Thank you for standing by. My name is Ellie and I will be your conference operator for today. At this time, I would like to welcome everyone to the Essential Utilities Third Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. Thank you. I would now like to turn the conference over to Brian Dingerdissen. You may now begin.

Good morning, everyone, and thank you for joining us for Essential Utilities third quarter 2024 earnings call, during which we will provide an update on new long-term guidance. The slides that we will be referencing and a webcast of this event can 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 or expressed implied by such forward-looking statements. Please refer to our most recent 10Q, 10K, and other SEC filings for 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 any non-GAAP to GAAP financial measures is posted in the investor relations section of the company's website. We will begin the call today with Chris Franklin, our Chairman and CEO, who will provide an update on the company, and then Dan Schuller, our CFO, who will provide an update on the financial results before Chris closes the call with our guidance. With that, I will turn the call over to Chris Franklin.

Hey, thanks, Brian, and welcome, everyone. We've got some really exciting news to share with you today. I've got some more color, but let me just run through it in a very, very brief summary on top here. We had a great quarter financially. We had a strong capital investment so far this year, and we have an approved Pennsylvania gas rate case that included a weather normalization mechanism. We had a settlement in our Pennsylvania water rate case, yielding us $73 million, and we are reinstating our multiyear EPS guidance at a 5% to 7% growth rate through 2027, which importantly does not include DELCORA, any earnings associated with DELCORA. And then we're also going to talk a little bit about our strong recovery from Hurricane Helene that hit North Carolina. So, a lot of good things to talk about for the quarter, so let me get into the details. First, we posted $0.25 in earnings per share for the quarter, which was above expectations. Our capital spending remains right on schedule this year. We've invested $932.5 million through the end of the third quarter, and we'll spend about $1.3 billion to $1.4 billion to improve water, wastewater, and natural gas infrastructure this year. I'll get into more details about the financials for the quarter in just a few minutes. In September, the Pennsylvania PUC unanimously approved the first rate case for Peoples Natural Gas under our ownership. The approval included an annualized revenue increase of $93 million and a weather normalization mechanism. This mechanism is designed to provide greater financial stability and predictability for both our customers and our investors by mitigating the financial volatility associated with abnormal weather impacts. I know you'll recall that both this year and last year have been unusually warm, which impacted our results. However, it could have just as easily gone the other way and we could have had two abnormally cold years, which would have negatively impacted our customers. This new mechanism will provide the ability to mitigate these abnormalities in weather and should assist in reducing the volatility for all parties going forward. I do want to mention that the Office of the Consumer Advocate filed a petition for review of the approval in the PNG case, and Dan will talk about that in a minute, but I want to mention that. Let's also talk about the water rate case, the Aqua Pennsylvania rate case. We filed our briefs on October 28, and in those documents, you'll see that we have a settlement agreement designed to provide a total annualized revenue increase of $73 million from our water and wastewater operations. We expect the settlement agreement to be filed formally on November 7, and available on the PUC website at that time. It's important to note that this settlement agreement, like all settlements, remains subject to a recommended decision by the Administrative Law Judges and approval by the PUC. I should also mention that East Whiteland, you'll recall that acquisition, it's a wastewater acquisition in Pennsylvania, was excluded from the settlement and will be fully litigated in front of the PUC with an expected decision on that, coinciding with the rate case decision in February. Our significant progress on the two Pennsylvania rate cases has provided us the opportunity to re-establish long-term guidance. This guidance, which I'll review in more detail later, includes EPS growth at a compound annual growth rate of 5% to 7% for the next three years, through 2027, continued rate-based growth of over 8% combined, and our commitment to improving and upgrading water, wastewater, and natural gas infrastructure by investing $7.8 billion over the next five years through 2029. We expect to achieve this EPS growth without including any extension to the EPS from the DELCORA transaction. We remain confident that our valid and enforceable asset purchase agreement will ultimately prevail and that we will close the DELCORA transaction, but we want to remove any potential overhang associated with the delayed closing of DELCORA, so we've taken it out of our numbers. This guidance communicates the right balance of growth for our investors built on the right level of infrastructure investment that ultimately results in rates that are affordable for our customers. It's truly a win-win. As this slide indicates, we've consistently executed our plan to grow earnings between 5% and 7% every year. We've delivered these results despite elevated inflation, higher interest rates, and some of the warmest weather on record in our natural gas territory. Hopefully, our most recent achievements and the continuous strong results indicated on this slide underscore our ability to execute and our regulatory credibility in the jurisdictions where we operate. We were hit hard by the hurricane as many people were in our country, particularly in the South. I want to talk a little about the impact of Hurricane Helene on our North Carolina operations. Thankfully, our team was quick to respond, clearing trees and other debris that allowed us to do some damage assessments early on after the storm had passed. We prioritized communications with our customers, most importantly, providing regular updates through our disruption map and other forms of electronic communication, physical communication, and signage, etc. We dispatched a special reconnaissance team equipped with drones to inspect damage in areas that were either inaccessible or unsafe, particularly in the more mountainous communities where we serve. In total, 90 of our systems in North Carolina were impacted, but through the strong work of our teams, all but six systems were back up in just five days after the storm. As of October 19, everything was back in power, repaired, and fully functional. We're grateful for the patience of our customers and the understanding they provided, and we appreciate the dedication and extensive work effort of our North Carolina team. With that, let me turn to Dan, and he's going to cover our financials for the quarter and some regulatory matters.

