Greetings, and welcome to the Atmos Energy Fourth Quarter Earnings Call. [Operator Instructions] Please note that this conference is being recorded..

I will now turn the conference over to our host, Dan Meziere, Vice President of IR and Treasurer. Thank you, sir. You may begin. .

Thank you, Diego. Good morning, everyone, and thank you for joining us today. With me this morning are Kevin Akers, President and Chief Executive Officer; and Chris Forsythe, Senior Vice President and Chief Financial Officer..

Our earnings release and conference call slide presentation, which we will reference in our prepared remarks are available at atmosenergy.com under the Investor Relations tab. Today's presentation also includes references to non-GAAP financial measures.

You should refer to the information contained in the slides accompanying today's presentation for definitional information and reconciliations of the non-GAAP measures to the closest GAAP financial measure..

As we review these financial results and discuss future expectations, please keep in mind that some of our discussion might contain forward-looking statements within the meaning of the Securities Act and the Securities Exchange Act. Our forward-looking statements and projections could differ materially from actual results.

The factors that could cause such material differences are outlined on Slide 43 and are more fully described in our SEC filings..

I will now turn the call over to Chris Forsythe. .

Thank you, Dan, and good morning, everyone. We appreciate your interest in Atmos Energy and are happy that you can join us this morning. .

Yesterday, we reported fiscal 2020 diluted earnings per share of $4.89, compared to diluted earnings per share of $4.35 reported in the prior year.

As a reminder, our fiscal 2020 results included a onetime noncash income tax benefit, $21 million or $0.17 per diluted share that we recognized during the third fiscal quarter related to a legislative change in Kansas that reduced our state deferred tax rate. Excluding this nonrecurring benefit, diluted earnings per share for fiscal 2020 was $4.72.

This represents the 18th consecutive year of rising earnings per share..

In summarizing the year, the pandemic began to impact the economies of the states we serve at the end of our winter heating season. By that time, we had earned 70% of our distribution revenue for fiscal '20.

Given the economic uncertainty at that time, we were conservative about the anticipated nonresidential load loss for the third and fourth quarter. And we plan to reduce O&M activities during the third and fourth quarters to keep our employees healthy and to align spending with anticipated revenues..

Our residential load loss during the last 6 months in the fiscal year was less severe than we had originally anticipated. And we maintained our O&M spending in the back half of the fiscal year in line with the revised guidance we issued after our second fiscal quarter.

As a result, our fiscal 2020 EPS came in at the higher end of our earnings guidance range of $4.58 to $4.73..

Taking a closer look, consolidated operating income rose over 10% to $824 million. Slides 5 and 6 provide details of the year-over-year changes to operating income for each of our segments. I will touch on a few of the fiscal year highlights..

Rate increases in both of our operating segments, driven by increased safety and reliability capital spending totaled $140 million. We also experienced a $14 million increase in distribution operating income, primarily due to customer growth in our Mid-Tex division.

During the 12 months ended September 30, our Mid-Tex division experienced net customer growth of 1.5%. On a consolidated basis, we experienced net customer growth of 1.2% over the same period..

We did experience a $6 million reduction in operating income, primarily due to a 13% decline in commercial consumption in our Distribution segment during the last 6 months of the year. We also experienced a $6 million decline in service order revenue, primarily due to the suspension of collection activities since March of this year..

In our Pipeline and Storage segment, we experienced a net $14 million decrease through system revenue. Volumes declined 17% and prices declined 13% due to reduced associated gas production in the Permian Basin. Consolidated O&M expense for fiscal 2020 was flat compared to 2019, in line with our expectations.

O&M in our Distribution segment was about $8 million lower than the prior year, reflecting lower employee, travel and training costs, partially offset by an increase in bad debt expense..

Lower spending in our Distribution segment was offset by higher spending for system maintenance activities in our Pipeline and Storage segment, most of which was completed during the first half of the fiscal year.

Consolidated capital spending increased 14% to $1.94 billion, with 88% of our spending directed towards investments to modernize the safety, reliability and environmental performance of our system.

With this spending, our team replaced approximately 845 miles in distribution and transmission pipe and 55,000 service lines across the 8 states in which we operate..

In fiscal 2020, over 90% of our capital spending began to earn a return within 6 months of the test period end. We accomplished this by implementing $160 million in annualized operating income increases.

