Earnings Call Transcript
ENTERGY MISSISSIPPI, LLC (EMP)
Earnings Call Transcript - EMP Q1 2022
Operator, Operator
Thank you for standing by, and welcome to the Entergy Corporation's First Quarter 2022 Earnings Release and Teleconference. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. As a reminder, today’s program is being recorded. I would now like to introduce your host for today's program, Bill Abler, Vice President, Investor Relations. Please go ahead, sir.
William Abler, Vice President, Investor Relations
Good morning and thank you for joining us. We will begin today with comments from Entergy's Chairman and CEO, Leo Denault; and then Drew Marsh, our CFO, will review results. In an effort to accommodate everyone who asks questions, we request that each person asks no more than two questions. In today's call, management will make certain forward-looking statements. Actual results could differ materially from these forward-looking statements due to a number of factors, which are set forth in our earnings release, our slide presentation and our SEC filings. Entergy does not assume any obligation to update these forward-looking statements. Management will also discuss non-GAAP financial information. Reconciliations to the applicable GAAP measures are included in today's press release and slide presentation, both of which can be found on the Investor Relations section of our website. And now, I will turn the call over to Leo.
Leo Denault, CEO
Thank you, Bill, and good morning, everyone. Today, we are reporting first quarter adjusted earnings of $1.32 per share, a very good start for the year. With favorable weather and higher-than-planned retail sales, we are ahead of schedule and solidly on track to achieve our 2022 objectives. And we remain on track for our longer-term outlooks. During the quarter, we continued to execute on both our near and long-term deliverables, just as we have over the last several years. We've made demonstrable progress on our operational, strategic, and financial objectives. Operationally, I'll start with some notable regulatory updates. We've continued to make meaningful progress on storm cost recovery. Texas is done, and Louisiana's securitization proceeds from the 2020 storms, plus $1 billion towards Hurricane Ida, will be completed in the coming weeks. Entergy Louisiana's filing for the balance of Hurricane Ida will be completed within the coming days, and the Entergy New Orleans filing will follow later this year. A financially strong utility is important for customers. Drew will discuss how securitization progress supports our balance sheet strength. As expected, Entergy Mississippi filed its annual formula rate plan, which enables continued customer-centric investment and supports our financial outlooks. We're continuing to drive progress on enhancing the resilience of our system, which benefits customers, supports local economic activity as well as our growth plan. Entergy Louisiana completed an important transmission upgrade in the southern part of the state. This $86 million project replaced approximately 80 structures to increase resilience along several miles of critical path transmission in La Pouch Parish, an area that was severely affected by Hurricane Ida last year. To create a solid foundation, the new infrastructure is placed in steel cases. The line was built to withstand wind speeds of 150 miles per hour and will improve the resilience of the electric system. Entergy Louisiana also completed a $100 million project in North Louisiana that positions the region for economic growth. The West Monroe project will provide additional transition capacity, improve reliability, and is built to withstand extreme weather events. What that means for customers is enhanced reliability and resilience, better integration of clean generating resources, and economic benefits to improved access to lower-cost power. Bottom line, the Entergy team continues to focus on delivering operational excellence across all facets of our business. Strategically, I'll start with our merchant business wind down. The last step in our merchant nuclear exit is nearly complete. Palisades is on track to shut down at the end of May with the sale to Holtec following around mid-year. The Palisades team is finishing strong, and I would like to thank them for their dedicated service. We have worked to help employees with their career goals beyond the plant shutdown. Many will continue to work for Entergy at other locations. Some will continue to work for Holtec on decommissioning, and others are retiring. As you know, the DOE recently announced a program to save nuclear plants that are about to shut down. Michigan's Governor issued a letter encouraging utilization of this program to keep Palisades open. We are supportive of federal initiatives to keep nuclear plants operating. However, we are five years into the Palisades shutdown process. We're far down the path. There are significant technical and commercial hurdles to changing course at this point. That said, alongside Holtec, we will work with any qualified party that wants to explore acquiring the plant and obtaining federal funding. But I do want to be very clear, this does not change our strategy. Entergy is exiting the merchant nuclear business, even if Palisades continues to operate as a part of Entergy. Across all of our operating companies, we continue to be a critical partner to support strong economic development, bringing new businesses, new jobs, and new tax bases in the communities we serve. For example, Entergy Arkansas, along with the Wynne Economic Development Corporation, announced the completion of the select site certification for a 37-acre industrial site. Certification streamlines the site selection process. Initiatives like this help attract new businesses and new projects, like the U.S. Steel expansion that was announced earlier this year. Over the past five years, our economic development team has helped bring to fruition close to 300 announced projects, $42 billion of capital investments, and more than 25,000 jobs. These outcomes have been critical to the