Conference Transcript - POR 2025-07-25

Operator

Good morning everyone and welcome to Portland General Electric Company's second quarter 2025 earnings conference call. Today is Friday, July 25th, 2025. This call is being recorded and as such all lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer period. If you would like to ask a question during this time, simply press star, then the numbers 1-1 on your telephone keypad. If you'd like to withdraw your question, please press star 1-1 again. If you do intend to ask a question, please avoid the use of speaker phones. For opening remarks, I will turn the conference call over to Portland General Electric's Manager of Investor Relations, Nick White. Please go ahead. Thank you, Victor. Good

Nick White, Head of Investor Relations

morning, everyone. I'm pleased you can join us today. Before we begin this morning, I would like remind you that we have prepared a presentation to supplement our discussion which we will be referencing throughout the call the slides are available on our website at investors.portlandgeneral.com referring to slide two some of our remarks this morning will constitute forward-looking statements we caution you that such statements involve inherent risks and uncertainties and actual results may differ materially from our expectations for a description of some of the factors that could cause actual results two different materially please refer to our earnings press release and our most recent periodic reports on forms 10k and 10q which are available on our website turning to slide three leading our discussion today are maria pope president and ceo and joe turpic senior vice president of finance and cfo following their prepared remarks we will open the line for your questions now it's my pleasure to turn the call over to maria good morning and thank

Maria Pope, CEO

you all for joining us today. Starting on slide four, our second quarter has been marked by strong execution across the business and significant advances in each of our five strategic priorities, which we've outlined in previous calls. First, investing in customer-driven clean energy goals. Second, working to keep customer prices as low as possible. Third, supporting data center and high growth, and the region's economic development. Fourth, reducing risk through operational execution, system hardening, and wildfire policies. And fifth, promoting an investable energy future for Oregon, updating our corporate structure, and aligning legislative and regulatory policies. Today, we stand at the intersection of high growth, and in Oregon, a continued focus on clean energy, all while driving to meet customer needs reliably and affordably. Let me describe the progress we have made in each area. Clean energy. To align with the one big, beautiful bill and take advantage of the changes to investment tax credits and production tax credits, we're undertaking a price refresh in our 2023 RFP and accelerating our 2025 RFP procurement. Our company, region, and customers remain firmly committed to a decarbonized future, and we're adopting to build on our recent progress while also delivering maximum value. We're focused on securing projects that meet the latest timing and domestic content requirements, allowing us to maximize the impact of important federal tax credits. These credits are a significant tool in lowering the cost of clean energy and keeping customer prices as low as possible. Jill will cover this in more detail shortly. Customer affordability. Our customer affordability commitment, multi-year cost management work is underway and delivering results. This quarter, we made the difficult decision to reduce 330 employed and contracted positions and now have process improvement work ongoing across our company. Every aspect of Portland General will be touched, and everyone is involved. Customer-Driven Growth. Our strong growth continues. Importantly, we're seeing sustained growth from data center and high-tech customers. over 16% compared to the same quarter last year. This comes from over a dozen text manufacturing and infrastructure companies, including the upcoming return of a significant semiconductor company to PGE's cost of service. This robust demand builds on the significant high-tech and data center growth trajectory that we have seen for over seven-plus years and benefits all customers. enabling grid-wide improvements and infrastructure upgrades while spreading the company's fixed costs across a broader base. We're also pleased that the Oregon legislature passed the POWER Act, which furthers growth and brings greater clarity to the rate-making framework, enabling regulatory flexibility to the allocation of costs and direct long-term contracting with data center customers. Risk management. We still have work to do on wildfire policy and are focused on supporting policies that clarify standards for wildfire mitigation, establish financial backstops, and provide timely recovery for victims. Operationally, we're deepening our focus on wildfire mitigation and prevention with system hardening and monitoring, quick response and collaboration with first responders, including the U.S. Forest Service and Oregon Department of Forestry, and targeted use of public safety power shutoffs in response to high-risk conditions, and investable energy future for Oregon. And finally, on our last call, we discussed our intent to file for a holding company. That notification was made on May 23rd and today we completed the filings with the Oregon Public Utility Commission for the approval of a holding company under which the existing utility company and a separate transmission company will sit. This proposed corporate structure update is designed to help reduce the cost of investments and infrastructure as we work to achieve clean energy goals and serve society's rising needs for electricity while working to keep customer prices as low as possible. We also worked in close collaboration with the customers and the Citizens Utility Board on the passage of the Fair Energy Act, which brings important clarity to future regulatory proceedings. This moves Oregon to a more predictable multi-year rate making and offers additional flexibility and opportunities for securitization, as well as adjusting the timing of when new customer prices take effect. In state regulatory proceedings, we've strengthened collaboration with all parties and recent MOU with interveners and staff in both the Seaside battery filing made in May and the Distributed System Plan Alternative Recovery Mechanism, the DSP-ARM, which we're filing later today. We're very pleased with these outcomes, which incorporate the Fair Energy Act requirements and provide well-defined path forward. This combination of multi-year rate-making, the MOU, and other regulatory improvements drive towards regulatory predictability in Oregon while supporting greater precision in our planning and execution capabilities. I want to recognize PGE's legislative and regulatory teams for the exceptional work and outcomes achieved this quarter. This includes important progress made on numerous complex topics, outcomes that move PGE forward in serving our customers. Now let's turn to slide five for financial results, and then I'll turn it over to Joe. For the second quarter, we reported GAAP net income of $62 million, or $0.56 per diluted share. On a non-GAAP basis, net income was $73 million, or $0.66 per share. This compares to second quarter GAAP net income of $72 million, or $0.69 per diluted share. Q2 2025 non-GAAP results exclude business transformation and optimization expenses as part of our customer affordability commitment and the updates to our corporate structure. This has been a busy quarter for Portland General Electric. We continue building on the momentum of the first half of 2025, executing on expectations, and delivering results. We remain laser-focused on our strategic priorities and continued execution. Thank you to the entire PCE team for your work this quarter, bringing safe, reliable energy to our customers and building upon our strong operational capabilities to deliver value for our stakeholders and the communities we serve. With that, I'll turn it over to Joe.

