Good day, and welcome to the Essential Utilities Q1 2021 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brian Dingerdissen. Sir, please go ahead.

Thank you, Katie. Good morning, everyone and thank you for joining us for our first quarter 2021 earnings call. I am Brian Dingerdissen, Vice President, Head of Investor Relations. And if you did not receive a copy of the press release, you can find it by visiting the Investor Relations section of our website. The slides that we will be referencing and the webcast of this event can also be found on our website. As a reminder, some of the matters discussed during this call may include forward-looking statements that involve risks, uncertainties and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward-looking statements. Please refer to our most recent 10-Q, 10-K and other SEC filings for a description of such risks and uncertainties. During the course of this call, reference may be made to certain non-GAAP financial measures. A reconciliation of these non-GAAP to GAAP financial measures is included at the end of the presentation and also posted on the company's website. After the presentation, we will open the call for questions. Here’s our agenda for today. We'll start with Chris Franklin, our Chairman and CEO, who will provide a company update. Next Dan Schuller, our CFO, will discuss our financial results. Chris will then conclude the presentation portion with an update on our municipal acquisition program and a review of our 2021 guidance. At the conclusion of the call, we will open it up for questions. With that, I will now turn it over to Chris Franklin.

Thanks, Brian and good morning, everyone. Thanks for joining us. Let's start out with a look at some of our first quarter highlights. The first quarter marked our one-year anniversary already as essential utilities and the one-year closing of Peoples. We had a strong first quarter. And on a GAAP basis earnings per share was $0.72 for the quarter up 19.6% and Dan will get into the details of that in just a few moments. We invested approximately $178 million in infrastructure improvements through our systems in the first quarter as compared to $172.2 million at the same time last year. Our seven pending acquisitions totaling $450.5 million in purchase price really shows the strength of our municipal acquisition strategy. Also yesterday was our annual meeting of shareholders and I'm pleased to report that all items on the ballot were voted in accordance with management's recommendations. The meeting was also one of transition. Our long-time board member and friend former CEO Nick DeBenedictis stepped down from the Board to comply with the Board's age policy. And Wendy Franks, who represented CPPIB since the acquisition of Peoples was replaced by Edwina Kelly. Wendy Franks left CPPIB to take another position with a different firm. And we also then expect to add a well-qualified director in the coming months to bring the Board back to nine members again. As a reminder, our current eight member Board has a strong diversity, which includes three women, two people of color and a board all of which have diverse cognitive and experiential backgrounds. I should also note that if you haven't had a chance to review our proxy, I encourage you to do so. We spent a lot of time and energy around that proxy. It's informative and very easy to read. All right. I'm excited to announce that in March, we opened a brand-new state-of-the-art environmental laboratory on our Bryn Mawr campus here. The new lab is just one example of our commitment to operational excellence and our mission to protect the public health and ensure high-quality water. The new two-storey building will more than double the size of the previous lab which did great service over 70 years. This new lab though will allow us adapt to the dynamic regulatory environment that requires additional sampling and equipment necessary for drinking water and wastewater operations. It also has the capacity to accommodate the increasing needs as we add customers and systems through acquisition. The lab employs a professional staff of 20, including microbiologists and chemists who perform about 300,000 tests on 30,000 water samples each year. These scientists use 50 different analytical methods for 240 different water quality parameters. It's a busy group. The lab is certified by the Pennsylvania Department of Environmental Protection and four other state environmental and health regulatory agencies. And as we've gone from measuring in parts per million to now parts per trillion, a million-fold increase in detection levels, we feel confident that we will be able to deliver water that is safe and the wastewater we treat and return to our rivers, lakes and streams is pristine. Now as announced a year ago, we set a company-wide standard of 13 parts per trillion to uniformly address the presence of the contaminants PFOA, PFOS and PFNA, which are all part of that PFOS family of chemicals. As I think you're aware the EPA's non-enforceable health advisory level for PFOS and PFOA is still at 70 parts per trillion. And although an enforceable federal standard is still probably years away, our laboratory is one of two labs accredited and the only utility certified to test PFOS in Pennsylvania. Our commitment to making the necessary capital investment where source water exceeds 13 parts per trillion is for the safety and health of our customers we serve. And our new lab is integral to this important work. Now in light of the ESG guidance that we announced earlier this year, I'd like to highlight two solar field projects in Illinois that are in the final stages of completion. You can see the pictures here. The Manteno solar field project was completed and became operational at the end of February. This nearly one megawatt solar field will supply approximately 85% of the power needed to operate the wastewater plant. We estimate that the project will save between $20,000 and $25,000 annually in operating costs, which is very good for the customers. The Danville solar plant project, spans eight acres and is anticipated to become operational in the second quarter of the year. This is a 2.1 megawatt solar field and will supply approximately 70% of the power needed to operate that water plant. We estimate this project will save between $110,000 and $140,000 annually in operating costs. So in total now we have six solar fields across our footprint. It's projects like these that allow increased reliability and lower emissions while also achieving cost savings. As we switch to renewable energy options throughout our footprint, we'll continue to improve the company's already aggressive target to reduce Scope 1 and Scope 2 emissions by 60% over the next 15 years. With that let me hand it over to Dan to talk about our financial results.

