Spire Inc (SR) Q2 2020 Earnings Call Transcript

Good morning, and welcome to our second quarter earnings call. We issued our earnings news release this morning, and you may access it on our website at spireenergy.com under Newsroom. There's a slide presentation that accompanies our webcast, and you may download it either from the webcast site or from our website under Investors and then Events and Presentations. Presenting on the call today are Suzanne Sitherwood, President and CEO; Steve Lindsey, Executive Vice President and Chief Operating Officer; and Steve Rasche, Executive Vice President and CFO. Before we begin, let me cover our safe harbor statement and use of non-GAAP earnings measures. Today's call, including responses to questions, may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although our forward-looking statements are based on reasonable assumptions, there are various uncertainties and risk factors that may cause future performance or results to be different than those anticipated. These risks and uncertainties are outlined in our quarterly and annual filings with the SEC. In our comments, we will be discussing net economic earnings, contribution margin, adjusted EBITDA, and adjusted long-term capitalization, which are all non-GAAP measures used by management when evaluating our performance and results of operations. Explanations and reconciliations of these measures to their GAAP counterparts are contained in our news release and the slide presentation. So with that, I will turn the call over to Suzanne.

Thank you, Scott, and good morning to everyone joining us for our second quarter update. I'd like to begin by acknowledging that we're all adjusting to a new normal. As we focus on staying safe and healthy during the coronavirus, we're living in a world of video calls, FaceTime, webcast, working from home, wearing face masks and washing our hands frequently, and we're connecting in new ways. Many of us aren't in our offices and aren't able to see one another face to face. In fact, today is the second time in nearly 2 months, that Steve Rasche, Steve Lindsey, and I have been in the same location. Rest assured that we're maintaining safety protocols and getting the job done. It's not easy to stay connected in times like this. At Spire, connecting with us should feel like a handshake at the front door. But without the ability to actually shake someone's hand, we have found ourselves leaning into other expressions of caring and friendship. Like how we listen, how we check on our elderly neighbors, how we smile, and wave hello to strangers. It's how our crew starts work, taking off their hat and putting their hands over their heart when a funeral procession drives by. These moments of connection and caring inspire the good in all of us and provide the energy to walk through a time like this. A time when some communities are impacted more than others but none go untouched. A time when we understand how essential our service is and how people count on us to deliver. A time when safety has an expanded meaning and Personal Protective Equipment becomes an everyday necessity. But at Spire, it's easier for us to pivot. We have a very clear mission that guides us: to answer every challenge, advance every community, and enrich every life through the strength of our energy. You see, we believe we are called to address every challenge that arises. We know that people rely on our energy every day and that we are an essential service. We know that we cannot let our customers and communities down, and we know that safety is a core value, central to every decision we make. It's because of this deeply held belief that we have implemented a broad range of protective steps to address the coronavirus health crisis and its economic impact on our customers, while passionately protecting the health and safety of our employees and communities. We began in early March by activating our incident support team, a cross-functional team of 25 leaders from operations and all shared services. The IST has been meeting nearly every morning to discuss challenges, solve issues, and coordinate actions, from HR policies to supply chain access to PPE and impact to employees, customers, and operations. By the middle of March, we activated the highest level of our crisis response plan by convening our crisis management team. I asked Steve Lindsey to lead this team. Steve immediately gathered all of our Chief Officers and Business Unit Presidents to quickly make executive decisions around broad-ranging challenges. Steve will talk more about this in a moment. From my perspective, I would like to say that it has been inspiring to watch the IST and CMT work together, bringing a collection of expertise to our conversations from the very professional perspective of Spire's leadership to our external involvement with the American Gas Association and our firsthand conversations with medical experts via the many hospital boards we serve on. Together, we are careful to balance the needs of our many stakeholders, including you. We are communicating early and often with all employees and customers. We are connecting regularly with our Board and keeping our governors, legislators, and regulators informed every step of the way. Importantly, the CMT is very aware of the impact our decisions have on people. Our goal is to flatten the curve and help control the spread of coronavirus while safely and reliably providing energy for our customers and communities. Thankfully, our largest operations are in Missouri and Alabama, areas of the country that have been minimally impacted by the pandemic. In fact, only 11 of our 3,500 employees have tested positive for the coronavirus, and all but one person is back to work. While we work to meet the challenges created by the coronavirus, we remain focused on our strategy to deliver growth and value. By growing organically, investing in infrastructure, and advancing through innovation. We continue to take steps to ensure that we remain strong, both financially and operationally. We will hear more on that from Steve and Steve when they discuss our capital spending, including investments in new business and infrastructure upgrades as well as our updated CapEx forecast that supports our long-term growth outlook. As reported in our earnings announcement this morning, our second quarter net economic earnings per share was below last year and our fiscal year 2020 plan. As Steve Rasche will discuss in more detail, the results were driven by lower margins due to warmer weather across our footprint, margins that were not fully mitigated by a regulatory mechanism. However, our results were minimally impacted by the coronavirus. And finally, we will spend some time updating you on our process as we continue to pursue favorable regulatory outcomes across our jurisdictions, focusing on the ISRS case and filings in Missouri. With that, I'll turn the call over to Steve Lindsey to discuss our results and coronavirus responses in more detail.