Joe Trpik, CFO

Thank you, Maria, and good morning, everyone. Q2 has indeed been a busy period for PGE, and we've climbed a bunch of hills across the organization. Turning to slide six, our results reflect significant demand growth from industrial customers, mild spring temperatures, and the maturing of our cost management and optimization program. Total load increased 4.9% overall and 6.1% weather adjustment as compared to Q2 2024. Residential load decreased 2.3% quarter over quarter, but increased 1% weather adjusted, highlighting the warmer than average temperatures in April and May. Residential customer count increased by 1.4% offset by continued energy efficiency. Commercial load increased slightly at 0.3% overall, or 0.7% weather adjusted. Industrial load, particularly from data centers, continued its rapid acceleration with Q2 demand increasing 16.5% on a nominal and weather-adjusted basis. We expect continued demand growth from our industrial customer class, underpinning our reaffirmed weather-adjusted 2025 load guidance of 2.5% to 3.5%. In the long run, with the 2023 CEE IRP update published in June, captured fresh load inputs, further solidifying our long-term growth expectations of 3% through 2029.

Travis Miller, Analyst — Morningstar

Now I'll cover our quarter earnings driver.

Joe Trpik, CFO

We experienced a $0.32 increase in total revenue driven by a $0.12 increase from the 4.9% demand growth and a $0.20 increase from the average price of deliveries from improved recovery partially offset by delivery composition changes, a decrease from power cost of $0.20 driven by a $0.12 EPS decrease from power cost performance in 2024 that reverses for this comparison, and an $0.08 decrease from current year power cost performance driven by less favorable wholesale and environmental credit market conditions. A $0.06 EPS increase from lower operations and maintenance expenses as we begin to realize the benefits and savings from our cost management and optimization work. A $0.13 EPS decrease from other operating expenses in support of the ongoing rate-based investments made up of $0.10 from higher depreciation and amortization and $0.03 from higher interest expense, an $0.08 decrease from other items, including $0.04 from dilution and $0.04 from other miscellaneous items, and lastly, a $0.10 decrease from business transformation and optimization expenses as we update our practices and corporate structure to achieve improved financing flexibility and lower long-term, lower our long-term costs. This brings us to our GAAP EPS of 56 cents per diluted share. After adjusting for the 10 cent impact, we reach our Q2 2025 non-GAAP EPS of 66 cents per diluted share. Turning to slide seven for our five-year capital forecast, we've made a minus reduction in 2025 to our 2025 forecast due to efficiencies from our capital execution this year. Overall, our plan continues to support the trajectory of our growth and the escalating needs of our customers and region. On the slide eight, I'll detail the meaningful regulatory and stakeholder progress Maria highlighted earlier. After thorough engagement with regulatory stakeholders, PGE signed an MOU in June with the OPUC staff, the Oregon CUB, and AWEC, which will govern two important cost recovery proceedings. First, the expedited recovery of the Seaside Battery Project, which began serving customers in early July. This filing has a proposed conclusion of October 2025. Second, an alternative recovery mechanism for distribution system assets, the DSP-ARM, which has a proposed conclusion of April 2026. As a result of the MOU, the earliest filing for our next general rate review would occur after Q2, 2026, with the earliest rate effective date being May 1, 2027. Combined, these two proceedings cover nearly 600 million of critical rate-based investments serving customers while also clarifying our regulatory path and go-forward strategy. Moving to slide 9 for an update on resource planning and procurement. With the passage of the federal legislative package, PGE is planning a price refresh for conforming bidders in the 2023 RFP. We undertook a very similar process in our 2021 RFP, which also navigated tariff and tax policy changes. This refresh is a strong net positive, allowing bidders to price in what was once uncertain, lowering risk, and improving consideration of key macro factors. In collaboration with the RFP Independent Evaluator, we will work to update bid scoring and ranking to reflect pricing changes in the coming months. We still expect contract execution by year-end and remain firmly committed to a 2027 COD target for these projects. Overall, we expect