Thanks, Chris, and good morning, everyone. As Chris mentioned, we're pleased with the financial results for the quarter. On this slide, I'll discuss high-level Q3 financial highlights, and then we'll get into the details with the waterfalls. Our revenues for the third quarter of 2024 were $435.3 million, marking an increase of about 6% compared to $411.3 million in the third quarter of 2023. This increase was driven by rates and surcharges, increased water sales, an increase in the price of gas, and water customer growth. These factors far offset the minor revenue decline from lower natural gas sales. The quarterly operations and maintenance expenses decreased for the third quarter compared to the third quarter of 2023. This decrease was primarily due to a reduction in bad debt expenses and a decrease in expenses associated with the West Virginia Gas Utility Asset and the Pittsburgh Area Energy Project, both of which we have divested. We achieved quarterly earnings per share of $0.25, which compared to $0.30 in earnings per share in the third quarter of 2023. While we had an increase in revenue and a decrease in O&M expenses, last year's EPS in the third quarter was positively impacted by significant one-time tax repair benefits associated with the natural gas safe harbor, which, of course, did not repeat this year. Next, let's look through the waterfall. Regarding the first revenue waterfall, moving left to right, we have regulatory recoveries of over $11 million, with the majority of this increase coming from the regulated water segment, plus over $10 million in increased water segment volume, and about $4 million coming from an increase in purchase gas costs, as well as acquisitions and organic growth in the water business. This was offset slightly by lower volume of gas sales due to the warmer-than-normal weather, as well as the other category. Revenues from the regulated water segment increased just shy of 8% for the third quarter of 2024, compared to the same period in 2023. We saw excessively warm and dry weather at various times in the Mid-Atlantic, as well as in Ohio, which in turn led to higher water volume. However, we experienced lower water consumption in Texas and North Carolina. Next, let's look at the O&M on slide 10. We saw a relatively modest increase of approximately $1.6 million in water production costs due to the higher volumes previously discussed, and among the smaller increases to O&M were the impact of the customer rider in the gas business, routine increases in employee-related costs, and customer growth in the water segment. The overall reduction to O&M costs was primarily due to a decrease in bad debt expenses and a reduction in expenses related to the now-divested West Virginia gas utility assets and the Pittsburgh Area Energy Project. Importantly, our year-to-date O&M performance is quite strong, expenses only up about 1% over the previous year, which demonstrates our continued commitment to operating efficiency. Next, let's look at the EPS waterfall on slide 11. Starting on the left of the EPS waterfall, with $0.30 from last year, the next thing we see is the nearly $0.03 increase from regulatory recoveries and close to $0.03 from increased water volume, the benefit of $0.06 from the decline in expenses, and $0.03 in customer growth in the water segment. These increases were offset slightly by decreased gas consumption and then more materially by nearly $0.11 from other, which reflects lower tax repair benefits and increased depreciation and interest expenses. As I noted earlier, the lower repair tax benefits this year are mainly the result of the timing of the natural gas safe harbor impact in 2023. In conclusion, we're pleased with the performance for the quarter, given strong results in the slightly lower expenses year-over-year. More importantly, we remain on track for a year in line with our guidance and investor expectations once we adjust for the sale of the energy project and normalized weather for the gas business. Let's review the guidance we provided in February, updated in