Thank you, Suzanne. I want to begin by acknowledging the outstanding efforts of our employees during the difficult times brought on by the coronavirus and the resulting economic shutdown. We're providing great service to our customers while taking extra care to ensure their health, safety, and well-being as well as your own and helping support our communities in this time of need. And we all thank you very much. Suzanne mentioned we quickly activated the CMT with 10 primary areas of focus. This morning, I'd like to take a moment to outline the steps we've taken to address the coronavirus and limit its impact on three of those areas: our employees, customers, and communities. Keeping these stakeholders healthy, safe, and supported is more than a priority for us; it’s a core value. It's who we are at Spire. For our employees, we have educated everyone on healthy practices and encouraged people to follow the advice of experts, including the CDC and other public health organizations. Our guidelines include staying home when not feeling well, frequent hand washing, social distancing, and other best practices. We implemented policies to help employees deal with the impacts of the coronavirus, including taking care of family members or dealing with children being home from school. An example of this is the implementation of our emergency LIHEAP program. For our field workers and technicians, we have taken extra safety precautions to protect them and our customers. We pre-screen a customer's premises to ensure that no one is sick or symptomatic before we allow our workers to enter a home or business. We equip our employees with Personal Protective Equipment. For our office-based employees, we implemented a work-from-home policy starting in March and extending through May. Along with work from home and social distancing, we've also implemented related policies to eliminate all non-essential travel as well as group meetings and gatherings. Across our company, we stepped up the frequency of cleaning and sanitizing our work locations. Currently, we're developing work transition plans that include reopening offices and facilities. For our customers, we are first and foremost focused on making sure they are well served and that we continue to provide safe and reliable energy they have come to rely on regardless of the situation at hand. To help reduce customer contact and limit the potential for spreading the illness, we postponed work that wasn't time-critical or urgent and to help our customers through what is surely a difficult time financially, we worked with our regulators to suspend involuntary disconnections and late fees through the end of May, while also expanding customer bill assistance programs. As a company, we have pledged $500,000 in matching gifts to augment the contributions made by customers and employees into our DollarHelp program. Thousands of customers have already signed up to give, and their match gifts total more than $300,000 so far. Similarly, we have donated $250,000 to local area food pantries and meal programs. From Alabama to Wyoming, we're helping provide about 650,000 meals for families struggling to make ends meet during this time. We also led an effort with other companies to donate and set up laptops for children in income-limited schools, so they're able to learn from home. Since we're all in this together, we've been coordinating and maintaining close communications with various state and local government bodies, healthcare organizations, and industry groups to ensure that we are doing the most good by leveraging our collective energy and resources. While we've been hard at work to address the impact of the coronavirus and serve our customers well, we've also remained focused on our business objectives centered on growing our company. We continue to invest in organic growth and infrastructure upgrades across our utilities. For the first half of fiscal 2020, we invested $53 million in new business, keeping pace with last year's record levels of investment and new premise activations. Our investment in our utilities is expanding. Year-to-date, we've invested $279 million focused on new business and pipeline replacement, which is up $24 million or nearly 10% over the first half of last year. Our gas-related business side saw our spend actually decrease year-over-year, largely due to the completion of the Spire STL Pipeline. For the full year of fiscal 2020, we've increased our planned capital spend to $640 million, up $30 million from our prior forecasted investment. About 88% of our 2020 spend will be on our gas utilities, with two-thirds of the increase or about $20 million attributable to utility investment. We also plan to invest $10 million in the third quarter at Spire Storage. Regulatory mechanisms we have, including incentives to accelerate system upgrades in Missouri and Alabama and real-time freight making in Alabama, are key to timely recovery and support infrastructure modernization, earnings growth, and better environmental performance through reduced methane emissions. As you know from our discussion last quarter, in Missouri, we have been working through a number of ISRS cases decided by the Missouri Public Service Commission going back to 2016 that have been challenged and appealed by the Office of Public Counsel and resulted in adverse appellate court rulings late last year. At the time of the appellate court orders, we said we would pursue all avenues: legislative, judicial, and regulatory to preserve our ability to continue investing in the safety, reliability, and environmental performance of our pipeline system while achieving timely recovery. At the start of the Missouri legislative session in January, we worked to introduce bills in both the House and Senate to clarify the ISRS statute as it relates to the eligibility of infrastructure upgrade spend for accelerated recovery. The Senate Bill passed early March. On May 6, the House passed the substitution of the Senate Bill. Given the differences between the versions passed in each chamber, the legislation will now go to a conference committee to reconcile the two versions. Meanwhile, we have continued to file new ISRS requests, including one in early February. Late last month, we, the staff of the Missouri Public Service Commission, and the Office of Public Counsel reached a unanimous stipulation and agreement subject to Missouri PSC approval, that would result in an $11 million annualized increase in ISRS revenue. Regarding the cases subject to the appellate court ruling, these have been remanded back to the Missouri Public Service Commission for final resolution following the denial of our request for the Missouri Supreme Court review in mid-March. The commission has 120 days or until the middle of July to render a decision, including whether any refund is required. For anyone who would like more detail on the various ISRS cases, there's a table in the appendix of our slide presentation today. Finally, in Alabama, we have been implementing a new off-system sales and capacity release program that went into effect December 1. We're also continuing to pursue the benefits of the accelerated infrastructure modernization rider and are on track to achieve the threshold number of miles replaced this year in order to qualify for the ROE adder in 2021, as we received this past year.