economic health of our communities and have been a significant factor in the 9% cumulative industrial sales growth we've achieved over the past five years. And we continue to expect significant industrial expansion in the next several years. As we have discussed, growth from our industrial customers has been driven in large part by cost, labor, logistics, and regulatory advantages of the Gulf Coast, as well as favorable commodity spreads, which continue to support expansion. Further, the current geopolitical state of the world makes the U.S. and the Gulf Coast in particular, a top choice for stability. LNG exporters in the Gulf are being called on to expand production to help reduce Europe's reliance on Russian energy influence. This opportunity represents a win for our customers, communities, and owners, not to mention the community. To help support our customers' growth and decarbonization objectives, we are driving progress to expand our renewable footprint. As of today, we have approximately 650 megawatts of renewable capacity in service, 625 megawatts of solar projects approved by regulators and in progress, 725 megawatts of announced projects, and up to 4,000 megawatts of RFPs. That's more than half of the 11,000 megawatts of renewable resources in our supply plan through 2030. We've made progress identifying new resources and active RFPs. Since our last call, Entergy Texas concluded evaluations of its 2021 solar RFP. Several resources were selected totaling at least 400 megawatts from owned and contracted proposals. We also made selections from the Louisiana and Arkansas 2021 RFPs earlier in the year. We will provide additional details about the resources selected from these proposals once parties reach definitive agreements. We are also soliciting the next round of renewables. Entergy Arkansas recently issued its RFP seeking up to 500 megawatts of renewables to provide cost-effective clean energy, which furthers fuel diversity. Entergy Louisiana also issued notice to proceed with renewable RFP seeking up to 1,500 megawatts in Louisiana. Our customers' demand for decarbonization solutions, including green products, is not slowing down. The long-term solar market continues to look favorable based on an improving technology curve and higher natural gas price scenarios. However, we fully recognize the near-term cost and schedule pressures that solar projects are facing. Supply chain constraints have been exacerbated by the Department of Commerce investigation, which we expect will drive additional delays and the potential for further cost increases. These dynamics are affecting the entire U.S. solar industry, but we are continuing to work through these constraints and are executing on our solar expansion plans. It's important to note that not all of our projects are affected. For example, Sunflower solar in Mississippi, our only owned project coming online this year, has its panels on site and installation nearly complete. Entergy's owned solar represents a relatively small portion of our three-year $12 million capital plan. Roughly half of owned projects in the three-year horizon are not experiencing impacts of recent market constraints. A greater portion of our own projects are expected in the latter half of the decade, which would be past the current working constraints. As we've said before, we have a large backlog of customer-centric investments with the ability to rotate capital into our plan as an opening presents itself. The bottom line is that we recognize the near and medium-term constraints, still see strong market fundamentals in the long term that support our supply, demand, and customer objectives. On our last call, we told you about the new U.S. Steel expansion. In support of this project and the customers' decarbonization goals, Entergy Arkansas filed for approval to acquire the 250-megawatt Driver solar facility. Driver solar is an example of how we can partner with customers with their sustainability needs while accelerating the growth of our renewable portfolio in our regulated framework. It also highlights our unique growth strategy to help customers achieve the outcomes they desire, which in turn drives the outcomes for all Entergy’s stakeholders through more jobs and economic activity in our service area, increased capital deployment to support electrification, low growth to offset costs, and a higher rate of change towards societal decarbonization. Nuclear also plays a critical role in our customer decarbonization strategy. Entergy is one of the cleanest large-scale fleets in the nation due to our nuclear fleet. Customers are increasingly highlighting that access to carbon-renewable resources is key to economic development. They are looking to reduce their carbon footprint, and many are indifferent to the type of carbon-free technology. We continue to see examples in the industry that reinforce the need to balance reliability, supportability, and environmental sustainability. Entergy's resource planning has always balanced these objectives. Our baseload nuclear plays an important role. We have discussed the sizable long-term opportunity for Entergy to help our industrial customers decarbonize and achieve their sustainability goals. We estimate an addressable market of approximately 30 terawatt-hours by 2030. To put that into context, that's about 25% of our 2021 total retail sales. That's not to say that we capture the entire market, but we're working to serve our customers' needs and maximize this opportunity. With many carbon reduction goals coming past 2030, this creates greater opportunities beyond the next 10 years. Realizing this growth requires significant investment benefits to all stakeholders. This will include meaningful transmission and distribution investments to reliably serve the expansion of our renewable resources beyond our current 2030 resource plan. Financially, we continue to strengthen our balance sheet. Beyond the securitization progress that I mentioned, we also significantly reduced our remaining growth equity needs through 2020. Currently, only 25% of the original amount discussed at our 2020 