May, and reconfirmed in August, as well as today. We provided guidance for 2024 net income for diluted common share to be $1.96 to $2. We expect to achieve this once we consider the gain on sale and weather impact. So think about it this way. Due to the energy project sale, GAAP earnings per share will exceed our guidance range, but if we subtract the $0.24 gain from that figure and add back $0.08 to reflect the warmer than-normal weather in Q1 and Q2, we'd expect a result into the $1.96 to $2 EPS guidance range. As Chris mentioned, in 2024, we expect to invest between $1.3 billion and $1.4 billion. We're on track to do this, as we've already invested over $932 million through September. Turning to the next slide, let's look at regulatory activity. The Pennsylvania Natural Gas, or PNG, rate case was filed in December 2023, and we received an order from the Pennsylvania Public Utility Commission back in September. This order included an annualized revenue increase of $93 million, mainly due to the doubling of rate base due to replacing aging infrastructure since the last case, as well as weather normalization, which is good for both customers and investors. This order also fully incorporates the repair tax benefit into the revenue requirement, thus benefiting our customers. This case has a fully projected future test year that extends through September of 2025. Rates went into effect on September 27, so you'll see the increased revenue from the rate case in our Q4 results. Unfortunately, as Chris mentioned, in a highly unusual action, one of the parties that didn't sign on to the settlement agreement, the Office of the Consumer Advocate, has appealed the PUC's order to the Commonwealth Court and has asked for a remand of the PUC, essentially claiming that the PUC needed to include more information to support its findings to approve the rate increase. We believe that the order is very sound, and while based on a non-unanimous settlement with all parties except for the OCA, it was supported by both the Administrative Law Judge and the commissioners who voted 5-0 to approve the order. We'll be supporting the commission and its order on appeal, and we're closely monitoring the situation. The company does not expect accounting implications related to this appeal process. Moving on to the next slide, as Chris mentioned, we've reached a settlement for the rate case we filed for Aqua Pennsylvania in May of 2024. The settlement would be reviewed by the assigned Administrative Law Judges and then the Commission. Once approved, we expect the new rates from this settlement to go into effect in February of 2025. This rate case includes a fully projected test year through the end of 2025. The settlement is designed to provide an annualized revenue increase of $73 million on the water and wastewater operation. It's important to note that the East Whiteland Wastewater System is excluded from this settlement and thus is being addressed separately, but we'll conclude with the rate case outcome in February. Moving on to the next slide, in 2024, our regulated water segment received rate orders for infrastructure surcharges in several states, including Illinois, New Jersey, Ohio, North Carolina, Texas, Virginia, and Pennsylvania, totaling $51 million. This does not include the settled rate amount for the Aqua Pennsylvania case that we discussed a moment ago. Our regulated natural gas segment also received infrastructure surcharges in Kentucky and Pennsylvania, totaling approximately $22 million, in addition to the $93 million that we just discussed, for a total of approximately $115 million in increased annualized revenue. Looking ahead, we currently have rate cases or infrastructure surcharges pending in Illinois and Ohio and the pending Aqua Pennsylvania rate case settlement for our regulated water segment. Combined, the revenue request in these cases is $149.2 million. We also have an infrastructure surcharge pending in Kentucky in the amount of $465,000 for our regulated gas segment. And with that, I'll hand the mic back to Chris.

