Q4 2023 Portland General Electric Co Earnings Call
Participants
Nick White; IR Contact Officer; Portland General Electric Co
Maria Pope; President and Chief Executive Officer; Portland General Electric Co
Joseph Trpik; Chief Financial Officer, Senior Vice President; Portland General Electric Co
Nicholas Campanella; Analyst; Barclays
Shahriar Pourreza; Analyst; Guggenheim Partners
Julien Dumoulin-Smith; Analyst; Bank of America
Gregg Orrill; Analyst; UBS Equities
Paul Fremont; Analyst; Ladenburg Thalmann & Co. Inc.
Travis Miller; Analyst; Morningstar, Inc.
Willard Grainger; Analyst; Mizuho Securities USA
Presentation
Operator
Good morning, everyone, and welcome to Portland General Electric Company's fourth quarter 2023 earnings results conference call. Today is Friday, February 16th, 2020, for this call is being recorded and as such, all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period. If you would like to ask a question during this time, simply press star then the number one one on your telephone keypad. If you would like to withdraw your question, please press star one one again if you do intend to ask a question, please avoid the use of speakerphones for opening remarks. I will turn the call over to Portland General Electric's Manager of Investor Relations. Nick White. Please go ahead, sir.
Nick White
Thank you, Daniel. Good morning, everyone. I'm happy you could join us today. Before we begin this morning, I would like to remind you that we have prepared a presentation to supplement our discussion, which we will be referencing throughout the call. Slides are available on our website at investors dot portlandgeneral.com. referring to slide 2, some of our remarks this morning will constitute forward-looking statements. We caution you that such statements involve inherent risks and uncertainties, and actual results may differ materially from our expectations. For a description of some of the factors that could cause our actual results to differ materially, please refer to our earnings press release and our most recent periodic reports on Forms 10 K and 10 Q, which are available on our website on our website.
Leading our discussion today are Maria Pope, President and CEO, and Joe Trpik, Senior Vice President of Finance and CFO following their prepared remarks, we will open the line for your questions. Now it's my pleasure to turn the call over to Maria.
Maria Pope
Thank you, Nick, and good morning. Thank you all for joining us today beginning with Slide 4. I'll discuss our 2023 full year and fourth quarter results and then turn to our outlook for 2024 and beyond. For the full year, we reported GAAP net income of $228 million or $2.33 per diluted share and non-GAAP adjusted net income of $233 million or $2.38 per share. This compares with GAAP net income of $233 million or $2.60 per share and non-GAAP adjusted net income of $245 million or $2.74 per share in 2022. For the fourth quarter, we reported net income of $68 million or $0.67 per share, up from the fourth quarter of 2022 of $50 million or $0.56 per share. While these are lower than expected results, we remain confident in our long-term growth trajectory of 5% to 7% and 2024 guidance of $2.98 to $2, an $0.18 per diluted share to start challenging. Weather impacted the quarter with mild conditions across the period and the second warmest December on record. This resulted in very low energy usage and historically low wind and hydro production. As a result of this combination, both to our revenue and purchase power and fuel expense performance fell short, the power cost challenges we faced in 2023 underscore the importance of risk reductions achieved as part of the 2024 general rate case. This includes 500 megawatts of hydro agreements, improving our capacity portfolio and the introduction of the reliability contingency event provision as part of the Pecem. These are solid steps in reflecting actual power costs and extreme events. We also have more work to do and look forward to working with the commission, other utilities and regional courts holders towards a holistic energy framework and solution.
Finally, our results also reflect higher costs associated with continued capital investment to support grid resiliency, customer growth and decarbonization.
Turning to slide 5, we consistently said that 2023 would be an investment year, notwithstanding the challenges we faced, we achieved important milestones. It has set the stage for 2024, including a constructive outcome in our general rate case, 2024 will be a year of growth, supported by three key drivers. First, continued load growth led by high tech and digital customers. Second, capital investment to enable this growth advance our clean energy goals and strengthen reliability and resilience, and third, ongoing operational discipline across our organization. I will touch on each of these in turn.
