the PSNC sale and the CVOW partnership financing to further reduce debt and lower interest expense. In conclusion, I'll reiterate that I am highly confident in our ability to deliver on our financial plan. The post-review guidance has been built to be appropriately but also not unreasonably conservative to weather unforeseen challenges that may come our way. And with that, I'll turn the call over to Bob.

Operator:

And at this time we will open the floor for questions. [Operator Instructions]. And it does look like we have our first question from Constantine Lednev with Guggenheim Partners.

Robert Blue:

Good morning.

Diane Leopold:

Hi, good morning. This is Diane Leopold. Yes, we are excited that we've been able to hit the two and the second vessel that we have will keep us in production mode for longer into this season. We're kind of right in peak season right now as the weather starts to change a little bit. We may not be able to keep hitting to quite as often. So we feel really confident in the 70 to 100 and just also keep in mind that during this season, we want to put in at least enough pin piles to be able to set one of the offshore substations. So we have to take that into account. So overall, I would say the team, both our own internal team and the DEME team is doing a fantastic job and that 70 to 100 is a great range. We're very confident in it.

Robert Blue:

Yes, Constantine. When we think about our plans going forward, we gave our five year capital plan at the Investor Day in March, and we'll update that annually. That's our expectation. And then we'll file our IRP in the fall. We update that annually as well. And that takes a longer-term view. But when we think about demand growth we saw a big jump as the slide demonstrates with PJM between their '22 and '23 forecast, a little more modest, much more modest increase from '23 to '24. So as we described in the prepared remarks, sure, there may be some opportunities towards the back end of the plan to increase CapEx and lots of data points indicating that we need generation in which we've been saying for some time, both renewable and dispatchable in our service territory here in Virginia. So we'll update the capital plan next year. We'll have an updated IRP based upon the PJM forecast, which was not hugely different than last year's, and we'll remain very focused on making sure that we're able to meet demand for our customers. This is a really exciting time has been in Virginia. We're very excited to help keep the state number one for business going forward and that will require investment in distribution, transmission and generation as outlined in the plans we've put forward.

Operator:

And we have our next question from Nick Campanella with Barclays.

Robert Blue:

[Indiscernible].

Robert Blue:

Yes. Nick, I'll take it. So as I mentioned, we've got a natural hedge, which is the generation we own is bidding into the capacity market and receiving the elevated price or we'll receive the elevated price you saw clear. So that revenue credits to customers. Simultaneously, we have an obligation as a load serving entity to also go out and procure enough capacity to sort of satisfy our load and that we'll be paying that high price as well. So naturally, we have the hedge of effectively receiving revenue at the same time as we're outlaying expense. The reason we have a small hurt in the second half of '25 related to this is because we do have a short position between the organic generation that we own and bid into the market versus the load and we typically satisfy that through imports from PJM, and that's not news. And that short positions anywhere between 2,000 and 3,000 megawatts. Going forward, the reason it's leakage, so to speak is because we're in between rate cases. And we weren't able to, because of the timing of this auction, in particular, we weren't able to include the expected cost in the cost of service that we filed as part of the last biennial, and we can't change rates until the end of 2025. So for six months, or it's I guess, seven months starts in June. For seven months, we will bear the cost effectively of that leakage. But then it will go into rates and rates will be effective. Capacity is part of base rates. It's a prudently incurred cost. It's recoverable from customers, and that's why we shared some comments on the potential impact on customers. So this is a very, very temporary. It's driven partly by the fact that we were not in a position to increase rates as part of the most recent biennial settlement. It has to do with the timing of this particular auction. And going forward, we fully expect to be able to recover 100% of this leakage in our rates from customers. So that's why it's temporary. And that's why we kind of said we wanted to be transparent with folks to say, "Hey, here's the math, here's out works. Here's what it is." But also point to that being temporary bigger picture, as -- was alluded to in the last question, this is a consistent signal of what we've been saying of the need for incremental regulated investment will help elongate our growth rate over a longer period of time as we put more and more capital to work on our system. So that's why we've got this natural hedge. That's what's different between the vertically integrated and to the extent that the short position persists, which it will for some period of time, we'll have offshore wind come in, we'll have the Chesterfield CTs come in. So -- but demand is growing. So as that persists, we'll think about ways to become effectively self-sufficient as we have been in the past as we catch up on demand. But from a financial impact, it truly is just a temporary item.

Diane Leopold:

Sure. Good morning. Diane again. So as Bob talked about, these modifications, it really wasn't any change to the base ship, those costs did not increase. But these types of modifications just aren't unusual or not unusual. We had to order the ship long before the final turbine design was complete for our project. So based on the final loadings, there's some additional DESC destining and hell reinforcement for the towers and to support the cantilever blade rocks. So that's really what's driving it. It's not any kind of scope change in the ship. It's just some of these normal modifications. So we're doing a lot of those. That work is already starting -- and a lot of it will happen, while we're completing kind of the internals of the ship, finishing the piping, the electrical work, the crane loading. We'll go for sea trials and then we'll bring it back and finish the last of that work to make sure that we can get the sea fasteners on to support our specific towers, blades, and the cells.

Nicholas Campanella:

Really helpful. Thanks for all the answers. Have a good day.

Operator:

And our next question comes from Jeremy Tonet with JPMorgan.

Robert Blue:

Good morning, Jeremy.

Jeremy Tonet:

Just wanted to pivot conversation, if I could, towards Millstone and possibility for data center colocation there? If you could just provide any incremental thoughts on the outlook there? And I guess, maybe navigating stakeholder sensitivities?

Jeremy Tonet:

Got it. Makes sense. And just wanted to dive in a little bit more, if you could kind of touch just on other angles here. But as far as the ISA protest in front of FERC, where we might hear some news tomorrow. Just wondering any thoughts on the subject that you might be willing to share?

Jeremy Tonet:

Fair enough. And I think you mentioned that net capacity expenses were previously only about 1% of customer bills. And just any thoughts on the range of what that could look like now after this auction?

Jeremy Tonet:

Got it. That's helpful. I'll leave it there. Thanks.

Operator:

And we have reached our allotted time for our question-and-answer session. This does conclude this morning's conference call. You may disconnect your lines, and enjoy your day.

Operator:

Ladies and gentlemen, welcome to the Dominion Energy First Quarter Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to David McFarland, Vice President, Investor Relations and Treasurer.

Steven Ridge:

Thank you, David, and good morning, everyone. Our first quarter 2024 operating earnings, as shown on Slide 3, were $0.55 per share, which included $0.06 of headwind from worse-than-normal weather in our utility service areas. Offsets to weather included modest interest savings driven by an earlier-than-budgeted close of the East Ohio Gas Company sale as well as O&M timing. Relative to last year, positive factors for the quarter were higher sales, regulated investment growth and better weather. Recall that we experienced a $0.10 weather headwind in the first quarter last year. So by comparison, a $0.06 weather headwind this quarter is actually a positive year-over-year driver. Other factors include higher interest expense and the revenue reduction at Dominion Energy Virginia related to moving certain riders to base rates. A summary of all drivers for earnings relative to the prior year period is included in Schedule 4 of the earnings release kit. First quarter GAAP results were $0.78 per share, which includes the net benefit from discontinued operations, primarily associated with the sale of gas distribution operations, unrealized noncash net gains on nuclear decommissioning trust funds, and the unrealized noncash mark-to-market impact of economic hedging activities. A summary of all adjustments between operating and reported results is included in Schedule 2 of the earnings release kit. Turning to guidance on Page 4. We are affirming all of the financial guidance we provided at our March 1 Investor Meeting. As such, we continue to expect 2024 operating earnings per share to be between $2.62 and $2.87 with a midpoint of $2.75. As discussed with the March investor meeting, we're no longer providing quarterly earnings guidance. We are, however, replicating in the appendix of today's materials, the expected cadence of earnings across 2024, including anticipated year-over-year drivers by quarter. There haven't been any changes to that guidance from the investor meeting. We continue to expect 2025 operating earnings per share to be between $3.25 and $3.54, inclusive of the impact of RNG 45Z credits with a midpoint of $3.40. We also continue to forecast an operating earnings annual growth rate range of 5% to 7% through 2029, up a midpoint of $3.30, which excludes the impact of the RNG 45Z credits. As a reminder, authorizing legislation applies to produce RNG volumes in 2025, 2026 and 2027, but sunsets thereafter. For the avoidance of doubt, no changes to any of the other financial guidance we provided on March 1, including credit, dividend and financing guidance. Turning now to a status update on our business review initiatives as shown on Slide 5. During the review, we announced transactions that represent approximately $21 billion of debt reduction. With the closings of the Cove Point and East Ohio gas sales and completion of the DEV fuel securitization, we've now achieved 53% of the targeted debt reduction, representing over $11 billion. With regard to the remaining 47%, we're working methodically towards timely closings for the sales of Questar Gas, Wexpro and Public Service of North Carolina as well as the noncontrolling equity financing for the Coastal Virginia offshore wind project. In all cases, no changes to our original timing expectations. We look forward to continuing to work with involved parties and expect regulatory proceedings to conclude and transaction closings to occur during 2024. For a little more color, in Utah, parties to the merger proceeding agreed to a comprehensive settlement in late March, which was followed by an evidentiary hearing in front of the commission on April 11. In Wyoming, a commission hearing is currently scheduled for May 23. And in North Carolina, a commission hearing is currently scheduled for June 11. As it relates to our announced offshore wind partnership, the transaction requires approvals from the Virginia State Corporation Commission and North Carolina Utilities Commission as well as certain consents from the BOEM and other regulatory agencies. All regulatory filings have now been submitted and procedural schedules have been published in both Virginia and North Carolina. We are excited to have a well-capitalized and experienced financing partner on terms that significantly derisked the project for Dominion Energy customers and shareholders. On credit, the business review resulted in significant quantitative and qualitative improvement to our credit profile. Recent comments by the rating agencies with whom we maintain frequent engagement highlighted the credit positive nature of the business review results. As a result of the review, we have strengthened the company's credit position with an existing consolidated rating categories at each of our 3 rating agencies. Turning to financing on Slide 6. No changes to the financing plans that we shared at the investor meeting. Specific to 2024, we have normal course long-term debt issuance at DEV in the plan for later this year. We expect to issue between $600 million and $800 million of common equity during 2024, including $200 million through our DRIP program and between $400 million and $600 million via ATM. We view this level of steady common equity issuance as prudent, EPS accretive and in the context of our sizable growth capital spending program, appropriate to keep our consolidated credit metrics within the guidelines for our strong credit ratings category. Our plan includes the ongoing utilization of hybrid securities in our capital structure. We have $700 million of junior subordinated notes that will mature in August. And as a reminder, we expect to issue between $700 million and $1.5 billion of hybrids this year. We expect to structure any new hybrids to qualify for 50% equity treatment from the credit rating agencies. In conclusion, I'll reiterate that I'm highly confident in our ability to deliver on our financial plan. The post review guidance has been built to be appropriately but also not unreasonably conservative to weather unforeseen challenges that may come our way. With that, I'll turn the call over to Bob.

Operator:

[Operator Instructions]. We'll take our first question today from Shar Pourreza at Guggenheim Partners.

Robert Blue:

Yes, Shar, both really good questions. I may take them a little bit in reverse order. We've worked with data centers for many years, and we have very strong relationships with them. As you know, Loudoun County is home to the largest data center market in the world. And we have had an opportunity to work with our data center customers for 15 or more years. So with those relationships, we're certainly looking into alternative rate designs and discussing potential structures with them. Obviously, anything that we would do there would need to be approved by the SCC. So nothing specific to offer, but we certainly continue conversations with these customers that we've worked with so well for so long. As behind-the-meter solutions or some sort of self-supply, I suppose there could be some specific situations where that might make sense for some customers. But we think given their need for reliability and affordability, we think the majority of those solutions are going to want to access the broader network of system resources that are in front of the meter. And I think it's really important to keep in mind, regardless of the source of generation, substantial transmission investment, which we've noted before. So fundamentally, given our long history with data center customers, we're quite confident in our ability to find solutions that work for them, for other customers and for our shareholders.

Robert Blue:

Yes. Again, I'll take the second part first. So as to potential incremental capital, as we said in our prepared remarks, toward the end of the plan, we could certainly see some additional capacity. We described the way data centers are ramping in faster than they have before that their requests are bigger than they've been before. We don't forecast demand based on engineering assessments. We do that based on signed contracts. And then in the later years, customer intelligence, we're pretty confident in our ability to do that. So there may be potentially some upside there as we go out. As I said in our prepared remarks, our investments are going to be driven by policy and customer needs. We'll be very thoughtful about our balance sheet and our business risk profile as we make additional investment decisions. Fundamentally, it's just a very exciting time for the industry, particularly for us, given our experience with data centers. As to PJM as I expect you know, Shar, from 2007 to 2022, we participated in the PJM capacity market through the reliability pricing model. In 2021, we announced we were going to elect FRR because that made the most sense for our customers. Now with PJM's most recent capacity market reforms and assumptions, it makes sense for us to return to the capacity auction starting with the '25, '26 auction. Returned us to the way we did business for many years. It doesn't change guidance. It doesn't change the way we operate our system or the way we think about the world. In fact, all the auction planning parameters released by PJM in April, are quite consistent with our view. We're going to see substantial load growth driven by electrification data centers for the foreseeable future.

Nicholas Campanella:

I wanted to ask on South Carolina. I think HB 5118 has been kind of progressing through and it's our understanding that can maybe kind of change a few things on the regulatory footprint there. Can you just kind of talk through if that affects your capital plans or your assumptions at all and how we should kind of think about that?

Nicholas Campanella:

I appreciate that. And then I guess just on the ship, these ship to be certain, you kind of talked about derisking the project timeline and you seem ahead of schedule. Is that versus the ISD, the '24 to early '25? Or is that more relative to where it falls in your kind of current offshore wind construction schedule. And then maybe you can kind of remind us what's in the plan today for future contracting opportunities for that ship after you're done with Virginia Offshore win?

Operator:

We will take our next question from the line of Steve Fleishman with Wolfe Research.

Steven Ridge:

Yes. We haven't issued any shares of the ATM yet, Steven. And that's a function of during the business review, our ATM shelf registration expired and so we actually didn't have the registration statement available to us. So we will be implementing that here very, very shortly, and then that will allow us to begin that program.

Robert Blue:

Yes. Just to be clear, we're looking potentially at -- we've got a couple of big combined cycle plants not too far away from each other, being able to have some gas LNG storage that is available to those two. That's the kind of thing that we're talking about. More broadly, as we've discussed, we're building a lot of renewables, which all of our customers are looking for, but we need to make sure that we can operate the system reliably. That's why we've been talking about that storage I just described as well as some combustion turbines at our Chesterfield site.

Jeremy Tonet:

It's Jeremy Tonet from JPMorgan. Continuing, I guess, with the data center line of thought, if I could. And I appreciate that this is a sensitive topic overall. But just any thoughts that you could provide with regards to the uncontracted Millstone capacity and that could possibly supply power to data centers? And how have conversations with stakeholders evolved there?

Steven Ridge:

And Jeremy, I would just note, and I think we disclosed this earlier, we've not made any assumptions in our financial plan associated with a co-located data center at the Millstone Power facility. So...

Robert Blue:

Yes, Jeremy, first. I think that legislation confirms a continued commitment in Virginia among policymakers in support of nuclear power. We operate 4 units in Virginia and have well for many years. The Navy has a substantial nuclear fleet. Many of those vessels ported in Virginia. And there are other parts of the nuclear industry that are all represented in Virginia. So I think it was a very positive sign that, that legislation passed that continues to support nuclear power in Virginia. We included SMRs in our last IRP out toward the end of the plan. We continue to investigate the opportunity to be able to deploy SMRs on the behalf of our customers. But I would add, just like with every other investment that we think about, we need to make sure that it's customer-friendly, that it fits within the parameters of our balance sheet and our business risk profile. So we're continuing to explore SMRs, as you point out, they are dispatchable and nonemitting, but we've got ways to go yet.

William Appicelli:

Most of my questions have been answered, but just piling on the data center, just a couple of comments that you made there. You commented the ramp times have been accelerating. Can you maybe just describe how that's playing out? Like, for example, the 15 that you're connecting this year, when would you expect them to be at full run rate?

William Appicelli:

Okay. I mean is there, I guess, a historical precedent of how long it's taken on prior data centers?

William Appicelli:

Okay. That's helpful. And then I guess just more broadly, again, on the same topic. Can you just share a little bit about the process of evaluation with the data center developers and how you structure the contracts and their commitments in terms of having the load show up and so that you're restructuring the cost profile appropriately to protect ratepayers?

Operator:

Ladies and gentlemen, thank you. This does conclude this morning's conference call. You may disconnect your lines, and we hope that you enjoy the rest of your day.

Operator:

Welcome to the Dominion Energy Fourth Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to David McFarland, Vice President, Investor Relations and Treasurer.

Bob Blue:

Thank you, David. Good morning, everyone. As always, let me begin with safety, as shown on Slide 3. In 2023, our employee OSHA recordable incident rate was 0.45, a significant improvement to already strong historical performance. We also achieved a record low lost time restricted duty injury rate. We're pleased but not satisfied with these results. I strongly believe that exemplary safety performance unlocks our ability to execute optimally across the 3 pillars of our mission, as shown on Slide 4. We maintained outstanding reliability in 2023 as our electric customers in Virginia and South Carolina had power 99.9% of the time, excluding major storms. Our residential rates continue to be well below the national and regional averages. From 2005 through 2022, we've reduced Scope 1 carbon emissions from our electric operations by nearly 50%, even as annual energy generated over that period has increased 9%. Going forward, you'll continue to hear how we're executing against our mission because an exceptional customer experience positions our company to deliver the best results for our shareholders. I'm very pleased to share several important updates with you this morning as it relates to our business review in the Coastal Virginia Offshore Wind Project. Let me begin by reiterating my previous commentary regarding the review. Our guiding priorities and commitments are unchanged, as is my conviction around both the decision to undertake the review and the quality of the result I expect us to deliver. The review will comprehensively and finally address foundational concerns that have eroded investor confidence in our company over the last several years. We will not pursue a series of partial solutions that leave key elements and risks unaddressed. Instead, we'll deliver a comprehensive result that will provide a durable and high-quality strategic and financial profile that optimally positions Dominion Energy to provide compelling long-term value for shareholders, customers and employees. This morning, we announced a key part of that result with the execution of an agreement to add a non-controlling equity partner in the Coastal Virginia Offshore Wind project. This arrangement with Stonepeak, a global leader in infrastructure investing, represents the final strategic step in the business review and delivers an exciting result for our customers and our shareholders. Before I walk through the transaction specifics, let me update you on the continued successful development of the project across all phases. The project is proceeding on time and on budget, consistent with the time lines and estimates previously provided. We continue to achieve significant project milestones, as shown on Slide 5. On permitting; last month BOEM provided final approval of our construction and operation plan which allows us to begin offshore construction in the second quarter. And the Army Corps of Engineers issued its permit which has allowed us to ramp up onshore construction. On materials and equipment; we're on-track and making excellent progress. One of the keys to our success has been that from the beginning of the project, we insisted that our equipment be sourced from mature facilities under dedicated production allocations that are specific to our components. We've received 24 monopiles from our supplier, EEW, at the Portsmouth Marine Terminal, with more on the way in the coming weeks. These monopiles will begin to be installed by DEME during the second quarter. Recall that we've scheduled monopile installation across 2 seasons, 2024 and 2025 which allows us to better mitigate any potential delays or disruptions without impacting final schedule. The first of 3 offshore substation topside structures is complete and has been delivered to Bladt/SEMco to be outfitted. We expect first delivery of transition pieces to Virginia during the second quarter. All 161 miles of onshore underground cable has been manufactured and approximately 200 out of 600 miles of offshore cable has been produced. Schedule for the manufacturing of our turbines remains on track; it's worth noting that even though we won't begin turbine installation until 2025, per our schedule, DEME is currently supporting an installation campaign for a project off the coast of Scotland that's using the same Siemens Gamesa wind turbine model that CVOW will use. The lessons learned from that project will benefit our project installation in the future. Moving onshore; construction activities have begun, including civil work, horizontal directional drills and the bores where the export cables come ashore. On regulatory; last November we made our 2023 rider filing representing $486 million of annual revenue. We're currently in the testimony phase and expect the final order by August. Turning to Slide 6. There have been no changes to the project's expected LCOE of $77 per megawatt hour. We've again provided sensitivities to show how the average lifetime cost to our customers is impacted by capital costs, capacity factor and interest rates. We remain well below the legislative prudency cap on this metric. Project-to-date; we've invested approximately $3 billion and we expect to spend an additional $3 billion by year-end 2024. A little more than 92% of project costs are now fixed. We'll gradually increase that percentage over the remainder of the project construction time line. At this stage of project completion, the current unused contingency at $351 million benchmarks competitively as a percentage of total budgeted costs when compared to other large infrastructure projects we've studied. It also compares favorably to the current level of unfixed costs. We've been very clear with our team and with our suppliers and partners that delivery of an on-budget project is the expectation. Along those lines, this morning, we posted an important video update to our Investor Relations website that features representatives from the senior executive management teams of all of our primary CVOW commercial partners, including Siemens Gamesa Renewable Energy, EEW, Bladt Industries, Semco Maritime, DEME and Prysmian, as well as the CEO of Seatrium, the constructor of our Jones Act-compliant installation vessel. I strongly encourage our investors, government and regulatory partners, employees and other stakeholders to watch the short video. You'll hear, in their own words, a course of unwavering enthusiasm for and commitment to an on-time and on-budget in-service for the project. We're fortunate to enjoy such extraordinary support from our key suppliers and, together, we will deliver this exciting project. Moving to Slide 8, a couple of final points here on Charybdis. The vessel is currently 82% complete, up from 77% as of our last update. No change to our expected delivery time frame of late 2024 or early 2025. A few highlights. Labor levels have increased to over 1,200 and are continuing to be augmented as compared to approximately 1,000 last October and 800 last August. Recent construction milestones have been met, including installation of the remaining jack-up legs. Jack-up system commissioning is underway. All major subcomponents are on-site and awaiting installation. We expect the vessel to be floated in coming weeks. And there's been no change to project costs of $625 million, including financing costs. In summary, there is no change to the vessel's expected availability to support the current CVOW construction schedule, including its availability to support any third-party charter agreements in 2025. As you can see, we feel very good about the progress we're making with the support of our project partners towards an on-time and on-budget completion of this very important project. Throughout our robust and competitive offshore wind process, we had multiple high-quality strategic and financial potential partners deploy significant operational, regulatory, commercial, financial and legal resources to thoroughly diligence every aspect of the project. And the consensus independent feedback was that the Coastal Virginia Offshore Wind Project is optimally positioned to be delivered on time and on budget and is supported by enthusiastic and committed suppliers and partners. With that, let me walk through the CVOW transaction, starting with Slide 9. We're excited to be partnering with Stonepeak, one of the world's largest energy infrastructure investors with over $61 billion in assets under management. Stonepeak has a track record of investment in large and complex energy infrastructure projects, including offshore wind. Their significant financial participation will benefit both our project and our customers. On transaction structure; Stonepeak will invest in a newly formed subsidiary of Dominion Energy Virginia. It will be a public utility in Virginia and be entitled to recover its prudently incurred cost of constructing and operating the project under the existing offshore wind rider in Virginia. Dominion Energy will retain full operational control of the construction and operations of CVOW. And as a result, we expect to consolidate the partnership for accounting purposes. Stonepeak will own a non-controlling equity interest and will have customary minority interest rights. On cost sharing; the agreement provides for robust cost sharing that significantly improves the company's credit profile and provides meaningful protection from any unforeseen project cost increases. Mandatory capital contributions, including an initial reimbursement, will be used to fund expenditures up to $11.3 billion on a 50-50 pro rata basis. This represents 50-50 cost sharing up to 15% or nearly $1.5 billion higher than the project's current budget, including unused contingency and up to 20% or nearly $2 billion higher than the project's current pre-contingency budget. The agreement also provides for additional sharing of project costs, if any, between $11.3 billion and $13.7 billion. In that hypothetical case, Stonepeak would continue to share in project costs through a gradually increasing spectrum of dilution to Dominion's share of project ownership. Slide 10 shows how Dominion and Stonepeak will share project funding and ownership under a variety of hypothetical cost scenarios and I stress hypothetical because we fully expect to deliver this project on time and on budget. Turning to Slide 11. At closing, Stonepeak will make a cash payment to Dominion to reimburse 50% of the capital spent to date, less $145 million. This nearly $3 billion project cost reimbursement will be used to reduce parent-level debt. Thereafter, Stonepeak will fund their pro rata share of capital calls during construction, consistent with the schedule included in the appendix of today's materials. At commercial operation, Stonepeak will make a payment to Dominion Energy, the amount of which will depend on the final construction cost, as shown on the slide. The transaction requires approvals from the Virginia SEC and North Carolina Utilities Commission as well as certain consents from BOEM and other regulatory agencies regarding the assignment of certain contracts and permits needed for the partnership post-closing. We expect to obtain all necessary approvals and consents by the end of 2024. Continuing to Slide 12. I'm confident that this partnership is in the long-term best interest of our customers and our shareholders. The transaction achieved several key objectives. First, it adds an attractive, well-capitalized and high-quality partner who brings a track record of investment in large and complex infrastructure projects, including offshore wind, that will further derisk what is already a significantly derisked and well-developed project. Second, it provides for robust cost sharing and provides meaningful protection from any unforeseen project cost increases. And third, it improves our quantitative and qualitative business risk profile via a highly credit-positive partnership. The transaction will improve our credit profile, reduce project concentration risk and lower our financing needs during construction. Further, the transaction is expected to improve our estimated 2024 consolidated FFO to debt by approximately 1%. Importantly, we reviewed the transaction with our credit rating agencies in advance of signing. And based on their feedback, we expect the transaction to be viewed as unambiguously credit positive and that is a very key benefit for our customers. A financially healthy utility with a strong balance sheet is optimally positioned to attract the capital it needs to provide an exceptional customer experience and support the state's economic and environmental goals. In other words, this partnership will reduce our company's business and financial risk profile which benefits our customers. Let me provide a few final updates on the business review to conclude my prepared remarks. Turning to Slide 13. We're working methodically towards regulatory approvals and timely closings for the sale of our gas utilities. No changes to our original expectations in any of these cases. We look forward to continuing to work with involved parties and expect regulatory proceedings to conclude and staggered transaction closings to occur during 2024. We intend to apply 100% of the estimated after-tax proceeds of nearly $9 billion to reduce parent-level debt which, based on current rates, will result in a reduction of around $500 million of pre-tax interest expense annually. Next, Virginia regulation. As part of the business review, we supported reasonable regulatory reform that positions Dominion Energy Virginia to serve customers, support the state's goals and compete for investor capital in support of our customer beneficial investments. Last November, Dominion Energy Virginia, State Corporation Commission staff, the Office of the Attorney General and other key parties reached a comprehensive settlement in the current biennial review. No parties to the case opposed the settlement. And last month, these same key parties reiterated their support to the original comprehensive agreement. We expect the final order in early March. On a related topic, last month, the General Assembly unanimously elected Sam Towell and Kelsey Bagot to serve as members of the State Corporation Commission, filling the two outstanding vacancies on the commission. They have extensive experience in both government and the private sector and we look forward to working cooperatively with these well-qualified new members. Turning now to Slide 14. There have been no changes to our original business review commitments and priorities. First, for the avoidance of doubt, we have been and continue to be 100% committed to our current dividend. Earnings growth, combined with a period of low to no dividend growth, will restore our payout ratio to a peer-appropriate range over time. Second, last year, the Board, in direct response to investor feedback, modified my compensation structure for 2023 to align my economic incentives more closely with the financial interests of our shareholders. As a result, 100% of my 2023 long-term incentive compensation was performance-based. Last month, the Board approved my 2024 long-term compensation plan but like last year, it is 100% performance-based. 65% is premised solely on 3-year relative total shareholder return, with a 65th percentile relative performance required to achieve a 100% payout. This represents a high bar relative to industry practice but I believe it appropriately aligns my financial interest with those of our shareholders. Additional details around the increasing alignment of my compensation with our owners' interest will be available in our proxy statement which will be published in March. Certainly, this has been a difficult time for our investors and I want them to understand how seriously I take that. Third, we continue to focus on costs and identify incremental savings, particularly in the area of corporate overhead. We are, have been and will continue to be one of the most efficient and most reliable electric utility companies in the country. Finally, we've been focused on evaluating investor feedback around perceived earnings quality and plan risks. In his prepared remarks, Steven will provide an update on our treatment of unregulated investment tax credits and assumptions around our retirement benefit plans. Turning to Slide 15. Today's announcement of an offshore wind partner marks the final strategic step of the business review. We're in the process of finalizing our financial plan which will allow us to conclude the review. We've scheduled an investor meeting on March 1, at which time we will provide a comprehensive strategic and financial update for the company and participate in a question-and-answer session. We encourage our investors and other stakeholders to participate virtually as their schedule allows. Following the event, we plan to initiate a comprehensive investor engagement effort to meet with our existing and prospective investors. As we prepare to conclude the review, I am more optimistic than I have ever been about the future of our company. We recognize that we must consistently execute against the financial targets we provided at the conclusion of the review. As is always the case, I am accountable for and my entire leadership team has embraced our commitment to consistently deliver high-quality earnings growth that meets that plan. With that, I'll turn the call over to Steven.