a similar opportunity set for the 2023 RFP CapEx investments, which supports our long-term growth expectations. As we noted in the recent CEP IRP update, we have large procurement needs ahead, driving the 2025 RFP, which we plan to issue to the market in the coming weeks. The current timeline anticipates a final shortlist in the first half of 2026, with contract execution later next year, as we track to complete the projects by the end of the decade. We'll continue to utilize a lease cost and lease risk selection approach, which will evolve to capture the changing tax policy environment and impacts to customer prices for RFP projects. At this time, we see limited tax credit exposure for the 2023 RFP projects, especially given the firm end of the 2027 COD requirement. For the 2025 RFP projects, tax credit eligibility will be key as we evaluate acceleration to keep customer price impacts as low as possible. In both the 2023 and 2025 RFP, we are focused on maximizing tax credits to dampen customer price impacts. On to slide 10 for our liquidity and financing summary. Total liquidity at the end of Q2 was $980 million, and our credit ratings and outlook remain static since the last quarter. As of June 30, we have $104 million of equity priced but not drawn under our ATM. Our total equity target in 2025 remains at about $300 million in support of our capital program. As our holding company application proceeds, we'll continue evaluating our financing needs as we seek the most efficient options for our customers and shareholders. This approach helps reduce costs, better serve customers, and creates optionality in how we fund critical grid investments in support of the growing demand for clean, reliable energy. This also dovetails with our broader cost management work, which is scaling as designed to reduce costs across the organization. We're leaving no stone unturned as we enhance our practices and optimize our structure to safely operate, meet our financial commitments, and keep customer prices as low as possible. We are pleased with our year-to-date execution and remain committed to achieving our full year plan. Our progress in Q2 has kept us on course for solid performance. We are reaffirming our 2025 adjusted earnings guidance of $3.13 to $3.33 per diluted share, and our long-term earnings and dividend growth guidance of 5% to 7%. We remain focused on safe, reliable, and efficient operations, advancing our strategic priorities, and achieving our commitments to deliver value to our customers, communities, and shareholders. And now, operator, we are ready for questions. Thank you.

Operator

As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To enjoy your question, please press star one one again. Please stand by. We'll comply with the Q&A roster. One moment for our first question. Our first question will come from the line of Richard Sunderland from J.P. Morgan. Your line is open.

Richard Sunderland, Analyst — J.P. Morgan

Hey, good morning. Thank you for the time today.

Maria Pope, CEO

Good morning, Richard.

Richard Sunderland, Analyst — J.P. Morgan

a lot of things in motion here appreciate all the color maybe starting with this MOU and the seaside and distribution recovery proceedings how do you think that MOU informs the path to actually progress through those two proceedings in a fashion versus a general rate case more broadly I guess I'm curious how you think these proceedings will be different is this Just to focus on the prudency of capital, maybe to frame it more broadly, how do you think about the $600 million of rate base you highlighted as in those two proceedings and how interveners are going to evaluate that under the terms of the MOU?

Maria Pope, CEO

Great. Great question. And first of all, I think we've really front loaded a lot of the discussion with regards to the seaside battery projects, which, by the way, is fully operational and delivering tremendous value to customers, keeping energy prices lower as we're into these hot summer months. But as we also include the distributed system plan and much of our capital that is in the distribution system for customer growth as well as reliability, we're able to have a lot of these conversations before we actually get into a rate review proceeding. That allows for really good understanding and shared outcomes as we file the filings under those MOUs. The first we hope to finish up in October. That would be the Seaside Battery Project and the DSP arm in April. But, again, I think we're aligning interests, having shared understanding of the work that we're doing, which should lead to certainty, predictability, and driving value.