All right. Thanks, Dan. Let me talk a little bit about growth. As of this call, we have seven signed asset purchase agreements across three states, Pennsylvania, Texas, and Ohio, in which we already have existing water and wastewater operations. These agreements are projected to cover over 213,000 customers, or customer equivalents, and total approximately $360 million in purchase price. Just a reminder that the federal bankruptcy court judge in the bankruptcy of the city of Chester continues to have a stay on all proceedings related to DELCORA, but also remind you that we've said a couple of times we've removed all financial impacts from DELCORA in our new EPS guidance. You'll notice that we recently signed a deal with Integra Water to acquire the wastewater system in Los Milagros, Texas. This system is expected to add about 1,100 customers to our network and comes with a purchase price of about $4.4 million. We've also entered into an agreement with the village of Midvale to acquire their water system in Midvale, Ohio. This system is expected to add about 900 customers to our network and has a purchase price of $3 million. Although a couple of these most recent systems are on the small side, we continue to have a robust pipeline of potential water and wastewater municipal acquisitions that we are actively pursuing. These potential acquisitions continue to represent nearly 400,000 total customers and will result in a significant expansion of our current customer base, assuming we get them completed. Since 2015, our growth by acquisition strategy has allowed us to add over $500 million in rate base and more than 129,000 new customers or customer equivalents to our footprint. In addition to municipal growth activity, we're seeing great developer opportunities in several of our states, especially in Texas and North Carolina. In the past three years, we've negotiated deals with Texas developers to be the water and/or wastewater utility operator and owner for communities that are expected to build over 30,000 homes. Growth like this is as valuable as any acquisition we would do. Texas has been growing significantly over the last 20 years, adding roughly a million people every two years. Our service territory is within what they call the Texas Triangle, the most rapidly growing areas of Texas, including Austin, San Antonio, Houston, and the Dallas-Fort Worth metroplex. In closing, let me share with you our multiyear financial and growth guidance. We've reestablished guidance as promised, and we believe it will give you a clear line of sight to the opportunities in front of us. In 2025, we expect earnings per share to be between $2.07 and $2.11, and now that we have a weather normalization mechanism in place, the volatility in earnings associated with unusual weather should be dramatically reduced. We're guiding longer-term EPS at a compounded annual growth rate of 5% to 7%, for the three-year period through 2027. Once again, this does not include DELCORA. As we look to the next five years through 2029, we plan to make regulated infrastructure investment of about $7.8 billion. We expect our 2025 capital spending on infrastructure to be approximately $1.4 billion to $1.5 billion. Through 2029, we expect the regulated water segment rate-based growth at a compounded annual growth rate of about 6%. This projection only includes the acquisitions listed in the previous slide and are scheduled to close in 2025, and excludes DELCORA. This projection does include the crucial work that we're doing to remediate PFAS across the systems we currently own and operate. For our regulated natural gas segment, we expect the rate base to grow at a compounded annual growth rate of approximately 11% through 2029. The team at People's continues to amaze us with their ability to execute on their capital plans, and we have the opportunity to continue the important work of replacing aging natural gas pipes well past the next decade. On a combined basis, that's water and gas, we project rate-based growth at a compounded annual growth rate of over 8% through 2029. This growth will be driven by our ongoing investments in infrastructure and our commitment to operational excellence. I would expect that when we look back in five years on what we've done, we will have completed even more, given the acquisition pipeline that is not factored into our rate-based growth projections. We believe that the growth we're describing can be accomplished while we keep customer rates at affordable levels. We anticipate that our water customer base will continue to grow at an average annual growth rate of between 2% and 3% over the long term because of the continued consolidation opportunity in water wastewater and strong organic customer growth, especially in Texas and North Carolina. We expect our regulated natural gas customer base to remain stable. To support our growth and meet our credit metrics, we plan to raise equity through our multiyear ATM program through 2027. Specifically, between 2024 and 2025, we expect to issue approximately $350 million in equity through the ATM. I know that that's probably smaller than some of you expected, but we believe our strong regulatory outcomes allow us now to do about $350 million between the two years, and we believe that will satisfy our capital needs, fund our growth initiatives, and maintain a strong balance sheet and credit profile. We remain committed to our sustainability goals as outlined in our annual sustainability report, and we're very, very excited about providing all this guidance to you today. We are optimistic about the future of our company and the opportunities that lie ahead. With that, I look forward to your questions. Operator, please open the line for questions.