Thanks, Chris and good morning, everyone. We ended the first quarter with revenues of $583.6 million, up about 128% from last year. You'll recall that the Peoples transaction closed on March 16th last year. Therefore, the primary driver of the increase was the addition of the natural gas business from the full quarter, which contributed $315.8 million of revenue growth. O&M increased $125.1 million in the first quarter, up from $106.6 million in the first quarter of last year. Again, this was primarily a result of the addition of the natural gas business and we'll spell that out a little bit more when we talk about the O&M waterfall. Net income was up year-over-year from $51.8 million to $183.7 million and GAAP EPS increased from $0.20 to $0.72. Adjusted income was up from $153.7 million to $183.7 million and adjusted income per share increased 19.6% from $0.60 to $0.72. As a reminder, adjusted income for the first quarter of last year excluded Peoples-related transaction expenses and included a pro forma adjustment for the Peoples operating results for the period from January 1st to March 15th, 2020 thereby providing a basis for a full year run rate of operating results for 2020. And as a reminder to clarify, there were no adjustments for 2021 for this first quarter. Next, we'll walk through the details in the following waterfall slides starting with revenue. In the first quarter of 2021, revenues increased $328 million or 128.3% on a GAAP basis. The primary driver being the $315.8 million related to the full period for our natural gas segment. This figure includes $132.2 million of purchased gas costs. Rates and surcharges, primarily driven by the Pennsylvania DSIC organic and acquisition growth and increased volumes from our regulated water segment wrote an additional $12.2 million towards the revenue increase, which was slightly offset by other. The $2.3 million increase due to volume reflects both water consumption and wastewater volumes. Next let's look at our water consumption by customer class. Since COVID started, we've experienced increased usage and this trend continued in the first quarter. Overall, usage was up 1.7%. And again, residential usage was strong for the quarter, up almost 5%, offsetting the declines in the commercial and public customer classes. As you will recall, commercial water consumption has consistently been down since COVID began. Next, let's talk a little about weather and gas usage in our gas business or gas segment. You'll recall that weather has a very direct impact on gas consumption and associated revenues. So we closely monitor the heating degree days as an indicator. As the left side of the slide shows, we had a somewhat warmer than normal first quarter in Western Pennsylvania with 2726 heating degree days compared to a 20-year average of 2845 heating degree days. This was however an improvement over the 2421 heating degree days in the first quarter of 2020 and just short of last year's pro forma of 2766. The chart on the right serves as a reminder of how residential natural gas consumption in Pennsylvania was distributed throughout 2020, noting that more than 3/4 of the gas was sold in the first and fourth quarters of the year, with the largest portion being in the first quarter. Now, let's move on to operations and maintenance expenses. Looking at the O&M waterfall, expenses increased by 17.3% from $106.6 million in Q1 last year to $125.1 million this year. The primary reason for the increase in O&M expenses for the first quarter was the $42.9 million of additional O&M associated with Peoples from the full quarter, offset by the impact of the Peoples' transaction-related expenses of $25.4 million incurred last year. Other contributing drivers include employee-related costs, cover related expenses for our water segment and growth which were offset by savings in other costs and production costs. Adjusting for growth, cover related bad debt and increased pension expenses, regulated water segment operations and maintenance increased in line with historical experience. Next, we're going to spend a few minutes on the earnings per share waterfall. This presentation bridges from the first quarter 2020 GAAP EPS to the first quarter of 2020 adjusted income per share and then to the first quarter 2021 GAAP EPS. You will note that GAAP EPS for Q1, 2020 was $0.20, but adding back $0.08 of Peoples-related transaction costs and almost $0.32 related to the pro forma adjustment for the Peoples operating results for the period between January 1 and March 15, 2020, brought up to $0.60 per share on an adjusted income basis for Q1, 2020. Continuing on to the right, the Peoples contribution added $0.10, followed by regulated water segment rates and surcharges, expenses, volume and growth, which together contributed $0.045. These were offset by $0.03 from other items, which include increased depreciation, amortization, and interest, resulting in GAAP EPS of $0.72 for the first quarter of 2021. The incremental $0.10 from Peoples is primarily due to increased tax repair in this full three-month quarter, versus the 16-day first quarter that we had included last year. For the full year of 2021, tax repair of Peoples will contribute $0.18 to $0.20, but it's attributed to the quarters based on profitability, so the high gas usage quarters will receive the most benefit. Given the strong results of the first quarter, we wanted to take a moment to remind everyone of how we think about net income by quarter as a water, wastewater and natural gas company. Due to the lack of historical comparisons, the intent of this slide was to assist our investors in creating quarterly projections. We reported income per share on a GAAP basis for Q1 at $0.72, which falls above the midpoint of the range noted on the slide. But as we look forward to the second and third quarters, we'd like to reiterate that the natural falloff of gas consumption could push us lower in those ranges. And that our previously stated full-year guidance range of $1.64 to $1.69 remains intact. As we previously noted, our collective ability to quarterly our earnings will improve as we establish a track record of actual results as a combined company. Moving on to rate activity and other regulatory matters. In 2021, so far, we've completed rate cases or surcharge filings for our regulated water segment in New Jersey, North Carolina, Ohio, Pennsylvania, Illinois, and Indiana, with total annualized revenues of $13.5 million. In our regulated natural gas segment, we have completed rate cases or surcharge filings in Pennsylvania and Kentucky, with total annualized revenue of $1.1 million. In the coming months, we expect to receive new base rates in Virginia for our regulated water segment. And at this point in the year, we do not have any pending base rates or surcharges for our regulated natural gas segment. As we previously noted, we expect to file a rate case for Aqua Pennsylvania this year. That's now expected to occur sometime in the second half. Also, I wanted to close the loop on the discussion we had on the last call related to the Peoples catch-up deduction. The settlement that we reached with the statutory advocates was filed with the Pennsylvania PUC and was recommended to the commission by the administrator of Law Judge. This matter was on the docket at the PUC today with a recommendation to approve. And it was approved for zero without comment. The settlement proposes another point, but the catch-up adjustment be provided to utility customers over a five-year period, and that Peoples will file its next base rate case before the end of 2023. Now, as you'd expect, we've been watching proposed tax legislation and gauging its potential impact on Essential. For regulated utilities, the tax increase would look like a reverse TCJA and we'd expect a surcharge on customer bills or a regulatory asset to recover the increase. Interestingly, an increase in the tax rate would actually increase the repair benefit. And fortunately, it appears that the minimum tax on book income as currently discussed wouldn't apply to essential at this time. So, this is obviously something that's still developing, but I'd expect we'll have more to discuss on tax reform during our next earnings call. Finally, let's spend a few minutes discussing our financing activities. As you know, last August the company announced an offering of 6.7 million shares of common stock by a forward equity sale agreement for $308 million. Post settlement, the proceeds are expected to be used for general corporate purposes, including the DELCORA acquisition and other water and wastewater acquisitions in our pipeline. The forward sale agreement allows the company to settle the transaction between now and August 10, 2021. Regardless of the timing of the DELCORA closing, we intend to fully settle the forward by delivering the 6.7 million shares and receiving the cash from our counterparties. We'd likely do that close to that end date of August 10. Additionally, on March 4, the company priced $100 million of first mortgage bonds throughout Ohio with a weighted average tenor of 20 years and a weighted average coupon of 2.86%. Upon closing on April 15, the proceeds of these bonds were used for general corporate purposes. On April 2019, the company completed a $400 million public debt offering of 10-year notes issued at 2.4%. The company used these proceeds to pay down short-term borrowings and credit lines. In both of these cases, we moved expeditiously to take advantage of attractive capital markets conditions. After years of falling rates and purposeful refinancing of higher rate debt, our weighted average interest rate for our long-term debt now stands at 3.62%. As of April 30, after considering the effect of these financings, the company had $1.1 billion of capacity to borrow on various credit facilities. And with that, I'll hand it back over to Chris.