First, we expect continued strong industrial load growth, supported by state and federal policies. Microchip was recently awarded $72 million under the Federal CHIPS Act for $800 million expansion at their facility in Gresham. This is in addition to the multibillion-dollar dollar investments by Analog Devices and others. This builds on the state of Oregon's appropriation of $240 million for semiconductor projects, 85% of which are in our service territory. Our capital plan now includes additional strategic transmission investments to enable this high-tech and other customer growth as well as renewable development. Joe will walk you through the updates to our plan in more detail, but at a high level, our transmission projects are largely within our service territory or adjacent. Many of these lower risk projects are reconfiguring existing lines related to renewable development. We are currently accepting and evaluating bids for the 2023 RSP. throughout the first quarter of 2024, and we'll present at the shortlist later in the year.
Coming out of our last RFP, Clearwater wind project came online in January with an impressive 45% capacity factor. And we look forward to our battery storage projects coming online later this year and into 2025.
Now on to Slide 6. Utilities across the country are dealing with increasing impacts of extreme weather. This January, a severe storm propped up a powerful combination of high winds, ice and snow that led to widespread damage and high power costs. In the face of these extraordinary conditions, we deployed an extraordinary response. This included more than 1800 personnel crews and support staff working hard to restore power and repair critical equipment.
I want to take a moment to acknowledge and thank our teams and partners for all of their hard work in very challenging conditions. The storm came in multiple phases of severe weather and single digit temperatures in the course of about a week crews restored power to over half a million customers. This is a great example of how our teams are working together efficiently to deliver for customers when they need us most. Our response was informed by lessons learned from the severe storms we experienced in 2021, and we're continuing to improve and what used to be one and a decade of it. This operational focus is showing up in other ways as well. Our results and 2023 reflect our strong execution on cost management. Thanks to the extraordinary efforts of our team, streamline processes, leverage technology and improved productivity.
As we look to 2020 form, we continue to build on this progress. To reiterate, we're focused on three main areas to achieve growth in the coming year and beyond. First, exceptional customer growth, second, execution of our capital plan, and third, and ongoing operational discipline. As such, we are well positioned to achieve 5% to 7% long-term earnings growth.
With that, I'll turn it over to Joe, who will walk you through our financial results. Thank you.
Joseph Trpik
Thank you, Maria. And good morning, everyone. Before I walk you through the results and outlook, I want to acknowledge that we did not file our 10 K this morning in line with our typical practice, we are just finalizing the required documentation for the 10 K and completing associated compliance procedures. As you may know, we finished a new ERP software implementation in the fourth quarter with the holiday on Monday, you will see our filing posted with the SEC on Tuesday morning.
Now turning to Slide 7. Our 2023 results reflect continued industrial load growth dynamic weather and power cost conditions, execution of our capital plan and strengthening our growth foundation. Weather had a meaningful impact on 2023 results, particularly in the second half of the year, we saw 11% fewer cooling degree days and 13% fewer heating degree days compared to 2020 to Q4 had historically moderate stretches with our regions in the second warmest December on record. Overall, we experienced 15% fewer heating degree days than the 15-year average customer uses was affected by these conditions. Power costs were also challenged as renewables production was significantly impacted during these mild periods. Pge's wind farms generated 23% less energy in Q4 2023 than Q4 2022, requiring generation at PGE's thermal fleet to make up much of the shortfall. Ultimately, these dynamics were a significant headwind in achieving the level of power cost favorability expected for the year 2023 load increased by 0.9% or 1.4%. Weather adjusted compared to 2022 2022. Residential load decreased 1.7% year over year or 0.5% weather-adjusted driven by mild weather and energy efficiency. Residential customer count increased 0.8% for the year. Commercial load decreased slightly, down 0.3% or 0.2% weather-adjusted versus 2022, largely driven by energy efficiency. Healthy industrial load growth continued in 2023, increasing 5.9% over the last five years, we've observed a 7.5% compound annual growth rate in industrial load as high tech investments and a high expansion have driven semiconductor and data center demand growth while total loads in 2023 were below our expectations. Our service territory fundamentals in our load outlook remained strong. Unemployment in our region of 3.4% trailed the national average of 3.7%. And we continue to see other public positive indicators, public and private sector investment points to broader economic development and continued load growth in 2024 and beyond.