And since the end of the fiscal year, we reached agreement with our regulators to implement an additional $106 million of annualized operating income during our fiscal 2021 first quarter..

As of today, we have 3 filings pending seeking about $12.5 million. Slides 30 to 42 summarize our regulatory activities. During fiscal 2020, we successfully executed our long-term financing strategy while maintaining the strength of our balance sheet and further enhancing our liquidity position.

We completed over $1.6 billion of long-term debt and equity financing. We fully satisfied our fiscal '20 equity needs through our ATM equity sales program. Under the program, we issued 4.8 million shares under forward agreements for $523 million and settled 6.1 million shares for net proceeds of $624 million..

As of September 30, we had about $345 million remaining under equity forward arrangements. This equity financing complemented the $800 million in long-term debt financing we issued last fall and the $200 million term loan we executed in April. As a result of these financing activities, our equity capitalization was 60% as of September 30.

Additionally, due in part of the additional -- addition of $700 million of new credit facility capacity, we finished the fiscal year with approximately $2.6 billion of liquidity, including cash held in escrow under equity forward arrangements. The strength of our balance sheet and liquidity leaves us well positioned as we move into fiscal 2021.

Details of our financing activities, including our equity forward arrangements as well as our financial profile can be found on Slides 9 through 12..

Looking forward, fiscal '21 will represent the tenth year of executing our operating plan to modernize our distribution, transmission and storage systems. The fundamentals of our operating plan remain the same. Yesterday, we initiated our fiscal '21 earnings per share guidance in the range of $4.90 to $5.10.

Consistent with prior years, we expect about 2/3 of our earnings will come from our distribution segment. Over the next 5 years, we anticipate earnings per share will grow 6% to 8% per year. By fiscal '25, we anticipate earnings per share to be in the range of $6.30 to $6.70..

From a revenue perspective, we have assumed no material changes to our residential revenue as a result of COVID-19. However, we continue to remain cautious about our nonresidential revenue due to the continued economic uncertainty and the fact that we are now heading into the winter heating season.

Although it is difficult to precisely estimate the potential load loss that we might experience, we performed multiple sensitivity scenarios as we considered our fiscal '21 earnings per share guidance..

Slide 18 summarizes our key Distribution segment revenue attributes and provides EPS sensitivities for the full fiscal year for each 1% change in sales volumes by customer class. And as you're aware, the performance of our Pipeline and Storage segment is predominantly driven by APT.

As a reminder, over 80% of APT's revenues are earned from delivery services to LDCs, including our Mid-Tex division, under a straight fixed variable rate design. The remainder of APT's revenues relates to a 3-system business and other ancillary pipeline services..

APT only keeps 25% of the difference between actual revenues earned from these activities and the approved $69 million benchmark in its straight design. Our fiscal '21 guidance reflects current market conditions for the small portion of APT's business..

From an O&M perspective, we have assumed that we'll execute our normal O&M program as we continue to focus on compliance-based activities that address system safety.

These activities include enhanced leak surveys, pipeline integrity work, work to address PHMSA's new integrity management rules that became effective July 1, 2020, and continued record establishment and retention..

Similar to fiscal '20, we do have some flexibility around the timing of this O&M spending, which could help us align spending with potential changes to revenue. As we continue to focus on safely operating our system, we continue to assume O&M inflation of 3% to 3.5% annually through fiscal '25. Additional details can be found on Slides 16 and 17..

Fiscal '21 capital spending is expected to rise about 7.5% and is expected to range from $2 billion to $2.2 billion. Approximately 85% of the spending will be dedicated to safety and reliability spending, which will also reduce methane emissions from our system. Approximately 73% of the spending will be allocated to our Distribution segment.

Over 90% of our consolidated capital spending is expected to begin earning a return within 6 months of the test period end..

Continued spending, persistent replacement and modernization will be the primary driver for the anticipated increase in capital spending, net income and earnings per share through fiscal '25.

As you can see on Slide 21, we anticipate capital spending to increase about 7% to 8% per year off of fiscal 2020 spend levels for a total of $11 billion to $12 billion over the next 5 years. This should support rate base growth of about 12% to 14% per year.

This translates into an estimated rate base of $19 billion to $20 billion in fiscal '25, up from about $11 billion at the end of fiscal 2020, as you can see on Slide 22..