Operator:

[Operator Instructions] And we'll take our first question from the line of Shar Pourreza with Guggenheim Partners.

Bob Blue:

Yes.

Bob Blue:

You have that exactly right, Shar. So it is 50-50 through $11.3 billion and then there's the adjustment that we described. So on the process, we attracted quite a bit of interest from financial and strategic counterparties. We talked a little bit about that on the last call that we were in late stages with several attractive parties. And they diligenced this project extensively. They came in with their own experts in offshore wind, obviously, teams related to regulation, finance and so forth. And what was really encouraging to me was to hear unanimously from parties who participated how well this project is going. So it was -- there was nobody who got in diligence who was concerned about the project at all and that was really helpful. So then as we thought about how we were going to choose a partner, if you refer back to some of the things that we've said before, on the last call, we noted the importance of having pro rata sharing of costs. And we've achieved that here and we feel very good about that. We said that we needed a transaction that made sense for our customers and our shareholders and that was in keeping with the objectives that we set out in terms of the business review. And we believe this transaction with Stonepeak meets that extremely well. The cost sharing, with protection from any hypothetical or unforeseen project cost increases but having a well-capitalized partner to help us there was critical. And improving our credit profile means that this is going to be extraordinarily beneficial for our customers and our capital providers, so this is a very good deal. We're very pleased with it. We're pleased with the way the process worked.

Bob Blue:

This legislation that permitted this partnership structure, I think, was designed for this project. And so we're focused very heavily on on-time, on-budget on offshore wind right now and we've got a very good partner to work with to do that.

Steven Ridge:

Thanks, Shar. Steve. I'll take it. So what we've said is that the offshore wind is the final strategic step in our process. And that next week, we look forward to sharing our comprehensive strategic and financial plan. We're not going to comment today on any specifics with regard to financing plan. I'd reiterate what we've shared since the beginning of the review that we're seeking to meet and exceed our downgrade thresholds, while seeking also to minimize the amount of external equity need. We think that the transactions we've announced to date have been very supportive of our objective. But we'll provide a fulsome plan next week and I think we're going to hold off on giving pieces and parts until we get there.

Steven Ridge:

Thanks, Shar.

Nick Campanella:

So yes, congrats. So I guess, just -- you had this view in the slide out on 2025 considerations on the third quarter call and the drivers are largely the same. But you've also kind of introduced this pension and ITC disclosure. So I guess, just as you kind of think through the $0.08 to $0.10 of detriment and then from pension and then the $0.03 to $0.04 of ITC, is that kind of incremental to that 2025 view?

Nick Campanella:

Okay. I appreciate that. And I guess, just -- it's great to hear the agency feedback does seem like it was positive and you're highlighting 100 basis points increase to FFO to debt from this transaction. I guess, just from a numeric perspective versus where the agencies want you to be out of this review, where does that kind of put you holistically?

Nick Campanella:

Understood. Understood. Looking forward to next week. And congrats again. Thank you.

Operator:

And we'll take our next question from the line of Jeremy Tonet with JPMorgan.

Steven Ridge:

Yes. Thanks, Jeremy. So what I would say on that topic is, generally, I think we agree with effectively how the agencies were describing it which was some prefunding of some very heavy capital plans that we have in our plan which we've talked about in previous calls. We haven't given specific numbers. Tomorrow, when the K comes out, you'll see our capital investment this year is $10 billion which is relative to an average of $6 billion for our company. And so there was some -- effectively, some prefunding from asset sales and I think that's what they were signaling. Just generally on our relationship with the agencies, we just -- we don't speak for them. And I will say that we have been very deliberate throughout the process and making sure that they understood, in some detail, some confidential detail, how we were thinking about the review and gathering their perspectives as it related to how they think about our company. And that has extended some -- I can share, it's extended to some formal engagements with rating agencies that have allowed us to make sure that we have a good sense of where they are relative to how we're thinking about our plan and our business risk profile. And with regard to this transaction, specifically, as I mentioned and as we typically will do, we walked them through in some fairly detailed manner the terms of the offshore wind partnership transaction before we signed and made sure that we were comfortable indicating in our script today that we think that they'll view it as unambiguously credit positive.

Bob Blue:

There is no new messaging. It's the same as it has been since we started which is we are 100% committed to the current dividend.

Jeremy Tonet:

Got it. That's very helpful. I'll leave it there.

Operator:

[Operator Instructions]

Operator:

We are getting people requeued now.

Operator:

Okay. We'll take the question from Jeremy Tonet next.

Bob Blue:

Yes. Jeremy, we just talked to the regulatory staff this morning after the announcement went out. But let me just talk sort of generally about how we expect this to be received; so just to start with the process. We need to get approval from the State Corporation Commission in Virginia, the North Carolina Utilities Commission. We need some administrative approvals from BOEM but the primary approvals are at the state level. And as I mentioned earlier and as I believe you know, legislation that was passed unanimously in Virginia last year enabled this partnership structure that we've put together. So it has to be approved by the SEC under the Utility Affiliates and Transfers Act. And the standard there is adequate service at reasonable rates have to be maintained and that the arrangements are otherwise in the public interest. And then we need Affiliates Act approval in North Carolina as well. In Virginia, that Affiliates Act approval has a statutory time line of 90 days. The other regulatory approvals don't have particular time lines on them but we think it's reasonable to assume we'd get approval by the end of the year; so that's the process. But if you sort of step back for a moment, both Virginia and North Carolina policymakers both understand the value of a strong balance sheet. If you look at Virginia's general obligation bonds, they've been rated AAA by Moody's since 1938, by S&P since 1962 and by Fitch since 1991. And I can tell you that when you talk to policymakers in Virginia about the AAA bond rating, they usually use the adjective coveted. And that's because they realized that a strong balance sheet for the state allows them to provide the best service to their constituents. And the same is true for our company. If we have a healthy balance sheet, we're going to provide the best customer experience. We're going to be able to invest to meet the state's goals. That is a very compelling reason for regulators to approve this transaction and I'm highly confident that they'll see the benefits and approve it.

Bob Blue:

Diane will talk a little bit about that. And Jeremy, we're quite impressed with your ability to navigate the technical issues here.

Jeremy Tonet:

Got it. That's helpful. I'll leave it there.

Operator:

And our next question, please state your name and company name before asking your questions.

Bob Blue:

Steve, we can hear you. Thank you for hanging in there.

Bob Blue:

Yes.

Bob Blue:

Steve, your characterization is accurate. Major issues that General Assembly was dealing with didn't have much to do with energy. They obviously elected the SEC judges. And there were legislative proposals related to energy but they're none that are still active in the General Assembly at this point.

Ross Fowler:

So a couple of questions; commercial load growth was up almost 9% in 2023. And I think you guys talked a little bit about data centers. But if I remember correctly, there were a lot of constraints in sort of putting data centers into Northern Virginia because of transmission. How do you think about that growth going forward into 2024, is there a constraint that limits that in 2024? Or should I be thinking about something of the same scale over the coming year?

Ross Fowler:

That's great, Bob. Thank you for that update. and then one more, if I may. I appreciate you can't answer a lot of questions around a lot of things today until we get to the Analyst Day next week. But hopefully, when you can discuss, fixed costs are now, I think, at 92 -- just north of 92% on this and there's about 700 -- just south of $750 million on fixed costs. How are you thinking about your capabilities and time line to lock more of that on fixed costs in -- on this project?

Diane Leopold:

And the only other is miscellaneous project management cost, just our own project management through time. So those are the largest factors.

Durgesh Chopra:

Two quick questions. Sorry, I just want to be absolutely clear. The -- with the announced offshore sale, this is the last asset sale that we should be expecting? Or are there portfolio optimizations we should be expecting heading into the Investor Day next week?

Durgesh Chopra:

Got it. And then just one small net, maybe this is for Steve. When we talk about the ITC accounting change and then the pension accounting change, Steve, can you just remind us what is embedded in your '23 representative number there, EPS number there? What is kind of baked into that number?

Durgesh Chopra:

Perfect. And Steve, just to be clear, I apologize, this is under the weeds. But -- so if I'm thinking about prospective EPS, net-net, we should be -- versus '23, $2.85 [ph] in '23, we should be $0.20 lower net-net, right, ITC being just kind of the same and the pension being $0.20 lower.

Durgesh Chopra:

Thank you, Steve.

Operator:

Welcome to the Dominion Energy Third Quarter Earnings Conference Call. [Operator instructions] I would now like to turn the call over to David McFarland, Vice President, Investor Relations. Please go ahead.

Bob Blue:

Thank you, David. Good morning, everyone. I'll begin my remarks by highlighting our safety performance. As shown on Slide 3, our OSHA injury recordable rate for the first nine months of the year was 0.43, a significant improvement relative to already strong historical performance. I commend my colleagues for their consistent focus on employee safety, which is our first core value. Moving now to the business review; it's been a year since we announced the review. These last 12 months have been a challenging environment for utility investors generally and even more so for Dominion Energy shareholders. As stewards of investor capital, we take that very seriously. That said, my conviction around the decision to launch and execute the review has not wavered. It is the right course of action for Dominion Energy, and we are seeing it through to its successful completion with urgency and with care. Let me take a step back and share some of the most common themes I heard from our investors in the months leading up to the announcement of the review. Dissatisfaction with our track record of inconsistent earnings growth and an earnings mix, which too often had what some investors considered to be lower quality earnings, questions about the complexity and durability of the Virginia regulatory model and concerns around the balance sheet, which included never fully addressing the impact of the failure of our master limited partnership financing model, as well as leaning on our balance sheet to remedy short term earnings pressures at the potential cost of longer term credit quality, both of which contributed to our living below our downgrade thresholds even in a low interest rate environment, all of which led to inquiries around whether a new approach was needed to deliver results that were consistent with shareholder expectations. Since announcing the review, I've had the opportunity to engage directly with many of our shareholders. While opinions around the exact path and desired outcome of the review have varied, the common direction I receive and with which I strongly agree is that the review must comprehensively and finally address the foundational concerns that have eroded investor confidence over the last several years. This can't be a series of partial solutions that leave key elements and risks unaddressed. That's how we've approached this top to bottom review and we've strive to leave no stone unturned in our effort to deliver a result that will provide a durable, transparent, credible and achievable strategic and financial profile that puts Dominion Energy on a path to compelling long term value for shareholders, customers and employees. We've taken several meaningful steps over the last 12 months in furtherance of our objectives and are rapidly nearing a conclusion to this comprehensive review. With that context, let me recap our progress before turning to what's left to conclude the review. Again, we're moving with urgency but also with great care and our guiding priorities and commitments are unchanged. As shown on Slide four, we supported bipartisan legislation in Virginia that puts our largest utility on solid and durable footing, which will enable our delivery of the reliable, affordable and increasingly clean energy that powers our customers every day for decades to come, while also playing a vital role in supporting Virginia job creation, tax revenue and economic growth. This legislation supports our compelling value proposition to customers. If you're a residential customer in Virginia, you pay approximately 16% less per kilowatt hour for your electricity than the average US utility customer and your power is on 99.99% of the time outside of a major storm event. Furthermore, we're taking an all of the above approach to ensure a highly reliable grid while we work to decarbonize and meet unprecedented demand growth. We're making billions of dollars of investment and low to zero carbon generation resources, as well as transmission and distribution infrastructure that will work together to maintain critical grid reliability and for investors, we compete for your capital in support of our customers by enhancing timeliness of recovery for prudently incurred investment by the preservation of riders and the establishment of regular base rate case reviews. Meanwhile, we will be positioned to deliver constructive regulatory outcomes that appropriately balance customer needs with investor demands for strong capital structure and a competitive return on equity against an industry-leading demand growth backdrop. Two, we've been and continue to be 100% committed to our current dividend. Earnings growth combined with a period of low to no dividend growth will restore our payout ratio to a peer appropriate range over time. Three, we indicated that we are eliminating future operating earnings from sources that investors have told us they consider to be of low quality. That includes the upfront recognition of unregulated solar investment tax credits and certain gains from asset sales. Four, on a strategic front, we announced and closed on the sale of our remaining interest in Cove Point. We applied the $3.3 billion of after tax proceeds to reducing debt. This was a significantly credit accretive transaction done with a high quality counterparty after a robust competitive process. Five, we announced the sale of our gas utilities to Enbridge, one of North America's largest energy infrastructure companies. We ran broad and competitive processes for each of the individual utilities and we are delighted to have found a partner that not only shares our ideals around safety, reliability, customer service, employee treatment and community investment, but that was also the most competitive option on value across each of the three utilities. We intend to apply 100% of the estimated after-tax proceeds of nearly $9 billion to reducing parent-level debt, which, based on current rates, will result in the reduction of around $500 million of pre-tax interest expense annually. Like COVE, these are significantly credit-accretive transactions. By way of update, all state regulatory, HSR and the initial CFIUS filings have now been submitted, and the HSR waiting period expired on November 01. We're pleased, though not surprised, with the positive reception the Enbridge team has gotten from employees, regulators and policymakers. Further, Enbridge has already taken steps to materially pre-fund the acquisition. We expect a staggered close for each of the LDCs, with all three transactions closing in 2024. Moving to Slide 5, on O&M, we've continued to focus on and identify incremental cost savings, particularly in the area of corporate overhead. We are, have been and will continue to be one of the most efficient and most reliable electric utility companies in the country. Finally, on governance, the Board, in direct response to investor feedback, modified my compensation structure for 2023 to align my economic incentives more closely with the financial interests of our shareholders. As a result, 100% of my 2023 long-term incentive compensation is now performance-based, 70% is premised solely on three-year relative total shareholder return, with a 65 percentile relative performance required to achieve a 100%, which is well above the medium threshold of industry peers. Staying with the topic of governance and consistent with corporate best practice, we've maintained a regular cadence of Board refreshment. Earlier today, we announced that Mike Szymanskik and Ron Gibson will not stand for re-election next year. I want to thank Mike, whose departure is a result of our age-based mandatory retirement policy, and Ron for their faithful and dedicated service to our company over the last several years and I welcome Paul Dabbar and Vanessa Sutherland to the Board, effective December 01. Their biographical information was included in today's press release, but suffice to say they are both uniquely qualified to continue the strong legacy of governance that Mike and Ron are leaving behind. As part of our ongoing Board refreshment process, we've now added six new directors since 2019, bringing the average tenure of our 11 directors to six years. The Board will continue to work to ensure our shareholders' interests are properly represented via robust governance. Each of these steps serve a valuable purpose in achieving the guiding principles of the review. They enhance the durability of our Virginia regulatory model. They address concerns around earnings quality. They strengthen the balance sheet. They emphasize our commitment to good governance, including a disciplined approach to O&M expense. However, our work isn't complete. Our offshore wind project is a significant focus of our investors. The project, which is fully regulated, is on time and on budget. Let me just repeat that. Our project is progressing in alignment with our unchanged cost estimate and our unchanged in-service target date. Earlier this year, in recognition of the potential value for customers and shareholders, we supported legislation that allows us to petition the Virginia State Corporation Commission to take a controlling equity financing partner in the project, a non-controlling equity financing partner in the project. As part of the business review, we're in advanced stages of a process to transact with a partner with a focus on pro-rata sharing of project costs. The process has driven considerable interest from attractive and high-quality potential counterparties. Their interest is driven by the attractive characteristics of our project, including our priority position in the offshore wind supply chain, our successful track record of on-time permitting with the strong support of Federal agencies, the bipartisan and public support of Virginia political, business, and community leadership, a differentiated legislative and regulatory construct that is delivering on behalf of our customers and significant de-risking, which I'll highlight further later in my prepared remarks, driven by both the advanced stage of development as well as a high percentage of fixed costs. Combined with the prospect of deploying a significant amount of capital into a high-quality, long-term regulated investment, it's no surprise to me that the process has generated strong interest. We will conclude the business review when we've made a final decision on an offshore wind project partner. That's the final strategic step outstanding in the business review, and it's in the long-term best interest of our customers and shareholders that we make the right, not just the expedient decision. A properly structured partnership with the optimal counterparty is an attractive option, but only if the terms of a potential transaction make sense for our customers and shareholders. We expect a decision by year-end or in early 2024. As we near the review's conclusion, I'm more optimistic than I have ever been about the future of our company. We've always owned great assets and operated at best-in-class levels with an industry-leading workforce of dedicated employees who are devoted to our fundamental mission to provide reliable, affordable, and increasingly clean energy that powers our customers every day. I'm confident that upon concluding the review, we will have a solid long-term financial foundation that matches the remarkable quality of our assets and people. Let me also be clear. We recognize that we must consistently execute against the financial targets we provide at the conclusion of the review. It is always the case. I am accountable for, and my entire leadership team has embraced, our commitment to consistently deliver high-quality earnings growth that meets that plan. We'll continue to announce updates as events warrant. Upon completion of the review, we expect to host an investor meeting to discuss the company's repositioned strategic and financial outlook. Stephen will share some additional thoughts on investor communication in his prepared remarks. Let me now touch on a handful of key business updates, starting with the offshore wind project. As I mentioned, the project is proceeding on time and on budget, consistent with the timelines and estimates previously provided. We continue to achieve significant milestones. On materials and equipment, as shown on Slide 7, last week we celebrated the arrival of the first eight monopiles from our supplier, EEW, at the Portsmouth Marine Terminal, with the Virginia Governor, Lieutenant Governor, Attorney General, General Assembly leaders from both parties, representatives from Virginia's congressional delegation, leaders from the Bureau of Ocean Energy Management, and other local, military, civic, educational, environmental, labor and community partners. We're fortunate to have the remarkable support of these national, state, and local leaders. The offloading of these monopiles on to the newly upgraded port facilities went exceptionally smoothly. The next transport ship for monopiles is expected to be loaded at the factory later this month and delivered to the port in December. Also worth noting that turbine blades and the cells remain on track with a fixed production schedule and mature existing manufacturing facilities. Turning to Slide 8, we continue to expect the project to be completed by the end of 2026. On permitting, the final environmental impact statement was issued on September 29, and the record of decision was signed on October 30, which allows us to begin onshore construction. In fact, we began construction mobilization this week. On regulatory, as a reminder, our 2022 rider filing for the project was approved in July, representing $271 million of annual revenue. Earlier this week, we made our 2023 rider filing, representing $486 million of annual revenue. We expect a final order by August of 2024. On project management, there are over 100 personnel dedicated to this project and growing. Many of our offshore wind project leaders and personnel have also managed our most complex construction projects, including thousands of megawatts of large gas fire generation, the Cove Point liquefaction facility, and the offshore wind test turbines. While each of those projects presented unique complexities and risks, they all required sophisticated management of contracts, vendor relationships, scheduling, engineering, procurement, construction, and oversight, skills, expertise, and lessons learned, which are now being applied to full effect to the offshore wind project. In addition, we also have numerous offshore wind industry experts from around the globe supporting the team. On principal suppliers and vendors, as you might expect, Diane, Mark Mitchell, who is our senior vice president of project construction, and I, interact frequently, including regular in-person meetings with the CEOs and leadership teams of each of our primary vendors. We perform regular site visits during which we inspect the manufacturing facilities and interact with boots on the ground project managers and members of the workforce. We maintain near constant dialogue with our key project partners at a variety of levels. Based on this ongoing monitoring and diligence, we fully expect that our vendors, without exception, will continue their support of the project's timely completion. On the performance of our test turbines, our two adjacent test turbines, our two adjacent test turbines have delivered an average net capacity factor over the last three years of approximately 46%, with a 97% availability factor. The high reliability and strong operating performance of our test turbines provide further confidence in the capacity factor of the larger commercial project. Turning to cost on Slide 9, I draw your attention to the key metrics we have included in the slide, much of which is by way of reminder. First, we updated the project's expected LCOE in our filing earlier this week to approximately $77 per megawatt hour, as compared to our previous range of $80 to $90. The decrease reflects updated and refined estimates around production tax credit, cost of capital, and REC values. We have provided sensitivities to show how the average lifetime cost to our customers is impacted by capital costs, capacity factor and interest rates. We remain well below the legislative prudency cap on this metric. Next, the project total cost remains $9.8 billion. Project to date, we have invested approximately $2.3 billion, which we expect to grow to around $3 billion by year end. I am pleased to update that our current project costs, excluding contingency, have improved to 92% fixed. The remaining costs to be fixed include finalizing the construction for the aboveground onshore electrical work, certain commodities consisting mainly of the fuel which will be used for transportation and installation, and other project oversight costs. Our current contingency estimate, which is included in the $9.8 billion budget, has increased modestly relative to our initial filing position, despite being at a much more advanced phase of project completion and having fixed a significant portion of costs. At $370 million, the current contingency has a percentage of total budgeted costs, and in the context of this stage of completion, benchmarks competitively when compared to other large infrastructure projects we have studied. With 92% of project costs now fixed, our current contingency is about half of our remaining unfixed costs. We have been very clear with our team and with our vendors that delivery of an onbudget project is the expectation. Moving to Slide 10, a couple of final points here on Charybdis, our Jones Act compliant installation vessel being constructed in Brownsville, Texas, by Seatrium, formerly known as Keppel. The vessel is currently 77% complete. We continue to expect it to be delivered late 2024 or early 2025, which is later than we originally planned but still supportive of our construction timeline. I personally visited the site earlier this week, met with management and reviewed progress. A few highlights. Seatrium has extensive relevant experience in constructing vessels similar to Charybdis. The project is considered strategically important to their management team, and they are committed to timely completion of the project. They have dedicated some of their most experienced management and supervision from Singapore to support the efforts in response to project delays. Labor, which was an initial constraint, has increased from 800 to over 1,000 and is continuing to be augmented. Recent construction milestones, including a major milestone of first leg installation in late August, are being met, and the vessel is on track for engine startup later this year. All major subcomponents are on site and awaiting installation. Supply chain is not a cause of concern. On costs, there has been no change to the underlying construction cost estimate for Dominion Energy. Last quarter's $75 million increase in total project costs to $650 million, including financing costs, is largely attributable to higher financing costs related to higher rates and a longer construction timeline, with the remainder being attributable to small increases to some ancillary costs such as crew training and capital spares. In summary, there is no change to the vessel's expected availability to support the current CVAL construction schedule, including its availability to support any third-party charter agreements in 2025. We've provided supplemental information related to our offshore wind project that can be found in materials included on our investor relations website. Transitioning now to the Virginia biennial review, which is currently in the testimony phase. As a reminder, DEV submitted its biennial filing on July 03, initiating a review of base rates, which represents about a third of DEV's total rate base. Virginia rider investments like offshore wind, solar, battery storage, nuclear life extension, and electric transmission, which are outside the scope of the proceeding, represent the vast majority of the growth at DEV. We look forward to engaging with parties to the case and would expect a final order by March 03 of next year. Turning to other notable DEV updates, we made our fourth clean energy rider submission in October. The filing included new solar projects and represented nearly $900 million of utility-owned solar and rider-eligible investment. We expect to receive an order from the SCC in the second quarter of 2024. On data centers, we continue to advance a series of infrastructure upgrade projects that will enable incremental increases in power for data center customers in Eastern Loudoun County. Four projects have been completed ahead of schedule. An additional project is currently under construction and on schedule to be completed by the end of 2023. We continue to develop a new 500 kV transmission line with an expected in-service date of late 2025. Given the unprecedented growth in areas served by our electric transmission, we continue to see an acceleration of and long-term increase in electric transmission investment opportunity throughout our service area. As part of PJM's transmission planning process, we submitted numerous new projects that we believe are needed to ensure the electric grid in Virginia is reliable, resilient, and able to adapt to increasing energy demand while also transitioning to cleaner energy resources. PJM recently advanced the majority of these projects for further evaluation. We've also included updates on our latest grid transformation filing as well as our fuel securitization proceeding. Turning to Dominion Energy South Carolina, in addition to delivering safe and reliable energy, DESC's electric rates for residential customers are 8% below the national average. This represents an improvement of 21% relative to the national average since the time of the merger announcement, when rates were 13% higher than the national average. We're meeting the expanding energy needs resulting from robust economic development and population growth in South Carolina. On the regulatory front, we reached a settlement in our natural gas general rate case, which the Public Service Commission unanimously approved on September 20. The settlement will result in a $9 million increase, with new rates effective in October. Since the merger, we've now achieved rate settlements in both electric and gas-based rate cases, which is a testament to the company's improved regulatory and stakeholder relationships in the state. With that, I'll turn the call over to Stephen.