Richard Sunderland, Analyst — J.P. Morgan

Understood. That was very helpful there. Switching to the RFP topics, you mentioned tax credit eligibility is key for the 25 RFP. I guess turning back to 2023, how do you think about the price refresh and then opportunities to execute those projects in the back half of the year? is there a potential to accelerate some of the procurement from the 23 RFP where you seem less concerned with the tax credit eligibility? I guess just 23 versus 25 RFPs, any other dynamics you'd

Joe Trpik, CFO

highlight there? Thank you. Hey, Richard. So, you know, as it relates to 2023 RFP, so yes, there is the opportunity to accelerate. The reprice will open up to all of the bidders that were in the original shortlist. And so that selection will be expanded. I mean, we do think it's a good opportunity to drive certainty here. You know, we expect similar performance that we saw in the last case. But, you know, the whole point of this reprice RFP is to really be able to get clarity for these bidders. And then also, I know we were talking 23, but in 25, you know, to start moving quickly on 25 to hopefully, you know, find to be able to have time to identify bidders who have the tax credit ability for those projects as well.

Richard Sunderland, Analyst — J.P. Morgan

Got it. That's helpful. And sorry, just one final cleanup from me. The business transformation efforts and the cost there, are those going to continue over the balance of the year into next, or is that kind of a one and done on this quarter?

Joe Trpik, CFO

Yeah, as it relates to the business transformation, we're just getting rolling. I mean, we're pretty excited about the momentum that we've created. We would expect that we'll incur, you know, costs or investments as it relates to the business transformation into next year, you know, a collection of costs related to, you know, change management as well as other items. But clearly having, you know, the benefits will start to really yield themselves later this year and then create pretty significant momentum into next year. But on the cost exclusion side, that is something that will work into 26.

Richard Sunderland, Analyst — J.P. Morgan

Thanks for the time today.

Maria Pope, CEO

Thank you.

Operator

For a moment for our next question. Our next question will come from the line of Chris Ellinghouse from Siebert-Williams-Shank. Your line is open.

Chris Ellinghouse, Analyst — Siebert Williams Shank

Hey, everybody. How are you? Morning, Chris. Good. Good morning. Can you talk, Maria, a little bit about 3179 and, you know, some of the limitations that are within that legislation in terms of, like, rate timing and things like that. Will that make you make adjustments for when you try to time investment? Or is that just something you think you can just work around?

Maria Pope, CEO

So first of all, the bill that you're referring to is the FAIR Act. And it's something that we worked collaboratively with the Citizens Utility Board, with customers. And we're really pleased that it creates the opportunity to really look at multi-year rate making. And we are also focused on ensuring that all of our systems and our processes are aligned with customer prices going into effect in the April to November time period and not during the most difficult months of winter. So much of that is internal work that we need to do and isn't a problem, but just some work to get done. Overall, we're very pleased with the ability to have increased securitization, and we've had a lot of good discussions on what does good long-term rate making look like in the current environment and as we go forward. I think our MOUs that we've just talked about in answer to Richard's questions, you know, are right along those same lines of how do we work better together for outcomes that ensure adequate investment for our economic growth in the state of Oregon, for customers, and for reliability and affordability while delivering value to all stakeholders and good returns on equity.

Chris Ellinghouse, Analyst — Siebert Williams Shank

Okay. And with SB 688, can you just sort of talk about how you envision, you know, utilizing PBRs?

Maria Pope, CEO

So when we look at what you're, the bill that you're referring to is what we call the POWER Act. And as we look to that, we're looking at performance metrics that are connected to our core work. You know, I don't, in terms of performance rate making, you know, I don't think, we've been long talking about this with our regulators, and we're not, I'm not overly concerned about working through these issues. Obviously, we need clean energy, energy efficiency, and these aren't new concepts. In fact, you probably know that we have some of the most productive energy efficiency programs in the entire country. And Portland General Electric's customers, we have the number one clean energy program. But as we also look to serving a diversified and growing customer base, particularly data centers and semiconductors, all of these things work together.

Chris Ellinghouse, Analyst — Siebert Williams Shank

In the MOU, and it's probably fairly irrelevant given the timing of the next GRC filing, but, you know, going forward into the future, does that MOU have any bearing on utilization of arms in the future?