Thank you. We are now opening the floor for the question-and-answer session. Your first question comes from Julien Dumoulin Smith from Jeffries. Your line is now open.

Hey, good morning, team. Chris, Dan, the whole team here, guys. Really incredible outcome here. Really nicely done to get back on that EPS CAGR, so kudos on that pivot. With that said, guys, a lot of comments here. I want to come back to a couple of them. On the equity financing expectations, just want to understand, am I seeing a little bit of a shift here? I mean, in terms of '24 and pushing into '25 a little bit with this 350 between '24 and '25, and how do you think about that fitting with the rating agencies out there? I just want to speak to having reviewed the new plan with Moody's potentially, how are they reacting? How are you thinking about your equity timing with their outlook as it stands?

Thanks, Julien. Dan here. So we're staying quite close to the rating agencies at this point in time just to make sure that we are in sync. What we put out here is that we would raise $350 million between '24 and '25. We stood up the ATM back in August. We've raised some equity on that already. This gives us the opportunity to pick the advantageous times between now and the end of 2025 to raise the $350 million that we noted.

We feel confident that Moody's feels good about our plan.

Correct. Thanks, Chris.

Got it. Is that any kind of subtle shift from your earlier $1 billion multi-year equity, just to dig at that a second further?

When we talked about the $1 billion and set the $1 billion ATM in place, what we said was that we would use that over an approximately three-year period of time. Depending on acquisitions and other facts, I don't really see it as a pivot at all or a change from what we had indicated before.

We hope if we're raising that kind of equity, we're doing some really nice acquisitions. It gives us some optionality, Julien.

Yeah, absolutely. In fact, did you want to speak to that a little bit? I've heard you comment about the equity expectations under the base versus your updated thinking about DELCORA or some of these acquisitions. What is that ex-M&A dynamic on equity versus inclusive? And then, I know you mentioned DELCORA here as being incremental and the cherry on top, if you will. Is there a sense that, as far as you're concerned, that you can get this done in a given time or are you going to hold off from providing any more prescriptive time limits in place?

The way I think about it is, we have a very strong asset purchase agreement, as you know, and it's been declared by several levels of courts to be valid and enforceable. The frustrating part is this federal bankruptcy court judge, not even on DELCORA, obviously, it's on the city of Chester. We have no control over that. Now, there is a hearing later this week, and we do believe that the stay will be lifted on the Supreme Court's ability to determine who is the owner of the Chester Water Authority. That's helpful. We need to get the stay lifted on PUC proceedings on DELCORA, but given the fact that we're not in control, it's difficult for us to have that influence. We backed that out of our numbers for that reason, but we strongly believe that if we can get that stay lifted and get it moving at the Public Utility Commission, we feel confident that it will go. Remember, it's a one-time rate base case, so that new RRR won't really have any influence, and this should fit nicely with it. If we could move it forward, say in late '25 or '26, then most certainly we'd need equity, and we'd want to be able to have access to ways to raise that equity. This gives us optionality. When we put the ATM in place at that size, we thought about how to do this efficiently, save legal costs, and set these things up in a manner where we had access to it, even if we need the entire amount.

What I would add is when we put that out there, we talked about the three years, but it's a multiyear program, but it did contemplate having some room for acquisitions as well.

Got it. Last clarification here, as you pivot out of DELCORA, is that the bulk of the Delta here? I know you have the segment rate-based CAGRs. You move from the 8% to 10% to the 6% and 11%, respectively, for water and gas. Is that reflected principally as a function of pulling DELCORA out there in terms of the composition mix?

Yes, that is, Julien. We don't have DELCORA unless we don't have the follow-on capital related to DELCORA either. We remain confident that we will ultimately close DELCORA and have it in our future, but it's not in the plan.

Got it. Excellent. Thank you, guys. Appreciate it.

Thank you.