Analyst Day remains. We are on track to achieve steady predictable growth in adjusted EPS and dividends, with the opportunity to do even better. We're very excited about our upcoming Analyst Day on June 16. We'll use that opportunity to provide a closer look at our multi-year strategy and financial plans. That includes our plans to quickly advance resilient investment in our coastal region to lower storm risk for our system, our communities, and our customers. And to further expand our renewables portfolio to support our customers' decarbonization goals. As I said, we've had a productive start to 2022, and we will continue to successfully achieve the milestones that keep us on track to deliver steady, predictable earnings and dividend growth while maximizing operating efficiencies and investments to make our system the most resilient, reliable, clean, and affordable it can be. These are the outcomes our customers want, and by delivering them, we create sustainable value for all our stakeholders. Before I conclude, I encourage you to see our recently released 2021 integrated report, "The Future is On." The report lays out how we delivered results in 2021 and discusses why we're optimistic and excited about Entergy's future. You can see how we integrate the environmental, social, and governance objectives into all we do. I'll now turn the call over to Drew to review our first quarter results as well as our financial strength and outlook.
Andrew Marsh, CFO
Thank you, Leo. Good morning, everyone. Today, we are reporting strong results for the first quarter. As you can see on Slide 3, we had adjusted earnings of $1.32 per share. The drivers are straightforward and keep us solidly on track to achieve our financial objectives for the year. We remain confident in our continued success and we are affirming our guidance and longer-term outlook. Turning to Slide 4, you'll see the drivers for the quarter. As a result of our continued customer-centric investments, we saw higher levels of revenue as well as higher depreciation and interest expenses. Other O&M increases included higher customer service support and nuclear generation expenses. Results for EWC are summarized on Slide 5. The drivers for that business are largely due to the shutdown sale of Indian Point last year. As Leo mentioned, we expect to complete our exit of the merchant nuclear business in the coming months. That will be a major strategic milestone. Moving to Slide 6, operating cash flow for the quarter was higher than last year at $538 million. Higher utility revenue, lower fuel and purchase power payments, and lower pension contributions were the largest drivers. As a reminder, fuel and purchase power payments were significantly impacted by winter storm Uri in 2021. Non-capital storm spending was higher than last year, which provided a partial offset. Turning to credit and liquidity on Slide 7. We continue to make progress on securitizations that will strengthen our balance sheet to produce significant cost savings for our customers. Our regulators recognize that financially healthy utilities benefit our customers. To that end, Entergy Texas recently completed securitization for its 2020 storms. And on the day of our last call, the LPSC approved storm recovery and financing for the 2020 storm plus $1 million down payment on Hurricane Ida. The approval included replenishment of Louisiana storm escrow to $290 million. Louisiana securitization is expected to be off balance sheet, and we anticipate a $3.2 billion issuance in the coming weeks. Entergy Louisiana plans to file for Ida cost recovery in the coming days. As Leo mentioned, we are targeting to receive proceeds by year-end. The timing of recovery ultimately depends on the procedural schedule approved by the commission. Entergy New Orleans is seeking approval from the New Orleans City Council to issue $150 million in securitized bonds to replenish the company's storm reserve. If approved, this reserve would enhance credit and ability to respond to potential future storms. In addition, Entergy New Orleans plans to file for Ida cost recovery later this year. Our net liquidity at the end of the quarter was $3.5 billion, being further supported by the tax securitization proceeds received on April 1, and the $3.2 billion Louisiana securitization proceeds once they are received. Beyond securitization and liquidity, we continue to focus on resilience, which we will discuss in detail at our Analyst Day. Part of that discussion will include how we are actively applying for federal funding to help pay for resilience investments and mitigate customer impacts. Looking at Slide 8, it's been approximately two months since our last earnings call. In that time, we have reduced our equity needs by nearly $170 million through our ATM program, with roughly $570 million remaining to be executed between now and the end of 2024. Given the small amount, our plan is to close out the remaining needs with the ATM program. The four sectors shown on Slide 9 represent nearly half of our industrial sales. The fundamentals for our industrial customers remained robust in support of continued growth expansion. In addition, expansion of LNG export facilities is coming into the spotlight again. The majority of these potential LNG expansion projects will provide and expand Entergy's service territories. Looking forward to Slide 10, we have a solid base plan with good visibility to achieve our guidance and outlook. We are also monitoring situations surrounding inflation and interest rates. We do not see a meaningful impact on our operational results, and we remain on track to achieve our annual cost estimate. As a result, we are affirming our 2022 adjusted EPS guidance range as well as our longer-term outlook. As we move towards Analyst Day in New York in June, we are executing on our operational, strategic, and financial objectives and building on a solid foundation. In New York, we'll share our longer-term views on customer-centric investments and financial outlooks. And we look forward to seeing you there. And now the Entergy team is available to answer questions.