Operator:

[Operator instructions] And we have our first question from Shar Pourreza with Guggenheim Partners.

Bob Blue:

Shar, I'll take that one. So on the second question, again, we view 2025 as the foundational year for our post-review earnings growth. So when we do our investor meeting, we'll provide our forecast for 2025 and a growth rate off of that 2025 number, a multiyear growth rate off of that 2025 number. And with regard to slides 14 and 15, look, we felt it was important, given the uncertainty that's been created as a result of the review, to try and be clear about what we think is an accurate assessment of what 2023 earnings are, not because it's going to be the foundational year, but because it's important that investors feel confident about our ability to deliver good results. And the language we've provided on Slide 15 is simply an indication that given a host of very important input variables, which are not public at this time, we would simply caution against taking a simplified approach of applying a growth rate to the $2.90.

Steven Ridge:

Yeah, Shar. Let's take a step back for a moment in this process. When we announced the top to bottom business review last fall, we didn't even have legislative authorization to take an equity partner in offshore win. Now we do, thanks to our proposal and our work with the legislature earlier this year. We didn't have an EIS, a record of decision, for the project. Now we do on the schedule that we expected. We hadn't started manufacturing equipment. Now our first shipment of monopiles has arrived on time. When we started, we had about 75% of project costs fixed. Now we're at 92%. So I could go on with how well the project is going. So we feel very good about what we've done so far. We've got multiple parties who are engaged with us, and our objective is a true equity partner with pro rata sharing of project costs. That's what we're after.

Operator:

And our next question comes from Nick Campanella with Barclays.

Bob Blue:

Yeah, we're not giving that guidance, Nick. The language we continue to use is that we're very specific on what we're attempting to achieve for credit, and we're also very specific on what we're attempting to achieve with regard to evaluating efficient sources of capital, seeking to minimize any amount of external financing need. When we have our investor meeting, we will provide a full outlook on what our financing plan is and so, we're just not in a position to give that guidance because the review is not complete yet.

Steven Ridge:

Yeah, Nick, let me provide a little guidance on that. So, from 2018 through 2022, our company had a capital budget on average of about $6 billion per year. When we last provided our long-term growth guidance which was the fourth quarter of 2021, net gas distribution so taking gas distribution capital out and you can go back and look at our Q4 2021 earnings debt for this, we averaged in '23, '24 and '25 at the time about $9 billion of capital investment each year over '23, '24, '25. We haven't at this time given any update to that, but we've talked a lot about some of the drivers potentially increase those numbers. Another anecdotal piece of information is that year-to-date through 2023, our CapEx has been $7.2 billion, a year ago through nine thirty, it was $5.2 billion and for the full year 2022, it was $7.6 billion. So you can see even in the result year-to-date how significantly increased our capital budget is an it I want to be clear about what's driving that. What's driving that is demand growth, policy directives and reliability investment many of which are already underway under writer programs at DEV as well as growth at our South Carolina utility. So more to come on that Nick, but we have a very strong demand growth driving on a very robust amount of capital investment in a regulated businesses.

Operator:

And our next question comes from Steve Fleishman with Wolfe Research.

Bob Blue:

Yes Steve, we're going to look at total picture on any deal. So I'm not going to tell you what any specific pieces of it may be while we sit here today. We're going to judge any deal against the commitment and priorities that we set out at the beginning of the process to help improve our credit metrics because it to solidify our credit profile, does it enhance shareholder value, does it reduce the company's concentration in this one project, is it consistent with our goal of reliable performance? Those are things we're going to look at and again our objective is to get a true equity partner with pro-rata sharing a project cost. I can't tell you today what the specific pieces of any deal maybe because it's not done yet. That's what we're after.

Bob Blue:

Yes. We communicate regularly with them, with our suppliers and if you look at the deck that we posted on the website on offshore wind, we walk through each one of them and the status of the contract with each of them and you can see they're all performing and they're all performing on time. Now I know that Siemens in particular is one that's been in the news recently and there are turban provider. I communicate regularly with the CEO Siemens Gamesa Renewable Energy and I most recently heard from him after that news on some of the challenges that they're facing mostly with their onshore business and sort of project potential that they have but they need to be able to put guarantees on those. So they are growth opportunities but that's causing them some challenges that have been in the news. So he assured me they're committed to their contractual obligations and he said nothing will change the close and successful partnership we have from their side. So we're very focused on this. We communicate regularly with all of those providers and as we outlined earlier and as you can see in the deck, those projects are going very well. They're all performing. They're all on time.

Steven Ridge:

Well, we're not giving guidance. So, I'll start with that. I think we provided this list to try and be comprehensive and holistic, so that we're not suspected of trying to cherry pick or give half guidance. We talked a lot internally in advance of this call about staying true to what we've done thus far, which has been disciplined about not providing partial guidance until the review is complete and this is in the spirit of that. Now, I would just say on individual items, some of these are certainly tailwinds. Higher rates, of course, I probably wouldn't describe that as a tailwind, but we talk about the in-the-money portfolio of rates. So, I don't want to get into a box given that we're not giving guidance on any of these particular items, except we felt it was important to highlight the various inputs that we have not disclosed that we think will be important to analyzing accurately what our 2025 earnings will be.

Operator:

And we have our next question from Jeremy Tonet with JPMorgan.

Bob Blue:

We're committed to the dividend, Jeremy. As we said, we're 100% committed to the dividend. Trying to talk about scenarios that people could imagine, I don't think is terribly productive. We've been committed to the dividend since the beginning. We haven't wavered in that. We're not wavering on it today.

Operator:

And we have our next question from Carly Davenport with Goldman Sachs.

Bob Blue:

No. We, I think, laid it out pretty clearly. We're in the last stage here on evaluating an offshore wind equity partner. But no, there's nothing else out there.

Bob Blue:

Yeah. So we've got derivatives at both VEPCO as well as at the holding company and more at the holding company than at Vepco. Vepco is, because we use hedge accounting, we're a little more restricted on when we utilize those hedges. So those are '24-'25 style hedges at DEI. We're able to use any time in advance of a future settlement date. So we've got some flexibility in timing of use of that, anywhere between now and 2028, based on the current notional. So we've got some flexibility there and as part of the investor day, we'll of course provide some incremental disclosure around how we intend to utilize that portfolio.

Operator:

And we have reached our allotted time for our question-and-answer session. This does conclude this morning's conference call. You may disconnect your lines and enjoy your day.

Operator:

Welcome to the Dominion Energy Second Quarter Earnings Conference Call. [Operator instructions] I would now like to turn the call over to David McFarland, Vice President of Investor Relations.

Bob Blue:

Thank you, David. Good morning, everyone. As announced this morning, we reported second quarter operating earnings of $0.53 per share. Our results were meaningfully impacted by historically mild weather and outages at the Millstone Power Station, both of which will address later in our prepared remarks. But first, I'll address our safety performance and provide an update on the status of the business review. Turning to slide 3, our employee OSHA injury recordable rate for the first half of the year was 0.32, this remarkable performance has us on pace to achieve the best safety year in the history of our company. Safety is of course much more than just a number on a page. It's our first core value and represents the wellbeing of our people. I commend my colleagues for the dedicated focus necessary to create and maintain the safety mindset and work practices that enable this outstanding performance. Moving now to the Business Review, I'm pleased with the progress we're making toward delivering a compelling repositioning of our company to create maximum long term value for shareholders, employees, customers, and other stakeholders. As I've said before, I'm as excited as ever for the future of our company. Our guiding commitments and priorities are unchanged, and replicated identically on slide 4. The review timeline shown on slide 5 is also unchanged. We expect to conclude the review and hosted Investor Day during the third quarter, at which we will provide an updated strategic and financial outlook for the company. We're working expeditiously but conscientiously in recognition of the vital importance of achieving an optimal result. Since announcing the review last November, we have among other steps, rigorously engaged with our shareholders to listen, reflect and inform our business review commitments and priorities. We're committed to maintaining a similar level of engagement as we navigate through and beyond the review. We know that rebuilding trust is vital. We've positioned Dominion Energy Virginia for long-term success by working collaboratively with key stakeholders to simplify the regulatory framework, provide meaningful rate relief to customers, and ensure the stability that will allow our company to confidently continue to allocate billions of dollars of annual investment in support of the economic prosperity of the citizens of the [inaudible] of Virginia, to the benefit of both customers, and capital providers. We've confirmed our commitment to the current dividend. We've committed to and taken steps to improve operating earnings quality. We continue to focus on cost control by looking for what more can be done without losing sight of the absolute necessity of meeting high customer service standards. And against the backdrop of the significant operational and cost efficiencies we've achieved over the last several years. So consistent with prior comments. While there may be some potential in that area, we do not see it as a game changer. We've included our own and performance metrics in the appendix of today's materials for reference, and we've committed to an improved credit profile and taking the first step toward that goal by announcing an agreement to sell our remaining interest in Cove Point, which will generate approximately $3.3 billion of cash after tax, which we will use to reduce debt. This highly credit accretive transaction was the result of a robust and competitive sale process. The sale represents an attractive exit from what has been an excellent investment for our shareholders. With the sale we've recycled nearly $9 billion of cash flow since 2018, which is well in excess of our total investment in the facility, inclusive of the export project construction cost of approximately $4 billion. We've included the investor slides we publish at the time of the announcement in the appendix of today's materials. The request for HSR clearance and the DOE notification have both been filed. And we expect the transaction to close later this year. We will continue to announce updates as events warrant as we work to finalize additional business review inputs in advance of the Investor Day With that, I'll turn it over to Steven to address financial matters.

Bob Blue:

Turning to slide 9. Let me start by updating you on the implementation of the Virginia rate reform legislation that became effective on July 1. The new Virginia law provides significant bill relief for our customers and supports the long term stability of our largest utility segment. With nearly unanimous bipartisan support, the legislation provides the certainty we need to fund and execute the critical energy investments that support the robust electrical demand growth in Virginia. As of July 1, the law directly enabled a nearly $14 reduction to the typical Dominion Energy residential customers monthly bill. Roughly half of this decrease results from the cessation of certain riders that represent approximately $350 million of annual revenues. The other half of the reduction comes from a downward adjustment to the component of electric rates that recovers the cost of power station fuel and purchase power. The commission has allowed this interim adjustment to take effect while it considers the fuel securitization proposal DEV filed on July 3, by arranging for certain unrecovered fuel costs to be paid off over time, securitization would avoid the possible alternative and abrupt rate increase that would amount to about $15 per month for typical residential customers. We expect the final order by early November. DEV also submitted its biannual review filing on July 3, initiating review of base rates, which represents about on third DEV’s total rate base. The filing highlights DEV’s exceptionally reliable and affordable service. Consider these facts, 99.9% average reliability delivered at rates 22% below the national average. I note our track record of operating efficiently is reflected in our competitive rates as I mentioned previously. Since 2010, the typical residential bill has grown by only about 1.2% year-over-year, less than half of the 2.6% increase in the general inflation rate. We're proud of our record and the work we do to serve customers every single day. We expect the final order by March 3 of next year. Turning to offshore wind on slide 10. The project remains on time and on budget consistent with the timelines and estimates previously provided. We continue to work closely with the Bureau of Ocean Energy Management and other stakeholders to support the project timeline. BOEM received comments from all agencies on the draft of the Final EIS and is on schedule to deliver the Final EIS by the end of September and the record of decision by the end of October. We continue to be encouraged by the administration's timely processing of offshore wind projects. In July, the SEC approved our updated offshore wind rider. In the application, DEV requested and received an annual revenue requirement of $271 million for jurisdictional customers. I'm pleased to update that our current project costs excluding contingency are now more than 90% fixed, our procurement and manufacturing processes are well underway. In fact, we expect the first monopiles to be delivered to the Port of Virginia later this year. Our current contingency reserve is still about equal to our original reserve, despite having progressed the project significantly and fix more costs. Taken together and despite trends we see elsewhere in the offshore wind market, we do not see anything that changes our confidence in delivering the project on time and on budget. Project to date, we've invested approximately $1.7 billion, which we expect to grow to around $3 billion by year end. As a reminder, we updated our expected LCOE in our most recent regulatory filing to the low end of the $80 to $90 per megawatt range to account for PTC value based on the Inflation Reduction Act. Our Jones Act-compliant installation vessel is currently 74% complete, their change to our expectation of completion well in advance of the need to support the current CVOW construction schedule, and timely completion by the end of 2026. Turning to other notable updates on slide 11, we've continued to see strong regulatory outcomes related to nuclear life extension, clean energy, and grid transformation. On data centers, we continue to advance a series of infrastructure upgrade projects that will enable incremental increases in power for data center customers in eastern Loudoun County. Four projects have been completed ahead of schedule and additional project is on schedule to be completed by the end of 2023. We continue to develop a new 500 kV transmission line with an expected in service state of late 2025. Given the unprecedented growth in areas served by our electric transmission, we continue to see an acceleration of and long term increase in electric transmission investment opportunity throughout our service area. As such, we recently submitted a significant number of additional projects as part of PJM transmission planning process that we believe will ensure the electric grid in Virginia is reliable, resilient, and able to adapt to the increasing energy demand while also transitioning to cleaner energy resources. Turning to Dominion Energy South Carolina on slide 12, in addition to delivering safe and reliable energy DESC electric rates for residential customers are 9% below the national average as of July 1, we're proud to meet the energy needs of the robust economic development and population growth in South Carolina. On the regulatory front, we will complete the testimony and hearings phases in our natural gas general rate case in the next few weeks. We expect an order from the commission by October. Following commission approval of the electric fuel settlement. The annual fuel adjustment was effective in May, and is designed to eliminate all previous under collections during these few years. Finally, at our gas distribution business, strong economic development is driving attractive customer growth year-over-year of 2.4% in North Carolina and 2.3% in Utah. Across all our gas businesses, we continue to see strong support for timely recovery on prudently incurred investment that provide safe, reliable, affordable and increasingly sustainable service, including pipeline replacement efforts and expansion of service to rural communities. On RNG, we have six RNG projects currently injecting gas, of 18 other projects in various stages of development. With that, let me summarize our remarks on slide 13. Our safety performance this quarter was outstanding. We reported operating earnings of $0.53 per share. We continue to execute on our decarbonization and resiliency investment programs to meet our customers’ needs while creating jobs and spurring new business growth. Our offshore wind project continues to move forward on schedule and on budget. And the Business Review is proceeding with pace and purpose. I'm focused on ensuring that Dominion Energy is best positioned to create significant long term value for our shareholders. With that, we're ready to take your questions.

Shar Pourreza:

Hey, guys, good morning. Bob, just as you know, one of my favorite questions to ask is obviously, as we're getting closer to the Investor Day, I guess, is there any changes to your expectations for kind of this turn key event now that you've sold Cove? Or could there still be some contingencies on potential ongoing sale processes? So will all of our questions be answered as we think about the balance sheet based earnings growth rate, et cetera as we head into that event?

Shar Pourreza:

Okay, good. And then it's good to see on the offshore wind, you guys have locked in additional costs there. And I don't mean to like ask a blunt question like this, but I might as well, but can you just tell us if you've had any interest in the wind stake option at all, at this point? Just given what we've been seeing around?

Shar Pourreza:

Okay. And then just lastly, one of the Millstone units, obviously heading for another outage this fall. I mean, can you just talk about sort of talk to the quantum of like that going in there? And it seems like there's been some issues with the units this year? Is there any kind of major capital investments you may be facing there? Thanks.

Operator:

And our next question comes from Jeremy Tonet with JPMorgan.

Steven Ridge:

Hey, Jeremy, Steve. That's really good question. Thanks for that. So let me start with this at the Investor Day, which we intend to have in the third quarter, we're going to provide very clear direction on our company's post review earnings and earnings growth outlook, including a buildup of the parts to that consolidated forecast. I would just say that 2023 is very much a transition year for us. And I understand that does make it more challenging to model. But since the initiation of the review, I think we've tried to be very transparent as we've delivered results around key drivers that are going to impact 2023 results including the DEV rider roll-in and interest expense, and we don't see that those major categories have changed much. So we haven't given full year guidance, as we mentioned. But I would say we're cognizant of investment community's interest in what the earnings potential of the company is going to be. And the good news is that we're going to be very comprehensive and how we address that as part of the Investor Day.

Bob Blue:

Yes, as you would expect, people are pretty positive about a rate reduction. I think that if you look at the history of our regulatory outcomes in Virginia, over the last few years, you see approval of the variety of new clean energy programs, approval of subsequent license, renewal investment, approval of transmission projects. We've, I believe, worked well with stakeholders in the regulatory process and achieved strong outcomes. And I think if you look at the big picture, as we mentioned in our prepared remarks, our reliability is high. Our rates are competitive substantially below the national average. That's a very good place to be when you're in front of your regulators.

Carly Davenport:

Hey, good morning. Thanks for taking the questions. Want to just start off on the demand side. Do you feel like PJM's peak forecasts kind of accurately capture the growth that you're seeing in Virginia? And maybe how do you think about that in the context of your forecasts for electric sales growth in Virginia going forward? It seems like it's pretty in line for 2023. But just kind of as you think about 2024 and beyond.

Carly Davenport:

Great, that's helpful. And then maybe just a follow up kind of, appreciate all the updates that you provided on Virginia and just wanted to touch on the nuclear life extension program. Can you just talk about kind of what investments are included in that initial $1.2 billion? And then what other potential phases of that program could look like?

Operator:

Thank you. This does conclude this morning's conference call. You may now disconnect your lines. And enjoy your day.

Operator:

Welcome to the Dominion Energy First Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to David McFarland, Vice President, Investor Relations.

