Ladies and gentlemen, welcome to the Dominion Energy First Quarter 2021 Earnings Conference Call [Operator Instructions]. I would now like to turn the conference over to Mr. Steven Ridge, Vice President, Investor Relations..

Thank you, David, and thanks to everyone for joining today's call. Earnings materials, including today's prepared remarks, may contain forward-looking statements and estimates that are subject to various risks and uncertainties.

Please refer to our SEC filings, including our most recent annual reports on Form 10-K and our quarterly reports on Form 10-Q for a discussion of factors that may cause results to differ from management's estimates and expectations. This morning, we'll discuss some measures of our company's performance that differ from those recognized by GAAP.

Reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measures, which we can calculate, are contained in the earnings release kit. I encourage you to visit our Investor Relations Web site to review webcast slides as well as the earnings release kit.

Joining today's call are Bob Blue, Chairman, President and Chief Executive Officer; Jim Chapman, Executive Vice President, Chief Financial Officer and Treasurer; and other members of the executive management team. I'll turn the call over to Bob..

Thank you, Steven. Before we provide our business update, I'd like to take a moment to remember our friend, Tom Farrell. Tom's passing on April 2nd was heartbreaking to those of us who loved, admired and respected him. We've heard from so many people including many of you about Tom's impact on the industry and the people who work in and around it.

It's quite clear that while Tom's list of professional accomplishments was long, the list of people whose lives he touched was much, much longer.

He can be gruff occasionally, many of us participating on this call may have experienced that from time to time but much more often, we experienced his generosity, his loyalty, his dry sense of humor and his focus on improving our company, our community and our industry.

We should all seek to emulate his example, a consistent commitment to ethics and integrity to excellence and perhaps most of all, to the safety of our colleagues. He cherished his friends and family most of all. I can't [Technical Difficulty]….

…from around the world. Thank you all. As Bob said, we will very much miss Tom. Let me now turn to our business update. Following the in depth review and roll forward of our capital spending outlook we provided last quarter, our prepared remarks today will be relatively brief.

We are very focused on overall execution, including extending our track record of meeting or exceeding our quarterly guidance midpoints as we did again this quarter. I'll start my review on Slide 4, with a reminder of Dominion Energy's compelling total shareholder return proposition.

We expect to grow our earnings per share by 6.5% per year through at least 2025, supported by our updated $32 billion five year growth capital plan. Keep in mind that over 80% of that capital investment is emissions reduction enabling and that over 70% is rider eligible.

We offer an attractive dividend yield of approximately 3.2%, reflecting a target payout ratio of 65% and an expected long term dividend per share growth rate of 6% [Technical Difficulty] this resulting approximately 10% total shareholder return proposition is combined with an attractive pure play, state regulated utility profile characterized by industry leading ESG credentials and the largest regulated decarbonization investment opportunity in the country, as shown on the next slide.

Our 15 year opportunity is estimated to be over $70 billion with multiple programs that extend well beyond our five year plan and skew meaningfully towards rider style regulated cost of service recovery.

We believe we offer the largest, the broadest in scope, the longest in duration and the most visible regulated decarbonization opportunity among US utilities. The successful execution of this plan will benefit our customers, communities, employees and the environment. Turning now to earnings.

Our first quarter 2021 operating earnings, as shown on Slide 6, were $1.09 per share, which included a penny hurt from worse than normal weather in our utility service territories.

This represents our 21st consecutive quarter, so over five years now, of delivering weather normal quarterly results that meet or exceed the midpoint of our quarterly guidance range. GAAP earnings for the quarter were $1.23 per share.

The difference between GAAP and operating earnings for the three months ended March 31st was primarily attributable to a net benefit associated with nuclear decommissioning trusts and economic hedging activities, partially offset by other charges.

A summary of such adjustments between operating and reported results, is as usual, included in Schedule 2 of the Earnings Release Kit. Turning on to guidance on Slide 7. As usual, we're providing a quarterly guidance range, which is designed primarily to account for variations from normal weather.

For the second quarter of 2021, we expect operating earnings to be between $0.70 and $0.80 per share. We are affirming our existing full year and long term operating earnings and dividend guidance as well. No changes here from prior guidance. Turning to Slide 8, and briefly on financing.

Since January, we've issued $1.3 billion of long term debt, consistent with our 2021 financing plan guidance at a weighted average cost of 2.4%.

Thanks to all who participated in these important offerings and as a reminder, we'll have additional fixed income issuance at Dominion Energy Virginia, at gas distribution at Dominion Energy South Carolina and at our parent company during the remainder of the year.