I'll now cover our financial performance year over year, we experienced a $0.14 decrease in revenues, excluding power costs and regulatory program collections, driven by a $0.13 increase due to a 0.9 increase in deliveries and $0.27 decrease due to changes in the average prices of deliveries from higher industrial load and lower residential and commercial low power costs drove a $0.25 increase in EPS, driven by a $0.29 EPS increase due to power cost headwinds in 2022 that reversed for this comparison and a $0.04 EPS decrease from higher power costs than anticipated in the annual update, tariff serving load during the August heat event and the impacts of mild weather in on Q4 renewable generations were the key factors. Operating expenses, net of deferral related items drove a $0.01 decrease. Our efficiency and cost management efforts, particularly in Q4 allowed us to keep base O&M nearly flat year over year.
Next, a handful of impacts driven by the execution of our long-term capital strategy, including a $0.19 decrease from higher depreciation and amortization, a $0.16 increase due to higher interest expenses expenses, a $0.1 increase from higher AFUDC, driven by ongoing investment, including the recently completed Clearwater wind development and a $0.22 decrease due to dilutive impacts of draws on the equity forward sale. In 2023, we had a $0.01 increase from other items, including higher returns on benefit plan assets and regulatory interest, partially offset by benefit plan buyout in 2022 that did not recur.
Lastly, a $0.05 decrease to GAAP EPS resulting from the Boardman settlement refund, bringing bringing us to our GAAP EPS of $2.33 per diluted share. After adjusting for this $0.05 impact, we reach our 2023 non-GAAP EPS of $2.38 per diluted share.
Turning to Slide 8, which shows our latest 5-year capital forecast 2024 through 2027 estimates are now upsized by $1.2 billion. As we look to maximize customer value with system-wide improvements and emerging transmission investments. These transmission projects will focus on network improvements meant to alleviate congestion, improve adequacy and reliability enable decarbonization and address customer growth. 2028 transmission product projections also include PGS. and a contribution to the Bethel around new transmission line upgrade, which will be undertaken with our longtime partner that can federate Tribes of the Warm Springs. This project will be assisted by the previously disclosed $250 million US DOE grant awarded to the tribe as planning and scoping are finalized for this and other grant related projects, we will update our estimates and reflect in future forecasts. We have also refined our expectations for base capital spend to support grid modernization, system hardening and technology investments. As a reminder, this chart does not reflect CapEx related to the possible ownership from the recently launched 2023 RFP, which went to the market on February second, the competitive bidding process schedule, which is included on our RFP website, anticipates bid submissions, final short to shortlist selection and shortlist submission to the OPUC by mid 2020 for project selection is expected in Q3 or Q4. This timeline is dependent on the volume and complexity of the bids and we will update you as the competitive process continues. While we are continuing to evaluate timing, increased base CapEx to deliver customer benefits and the incoming battery projects to improve grid flexibility put weight on the scale for a near term rate case filing in line with our standard process. We will keep you informed of any actions regarding every case file on to Slide 9 for our liquidity and financing summary, total available liquidity at December 31st is $969 million. Our strong balance sheet investment grade credit ratings and stable credit outlook remain unchanged from our previous disclosures through December 2023, we've entered into forward sale agreements for $78 million of the $300 million available under the ATM. There have not been any draws on these forward agreements thus far. As we look to the remainder of 2024, we anticipate debt issuances of up to $730 million for the year. And we plan to continue our practice of issuing under our green financing framework where possible on the equity front capacity under the ATM remains sufficient for our base capital financing needs, including two battery projects currently underway. The ATM provides a helpful mix of capital access and dilution management that supports our ongoing base capital plan, continued management of our capital structure and trending towards our authorized 50 50 50 ratio over time remains a key priority. We maintain flexibility in financing options and remain confident in competitively accessing both debt and equity markets when necessary as additional capital investment opportunities mature, including from the RFP. We will continue to evaluate our strategy and update you on our financing plans.