Great. Thanks, Dan. And let's switch our topics now to municipal acquisitions. Many of you I think are familiar with this slide as we previously announced six of these municipal acquisitions that have been signed and are pending closing. In April, we signed an asset purchase agreement for $12.5 million for a municipal system in Illinois with approximately 4,000 equivalent dwelling units. Now these seven transactions in total will add close to 231,000 customers or customer equivalents and approximately $450.5 million of rate base when closed. We also have one additional deal in which we have been selected as the winning bidder. We are working to sign an APA and hope to announce that as well in the near future here. Now let's take a moment to discuss DELCORA. You'll recall the county court has twice ruled that our asset purchase agreement with DELCORA is a valid and enforceable contract and has also ruled on the validity of the trust concept. So Delaware County has appealed those decisions to state court. We know that the state court called Commonwealth Court in Pennsylvania and we're awaiting a judge's decision. Given the clarity of the rulings from the County court, we expect a positive decision in state court. Absent a settlement this process typically takes about six months or more. Now let's talk about the regulatory process for DELCORA. Since our last quarterly call, the Pennsylvania public utility commissioners on March 30 vacated the administrative law Judge's recommended decision and remanded the case back to the ALJ to reopen the record and conduct further proceedings based upon recent developments, including settlement agreements reached with all of the municipal interveners in the case. In its remand order, the commission indicated awareness of the county's appeal of the trial court's decision in favor of DELCORA. But then on April 16, the ALJ issued a stay order for the case pending a final and unappealable decision by the State Commonwealth Court. We have since petitioned the commission to review the ALJ's order, as the ALJ order is very clearly inconsistent with the commission's remand directive. And we've asked the commission to clarify its direction to the administrative law judge for the remanded proceeding. All right. As these municipal transactions folks get larger like DELCORA, there is always going to be the possibility of litigation and politics that play a role. We remain focused and patient as we move through the process. We also remain convinced that our solution is best for the DELCORA and Aqua customers and essential shareholders. We will see this to conclusion.