Good morning, and let me add my wishes for good health and safety to everyone and a huge shout-out to all of our first responders, healthcare workers, and our own team who continue to serve courageously every day. Let me cover our quarterly results, the financial impact of coronavirus and an update to our targets for the second half of our fiscal year 2020. Turning to our results for the quarter. We delivered consolidated net economic earnings of $144 million, down $3.9 million from last year. Our gas utility posted earnings of just over $144 million, down $2.4 million from last year as a result of warmer weather and losses on investments. Gas marketing delivered earnings of just over $5 million, down just over $1 million from last year as higher volumes from our expansion were offset by less favorable market conditions and higher costs. We saw higher earnings from the Spire STL Pipeline, which entered service last quarter, and a lower loss from Spire Storage, reflecting the benefits of our operational improvements and slightly higher corporate costs. Looking at our per share results, current year earnings of $2.75 per share were down $0.15 from last year, reflecting lower earnings as well as the impact of preferred and common stock issued over the last 12 months. I'd offer two additional comments. First, as Suzanne mentioned, we characterized the financial impact from coronavirus this quarter as limited since it really didn't hit our service territories until mid-March. More on the forward impact in a few minutes. And secondly, as reflected here, net economic earnings continues to include all ISRS revenues; in other words, excluding the provision we booked for GAAP purposes. For this quarter, ISRS revenue subject to a provision was $2.2 million, including interest, bringing the cumulative provision at March 31 to $16.9 million. Overall, weather this quarter was warmer than normal by 11% in Missouri and by 26% in Alabama. Compared to last year's colder weather, we saw margins in Missouri decline by $3 million. Slightly lower residential volumetric margins were offset by higher net ISRS revenues, combined with a significant drop in commercial margins. Our Southern utilities showed margin growth as lower demand was offset by annual rate increases. Margins were also significantly below our expectations of normal weather and mitigation mechanisms that offset that exposure. Again, in our southern service territories, the mechanisms worked largely as planned. In Missouri, however, we saw a $7 million negative impact to margins against normal weather, which consists of two components. First, the new weather normalization tool introduced in our last rate proceeding should ensure that we get the correct recovery of the residential volumetric charge, not over-collecting in cold periods and not under-collecting in warmer ones. While the mechanism did address a portion of our weather deficiencies this quarter, we estimate it was ineffective by 6% or roughly $5 million. Secondly, we saw a shortfall in commercial and industrial margins that do not have weather mitigation in Missouri, even for smaller, more weather-sensitive customers. Total impact here was about $2 million. We clearly have work to do, both working with our regulators to improve the effectiveness of our weather mitigation in our next Missouri rate proceeding; and generating earnings from other sources in the back half of 2020 to offset some of this headwind. There were two other key variances this quarter: O&M expenses and other expenses as shown here on Slide 13. Total O&M expenses, as reported, were down $12.6 million. Although we have a history of cost control, this reduction reflects the benefit of a regulatory deferral of a pension remeasurement charge, with the offsetting expense recorded in other expenses. Excluding this adjustment, our run rate utility O&M was up $2.9 million, or 2.6%, due to higher operations and employee costs. The remaining O&M expenses represent higher marketing costs due to our business growth and the cost of the Spire STL Pipeline, which is now in operations. The other key variances in other expenses reflect a run rate increase after the adjustment for the pension remeasurement of $6.5 million, reflecting two items: prior year Spire STL Pipeline, AFUDC, which no longer exists now in our operating numbers; and a $3.6 million swing in returns on investments held to support our non-qualified benefit plans. Not surprisingly, this year, we saw unrealized losses this quarter compared