Robert Blue:

Thank you, David. Good morning, everyone. During the first quarter, we delivered financial results consistent with our guidance range and made meaningful progress on regulated investment programs that decarbonize and add resiliency to our systems. We'll cover those topics in more detail but let me begin with safety performance and then address the status of the business review. Our employee OSHA injury recordable rate for the first quarter was 0.21, a significant improvement relative to historical performance, including record-setting results in 2020 and 2021. We have several months left in 2023 to demonstrate our ability to drive injuries toward the only acceptable outcome which is 0. I thank my colleagues for this remarkably strong start to the year. Now, I'd like to address the business review. Our guiding commitments and priorities are unchanged and replicated identically on Slide 3. We continue to receive valuable feedback from investors which has affirmed our focus on these principles. We'll continue to be deliberate and making ourselves available for input from the company's current and prospective capital providers. The review timeline shown on Slide 4 is also unchanged. We plan to host an Investor Day in the third quarter during which we'll provide an updated strategic and financial outlook based on the results of the business review which is still underway. We're working expeditiously but conscientiously in recognition of the vital importance of achieving an optimal result. I'm pleased with the progress we're making towards delivering a compelling repositioning of our company to create maximum long-term value for shareholders, employees, customers and other stakeholders. We have great people and great assets and I'm as excited as ever for the future of our company. Turning now to several noteworthy developments in Virginia, our largest service area. In November, I discussed the need to ensure that near-term economic and customer bill pressures didn't preclude the full realization of the benefits of the long-term resiliency and decarbonization capital investment opportunity before us. And in February, I discussed the need for a durable regulatory construct that provides for a competitive and fair return on utility investments to attract low-cost capital and support of our customer-focused programs. New Virginia law enacted in April and effective July 1, comprehensively addresses both of those needs. It provides significant bill relief for our customers and supports the long-term stability of our utility with nearly unanimous bipartisan support, the legislation provides the certainty we need to fund and execute critical energy investments in support of the Commonwealth's robust electric demand growth long-term energy security and reliability, leading decarbonization goals and impressive economic growth. Highlights of the law are shown on Slide 5. First, it provides meaningful rate relief for customers. Beginning July 1, it reduces the monthly bill for a typical residential customer by nearly $7 through the combination of certain existing riders that represent approximately $350 million of annual revenue and it allows for the commission to approve the securitization of deferred fuel costs which could provide up to $7 a month in additional near-term savings. If approved, fuel securitization would reduce the stand-alone fuel charge on customers' monthly bills by allowing the company to spread fuel cost over a multiyear period. Taken together, these savings, if approved, would equate to a 10% reduction to the current typical residential customer bill and position us to be around 21% below the national average. Second, the law simplifies the ratemaking process around our base business which now represents about 1/3 of DEV's total rate base. Specifically the law reinstates base rate reviews on a biannual schedule as compared to the current triennial cadence, improving the timeliness of operating expense and investment recovery. It's worth noting here, no change to the use of a forward-looking mechanism for purposes of establishing base rate revenues as part of the now biennial reviews. And it retains a modified customer sharing mechanism for base rate earnings that allows both customers and shareholders to benefit from positive financial drivers like improved cost efficiency. Finally, the law prescribes certain regulatory parameters for use in rate setting for the next few years. It establishes an authorized ROE of 9.7%, up from 9.35% currently for purposes of the 2023 biennial review which will determine base rates and rider returns through the next biennial period. It directs DEV to undertake reasonable efforts to maintain a common equity ratio of 52.1% through 2024 and it preserves the use of the rider recovery construct. As a reminder, riders are filed and trued up annually in single issue proceedings that utilize forward-looking test periods and allow for timely recovery of construction work in progress. The law complements precedent energy legislation, including the Virginia Clean Economy Act of 2020, the Grid Transformation & Security Act of 2018 and the Reregulation Act of 2007 to create a regulated utility framework that has delivered exemplary reliability and resiliency as well as exceptional customer value as evidenced by customer rates that are significantly below national and regional averages as shown on Slide 6. I believe this broadly supported bipartisan legislation strikes an appropriate balance between customer benefit, regulatory oversight and the critical need to position the company to compete for capital to support the significant investment required in Virginia for decades to come. In the words of the state's House of Delegates leadership, this resolution gives Dominion Energy Virginia, the certainty and stability to make investments needed to ensure stable, reliable service long into the future. That stability and certainty is especially critical now as we ramp into the very substantial and growing multi-decade utility investment required to address resiliency and decarbonization public policy goals plus recently updated independent electric load projections that reflect the very robust demand growth we're observing in real time across our system. I'm referring to PJM's 2023 forecast. That is shown on Slide 7, projects peak summer load growth in the DOM zone of approximately 5% per year for the next 10 years. To put that into perspective, the resulting peak load projected for 2033 has increased from 25.8 gigawatts as of the 2022 PJM estimate to 35.8 gigawatts as of this year's estimate, an increase of nearly 40%. DEV weather normal sales growth over the last 12 months was 6.1%. For full year 2023, we expect the growth rate to moderate somewhat to around 5%. So this isn't a hypothetical growth; its demand we're seeing and investing to serve every day. On Monday, we filed an updated integrated resource plan with the Virginia Commission that outlines a variety of paths to satisfy these growing service obligations. The plan calls for an acceleration of and long-term increase in our distribution, transmission and generation investment. We look forward to engaging with all stakeholders in the planning process and we'll provide a refreshed long-term capital investment plan as part of our third quarter Investor Day. This unique intersection of industry-leading demand growth and strong policy support for resiliency, decarbonization, affordability and economic growth, combined with the durability of the Virginia regulatory construct represents an unprecedented opportunity for our company, our customers and our shareholders. It will drive growth for many years to come, require prudent capital allocation and rely on a healthy financial foundation which is one of the reasons we've repeatedly highlighted balance sheet improvement as a key priority of the business review. With that, I'll turn it over to Steven to address the financial matters before I provide additional business updates.

Robert Blue:

Thanks, Steven. I'll now turn to other business updates on the execution of our growth program. Turning to offshore wind on Slide 11. The project remains on track and on budget. We continue to work closely with the Bureau of Ocean Energy Management and other stakeholders to support the project's time line. The draft EIS received late last year was thorough and contained no surprises. Public hearings have already taken place and we continue to work collaboratively with BOEM and all of the cooperating agencies. We expect the EIS record of decision later this year. We've advanced engineering and design work which has allowed us to release major equipment for fabrication and we made progress on procurement and other preconstruction activities for the onshore scope of work. Consistent with prior guidance, project costs, excluding contingency, are about 90% fixed, further derisking the project in its budget. Project to date, we've invested approximately $1.5 billion which we expect to grow to $3.3 billion by year-end. In our most recent regulatory filing, we updated our expected LCOE to the low end of the $80 to $90 per megawatt range to account for PTC value based on the Inflation Reduction Act. In March, legislation was enacted that authorizes DEV to establish an offshore wind affiliate subject to commission approval. And for the purpose of securing a non-controlling equity financing partner in our offshore wind project. We intend to evaluate this option as part of the business review. Our Jones Act-compliant turbine installation vessel is currently 70% complete. No change to our expectation of the completion well in advance of the need to support the current Coastal Virginia offshore wind construction schedule and timely completion by the end of 2026. On data centers, we're advancing a series of infrastructure upgrade projects that will enable incremental increases in power for data center customers in Eastern Loudoun County. The first 3 projects are ahead of schedule and will be completed by the end of this month. A second tranche of projects are on schedule to be completed by the end of 2023. Additionally, we recently received SEC approval for a new 500 kV transmission line with an expected in-service date of late 2025. This submission included around $700 million of capital investment. Turning to Slide 13. I'm very pleased that the SEC in April approved our most recent Clean Energy filing which included nearly 800 megawatts of solar and energy storage capacity, our sixth consecutive such approval. These projects will bring jobs and economic opportunity to our communities and they will deliver more than $250 million in fuel savings for our customers during their first 10 years in operation. Our next clean energy filing will take place later this year. Next, we're advancing our electric grid transformation plans to create a more resilient grid, improve reliability and offer faster recovery after major storms. We filed Phase III of our grid transformation plan in March, seeking approval for the continuation of existing and new projects through 2026. Our customers have already observed the benefits from prior investments as we've seen fewer outages and less significant damage on impacted facilities during major storms. The filing represented over $1 billion of rider eligible investment. We expect an order from the SEC by the end of the third quarter of 2023. Turning to South Carolina; on March 31, we filed a natural gas general rate case in South Carolina in accordance with its 2020 RSA settlement agreement with the South Carolina Office of Regulatory Staff. We asked in the case for an ROE of 10.38% and a revenue requirement increase of $19 million which represents around a 6% increase to a typical residential customer bill. We expect new rates based on a typical procedural schedule to be effective in October. On April 25, the commission approved our stipulation in the electric fuel proceeding. The stipulation was prepared through the joint efforts of DESC, the South Carolina Office of Regulatory Staff and the South Carolina Energy Users Committee. The stipulation supports an increase of just under 4% for an average residential customer bill. We now expect to recover all previous under collections during the next fuel year. I'd note that this is the second electric fuel adjustment settlement in the past 6 months. Another example of the improved regulatory and stakeholder relationships that will benefit our customers in the state. Lastly, at our gas distribution business. The Utah system delivered 7 of the top 20 throughput days in history including the 2 highest ever during a record setting winter. Also in Utah, we've launched the next phase of our hydrogen blending pilot and we've achieved up to 5% blending levels in Delta serving about 1,800 customers. On RNG, we have 6 RNG projects currently injecting gas with 15 projects under various stages of development. With that, let me summarize our remarks on Slide 14. Our safety performance this quarter was outstanding but more work to do to drive injuries to 0. We delivered financial results that were within our guidance range and above the midpoint of our guidance range on a weather-normal basis. We continue to execute on our decarbonization and resiliency investment programs to meet our customers' needs while creating jobs and spurring new business growth. Our offshore wind project continues to move forward on schedule and on budget. And the top to bottom business review is proceeding with pace and purpose. I'm focused on ensuring that Dominion Energy is best positioned to create significant long-term value for our shareholders. With that, we're ready to take your questions.

Shahriar Pourreza:

Maybe just, Bob, if we could start with a kind of a sequencing question regarding the Investor Day as it kind of draws closer. Should we be expecting kind of a turnkey Investor Day reset? Or could it still be contingent on potential ongoing sale processes? And the origin of the question is that the wind stake sales seems to be taking a while right now. You have that option now. So just trying to get a feel for what level of closure you're targeting for the rollout.

Shahriar Pourreza:

Got it. Perfect. And then Steven, you mentioned in the prepared that you continue to look at cost efficiencies, albeit within the context of all the work you've done to date. I guess how should we think about the opportunities here? Any color on scale or timing as we look ahead to the review and beyond?

Shahriar Pourreza:

Perfect. I think just one last one, I guess, just on the SEC. I guess what are your kind of expectations for lawmakers, I guess, to fill the 2 vacant seats at this point? It sounds like there's been little progress in Richmond. I guess what are the pathways forward here?

Operator:

And we'll take our next question from Steve Fleishman with Wolfe Research.

Steven Ridge:

Steve, this is Steve. I'll take a shot at that as well. I think as we think about the Investor Day, the goal is to have isolated as many variables of the review as possible at the time that we address the market with the repositioning of the company for the long term. And obviously, given the business review is underway, it's a little bit difficult to provide sort of more specific guidance than that. But we are well down the path on the review. As Bob mentioned, we're pleased with the progress that we're making and we look to use the Investor Day to provide a refreshed strategic and financial outlook that will cover earnings and credit and financing and capital investment. And I think based on the progress we've seen to date, we will be well positioned to do that.

Robert Blue:

I think there'll need to be some work done within the commission on how that will work. It's -- there was a similar provision in the law really starting back in 2007. And -- so we see it as an opportunity to demonstrate our excellent performance when we're in front of the commission. But I think it's a little early to establish exactly how that will play out.

Robert Blue:

We have an obligation to serve customers in Virginia. It's our obligation and we build generation, transmission and distribution as necessary to serve that load. So that's the way that it has worked. That's the way it's going to keep working in the future. So we've got investments to make as you see from the IRP.

Robert Blue:

Absolutely. Yes, these are large loads, 24/7, they need the grid.

Jeremy Tonet:

Just wanted to touch on the IRP scenarios a bit and just see what factors are, I guess, in play between the different scenarios. Just wondering if you would note any notable highlights on resource mix considerations across these scenarios and how that would impact be?

Jeremy Tonet:

Got it. That's very helpful. And small point I just wanted to pivot for Millstone. Just wondering if there's any updated thoughts that you could provide there given, I guess, changes in the market?

Operator:

Thank you. This does conclude this morning's conference call. You may disconnect your lines and enjoy your day.

Operator:

Good day, everyone, and welcome to the Dominion Energy Fourth Quarter 2022 Earnings Conference Call. At this time, each of your lines is in a listen-only mode. At the conclusion of today’s presentation, we will open the floor for questions. Instructions will be given for the procedure to follow if you would like to ask a question. I would now like to turn the call over to David McFarland, Vice President, Investor Relations. Please go ahead.

Bob Blue:

Thank you, David, and good morning, everyone. During 2022, we delivered earnings and dividend growth in line with our guidance, provided safe, reliable and affordable energy while demonstrating careful environmental stewardship, served our customers and invested in our communities, and made meaningful progress on our regulated investment programs focused on decarbonization and resiliency. I’ll begin by highlighting our annual safety performance. As shown on slide 3, our employee OSHA injury recordable rate continues to compare favorably with the Company’s long-term historical results as well as national industry and regional electric utility averages. However, our ultimate goal has been and continues to be that none of our colleagues get hurt ever. Next, on reliability, which our customers consistently indicate is their highest priority. In the past year, customers in our electric service areas in Virginia, South Carolina and North Carolina had power 99.9% of the time, excluding major storms. And it’s worth noting that Virginia reached record summer peak demand in August and all-time peak demand in December. As they do time and time again, our colleagues rose to the challenge and kept our system delivering without major or extended interruption during these demanding load conditions. The scale of our team and resiliency of our system were never more evident than during the December winter storm, when we also did not experience any major or extended service disruptions. Finally, affordability

Bob Blue:

Let me turn to other business updates and the execution of our growth program. As I’ve discussed in previous earnings calls, the strength of our Virginia service area economy supports our robust capital investment programs at DEV. Two recent announcements have confirmed Virginia’s economic strength. First, PJM recently published its annual forecast of demand growth. The Dominion Zone continues to be the highest growth rate among all zones within PJM, covering 13 states in the District of Columbia. PJM projects the 10-year summer peak load to grow at a 5% annual rate. This growth, primarily driven by data center loads, which have been increasing at an unprecedented rate, will require significant new capital investment. Second, last month, Amazon announced its plans to invest $35 billion by 2040 to establish multiple data center campuses across Virginia. These new campuses will combine expandable capacity to position Amazon for long-term growth in Virginia and create an estimated 1,000 jobs. Data centers currently represent about 20% of our total sales in Virginia and have provided strong sales growth to date, a trend supported by these two announcements we certainly expect to continue. Our work continues to advance projects to bring both new and upgraded infrastructure to enable the continued connection and expansion of data center customers. For example, we filed for a new 500 kV transmission line with the SCC with an expected in-service date of late 2025. The submission included around $700 million of capital investment. Turning to offshore wind on slide 12. In December, the SCC approved the cost sharing settlement agreement developed in collaboration with key stakeholders, including the Office of the Attorney General and other parties. We’re very pleased to be extending our track record of constructive regulatory outcomes. As it relates to the project execution, it’s very much on track and on budget. We have continued to work closely with the Bureau of Ocean Energy Management and other stakeholders to support the project’s time line. In particular, we received the draft environmental impact statement, which started the 36-day public comment period that will close later this month. The draft, DEIS, was thorough and contained no surprises. Public hearings have already taken place, and we continue to work collaboratively with BOEM and all of the cooperating agencies. Advanced engineering and design work, which has allowed us to release major equipment for fabrication in advanced procurement and other preconstruction activities for the onshore scope of work. Project costs, excluding contingency, are currently 80% fixed and we continue to expect about 90% of the project costs, excluding contingency, will be fixed by the end of the first quarter. We remain on schedule to complete construction of the project by the end of 2026. We expect the EIS record of decision in late October of this year, slightly later than expected because of the DEIS timing, but still in support of our current project schedule. Next, our Jones Act-compliant turbine installation vessel is currently 65% complete. We continue to expect it to be in service for the 2024 turbine installation season. Turning to other business updates on slide 14. As part of our ongoing resource planning, Dominion Energy South Carolina is replacing several of our older generation peaking turbines with modern, more efficient units. These peaking units which often operate seasonally during certain times of day when the demand for energy is at its highest, play an important role in our generation fleet with their ability to go from idle to producing energy quickly. Modernizing this equipment will lower fuel cost to customers, improve environmental performance and provide reliability and efficiency benefits. These important resources are also critical to support the grid as solar continues to be added to our system. Construction activities will begin later this year for two of the facilities and the all-source RFP for a third facility is on track. On the regulatory front, we filed our 2023 IRP last month. Our preferred plan continues to be indicative of the potential for accelerated decarbonization and assumes all coal-only units are retired by the end of the decade. We look forward to engaging with all stakeholders on this planning process. Next, at our gas distribution business, we continue to see strong support for timely recovery on prudently incurred investment that provides safe, reliable, affordable and increasingly sustainable service including pipeline replacement efforts and expansion of service to rural communities. For example, in December, the Public Service Commission of Utah approved a general rate increase of $48 million, and an allowed ROE of 9.6%. In this constructive outcome, they also approved the continuation of the infrastructure replacement tracker programs and the costs related to our natural gas storage project in Utah, Magna LNG, which was placed in service at the end of last year and will be used to meet system reliability for customers’ gas supply in the Salt Lake City area. On RNG, we remain one of the largest agriculture-based RNG developers in the country. We have six projects producing negative carbon renewable natural gas and 15 additional projects in various stages of development. We’re also reviewing potential tax benefits available to RNG through the inflation Reduction Act. When we launched this business, we did so on the strength of the underlying project economics, and the very robust decarbonization benefit of agricultural renewable natural gas. Those investment criteria have not changed. If the projects are deemed eligible for tax incentives, we would expect to capture that value on behalf of our shareholders. With that, let me summarize our remarks on slide 15. Safety remains our top priority as our first core value. We delivered 2022 financial results that were in line with our guidance range. We continue to aggressively execute on our decarbonization and resiliency investment programs to meet our customers’ needs while creating jobs and spurring new business growth. Our offshore wind cost sharing settlement agreement was approved, which allows the project to continue moving forward on schedule and on budget. And the top to bottom business review is proceeding with pace and purpose. I am focused on ensuring that Dominion Energy is best positioned to create significant long-term value for our shareholders. With that, we’re ready to take your questions.

Shahriar Pourreza:

So just starting, Bob, with the business review priorities you kind of discussed in the prepared remarks and you kind of laid out on slide 5, specifically kind of on the dividend comment. Could we maybe try to parse through the awards here a little more closely? I mean, obviously, we understand that you guys are holding the dividend at the current level for obvious reasons and that’s obviously consistent with your support for the dividend. But I guess, what is the language around quote unquote potentially over time mean as we think about the payout ratio bounds in the near term. I guess, what do you mean by potentially? Could this mean a faster or slower trajectory to get to the 60% range? I mean, we’ve received a lot of inbounds on these three words. So, any sort of visibility you could provide would probably be a reprieve.

Shahriar Pourreza:

Got it. Okay. I guess, we’ll wait for additional color there. And then, Bob, you took large impairment on the solar projects. I understand the test was triggered by the decision to not stay on the investment ITC recognition hamster wheel. But what part of the impairment test did you actually fail?

Shahriar Pourreza:

Okay. Got it. Got it. That’s helpful. And then just really quick lastly for me. Just from a legislative process standpoint, I guess, how should we think about the likelihood of slippage into a reconvened session? I mean, put differently, if you had firm clarity on March 27th, could we see the schedule accelerate? Thanks.

Operator:

Our next question comes from Steve Fleishman with Wolfe Research.

Steven Ridge:

Yes. Hey Steve, this is Steve. I’ll take that one. So, on an issuer rating, we’re actually high-BBB at two of the three rating agencies. At Moody we’re BBB. Our objective is to maintain those targeted rating categories, and the downgrade thresholds, at least at Moody’s associated with that is 14% on the down and 17% on the up. As we mentioned in the call script, we intend to meet and exceed that downgrade threshold even in times of temporary pressures from cost like fuel costs and regulatory adjustments. And that has been one of the drivers of our underperformance historically relative to our downgrade threshold. So, we’re still targeting high-BBB. It’s where we are on two of the three agencies from an issuer rating perspective. And the appropriate downgrade threshold, at least from the Moody’s perspective, is 14%.

Steven Ridge:

Depending on the specific methodology -- but, yes.

Steven Ridge:

That’s right.

Bob Blue:

Yes. Steve, it’s -- I apologize for not giving you a specific answer. But what we’re saying is, to the extent that the payout ratio changes as a result of the review that if they’re -- an obvious point, if our EPS changes as a result of the review and the dividend remains constant as we have said it will, that changes the payout ratio. And what we’re indicating is if there is a change in the payout ratio, we’re going to get back to it, but without reducing the dividend. That’s the point that we’re attempting to make here.

Bob Blue:

Correct. We’re in a business review. And as we have indicated in prior calls and this call as well, we don’t yet know what the outcome of that business review will be. So yes, it’s hypothetical as a good way of describing it.

Bob Blue:

Again, we can’t set that until we’re finished with the review. So not yet.

Jeremy Tonet:

I just want to pivot a little bit, if I could, towards Millstone here, interesting backdrop here. Just wondering if you could provide us updated thoughts, what’s the status of state regional discussions around Millstone, how you’re thinking about locking in more of this market upside to the asset?

Jeremy Tonet:

Got it. That’s helpful. And then kind of switching gears and realize I’m at risk of putting the horse ahead of the cart here. But as it relates to potential asset sales, was just wondering, does the solar impairment kind of a tip that you might look to sell this asset as part of the business review. And I guess, we’re at with news out of Black Hills this morning with regards to their thoughts on LDC sales. And so I was just wondering if you had any thoughts on what could potentially be or what could be prioritized in the sale process if you chose to do that?

Jeremy Tonet:

Got it. That’s helpful. And just a real quick last one, if I could. If you might be able to kind of parse more finally what we might expect on 2Q business review update versus the 3Q Investor Day? Is the 2Q update really just an outcome of the Virginia legislation or potentially more updates on other elements of the plan?

Operator:

Our next question comes from Durgesh Chopra with Evercore ISI.

Steven Ridge:

No. So, the impairment doesn’t change the revenue we generate under those existing PPAs. The impairment does have a slight impact on the depreciable life, because -- or the depreciation rather than the depreciable life, because the carrying value is now lower than previously assumed. The bridge is something different. The bridge, when we refer to that ITC, solar ITC, it’s effectively the lack of solar ITCs, consistent with the comments we’ve made on this call and previously with regard to pivoting that capital allocation elsewhere in our business. So, it’s effectively simply saying that a year ago, we would have had some solar ITC in earnings this quarter this year, we do not have that. So, the impairment is a different. It doesn’t have any impact on that bridge.

Steven Ridge:

That’s right. It’s about $0.04.

Bob Blue:

It will depend a little bit on the timing, Durgesh. We do typically have our first quarter call in early May. It may coincide, it may not. That won’t keep us from sort of advancing the discussion around the business review when we have the information necessary to actually have that discussion.

Ross Fowler:

Just a couple of things to clean a couple of things up, and I apologize, the call cut out, if this is already answered. But the cap -- the go-forward CapEx that you had had associated with sort of that competitive solar adjustment. Can you sort of scale that for us and sort of the cash that you wouldn’t be spending into that going forward?

Ross Fowler:

Okay. And then, sort of a bigger picture question following on to Jeremy’s question, and I appreciate the fact that you’re in a strategic review at the moment. But just maybe even anecdotally, Bob, as you look at this, you -- I think Steve made some comments around the need for significant balance sheet repair, if we’re going to get above that 14% -- meaningfully above that 14% FFO to debt ratio. I think dividend [ph] cut is clearly off the table, given your comments, but could you maybe prioritize other options, even just anecdotally in your mind at this point as to how you sort of get back to that level?

Ross Fowler:

Okay. I appreciate that, Bob. And then 2023 guidance, I think your comments were that you’re just -- you’re not going to provide it sort of for the full year given the strategic review. So, is that just should we expect sort of quarterly guidance going forward as we walk through the year? And can we kind of use Q1 guidance where we’re at as sort of a starting point status quo guidepost, and then make our own assumptions around where the strategic review lands to sort of get ourselves to a 2023 or 2024 number, or how should we think about that going forward?