Turning to Slide 10. We are now initiating full year 2024 adjusted earnings guidance of $2.98 to $3.18 per diluted share as Maria noted earlier, the January ice storm system had a meaningful impact on our service territory, and we are continuing to work through the implications of the multi-day event. Currently, we estimate storm restoration operating expenses of 35 to $45 million and approximately $15 million of capital cost to repair impacted assets. Earlier this month, we thought refiled a deferral of these costs, understanding emergency restoration deferral, the conditions to trigger the first reliability contingency event treatment under the updated power cost recovery framework format as the region saw market price spikes balancing authority alerts and resource adequacy constraints on PG. system under the RCE. mechanism, PG. is allowed to pursue recovery of 80% of the cost for the RC above the amounts forecasted in the AUT. with the remaining 20% flowing through the existing P can be currently estimating the RCE. cost between 85 and $100 million. These impacts are still being finalized, but we will be able to provide more detail when we report Q1 2024 results, given the extraordinary and irregular nature of this storm last month. The effects are excluded from our 2024 guidance and will be excluded from our 2020 for adjusted non-GAAP results to improve the comparability of earnings and to better reflect our ongoing financial performance. We expect this to involve the exclusion of the nonrecoverable 20% portion of the RC costs and any operating costs which have been determined nonrecoverable under existing mechanisms.
I will now touch on other drivers of 2024 guidance. As I said earlier, confidence in our service territory remains strong, highlighted by continued low growth from industrial customers and modest increases in the residential and commercial classes. Combined, we assume a 2% to 3% to 3% weather adjusted retail load growth for 2020 for these low dynamics as well as continued regional investment in our pipeline of incoming projects, give us continued confidence in our long run load assumptions expected expectation.
Sorry, as such, we are reiterating our long-term load growth guidance of 2% through 2027. We anticipate O&M expense ranging from $815 million to $840 million, which includes $165 million of earnings neutral regulatory deferral amortizations, wildfire mitigation and vegetation management costs and other offsetting items. Net of these items the midpoint of our O&M range represents a 3% compound annual growth rate compared to 2022 base O&M net of similar offsets. We remain committed to deploying the right tools to optimize productivity and provide the highest quality customer service while also managing operating costs. This philosophy, coupled with derisking accomplishments and critical investments made in 2023, give us continued confidence in our growth plan. As such, we are reiterating our long-term earnings growth and dividend growth growth guidance of 5% to 7% as our attention shifts to the year ahead, our core focus remains unchanged safely, serving clean, reliable and affordable energy while providing value to our communities, our customers and our shareholders.
Question and Answer Session
Operator
And now, operator, we are ready for price as a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again, please standby while we compile the Q&A roster. And our first question comes from Nicholas camp and Noah with Barclays. Your lines now.
Nicholas Campanella
Okay, thanks so much for taking my question.
And Happy Friday from Florida goes.
I guess, I guess just pretty material increase in the base CapEx plan here. So can you just help us understand, are there additional equity requirements beyond kind of the $300 million ATM that you've highlighted in the slides? And then on maybe I'll maybe I'll just leave it there for now and then where do you kind of stand and that five to seven EPS kegger with this new CapEx plan.
Maria Pope
Thank you. Sure, all. Thank you very much on the so first for one of the additions that you're seeing and we pulled it out and separated it from what we had shown you in the past is our transmission investment plan, and that will continue to probably increase as we move forward as well. And it frankly occurs to your questions on our equity offerings or where are we looking for the ATM, the ATM will cover what we need for the foreseeable future, including the batteries, we are waiting to see where we end up with the RFP projects that could be coming in and that could potentially require additional capital we remain confident in our 5% to 7% growth rate. And you'll see that moving forward with confidence as we look to 2024, which is a really solid year for us given the outcome of our rate case customer growth and the capital plan that we just discussed.
Nicholas Campanella
Okay. So on the on the base plan today, it's just the current equity funding needed to do the base plan today. Obviously, that can change as this RFP comes through and we'll see how much you can own versus not that not the right message?
Maria Pope
Yes, that's correct, Nick. Thanks.
Nicholas Campanella
Okay. Thank you. And then just on, I guess just on the storm expenses, just on understanding that you're deferring a portion of it, you kind of talked about the $35 million to 40 million bucket and then this $85 million to $100 million for the RCE. costs, just simplistically, like how much is actually being deferred versus at versus excluded from the non-GAAP number and '24?
Maria Pope
So let me let Joe take that on. And one thing I want to recognize that this was truly an extraordinary event, not only for the restoration efforts with regards to customer outages, but Beach and why the energy markets were really significant disarray that Joe alluded to to all sort of answered this a big reversal as it relates to the costs in the amount that we would expect not to be deferred, that would would be the operating the exclusion would be between 10 and $0.15, meaning everything else that we talk to would be deferred within one of the two mechanisms that we've mentioned previously.