For avoidance of doubt, there's no change to our prior common equity issuance guidance. Wrapping up my remarks, let me touch briefly on potential changes to the Federal Tax Code. Obviously, it's still early days with a lot of unknowns.

But at a high level, we see an increase in the corporate tax rate as being close to neutral on operating earnings based on, as is the case for all regulated entities, the assumed pass through for cost of service operations, an increase in parent level interest tax shield and the extension and expansion of clean or green tax credits, all of which will be offset by higher taxes on our contracted assets segment earnings.

We also expect modest improvement in credit metrics. [By] (ph) monitoring the contemplated minimum tax rules closely and would note the administration's support for renewable development suggests the ability to use renewable credits to offset any such minimum tax rule. More to come over time on that front.

With that, I'll turn the call back over to Bob..

we're processing competitive solicitations for equipment and services to achieve the best possible value for customers and in accordance with the prudency requirements of the VCEA. Interest in those RFPs has been robust.

We're analyzing performance data from our test turbines, which have been operational for several months now and are to date, generating at capacity factors that are higher than our initial expectations. Recall, we had assumed a lifetime capacity factor of around 41% for the full scale deployment.

Further evaluation of turbine design and wind resource in addition to the data we're gathering in real time suggest that our original assumption is too low. Higher generation would result in lower energy costs for customers.

We're monitoring raw material costs, and it seems to be the case across a number of industries right now, we're observing higher prices. In the case of steel, for example, the return of pandemic idled steel making capacity hasn't yet caught up to global demand.

We'll continue to monitor raw material cost trends as we move towards procurement later in the project timeline. We're moving into the detailed design phase for onshore transmission.

As we observed within the industry recently, utility systems are only as good as they are resilient, which is one of the reasons that we made the decision in 2019 to go the extra distance to connect to our 500 kV transmission system, to ensure that the project's power will be available when our customers need it most.

We believe that decisions we're making around onshore engineering configurations will ultimately result in the best value for customers. And finally, our Jones Act compliant wind turbine installation vessel is being constructed and is on track for delivery in late 2023.

We expect the vessel will be an invaluable resource to DEV as well as to the US offshore wind industry. We expect to announce further details on nonaffiliate vessel charters in the near term. In summary, lots of very exciting progress, which will continue through the summer, including our expected notice of intent from BOEM in June.

As is typical for a project of this size at this phase of development, there will be some puts and takes as work continues. Taken as a whole, there's no change to our confidence around the project's expected LCOE range of $80 to $90 per megawatt hour.

Near the end of the year, we'll file our CPCN and rider applications with the Virginia State Corporation Commission and we'll be in a position at that time to provide additional details around contractor selection and terms, project components, transmission routing, project costs, capacity factors and permitting.

Turning to updates around other select emissions reduction programs. On solar, on Friday, the Virginia State Corporation Commission approved our most recent Clean Energy filing, which included 500 megawatts of solar capacity across nine projects, including over 80 megawatts of utility owned solar, the fourth consecutive such approval.

We also recently issued an RFP for an additional 1,000 megawatts of solar and onshore wind as well as 100 megawatts of energy storage and 100 megawatts of small scale solar projects and 8 megawatts of solar to support our community solar program.

Our next clean energy filing, which we expect to include solar and battery storage projects, will take place later this year.

Since our last call, we've continued to derisk our plan to meet the VCEA solar milestone by putting another 30,000 acres of land under option, bringing the total to nearly 100,000 acres of optioned or exclusive land agreements, which is enough to support the approximately 10 gigawatts of utility owned solar as called for by the Virginia Clean Economy Act.

Our nuclear life extension, just this morning, the NRC authorized 20 year life extensions for our two Surry units in Virginia. The Surry station provides around 15% of the state's total electricity and around 45% of the state's zero carbon generation.

This authorization is a critical step in ensuring the plant will continue to provide significant environmental and economic benefits for many years to come. We expect to file with the FCC for rider recovery of relicensing spend late this year for both Surry and North Anna stations.

Our gas distribution business, as we've discussed in the past, our gas utility operations are enhancing sustainability and working to reduce Scope 1 and 3 emissions with focused efforts around energy efficiency, renewable natural gas and hydrogen blending, operational modifications and potential changes around procurement practices.

For example, as part of our recently filed natural gas rate case in North Carolina, we asked the North Carolina Utilities Commission to approve five new sustainability oriented programs.

Hydrogen blending pilot, that's part of our goal to be able to blend hydrogen across our entire gas utility footprint by 2030, a new option to allow our customers to purchase RNG attributes and three new energy efficiency programs. Finally, in South Carolina.