Operator, Operator
Our first question comes from Shar Pourreza from Guggenheim Partners. Please go ahead with your question.
Shar Pourreza, Analyst
Hey, guys.
Leo Denault, CEO
Good morning.
Shar Pourreza, Analyst
Leo, from your prepared remarks, just quickly on Palisades, should we assume you don't want to remain a short-term owner until the asset is potentially sold? So the viability of the asset is really a Holtec question, or could there be changes to the Holtec agreement? And maybe just elaborate a little bit on some of the technical challenges like refueling and the capital that's needed to halt decommissioning and can they even be overcome?
Leo Denault, CEO
Yeah. I'm not going to, Shar, get into any kind of details about what would or wouldn't work. The technical details around operations state that the plant will have to stop operating in May because we'll be out of fuel. We haven't ordered fuel. There's a lot of work that would need to be done at the plant to prepare it to continue to operate beyond that cycle. We really haven't done the investigation into what that work would be because, as you might guess, we have been planning for five years to shut the plant down. We do have an agreement with Holtec that has certain features in it, and by and large, all the conditions have been met, except for the plant continuing to operate. So it's a significant effort at the last hour. As I said, we couldn't be more supportive of the fact that continuing operation of the country's nuclear fleet is important for the reliability of the bulk electric system and the ability for us to decarbonize the economy. Shutting those plants down is just moving backwards. Therefore, I'm encouraged by what the DOE has going on for future plants, but at this stage with Palisades, it's a heavy lift.
Shar Pourreza, Analyst
Got it. And then just on credit metrics and equity, would you guys potentially trend above your thresholds? Do you see any opportunities to maybe further downsize your $570 million of remaining needs? And as you're kind of getting closer to hitting your credit metrics and prepare to roll forward your capital plan, do you anticipate any improvements in credit metric thresholds, especially as the business mix has improved and storm funding is moving closer to resolution? So would, for instance, an improvement in thresholds, let's say, from 12% to 13%, effectively leave you over-equitized versus the current projections?
Andrew Marsh, CFO
Yeah, Shar, this is Drew. In terms of the opportunities that could continue to change or improve our credit metrics, obviously. The one that we cited last year was around pensions. Interest rates changing could affect pension liabilities. The returns associated with the trust supporting the pension aren't as good as we were anticipating. If rates continue to stay high and returns come back around to closer to our expectations, it could create some more headroom in our credit metric. That's probably the one that we are looking at most closely right now. So we're monitoring that. In terms of, obviously, we need to get the securitizations done. We need those to be off balance sheet as we've discussed. Those will be big milestones in terms of taking debt off of our balance sheet. But we're watching that closely as well. Outside of that, our expectations around capital, which also drives our equity needs, are things that we're monitoring closely. We do have some capital associated with solar in the near term. We can talk more about that. But we have other capital projects waiting in the wings, particularly around resilience. If there's extra headroom because of delays in solar, there's quite a bit of resilience investments that our customers are waiting on. I don't anticipate any extra room from the capital side going forward.
Shar Pourreza, Analyst
Got it. Just one quick follow-up, if I may, and I appreciate that. It's regarding your Analyst Day. I know you mentioned resiliency and the green tariffs. Given the timing of regulatory initiatives and technical conferences, you highlighted how they fit into the Analyst Day. Should we view the Analyst Day as an update to your base plan, and will you qualitatively discuss these opportunities with some scenario analysis? Or could we actually see some of the spending included in the capital plan?