Nicholas Campanella
That's helpful. Thank you so much.
Operator
Thank you. One moment for our next question.
And our next question comes from shared Prism with Guggenheim Partners. Your line is now open.
Shahriar Pourreza
I think Charles morning. It's actually James for sure. Good morning morning. So if I could start on the load side, just part of the backdrop, it is your service territory. It's in a lot of companies involved in semiconductor manufacturing and Asia-Pacific data centers. Can you just give us some color on how AI is providing growth across the customer classes as you see it? And also any detail on what kind of incremental generation or transmission opportunities are being created in the longer term specifically by those customers start?
Maria Pope
That's a great question. So on the longer-term side of it was certainly a we have been a Asia semiconductor manufacturing center for decades. And of that 15% of semiconductors are manufactured. And in our service territory, we expect to see a lot of longer-term growth. The construction of those facilities is very extensive and easier to construct on a near term growth is the AI. driven data centers, both in terms of some of the mega facilities as well as some of the grid edge computing. So we are seeing no small shortage of demand from just about every hyperscaler and cloud computer company out there and it's a really terrific amount of opportunity for us up most of these companies, 100% clean energy. They frequently bring their own reliability backup, and we are interested in additional transmission substation infrastructure as well as other so that it allows for significant growth as we move forward for our communities and the other customers we serve. This creates an overall strengthening of our reliability and resiliency as we invest in new infrastructure and it provides important jobs for the region, our property taxes and other significant benefits.
Shahriar Pourreza
Got you. And then just shifting over to the regulatory side. Joe, you answered this at the end of your prepared and I assume the timeline for new rates Jan. one 25 would be the new GRC filing in the next week or two? I guess, can you just give a little more color on your thoughts on timing?
Maria Pope
Sure. Well, so we haven't finalized our thoughts on timing, but you're correct under the regulatory frame, it framework in Oregon, it is a 10 month window. So if we want rates to have effect immediately on January first, a filing would be to occur by the end of this month. We continue to sort of finalize our thinking and approach, and it will obviously communicate that as we have it as I mentioned previously, there are there are certain items putting weight on the scale of the batteries coming online and some other items that we would expect feeding more timely recover seven fixes.
Operator
Thank you. One hour for our next question.
Our next question comes from Julien Dumoulin-Smith with Bank of America. Your line is now open from.
Julien Dumoulin-Smith
Very good morning, and thank you guys very much for the time.
Hey, Maria. Thank you. And just a follow-up.
Hey, I'm just following up on the latest from the Oregon PUC had just on the rejection of the clean energy plan. I just want to understand a little bit, right, because obviously this sort of partial short term versus long term, what message are they trying to send here about 100% target. So she relative to affordability. And I'd love to get your words a sense of breaking out of the different pieces that are ongoing. And then I've got a follow-up quickly.
Maria Pope
Sure. No, I think it's a great question. And first of all, this is our first clean energy plan. And I want to acknowledge and recognize that our integrated resource plan was on it was acknowledged and we are moving forward under that IRP or have questions really had to do around more granular admissions modeling. We have been doing day by day admissions modeling, and they like to see hour-by-hour emissions modeling. And overall, you'll also remember our original IRP up had was upsized in July, a quite significantly for additional energy needs as well as additional capacity needs. And I think there's more discussion amongst stakeholders and key constituents around the how we're going to meet and the additional needs with additional renewable energy and other infrastructure. So it's a good time to have healthy discussion around what is really a dynamic answer rapidly growing environment here.
Julien Dumoulin-Smith
Yes, it's certainly. And just to make sure I'm understanding the key takeaway here. I mean, it seems like there's a broader question about like how you meet the 100% in terms of maybe there's a need for more again, because I know that at times has been an acute focus on affordability here and perhaps enabling and ensuring that there's a pathway for affordability. I just want to make sure I'm hearing clearly what direction there's some there's rejection on the long term came from.