Thanks, Chris. And I want to touch on the healthy pipeline of potential municipal opportunities. This table here includes acquisition opportunities where we are actively engaged in discussions with municipalities. As illustrated on this slide, we are actively pursuing approximately 395,000 customers through acquisition. We continue to believe that fair market value legislation in the eight states where we have water utilities is the main driver of our strong pipeline of opportunities. Also note that fair market value or similar legislation for water and wastewater acquisitions has been passed in the states in which we serve natural gas. West Virginia approved a fair market value legislation in 2020. And last month, the Kentucky governor signed House Bill 465 into law which is similar legislation to fair market value. These favorable regulatory environments are providing their municipalities the opportunity to pursue private capital solutions and infrastructure needs and access to industry experience. So, in closing, I want to reaffirm our guidance for 2021. We expect earnings to be between $1.64 and $1.69 per share. And hopefully, the discussion Dan led about how to best think about the quarters was helpful to you. Our capital plans remain on track, as we anticipate spending approximately $1 billion on regulated infrastructure this year and nearly $3 billion across our Essential platform by 2023. Rate base growth is expected to be 6% to 7% for water and 8% to 10% for gas. And this does obviously does not include acquisitions in the water side. Customer growth is expected to be between 2% and 3% on average, for our regulated water segment. And finally, our ESG targets include a 60% reduction in greenhouse gas emissions by 2035. And with that, I'll conclude our formal remarks. And Kate, if you want to open the line for questions, it would be great.

Thank you, Sir. Thank you. Our first question comes from Ryan Connors with Boeing and Scattergood.

Hey, Ryan. Good morning.