Leo Denault, CEO
Well, I think, Shar, we're going to let the high-level insights of Analyst Day show up on Analyst Day.
Operator, Operator
Thank you. Our next question comes from the line of Nicholas Campanella from Credit Suisse. Your question please.
Nicholas Campanella, Analyst
Hey. Good morning, team. Thanks for taking the question.
Leo Denault, CEO
Good morning.
Nicholas Campanella, Analyst
So I just wanted to hit solar supply chain risks quick and just the impact. Could you help us just size the amount of megawatts going into rate base that would potentially be at risk? I think you said roughly half you're secured on over the three-year horizon. So is that like 300 to 400 megawatts? And just to confirm, I heard your last comments right, to the extent that capital shifts, you were just going to backfill that with potential distribution resiliency spending?
Roderick West, Executive
Yeah. And this is Rod. Good morning. From Leo's comments, the near-term risk that we were referring to regarding existing owned projects was roughly 280 megawatts because we're explicit about both West Memphis and Walnut Bend. So from a megawatt standpoint, they really don't represent a material amount of capacity. So we want to ensure that we put that in context. Recall, Leo also mentioned that the majority of our renewable capacity actually shows up in the latter half of the decade. So we're calling it out because we recognize some near-term constraints, but they don't significantly influence how we're thinking about our build-out.
Leo Denault, CEO
To your last point, Nick, I think Drew mentioned it and I mentioned in the script, we've got a capital plan and timing laid out. We've got other things waiting in the wings that we could or couldn't accelerate. So the ability to roll something else into the plan that benefits our customers in a different way is always present.
Nicholas Campanella, Analyst
Absolutely. And then just Drew's comments on inflation. If anywhere, where would you kind of call out that you're seeing the most pressure on the plan? And can you just kind of talk about the current state of power markets, how you're managing customer bill impacts and the ability to continue to extend your rate base growth here, perhaps any levers that make your jurisdiction more unique than others? That would be helpful. Thanks.
Andrew Marsh, CFO
Thanks, Nick. This is Drew. The way you phrased it was an interesting way to think about it. I would actually turn that around and say that it enhances the economics of the plan because we consider where the inflation affects our two central investment themes beyond our base capital in renewables and resilience. Inflation will actually strengthen the economic case from a customer's perspective to get these things done. Certainly, when you talk about renewables and higher gas prices, there's more economic room right now. Additionally, the costs associated with putting up hardened lines, distribution lines, and transmission lines before a storm compared to the costs of doing it after the storm are influential. Inflation will exacerbate that difference, which is already substantial and accelerate the need for customers to fund these projects upfront. Obviously, these will have an impact on customer bills, but the alternative of not doing it would result in an even greater impact on overall bills. So I think it will drive customers who want to accelerate our plans, which will include renewables and resilience investment.
Nicholas Campanella, Analyst
That was very detailed. Thanks for the response. See you in New York.
Andrew Marsh, CFO
All right. Thanks, Nick.
Operator, Operator
Thank you. Our next question comes from the line of Jeremy Tonet from JPMorgan. Your question please.
Jeremy Tonet, Analyst
Hi. Good morning.
Leo Denault, CEO
Good morning, Jeremy.
Jeremy Tonet, Analyst
All right. Just want to come back to DOE a little bit more, if I could. And for 2023 projects, could you just break down price risk versus timing risk? And do you see C&I demand kind of insulating the project to a degree on both these factors?
Roderick West, Executive
I want to clarify the question regarding price risk, so let’s ensure Drew and I understand who will address each part of it, as it relates to price risk.
Jeremy Tonet, Analyst
Yeah. Just price and timing for 2023 projects.
Roderick West, Executive
On the projects that we just referenced, such as Sunflower, that project is not at risk. We expect that one to come into service sometime in August. The ongoing projects we're expecting some delays on include West Memphis and Walnut Bend. We're working with our BOT partners, who are reputable firms, to lock down both price and schedule certainty. There is some risk on both because of delays related to supply chain and DOC issues. But beyond that, we'll see if Drew adds anything to that.
Andrew Marsh, CFO
I think the only thing I'll add is that, as Rod mentioned earlier, the majority of our expectations are set beyond the next two-year window. We have issued RFPs, and those in that space are fully aware of all the supply chain and tariff concerns. We expect those engaged in the RFP process will be well situated to navigate through the current environment and meet these expectations. We anticipate that the DOC fees will be resolved at some point in the near term. Most people we’ve been engaging with expect this will occur by the end of the year. However, even if it takes a little longer, we don't believe it puts our overall expectations in jeopardy. Should certain projects experience delays, there are other things we can prioritize to meet customer expectations.