Hey, Chris and Dan, good morning. Congrats on the settlement in the water rate case. Well done. Just maybe on equity, Dan, can you clarify, what have you issued year-to-date, and is that $350 million that you're buying?

We've issued a relatively modest amount of equity between August and now, just given blackout periods and some stock price volatility. We've taken some off of that $350 million, but it's not a tremendous amount.

Okay. Got it. That's all I wanted to ask. Thank you. And then just the 5% to 7% EPS growth CAGR, the starting point is, just to confirm, is it the 2024 guidance midpoint of that?

Yeah. The way I would think about that, we haven't finished 2024 yet, so we don't yet have the final EPS. But if you think you start with the 2025 EPS guidance range that Chris talked about, the $2.07 to $2.11, and then you use the 5% to 7% growth, you can back calculate a 2024 EPS of $1.97, or you can go back another year, and you'd get to $1.86, which was our actual result for 2023. That should provide you with some insights into how we're thinking about it.

You got it. Okay. That's helpful. Essentially, it's close to the 2024 EPS guidance midpoint, the way you just described it. $1.97 versus $1.98. Okay. That's helpful. And then finally, just thank you for explaining. I was just going to ask you on the water rate-based delta. It looks like it's just not DELCORA, but DELCORA-plus future investments in DELCORA that's driving that rate cases delta. One last question from me is just on the Moody's metric basis, Dan, so where do you expect to shake out? I know that they had a negative outlook early in the year, and you have this equity plan. Where are you expecting to shake out?

Yes, in 2025, we'd expect to see FFO to debt that are above 12%, and then we'd expect ultimately to have the negative outlook resolved probably into 2026 at some point.

We got our current level.

Excellent. Well, thank you, and congrats again on this solid regulatory process in PA.

Thanks, Durgesh. Take care.

Hi. Good morning. Thank you. You answered most of my questions. I appreciate all the information, the guidance and such. A high-level question, timely here. PFAS, if there were to be a Republican administration, what are your thoughts, not necessarily in terms of the limits being reconsidered, but implementation timeline and some of the maybe federal aid that would come your way to help with that?

I would say, if anything, we would not expect a backing off on the limit so that the four parts per trillion probably stays in place, at least to our best estimate. Even if there was a slowing in the compliance period, we would expect to continue to meet the current pace. We've talked to our regulators in the states that are particularly impacted by this, and regulators both on the environmental side and on the economic side have suggested that we stay the course and complete the work and then get it recovered. In the meantime, as you know, we've been in for low-interest loans and grants and also sued the polluters, and we'll continue to pursue all of the above. In terms of federal money, that flows through the agencies, the SRLFs or State Revolving Loan Funds, and we don't see a big change in terms of the federal money flowing through the states. We fully expect to invest roughly $450 million to overcome the PFAS issue. And again, that will be funded in a number of different ways.

Okay, that's helpful. I have one more broad question about acquisitions. Your main competitor seems to have slowed or at least plateaued in their acquisitions. It appears that you have also plateaued or slowed in this area. Is there something fundamentally changing in the water business over the past year or two that is leading to a decrease in acquisitions? Can you provide insights on what we're hearing from some of the major water utilities regarding this?

I think in Pennsylvania, most certainly that is the case as people figure out how the new regulation will impact them. The new regulation they call RRR in Pennsylvania, which is essentially a cap. Those who are considering selling their systems are thinking about what their DOC and what's 1.68 times that DOC. We believe from our ongoing discussions that it will be enough for people to continue to sell because it's still a good multiple. We believe that will have a positive impact on the ultimate rate impact. I think it's a temporary lull. Our ongoing discussions, not only in Pennsylvania but other states indicate that. We see some really positive things in Ohio, Illinois, and even down south that hope to materialize in the coming year.

Okay. So, yeah, I understand that's structural in PA, but nothing structural in those other states that would indicate something new?

I feel good about it, Travis. I think we're in a little bit of a lull here, but I do think that it will recover nicely.