Maria Pope
It came from I need most clearly for additional admissions modeling, Julien, but the backs of the back story here is that we're seeing a pretty significant changes to the upside of energy usage and wanting to really understand the sources of the economics of all of those procurements as we bring on renewable resources in Clearwater would be a good example. We're actually not seeing customer prices react because we're displacing higher purchased energy in the market and certainly additional renewables procurement is actually not driving customer prices as much as one would think as we model it forward. It's the overall need for investment on an aging infrastructure and supporting significant customer growth that is driving customer prices have really moved forward more than clean energy development.
Julien Dumoulin-Smith
Right. And actually, to that point, I mean, you have a dramatic increase here in transmission, and that's not necessarily surprising, given what you've been telegraphing in recent periods about the need for transmission, but it can you maybe frame out I mean, how do you think about sort of upside generation given the new level of spend tied to especially transmission here? I mean, should we continue to think about this as being incremental? Do you have a shift and how you think about allocating capital to generation here? I mean, I know that you're reaffirming five to seven, but at times perhaps there's been sort of a ceiling on how much you want to push your core rate base considering all the various needs. Is there a push out potentially here in terms of some of the investments or really do we should we consider this as truly incremental upon incremental opportunities?
Maria Pope
Sure. I mean, we have to always keep customer prices. First and foremost, there's no more question that we have seeing customer price pressures, and we are very attuned to the interest of our customers and keep making sure that affordability stays first and foremost, one of the reasons that we have competitive RFPs for renewable generation capacity and energy is to get the very best prices for customers in competitive processes. We have done well in those processes in the past and we hope to continue to be able to deliver the lowest cost at least the risk clean energy resources to customers that is markedly up now available.
With regards to transmission, there is some flexibility. Some of these transmission spend was in our historic run rate. Some is new and incremental, we think is the sort of this concentric circles. The first circle being within our service territory, really directly impacting being impacted by customer growth. And second is to bring clean energy from our area or just adjacent to our areas to our customers and then the third is broader investments across the Northwest. One of the big increases, as you look farther out in the chart in 2028 is the Federated Tribes of the Warm Springs project on our existing Pelton route pulp around your line of where we received a $250 million Department of Energy grant to significantly upsize that existing line, most of which of which will continue over existing rights of way.
So as we look at transmission, we're focused on relatively easy to execute. And my colleagues would probably question that transmission is ever easy to execute, but to relatively lower risk on projects within our service territory, focused on repowering and increasing our existing rights-of-way and aligns wonderful.
Julien Dumoulin-Smith
Excellent. And just a quick quick housekeeping on the IGCC or if you don't mind, just for the battery is not going to be reflected in a single year here or over five years or how do you think about the accounting for the ITC. here real quickly, again, this sort of a novel subject and storage and regulated wind?
Joseph Trpik
So good morning, Julien. So from a from a standpoint of recognition as as the battery comes online, we'll recognize those IDCs and we would expect since we have two batteries that will be coming in over '24 and 25 that we'll recognize those ITCs. What I'll call it about to the balance sheet of the customer is receiving the benefits of those agencies and that will lay out in our in our next regulatory filing that will be amortized to them.
Julie, I think when you get to the real question is once we put them on the balance sheet. The expectation is that we will monetize them somewhat shortly thereafter. So as as we recognize them and they have been the certainty of the ability to transfer, we will be looking to monetize.
Julien Dumoulin-Smith
Got it pretty pretty concurrently. Got it again. Thank you.
Yes. So then that will flow through the income statement.
Joseph Trpik
The monitor the monetization will flow through as a as a cash flow right from and the purchase and sale of the ITC.s, which is income will be income statement neutral to us.
Julien Dumoulin-Smith
Okay, thanks very much for the question. Perfect.
Operator
Thank you. One moment for our next question. Our next question comes from Gregg Orrill with UBS. Your line is now open.
Gregg Orrill
Morning, guys.
Thank you. Good morning.
With regard to the rate case coming up, do you have any any sort of early thoughts on some level of rate increase or sort of thoughts on affordability? I'm heading into that Greg?
Joseph Trpik
Good morning, Javier. Because obviously we start our case here, always thinking about affordability to the customer. Also considering we kind of a previous case here, we I would expect in this case, the truly the focus is going to be on the batteries, the the assets that have been put in service to to continue to advance both reliable reliability, expand capacity on the system as well as small amounts of costs. I mean, I think this will be mainly be a truly just a in infrastructure update to the plan. We are focused on on affordability.