Operator:

Thank you. That will conclude our question-and-answer session. I’ll turn the call back over to management for any additional or closing remarks.

Operator:

Thank you. This does conclude this morning’s conference call. You may disconnect your lines, and have a great day.

Operator:

Welcome to the Dominion Energy Third Quarter Earnings Conference Call. At this time, each of your lines is in a listen-only mode. At the conclusion of today's presentation, we will open the floor for questions. Instructions will be given for the procedure to follow if you would like to ask a question. I would now like to turn the call over to David McFarland, Vice President, Investor Relations. Please, go ahead.

Bob Blue:

Thank you, David. Good morning, everyone. We delivered strong third quarter results and are well positioned to meet our expectations for the year. We also have been steadily executing on our investment programs focused on decarbonization. This successful execution is already benefiting our customers, communities, the environment and our investors. I'll begin with safety. Through September, our OSHA recordable rate was 0.53, which remains low relative to our historical levels and substantially below industry averages. We take pride in our relentless focus on safety, and it is the first of our company's core values. Next, I'd like to provide some context to our announcement this morning of our initiation of a top-to-bottom business review, with the goal of ensuring that Dominion Energy is best positioned to create significant long-term value for our shareholders. In recent years, we've taken a series of strategic steps, both through M& A and through the capital allocation decisions to materially increase the state-regulated profile of our business. Our strategy remains anchored on this pure-play, state-regulated utility operating profile that centers around premier states that share the philosophy that a common sense approach to energy policy and regulation prioritizes safety, reliability, affordability and increasingly sustainability. These states also strive to create environments that promote sensible economic growth, which, like the rising tide, lifts all boats. Our state-regulated utility model offers investors long-term earnings visibility and is enhanced by our concentration in these fast-growing constructive and business-friendly states. To state the obvious, we're monitoring what's going on in the broader economy. Like everyone, we're seeing inflation, supply chain limitations and higher fuel prices, all having an impact on customer rates and our balance sheet strength. We're keenly aware of the economic pressures that are affecting our customers and taking seriously our core mission to deliver reliable, affordable and clean energy to our customers, while creating value for our shareholders. So far, our company has navigated this new environment well. Our safety and reliability metrics have remained strong. As we steadily execute on our industry-leading decarbonization investment programs, we must provide energy that is affordable. We're, therefore, proud that residential rates at our electric utilities remain well below state and national averages. We've also found creative approaches to provide customer relief. I'll recap a few recent examples. First, we supported legislation in Virginia, which gave customers a fresh start by forgiving $200 million of customer arrears in the depths of the COVID crisis. We also agreed to more than $11 million of forgiveness in South Carolina. Second, we elected to recover $200 million through base rates currently in effect in connection with the suspension of Rider RGGI, as Virginia works towards its exit from that program. Lastly, we voluntarily agreed in Virginia to spread the recovery of the under-recovered fuel balance over a three-year period to reduce the effect on customer bills. And we have done all of these things, while moving forward with our growth plan and delivering results that met our financial guidance, just as we did again this quarter. As you can tell, I'm very proud of these accomplishments, and thank all my Dominion Energy colleagues who contributed to these successes. But our work is far from done. There are two drivers behind today's announcement of a review

Q - Shar Pourreza:

Hey good morning guys.

Shar Pourreza:

First, congrats, obviously, to Jim and Stephen. I guess, this means Mr. Ridge's park city skiing days are over with, but congrats to both you guys. Bob, if you can maybe elaborate a little bit on your prepared remarks as you're looking at sort of a range of scenarios. I think many would assume you start with looking at a monetization of the contracted assets. But in our view, they're really not why you're trading at a discount or why the stocks underperformed, some would argue the performance maybe driven by local politics. I guess, could we see more drastic actions like divestitures where you would only focus on Virginia or even a sale of the company to really maximize shareholder value? I guess, what is this going to look like in the end? And it seems like an update in February is a very tight time frame. So I guess, are you really progressed in this process? Thanks.

Shar Pourreza:

Got it. And then just lastly, Bob, just on the 6.5% growth rate you have out there. Obviously, you're implying on slide 13 in your prepared remarks that you could change the target pending the review. Obviously, the share price reaction this morning is implying cut in the growth rate. But could a scenario actually be accretive or even supportive of the target you have out there, especially if we assume the trend with privates and financial players, paying relatively healthy multiples for assets with proceeds you can redeploy organically at one-time rate base. I mean, does the deal need to be dilutive to growth? Are you concerned about the numbers?

Shar Pourreza:

Okay. Terrific. Thank you, guys. I'll jump back in the queue. Appreciate it.

Ross Fowler:

Good morning, Bob. Good morning, Jim.

Ross Fowler:

Maybe shifting to offshore wind, I'm sure there's going to be a lot of other questions on the strategic review, but just touching on offshore wind for a minute. As we look at slide 6 and then sort of slide 8 in the deck, I think getting the settlement done, obviously, it still needs to be approved. Is sort of shifts, investors' thoughts of risk from sort of that performance guarantee around capacity factor and now there's a shift to cost. So maybe you can frame the risk to cost from here given the cost sharing arrangement? And then the second sort of part of the question is you say 75% fixed as of today, and then working to that 90% in the first quarter next year. Can you kind of just give us some framework, what has fixed actually imply or mean? Is that locked and settled? Can that move at all? What we have there ex the contingency?

Diane Leopold:

Okay. Thanks. Good morning, everybody. So let me just give a little bit more color to the different aspects of the project. Kind of as you walk through, the first thing would be permitting. And as Bob just said, we're working through the process of the draft environmental impact statement. It is on time to come out by the end of this year. And we're working closely with the regulators with DOM and with NOA in addressing issues as they come up to minimize any risk of schedule issues. And then I'd want to remind you, we really focused on derisking the schedule from the start by having two piling seasons, two construction seasons to put those monopiles down. So we don't even install the turbines until the second season. So that allows for derisking in the construction, and we look at that as we move forward with the project. The next are our vendors and our suppliers, and we picked the worldwide experts in the offshore wind industry to ensure that we weren't adding any risk in our contracting. And of course, they were fixed price contracts. And as we move through the pieces that were variable in the offshore were commodities and fuel, and that's where you see 75% fixed as of now. So as we're looking to continue to move towards fabrication, we have all the manufacturing slots nailed down, much of the steel plate has been ordered and deliveries have actually already started. In fact, fabrications for our offshore substations and our cables have already begun. So that's as you're seeing the 75% move to the 90%, that's what's going on. The mills are operational. Our vendors are not concerned with them shutting down due to fuel issues in Europe, anything like that. And as Bob said, as we've looked at the entire projects throughout this time, we've been able to preserve and even add to our contingency. So we're feeling very good about where we are. On the -- so I think I've really answered that additional question of ramping from 75% to 90%. It's really as we're getting those deliveries and locking in the remaining part of the metals and the fuel. And the final piece of moving from that 75% to 90% is on the onshore side, on that onshore transmission and locking in those contracts.

Bob Blue:

Yeah. I think what we're saying, again, I know you're looking for certainty here, but it's early days and we're just getting started. So what we are focused on, you've correctly identified is regulated high quality earnings, predictable earnings going forward. How the numbers all settle out at the end of it, we'll report when that time comes. So that's why we're saying today, we have a path and a status quo scenario, but the outcome of the review could lead to different growth qualitatively and quantitatively.

Operator:

And our next question comes from Steve Fleishman from Wolfe Research. Your line is open.

Steve Fleishman:

Good morning. Hi, Bob. So just first on the status quo scenario. I think for 2023, you mentioned that you could do it, but you would need to do more unregulated investment. Could you just comment a little more on what you mean by that?

Jim Chapman:

Yeah, Steve, let me go through it a little bit higher level than your specific question, but I'll address that, too. So what's going on with our guidance? So for 2022, I know it's not your question, but for 2022, we affirmed, we narrowed, we're on track, EPS and credit for 2022. For 2023, we never give forward year specific guidance on our third quarter call, and we're not doing it this time either. I'll come back and talk about that in some more detail though to give some color. And then for our long-term growth rate, we haven't changed it. We haven't withdrawn it. But as you noted, we also haven't explicitly reaffirmed it given the review. But we see these paths as we show on slide 13, path to achieving our long-term guidance and tools we have to overcome some of the macroeconomic headwinds that Bob mentioned with increased investment on the unregulated side and other initiatives. But some of those tools and businesses are the same ones that are subject to this review. Of course, everything is subject for review. So Bob, as he mentioned in his prepared remarks, cautioned that long-term outcomes consistent with our existing guidance are really achievable in the status quo result to the review. So anyway, long story short, that's the color on the 2022, 2023 and long-term. But on the slide 13, we give drivers for 2023 targets. So let me walk through and provide some detail on each line item that's in our path to make our 6.5% into 2023. So 4.10 for 2022, that's the midpoint of our guidance that we just narrowed then 6.5% of the simple math is, of course, implies and our consensus, analyst consensus is 4.37. So 4.10 to 4.37. And of course, there are some helps and some hurts to bridge that. So let's go through those as listed on that slide. Sales growth. Sales growth we talked about on the electric side is clipping along at a healthy rate, 1% to 1.5%, slightly higher on the data center side. But that financial impact, together with the impact of margin, is probably flat. And we've given some additional detail on margin dynamics, including Virginia, on slide 31. We're happy to follow up after the call and walk through all that. The combination of those two things, flat. Regulated investment, which we’ve talked about is the long-term earnings growth driver for this company, call it, $0.27 year-over-year. Rough number, $6 billion of growth CapEx, 50% equity ratio, 10% ROE across all our businesses. Millstone margins, $0.08 year-on-year, help. And here, too, we provided additional disclosure on page 32 of our hedging position for Millstone for the next several years, $0.08. ITC, an increase in ITC, we have opportunities to complete projects and increase our ITC contribution in 2023. That could be in solar, as we've been doing in mid-teens for years now, or it could be an RNG ITC recognition. So $0.05 to $0.11 as a placeholder. And for RNG, that would assume sort of $200 million to $400 million of projects reaching COD in 2023. Then other, the last help I mention, other. $0.17 to $0.20, a lot of things in there. It includes O&M initiatives. It includes regulatory outcomes, including in Utah, some help on the Wexpro side. RNG non-ITC contribution and other. But in that bucket, $0.17 to $0.20, 1/4 of that impact is just the regulatory outcome in Utah. And then some hurts that we have been mentioned, the double outage at Millstone every three years, like clockwork, $0.06. Interest expense, let's just take numbers from the outside looking in. We have a lot of tools at our disposal for hedging and more dynamic management of this. But if you just say, okay, almost 20% of your debt balance is variable. Let's just say, rates year-on-year are up 2 to 3 percentage points, that would be $0.13 to $0.19 of hurt, and then share dilution modest $0.03. Finally, pension we talked about. For most of this year, I've been saying, it's too early to talk about pension. Only one date matters in pension world for us, 12/31. But as we sit here in November, it's coming closer, so we can kind of put it in a box, and there's a headwind. Our assets are down like everybody, our discount rate is up 2.5% or so like everybody. The headwind from that is modest. We're putting it in the high single-digit pennies range, so $0.06 to $0.09. So those are views on one path we have to continue along the 6.5% growth rate through 2023 and formal guidance along with updates on the status of our review will come on the fourth quarter call.

Jim Chapman:

My last chance to talk to you for a while so…

Bob Blue:

Yes, Steve, I think it could be a little bit of all of the above of what you just described. Maybe I'd phrase it a different way is, what investors are telling us they're looking for, what they're looking for is predictability. What they're looking for is earnings quality. They're looking for confidence in long-term growth. And so again, as we go through the review, those are the things that we're going to focus on to try to achieve for investors.

Bob Blue:

Steve, what I would say, maybe it's unorthodox, although I think other companies have announced reviews, maybe it's a little unorthodox. But again, as I talked about before, continuing to do the same thing we've been doing may well just end up in the same results that we've achieved before. And we're going to listen to the market. And we look forward to the opportunity to engage with investors and get their perspectives as we're working our way through this. Again, our goal with this is to land on an outcome that provides predictability and quality, and we want to do it in a very transparent fashion.

Operator:

And our next question comes from Jeremy Tonet from JPMorgan. Your line is open.

Bob Blue:

Hi, Jeremy.

Bob Blue:

Yes. So let me start with the first one, Jeremy, what's off the table versus what's on the table. And the answer to what's off the table is the same as the answer to what's on, which is we've kicked off a review, top to bottom, and again, guided by the principles that we described in our opening comments. And then on the second part of your question, sort of policy initiatives, we described examples of things that we have done in our states over the course of the last few years to help customers, whether it was forgiving arrears, recovering reg costs through base rates, spreading out fuel over multiple periods of time. As we work with policymakers and think through the most logical ways to assure that current customer bills don't get in the way of long-term customer investment, we'll be thinking about those same approaches that we've used in the past and making sure that we achieve constructive regulatory outcomes, which I think we've demonstrated over the course of many years we're very good at achieving here.

Diane Leopold:

Good morning, Jeremy, this is Diane. So the backlog just continues. It's going very well. As Bob brought up, if you do the count, we have 20 projects underway right now, four producing, 11 under construction and five more to be in construction by year-end. And those that are producing are producing as designed, and we're seeing very strong CARB scores out of them. So just how carbon negative they are, just focusing on this ag RNG business in the dairy and the swine side. So we have invested or will have invested $1 billion in this and expected to produce somewhere in the range of about $200 million by 2025. So it's going very well.

Bob Blue:

No. Again, there are a lot of factors at play in our business and you can't identify any one of them. Where as we said, the focus is our share performance and what can we do to make sure we maintain our long-term capital investment programs.

Operator:

Welcome to the Dominion Energy Second Quarter Earnings Conference Call. At this time, each of your line is in a listen-only mode. At the conclusion of today's presentation, we will open the floor for questions. Instructions will be given for the procedure to follow if you like to as question. I would now like to turn the call over to David McFarland, Director of Investor Relations.

Bob Blue:

Thank you, David, and good morning, everyone. We had another solid quarter and are well positioned to meet our expectations for the year. We're steadily executing on the largest decarbonization investment opportunity in the country, as outlined on our fourth quarter call in February. The successful execution of this plan is already benefiting our customers, communities, the environment and our investors. I'll begin with safety on Slide 4. Through June, our OSHA recordable rate was 0.52, which remains low relative to our historical levels and substantially below industry averages. We take pride in our relentless focus on safety, and it is the first of our company's core values. Now, I'll turn to updates around the execution of our growth plan. First, at Dominion Energy Virginia, our regulated offshore wind project development continues to be on schedule and on budget. On Friday, we received approval from the Virginia SEC for our rider and the CPCN for onshore transmission. The commission concluded that the project is in the public interest. And that our request for cost recovery associated with the project met all requirements as called for in the VCEA. We're continuing to review the specifics of the order, but we are extremely disappointed in the commission's requirement of a performance guarantee. While there are scant details, the order states the customer shall be held harmless for any shortfall in energy production below an annual net capacity factor of 42%, as measured on a three-year rolling average. You may recall that 42% is also our projected 30-year lifetime average net capacity factor, meaning, of course, that roughly half the time, it would be above that level and half below. Effectively, such guarantee would require DEV to financially guarantee the weather, among other factors beyond its control, for the life of the project. While no party opposed approval of the project, there were concerns raised regarding affordability and the financial risk to customers given a project of this magnitude. However, the commission's performance guarantee creates an unprecedented layer of financial one-way risk to DEV and is inconsistent with the utility risk profile expected by our investors. There are obviously factors that can affect the output of any generation facility, notwithstanding the reasonable and prudent actions of the operator, including natural disasters, acts of war or terrorism, changes in law or policy, regional transmission constraints or a host of other uncontrollable circumstances. We believe the commission already settled this issue when it declined to adopt a performance guarantee for our Clean Energy 1 solar projects in 2021 after such a provision was proposed by SEC staff. In that case, the commission ordered that involuntary performance guarantees, already unprecedented and regulated utility generation, are not required for projects specifically contemplated within the framework of the VCEA and needed by law to meet the objectives and requirements therein. By applying the commission's own logic, the same outcome should be made here. And all of this is occurring at a time when fuel costs have increased dramatically, leaving renewable energy as one of the few ways to alleviate inflationary pressures on electricity prices. As shown on Slide 5, offshore wind is expected to save Virginia customers billions of dollars in fuel costs. It will also enable economic development opportunities through Hampton Roads and the Commonwealth. This project is a key component to a diverse energy generation strategy to meet the commonwealth's clean energy goals while simultaneously meeting the need for an affordable and reliable grid. For example, it is expected to provide customers over $5 billion in benefits on a net present value as compared to being dependent upon purchasing energy and capacity from the PJM market. In summary, we continue to believe this is an important and beneficial project for our customers. It also has significant stakeholder support. Nevertheless, the performance guarantee as outlined in the commission's order is untenable. We plan to actively engage with stakeholders on the unintended consequences of that provision and are reviewing all public policy options, including reconsideration or an appeal. So more to come here. We'll update you along the way. Turning to other notable clean energy investment updates on Slide 7. Last month, the Virginia SEC approved the settlement agreement for the nuclear subsequent license renewal rider filing. Nuclear life extension represents nearly $4 billion in capital investment through 2035. These Virginia units have performed exceptionally well for years, providing over 30% of our customers' energy needs and providing that energy at a low cost and with zero carbon emissions. Successful nuclear life extension is a win for our customers and the environment. On solar, our next clean energy filing will take place in the third quarter. We expect the filing to include about a dozen solar and energy storage projects. The filing will represent at least $1.5 billion of utility-owned and rider eligible investment, further derisking our growth capital plan provided earlier this year. Let me touch on the solar supply chain. As we've discussed on prior calls, there continue to be challenges. Supply is still tight and prices for certain components are still up. However, our plans remain largely derisked. As it relates to the Department of Commerce's anti-circumvention review, I would remind everyone of the detailed remarks I shared on last quarter's call. We remain focused on the customer impact and advocate for energy policy that provides for an affordable clean energy transition. Development since our last call only reinforced our confidence in our near-term and long-term development expectations. This past quarter, we received commission approval to suspend our Rider RGGI as Virginia works towards its exit from that program. We also received approval that RGGI compliance costs incurred through July 31 and not yet recovered, totaling approximately $180 million, we alternatively recovered through base rates currently in effect. These approvals provide a meaningful benefit to customer bills. Finally, last month, we reached a settlement agreement with the SEC staff on the fuel factor component in DEV's rates. The settlement includes our voluntary mitigation alternative to spread the recovery of the under-recovered fuel balance over a three-year period to reduce the effect on customer bills. If approved, this settlement, together with other recent rate revisions, represents an increase to the typical residential customers' monthly bill by approximately 7%. Turning to Slide 8. We're dedicated to the delivery of safe and reliable energy to our customers, which is also affordable. Based on data from the U.S. Census Bureau, the share of our customers' wallet attributable to DEV's customer bill has declined over the years, a testament to the fact that DEV's rates have remained relatively stable despite an overall increase in household income during that time. Also, as regards to the starting point for relative rates, we're proud to have rates today that remain below the national and various regional averages. Based on EIA data, our rates, even after taking into account our most recent fuel filing, are 8% lower than the national average. Looking ahead, we expect to continue to offer a compelling value proposition to our customers, with the addition of zero fuel resources to support sales growth in our service area. As reflected on Slide 10, the share of our typical customer rate attributable to fuel is expected to decline, reducing our customers' exposure to future fuel cost fluctuations. By 2035, fuel is expected to be less than 10% of the total customer bill as compared to 25% of the total today. Our customers and our policymakers have made it abundantly clear. They want cleaner energy in a way that supports economic growth within our service area, and we're working to deliver those results. Let me now address data centers, which have provided strong sales growth in our service area to date, a trend we certainly expect to continue. Recently, we've been laser-focused on the potential for transmission constraints in a small pocket of Eastern Loudoun County, Virginia that could impact the pace of new connections for data center customers, which are shown on Slide 7. Let me share a few thoughts on

Operator:

[Operator Instructions] And we'll take our first question from Shahriar Pourreza from Guggenheim Partners.

Bob Blue:

Yes, Shar. First of all, I'm shocked that you didn't ask about Millstone that breaks through.

Bob Blue:

Okay. Fair enough. All right. Fair enough. Good. I'm glad you're remaining consistent. But let me address the questions that you asked. It's premature to be talking about that, Shar. We just got this order Friday afternoon. As we said in our prepared remarks, there's very little detail in that order. And as it is drafted, as we look at it, it is inconsistent with the utility risk profile expected by our investors. But it's a great project and it has a lot of stakeholder support. There are options for us to seek reconsideration and options for us to work with stakeholders so that we can get the clarity that we need for this to meet our expectations of what utility investors are looking for. So we're confident that we're going to be able to get that clarity as we work with stakeholders. But we're just 72 hours after the order so there's not a lot more beyond that, that I can tell you this morning.

Bob Blue:

Yes. That will depend obviously on stakeholders and on the commission. So, we'll work through that, I would hope. And over the coming weeks is the kind of time line that we would be looking for, for something like this.

Jim Chapman:

Shar, it's Jim. Let me recap our view on the act, the Inflation Reduction Act, still a moving target, of course. Really good that it passed the Senate. We'll see what other amendments pop up, if any, as it goes to the House this week. But here's where we are on broad strokes. So really high level, pretty good, really positive from a decarbonization incentive perspective, really positive for a utility customer cost perspective, so good. When it comes to all of the impacts to Dominion's financial plan, you touched on a little bit of it, the devil's in the details. It's going to take a long time before all the treasury regs are worked out. I mean it's not even law yet. But right now, based on what we know, we don't really see a major impact to our plan. Now customer beneficial incentive is good, and that could have some knock-on effects that are positive. But we don't see it as being an impact. And let me talk about a little bit the parts, ITC and PTC, the extension, the increases, again, all good. Good for us, good in the sense that it's direct customer bill benefit. We assume that we're going to continue to do what we've already been doing, recognizing those benefits in the customer bill over time. And it's different for different assets. So, nuclear PTC, a big topic of discussion, of course. We view that as positive as well for us, for the nuclear industry, for customers. I think there, it's going to take some real time before the regulations are worked out, to determine how exactly nuclear units within a vertically regulated utility, like most of ours, how they're treated when it comes to earned revenue per megawatt hour. Because there's a phase out, right, $43 a megawatt hour. Above that, you're not eligible. But we'll see. We have low-cost units, should be eligible. How that's calculated for a vertically regulated utility? No detail yet. If we qualify under that cap, it's a benefit to our customers in Virginia and South Carolina, no question. Millstone, obviously, not regulated, hedged, PPA. But as a reminder, under that existing 10-year PPA, all tax attributes, new taxes, like this, for 100% of the plant output, they flow through to the PPA off-takers and their customers. So again, customer-friendly element, even for Millstone, and long term, good for the industry, good for the future of Millstone, whatever happens after that 10-year PPA. For offshore wind, again, sticking with PTC, on the surface, we expect kind of the same thing that we talked about in the BBB era, that if there's a full rate PTC, which the Senate version includes a full rate PTC, that could lower the LCOE for our offshore wind project by up to $7. So pretty good there, too. So all that, the PTCs, ITCs, the extension, the increase, we think it's good in a customer-friendly way, and that can have, as I mentioned, knock-on effects. The AMT, of course, the other part, in my sense for the AMT is it's going to impact companies even in our industry in really different ways depending on whether you're a cash taxpayer right now or not and whether you generate credits or not, ITC PTC. So in our case, we're already a federal cash taxpayer and have been for some years. So, our rates though, our federal cash tax rate is shielded by our inventory of tax credits because we generate a lot of tax credit. So as you know, Shar, the way that works is the 21% top federal rate is shielded by tax credits, but the maximum you can shield is 75% of your cash tax liability. So, that means for us, our current federal cash tax rate is 5.25%. So, 25% of the federal 21% -- 25 -- 25% times 21%. So the IRA, this bill, totally different approach, 15% minimum on adjusted GAAP pretax income. And those adjustments, again, devil's in detail, but you take out pension plans, you take out NDTs, you add in the -- I mean, this is a change from over the week, and you add in accelerated tax depreciation from the tax book into this calculation of GAAP -- adjusted GAAP. But the tax credit, that shield remains. So you can still shield up to 75% of your cash tax liability of credits. So in this case, it'd be -- not the 5.25% of your tax -- pre-taxable income, but it would be 3.75 of adjusted GAAP, so 25% of the 15%. So, a lot of math there. But you can probably guess from that, that taking a view on a go-forward basis, like what is this going to look like? What's the difference between 5.25% of taxable income compared to 3.25 of adjusted GAAP, how does it change over time? It's complicated. But our view based on what we know is probably kind of in the same general area since we're already a cash taxpayer. So that drives us to the conclusion that, look, devil's in the details, we're not seeing a material impact. So details come. We'll see where it lands this week in the house. We would guess that the dust will settle in the next couple of weeks, and we're going to be in a position to talk about the detailed impacts on a more granular basis by the time we're sitting down with you and others at EEI.