Hey. Good morning, guys. Thank you for the time. And congrats on a very strong quarter and getting the long-term guidance back out there. Just one for me. I was wondering if you guys could talk maybe a bit about how the PUC is handling the separated estimated costs for PFAS. Maybe just any thoughts on if these will go through a similar rate-based process or how we think about those costs could be recovered.

We're sure that we will get recovery in each of the states where we've made the investments. One consideration is how the proceeds from the lawsuits, which we expect to be in the $100 million range, will be treated when those dollars come across. We know generally how they'll be allocated, but will the commissions want that applied to an offset to rate base or will it be offset to O&M? I don't think that's been fully determined. In terms of our actual capital investment in that mitigation, Dan, happy to get your opinion on that. I think there are various approaches depending on the state.

There are various approaches depending on the state. We're working toward in most of our states, Davis, really the ability to have deferred accounting treatment on these things. We would take these investments, we'd put them on the balance sheet, and then we'd either stall depreciation or we’d depreciate into this regulatory asset for recovery later. So that's the typical approach is to look for deferred accounting in other places where we're able to incorporate some of these things into our recovery mechanism in a future year.

That's super helpful. Yeah, that's all for me. Thank you so much, guys. Appreciate it.

Take care.

Could you talk about the process or timeline around the Peoples Gas appeal?

It's an unusual one. It's an appeal to the Commonwealth Court. Anytime these things come up, you don't like to see them. It's certainly not of paramount concern to us. It will probably play out over the year, but there are some moving parts to it as well. Today, being Election Day, there's a race for Attorney General here in Pennsylvania. The existing Attorney General is not running again, and the one appealing this is the Consumer Advocate, who is hired by the Attorney General. I think that's another factor in here, it will probably play out, and there would be some support for that decision from the PUC.

We give them an opportunity to document their support of the order effectively.

Hey, good morning. First off, is the entire $73 million water and wastewater base rate increase for the settlement to be effective in late February, or is it perhaps phased in at all?

No, that would be implemented at one time in February. I think it's February 20.

I guess just with the new PA rates in 2025 for both electric and gas, I'm a little surprised that the '25 guidance wasn't a little higher. Could you talk about what the '25 headwinds are to EPS growth that we should be thinking about off of the original '24 guidance range of $1.98?

We're still finalizing our budget for 2025, but one thing we are seeing is a few areas where we're having O&M headwinds that we haven't had in the past. One is purchased power. We've had a very advantageous multiyear agreement in our PJM states for purchased power. That agreement comes to an end, and we have a new contract going into effect. Purchased power prices have increased. We're facing that headwind as we go into 2025. We're also seeing new costs like chemicals. We will see some costs at our large surface water plants in 2025 to feed powder activated carbon as an O&M expense to help reduce PFAS in the water. That's one area of concern, as well as increased insurance costs that we've had. Those are a few headwinds that I would say help explain our guidance range of the $2.07 to $2.11 for 2025.

Okay. Great. That's helpful. I was wondering too, if you could give a breakdown of the five-year, $7.8 billion CapEx budget between water and gas?

That $7.8 billion CapEx only includes a few signed acquisitions. We expect with acquisitions that it will bias more toward water over time, but at this moment, it's slightly biased toward water and would be relatively close to 50-50.

Okay. Great. And then last question, I just saw that parts of Pennsylvania just issued a drought watch. How much of a concern is this to you guys right now? I know discretionary water use is getting lower this time of year, but how should we be thinking about that?

Not a great concern to us. We're conservationists at heart. We're an environmental company and are always guarded against any problems that would happen, but this is unusual weather. We've put some warnings out on our own to our customers, but we're in a good state. We don't anticipate any major impacts here in Pennsylvania, but certainly we'll comply with the warnings and support them.

Not just the supply side, but also on the revenue side shouldn't be too much.

Correct. We don't expect a financial impact to speak of.

Okay, great. Thanks so much for taking my questions.

Thanks, Jonathan. Take care.

Thank you. And thank you all for joining us as we're always available for follow-up calls, Brian, Haley, Dan and I, anytime. So thanks for joining us and take care.

Thank you for attending today's call. You may now disconnect. Have a wonderful day.