to a much stronger earnings stream in the first quarter of 2019. I would note that the explanation of all cost variances, contribution margins, and our review of our year-to-date results are included in the appendix to this presentation for your reference. Since the health crisis began, we've been focused on our liquidity position. Drawing on our credit facility in mid-March as the commercial paper market became uneconomic. In late March, we secured a $150 million term loan to provide additional liquidity. We stand at a strong financial position, with total available liquidity at March 31 of $661 million and a solid long-term capitalization as well. In fact, we issued equity early in the quarter, with proceeds of just under $10 million. As we turn to the coronavirus impacts on our operating results, a bit of perspective: roughly 70% of our earnings and margins are residential, and the current health crisis hit near the end of the winter heating season, when we earn a majority of our return. As a result, we've been relatively insulated so far from the economic downturn. We are watching closely our commercial and industrial customers, especially the smaller firms who are bearing the brunt of the current shutdown, and we are tracking the incremental cost of the actions that Steve and Suzanne touched on earlier. None of us have a crystal ball to predict how the situation will play out. Based on what we know today, including data and regional economic projections, we have constructed a forecast of key impacts based upon several assumptions. From an economic standpoint, we anticipate continuation of the downturn through this quarter and then a slow ramp-up in activity that will stretch at least through the rest of calendar 2020. From an operational standpoint, normal weather, a return of normal collection activities, disconnection, and late payment fees as well as minimal disruption for our construction crews. Based on these assumptions, we have estimated the following financial impacts. As a result of our moratorium on fees, we anticipate losing fee revenue of roughly $1.9 million. We have seen a decline in our commercial and industrial margins, reflecting both the temporary shutdowns of large manufacturers and the anticipated lower demand from our smaller commercial accounts. We estimate this impact to be approximately $2.2 million. We have not yet seen significant changes in our residential margins, and we will continue to monitor that closely. However, we are anticipating a significant increase in bad debt in the coming quarters. To estimate our exposure, we revisited our records from the last recession in 2008 and 2009, when we saw bad debt expense as a percentage of revenue increase about 20 basis points over normal levels. Applying that experience to our current book of business results in an estimated exposure of $3.5 million. Of course, we're tracking other direct costs, including the cost of PPE, enhanced facility cleaning, employee costs for lost time, among others. We are pursuing opportunities to offset these headwinds, including identifying costs that would naturally be lower as a result of stay-at-home orders such as travel, and finding additional operating efficiencies. We’re also working with our regulators to deal with the immediate impacts on our customers and our business during the quarter and now discussing potential regulatory treatment of the increased costs, including bad debts, and the costs of responding to the health crisis and helping our customers recover. Stepping back, our estimates are based upon a current view of the economic recovery. Looking forward, we remain on solid ground and are focused on growth. As Steve mentioned, we've upgraded our capital investment target for the year to $640 million. Additionally, we have updated our 5-year capital investment target through 2024 to $2.8 billion. That level of investment, driven by utility infrastructure upgrades, should drive rate base growth of between 7% and 8% for the forecast period. In addition, we reaffirm our long-term net economic per share growth target of 4% to 7%. Given the current uncertainty surrounding the resolution of our Missouri ISRS recovery, we will continue to refrain from EPS guidance for fiscal year 2020 at this time. Finally, our financing plans remain on track, with only modest equity needs for the remainder of 2020. So in summary, we’re in solid shape and remain focused on delivering for all our stakeholders. With that, let me turn it back over to you, Suzanne.