Jeremy Tonet:

Maybe I'll pick up with Millstone a little bit here. And there were some reports that Massachusetts might have interest in nuclear power. And just wondering, any thoughts that you could share there? And I guess, does things change with the PPC for Millstone? Just any thoughts on this as it relates to regular -- regulated and non-regulated nuclear in Massachusetts potential interest in Millstone?

Jeremy Tonet:

Got it. That's helpful. And just as it relates to the issues around the data centers with regards to congestion there. Could you provide any more color on what the accelerated T&D investments might look there? And could you provide us a perspective on potential dollar amounts here and what size of the plan this represents? Just trying to see if there's any more detail possible that you could provide on this side?

Operator:

Next question comes from Ross Fowler from UBS.

Ross Fowler:

Can you hear me?

Ross Fowler:

So just a couple of questions. So Jim, you talked about how it's up to $7 a megawatt hour savings in terms of the PTCs, should the House pass this as written, against that $80 to $90 megawatt hour cost for offshore wind or LCOE. That would also lower the cost cap at 125 because it's a 1.4x multiple. I just want to make sure that I'm clear on that.

Ross Fowler:

Got you. Got you. So it gives you more headroom to that cap. All right. And then in the original settlement for offshore winds, there certainly wasn't a performance guarantee. But there was this concept of lower capacity factor of about 37%. And then you'd report to the commission if it was ever lower than that on a three-year rolling average. And then the commission would determine whether that was a deficiency related to basically unreasonable actions by you versus sort of weather and everything else. So it seems like there's space between that and what was very unclearly written in the order as a reconsideration here to make sure we're not necessarily punishing you for the weather and things you can't control. Is that fair? Is that kind of where you see and where we could be headed here?

Operator:

And our next question comes from Julien Dumoulin-Smith from Bank of America.

Diane Leopold:

Good morning, Julien, this is Diane Leopold. I'll at least start and then maybe hand it off to Jim on some of the latter parts of your question. So, related to timing on the data centers. So these were all transmission projects that we had planned long term anyway. We'd seen some of these constraints. We were already designing it. So accelerating it is really moving the capital in our plan up roughly two years so to have the first set of projects in by 2026, the latter part of 2025. So that transmission spend that was maybe more focused '25, '26 and '27 would move into capital that would be '23, '24 and '25. And likewise, the next set of projects, and that's what's going to be filed in the next -- in the coming weeks. The next tranche of relieving the transmission constraint, also moving up in time, but instead of being online by 2026, is 2028. So, you can just kind of move that on out.

Julien Dumoulin-Smith:

Yes, understood. That's why I asked. Excellent. And then just to clarify the last comment. You did a bunch of math, super quick. With respect to the ability, some of the changes over the weekend here on the tax adjustments that you can do for the adjusted GAAP, just to clarify, you can deduct items against AMC with respect to bonus depreciation here, as you described. I think you said that. I just want to make it crystal clear.

Operator:

Our next question comes from Durgesh Chopra from Evercore ISI.

Jim Chapman:

Correct. From the last round of tax reform, that's correct.

Jim Chapman:

Exactly right, Durgesh.

Bob Blue:

We wouldn't expect it to have any effect on the schedule. We're -- again, we'll work quickly -- as quickly as we can with stakeholders. But this, as you know, is a guarantee that affects the -- applies to the operation, not the construction of the facility. So, it won't have an effect on the schedule.

Operator:

Welcome to the Dominion Energy First Quarter Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference call over to David McFarland, Director, Investor Relations.

James Chapman:

Thank you, David, and good morning. Before I begin, I'll remind everyone of the extensive disclosure package and growth capital roll forward we shared on last quarter's call. We're very focused on overall execution of those plans, including extending our track record of delivering results in line with our financial guidance as we did again this quarter. I'll begin with a recap of our compelling investment proposition and again, highlight our focus on the consistent execution of our strategy. We expect to grow our earnings per share by 6.5% per year through at least 2026, based largely on our continued execution of our $37 billion 5-year growth capital program, as shown on Slide 3. As a reminder, over 85% of that capital investment is emissions reduction enabling and over 75% is rider recovery eligible. The resulting approximately 10% total shareholder return proposition is combined with an attractive pure-play state-regulated utility profile and an industry-leading ESG profile. This utility profile is centered around five premier states, as shown on Slide 4. All of these states share the philosophy that a common sense approach to energy policy and regulation puts a priority on safety, reliability, affordability and sustainability, as Bob will touch on in his remarks in just a moment. Turning to Slide 5. We see up to $73 billion of green investment opportunity across our entire footprint through 2035, nearly all of which will qualify for regulated rider recovery. We believe we offer the largest, broadest in scope, longest in duration and most visible regulated decarbonization opportunity among U.S. utilities, which, as you will hear in today's prepared remarks, is continuing to steadily transform into reality. The successful execution of this plan is already benefiting our customers, communities, the environment and our investors. Before handing it to Bob for his business update, I'll discuss our first quarter results and related financial topics. Our first quarter 2022 operating earnings, as shown on Slide 6, were $1.18 per share, which included $0.01 of help from better-than-normal weather in our utility service territories. Weather-normalized results were at the midpoint of our quarterly guidance range, extending to 25 consecutive quarters, our track record of delivering on our financial commitments to our investors. Positive factors as compared to last year include growth from regulated investment across electric and gas utility programs, interest expense and modest margin help. Other factors as compared to the prior year include capacity expense and share dilution. First quarter GAAP earnings were $0.83 per share and reflect a noncash mark-to-market impact of economic hedging activities, unrealized changes in the value of our nuclear decommissioning trust fund and other adjustments. A summary of all adjustments between operating and reported results is as usual, included in Schedule 2 of the earnings release kit. Turning now to guidance on Slide 7. As usual, we are providing a quarterly guidance range, which is designed primarily to account for variations from normal weather. For the second quarter of 2022, we expect operating earnings to be between $0.70 and $0.80 per share. Positive factors as compared to last year are expected to be normal course regulated rider growth, sales growth and a return to normal weather. Other factors as compared to last year are expected to be a millstone planned outage and some tax timing. We are affirming our existing full year and long-term operating earnings and dividend guidance as well, no changes here from prior guidance. Turning to Slide 8. Let me take a minute to recap our O&M management and highlight our strong performance relative to our guidance of keeping O&M flat normalized for riders. Since our 2019 Investor Day, when we spent some time describing our flat normalized O&M target, we created a material value for our customers and shareholders by removing about $250 million in costs, a reduction over 8% during that 4-year period, something we view as quite an accomplishment. Looking forward, we're focused on keeping normalized O&M flat by driving down costs through improved processes, innovative use of technology and other best practices or cost-cutting initiatives. It's a dynamic process. We very intentionally go through each of our segments, each of our assets, each of our locations to find opportunities to lean into technology to improve business processes and to improve in areas like smart buying across our platform. Finally, consistent with our current guidance, we expect to achieve flat normalized O&M through 2026, no changes here also from prior communications. Next, I'll touch on inflation, one of the more prevalent themes for this earnings season, it seems. While we don't have a crystal ball on where inflation rates are heading, how high and for how long, let me share some color on the way we think about the impact of inflation on our business. As I mentioned, a substantial portion of our existing rate base and over 75% of our growth capital is rider eligible which allows for timely annual true-ups, including recovery of any changes to cost and interest rates without the need to wait for less frequent base rate proceedings. So how about inflationary impacts on our largest single rider project, regulated offshore wind? As discussed on our fourth quarter call, that project has been largely derisked from inflationary impacts at this point. Our five major fixed cost agreements collectively represent about $7 billion of the total -- budget. Within those contracts, only about $800 million remains subject to steel and metals commodity indexing, and this component of the budget already reflects commodity cost increases observed in 2021, leading up to our filing date. So what about interest rates? Inflation is, of course, generally accompanied by a rise in rates. And we reflect market expectations, so increases in our planning process and in guidance. We, of course, don't just model flat rates. About 80% of our balance sheet is fixed rate and is long in duration, over 13 years in average tenure. Looking ahead the future issuances of long-term debt, we manage that interest rate exposure through a variety of hedging and treasury activities including throughout currently about $10 billion notional of pre-issuance interest rate hedges, which will help us keep future costs low. So what does that mean? That portfolio allows us to lock in treasury rates for issuances between now and 2026 at rates as low as almost 1%. This year, we've already issued $1 billion of long-term debt at Dominion Energy Virginia at a weighted average cost of 2.6%, consistent with our 2022 financing plan guidance. As it relates to additional fixed income issuances remaining for the year, we will continue to monitor market conditions and look for opportunities to further derisk our plan and create shareholder value. Finally, a reminder that economic growth, inflation and higher interest rates are all part of the mix when it comes to determining authorized ROEs across our utility businesses in our periodic rate proceedings. So in summary, the current inflation environment is, of course, dynamic, and we are monitoring it closely. At present, however, due in part of the factors I've just described, we're not currently forecasting a material earnings impact associated with inflation. I would also note the impact that the current inflation environment can have on our customer bill. We, of course, prioritize customer affordability and implement various mitigation strategies as Bob will discuss in a moment. And with that, I'll turn the call over to Bob.

Operator:

[Operator Instructions]. Our first question will come from Shahriar Pourreza with Guggenheim Partners.

Robert Blue:

Yes. So Shar, you're right. The back and forth was expected. It's a regulatory proceeding. There's always a bit ask there. What I would say though is if you look at our rebuttal testimony and we were of this view when we filed the case, but I feel even stronger as now all the testimony is in, we have a very strong case on offshore wind. The legislation, the Virginia Clean Economy Act lays out the parameters for spending that is presumed prudent and we've clearly met all of those. And we showed in our rebuttal testimony under a variety of scenarios that this project is customer beneficial, particularly when you think about the updated PJM load forecast, which shows increased sales in Virginia. So this project will help us meet that need. It will provide incredible economic benefits for the state. It is strongly supported, and we feel very comfortable with where we are on this as you recognize fully regulated offshore wind project. On pricing. Yes, as you point out, there are portions of our contracts that have some indexes. They sort of move around but we contracted late last year, as you know, on these projects. And as we said in our prepared remarks, there's no change or update to budget or schedule on offshore wind. So we're still in what we believe was a very strong position we were in when we filed the case.

Robert Blue:

We're a state-regulated pure-play utility, and we're interested in state-regulated projects like the one that we're doing in Virginia. That's our interest in offshore wind.

Robert Blue:

Yes, Shar. I appreciate the fact that you -- every time we get a chance to see, you ask us about this. So that's good and I admire your consistency. And we'll give the same answer and try to be consistent as well, which is we like the assets that we have to deliver on the performance that we've laid out. We're very focused on execution. I will note specifically with Millstone, as we've been saying for some time, there's -- we think Millstone is critical to Connecticut and the region achieving its decarbonization goals. And the Connecticut legislature just overwhelmingly passed a bill proposed by Governor Lamont [ph] for -- based on his executive order for zero carbon by 2040. And as you'll recall last year, the deep -- the Department of Energy and the Environment in Connecticut did a study on meeting that 2040 goal when it was executive order and showed that cases that keep Millstone in are hugely customer beneficial. So we think that Millstone is a really solid asset that has operated very well. But overall, we like the asset mix that we've got to achieve the goals that we've set out.

Robert Blue:

Absolutely. Wouldn't expect anything less from you.

Steven Fleishman:

Just the offshore wind -- just on the offshore wind, the -- should we assume this -- litigated outcome in August? Or is there any chance to settle with the parties?

Steven Fleishman:

Okay. And just going to the -- that was a very helpful update on the solar project situation for the company. Just on -- do you think when you get a preliminary decision in August, either way, would that be enough information likely to be able to kind of move forward with project decisions just because kind of likely be the rough range of outcome?

Steven Fleishman:

Okay. And I'm also just curious how the C&I, the data center, those types of customers are? As you mentioned, a lot of them have ESG-type requirements and the like. Like do they seem to kind of get -- if it is a little more expensive, it just is like in terms of flexibility on that? Obviously, gas price is a lot higher, too, since this all started.

Steven Fleishman:

Okay. I'll leave it there.

Durgesh Chopra:

I want to second Steve's comment there on the crisp solar disclosures. I have two questions, both on that solar front. Bob, you mentioned narrowing the scope of the investigation last week. Maybe just elaborate on that as to sort of why do you think that's a positive update? And how does that impact you and others in the industry?

Durgesh Chopra:

Got it. I guess it sounds like they narrowed the scope and it seems like you feel like the items to be debated are somewhat less. Is that like...

Durgesh Chopra:

Got it. Okay. Understood. And then just the 2023 1-plus gigawatt sort of plan, 60% secured. How are you getting to that 60% secured? Is that because it is sort of -- the procurement there is from domestic entities? Or -- because we're hearing from some of your peers that there's a tremendous amount of tightening in the market on store panels. And given the tariff uncertainty, it's kind of hard to procure. So I'm just kind of curious as to how you get to that 60%? How do you get comfortable with that 60% number in 2023?

Durgesh Chopra:

Okay. That's very helpful color. I appreciate that.

Jeremy Tonet:

Just want to keep going with the solar a little bit here. And I know you guys provide a lot of great details, so thank you for that. But just picking up, I guess, in your conversations with key stakeholders here, especially the commission. Since the start of the DOC investigation just wondering if you could provide a bit more color on how that's going? And do you anticipate the next clean energy filing in 2022? Or are those following in 2023 to differ from the latest clean energy filing? And really, how is the commission viewing the higher solar costs relative to other means of generation at this point?

Jeremy Tonet:

Got it. That's very helpful there. And then just pivoting here towards the hope gas. Just want to see if there's any updates that you could provide us there in the process or any expectations, if anything's changed or just on track at this point?

Jeremy Tonet:

Got it. That's very helpful. I'll leave it there.

Paul Zimbardo:

I definitely can pass on the solar question. Thanks for the details there. On your commentary about O&M, I was curious, what does the pension performance been year-to-date? And are you thinking there could be a benefit or a headwind for '23 when you factor in the asset performance and also changes to the discount rate?

Paul Zimbardo:

Okay. Great. And then a bigger picture, longer-term question, if I could? I noticed there's a fair amount of storm damage in the quarter and also last year as well. Are there any kind of initiatives, whether capital or O&M that you can take to kind of preemptively mitigate some of this like more strategic undergrounding or other avenues such as that?

Operator:

Thank you, ladies and gentlemen. This concludes today's event. Thank you for joining us. You may now disconnect.

Operator:

Welcome to the Dominion Energy Fourth Quarter and Full Year 2021 Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to David McFarland, Director, Investor Relations.

Robert Blue:

Thank you, David, and good morning, everyone. I'll start by outlining Dominion Energy's compelling shareholder return proposition. We expect to grow our earnings per share by 6.5% per year through at least 2026, supported by our updated $37 billion 5-year growth capital program, resulting in an approximately 10% total return. That's all underpinned by Dominion's industry-leading ESG profile, which includes the largest regulated decarbonization investment opportunity in the country, which, as you will hear in today's prepared remarks, is steadily transforming from opportunity to reality. Our strategy is anchored on a pure-play, state-regulated utility operating profile that centers around 5 premier states, as shown on Slide 4. I'll share the philosophy that a common sense approach to energy policy and regulation puts a priority on safety, reliability, affordability and sustainability. Next, I want to highlight what a successful year 2021 was in the continuing execution of our strategy. For example, we continue to provide safe, reliable service to our customers, ensuring that safety remains our top priority when it comes to our employees, our customers and our communities. We reported our 24th consecutive quarterly financial result that, normalized for weather, meets or exceeds the midpoint of our guidance range, a reflection of our focus on continuing to provide consistent and predictable financial results. We successfully concluded substantial rate cases in Virginia, South Carolina and North Carolina in each case demonstrating our ability to deliver constructive regulatory results for both our customers and our shareholders in these fast-growing, premier and business-friendly states. And we significantly advanced our clean energy growth plans on a number of fronts. For instance, we received our notice of intent from BOEM for our regulated offshore wind project in July as planned and filed our rider application with the Virginia State Corporation Commission on schedule in November. And we proposed new solar and energy storage projects in our second annual clean energy filing in Virginia, the largest such group ever proposed. Looking ahead, we've rolled forward our 5-year growth capital plan to capture the years 2022 through 2026. We now expect to invest $37 billion on behalf of our customers. The investment programs are highlighted on Slide 5, with over 85% focused on decarbonization. As meaningful as these near-term plans are, consider on Slide 6 how they compare to the long-term scope and duration of our overall decarbonization opportunity. Our initiatives extend well beyond our 5-year plan. We now project $73 billion of green investment opportunity through 2035, nearly all of which will qualify for regulated cost of service recovery. This is, as far as we can tell, the largest regulated decarbonization investment opportunity in the industry. With that, I'll turn it over to Jim to walk through our financial results and guidance before I provide further business updates on the execution of our plan.

Robert Blue:

Thanks, Jim. Starting with safety, Dominion Energy finished 2021 with its second-best performance ever. Additionally, the company was the top performer in the 2021 Southeastern Electric Exchange ranking. We take pride in our relentless focus on safety, and it's the first of our company's core values. While our safety performance relative to industry is very good, our goal has been and continues to be that none of our colleagues get hurt ever. Our customers' highest priority is reliability. They expect their power will come on when they need it, period. In the past year, our customers in our electric service areas in Virginia, South Carolina and North Carolina had power 99.9% of the time, excluding major storms. When major storms approach, we stage equipment and people to be ready so crews can swing into action as soon as it is safe to do so. As we did for the first winter storm of 2022 that dumped wet, heavy snow on most of the northern, central and western regions of Virginia, interrupting service to over 400,000 customers. Over 87% of those customers had service restored after 2 days of restoration and 96% within 4 days. Our crews worked around the clock in frigid temperatures and treacherous icy travel conditions to safely restore service to our communities. Our gas distribution business knows that safe and reliable service is the priority, especially when exigent circumstances exist. When an emergency notification is received, we typically have a crew on site twice as quickly as the industry expected response time. Last month, we had the highest-ever flow of gas at our Utah system and the highest-ever daily throughput across our Ohio system, higher even than the polar vortex of 2019. And in both cases, our service never missed a beat, and our customers would never have known we were setting all-time records. I'm proud, though not surprised, at the way in which our Dominion Energy team members have responded on behalf of our customers. Now I'll turn to updates around the execution of our growth plan. In Virginia, the SEC approved the comprehensive settlement agreement for our first triennial review in November. We're very pleased to be extending our track record of constructive regulatory outcomes. On top of that, we are incredibly excited about what Dominion Energy is working to accomplish, specifically our green capital investment programs on behalf of our customers in Virginia, which I will touch on in a few minutes, nearly all of which will grow earnings under regulated rider mechanisms. Since the Virginia rider investment programs are reviewed and trued up annually, they are not included in the Virginia triennial review process. Based on these trends, the Virginia base investment balance as a percentage of total Dominion Energy declines to about 13% by 2026 and is expected to continue to decline as a percentage in the future. Turning to offshore wind. The country's only fully regulated offshore wind project is very much on track. As it relates to the SEC rider application, we're currently in the discovery phase. And to date, this process very much conforms with what we typically expect during a rider proceeding of this type. Major project milestones are listed on Slide 15. We expect to receive a final order from the SEC in August this year. A few items to reiterate here. First, this project will provide a boost to Virginia's growing green economy by creating hundreds of jobs, hundreds of millions of dollars of economic output and millions of dollars of tax revenue for the state and localities. It will also propel Virginia closer to achieving its goal to become a major hub for the burgeoning offshore wind value chain up and down the country's East Coast. Second, unlike any other such project in North America, this investment is 100% regulated and eligible for rider recovery in Virginia. Finally, the VCEA provides very specific requirements on the presumption of prudency for investment in the project, which we are confident that we have already met. Our Jones Act-compliant wind turbine installation vessel is being constructed and is on track for delivery in late 2023 as originally scheduled. The project is currently about 43% complete. We expect the vessel will be in a central resource to DEV as well as to the overall domestic offshore wind industry, and we'll be entering service with plenty of time to support the 2024 turbine installation season. Our other clean energy filings in Virginia are also progressing well. Last month, we were very pleased to see the SEC approved Phase 2 of our grid transformation plan for projects that we plan to deploy in 2022 and 2023. These projects will facilitate the expected increase in distributed energy resources like small-scale solar and expand electric vehicle infrastructure as well as enhance grid resiliency and security. Our clean energy and nuclear rider filings remain on track. Final orders are expected later this year as outlined on Page 18. Through 2020, we have successfully reduced our enterprise-wide CO2 equivalent emissions by 42%. That's great progress, but it's not enough. By 2035, we expect to improve that reduction to between 70% and 80% versus baseline on our way to meet net zero by 2050. As shown on the right side of Slide 19, the transition to a clean energy future means reduced reliance on coal-fired generation. Back in 2005, more than half of our company's power production was from coal-fired generation. By 2035, we project that to be less than 1%. We show our time line for transitioning out of coal on Slide 20. By the end of the decade, as part of our ongoing resource planning, we expect to be coal-free in South Carolina and have only 2 remaining facilities at Dominion Energy Virginia for reliability and energy security considerations. While our IRPs are informational filings and do not provide approval or disapproval for any specific capital project, we look forward to continuing to work with stakeholders, including the commission, to drive towards an increasingly low-carbon future. From an investment base perspective, which is a rough approximation of earnings contribution, you can see on Slide 21 the diminished role coal-fired generation plays in our financial performance, driven by facility retirements and non-coal investment. We're mindful that this shift has the potential to be disruptive to employees and communities, and we are being purposeful in our efforts to ameliorate any such negative consequences. We believe in a just transition. We have and will continue to consider the needs of impacted communities and our entire workforce during this clean energy transition. You'll also note that zero carbon generation grows significantly, such that by 2026, over 65% of our investment base will consist of electric wires and zero carbon generation. Moving on to South Carolina. As part of our ongoing resource planning, Dominion Energy South Carolina is planning to replace several of our older generation peaking turbines with modern, more efficient units. These peaking units, which often operate seasonally during certain times of day when the demand for energy is at its highest, play an important role in our generation fleet with their ability to go from idle to producing energy quickly. Modernizing this equipment will lower fuel cost to customers, improve environmental performance and provide reliability and efficiency benefits. These will become even more important as additional intermittent fluctuating resources such as solar are added to our system. Last quarter, the Public Service Commission of South Carolina approved a settlement allowing the company to move forward with 2 of the proposed sites, and we'll hold an RFP for a third. Turning to gas distribution. In North Carolina, the commission approved a comprehensive settlement last month for our gas operations with rates based on a 9.6% ROE. As a reminder, the agreement included 3 new clean energy programs, a new hydrogen blending pilot, a new option to allow our customers to purchase RNG attributes and a new and expanded energy efficiency programs. This is a prime example of the role that supportive regulation can play in meeting our decarbonization objectives. Let me now address this morning's announcement regarding the sale of our West Virginia natural gas utility to Ullico. Hope Gas is a valuable business with tremendous people. At the same time, compared to the other larger state-regulated utilities across our 5 premier states, Hope Gas is relatively a small stand-alone operation. Our talented employees have consistently delivered safe, reliable and affordable energy to Hope's customers. We're pleased that these best-in-class employees are now joining another excellent organization in the form of Ullico, who has agreed to provide significant protections for employees and honor existing union commitments. Ullico's operating expertise and financial resources will also ensure that Hope's customers will continue to receive the high level of service to which they have grown accustomed. Slide 24 provides a summary of several important steps we took in 2021 that enhanced our industry-leading ESG profile. Just a couple of items I'll highlight here. In July, we published our updated climate report, which included disclosure of Scope 1, 2 and 3 emissions, an important step as it relates to our net zero commitment as I will expand on in a minute. In November, we issued our inaugural Diversity, Equity and Inclusion report, which highlights our progress towards building a more diverse and inclusive workforce. As part of that report, we also published our EEO-1 data. This enhanced external reporting builds upon our commitment to increase our total workforce diversity by 1% each year, with a goal of reaching at least 40% by year-end 2026. We're very much on track to meet that goal. These and other ESG-oriented efforts have been recognized by leading third-party assessment services, as shown on Slide 25. By each measure, our performance exceeds the sector average. We've been recognized as part of the leadership band by CDP for our climate and water disclosure for the second year in a row. As trendsetters, the highest categorization for the fourth consecutive year by the CPA-Zicklin report on political accountability and transparency. And most recently, MSCI increased our rating from A to AA, which designates us a leader in the field. Turning to Slide 26. I'm pleased to announce an expansion of our net zero commitments. In addition to our current commitment to achieve enterprise-wide net zero Scope 1 carbon and methane emissions by 2050, we now aim to achieve net zero by 2050 for all Scope 2 emissions and for Scope 3 emissions associated with 3 major sources

Jeremy Tonet:

Just wanted to start off here. If you could walk us from the prior planned CapEx to today's and the impact on targeted equity included the expected LDC sale proceeds. Just wondering, are there any other non-core assets in the portfolio you might look to sell an asset such as Millstone for equity source?