Annual filing mechanisms will be the primary means through which we recover our capital spending. These mechanisms enable us to more efficiently deploy capital and generate the returns necessary to attract the capital we need to finance our investments.

And these mechanisms produce a smaller impact to customer bills while providing the regular rate adjustments that support our ongoing system modernization efforts. We have assumed no material changes to these mechanisms through fiscal '25..

In fiscal 2021, we anticipate completing filings from $195 million to $215 million in annualized regulatory outcomes that will impact fiscal years 2021 and 2022..

Moving to Slide 24. In light of our financial performance of fiscal 2020, yesterday Atmos Energy's Board of Directors approved a 148th consecutive quarterly cash dividend. The indicated dividend for fiscal 2021 is $2.50, an 8.7% increase over fiscal 2020.

We continue to expect dividends per share to grow in line with earnings per share over the next 5 years.

And we will continue to target a payout ratio of approximately 50% as it strikes the right balance between using funds to invest in the modernization of our system and providing a reasonable return to our shareholders who support our operating plans with their investments. .

This 5-year plan also continues the financing strategy that we've been executing over the last few years. It balances the interest of our customers and our investors while preserving strong credit metrics that minimize the cost of financing.

Based upon our spending assumptions, we anticipate the need to raise between $6.5 billion and $7.5 billion in incremental long-term financing over the next 5 years.

The strength of our balance sheet enables us to continue to use a prudent mix of long-term debt and equity in order to maintain a balanced capital structure, with the targeted equity to total capitalization ratio ranging from 50% to 60%, inclusive of short-term debt. This strategy is summarized on Slide 25.

And consistent with prior year plans, our financing plan has fully reflected in our earnings per share guidance through fiscal 2025..

In October, we completed a $600 million 10-year senior note issuance with a coupon of 1.5%. As a result, our overall weighted average cost of debt, as of October 1, 2020, stands at 3.94%. And our debt profile remains very manageable with a weighted average maturity of 19 years..

From an equity perspective, the equity forwards we executed during fiscal '20 will set us a significant portion of our expected equity needs for fiscal '21. We expect to raise the remaining equity needs for fiscal '21 through our ATM program..

To recap, the execution of this plan to modernize our system through disciplined capital spending, timely recovery of those investments through our various regulatory mechanisms and balanced long-term financing all support our ability to grow earnings per share and dividends at 6% to 8% annually through fiscal 2025.

And as you can see on Slide 26, the execution of this plan will also keep customer bills affordable, which will help us sustain this plan for the long-term..

Thank you for your time this morning. I will now turn the call over to Kevin for his remarks.

Kevin?.

Thank you, Chris, and good morning, everyone. We appreciate you joining us today and your interest in Atmos Energy..

Our success in fiscal 2020 reflects the talent and dedication of our 4,700 employees. I've said it before and I will say it again today that they are the heart and soul of Atmos Energy and provide the foundation for the sustained long-term success of our company.

I'm extremely proud of their commitment to keep our 3.2 million customers, our 1,400 communities themselves and their families healthy and safe..

I'd also like to take this opportunity to thank our state regulatory commissions, our many peer companies, our state gas associations as well as the American Gas Association for their assistance and support during these challenging times..

Our robust risk management process has served us extremely well during this pandemic and will continue to guide us as we navigate our way forward.

As I've shared previously, through the outstanding work of our risk management and compliance committee and our senior leadership team, all 4,700 Atmos Energy employees were well prepared when we transitioned to a digital work environment..

As you can see in our fiscal year operating and financial performance, our team has proven their ability to execute at the highest levels in all facets of our business. .

Our move to digital work environment in March provided opportunities for us to leverage new tools to virtually connect with one another. One of the areas I want to highlight today is technical training. To date, we have trained over 900 employees, utilizing a virtual format designed by our workforce development and curriculum design teams.

This has created exciting possibilities for us as this training is a critical part of our vision of being the safest provider of natural gas services..

We play a vital role in every community we serve through our safe delivery natural gas service. Also important is our time, our talent and our resources, invested in bringing out the best in our communities so they can thrive..

For example, during September, that's Hunger Action Month, we joined forces with hundreds of local school districts, food banks and other essential organizations that provide breakfast, lunch, snacks and healthy meals that all children need to grow, develop and succeed.