Thank you, Steve, and Steve. As we close today's presentation, I think it's important to take a moment to acknowledge the strength of our collective energy. Spire's utilities have been operating for more than 160 years. Thanks to great leadership, partnership, and a legacy of hardworking, caring employees, we have survived wars, the Great Depression, weather disasters, and the 1918 influenza pandemic. With this long successful history, and with the support of our investors, communities, and public policy leaders, we will work our way through the impact of the coronavirus. We'll do it together, and we'll do it in a way that brings sustained long-term value for our shareholders, customers, and the communities we serve. Before we open for questions, I'd like to thank Spire’s employees, many of whom are listening to this webcast. I know how hard you work, and how much you care about one another, our customers, and the communities that we live and work in. You make me proud every day, and I am forever grateful for the way you rally to answer challenges. You are leaders, conveners, helpers, heroes. You understand that fundamentally, energy exists to help people and you give your all to deliver energy safely, reliably, and with all your heart. To the investors and analysts on the call today, thank you for your investment and trust in us. On behalf of our Board of Directors, our executive team, and our employees, we take that trust very seriously, especially during these uncertain times. We look forward to seeing you again soon, either as part of the upcoming virtual AGA Financial Forum or other virtual conferences and roadshows in the months ahead. Of course, we look forward to the time when we can once again meet face to face. Until then, we wish you well and trust that you will stay safe and healthy. Now we'll take your questions.