James Chapman:

Yes, Jeremy. As I mentioned in prepared remarks, we provided a lot of detail on our growth plans and capital spending in the appendix, so wouldn't expect anyone to digest all that yet. But I would draw attention to Page 34, which is a bridge from our prior 5-year capital growth plan to the new one, $32 billion to $37 billion. And let me just quickly tick through some of the changes. The most material single change is simply moving from one 5-year period to the next, drop 2021, check that box, add 2026. And just in doing that, you're also incidentally including the full time frame for offshore wind spend. Then if you look at budget changes for some of our capital programs, for example, the budget we discussed in November on offshore wind is actually fully neutralized in our 5-year capital spend plan by postponement for further evaluation, as we talked about in November, of our pump storage project and our Virginia CTs, which are further out in time outside the 5-year period. So that nets to zero. And then you'll see some other drivers there. Just true up some of our capital spending across gas distribution, R&D and all of our other decarbonization investment programs, so that's what bridges the prior plan to new. And then, Jeremy, you asked a lot of subparts to that question. You also asked about equity, so let me say a few things about that. We -- I observed that we're one of few companies that actually give detailed guidance on equity issuance, so I'm happy it's noticed. There's no change in our equity guidance for '22. There's some very modest tweaks, $100 million in some years, $200 million in others thereafter, keeping in mind that spending is up. So equity is up. Cash flow is up. Debt's up a little bit. So how could that change? If spending in our 5-year plan as we move forward goes up, which would be good, these equity amounts could trend up slightly as well. Conversely, if it goes down, which we don't expect, they go down a little bit. But we think this level of constant equity through our existing programs. As I mentioned, 1% to 1.5% of our current market cap is -- it's accretive, it's modest and it's appropriate to keep us in the right spot from a credit rating metric perspective.

Robert Blue:

Yes. Let me start and then I'll turn it over to Diane to talk a little bit more specifically about RNG. As we described in our opening remarks, Jeremy, Scope 2 and 3 emissions reductions by 2050 are going to require technology and supportive regulatory environment. So a lot of this that we would be thinking about are sort of longer term. It's hard for us to put as much definition around it as we can, the Virginia -- particularly Virginia-regulated rider investments and some of the others that you're seeing in that 15-year chart. Obviously, nothing in the 5-year plan when we think would move the needle there. But lots of opportunities, we believe, and we think it's important. That's what our customers are looking for us to do. It's what our shareholders are looking for us to do. So we'll have opportunities to flesh that out. There's -- as we mentioned, we've already got a fair amount going, and a big chunk of that right now is our investment in RNG. And I'll ask Diane to talk a little bit more detail about that.

Operator:

Our next question comes from Steve Fleishman with Wolfe Research.

Robert Blue:

Yes, Steve. So things have been going well with the new administration and the general assembly. Obviously, the session in Virginia is less than -- a little less than halfway over, but Virginia session moves pretty quickly. It's really -- energy just has not been a big focus. As we discussed, I think, on the last call, that campaign was focused on education and taxes, and that's what the general assembly has been focused on, not surprisingly. And so energy has not been a huge part of the equation. So we'll -- obviously, you make predictions about the legislative process at your peril, but we're participating and finding that we continue to work well with both Republicans and Democrats as we have for quite a long time. As regards offshore wind, there continues to be very strong support for offshore wind as we discussed, on -- in our opening remarks. There is a great opportunity for Virginia with respect to new jobs and new industry. And our project is recognized as one that can bring a lot of benefits to the state. So still seeing great support for offshore wind.

Robert Blue:

Yes. In fact, Diane and I met with the executives at Prysmian and DEME, who are handling, we talked about these large packages there that transport and install. So they're doing the cable and installing the monopods. We just met with them earlier this week, and things are very much on track with them. So our -- and as regards our own vessel, the installation vessel, the steel for that, for example, has been on site for quite some time. So I think the premise where you started the question saying that the pressures that you may have heard about were factored into our -- contracting is exactly right. We entered into these contracts late last year with counter-parties who are very experienced. Every single one of them is very experienced in this industry. So we still feel very good about that project both in terms of schedule and budget.

Robert Blue:

We feel very good about the value of our remaining LDCs as we have for some time. As I mentioned, this was a decision that we made related to scale. As it pertains to our LDC businesses, they are growing there in what we describe as premium states, very pro-business states, strong customer bases, very supportive of natural gas and with customers who want natural gas for cooking and heating their homes. So this was not, from our perspective, a reflection on our thinking about the LDC business going forward. And that being said, we had a lot of interest, obviously, in this process, and we feel very good about the price and equally important about the quality of the counter-party. So I think it was a good outcome and one that we think will be very well received. But we expect to continue operating our LDC as well.

Ross Fowler:

Hope you and the team are well. So I just wanted to walk through Slide 11 one more time and make sure I understand very clearly what you said. So we know that CapEx is up plan to plan basically as you're adding '26 and taking '21 away. And what you're saying is there's no change here to '22 equity, a small increase to equity in '23 forward and that the Hope proceeds are really going to be used to repay debt, and that capacity turns around to be available for regulated CapEx. Did I frame that correctly? Is that what I heard you say on the call?

Ross Fowler:

That's perfect, Bob. And then on your comments on solar on the call, so you noted that costs are up and prices are tight here, but then you've done a lot of '22 procurement already so that stuff is on track. And on '23, you're on track, but you're watching it. How much of '23 have you already procured? And how much is maybe still out there that may be a swing factor for maybe pushing projects to '24?

Operator:

Our next question comes from Durgesh Chopra with Evercore ISI.

James Chapman:

Yes, Durgesh. That $800 million is part of the $7 billion locked across those 5 project components that we announced in November. The remaining amounts, as you'll recall, is the onshore transmission and contingency.

James Chapman:

Yes, Durgesh, we're happy to connect. We have, as I mentioned, a lot of detailed backup in the appendix. But what you mentioned there is just a timing issue from the starting point. There's not a material change to the programs or the overall pace. That's just timing quarter-to-quarter.

James Chapman:

Thank you.

Operator:

Welcome to Dominion Energy Third Quarter 2021 earnings conference call. At this time, each of your lines is in a listen-only mode. At the conclusion of today's presentation we will open the floor for questions. Instructions will be given for the procedure to follow if you would like to ask a question. I would now turn the call over to David McFarlane, Director Investor Relations.

Jim Chapman:

Thank you, David. Good morning, everybody. Let me begin with a recap of our compelling investment proposition and highlight our focus on the consistent execution of our strategy. We expect to grow our earnings per share by 6.5% per year through at least 2025. Growth that is driven by our $32 billion 5-year growth capital plan.

Jim Chapman:

February. Thanks to this regulatory structure. In our electric service territories, we also have longstanding risk mitigation strategies including hedging and storage with most fuel costs trued up to customer bills on a delayed basis a structure which helped to smooth out the bill impact of commodity swings. In summary, we certainly don't want to see any increased costs for any of our electric and gas customers. So we will continue to employ these mitigation measures to keep any increases as muted as possible, for the avoidance of doubt, we currently don't see any impact on our -- to our decarbonization focused growth capital investment plan. And wrapping up, we plan to use our Fourth Quarter call early next year to provide a comprehensive update and roll-forward of capital investment, financial outlook, and related disclosures akin to the format of our last Fourth Quarter earnings call which we believe was well received. Investors should expect further evidence in support of several fundamental Dominion Energy themes compelling an earnings and dividend growth, combined with the largest regulated de - carbonization opportunity in the industry, and unyielding focus on extending our track record of successful project, regulatory, and financial performance. With that, I'll turn the call over to Bob.

Operator:

Thank you sir. At this time, we'll open the floor for questions. [Operator Instructions] [Operator Instructions]. Thank you. Our first question will come from Shar Pourreza with Guggenheim Partners.

Shar Pourreza :

Bob or Jim, you got the settlement which as you mentioned in the prepared remarks, does de -risk even the second triennial review. I guess, I just want to touch a little bit on the level of confidence in your plan now. How does that tie-in to the 6.5% EPS growth target that's been out there? And could we see some changes around the capital program as a result of the settlement, maybe when you report year-end results?

Shar Pourreza:

Got it. And then just lastly on coastal wind, it's a huge day to dump so I appreciate that incremental color you provided. The $87 LCOE capital costs are higher, so obviously you're seeing some cost pressures despite being below the projections and still within the range, right. I think the initial cost correct me if I'm wrong, was $8 billion. Can you touch on the customer bill impact here as costs are higher just isolating this project and it seems that the input cost pressures are widespread. So how do you think about mitigating factors assuming these cost headwinds have some persistency?

Shar Pourreza :

Okay, great. Terrific. I think that sort of touches us on it. See you in a few days. Bye guys.

David Peters:

Thank you. Our next question comes from David Peters with Wolfe Research. Hey, good morning, guys.

David Peters:

First question I have is just on the recent election outcomes in Virginia. Obviously a lot of focus there nationally and given that you now have a Republican Governor and I think the General Assembly flipped too, wondering if you could maybe just provide some perspective on what you think may or may not change going forward, particularly with respect to energy policy in the state?

David Peters:

Great. Second question is switching gears a little bit just on what's being proposed in Washington with this potential reconciliation bill. Wondering Jim, maybe if you could comment on how meaningful something like a direct day option would be for potentially loosening or lessening future equity needs given the many renewable projects that you guys have here at Omnicom.

David Peters:

Appreciate that detail. Thank you, guys.

Operator:

Our next question comes from Paul Zimbardo with Bank of America.

Jim Chapman:

Morning Paul.

Paul Zimbardo:

[Indiscernible] method of update overall because I want to follow-up on Shar 's offshore then question. How should we think about the earnings potential and of the credit consideration from the $2 billion increase in the estimated cost?

Paul Zimbardo:

Okay, that's clear, looking forward for that update. And then I know you commented on the pipe and prepare market but you could elaborate a little bit on the confidence in the transaction closing, given some of the uncertainties you mentioned and confirming the counter party could not proactively pay the termination to the exit and gigs?

Paul Zimbardo:

Okay. Thank you. Very clear. Looking forward to EEI.

Jim Chapman:

Thank you.

Jeremy Tonet:

Hi, good morning.

Jeremy Tonet:

Just want to follow up with offshore wind a little bit more here, if I could. Just want to see, how do you see customer bill impacts through the completion of this initial offshore wind phase? And just thinking, what would be the bill impact under the 80 LCOE scenario? I think you might have touched on there with tax credits.

Jeremy Tonet:

Got it. Thanks to that. And then just understanding there's a cross focus with the offshore wind here. Could you outline how the economic benefits in supplier agreements you outline have evolved since this project was first announced?

Jeremy Tonet:

Got it. Maybe just one last quick one if I could? Could you speak a bit more to the R&D in hydrogen pilots, how they progressed over the past quarter?

Jeremy Tonet:

Got it.That's very helpful on high vision project side.Thank you so much.

Operator:

Welcome to the Dominion Energy Second Quarter 2021 Earnings Conference Call At this time, your line is in a listen-only mode. At the conclusion of today’s presentation, we will open the floor for questions. Instructions will be given for the procedure to follow if you would like to ask a question. I would now like to turn the call over to Steven Ridge, Vice President, Investor Relations.

Jim Chapman:

Thank you, Steven, and good morning, everyone. I know there's some competition for utility investor’s attention this morning, a couple of competing calls in this time slot. So thank you for joining our call and we promise to keep our call today somewhat brief. Before I report on our strong quarterly financial results, I'm going to start with a recap of our compelling investment proposition and highlight our focus on the consistent execution of our repositioned strategy. We expect to grow our earnings per share 6.5% per year through at least 2025, supported by a $32 billion five-year growth capital plan. As outlined on our fourth quarter call in February, over 80% of that capital investment is emissions reduction enabling and over 70% is rider recovery eligible. We offer a nearly 3.5% yield and expect dividends per share to grow 6% per year based on a target payout ratio of 65%. Taken together, Dominion Energy offers an approximately 10% total return, premised on a pure-play state-regulated utility profile, operating in premier regions of the country. More on that lasting in a minute. Our industry-leading ESG positioning includes the largest regulated decarbonization investment opportunity in the nation, which as you'll hear in today's prepared remarks, is steadily transforming from opportunity to reality. Turning now to earnings. Our second quarter 2021 operating earnings, as shown on Slide 4, were $0.76 per share, which included a one pending hurt from worse than normal weather in our utility service territories. Both actual results and weather normalized results of $0.77 were above the midpoint of our quarterly guidance range. So this is our 22nd consecutive quarter, so 5.5 years now of delivering weather normal quarterly results that meet or exceed the midpoint of our quarterly guidance range. Note that our second quarter and year-to-date GAAP and operating earnings, together with comparative periods, are adjusted to account for discontinued operations, including those associated with our gas transmission and storage assets. Second quarter GAAP earnings were $0.33 per share and reflect the mark-to-market impact of economic hedging activities, unrealized changes in the value of our nuclear decommissioning trust funds, the contribution from Questar pipeline, which will continue to be accounted for as discontinued operations until divested and other adjustments. A summary of all adjustments between operating and reported results is as usual, included in Schedule 2 of our Earnings Release Kit. Turning now to guidance on Slide 5. As usual, we're providing a quarterly guidance range, which is designed primarily to account for variations from normal weather. For the third quarter of 2021, we expect operating earnings to be between $0.95 and $1.10 per share. We are affirming our existing full year and long-term operating earnings and dividend growth guidance as well. No changes here from prior communications. Through the first half of the year, weather normal operating EPS of $1.86 represents approximately half of our full year guidance midpoint. So we are tracking nicely in line with our expectations. We'll provide our formal fourth quarter earnings guidance, as is typical, on our next earnings call, but let me provide some commentary on the implied cadence of our earnings over the second half of the year. While Q3 guidance is roughly in line with weather normal results from a year ago, we will see a multitude of small year-over-year helps in Q4, such as normal course regulated rider growth, the impact of the South Carolina electric rate settlement, strengthening sales, modest margin help including from Millstone, continued expense management and tax timing that combined will help us to deliver solid second half results. We continue to be very focused on extending our track record of achieving weather normal results, at least equal to the midpoint of our guidance on both a quarterly and annual basis. Turning now to a couple of macro items. First, overall electric sales trends. In Virginia, weather-normalized sales increased 1.2% year-over-year in the second quarter and 3.2% in South Carolina. In both states, increased usage from commercial and industrial segments overcame declines among residential users as the stay-at-home impact of COVID waned, some context on that. You'll recall that demand in DOM Zone last year was, despite the pandemic, pretty resilient due to robust residential and data center demand. So it's not surprising to see South Carolina's relatively higher growth in Q2, given the larger toll COVID had on sales there last year. We're encouraged by the strong return of commercial and industrial volumes in South Carolina in the second quarter. And looking ahead, we expect electric sales growth in our Virginia and South Carolina service territories to continue to a run rate of 1% to 1.5% per year, so similar to what we were observing pre-pandemic. Next, let me discuss what we're seeing around input prices. As discussed on last quarter's call, we're continuing to monitor raw material costs. And it seems to be the case across a number of industries right now, we're observing higher prices, although we have seen a moderation in the upward pressure over the last few months, especially in steel. Despite these cost pressures, as it relates to offshore wind, in particular, we remain confident in our ability to deliver that project, in line with our previously guided levelized cost of energy range of $80 to $90 per megawatt-hour. On the solar side, we're seeing again what others seemed to be seeing supply is tight and prices for steel, poly, and glass are up, but our 2021 projects remain on track with most material now already on site. We're beginning to see moderation in pricing and relief from modest shipping constraints, which bodes well we expect for our post-2021 projects. So, again, we're watching, but no material financial impacts at this time. Let me address a few additional topics on Slide 6. First, Questar Pipeline. Last month, Dominion Energy and Berkshire Hathaway Energy mutually agreed to terminate our planned sale of Questar Pipeline as a result of ongoing uncertainty associated with the timing and the likelihood of ultimately achieving Hart-Scott renewal clearance. A few thoughts here. First, that we obviously felt that a timely clearance and closing was the logical outcome given the facts and circumstances surrounding that transaction. We did build into the original Berkshire sale contract the flexibility to easily accommodate a termination if needed. Second, we are already at a reasonably advanced stage of an alternate competitive sale process for Questar Pipeline with expected closing by the end of this year. Third, its termination has no impact on the sale of the gas transmission storage assets to Berkshire which we successfully completed back in November of last year and which represented approximately 80% of the originally announced transaction value. And finally, this termination nor the outcome of the ongoing sale process impacts Dominion Energy's existing financial guidance. As mentioned, Questar Pipeline will continue to be accounted for as discontinued operations excluded from the company's calculation of operating earnings. Briefly, on credit, we've continued to deliberately enhance our qualitative and quantitative credit measures. Last month we were pleased to see Fitch upgrade Dominion Energy South Carolina's credit rating from BBB+ to A-. Fitch cited both improved regulatory relationships including the unanimous approval of the General Electric rate settlement, which Bob will discuss in some more detail as well as good balance sheet management. So, let me turn now to a couple of ESG-related topics. In June, we announced the successful syndication of sustainability-linked credit facilities totaling $6.9 billion and we very much appreciate the efforts and support of all the banks who work with us on what we view as a very interesting new type of financing. The $6 billion master credit facility links pricing to achievement of annual renewable electric generation and diversity and inclusion milestones. And the $900 million supplemental facility presents a first-of-its-kind structure where pricing benefits accrue for draws related to qualified environmental and social spending programs. So in other words, going forward, if we meet or exceed our quantifiable goals in these areas, our borrowing costs decline. And of course, the opposite is also true. If we fail to meet our goals, we pay more. But for this financing, we're very much putting our money where our mouth is when it comes to ESG performance. And we're looking for more ways to deploy green capital raises as we execute on our fixed income financing plan during the balance of the year. In July, we issued an updated and comprehensive climate report, which reflects the task force on climate-related financial disclosures or TCFD methodology. We are just one of six US electric utilities that have pledged formal support for TCFD. As described in the report, which is available on our website, we have modeled several potential pathways to achieve net zero emissions across our electric and gas business that reflect 1.5-degree scenarios and are consistent with the Paris Agreement on climate change. The climate report shows we are a leader in both greenhouse gas emission reductions over the last 15 years and in our commitment to transparent progress towards our goal of net zero emissions. With that, I'll turn the call over to Bob.

Operator:

Thank you. At this time, we will open the floor to questions. [Operator Instructions] Thank you. Our first question comes from Paul Zembardo [ph] with Bank of America.

Bob Blue:

Paul, morning.

Steven Ridge:

Thank you.

Jim Chapman:

Yes. Sure, Paul. Thanks for joining. Good question. You'll probably appreciate that we need to exercise a little bit of discretion as we're in the middle of process. So more information will come over time. But really high level, we of course, laid the groundwork for this process with a bunch of preparation prior to the termination of the prior deal. So we're in a pretty good spot. We are -- as I mentioned in the prepared remarks, we're in the relatively advanced stage of that process of an auction process. We have, for example, received first round bids. I can say that the participation and the interest level is certainly robust. We have a really good number of highly credible, strategic and financial participants there. And beyond that, I'm sorry to say more information will come. We'll provide updates when we can. But it's very much on track. We're satisfied with the progress. And we, as mentioned, expect that transaction to close late this year. But again, no impact one way or the other on our financial guidance of operating earnings for the year.

Bob Blue:

Yes. Thanks, Paul. I think it would come as no surprise, we're philosophically very much aligned with the intent of the package. We are focused on rural broadband, EV charging, grid reliability and resiliency. These are all items that are in that package that we're – we think make a lot of sense. So we'll obviously be watching as it makes its way through the process, pay attention to how the details get work out - worked out for appropriations, if the bill passes. A couple of specifics. We're very much in favor of support for R&D on clean technologies like hydrogen, small modular reactors. Those are things that we're focused on. And to the extent that, there's broad-based support that allow a commercialization in a way that can be quick and customer beneficial, we think that's very important and certainly something that we support. And obviously, clean energy manufacturing tax credits, which can help enable U.S. renewable supply, particularly offshore wind and solar, we think are really valuable. So we're very much engaged in Washington and participating in the process. We like the direction that it's going. Details yet to come, but we think there are some real possibilities there.

Jim Chapman:

Hey, Paul, I wasn't fast enough on the draw there when we started. I failed to mention – congratulations to you too on your new role at BAML, also well deserved. We look forward to working with you in this new context.

Jim Chapman:

Thanks.

David Peters:

Yeah. Hey, good morning, everyone.

Jim Chapman:

Good morning, Dave.

Bob Blue:

Yeah, sure. Thanks, David. So on triennial one, look, it's a rate proceeding. And we would expect, as in any rate proceeding, that there's going to be a wide variety of approaches and positions taken by the parties. We'll obviously know more as you said in the question early September, we'll hear from interveners. And then a couple of weeks later, we'll hear from the staff. So we'll get a sense then, but it's a rate case covering a four-year period and then setting rates going forward with the guardrail you mentioned. So I wouldn't be surprised, if we see a pretty wide variety of opinions expressed by the parties. But if you take a step back and just think about the bigger picture here in that case, we have rates below national regional averages. Our performance of our utility is outstanding on the generation and the wire side. And we're reducing our emissions and improving – reducing our impact on the environment. And so that's a pretty good place to be in a rate case. So we feel very good about that. As to T2, that's obviously – we're only a few months into the period that is going to be reviewed for T2. So a lot of details yet to go on the second triennial. But the tools that are in the toolbox like the customer credit reinvestment offset will be available to us in triennial 2. And then, as we pointed out in our prepared remarks and as we've noted for some time, as we move forward in this plan, the portion of our earnings that come from Virginia base as opposed to the rest of the business and in Virginia, in particular, the riders, decreases as a percentage of the overall amount. So, I think those are important considerations to keep in mind. Obviously, a long ways to go between now and triennial 2, but we've got tools in the toolbox and the percentage of our earnings affected by triennial 2 as compared to the rest of the company will continue to decrease.

