DUK
#Thank you, Mike, and good morning, everyone
Today, we announced adjusted earnings per share of $1.59 for the third quarter, continuing to demonstrate growth in the fundamentals of our business
We advanced our long-term strategic investment plan while maintaining our focus on operational excellence
And our employees rose to the challenge of Hurricane Irma, one of the most powerful storms ever to hit the Atlantic
Given our results through the third quarter, we are narrowing our 2017 guidance range to $4.50 to $4.60 per share
Even with $0.15 of below-normal weather year-to-date, including the lost revenues from Hurricane Irma, we'll deliver on our earnings commitment to our shareholders
This is a testament to the dedication of our employees and our focus on flexible cost management
We are also confident in our ability to maintain our long-term growth rate of 4% to 6% off of the $4.60 midpoint of our original 2017 guidance range
We remain focused on achieving growth at the high end of our range over time as our investments build and recovery accumulates
Turning to our operational performance in the quarter, I'm proud to begin with our response to Hurricane Irma
This storm caused widespread, devastating damage across the Southeast region leaving nearly a 1.5 million of our Florida and Carolinas customers without power
And even though many of our employees' own homes and families were impacted by the storm, they put the needs of our customers first
Most of the damage was in our Florida territory with 1.3 million customers experiencing outages
More than 12,000 line and field workers rebuilt our system and restored power to over 75% of customers in just three days, and 99% within eight days
Our initial storm restoration cost estimate for our Florida service territory is almost $500 million
The majority of this will be recovered through the existing Commission storm rule or transmission tariffs
After netting our current storm reserve balance of $60 million in storm related capital replacements, we plan to defer approximately $400 million for future recovery from customers
We can also request an additional $132 million to replenish the storm reserve
Under our current rate agreement, Duke Energy Florida is authorized to begin recovering both the storm impact and reserve replenishment 60 days after filing a petition with the Commission
Based on our initial estimates, we believe the customers would see an approximate $5 increase on a typical monthly residential bill, assuming a three-year recovery period
We continue to refine our cost estimate as we prepare to file with the Commission by year-end
We also received two important recognitions in the quarter
Duke Energy was named to the Dow Jones Sustainability Index for the 12th consecutive year, acknowledging our commitment to a cleaner, sustainable energy future
And Site Selection Magazine named us as one of the top utilities in economic development for the 13th consecutive year, highlighting our work to attract businesses to our service areas
We also reached an important milestone with the one-year anniversary of our acquisition of Piedmont Natural Gas
This merger has truly been a seamless, textbook integration and we're happy to have our Piedmont teammates as part of Duke Energy
We look forward to investing in this business and expanding our natural gas infrastructure for years to come
As you know, we have a busy regulatory calendar this year
Starting with Florida, we reached a constructive agreement with numerous parties in the state and the settlement was unanimously approved by the commission last week
We worked closely with stakeholders to reach an agreement that paves the way to a smarter energy future for our Florida customers
The settlement provides rate clarity through 2021 and allows us to recover up to 700 megawatts of solar energy and our grid investments, which will improve reliability and enhance customer choice
The agreement also includes recovery of investments in electric vehicle charging stations in a battery storage pilot program
As part of the settlement, we will not move forward with building the Levy nuclear plant, and customers will not pay any further costs associated with this project
Our success in reaching this settlement is another example of our ability to achieve favorable outcomes for our customers and our shareholders
We will continue to engage constructively with stakeholders as we advance our regulatory modernization agenda across all of our service areas
Slide six summarizes our pending North Carolina rate cases
Our Duke Energy Progress case is advancing and in mid-October, a number of intervenors filed written testimony advocating their positions on our request
This is a normal part of the process
As we've seen in past rate cases, the public staff and others typically recommend revenue adjustments
We remain confident in our positions and look forward to filing our rebuttal testimony this coming Monday, November 6 where we will respond to the arguments raised by intervenors
The hearings for the DEP case are scheduled to commence on November 20. At Duke Energy Carolinas, our rate case is in the early stages
We recently received a scheduling order and intervenor testimony is due January 19 and hearings are scheduled for mid-February
Slide seven outlines our strategic priorities to transform the customer experience by modernizing the energy grid, generating cleaner energy, and expanding natural gas infrastructure
Let me share a few updates on our progress starting with our grid investments
Today, we announced the expansion of our Power/Forward Carolinas initiative into South Carolina
We plan to invest $3 billion in the state, consistent with our 10-year strategy to invest $25 billion in the grid across our jurisdictions
We commissioned a University of South Carolina research economist to study the potential impacts of this initiative
According to the findings, our investments over the next 10 years will deliver significant benefits to the state, including an average of nearly 3,300 jobs supported per year, representing almost $200 million in new salaries and wages annually, more than $100 million in new tax revenue for the state, and a total economic output of more than $5 billion