Jeremy Tonet, Analyst
Got it. Thank you for that thought. That's helpful. And just kind of pivoting a bit here to nuclear and small modular reactors, just want to know your thoughts on how this could unfold going forward. We saw one of your peers potentially partnering with a university to build an SMR. Is this something that Entergy would consider doing to demonstrate the viability of the technology? Or any thoughts on SMR and when and if that could be something that Entergy is really moving more towards or exploring?
Roderick West, Executive
Yeah, Jeremy. We're certainly monitoring the SMR technology space. Our nuclear teams are involved in advisory capacities and various entities to ensure that we're up to speed on developments. The success of this technology will be critical to the economy's decarbonization objectives. When thinking about building cost-competitive, carbon-free, smaller projects, they present a distinct challenge due to the size of capital budgets required for existing technologies. We’re excited about these opportunities. However, it’s difficult to predict when and how this technology might meet our needs. We are much more focused on our hydrogen market, uniquely positioned within our service territory, involving producers, consumers, and storage so there’s a unique advantage there. Nonetheless, we are staying involved with developments in SMR technology.
Jeremy Tonet, Analyst
Got it. It's very helpful, I’ll leave it there. Thanks.
Roderick West, Executive
Thank you.
Operator, Operator
Thank you. Our next question comes from the line of Durgesh Chopra from Evercore ISI. Your question please.
Durgesh Chopra, Analyst
Good morning, everyone. It's been a while since I saw you, Drew. I want to follow up on a question that has already been addressed. Can you confirm whether the balance of costs related to storm Ida, for which you have not yet received regulatory approval, is still $1.7 billion? I believe that was the figure mentioned at the end of the fourth quarter call. Could you please confirm that or provide an update on its status?
Andrew Marsh, CFO
Yeah. The total cost estimate for that storm is still at $2.7 billion; $1 billion of that is part of the first securitization we expect to price in the next few weeks. The balance would be towards the end of the year. We’ll be making a filing in the next few days for the full amount to get cost recovery. The $1 billion down payment is not pre-approval of those costs; it's just pre-financing.
Durgesh Chopra, Analyst
I see. So essentially, you'll be seeking approval for the full $2.7 billion, and the $1 billion that you've gotten already will be applied towards it. Is that the right way to think about it?
Andrew Marsh, CFO
That is correct.
Durgesh Chopra, Analyst
Okay. Thank you very much. I appreciate the call today. Thanks, guys.
Andrew Marsh, CFO
Thank you.
Operator, Operator
Thank you. Our next question comes from the line of Julien Dumoulin-Smith from Bank of America. Your question please.
Julien Dumoulin-Smith, Analyst
Hi. Good morning, team, and thanks for the opportunity here. Congratulations on continued results. If I can, just to focus on the first quarter and some dynamics here. Can you comment a little bit on the industrial demand and the 6.5% in the first quarter? And how do you see this trend through the balance of the year as you think about it, especially given the potential for export-oriented industries to do particularly well here? And could you talk also in tandem about some trends that you observed specifically around accelerating customer desire for renewables? You had specifically identified at the start of this year, a number of very large customers. But I have to imagine, based on your comments already, that there are actually several other larger customers that you're talking to.
Andrew Marsh, CFO
Yes. So this is Drew. I'll take the first part, and then I'll turn the second part over to Rod. Certainly, in terms of the sales expectations, we had higher-than-anticipated industrial sales in the quarter. Most of it was in line, although refiners saw very high crack spreads that performed well. We did experience some unplanned outages in the chemical and petrochemical space, which pulled us down a bit. However, there were unplanned outages for our Cogent customers, and that actually lifted us back up. Due to planned or unplanned outages, our customers will try to trim those as much as possible to run at high utilization rates. LNG wasn’t on that page, but LNG utilization rates are extremely high as well. I will pass it over to Rod for the other part.
Roderick West, Executive
I was only going to elaborate on the LNG piece. As Leo pointed out, it is premature to discuss specifics surrounding the Analyst Day as we’re preparing to share our five-year outlook. However, we have seen greater interest in signing off-take contracts that support our view on expansion in the LNG space. Empirically, I can confirm that 85% of projects currently off FID consideration in the LNG domain are in Entergy's service territory. This further demonstrates our belief in our unique growth story as our customers have theirs. Our ability to serve their expansions while helping them meet their ESG objectives remains a growth opportunity for us, and we are still bullish about it.