Maria Pope, CEO

No, I think we'll continue the conversations and keep looking at what's going to work best, given the different work we have in front of us and how we can best serve customers. Do you want to add something?

Joe Trpik, CFO

The MOU is a one-time item specific to these, and then the same thing with the ARM. The ARM is a specific item. And, you know, the way we think of the ARM seaside, they're a nice bridge between now, the next rate review, and then ultimately a multi-year plan. You know, we think this ties nicely with the, you know, the legislation that's come out there on the timing of rate cases. It continues to tie to our overall growth plan of just how these rate reviews can be laid out in a way where we can keep the cost as low as possible for the customer. we can manage our costs and do some internal items that really just bridge us across what is a longer period of time and create some clarity and certainty as we work through the regulatory framework over the next few years.

Chris Ellinghouse, Analyst — Siebert Williams Shank

And lastly, you gave us a bunch of dockets to peruse for the weekend. Are you still expecting the Seaside intervener testimony today to be filed?

Maria Pope, CEO

Hopefully. I would also say that there's more still to come. So, Chris, you should be expecting the DSP later this afternoon, and clearly you've got all of the HULTCO, TRANSCO filings this morning.

Chris Ellinghouse, Analyst — Siebert Williams Shank

Yes, you gave us a lot of homework. I appreciate that.

Maria Pope, CEO

Thank you.

Chris Ellinghouse, Analyst — Siebert Williams Shank

Okay, thanks. I appreciate the caller.

Maria Pope, CEO

Thank you.

Operator

One moment for our next question. Our next question will come from the line of Julian DeMolen-Smith from Jefferies. Your line is open.

Maria Pope, CEO

Good morning, Julian.

Brian Rousseau, Analyst — Jefferies

Hi, good morning. Hey, it's Brian Rousseau on for Julian. Good morning.

Maria Pope, CEO

Good morning, Brian.

Brian Rousseau, Analyst — Jefferies

Hey, just with the House Bill 3179 and the DSP filing in the arm, how would you see your ROEs trending until you get new base rates? I think 2025 guidance assumes in 88 to 91 versus your 934 percent allowed ROE. Do you think you can maintain that type of return level, or should we expect any sort of degradation, you know, given the timing of the next base rate case?

Joe Trpik, CFO

So, good morning. You know, our intention here is that the combination of, you know, our cost management actions, the timing of these cases is to really continue in that same type of earnings band. We don't expect to see any additional lag. I think the range that you derived of the earned ROE site continues to be where our expectation lies with even considering this legislation. In all honesty, our regulatory plan, our growth plan contemplates something very similar to this. So we'd expect our performance, that relative earned to allowed, to be consistent over this period.

Brian Rousseau, Analyst — Jefferies

Okay, great. And the 23 CEP IRP update actually calls for 800 megawatts more of renewables and storage. And I'm just curious, you know, with the OBBB, and does that increase Portland General's competitiveness to essentially improve the win rate, which I think, you know, historically has been about 25 percent?

Maria Pope, CEO

So we talk about 25% as sort of a baseline that's in our financial forecast, but our actual performance has actually exceeded that. As when we work with parties on projects that end up as ownership, we're only focused on Portland General Electric customers. We're not looking at other customers to serve. So we're more focused on what would meet the needs of this specific region. and also making sure that we're very cost-conscious and cost-competitive, as these are all least-cost, least-risk competitive projects. We've done well in the past, and we also have a number of PPAs that come into our service territory as well. And actually, you can see those in the financial statements because we pull them out somewhat separately on the energy procurement line. So we have a balance with all parties to make sure that we're achieving least cost, least risk, clean energy options for customers.

Brian Rousseau, Analyst — Jefferies

And then lastly, assuming a 12-month review and approval process for the Hold Co., how should we think about kind of the 8 August 2026 kind of new structure and capital markets initiatives? Is it $300 million a year still applicable with 50-50 financing for RFP? related investments, or is there something about this HoldCo structure that can alter that and, I guess, just make it more efficient?

Joe Trpik, CFO

Yeah, so, I mean, so as it relates to the HoldCo, you know, we look forward to working through the proceeding here through to next year. You know, the goal of the HoldCo is to drive flexibility. So as the HoldCo gets ultimately defined and put in place, and as a reminder, right, in addition, there would be a TransCo, we will evaluate what flexibility it provides, how it allows us to yield you know greater benefits for our customers as well as us and and and in that time we will also rethink what that means to our financing plan we really just we'll want to wait and see how this lays itself out and then how do we you know most efficiently over time drive drive what benefits will come from having the whole town okay great thank you very much

Operator

thank you one moment for our next question our next question will come from line of Nicholas Campanella from Barclays. Your line is open.