Additionally, we provided resources that help students read on level by third grade..

Furthermore, during our annual week of giving in September, our employees generously pledged nearly $900,000 in donations to benefit No Kid Hungry, United Way and The Salvation Army. Atmos Energy will match our employee pledges to further support the important work these agencies do every day..

We also donated $1 million to more than 100 local energy assistant agency and nonprofit organizations to help customers stay warm this winter or weatherize their homes..

As Chris mentioned, over the next 5 years, we plan to invest $11 billion to $12 billion, with 88% of that capital spending focused on safety and reliability investments identified by our risk-based capital allocation strategy that includes replacing industry-identified materials such as bare steel, vintage plastic and cast iron.

Our Atmos pipeline Texas investments, in addition to safety and reliability, will continue to focus on serving a growing demand, particularly in North Texas. And as Chris mentioned earlier, our Mid-Tex division had a 1.5% net customer growth this past year..

As you can see on Slide 19, we anticipate our capital spending plan over the next 5 years will support the replacement of 5,000 to 6,000 miles of distribution and transmission pipe or about 6% to 8% of our total system.

Included in this amount is the replacement of the remaining cast iron pipe in our system and the replacement of all bare steel main outside of our Mid-Tex division. We also plan to replace between 100,000 and 150,000 steel service lines, which is expected to reduce our inventory between 20% to 25%.

This level of replacement work is expected to reduce methane emissions from our system by 15% to 20% over the next 5 years..

On the technology side, as part of our wireless operations network, we anticipate 75% of our system will be equipped with wireless meter reading at the end of fiscal year 2025.

Additionally, through this network, we are testing the ability to wirelessly receive cathodic protection monitoring data from across our distribution and transmission systems..

gas supply, operations, fleet, facilities and customers..

For example, on our gas supply it's RNG. Today, as you've heard us say before, we transport approximately 5 Bcf across our system, which is about 2% of our distribution sales volumes. We have identified several opportunities to increase the amount of RNG on our system.

For example, we have just signed an interconnect agreement with a renewables company for an additional level of RNG from 3 dairy facilities.

Although it is too soon to commit to how much RNG can ultimately be transported on our system, we will be working with regulators and all stakeholders to help develop frameworks for commercial viable RNG solutions to support our customers and improve the environment..

Additionally, under the category of facility, we have 13 leadership in energy and environmental design or LEED-certified facilities and have 4 additional LEED-certified facilities planned. Of these 13 LEED facilities, 4 are certified gold and 7 are certified silver..

LEED is a globally recognized green building certification rating system developed by the U.S. Green Building Council that provides third-party verification of efficiency and emissions reductions.

For example, our annual water use at these facilities has reduced 50% to 60%, and our carbon dioxide equivalent emissions are reduced approximately 600 metric tons per year..

In closing, the long-term fundamentals of our strategy remain the same. And as you just heard, our employees continue to execute at the highest levels and provide the foundation for the sustained long-term success of our company.

Our strategy is supported by the fact that we operate in constructive jurisdictions, and several of our markets continue to have a long, strong term growth potential, most notably in the DFW Metroplex, the fourth largest metropolitan area in the country..

The successful execution of our strategy, the strength of our balance sheet and our strong liquidity leaves us well positioned to continue to safely deliver reliable, affordable, efficient and abundant natural gas to homes, businesses and industries to fuel our energy needs now and in the future..

We appreciate your time this morning and your interest in Atmos Energy. And we'll now take any questions that you may have. .

[Operator Instructions] Our first question comes from Insoo Kim with Goldman Sachs. .

My first question is on your 2021 guidance. I appreciate the commentary you gave on the sensitivities on what could happen with COVID during these winter months.

But as we think about the midpoint of that guidance, are you able to give us a little more specificity as to what's embedded in terms of any demand impact net?.

Insoo, this is Chris. Like I said earlier, we did a number of different sensitivities, and rather than debating it with individuals, we thought by putting the sensitivities out that you see in Slide 18 would provide folks with the data that they can do to make some assumptions around what they want to think about the nonresidential load loss.

But as I said, we ran multiple scenarios, and we feel like our guidance is reflective of those various scenarios..