Julien Dumoulin-Smith, Analyst
Excellent. And then just one other nuance here. I'm seeing a lot of headlines here on insurance costs. I'm sure you guys have seen the headlines in Florida, but also in Louisiana itself, especially regarding catastrophic storms. Can you comment about any potential pressures from an inflationary perspective on your business specifics?
Leo Denault, CEO
You're talking about insurance specifically, Julien?
Julien Dumoulin-Smith, Analyst
Yeah. I mean, I was thinking about insurance specifically, but obviously, with a broader backdrop. Insurance seems to be getting headlines recently, especially outside of the utility realm.
Leo Denault, CEO
We aren't allowed to insure our poles and wires, so that hasn't driven that particular space. Just like everybody else, we have seen broad insurance premium pressure, but we are managing through that regardless of whether it's property, general liability, etc. So we are approaching that and ensuring we continue to meet our operational expectations. That's symptomatic of a broader perspective around inflation. We certainly have seen inflation in the fuel space. We've discussed this a bit. We are working with stakeholders on how to manage that in the near term. Long-term, that is a commodity that cycles, and we expect the wildcatter spirit in the oil patch to emerge at some point and help bring prices back down. Regarding inflation in the capital space, we discussed this with solar; we're observing it in other materials for capital projects. However, it's important to note that while we see increases in current marginal capital projects, they are being added to a much larger rate base already invested and fixed. As a result, the pressure on customer bills is not as significant. As I mentioned, the fuel piece is something we are closely monitoring, and for other operating costs, we haven't seen much pressure lately. We are vigilant about that and are committed to continuous improvement to stay ahead of potential challenges.
Julien Dumoulin-Smith, Analyst
Got it. It doesn't sound like it's an outsized impact on you all here. It sounds like you guys have it under control. I also think it's a great update ahead of the Analyst Day, so we're going to stay tuned. Thank you, guys.
Leo Denault, CEO
Thanks, Julien.
Operator, Operator
Thank you. Our next question comes from the line of Steve Fleishman from Wolfe Research. Your question please.
Steve Fleishman, Analyst
Yeah. Hi. Good morning. Just on the resilience plans that you have talked about. I think going back to last year, you discussed having discussions with key stakeholders. Can you provide any sense of how those have gone? Do you feel a sense of urgency from people on this? Any color would be appreciated.
Roderick West, Executive
Thanks, Steve. It's Rod. Good morning. We recently completed analytics regarding the risk scenarios, especially around storms, and are evaluating capital investment scenarios. We begin engaging in formal and informal discussions with stakeholders starting tomorrow, and will hold further conversations in New Orleans. The feedback loop is just beginning, but feedback from preliminary discussions indicates a strong interest in understanding our perspectives on risks and how investment associated with resilience provides benefits. Given the current economic environment, stakeholders, customers, regulators, and others are interested in how we frame these issues, including cost and bill implications. We're starting these discussions now, but I expect very active engagement as we continue this dialogue. Certainly, Louisiana is on track for what we anticipate to be our first formal filings around July for the City of New Orleans and for the state of Louisiana likely around that time or shortly thereafter. Even in Texas, we're beginning initial discussions about resilience. Their outlook may differ slightly in terms of their sense of urgency compared to Louisiana and New Orleans. Still, they are intrigued by our Texas service territory's crucial role in the industrial growth space.
Steve Fleishman, Analyst
It sounds like you'll have better data scenarios ready for the Analyst Day regarding different options, and results may vary by customer states.
Roderick West, Executive
Indeed, we are moving in that direction and will provide more context during Analyst Day.
Operator, Operator
Thank you. Our next question comes from the line of Jonathan Arnold from Vertical Research. Your question please.
Jonathan Arnold, Analyst
Good morning, guys. One question, just can you give us a bit of sense? You've alluded to being conscious of commodity and gas prices, and obviously, thinking about the longer-term benefits of some of your investment plans. What is the current build trajectory that you see over the coming months? Can we focus on that?