Good morning. Thanks for taking the time. I've got one kind of P&L question for Dan then a big picture question for you Chris. Obviously, we're in an inflationary environment here that impacts materials and chemicals and labor and all of the above. Peers have called that out as a headwind, but you don't seem to be experiencing much of that. Dan mentioned actually production costs down, on the water side. And that's your late in the rate cycle in PA anyway. But can you just frame that for us a little bit Dan, why you're not seeing that? And whether you anticipate any cost escalation going forward?

Yeah, Ryan thanks. And obviously, we're on the lookout for it but we have not seen it yet. And we do have long-term agreements with providers of lots of our materials as well as chemicals. So we expect that, we'll have a little bit of warning before we see increases in some of those types of things. But obviously, we're aware of the commodity price increases in the market more broadly. And so, we're on a lookout here.

Given your involvement in rate matters, do you think you might need to make more aggressive assumptions in future test years? How do you view that?

Yeah. I mean, we do that. As we go into a future test year, we are looking forward to what we expect to see in terms of expenses for, specifically the operational expense right so chemicals and power and things like that. Now power we've got long-term agreements in place. Chemicals that's done on a one-year basis, and usually as we go through our budgeting process we look forward to that subsequent year, which is something we then use ultimately in a rate case filing in future test years. We are getting a read from our chemical providers in terms of what they expect to see as inflationary increases in that subsequent year. So we will be looking at that as we go through this budgeting process now for 2022.

Got it. Okay. And then my big picture question Chris was, just talk about the municipal acquisition side. Just this past Sunday, there was a very prominent front page above the fold story in the Philadelphia Inquirer, biggest newspaper in the state, basically suggesting that there's growing and more organized opposition element to sort of municipal asset sales in Pennsylvania. I think you were quoted in that piece. Can you just kind of give us your sum-up, how you think about the issues raised there? And how you strategize against that if in fact there's any reality to that?

It was interesting. Andy made the article, and they spent some time with us. I'm not sure he fully captured my sentiments. One thing I mentioned to Andy was that I thought his premise was somewhat flawed. Last year, we had ten deals signed or closed, and if you examine them individually, only one faced opposition, which was in DELCORA. We also chose to step back from Willistown, but we did that before it went to any kind of referendum or vote. From our perspective, the volume of transactions is increasing, and as a result, we see more people voicing their opinions. So yes, there are more deals in the market, and there is some increased opposition, but I wouldn't characterize it as disproportionate; instead, it's growing at a comparable rate.

Okay. That's fair. And then lastly, it's good to see Illinois picking up a bit on the M&A front another deal there, but I thought it was kind of unusual that you don't disclose there the name of this town or the system. What's the story behind that? Has that been disclosed locally, or is there some other reason why you're not disclosing that one?

It is unusual, Ryan. The reason we're not disclosing it yet is that we hope to make an announcement soon, but we're finalizing some associated agreements. There are some sensitive details we want to wrap up before making a formal public announcement. It's very good news, and we do have an asset purchase agreement in place. We want to inform investors that we've made progress, but it will take a little more time before we can finalize the associated agreements. That's all.

Sure. Great. Thanks for your time today.

Thank you.

Thanks, Ryan. Take care.

Thank you. Our next question comes from Durgesh Chopra with Evercore ISI.

Hey, Durgesh.

Hey, Durgesh.

Hey, guys. Thanks for taking my question. Chris I must say the picture needs to be updated with facial hair on the slides.

It's already gone. It's already gone Durgesh.

I sat in to hear that, anyways that was my inappropriate earnings call comment. Just – I wanted to see – so there's a back in forth between the commission and LG and DELCORA. Is there – and you guys were – if I remember this correctly targeting maybe year 2021 flows, it seems like that is going to get pushed. Is there a target there of closing here maybe perhaps in the second half or early next year?

Yes. I – the guidance, I just kind of provided was that, if it winds through the courts, it could be at least another six months. Now there's always a possibility of a settlement. We've said that all through for this process. But if it winds through the state court, it could be a while again. So we haven't provided an exact date. We have to see, the county has to file a formal brief probably in the coming days here. And then the – that clock begins. So best estimate is probably – unless a settlement would probably be sometime next year.