The South Carolina Office of Regulatory Staff recently filed a report finding that our revised IRP met the requirements of the law and the Public Service Commission's order requiring the modified filing.

As a reminder, the preferred plan and the revised filing calls for the retirement of all coal fired generation in our South Carolina system by the end of the decade, which helps to drive a projected carbon reduction of nearly 60% by 2030 as compared to 2005.

While the IRP is an informational filing, does not provide approval or disapproval for any specific capital project, we look forward to continuing to talk with stakeholders, including the commission about an increasingly low carbon future. An order is expected from the Public Service Commission by June 18th.

Turning to the regulatory landscape, let me provide a brief update on our Virginia triennial review filing, which we submitted at the end of March. As shown on Slide 12, the filing highlights Dominion Energy Virginia's exceptionally reliable and affordable service.

The state's careful and thoughtful approach to utility regulation has resulted in a model that prioritizes long term planning that protects customers from service disruptions and bill shocks. Consider these facts, 99.9% average reliability delivered at rates that are between 8% and 35% lower than comparable peer groups.

We're proud of our record and the work we do to serve customers every single day. Our filing also reflects over $200 million of customer arrears forgiveness as directed by the general assembly, relief that is helping our most vulnerable customers address the financial impacts of COVID-19.

The filing also identifies nearly $5 billion of investment in rate base on behalf of our customers over the four year review period, including $300 million of capital investment in renewable energy and grid transformation projects that we believe meet the eligibility criteria for reinvestment credits for customers.

The commission's procedural schedule is shown here. We've included additional details regarding the case as filed in the appendix for your review and look forward to engaging with stakeholders in coming months. It's clear to us that the existing regulatory model is working exceptionally well for customers, communities and the environment in Virginia.

We're delivering increasingly clean energy while protecting reliability and safeguarding affordability. In South Carolina, we continue to engage in settlement discussions with the other parties as highlighted in our monthly filings before the commission.

We aren't able to discuss specifics of that process but can report that all parties appear committed to working toward a mutually agreeable resolution. Finally, let me highlight noteworthy developments in the legislative landscape for our company.

In Virginia, during the now adjourned session, the Virginia General Assembly passed House Bill 1965, which adopts low and zero emissions vehicle programs that mirror vehicle emission standards in California. The law, which has been signed by the governor, ensures that more electric vehicles are manufactured and sold in Virginia.

It will likely take a few years before we see the significant and inevitable ramp up in electric vehicle adoption in our service territory, but we're taking steps today to be prepared for the incremental electric demand and associated infrastructure.

That includes regional coordination with other utilities to ensure highway corridors that ensure seamless charging networks, support for in territory EV charging infrastructure, which includes a significant investment in a variety of grid transformation projects, as well as the rollout of time of use programs.

At the federal level, we're encouraged by the support we're seeing for our offshore wind project. We applaud efforts to increase funding for the research and development of technologies that will allow the utility industry to drive further carbon emissions reductions.

We're philosophically aligned with the current administration and wanting to accelerate decarbonization across the utility value chain, while also recognizing that the energy we deliver must remain reliable and affordable.

It's still early but we're engaging in the process of policy formation and monitoring developments closely and continue to believe we are well positioned to succeed in an increasingly decarbonized world. I'll conclude the call with the summary on Slide 13.

Our safety performance year-to-date is tracking closely to our record setting achievement from last year. We reported our 21st consecutive quarterly result that normalized for weather, meets or exceeds the midpoint of our guidance range. We affirmed our existing long term earnings and dividend guidance.

We're focused on executing across the largest regulated decarbonization investment opportunity in the nation to the benefit of our customers. And we're aggressively pursuing our vision to be the most sustainable energy company in America. With that, we're ready to take your questions..

[Operator Instructions] Our first question comes from Shar Pourreza with Guggenheim Partners..

Just a couple of quick questions here. First, we've seen others revise estimates on Uri.

Any update on how kind of how Uri impacted your customers and fuel costs, are you still okay there? And how are you sort of thinking about maybe resiliency spend for renewables based on maybe some of what you've observed as a result of Uri, any incremental spend associated with that, that we should be thinking about there?.

Shar, it's Bob. I'll let Jim take the first part of that question, and then I'll answer the second..

We're hearing a lot about this topic across the industry this quarter, of course. For us -- let me walk through it. So there's no impact for us at all in our electric operations, of course, given our geographic location.