I also do want to point out that we've assumed a full O&M program this year and to the extent that we need to pull levers a little bit to align spending with revenues as well as keeping our employees safe. That opportunity exists for us as well. .

Got it.

And just on top of that, what markets are you seeing the greatest risk to demand as we enter into these -- into those winter months?.

I think when we looked at our markets, in the back half of the year, Louisiana, Mississippi are -- excuse me, Mid-Tex were 2 that saw most of our -- the commercial decline that I commented on earlier. But right now, towards the back half of the year, it wasn't nearly as severe as we anticipated.

It certainly recovered as we moved along through the third and fourth quarters. And we always have to continue to watch and see. I think it's also going to be contingent upon how the buyer spreads, how states may respond to containing the spreads, protecting the citizenry and also balancing the needs of the economy. .

Understood. And then looking at the longer-term guidance, you guys have been so consistent historically and given the 6% to 8% EPS, achieving most of the times at the -- or even above the upper end of that.

When we look at the 5-year CAGRs through 2025 off of the 2020 actuals, it does imply a CAGR that's around 6.5%, a little bit less than some of the CAGRs that we've been calculating in prior years.

How much of this is you being more just conservative versus some law of large numbers kicking in in terms of how much CapEx you're able to do or the financing plans that you currently have in place?.

Yes. I think there's an element of conservatism in our numbers this year, as I mentioned, because we're going to be cautious about what we're seeing around the nonresidential load loss as we go into the winter heating season.

If you go back to the kind of midpoint of the guidance for fiscal '20, had we achieved that and then you kind of extrapolate that out, that would get you closer to 7%, I believe. .

Yes. Understood. And just one more.

At what point do you think, and is this in consideration when you look over this new 5-year time frame in creating potentially a holdco structure to help you guys create additional financing capacity?.

Yes. The holding company structure, we get that question from time to time. We like the transparency that our current structure provides for a regulatory environment. It minimizes the questions that you get around what are you doing at the parent level versus at the operating level in terms of equity capitalization, debt financing, so on and so forth.

We've seen instances where regulators have tried to kind of pierce that at operating company level and try to get to the parent level to impute a capitalization at the opco level.

So we feel like having a transparent capital structure the way we do today, just takes one less question off the table, and we can remain focused on talking about what we're doing with the spending in terms of modernizing system to make it perform more safely, more reliably and more environmentally responsible. .

Our next question comes from Stephen Byrd with Morgan Stanley. .

Congrats on the continued very good results. I wanted to build on a couple of questions there that were just asked. Just over time, how do you think about the delta between rate base growth and EPS growth? I think you've had a fairly consistent approach there. I was just curious as you continue to get bigger.

If there are any sort of changes to your thoughts around that delta between rate base and EPS growth?.

As we've talked about before, Stephen, that large delta largely reflects the financing plan that we've assumed over the next 5 years. And we certainly believe that -- certainly over the next 5 years that we can continue to operate financing the corporation in a balanced fashion using an improved mix of long-term debt and equity.

And the strength of the balance sheet is important. As we saw earlier this year with the shot to the markets, the ability to access the commercial paper markets, we really didn't have much material impact as a result of the strength of that balance sheet.

And it also gave us the opportunity to further enhance the liquidity by $700 million because we did have that equity capitalization in place. .

Understood. That balance sheet -- [ conservative ] balance sheet certainly has been a nice asset for you all to have. Now that makes sense. I wanted to shift over to M&A, which is -- I know you all don't really need any kind of inorganic growth. You've got great organic growth, really more at a high level.

When you think about the skills and the capabilities that you've developed over time and you think about sort of applying that skill set to others, do you often sort of see a gap in that skill set where you could add value? Are there certain sort of categories of value-add you could provide or is that not something you spend much time kind of thinking about in the context of sort of inorganic growth?.

Well, Stephen, it's Kevin. Let me start with and take us back to, as Chris and I said earlier, over the next 5 years we plan to invest $11 billion to $12 billion. And you know our rate construct very well. Within 6 months, we start earning on 90% of that and 99% by the end of 12 months. So that's where we're going to continue to focus right there.

That's our strength. We've proven that over the last decade or so that we can execute at that level. It's a very understandable story for our employees, for our investors and for our regulators to follow. And I think everybody is working hard now around the regulations at the state and federal level to meet compliance.