The first question comes from Richie Ciciarelli with BofA Securities.

I hope everyone is healthy and safe today. Can you explain the differences between the two versions of the House and Senate Bill and what you expect the reconciliation to look like? Additionally, regarding the recent settlement with the ISRS filing, what changed this time with OPC that allowed for a settlement?

Richie, this is Steve Lindsey, and I appreciate you calling in this morning. On your first question relative to the legislation, there are really not that many differences between the House and Senate bills in terms of content. They have some things that get attached as they go through the process. We are fairly consistent with those bills. What they're trying to accomplish is reinforcing the intent of the statute set in place over 15 years ago, primarily around infrastructure upgrades, particularly surrounding bare steel and cast iron, and codifying some of that in terms of the language. Therefore, I don't think there is a substantial difference between those two, and that’s why when it goes back for reconciliation, there will be cleanup around the things that are attached. Regarding your second question about the stipulation, we've been working collectively. We felt that the pipe we've been replacing meets all requirements relative to what needs to be part of the infrastructure upgrades, including in the ISRS program. This primarily focuses on the bare steel and cast iron and their criteria for replacement. Providing additional evidence supports that we believe this is progress.

Got it. That's very helpful. And then just around your CapEx profile. I think you might have been one of the few companies to raise your spending this year for 2020. Just curious, what's given you the increased confidence to execute on the plan this year, given the headwinds with COVID-related pressures?

Richie, this is Steve. Great question. A couple of things. First, the downside, the warmer weather that has impacted our margins provides a little bit better working conditions on our capital spend. As we've now transitioned to the heart of our capital spend, we intend to ramp up our capital spending even as we contend with these challenges. Additionally, the playbook for utilities is how we can offset both the headwinds from weather and those from coronavirus, and ramping up our capital spend is a crucial part of that strategy. It helps get us back to work, and we’re doing it under the cooperation and understanding of leaders throughout our states and jurisdictions. This ensures we are doing the right thing by upgrading our infrastructure while making our business more resilient.

And Richie, this is the other Steve. Let me follow up from an operational perspective. While this past quarter was only several weeks in terms of measurement period, we never truly stopped working. As we talk about returning to work, we consider it more of a transition. Our construction and capital projects never slowed down. We did change some of our procedures around Personal Protective Equipment and limited entering homes for service tie-overs and changeovers, but our frontline employees and management successfully kept the momentum going on infrastructure work. Our capital for these programs is fairly evenly distributed across our three major operating areas in Missouri, the West, and Alabama. We believe this balance is beneficial to our overall strategy.

The next question comes from Michael Weinstein with Crédit Suisse.

I was wondering if you guys have a better sense at all how legislation would preclude the need for a ruling at the Supreme Court or not at this point after confirming with your lawyers and maybe outside counsel.

Michael, this is Steve. The opportunity for the Supreme Court, at least for the appellate court rulings, has already passed. They opted not to take the appeal we and the Public Service Commission put forth. Therefore, the legislation that Steve Lindsey discussed is the best opportunity for a more long-term fix. We are continuing to work with the Missouri Public Service Commission staff, the OPC, and other interveners to ensure unity in our efforts moving forward.

And I would just add, too, that this aligns with our previous strategies, pursuing regulatory, legislative, and judicial outcomes. We're on track with what we set out initially.

What’s the July 16 decision that we're waiting on? What is that?

Okay. This refers to the cases that were remanded back to the commission. Once they return to the Public Service Commission, they essentially have 120 days to make a decision based on those cases that did not go through to the Supreme Court. There are several moving parts here from both legislative and regulatory perspectives, but that decision pertains to cases under appeal that have been remanded back to the commission.

Got it. Okay. On the guidance, is the long-term guidance still based on 2019? Or is there a base year here?

Yes, I chuckle since it's a fair question. The answer is, if you look at our capital spend program over five years and expect to drive rate base growth of 7% to 8%, we should be able to achieve the growth we've discussed over the long term. I laugh because, as many are, we've spent significant time addressing current situations. In fullness of time, as we grasp what is happening in 2020, we'll find a way to rebase and ensure understanding among all. But for now, our focus is to help our customers get through this year.

Yes, that seems to be the general consensus. A lot of people want to treat 2020 as an abnormal year.

The next question comes from Brian Russo with Sidoti.

Just curious on the weather normalization mechanism in Missouri; that was termed ineffective. What structurally made it ineffective? What would you need to do in terms of further discussions with regulators or during your next rate case to fix it? Can it even be perfected?