Understood. And then just on the timing of the equity forwards August 10, did I hear that correctly? And is that sort of – are you timing that in accordance with perhaps – or what should we think of that?

Yes. So Durgesh, the forward agreement way those work is they have a one-year life. So you've got one-year from when you price forward to actually settle that issue the shares and take the cash. So that expires on August 10, 2021 here. So we would expect that we would settle that in the days before the days or weeks before that. We don't need to settle it now but we expect we'd settle it close to that end date if you will.

And importantly, the dilution associated is already in the numbers for the rest of the year.

Correct, correct. So you'd see – those shares would be in place from just simply put kind of the middle of August through year-end. That's already in the denominator when we think about our guidance range and the EPS in that guidance range.

Understood. Okay. Appreciate that. So settlement before or around August 10 but it's already incorporated in your 2021 guidance. Perfect. Maybe just one big picture question for you Chris. So clearly, a private market if you, I'm sure you're following very closely the gas LDC multiples and gas asset transactions, right? Clearly, there's a disconnect between the public equity market – valuation market for these assets versus private. Would you consider – or how should we think about like a lot of your electric years have done some part ownership type deals in utilities amongst other things. Is there an opportunity here for you to kind of put a valuation marker of these premier assets in the private market? How do you – how do you guys thinking about that?

We are really happy with the acquisition of Peoples. The integration has gone extremely well. It's in accordance with our expectations. And is operating even better. And so we are very happy with this combination. We see a long life together and we're going to stay the course. And I think through continued understanding among investors and the public in general that natural gas is here for a very long time. You estimated at least 36% of the energy mix for the next 30 years. We're going to tighten up our system. We're going to operate as environmentally consciously as we can with dropping our footprint by 60% our greenhouse gas footprint by 60%. And we believe this is going to be a strong combination into the future. So we're going to stay the course.

And I think, Durgesh to add to that we would expect that, if we see private market transactions at that level. We start to see that disconnect – you start to see those converge with public market valuations increasing to that level or toward as well.

Understood. That makes sense guys. Thanks for the time this morning. Appreciate it.

You bet.

Take care.

Thank you. Our next question comes from Insoo Kim with Goldman Sachs.

Hi, Insoo.

Thank you. Hey, good morning. First question, just on the timing of the equity forward and the H Drive game on DELCORA and what that could mean from a closing standpoint, I appreciate the comments on 2021 and what's embedded. When you just look out to 2022 at this point with the recent updates, how much of a potential impact does this have this disconnect in timing and potential delays and just what are some of the offsets that you could do to maintain the five to seven.

Yes, I would say it's a relatively small number of shares compared to our total shares today, which helps reduce any impact. As Chris mentioned, we have six acquisitions already signed, in addition to DELCORA, along with a robust pipeline of further opportunities. Therefore, we believe that proceeding with the settlement in August to issue those shares for cash makes sense. As I hinted at earlier, there’s an annual planning process where we will incorporate these shares. They are already included in our five-year plan for 2022 and will be part of our budget for the upcoming year. We manage a business with many components and are focused on driving earnings while trying to counter any potential dilution. Additionally, we have more acquisitions to close where we will be deploying capital.

I think also that, when you think about the increased equity, we are spending $1 billion a year. And so, that's a pretty good clip of capital and we're very mindful about our credit metrics, as Dan said earlier. And so, these things, as Dan said, it's a balance. So, all things in mind, I think it's very prudent to take down the equity here in August or just before. And I think you about talking about the future. Listen, we remain confident that we're going to close DELCORA. As Dan said, we've got a couple of other things in the hopper. But I think we'll stand behind our guidance here.

Yes, completely agree.

Got it. Second, just wondering, if there's any updated assessment of cost from the February event? I know we had discussed that in the fourth quarter call, but any color there? And if that impacts not that it would impact 2021 guidance but just giving overall magnitude?

Yes, the cost from that event is around $0.5 million, which will help cover the revenue loss and operating expenses related to the situation. Moving forward, our analysis showed that the system failures were primarily due to electrical outages rather than freezing conditions. Without these outages, we could have maintained uninterrupted service to our customers. There is certainly an opportunity to invest in hardening some of the systems, though the costs are not significant. In Texas, we meet compliance regarding the number of generators, but to invest in more, we would need prior approval from the PUC to ensure we can produce power during outages. However, installing a large number of generators across various systems in Texas represents a substantial investment, and I don't anticipate the PUC will allow extensive additional spending beyond current limits.