Gregg Orrill
Got it. Thank you.
Operator
Thank you. One moment for our next question. Our next question comes from Paul Fremont with Ladenburg Thalmann. Your line is open.
Paul Fremont
Thank you very much, and thank you for taking my question. Questions on.
I guess my first is, given the storm deferrals for January, is that something that you would be looking to recover in the rate case that you're filing currently or would that fall outside the purview because of it's two risk.
Joseph Trpik
Good morning, Paul. So the these store recovery actually will fall through two separate processes, then the the general rate case. So they'll both be in existing mechanism. So the as it relates to the operating costs and the reconstruction costs, those will come through rate a deferral rider that will be filed and it will have its own proceeding, which is. And then the as it relates to the the cost of the of the energy and the RC events that will go through the pecan process, each will have a bit of a different timeframe. For example, the PTM. process would not be filed until 2025 with the recovery of that, that would work itself into 2026.
And then the timing on the OpEx recovery, does that normal would that normally occur within a year's time or or shorter than that, that recovery will be up to the discretion with the condition. Normally, the storms are recovered over due to their magnitude and the significance over an extended period. The last time we had a storm recovery of this nature. It was recovered over seven years. And what we will also run through just isn't as you say, we'll also look to the eligibility for either of these four securitization, which will obviously change can change the recovery stream as well.
Paul Fremont
Okay. And then looking at a higher base CapEx, how should we think about that relative to your guidance bidding into the renewable RFPs? Or would you be looking to wind less in the RFPs given sort of the magnitude of the CapEx increase? Or would there be sort of no change in terms of Bob, in terms of your business strategy?
Maria Pope
So our bidding strategy today, our bidding strategy going forward and our bidding strategy in the past has always been the same. And that is to have the most competitive projects for the lease cost and leased risks, our customers and those if those projects are our winners, they're good for customers and they're good for financing.
Paul Fremont
Okay. Pump. And then it looks like there's a 2 to 300 million annual increase in CapEx each year on, should we look at the incremental amount of ending as being funded, roughly 50% with equity?
Is that sort of a fair way to think about the financing. I think when we look to the long-term financings here, we continue to look to to over a sort of using flexibility, manage our capital structure.
Joseph Trpik
You'll continue to move towards 50 50. So your assumption that over time they would that would be looked at it at that balance level. It would be a reasonable way to look at.
Paul Fremont
Great. And then my last question. There's a big step-up, I think, in transmission and spend in 28. And I was just wondering, you know what sort of what's the and the explanation.
Maria Pope
In answer to Julien's question earlier, that's the Pelton Round due to two 30 line that's planned to be increased to 500 kV in partnership with Federated Tribes of the Warm Springs. We previously announced a $250 million grant for that work on it from the Department of Energy on. Obviously, that project would cost more than $250 million over 100 miles long, and it would be a multi-year project. The 1st year we're anticipating in 2028 would the current level of transmission spending sort of stay at that higher level for several years. I I probably for a couple of years after that, in 2029, 2030 on the transmission line and the increase also opens up a good portion of the central part of Oregon for additional renewable development in partnership with the tribes. We currently colon several hydro facilities out with them and so this will allow for significant expansion, particularly of solar energy, but really making the central part of of Oregon and the competitor Tribes of the Warm Springs reservation or an opportunity for further development on through 2028 and beyond?
Paul Fremont
And then my last question with sort of the step-up in CapEx, what what type of rate base growth does that give you on a percentage basis through through 28.
Joseph Trpik
So Apollo in the sort of the sister document that we also filed this morning for the base capital, which includes the transmission which includes the U.S. aligned that Maria just mentioned, that would put us at right around an 8% rate base growth up. And then we've also in that in that update on made some yield scenarios regarding an RFP outcome in that update, we would put you at a with a a 25% outcome would put you at a 9.2% rate base growth through 20.
Paul Fremont
Great. Thank you.
Maria Pope
Thank you.
Operator
Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one. Again, one moment for our next question. Our next question comes from Travis Miller with Morningstar and your line is now.
Travis Miller
Thank you, Chad, and good morning, everyone.