So I think through our associations, through our peer group meetings and everything else, I think our industry is at the top of its game right now and its ability to operate and deliver safe reliable natural gas service every day. .

Understood. Okay. And then maybe just lastly, I know this is not likely to be relevant anytime soon, but we do think longer-term about green hydrogen.

And I was especially interested just given your geography, in some cases your proximity to sort of pure hydrogen infrastructure nearby, and I was just curious your latest thoughts on sort of the cost to be able to accommodate green hydrogen, what percentage could be blended.

And I appreciate that green hydrogen is quite expensive compared to natural gas. I'm not really thinking in the near-term.

But also beyond sort of what you could do with your own system, whether there might, in the future, be some potential to combine your capabilities with the capabilities of sort of pure hydrogen infrastructure nearby to create really a backbone that could allow for a larger conversion to green hydrogen and usage of your systems? So I know that's fairly broad, but was just curious your thoughts on that.

.

Sure. And as we've said before, too, we are certainly plugged into and watching all the projects that are coming online, particularly here those in the states.

As you're aware, most of those are, what I would call, single-point source or other particular turbine or a particular smaller scale project here or there, not anything on a wide distribution or transmission level. We're also watching very closely what's going on in Europe around -- particularly in Germany right now.

There are several projects on a little bit larger scale, if you will, of blending and delivering that hydrogen. So we're staying plugged into the American Gas Association through the Gas Technology Research Institute and other associations to continue to monitor those projects.

So we can take a look at such things, as you just mentioned, what is the appropriate blending, right? How and where do you do that? What's the impact on the infrastructure, the steel of those systems and the burners on the end-use equipment, those sort of things. So we're plugged in. We're continuing to monitor that.

And we'll continue to stay in touch with those groups, and as necessary, continue our evaluation of our systems and what that may look like for a longer-term. .

Our next question comes from Richie Ciciarelli with Bank of America. .

I just wanted to follow-up a bit on Stephen's question, if I could. You obviously have a robust CapEx plan in front of you. But there are a few players in the space looking to divest some LDC assets, some are adjacent to your service territory.

And just given where your multiple is relative to those peers, it would seem like an acquisition to be quite accretive.

So just curious how you guys are thinking about the strategic landscape?.

Exactly, as I said before, we're focused on that $11 billion to $12 billion going back into our system, modernizing our system, both at the distribution, transmission and storage levels, if you will. And again, you look at that regulatory construct on the times we just talked about that coming back to us in rate recovery.

It's hard for me to say that you could get that type of recovery through an acquisition. We've been part of several, as you know, over the years. And they are extremely difficult at times to integrate both from an operational perspective, from an employee perspective and a cultural perspective.

And right now, we have shown a decades long ability to execute on this strategy.

And that's what we're going to continue to focus on making sure we're investing in the right things, getting the right recovery for that and modernizing our system so we can be environmentally sound as we continue to go forward and tighten our system up for our customers, our communities and our investors. .

Got it. That's very helpful, focus on the organic profile here. And then just separately on the equity needs remaining for 2021, I think you've executed on roughly $345 million in equity forwards.

So is the remaining amount through the ATM program, is it roughly in the $270 million to $300 million range?.

That's a pretty good assumption. .

Okay. And then just last one on the O&M front, I guess, in response to what you were talking about Insoo earlier on the levers there.

Should we think about that basically that you can offset and keep O&M flat relative to this year, if sales figures don't come in where you expect?.

Yes. I think we'll just have to see how the year unfolds, Richie. I mean first and foremost, we still have to maintain compliance throughout the entire system. And we don't want to achieve compliance just by barely achieving -- by barely making it, if you will.

So we'll just have to continue to look at that in terms of -- we do have just general inflation as everybody does in some of our just general costs as they continue to go up. So we'll just continue to monitor that, see where the fiscal year takes us in terms of revenue, looking at the portfolio of O&M activities.

And we'll -- to the extent that we need to adjust, we'll update at the appropriate time. .

[Operator Instructions] Our next question comes from Charles Fishman with Morningstar. .

Slide 19, where you -- 5,000 to 6,000 miles of pipe replacement over the next 5 years.

Where will you stand at the end of 2025 as far as how many miles of pipe are left or how many years of that kind of pace goes on? What's the -- what are we looking at post 2025?.