Alright, well, Brian, this is Steve Lindsey. Thanks for the question. Unfortunately, I don't know all the answers. It's a complex formula. The positive thing is we have something implemented now that didn’t exist previously. It helped but did not completely address the differences between weather and the resulting volumes and revenue. There are a couple of aspects: one is it does not include the small commercial class and others that behave like residential classes, which is an opportunity. The other aspect is that it’s not linear. Not every day or week is the same throughout the month, resulting in some outcomes from degree days that didn’t translate appropriately to our revenue expectations. We will identify the deficiencies and can make a strong case towards improvement going forward.

Got it. Just a reminder, what percentage of the overall bill is a fixed charge?

Yes, it can depend on the year, but it's generally around 20% to 25% for residential customers, depending on the kind of winter season we experience.

Great. And just on the Supreme Court denial of your request for rehearing. Remind me how many millions of dollars of revenues is that? When might that affect net economic earnings? Would it be after a commission decision or because of legal clarity, do you now have more clarity on the recovery of those costs? I'm curious about when a provision might be taken against net economic earnings.

Yes, Brian, this is Steve Rasche. There is a detailed chart in the appendix of our presentation outlining the various layers of ISRS. The total provision is approximately $16.9 million, including all collections addressed in the rulings that are part of the appellate court decision. Up until the Missouri Public Service Commission makes a final determination, we will continue to collect those funds, about $2 million and change every quarter. I would point out, there are several components within that $16.9 million related to assessing whether cast iron and bare steel need replacement and another component concerning incidental plastics replaced along with those longer lines. The public commission will weigh in based on remand from the appellate court on each of those items, leading to their decision.

Understood. And when does the Missouri legislature end this year?

We're navigating this now, but the process should last for at least a couple more weeks. This is not a special session; it's the standard start-up, and we have been pleased to be part of the legislation under consideration. We feel good about our progress so far.

The next question comes from Selman Akyol with Stifel.

A lot has been asked and answered. So just a few follow-ups and clarifications, if I could. Following up, we should receive a legislative response one way or another by the end of the month. If that's successful, does it impact the July outcome in your opinion?

I would say it doesn't directly impact the ruling since it's a forward-looking issue. However, it may provide guidance that validates what we have been operating under for the past 15 years that is reinforced through this legislation. Hopefully, the commission can incorporate that insight in their decision-making regarding our infrastructure upgrades.

As you all likely know, it’s not unusual for a House to produce a bill while the Senate sends over its own version, each with slight discrepancies. Thus, the conference committees facilitate the resolution of those differences, which is what we are currently experiencing.

Right. You referenced additional investment in storage for $10 million. How much more is to go there?

Yes, Selman, this is Steve. We are still working on our long-term development plan, given various ongoing challenges. We're pleased with the operational performance during this winter, evidenced by improved results. We’ll continue to provide updates on our spending between now and the next call, starting with the $10 million increase for our capital spend target this year.

Okay. On the ineffectiveness of the weather mitigation, will it require waiting until your next rate case for improvements or can it be improved at an earlier time?

Yes, it will be part of our next rate case, which is not unusual. The requirements involve establishing a revenue requirement and rate design. It’s rare for commissions to address either outside of a rate case. Though it can occur, it is not the standard practice.

The next question comes from Richard Sunderland with JPMorgan.

Just one for me today. The STL Pipeline, any updates on discussions around contracting that? I would assume there have been some impacts from COVID. What's your expectations there?

Yes. Thank you for the question. The STL Pipeline did indeed enter service and performed well during the winter. We will continue to operate it as designed and provide gas from the Northeast to this region for our customers. We'll keep pursuing opportunities, but many have stalled amid current conditions. Thus, as opportunities arise, we will actively continue to seek them out along with the additional capacity.

At this time, there are no further questions. So this concludes our question-and-answer session. I would like to turn the conference back over to Scott Dudley for any closing remarks.

Thank you all for joining us. I know it's a busy earnings day. We're going to be around throughout the rest of the day, and we'll look forward to catching up with many of you then. Thanks and be safe.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.