We're looking forward to making these investments on behalf of our customers and to support economic development in South Carolina
In North Carolina, we announced plans for 13 megawatts of batteries spread across two sites as part of our Western Carolinas Modernization Project
And in Indiana, we'll be installing a 5-megawatt battery as part of our microgrid at Camp Atterbury
We continue to look for opportunities to deploy utility scale battery storage as costs come down and performance improves
Shifting to generation, our W
Lee, Citrus County and Western Carolinas combined cycle natural gas plants are progressing well, and these projects remain on time and on budget
We are also moving forward with a dual-fuel project at our Belews Creek coal-fired plant in North Carolina, representing a combined investment of over $150 million between Duke Energy Carolinas and Piedmont
This upgrade will enable 50% natural gas co-firing on two units at the site increasing fuel flexibility and lowering carbon emissions
Piedmont has filed with the NCUC for permission to build gas infrastructure to supply the plant with natural gas
The project is expected to be completed in two phases, in 2019 and 2020. During the quarter, we also saw important developments in each of our pipeline investments, Atlantic Coast Pipeline, Sabal Trail and Constitution
Atlantic Coast Pipeline reached a significant milestone on October 13 when FERC issued the final certificate
This project will stimulate significant economic development in Eastern North Carolina and support growth in the region
We are working with the relevant state agencies to secure remaining permits and expect to begin construction by the end of this year for an in-service date in late 2019. ACP also closed a revolving credit facility in October to fund approximately half of the pipeline construction costs
The project has borrowed $570 million against the facility to cover costs incurred to date with Duke's share at 47%
Regarding the Sabal Trail pipeline, FERC issued a supplemental environmental impact statement on September 27. This addressed issues noted by the D
Circuit Court, which vacated the project certificate
FERC and other interested parties have filed with the court for a rehearing and we expect a favorable outcome
The project remains operational as we await the court's decision
And turning to Constitution, the project filed a petition for a declaratory order in early October asking FERC to determine if New York failed to act within a reasonable time period on its water permit
We are hopeful FERC agrees with our position within the next several months, which would preserve an in-service date as early as the first half of 2019. Before I close, let me say a few words about tax reform
Duke supports comprehensive tax reform
Like everyone, we are reviewing the legislation that came out yesterday
We were encouraged to see that the bill includes provisions to retain interest deductibility in lieu of the immediate expensing of capital
We're taking a close look at these provisions and the bill as a whole, but let me say this is a positive first step, and recognizes our industry and the importance of the impact to our customers, and we will remain engaged as the process continues to unfold
As we near the close of 2017, our focus is unwavering as we execute our strategy and follow through on our commitments to customers, communities, and investors
We are on track to deliver earnings within our original guidance range for 2017, as we achieve planned growth in our regulated businesses and maintain our focus on effective cost management
Our long-term earnings growth profile of 4% to 6%, off our original midpoint of 460 is unchanged, underpinned by the strength of our regulated investments and our attractive service areas
This demonstrates the resilience of our company and the employees who deliver exceptional safety results, operational excellence, and financial performance every day
Now, let me turn it over to Steve
<UNK> morning, Shar
Yeah
You know, Shar, we have included in the plan we shared with you in February, grid investment that is generally consistent with these programs that we're talking about
We'll of course fine tune those in February when we give you an update on the five-year plan
And the approach that we've taken both in North Carolina and South Carolina is to complete economic impact studies for the benefits of these investments, also customer benefits that would be delivered directly
And we're in the process of discussions with stakeholders throughout both states, and what this investment potential could mean
We have a couple of pads on recovery which we've talked about
Of course our ultimate goal is modernization of the regulatory framework in North Carolina to allow more timely recovery of these types of investments
But in parallel, we're also pursuing recovery of grid investment in our rate case for Duke Energy Carolinas
We'll pursue a similar path in South Carolina, probably approaching first through the regulatory process and determining whether anything further is required
So, I think this represents just further underpinning of the growth that we've laid out for you and why we have confidence in our ability to deliver at 4% to 6% reaching to the higher end of the range as these investments continue to grow and accumulate
You know, Shar, we have no interest in the new nuclear plant in South Carolina and we've been clear about that
Given the risks and the uncertainties around completion of that plant, we don't think there's a fit either for customers or investors and we've been very candid with the state about that
As you indicate, South Carolina is incredibly important to Duke Energy
We operate important businesses and important assets in the state
We're announcing today our willingness to invest another $3 billion
So, we are continuing to operate well within the state
We're engaged and supporting our businesses in a way you would expect, but no interest in pursuing new nuclear
<UNK>, let me take the Dominion question first