We have fewer than 100,000 customers in Texas, and installing generators at all these facilities would cost around $41 million. I believe customers are unlikely to pay that amount, and I doubt the commission will approve that many installations. There may be some middle ground between our current setup and the future hardening requirements from the commission that could present an opportunity for capital investment to strengthen the system. However, I don't foresee spending at a level where every facility would have its own generator, as that would be cost prohibitive.

Yes. So, maybe a few million dollars, but not tens of millions of dollars.

Yes.

Understood. Thank you so much, folks.

Yes. Thank you, Insoo.

Thank you. Our next question comes from Travis Miller with Morningstar.

Hey, Travis. How are you?

Hey, Travis.

Hi, everyone. Wondering if you could give some more thoughts on Kentucky and the legislation there. Is that a place you've historically looked at acquisitions and just not been able to get to work or now with that legislation, is that a strategic area that you might look at more?

Yes. That's a good question. We have not traditionally looked there, because we didn't have a base there. Now, that we have a base, a utility base there, albeit it's a natural gas base. We do have a management team and a regulatory expertise there and an operational team, as I said, albeit natural gas. But it does give us a base of operations to look for utilities in Kentucky. And yes, I think the short answer is, we are interested in Kentucky, particularly with that legislation. It's a great regulatory state otherwise. And we enjoy operating the gas utility there from an economic standpoint. So, I would look for us to be very active in Kentucky going forward.

Okay. Great. And then at the national level as you think about the infrastructure move and some of the proposals there. Do you think that's an opportunity more in terms of direct CapEx for you guys in your system, or does it possibly open the opportunity for more acquisitions as kind of these municipals face or look at potential for large investment needs or wants?

Yeah. Listen, my hope is that they would focus more of the infrastructure federal funding on infrastructure on things like separating sanitary and storm sewers, bridges roads that sort of thing, because I think that's really where you can't bring private capital as easily to bear. In water and wastewater, we like to think about the solution as bringing low-cost capital to the game here, as well as local rate-making. So that combination, I think about almost like a user fee rather than a federal bailout. So to the extent that those federal dollars would flow for our use, I think that would be useful. To the extent that it would flow to municipals and give them temporary band aids on some of their massive capital needs. Obviously, that is not as productive. But I really don't see it having a major impact given the vast bucket of need and the relatively small dollars that are designated here for water and wastewater.

Sure. Okay. Great. I really appreciate the thoughts.

You bet.

Thank you. Our next question comes from Jonathan Reeder with Wells Fargo.

Hey, Jonathan.

Hey, Jonathan.

Hey, Good morning, Chris and Dan. Dan, first for you did you say the repairs benefit is expected to be $0.18 to $0.20 of Peoples for the full year? And is that consistent with the benefit realized in full year 2020 on a pro forma basis. For some reason, I thought you'd previously indicated it was going to be like $0.08 to $0.12.

Yeah. That – so Jonathan, I did say, $0.18 to $0.20 for 2021. So you're correct there. But if we think about last year, we didn't have a full year of capital. I do think you're right $0.08 to $0.12 is what we said, when we had the Investor Day in New York, right, before COVID started. So I'd have checked, it's probably at the high end of that. But again, we didn't have the full year. We only had 16 days in the first quarter and then the subsequent three quarters. So less capital was invested that was repair eligible.

Okay. So $0.08 to $0.12 was for 2020 and then having the full year capital gets you up to that $0.18 to $0.20 this year?

Full year capital with this year's capital program. Yes.

Got you. Okay. Great. Appreciate that. And then just to also clarify the comments around usage trends in Q1 and kind of the full year guidance, if we're to assume call it normal weather for the remainder of the year in terms of both water and gas consumption. Would that put you in the current guidance range, or does the strong Q1 have you trending at or above the upper end?