Bob Blue:

So, we're feeling very good about our proposal this time around. So last time, bear in mind, I think, about $200 million of capital got approved in the filing last time, but some things have changed since that last filing. The most significant one is that the Virginia Clean Economy Act has passed, and we now have an obligation to seek approval for a substantial amount of renewables over the course of the next 1.5 decades shore -- offshore wind storage all of that. And we're going to need to modify the grid in order to make sure that we keep operating in that environment. And that's what we told the commission in that filing. Things like Distributed Energy Resource management system will be incredibly important in this new world that we're moving into. So the Clean Economy Act is different. That didn't exist when we filed last time. Obviously, we also have the benefit of what we heard from the commission and the order on the last filing, and we can target and we have targeted what we're doing with this most recent filing based on precisely what they told us last time. And then, some of this filing is continuation of programs that they did approve last time. As I mentioned, they approved $200 million of capital in the last filing. So, all of those factors lead us to believe that we should have a lot of confidence in that filing. We'll hear, as I said in the opening, around the end of this year, but it's a strong filing. It's important for us as we integrate additional renewables to make sure that we operate the system well.

Operator:

Thank you. Your next question comes from Jeremy Tonet with JPMorgan.

Bob Blue:

Good morning, Jeremy.

Diane Leopold:

Okay. Sure. Good morning, Jeremy. Diane Leopold, here. So, as Bob outlined in his prepared remarks, we really see RNG as a great way to intersect the essential gas service that we provide in reliable and affordable means to our customers in all of our states with our local gas distribution companies and enhanced sustainability. So, while this is a very early phase of development with renewable natural gas that we have been on the path on for the last several years, we decided in our investments to focus on agricultural RNG, so our swine and our dairy partnerships. And the reason we did that is because we believe that was the most carbon-negative, carbon-beneficial means to capture methane and repurpose that waste stream for a more environmentally friendly use. So, when it comes to the actual investment side of it, we now already have between both partnerships one project in service, which happens to be a swine project; and five projects under construction; and several more under construction by year-end. So as we were looking at our Vanguard partnership, we were really moving forward with development of a lot of prospects at a good rate and we saw enough interest in the demand for this renewable natural gas, multiyear contracts with customers that are interested in ensuring a source of supply for their sustainability targets. So we're really looking to develop these projects in the short to medium term for these customers. It could be the transportation market. It could be other local distribution companies. It could be thermal industrial users. And then long term, look to our regulated gas customers to help them lower their carbon footprint. So, we're working with stakeholders and regulators and policymakers towards that goal. And the green therm programs in Utah and we've already asked for in North Carolina is just one step in that path to try to move the renewable natural gas towards our regulated customers.

Jim Chapman:

All right, Jeremy. I'm taking notes during your question. I'm going to distribute that to our bidder universe like where we're going. Well, look, the environment is pretty strong. As you know in the last year, equities are up midstream phase, commodities way up as you mentioned, equities are up in part because, for true midstream companies, growth is up, so all good, means the macro environment is good. I would mention just to moderate that a little bit that, Questar pipeline this asset as you know, it's awesome. It's an awesome asset. It is though a utility like. That's the way we always operated it what it is now. It earns money through long-term contracts for its capacity. So, it's not really as much as a rocket ship up or down, as maybe the overall midstream true midstream market. That said though, we're pretty happy with where we're going, robust interest as mentioned and we'll come back and give updates as soon as we can.

Jim Chapman:

Thank you.

Operator:

Ladies and gentlemen, welcome to the Dominion Energy First Quarter 2021 Earnings Conference Call [Operator Instructions]. I would now like to turn the conference over to Mr. Steven Ridge, Vice President, Investor Relations.

Bob Blue:

Thank you, Steven. Before we provide our business update, I'd like to take a moment to remember our friend, Tom Farrell. Tom's passing on April 2nd was heartbreaking to those of us who loved, admired and respected him. We've heard from so many people including many of you about Tom's impact on the industry and the people who work in and around it. It's quite clear that while Tom's list of professional accomplishments was long, the list of people whose lives he touched was much, much longer. He can be gruff occasionally, many of us participating on this call may have experienced that from time to time but much more often, we experienced his generosity, his loyalty, his dry sense of humor and his focus on improving our company, our community and our industry. We should all seek to emulate his example, a consistent commitment to ethics and integrity to excellence and perhaps most of all, to the safety of our colleagues. He cherished his friends and family most of all. I can't [Technical Difficulty]…

Bob Blue:

Thank you, Jim. I'll begin with safety. As shown on Slide 9, through the first three months of 2021, we're tracking closely to the record setting OSHA rate that we achieved in 2020. In addition, we're seeing record low levels of lost time and restricted duty cases, which measure more severe incidents. Of course, the only acceptable number of safety incidents is zero, and we will continue to work toward that critical goal. Let me provide a few updates around our execution across the strategy. We're pleased that the 2.6 gigawatt Coastal Virginia offshore wind project has been declared a covered project under Title 41 of the Fixing America's Surface Transportation Act program, also known as FAST 41. The federal permitting targets now published under that program are consistent with the project schedule that we shared on the fourth quarter call in February. Key schedule milestones are shown side by side on Slide 10. We continue to be encouraged by the current administration's efforts to provide a pathway to timely processing of offshore wind projects. In the meantime, we're advancing the project as follows

Shar Pourreza:

Just a couple of quick questions here. First, we've seen others revise estimates on Uri. Any update on how kind of how Uri impacted your customers and fuel costs, are you still okay there? And how are you sort of thinking about maybe resiliency spend for renewables based on maybe some of what you've observed as a result of Uri, any incremental spend associated with that, that we should be thinking about there?

Jim Chapman:

We're hearing a lot about this topic across the industry this quarter, of course. For us -- let me walk through it. So there's no impact for us at all in our electric operations, of course, given our geographic location. On the gas side, very minimal cost impact in Ohio, West Virginia, North Carolina, those businesses kind of leveraged their storage assets to minimize purchasing during that week. In Utah, it's interesting, though, we did see increased gas purchases. We saw price spikes in the Rockies region for gas during that week, of course. And we had increased gas purchases of our own during that period in the range of about $60 million. Now as a reminder, those costs are covered by customers, but we think it's a modest cost to customers. So no financial impact to the company from that. But what's interesting is the strength of the operational and the regulatory design there, really saved customers very significant costs during that period. And those are twofold. One is Wexpro, the regulated fuel supply arm. So during that week, customers got the benefit of that cost of service supply, so insulated from price spikes. And then second, contracting. Questar Gas is, I think it's the largest contractor for a storage capacity for Clay Basin there in the Rockies region. So without those features, that $60 million would have been multiples and many multiples higher. So pretty positive reflection of the operational and regulatory profile there. But overall, big picture, pretty manageable and scale for us. Bob?

Shar Pourreza:

And then just two very super quick ones on South Carolina. First, obviously, Santee, NextEra pulled their offer, the senate passed their bill that's more focused on internal restructuring. Do Dominion have any stance remaining here, including maybe an MSA opportunity or is that sort of behind us?

Shar Pourreza:

And then just the GRC, I appreciate the comments that you made. But is there any sort of sense of timing, maybe just some of the pushes and takes, is there kind of a point of an overturn we should be thinking about as we think about maybe a breakdown of settlement talks? Just maybe a little bit more visibility and then that concludes.

Shar Pourreza:

Terrific, thank you guys. And I echo your comments around Tom. He's going to be greatly missed, and he was the true gentleman. So I appreciate your comments.

Jeremy Tonet:

So I just want to start with the caveat, granted we're very early innings here and things will change. But are there any thoughts you could share on how the current version of the Biden infrastructure plan might impact D, such as the tax credit front. Could this potentially impact wider spread deployment of storage in Virginia?

Jeremy Tonet:

And then also, I guess, under the new administration, you kind of touched on this a bit, but maybe you could just comment a bit more on your interaction with BOEM here, and how you kind of feel about things progressing moving forward through the process now versus before?

Jeremy Tonet:

And just one last one, if I could, and I think you've touched on this a bit. But just wondering what you're learning from initial hydrogen efforts here. How does this inform the relative opportunity between hydrogen and RNG for your gas distribution system going into the future?

Operator:

Our next question comes from Steve Fleishman with Wolfe Research.

Diane Leopold:

So yes, we have been an early investor. We announced our intention to spend about $650 million on two main partnerships. We've been focusing on the agricultural RNG. So the hog farms with Smithfield and the dairy farms with Vanguard renewables. We have one project that's in service as of the second half of last year. We have three projects under construction now and expect to have about five more under construction later this year. So we're really ramping up on actually bringing forward the projects. On the demand side, we really see a significant strong demand right now from a variety of customers. You can see people like the refiners that have LCFS obligations to make and we see more states looking to implement LCFS standards. We see utilities, both on the power generation side and direct customer use side. And then we see a lot of colleges and universities and other corporations that are kind of carbon conscious fires that are looking to offset their fossil usage. So we really see a lot of demand starting to pick up for multiyear contract terms at attractive prices. So long term, we're still looking at these projects as critical supply sources for our LDCs as an important tool for customers to achieve net zero. And so starting to access through our green therm tariff that we already have in Utah now and have requested in North Carolina and will continue to do so, but we're really continuing to see strong demand and our projects are ramping up.

Steven Fleishman:

And then just one quick question. Just sales trends in Virginia, South Carolina, any quick thoughts there?

Operator:

Our next question comes from Julien Dumoulin-Smith with Bank of America.

Bob Blue:

So I think the answer, should it look similar to the filing that we just got approved, the answer to that is, no, and that this next filing will be larger in scale. And I think you particularly asked the split between PPA and utility owned and that will be different going forward. That's what the Clean Economy Act is, it's quite specific on this point that for the new solar build, 65% is to be utility and 35% is to be third party or PPA, and sort of the total amount of that is on the order of 1,000 megawatts a year for the next 15. So that's what you should be thinking about, really long term for us is we will match the VCEA proportions and the magnitude going forward. The sort of second part of your question, where our focus, our growth is in regulated renewables to the extent that we -- and if I'm understanding correctly, to the extent we have customers, important customers who are looking for contracted approaches, we expect to do some of that. But our focus on growing our solar portfolio is on the regulated side.

Bob Blue:

Julien, I used to be a lawyer and as a profession, we seem to be procrastinators. So I wouldn't read too much into the fact that there's two months left. You can get a lot of work done in two months. And as we said in the script, everyone is approaching this constructively. So yes, we think we can get it done.

Jim Chapman:

I'll repeat what I think what we've said many times before, we very much like our new look and our asset mix. The dynamics you're speaking to, we're not blind to that. At some day, that could be an opportunity to raise capital in a place what we have in our plan for modest continued equity issuance, but no current focus on that topic. We're aware, following, but we're focusing on executing our plan with our current asset mix.

Durgesh Chopra:

Just a quick clarification, Jim, on 2021 guidance. What are we assuming in terms of the timing on the South Carolina rate case? If you could just clarify that, please.

Durgesh Chopra:

So basically, regardless of the timing of a final decision there sort of the '21 guidance is intact?

Durgesh Chopra:

And just a quick one on the nuclear plant extensions. Does that change or give you an opportunity to deploy more CapEx, or kind of this is in line with your thinking when you sort of develop the CapEx plan four, five years out?

Jim Chapman:

There's $1.3 billion of spend related to the nuclear license in our five year plan that we went through on the fourth quarter.

Operator:

Our next question comes from Michael Weinstein with Credit Suisse.

Bob Blue:

So I think you're asking about the '22 test year and our measurement versus a [10.8] ROE. And the answer is just with the way the law works, we project forward sort of known and knowables for year '22 and we calculate what the return is. And in this case, that return is slightly below the [10.8] that we believe is the appropriate authorized ROE. So I don't know that I can identify any one specific thing, there's a number of sort of components that go into that. But we do that analysis compare it against what we believe is an appropriate ROE, and that's how we end up with that slight revenue deficiency and the regulatory speak.

Diane Leopold:

In fact, it was part of our thinking when we committed to net zero by 2050 across both our gas and electric businesses, was blending renewable natural gas and hydrogen into the system as part of a component of that. So it certainly already worked into the plans, I believe, of numerous utilities in their net zero plans, especially RNG and the agricultural RNG, which is why we're trying to attract so much of it into our LDC systems and with regulators and investing in it to get it in the networks is because it's so much more carbon negative than a lot of other forms. So instead of just being carbon neutral, you just get a lot of bang for the buck out of smaller quantities of it to help meet those net zero goals.

Jim Chapman:

We're seeing the same, not in a material way. And the shipping and logistics issue, we're not seeing as much. There’s just some upward price pressure on poly, on glass, on steel. But it's something we're watching, but it's not -- for our business, it's not a material issue but certainly, there is upward pressure on costs right now.

Operator:

Welcome to the Dominion Energy Fourth Quarter 2020 Earnings Conference Call. At this time, each of your line is in a listen-only mode. At the conclusion of today’s presentation, we will open the floor for questions. [Operator Instructions]. I would now like to turn the call over to Steven Ridge, Vice President, Investor Relations.

Thomas Farrell:

Thank you, Steve, and good morning, everyone. I want to start by outlining Dominion Energy's compelling shareholder return proposition. We expect to grow our earnings per share by 6.5% per year through at least 2025, supported by our updated $32 billion five-year capital growth plan. We offer an attractive dividend yield of approximately 3.5%, reflecting a target payout ratio of 65% and an expected long-term dividend per share growth rate of 6%. This resulting 10% total shareholder return proposition is combined with an industry-leading ESG profile, characterized by what we believe is the largest regulated decarbonization investment opportunity in the country. We plan to invest tens of billions of dollars over the next several years to the benefit of the environment, our customers, our communities and our local economies. Our strategy is anchored on a pure-play state-regulated utility operating profile that centers around five premier states, as shown on Slide 5. I'll share the philosophy with a common sense approach to energy policy and regulation puts a priority on safety, reliability, affordability and, increasingly, sustainability. These states also strive to create environments that promote sensible economic growth, which like the rising tide, lifts all boats. For instance, three of these state jurisdictions rank consistently in the top four best states for business as determined by independent analysis carried out by CNBC and by Forbes. Our state-regulated utility model offers investors increased predictability and is enhanced by our concentration in these fast-growing, constructive and business-friendly states. Turning to Slide 6. Dominion is a purpose-driven company and has adopted a comprehensive stakeholder approach. We are driven by the belief that the world's best companies consider the interest not just of investors, but also employees, customers and communities and the well-being of the environment. Our actions are grounded in adherence to our five core values, and we embrace transparency and stakeholder engagement as hallmarks of responsible corporate citizenship. The well-being of our over 17,000 employees is critical to our long-term success, and there is no measure more important to our company than the safety performance of our employees. 2020 represented by a wide margin, the safest year of operations in the history of our company, as depicted on Slide 7. This result did not happen overnight. As you can see, it takes years of dedicated effort to drive sustainable improvement. I congratulate my colleagues on this significant achievement. Turning now to our customers and communities. We believe that it is not enough that we provide energy safely. We must also provide energy that is affordable. We are pleased the residential rates at our two electric utilities compare favorably to state, national and, where applicable, RGGI state averages. Looking forward, we expect our customers to be very competitive even as we invest heavily to transform our system's carbon footprint. Bob will address this more comprehensively in his remarks. With regard to our community initiatives during 2020, which are described on Slide 8. First, the impact of COVID-19 on our customers during 2020 was obviously significant, which is why we voluntarily took immediate action at the onset of the pandemic to suspend service disconnections. In doing this, we avoided what otherwise would have been disconnection of over 255,000 customer accounts. We also developed extended and flexible payment plans, resulting in over 330,000 enrollments. And we contributed $18 million toward direct energy assistance for our most vulnerable customers. In Virginia, we supported special session legislation, which gave customers a fresh start by forgiving over $125 million of customer arrears. We also agreed to a pause in our South Carolina rate case proceeding, ensuring that the results of that case will not impact customers until late this year. Second, we've built on our long-standing legacy of supporting social equity by committing $25 million to 11 historically Black colleges and universities, funding an additional $10 million for scholarships for underrepresented minority groups and creating a $5 million social justice fund that supports community efforts to address the impacts of racism. This is in addition to the diversity and inclusion initiatives within our company that Bob will address. As you can tell, we are extremely proud of these accomplishments, and I thank all of my Dominion Energy colleagues who contributed to these successes in what was obviously an extraordinarily challenging year. Turning now to Slide 9. We have rolled forward our five-year capital growth plan to capture the years 2021 through 2025. This has resulted in a $10 billion, or 43% increase to the plan we shared with you in the spring of 2019 as adjusted for the Gas Transmission & Storage sale. We now project $32 billion of growth capital investment on behalf of our customers, over 80% of which reduces or enables emissions reductions. We plan to invest $17 billion in zero-carbon generation and energy storage, including regulated offshore wind, solar and nuclear relicensing. Another $6 billion in electric grid enhancements, such as electric transmission and grid modernization, which will enable our system to be more resilient to cyber and climate threats and more responsive to increasing intermittent generation. And we plan to invest $3 billion on the modernization of our LDC networks as well as on renewable natural gas development, thereby increasing safety and reliability while driving emissions down. Jim and Bob will provide more color on these industry-leading investment programs in a moment. As meaningful as these near-term plans are, consider on Slide 10, how they compare to the long-term scope and duration of our overall decarbonization opportunity. Our initiatives extend well beyond our five-year plan. We have identified over $70 billion of green investment opportunity between 2020 and 2035, nearly all of which will qualify for regulated cost of service recovery. This is, as far as we can tell, the largest regulated decarbonization investment opportunity in the industry. And the accelerating electrification of the transportation sector promises to drive growing demand for utility-scale, zero and low-carbon generation for many years to come. The company's long-term transformation has multiple beneficiaries

Robert Blue:

Thanks, Jim, and good morning, everyone. I'll begin on Slide 25, which provides an overview of the Virginia Clean Economy Act. The law mandates a renewable energy portfolio standard that over the next 25 years moves towards a 0 carbon future. In order to achieve the RPS milestones, the law calls on the state's utilities to add significant amounts of wind and solar power generation as well as battery storage, ramps up energy efficiency and demand side management programs, requires the use of Virginia-based renewable energy credits, mandates that Virginia join the regional Greenhouse Gas Initiative and requires the retirement of substantial coal-fired generation by 2025 and all ossified units by 2046, subject to reliability and energy security considerations. The largest single investment project come out of the passage of the VCEA is Dominion Energy's initial 2.6-gigawatt offshore wind deployment, as described on Slide 26. I'm not going to go through every line item on this slide but will highlight the following

Steven Fleishman:

Hi, thanks. Good morning. So just a first question on the -- your growth rate now goes out to 2025, which would encompass, I guess, the 2024 triennial outcome in it. Can you talk a little bit about how you're kind of including that in your assumptions? What are you assuming for that?

Steven Fleishman:

Okay. So is the punchline then that you kind of feel like you've got ability to deal with a variety of outcomes for that or in the scheme of things or -- and that's kind of encompassed in there in your assumptions?

Steven Fleishman:

Okay. And then one other question related to that is, I did notice that it does seem like the base component of the rate base in Virginia and the percentages seemed lower than they have been in some of your other recent disclosures. Could you just explain maybe some of the changes there, I guess, maybe, Jim?

Steven Fleishman:

Okay. Thank you very much.

Operator:

Thank you. Our next question comes from Dan Ford with UBS.

Robert Blue:

Hi, Dan, thanks for joining.

Robert Blue:

Yes, sure. I don't think I can remember a fourth quarter call we've done where we didn't get a question on the Virginia General Assembly. I guess that's a function of the timing of our fourth quarter call and the session. So I'm glad you asked us. We would have been disappointed if we didn't get one this year. It's been now, I guess, more than 15 years since I worked in the governor's office in Virginia, but there are a few things about the legislative process that I think are probably still true. The first one, the legislature doesn't follow a script that -- you make a mistake or you make predictions with certainty about the outcome of legislation at your peril, and I think that is still true. The second is that bill for it to become law have to clear a number of hurdles. It's not just one House or the other, it's both Houses and it's committees of both Houses. And an example of that from this year's session would be the one bill introduced in the Senate that related to our regulatory model was defeated in committee on a pretty strong bipartisan vote. And then the last thing that is still true about the legislature in Virginia is it moves quickly. So I don't think we're going to have to wait a long time. This year, the timing has been a little bit different, as you mentioned. The session went -- it's constitutionally mandated 30 days and then the governor called a special session, but the process is still moving pretty quickly. And so I think those bills that you're referring to will be resolved relatively soon because that's the way the Virginia General Assembly moves. We'll keep an eye on them. But I think it's important to remember that they've got hurdles they would still have to clear before they could become law.

James Chapman:

Yes. Thanks, Dan. Let me do that. So as I mentioned, almost -- well, over 70%, almost 3/4 of our capital spending in this five-year plan is in rider format in Virginia and elsewhere. So what that means, as we invest that capital, there's no regulatory lag. There is a proportional increase in operating cash flow from that investment. So that's quite an assistance in our plan for the sources and uses of cash, given the lack of regulatory lag and kind of the proportional advancement of our rider spend and our rider rate base growth and also our operating cash flow. We think it's quite a nifty feature of the structure.

James Chapman:

Thanks, Dan.

Shahriar Pourreza:

Just a quick housekeeping and then I have a quick follow-up. Just maybe starting with the '21 guidance. I mean, obviously, you've highlighted an expectation for 10% or better growth off that 2020 base, but the bottom end sort of implies about 6% year-over-year growth. There's a lot of visibility with the plans. So just trying to get a sense on any scenarios outside of weather that could put you at that lower end. And then I know the midpoint of the range is about $0.025 lower versus prior. Is that South Carolina GRC delay-related? Can you manage it? Is there sort of a conservatism built in there?

Shahriar Pourreza:

Got it. And then just lastly, on the ratings, obviously, you're presenting a really healthy cash flow outlook. The business risk profile has obviously improved. 9% utility growth, a lot of it is rider treatment, single issue rate making, 15% FFO to debt levels. Any sort of -- an agency obviously also has a positive outlook. metrics seem to point you closer to A-. Any sense on how the conversations are going with the rating agencies?

Shahriar Pourreza:

Terrific. All right. That's what I was trying to get at, Jim.

Julien Dumoulin-Smith:

Perhaps to follow up on some of the last questions. I got a couple real quickly, if you can. I believe you just said a second ago, with respect to the 6.5% and the increased level of precision, I think Steve brought up earlier. Obviously, there's a lot baked into that 5-year outlook through '25. How do you get yourself so confident around that 6.5% precision that you guys articulated? I mean, obviously, it's purposeful, as you just said. If you can speak to it a little bit more narrowly about the level of confidence you have in these outcomes to drive that number, that would be great. And then I have a quick follow-up, if you don't mind.

Julien Dumoulin-Smith:

Got it, fair enough. And then turning back to South Carolina quickly, if you can. Obviously, I heard what you said about '21 here. How do you think about prospects for settlement time line there, just given some of the generations? Then ultimately, obviously, we're paying attention to what's going on with Duke in the Carolinas here, too. How do you think about CapEx opportunities as well?

Operator:

Our next question comes from Michael Weinstein with Crédit Suisse.

Robert Blue:

Yes. That's a great question, Michael. And you're right, for us, in the regulated environment that we're talking about, the extension of the ITCs and various tax credits is customer rate beneficial and doesn't change the investment return but definitely reduces the rate that customers pay. So we'll look at whether there are opportunities. We have a pretty aggressive plan, as you've seen in the Virginia Clean Economy Act last year passed an aggressive plan. So we're moving very quickly. If there are opportunities to advance, we'll take them. But the main effect of ITC extension is going to be benefit to customers on rate.

Michael Weinstein:

All right. And just to be clear, the ITC doesn't reduce the rate base in any of the projects that you're working on, on the regulated side?

Michael Weinstein:

And my understanding is the strategic undergrounding has driven the limit -- there's a limit to the amount you can invest there by law. Is there any talk of perhaps to be expanding that, considering maybe things might be getting more affordable to the federal tax credits?

Operator:

Our next question comes from Jeremy Tonet with JPMorgan.