There is precedent in the State of North Carolina for recovery of coal ash in the Dominion case with return oven on
And similarly in South Carolina in our own case, we received recovery of coal ash and return oven on
As you know, this is an important topic in the North Carolina cases and we are in the process of reviewing the arguments that were presented by public staff and the intervenors and we'll be responding to those very comprehensively with our rebuttal testimony on Monday
We believe that these costs are squarely within the law
They represent environmental compliance costs, and we have pursued our approach around closure of basins and around the science and engineering necessary to support compliance with the federal and state law in a very appropriate, aggressive way with science and engineering underpinning our decisions every step of the way
We believe we have a very strong case that we'll put forward on cost recovery for ash
<UNK>, I think there's an opportunity to look at methods of recovery
If you look at our filing position, we put forward a couple of ideas for consideration by the Commission
There's a traditional deferral and amortization for costs incurred to-date and we proposed recovery of those over a five-year period
And then we also proposed a run rate, which would be to say including a certain amount in customer rates on a current basis, kind of matching the spend, which results in a lower overall cost, because it's without a return, right? It's as you spend it
We think that provides a fertile opportunity for discussion about what makes sense to customers
And that'll be a part of this case as you know
But flexibility around timing always is an opportunity
Yeah, <UNK>, you're raising a question that we're looking very closely at
And we are evaluating and reading it closely, not only at Duke, but as an industry
I think it's important to recognize that this was a positive step and I think there's clear recognition in the language of the capital we spend, the impact to customers, the importance of interest, forgoing capital expensing normalization, excess deferred taxes are transitioned in an appropriate way
And so, when we look at the holding company, the area that we're focused on is this allocation to a trader business in a regulated utility and we'll be looking very closely at that, we believe, and we will also be engaged in discussions around intent and clarification and will be closely pursuing that over the next several days and coming weeks
But I think the important thing is, there's clear recognition of our industry in this framework, the importance to infrastructure economic development and we believe there could be a path forward on this
But, it's incremental to the $13 million, <UNK>, because $13 million was North Carolina
remaining in South Carolina
<UNK> <UNK> - Credit Suisse Securities (USA) LLC Got you
So, but it's not additive to the $37 billion CapEx plan
That's what you're saying, right?
You know, <UNK>, we can't comment at this point on whether we're engaged in settlement discussions or whether we will be engaged in settlement discussions
We're in a tight and important time period over the next couple of weeks
What we can talk about is rebuttal testimony on Monday, on November 6. I think that'll give you a very clear view of our response to the arguments that have been put forward
And then the hearing is scheduled for November 20. <UNK> <UNK> - Credit Suisse Securities (USA) LLC Okay
Thank you
The only modification that I would make to that, Steve, is to say, we always fine tune these capital estimates as to timing, near-term, longer term
But you'll recall back in February, we laid out grid investment as a key priority of ours and what we've done is continue to put flesh on the bones and brand them and do the important work with stakeholders
So, it is part of that strategy we laid out
We'll be fine tuning where and how much as we go forward, but you should think about it as part of our strategic plan
You know, it's in the plan, Steve, in the same way I just described for South Carolina
And we are pursuing it on a couple of courses, right, the legislative initiatives that we've talked about
It's also – the DEC piece is also in our Duke Energy Carolinas case, which will proceed in early 2018. So we'll continue to update as we go
We're obviously looking for ways that we can continue to accelerate that investment for the benefit of our customers and achieve the appropriate regulatory outcome
Thank you, Steve
Hi, <UNK>
You know, <UNK>, I believe there's a keen interest on the part of South Carolina for expanded and continued investment in gas infrastructure, for the reasons that you talked about
Our focus obviously is on the project as it's defined and constituted today, so it's been on – we're pleased with the FERC approval, we're moving forward with state approvals
But as the construction progresses, we'll of course be looking for ways that we can continue deliver value to customers in the states in which we operate
I'm just not prepared to give you specific timing, <UNK>
So the timing that you talk about is certainly within our planning horizon
We want to get ACP in first, which is late 2019, so we'll talk more specifically about expansion opportunities as time progresses here
So I wouldn't read anything into when or where it falls in that timeframe, but we do believe that additional infrastructure could be important to our customers and to the states in which we operate
<UNK>, I believe the Commissions could provide tracking recovery in both states for this type of investment
And you see us making a request for that in the Duke Energy Carolinas case
I would also say that the Commission will give us feedback on that and if they believe additional clarification is required to the legislature, we could certainly pursue it there as well
So, I think this is something that remains an ongoing topic of discussion for Duke as we think about modernizing our system and delivering value to customers
We're engaged with stakeholders, we're talking about the benefits that this brings
And we'll just continue to progress it
We see it as a terrific not only opportunity for customers, but obviously investors as well