Nicholas Campanella, Analyst — Barclays

Hey, thanks. Happy Friday. Happy Friday. Yeah, a lot of good questions. Just a quick follow-up on the RFP repricing. It sounds like you still see a good opportunity for ownership in any outcome, but just with prices potentially being higher, is that additive to the current 9% rate-based CAGR that you show in slides? Are there offsets elsewhere in the plan? Can you just kind of talk about, like, competition for capital in the plan at this point, and then, you know, how you think about financing that?

Joe Trpik, CFO

So, you know, as it relates to our base plan that we show as a specific capital, right, obviously doesn't include the results of the RFP, and then we have the illustrative growth. I mean, this really just underpins that illustrative growth that we show at a 25% rate, right? You know, we yielded about a 60% win rate in 2021. But we really just think that the reprice here gives an opportunity to drive this certainty. We think it yields a very similar opportunity set for both the overall megawatts as well as, you know, our performance in the overall portfolio. I mean, we just think of it as the reprice here is driving certainty into what, you know, what has been a bit of an uncertain time.

Nicholas Campanella, Analyst — Barclays

okay okay and then just these distribution filing that you're going to be putting out there today you know if that if that gets approved and then you're then going in to file the next case after that just what do rate cases look like if you have this type of structure in place going forward I would imagine that they're less onerous from an ask level but maybe you can kind of talk through some of the puts and takes around the benefits of that

Maria Pope, CEO

You know, I think we look at the overall puts and takes, you know, sort of in the totality of the whole. And it's really based on good conversations with all stakeholders, ensuring that we have alignment on the work that we're doing, keeping customer prices as low as possible, but ensuring that we are supporting and enabling the growth across the region that is making a difference in our economy.

Joe Trpik, CFO

Nick, if I could add, right, so we're, when we think to the cases, right, I mean, we've been pretty clear on, you know, you have the seaside tracker, and then you have the DSP, and then some kind of a rate review, you know, within the committed period, right? And the goal here is to have predictability both on our side as well as the stakeholder side. It allows us to have time to continue to drive the cost benefits that we're driving into the organization to yield here. But ultimately, you know, I think of these all as steps along the path to get towards a multi-year plan, which gets to a place, I think, for both parties where we can, you know, get clarity and have clarity over longer periods of time here instead of, you know, some of these small steps. Although I think right now, I think there's some pretty clear, thoughtful, aligned steps that we have.

Nicholas Campanella, Analyst — Barclays

All right. We're looking forward to seeing it. Thank you.

Operator

One moment for our next question. Our next question will come from the line of Greg Oral from UBS. Your line is open.

Greg Oral, Analyst — UBS

Good morning, Greg. Yeah, good morning. I was just wondering if you could sort of talk about the balance of year sort of earnings bridge versus last year, sort of the, you know, the variable power margin, you know, drivers to kind of bridge the gap there, which I think is around 40 cents is my point.

Joe Trpik, CFO

You know, 2020, 2024 and 2025 are a little bit of a challenge to compare. As you recall, in 24, very front end loaded. Now, we came in above the midpoint of our guidance there on the actual results, but a lot of that earnings was in the first half of the year, and it was weighted to what were some pretty favorable market conditions that occurred both on a load consumption side but also on a favorable pricing side at the same time. And if you recall, in Q3 and Q4 of last year, we tailed off pretty significantly to where Q4 was quite a low performer. And this year, you know, based on the way that the energy markets have set themselves up, based on the way that the cost management and the cases have set themselves up, we see this as a much more evenly distributed plan. And, you know, we just need to continue from where we sit right now, continue on our path to just staying on our net variable power cost plan to hit our results. So we think this year is a lot cleaner and not as unusual flow, right? The last year is the one that's causing more of the uncertainty. And we're pretty competent. I mean, based on where we sit cost management wise, understanding we had a warmer April and May, we feel we're set up pretty well to have a solid performance considering normal bands of market price and load consumption.

Greg Oral, Analyst — UBS

Okay. Thank you, Joe.

Operator

One moment for our next question. Our next question comes from the line of Sophie Karp from KBCM. Your line is open.