Andrew Marsh, CFO
Sure. This is Drew. In the near term, of course, it depends on the jurisdiction. You're probably most interested in Louisiana and the securitization costs associated with that. It will depend on the final pricing of those securitization bonds, but we're looking at something in the neighborhood of about 10% once all those securitization costs appear on bills. I think that includes a bit of an uptick in interest rates too. Our customers are aware of that. The gas price component depends on the jurisdiction; it’s typically reflected in bills fairly quickly, especially in Louisiana, Texas, and New Orleans. There’s some hedging involved in Mississippi and Louisiana, but it’s relatively minor. Regardless, customers are accustomed to gas price volatility. We're also putting forward continuous improvement programs to manage volatility for customers, including levelized billing programs. Over the long term, I think gas prices are still manageable, but we're closely monitoring that as part of our overall investment strategy.
Jonathan Arnold, Analyst
When you mentioned over time, you're talking about further out on the curve, right? Can you frame what the projected impact on total retail sales could be for Louisiana customers?
Andrew Marsh, CFO
For 2022, yes, it's going to be part of what I already explained regarding securitization costs. I would estimate around a 5% or 6% increase once those get into bills later this year.
Jonathan Arnold, Analyst
And I think the commodity piece is incremental to that? Or is that included in that number? I guess my...
Andrew Marsh, CFO
No, regarding gas prices, a $1 increase per MMBtu would typically result in about a 3% to 4% increase in overall bills if maintained for a year. However, we haven’t observed that yet.
Jonathan Arnold, Analyst
Okay. Thank you for that color. If I could just add one other thing. When reviewing the progress against guidance across different segments such as utility O&M, interest line, and the parent line that’s recently added, it seems like you've experienced considerable pressure across multiple categories during the first quarter. I know you indicated that other elements would be more front-loaded. But is that timing across the board, or are these challenges building, yet you hope the sales increase will keep you balanced?
Andrew Marsh, CFO
Yes, regarding O&M, I think for the first quarter, you're addressing the timing aspects. We're on track for expectations for the rest of the year. In terms of interest expense, we're seeing some expenses slightly above earlier expectations, but also, timing elements from the first quarter will even out over the year.
Jonathan Arnold, Analyst
Thank you for that clarification. Thanks. Good luck. Looking forward to seeing you at the Analyst Day.
Andrew Marsh, CFO
All right. Thank you.
Operator, Operator
Thank you. Our final question for today comes from the line of James Thalacker from BMO Capital Markets. Your question please.
James Thalacker, Analyst
Hi. Good morning, everyone.
Andrew Marsh, CFO
Good morning, James.
James Thalacker, Analyst
Just a quick clarification after Julien's question. With a slightly better sales outlook you guys have, have the drivers related to mix changed materially? Is this being driven more by a more robust C&I sales? Or are you seeing higher demand across all classes despite a trend towards a return to work at this point?
Roderick West, Executive
This is Rod. I think the short answer is it's been going as expected. We see residential demand trailing off as customers return to working and schooling, leading to growth driven by the C&I sector. We’re tracking according to our initial plan with slight robustness in C&I.
James Thalacker, Analyst
Great. Just following up on Jonathan's question to clarify: The 10% increase you're discussing is across total retail sales, correct, in Louisiana?
Roderick West, Executive
Yes.
James Thalacker, Analyst
Is there a skew from a rate design basis, like a rough idea of what that could mean for residential versus commercial versus industrial? It might be a little too granular at this point. I can follow up offline.
Andrew Marsh, CFO
I think Bill can cover that for you offline since I can’t provide an accurate answer on that from memory. The distribution costs are a significant part of the overall increase, which will primarily affect residential and commercial customers more than industrial.
James Thalacker, Analyst
Great. I’ll follow up with Bill. Thanks so much.
Operator, Operator
Thank you. This concludes the question-and-answer session of today's program. I'd like to hand the program back to Bill Abler for any further remarks.
William Abler, Vice President, Investor Relations
Thank you, Jonathan and thanks to everyone for participating this morning. Our quarterly report on Form 10-Q is due to the SEC on May 5 and will provide more details and disclosures about our financial statements. Events that occur prior to the date of our 10-Q filing that provide additional evidence of conditions that existed at the date of the balance sheet would be reflected in our financial statements in accordance with generally accepted accounting principles. Also, as a reminder, we maintain a web page as part of Entergy's Investor Relations website called Regulatory and Other Information, which provides key updates of regulatory proceedings and important milestones on our strategic execution. While some of this information may be considered material, you should not rely exclusively on this page for all relevant company information. And this concludes our call. Thank you very much.
Operator, Operator
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.