Thanks
You know Greg, I think the clarifying question there or clarifying point there is, who is a filer? Is it the individual tax payers or is it an affiliated group and consolidated group? And I think, depending on that interpretation and the corporate structure of any utility, that will have a bearing
What we believe is that the combination of the allocation of interest to trades or businesses that are regulated coupled with the 30% and the structure that we have in front of us, we believe we've got a framework here that we can work with
But as you know, it's 24 hours
Everyone's reading every word
Everyone's looking at all the interpretations
We're meeting with the industry
And I think the early read is, we see a lot of positive recognition of our industry
But we want to continue to make sure that we've got the appropriate interpretation and see if any clarification is necessary as this bill progresses
Hi, <UNK>
So, <UNK> you may recall, we filed a South Carolina Duke Energy Progress case recently
So, we'll be evaluating capital investment to prepare that utility to go back in
And then, we're evaluating timing on Duke Energy Carolina, South Carolina and also looking at our investment plan to catch that case at the right time
So we always are fine tuning the regulatory calendar
It may move up, it may move back, but what we're trying to communicate today is we see grid investment as an important part of growth in those utilities and we'll be pursuing timely recovery
I think that's fair
You know, <UNK>, we couldn't be more pleased with the integration of the Piedmont system, not only in terms of the business that they bring, but the expertise and the focus on natural gas
And with the position that Duke holds as a company, second largest consumer of natural gas, we see that as a growing opportunity for us
We're also pleased with progress on Atlantic Coast pipeline
I mean that's a $2 billion investment for us and we're anxious to get construction underway later this year
But we will continue to look for ways we can leverage our market position and expertise to bring investment into the gas business
<UNK> morning
The Florida settlement also <UNK>, lays the path in Florida for both grid and renewables
And House Bill 589 in the Carolinas also provides a pathway on additional investment around renewables in North Carolina
So all of the steps you see us taking in 2017 are underpinning confidence in those capital investment plans
They're transparent, they're clear and understandable, and they're projects that we have expertise to deliver
You know, <UNK>, when we talked about guidance this year, we were clear that the plan we've put in front of you gives us the ability to be within the range every year and that is really in response to that question about, will you fall outside of the range because of general rate cases et cetera
The plan we've put in front of you puts us squarely within the range every year
And so that's what we're executing to
And as you know, we'll give you a fuller update on the specifics around 2018 and refinement of the capital in February
Thank you
<UNK> morning
Well Chris, we'll comply with the law
We have state and federal requirements; CAMA in North Carolina, CCR in the Carolinas, and then throughout our service territory
So that's what we are – we'll comply with all of those requirements
And we will aggressively pursue recovery, and we'll have more to say about that, of course, as we work through these rate cases
There are court appeals and other avenues we could pursue if we think that's appropriate
We believe we have a very strong case
You're probably thinking about the risk rating in North Carolina, Chris
So we have certain sites that are due by the 2019, 2024, 2029. There are also timeframes within CCR
So you may have flexibility within a year or so, depending on how you ramp up the activity
But when you look at the project overall, the team is doing an outstanding job of balancing the compliance requirements with the spending in a way that minimizes cost to the extent we can, but of course complying with the law, as we always will
No
You know, Chris, the other thing I'd point to is, we've had weak wind resources in 2017, which has had an impact on results year-to-date
So we're continuing to operate the assets well
There will be weather variability, and there will be some variability around timing of projects, particularly those that are impacted by ITC, but nothing additional that I'd share with you from a strategic point of view on that segment
No, you know <UNK>, we do have certain of our utilities flowing up into the tax payer called Duke Energy Corporation, just the way we are structured
And so, I think there are a couple of avenues we're looking at; this allocation to trader business, a regulated utility, and then of course the 30% test
So, we believe we see a path here, but it's 24 hours
We want to take the time to understand, get the clarification
But I think the progress that we've made in this, and the recognition of our industry, is something that should not be overlooked
Yeah, so <UNK>, I would point again to this rebuttal testimony that we're filing on November 6. We disagree with the positions that were put forward on ash in particular, as well as a number of other items that were highlighted in the testimony
We believe they're not supported by precedent or the law, and we'll make those positions very clear
We are open to settlement discussions
Cannot comment on whether we are engaged or will be engaged in those discussions
But the process needs to play out over the next couple of weeks; hearing's of course on the [November] 20. And I think the potential implication to the financial results, we'll share with you when we have more information to share, and I think this is just a process that's going to need to unfold, not only over the next couple of weeks, but of course the Commission order is not expected until early 2018.
Thank you
Thank you
And thank you for your interest and investment in Duke Energy
We look forward to seeing many of you next week at EEI and continuing discussion
So thanks again for your time this morning