Sophie Karp, Analyst — KBCM

good morning thank you for taking my question um and i appreciate the comprehensive update this week this morning so i just kind of wanted to dig a little bit more on what nick was asking so with the seaside tracker in place i guess and the distribution recovery separate how much capital would you say even would be subject to general rate reviews and canary cases going forward is Is there, like, a percentage you can think of to help us think about how the importance of rate cases might be diminished in the future?

Maria Pope, CEO

Sure. You know, I think the best way of taking a look at that, Sophie, is looking at our capital plan as we go forward. And you'll see that the bulk of our capital spent, and it's on page seven of the slides, is in the distribution area. Much of that is reliability-related work that we do. Much of this area that we serve grew quite dramatically about 60 to 40 years ago, and that equipment is getting older and it's quite a bit of replacement. We also have the renewable adjustment cost, the RAC, for all wind and solar projects, and so that's another way that we can have customer prices tracked in. And then we also have for Wildfire, the AAC as well. So there's a lot of good work to create more predictability, which also enhances our ability from an operational planning standpoint along executing along five-year discipline plans.

Sophie Karp, Analyst — KBCM

Right, right, right. So, yes, that sounds like a lot of the capital will be recovered more contemporaneously through these mechanisms. Can you remind us what would government, I guess, say, allowed ROEs over this entire kind of portfolio of capital spend? Is that the ROE that's going to be set in this rate review or separate proceedings? How's it going to work?

Maria Pope, CEO

So taking a look at the ROE would require a general rate case. And we're planning on that, you know, in the future. But right now we have a really good bridge through great recovery of our recovery opportunities at the capital we've just discussed, as well as a number of other improvements from our cost structure, as well as financing alternatives.

Sophie Karp, Analyst — KBCM

Great, great. Thank you. And lastly, for me, I guess, I'm assuming your next rate case would be a multi-year rate case already?

Maria Pope, CEO

You know, that is, we're going to start having that discussion with parties, and I wouldn't want to front run the conversations. There's benefits to that that allow for greater certainty of sort of the blocking and tackling kind of capital that we do, which we've long benefited from in terms of clean energy.

Joe Trpik, CFO

I think, Sophie, right, we think we have a clear path to ultimately get to it. I mean, it'll be up to, you know, just working collaboratively with the groups to determine if that case is it. But we think, you know, we are well on the path here. And it's just a matter of, you know, a matter of which case it will follow.

Sophie Karp, Analyst — KBCM

Sounds good. Thank you. I appreciate the time. Thank you.

Travis Miller, Analyst — Morningstar

One moment for our next question.

Operator

Our next question will come from the line of Anthony Crowdel from Mizuho. Your line is open.

Anthony Crowdell, Analyst — Mizuho

Hey, good morning, team. Morning. Hey, I wanted to jump on Nick's question. And I think Nick was jumping on Richard's question, but I just said you may not want to answer it. On one of the other earnings calls we had earlier this week, one of the companies was talking about when you look at renewable projects and there's changes in tax law, or I'm just going to use the word, like there's some turbulence in the whole business model, it's benefited certain developers and hurt other developers. And when you guys had mentioned, I think your forecast is based on a 25% win rate from the RFPs, but you've achieved kind of, I think you said, a 60% number. Do you see those numbers changing in the repricing of the RFPs?

Maria Pope, CEO

No, you know, I think as we look, as we go forward, we're going to see what kind of projects come forth. We do have a number of very beneficial partnerships with developers, but we also have a number of completely third-party developers that bid in. The 25% that you're referring to is illustrative in our forecast and sort of a baseline. As Joe mentioned, our most recent build percentages were about 60%.

Joe Trpik, CFO

You know, to add on, you know, with where the IRP update sat, we believe that in this, you know, this reprice, there is plenty of room for all parties here. We expect, you know, to have pretty solid performance. You know, and back to Maria's, you know, we use the 25% here is solely a guide.

Maria Pope, CEO

I think we need to remember that we have a great window while we have investment tax credits and production tax credits that can significantly reduce the cost of clean energy in customer prices.

Anthony Crowdell, Analyst — Mizuho

Got it. And then I want to jump on Richard's question. I think that was on the business transformation and optimization, and you talked that you would see that through 2025, those chargers, and we'd start to see them benefiting in 26. And my question is, did I hear that right? And do we see the same magnitude or the actual amount of the chargers, or does that improve as we move closer to the beneficial part of it?