Charles, this is Kevin. We have a runway right now in steel service lines at about a 15- to 20-year rate. So you look at that, that will get us down about 5 years off of that. Like I said, they're about a 22% reduction. And then we've got about the same timeframe on industry identified. So we'll have a little over a decade or so left.

And let's keep in mind, that's at today's regulation, right? And what I mean by that, rules are always updated on types of equipment, various materials.

And in addition, we've now gotten into this past decade of the system modernization, where previous years under the old rate construct, if you will, people would stay out, invest at smaller levels and try and work back through O&M reductions to do that. That model has long since gone.

You have got to continue to invest in your system to keep it modernized, to keep the equipment up and leverage technology when and where you can.

So I think these are at the current regulations, at current identified materials, but also, you got to keep this other construct in mind of wanting to keep your system as up-to-date as possible, right?.

Okay. And then, Kevin, with that argument, I mean, I look at the average monthly bill slide on 26. And I realized you rolled it forward, now you're starting 2009, isn't as good as 2008, when it was much higher. I was just comparing them. But you do have significant increases.

What you just told me, is that the argument you used to municipalities you serve, the regulators?.

Well, I don't know. I'd quite state it as an argument. I think it's our investment strategy. And again, I think when you look at the household bill there, that's the lowest bill in the household today for our customers.

And you compare today's price that we have on the sheet and at $4.50 to $5.50 range, you're talking about equivalent of somewhere around $11, $12 gas, when you compare that to the equivalent electric side. So if you convert that over, you're looking at about $0.06, $0.07, $0.08, $0.09 on the electric side.

So I think we're continuing to be affordable at this investment progress that we're making. We continue to do it on an annual basis. So we send the right signals there. And honestly, that paired with the [ production and ] the basis and where prices sit today are certainly a help for us as well. .

Yes. Well, continuing on that affordability issue, we've seen some electrification mandates on the coast.

I don't believe there's been anything in your service territories, correct me if I'm wrong, but is -- let me ask you this, how are your market share with respect to new construction? Are you maintaining your market share with respect to single-family and multifamily with respect to competing against an all-electric new home or new apartment?.

Absolutely. You just heard us talk about the organic growth, particularly here in the Metroplex area, and in addition, the territories we serve in Middle Tennessee and around our Olathe, Kansas area continue to show good growth as well there. So our market share continues to be strong.

And when you look at what the Metroplex and how it's continued to grow here, I think we've got a good long horizon of customers wanting and demanding our natural gas product, as you've seen from those percentage increases there..

And as you said, we haven't seen that electrification discussion, that push yet. We continue to talk with our customers.

We continue to survey our customers, and they like the value the product brings and at the price, as I said today, at the $4.50 to $5.50 range, that equates again to $0.10, $0.11 a kilowatt electric, right? And you show me somewhere where people are getting that today.

So I think we continue to remain competitive and continue to have strong market share. .

I would think, Kevin, with the -- with respect to these electrification mandates, the amount of energy that you as a gas utility deliver on the coldest day, the electric utilities would be hard-pressed to come up with that.

It's a huge increase in their capacity, is that -- isn't it correct?.

Yes. You're exactly right. You've seen the challenges, particularly on the West Coast that, unfortunately, some of those folks are having during the peaks right now. So you draw parallels back to a winter period and trying to meet that demand, and those peak needs is going to be even more challenging.

But as you've heard me probably say before, right now, the population of the U.S. is about 330 million to 335 million and due to head toward 360 million by 2030. That's adding at Texas 30-plus million people here in less than a decade.

So where are you going to get that energy? Natural gas, as we just talked about, is abundant, it's affordable and it's reliable.

So -- and as the fourth largest proven reserve country in the world, I don't know why we would continue to leverage that asset and find ways to continue to grow that when we're thinking about a diversified energy portfolio going forward. So I think you're spot on with that. And that's how we view it.

We view it that the industry serves 70 million, 75 million customers today where we continue to grow with that. And we are in the right place with the right infrastructure today to continue to provide that reliable service. .

There are no further questions at this time. I'll turn it back to management for closing remarks. .

We appreciate your interest in Atmos Energy, and thank you for joining us. A recording of this call is available for replay on our website through December of 2020. Have a good day. .

Thank you. This concludes today's conference. All parties may disconnect. Have a great day..