A quick question on the battery stuff that increase in the 2024 number. Is that incremental projects or is that some kind of carryover spending from 2023 specifically as it relates to the battery, that is the that is the 2020 2020 21 RFP moving out and back the battery spend you see in '24 and '25 was all existing from that RFP. And it is the first set of spend is more. That is the console project or the smaller battery. And then the spend that goes into 2025 is the seaside battery, which is the larger.
Okay. I was thinking about the comp from previous capital update, which was living 100 and something million to the 235. And these are the same batteries we have. We have not we have not added any projects. This is the this is the update, the pricing for those same batteries.
Maria Pope
So there were some payments that went from 2023 to 2025.
Travis Miller
Got it. Okay. Okay. So I was thinking and then related on that, how much of the batteries specifically CapEx and those payments do you anticipate you'll be able to get into the rate case given that and correct me if I'm wrong, given that they're probably not going to be done right operational in the next two weeks when we update the so when we do the filing the filing, we'll look we'll use a future amount of rate base. So we'll use an end of 2020 for rate base and we'll be we'll let you know, when we decide to file, we will place a structure in there that would expect recovery of the batteries on their in-service date.
Joseph Trpik
The first, the console battery, which has an in-service date, somewhere right around 20 at the end of 2024. And then also then the seaside battery as it goes in service in 2025, that as you may recall in our prior case and when we file whenever we file our next phase, we will address the rack or the the renewable adjustment clause that allows for renewables to go into service. We previously had requested that batteries get included there. So they did they just automatically go in service. We will again, look within our filing to address that that policy as well as potentially consider other policies to ensure that the batteries are timely into service similar to other renewable on assets.
Travis Miller
Okay, great. That's really helpful. And then a different question, given the increase in the capital spending and your comments around trying to get back to the certain capital structure, what does that mean for the dividend and dividend growth? You anticipate.
Joseph Trpik
our expectation is as we continue to grow, we are committed to on are those drawing the line as it relates to our 5% earnings growth and that similar dividend growth. So we have no expectation of changes in our dividend growth rate off of our previously communicated.
Travis Miller
Okay. In line with earnings, Craig. Okay. That's all I had. Thanks so much.
Joseph Trpik
Thank you, and thank you, Trevor.
Operator
Thank you. One moment for our next question. Our next question comes from Willard Grainger with Brazil, who your line is now open.
Willard Grainger
Morning. Hi, good morning, everybody.
Good morning. Just a question on sort of coming back to the equity on equity in the balance sheet debt to cap. You finished 2023 with around 56%. That's the cap on. When do you think you'll be closer to the allowance of the 50% that you've gotten in the last rate case?
Joseph Trpik
Sure, Bob morning morning, we'll add so field, we look to as we built the the five year plan, we really we've considered a path that will get us towards that 50% over that period. With some flexibility on the timing in between peers considering the RFP or considering the art of Century Mile within or without our P. scenario. So we have sort of a series of flexible field strategies that work is there over what I'll call the longer planning.
Willard Grainger
Understood. Thanks for the clarity. And then on maybe just thinking about the on the battery GEORGE on. Is that something that and you'd likely see more of what with some of the load growth? Or do you think that the generation spend is for more geared towards that traditional renewable.
Maria Pope
And we'll I think we'll see both. Clearly, capacity is important as we've in particular, with all of the volatile weather that we're seeing. So I think you'll see additional batteries coming through through RFPs. I think you'll also see more traditional renewables of wind and solar. And there are also some pump storage projects and some other projects that are farther out to independent power producers have been working on. And so I think it's going to be what I call the all above set of solutions as we move forward. We'll also working very closely with customers on their energy usage and flexibility as well as standby generation up to bring all the resources to bear through this transition.
Willard Grainger
Thank you. I'll leave it there. That's super helpful.
Maria Pope
Thank you.
Operator
Thank you. I'm showing no further questions at this time. I would now like to turn it back to Maria Pope for closing remarks.
Maria Pope
Great. Thank you very much. We appreciate your interest in Portland General Electric, and we're excited about 2020 for our continued growth at high tech and digital customers. Our capital plans to support that growth in renewable development as well as our continued focus on operating costs and operational excellence. We look forward to connecting with you soon. And thank you very much for joining us today.
Operator
This concludes today's conference call. Thank you for participating. You may now disconnect.