Joe Trpik, CFO

You know, so the charges will taper into 26, but the charges are more front-end loaded here, right? We're making some pretty significant investments here that are the biggest investments on the spend side are going to be here in 25. They'll trickle into 26 here. And really just the true then benefits will really start to materialize. Obviously, there are already benefits this year will materialize next year. You know, we view the benefits that we'll see next year combined with the regulatory items as we talk to you is really part of our nice, clear path to continue to perform in our earnings span. You know, and overall, if you think to the cost, you know, pretty solid performance. But because we're trying to drive transformational change, we're going to thoughtfully step into these changes over time. But even with that, the payback period of time from investment to true net return is really right around a year or less.

Anthony Crowdell, Analyst — Mizuho

In our forecast, and I think this is to Brian Russo's question, should we be updating our assumption for earned return once this program starts yielding fruit, or that's not what you're trying to tell us?

Joe Trpik, CFO

So, no, what we're saying is we believe, so our earned return guidance I believe we've given you has somewhere around, you know, at 70 basis points or so at the midpoint. We believe that, right, our plan that we have now, we will hold that type of item, right? That has, that's a compressed number from what you've seen before. But we believe that the cost management plan will continue to, you know, continue to allow us to earn, to get that earned ROE and that higher range that we've talked about in our guidance.

Anthony Crowdell, Analyst — Mizuho

Great. Thanks so much for taking my questions, and congrats on a good quarter.

Maria Pope, CEO

Thank you.

Operator

Thank you. One moment for our next question. Our next question will come from the line of Travis Miller from Morningstar. Your line is open.

Travis Miller, Analyst — Morningstar

Good morning, everyone. Thank you. I think you've answered the multiple derivatives of all of my questions, but I have a higher level, maybe different subject here. As you get more of this industrial demand growth and that becomes a larger share of your total demand, how do you see that now? Or how do you anticipate that changing purchase power costs, that variable costs, anything involved in the wholesale market? I was wondering if an industrial demand comes with a different type of pricing environment or if that's the right word to use.

Maria Pope, CEO

So, first of all, that's a great question and a complex question. The first is that under some of the legislation that just recently passed, it's the POWER Act, and in the spirit of Chris Allenhouse, I'll give you the number. it's UM 2377, we are able to do long-term contracting with key customers, in particular with data centers, 10-year-plus contracts, which will make a big difference in how we're able to securitize that investment into infrastructure and enable better financing long-term. From a power cost standpoint, that will go all the way into generation projects, which should overall reduce power cost pressures on all customers. From the power cost side, many of the things that we have been doing have made a tremendous difference already. I would note that we have just under 500 megawatts of battery storage, which is really smooth customer prices, particularly during these critical periods of the summertime and cold winter days. but also are advancing across Western-wide energy markets. We've announced our intention to join the energy day head market led by the California Independent System Operator, and that will also make a big difference in terms of procurement westwide and taking advantage of excess renewable energy generated in the desert southwest and in California. We've seen remarkable change in power flows already, and we expect to see more, which will only benefit customers in our region as we work to lower costs.

Travis Miller, Analyst — Morningstar

Okay, that's great. Appreciate that. All of that that you talked about, and especially with the contracting opportunity, will that reduce some of the earnings exposure to net variable power costs or no change in that earnings exposure?

Maria Pope, CEO

I think where we need to go to on the net variable power cost side is really looking at the underlying rate design, some improvements that we can make in our PCAM mechanism, as well as the volatility that we just see as an evolution of the growth of the region and the tighter markets overall, as well as balancing that with the energy day ahead market. We're going to have to rationalize how these work because there are some conflicts that we will experience in the late fall of 2026 after we go live with EDAM.

Travis Miller, Analyst — Morningstar

Okay, perfect. I appreciate it. And one quick clarification. The timing of that base rate case, is that part of the DSP or the MOUs, or is that just your anticipation of when you might need a base rate case or a GRC?

Joe Trpik, CFO

Go ahead, Yel. In the MOU, we have an agreed upon of a not before, a filing of not before that Q2, or the beginning of Q3 in 2026. So that is an agreed upon. Okay, but you don't have to.

Nicholas Campanella, Analyst — Barclays

You don't have to file.

Travis Miller, Analyst — Morningstar

That is as early as we could. That's correct. Got it. Okay, thanks so much. I appreciate it. Great, thank you.

Operator

Thank you. I'm not showing any further questions in the queue. I would like to turn the call back over to Maria Pope for closing remarks.

Maria Pope, CEO

Thank you for joining us all today. We appreciate your interest in Portland General Electric, and we hope to connect with you soon. Thank you very much. Have a great day.

Operator

Thank you for your participation in today's conference. This has concluded the program. You may now disconnect. Everyone, have a great day.