I would still say in the guidance range. I mean, I think at some point here right, we'll see more people return to the workplace, we'll start to see less residential usage, more commercial usage, but we may not be the beneficiaries of that commercial usage, right, if we're serving the suburbs and people go back in the city. So I think we kind of come back to what we call normal usage on a COVID basis on the water side. And then on the gas side, right, it's so weather dependent. I think the best you can do is sort of kind of normal weather through the remainder of the year. And of course, there's always variability around that. But I would say, as I said earlier, and then I think Chris reiterated it, I think that $1.64 to $1.69 guidance range for 2023 that remains intact. And continue to focus on that.

Okay. Awesome. And then maybe this is for you Chris. When do you expect in terms of – respond to your appeal of the ALJ day in the DELCORA docket. Is there?

Yes 30 days. May 20th is the public meeting that they need to respond by.

And if they – I mean, if they kind of reiterate that, yeah, they didn't want those things stayed, and move forward. Would you think then like the commissions prepared to act before I guess the appeal process plays out?

That's a question. I don't want to front-run the commissioners. It is a good question. And I think there's a diversity of views among the commissioners. So we'll have to – let's see. We're trying to take these things one step at a time. So let's see what they do on May 20th, and then maybe give a better judgment from there.

Okay. And then last, and I know you're limited as to what you can say in regards to the potential settlement. But do you feel any additional headway has been made in reaching a compromise since say your year-end update in February?

Yes. All I can say is there have been discussions. I'm very disappointed in the politics involved. DELCORA had to increase rates by 10% at the end of last year and may need to do so again this year if things don't change. We committed to only raising rates by 3% annually, so customers are already paying more than necessary. We continue to ask for transparency regarding the county's legal fees, which amount to millions of dollars. It highlights the unfortunate intersection of politics and economics. However, we remain dedicated to seeing this through. Ultimately, we believe our contract is valid and enforceable, and we intend to uphold it until the end.

Okay. Great. I appreciate those responses. Yes. And good luck with DELCORA hopefully we get some movement there and you can get the deal done soon.

Yes. Thank you.

Thanks, Jonathan.

Thank you. Our next question comes from Verity Mitchell with HSBC.

Hi, Verity.

Hi, Verity.

Hi. Good morning. I've got a more general question about your gas business. There's been a lot of focus on water. In one of your previous slide decks you've got a rate of mild for gas rehabilitation. So you've obviously got a step-up in this year and then kind of flat in 2022 and then another step-up in 2023. Are you being conservative, or could you do your gas rehabilitation faster? And therefore spend more. Some comment on that would be interesting. Thank you.

Yes. I think, I'll give a couple of opening thoughts and then let Dan jump in to Verity. So when you do a gas rehabilitation program the number one thing right is safety. And so depending on where that work is being completed? What it looks like? Is it densely populated city of Pittsburgh? Is it out further in more rural areas? Clearly the complication in the city is difficult right? We're looking at a construction site just this week out there in Pittsburgh and they were moving nine feet a day. That's how complicated City Street is. However, out in the more rural area you can move much more quickly. And so the mix of projects is part of the element of what comes to bear here. And as you can imagine what we've tried to do in our capital program is handle those more densely populated areas first and then move into the more rural areas. And so there's a lot of things to consider in that mix. We've estimated about 15 years in total and that will probably vary a little bit in terms of pace throughout that period. But Dan do you think about it in any different way than that?

No, I think you're right, Chris. When I look at the same slide you're looking at, there is an increase in mileage. This is largely due to a shift towards covering more miles outside the city where travel is quicker. Additionally, we file a long-term infrastructure improvement plan with the Pennsylvania PUC that details the miles we plan to replace each year. As part of the transaction, we committed to increasing both the mileage and the investment each year, which is reflected in our filed LTIP program. It's important to note that we have a plan in place for this. Another challenge we face is finding qualified labor to support this capital program. Increasing the scope of our capital program requires both more external crews that are qualified and a significant amount of internal resources since we need our team for tie-ins and any live gas work where we connect to customer service lines. So, we also need to focus on ramping up our resources to expedite this process. For now, we believe that our LTIP filing and our plans align with what is presented on the slide.

Thanks. It's really helpful. Thank you.

Thanks, Verity.

Thank you. This concludes today's Q&A. I would now like to turn the call back over to Chris for closing remarks.

Thank you all for joining us today. As always Brian, Dan and I are always available for follow-ups if you needed. Have a great day. Thanks again for joining us.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.