On the gas side, very minimal cost impact in Ohio, West Virginia, North Carolina, those businesses kind of leveraged their storage assets to minimize purchasing during that week. In Utah, it's interesting, though, we did see increased gas purchases. We saw price spikes in the Rockies region for gas during that week, of course.

And we had increased gas purchases of our own during that period in the range of about $60 million. Now as a reminder, those costs are covered by customers, but we think it's a modest cost to customers. So no financial impact to the company from that.

But what's interesting is the strength of the operational and the regulatory design there, really saved customers very significant costs during that period. And those are twofold. One is Wexpro, the regulated fuel supply arm. So during that week, customers got the benefit of that cost of service supply, so insulated from price spikes.

And then second, contracting. Questar Gas is, I think it's the largest contractor for a storage capacity for Clay Basin there in the Rockies region. So without those features, that $60 million would have been multiples and many multiples higher. So pretty positive reflection of the operational and regulatory profile there.

But overall, big picture, pretty manageable and scale for us.

Bob?.

I think it's important to remember that the regulatory models in the states where we do business and particularly our electric states in Virginia and South Carolina are very well suited to operate a reliable system for our customers, and that is absolutely the number one priority for our customers, is keeping the lights on.

And so on the generation side that means things like having diverse fuel mix, making sure the design basis for equipment is right for the circumstances under which it's going to operate, considerations for fuel security, firm transportation for natural gas.

And on the T&D side, it would be advanced simulations of the effect of events on the grid, innovative equipment and engineering new voltage control devices, for example, And it means a robust communications infrastructure.

And in Virginia, all of those types of investments that I was just describing are contemplated in both the Clean Economy Act and Grid Transformation and Security Act from 2018, things like grid mod, strategic undergrounding storage. So we feel very good about that now.

But we're reviewing to see whether any of our resiliency efforts need to be expanded or we need to add new resiliency programs. And we do that all the time, by the way. We learn from experiences on our own system and other systems. So I'd just sum up by saying nothing changes on the clean energy capital investment front.

We're confident we will continue that investment and operate reliably and the scope of any additional reliability investments and resiliency investments remains to be seen, but we're studying what is best for our customers right now as we've been doing for decades..

And then just two very super quick ones on South Carolina. First, obviously, Santee, NextEra pulled their offer, the senate passed their bill that's more focused on internal restructuring.

Do Dominion have any stance remaining here, including maybe an MSA opportunity or is that sort of behind us?.

Our position on that hasn't changed, it's the same. We've offered - we've worked cooperatively with Santee. We continue to work cooperatively with Santee and we look forward to other opportunities to work cooperatively with Santee Cooper. So no change there, Shar. We want to do what is best for South Carolina..

And then just the GRC, I appreciate the comments that you made. But is there any sort of sense of timing, maybe just some of the pushes and takes, is there kind of a point of an overturn we should be thinking about as we think about maybe a breakdown of settlement talks? Just maybe a little bit more visibility and then that concludes..

So the pause was for six months from January, so it comes to an end on the 12th of July, I believe. And so the case would resume on July 12, so a little more than two months from now. But as we said in our prepared remarks, everyone appears to be approaching this, looking for a constructive outcome and that's what we're focused on..

Terrific, thank you guys. And I echo your comments around Tom. He's going to be greatly missed, and he was the true gentleman. So I appreciate your comments..

Our next question comes from Jeremy Tonet with JPMorgan..

So I just want to start with the caveat, granted we're very early innings here and things will change. But are there any thoughts you could share on how the current version of the Biden infrastructure plan might impact D, such as the tax credit front.

Could this potentially impact wider spread deployment of storage in Virginia?.

Your preface to the question was exactly right. It is indeed early days. So we don't know what's going to come out in the final analysis. So I think the best way to think about it is we're just very well positioned, we think the approach to decarbonize as quickly as we can reliably and affordably makes all the sense in the world.

We're very well positioned to do that. This is not something that's new for us. And we see, to the extent we see opportunities with the Biden plan, we'll take advantage of them. But at this point, we don't exactly know. We just know the atmosphere is really good. We think it's smart for customers. We're excited about it..

And then also, I guess, under the new administration, you kind of touched on this a bit, but maybe you could just comment a bit more on your interaction with BOEM here, and how you kind of feel about things progressing moving forward through the process now versus before?.

We've had the opportunity to be involved in a couple of different industry conversations with BOEM leadership and other leadership in the administration. I think it's very clear that they see the advantages to offshore wind development.

And I think the best evidence when it comes to us is, as we mentioned earlier, the schedule for the notice of intent and for the record of decision line up exactly with what we talked about on our fourth quarter call. So we have a very good sense that the professionals at BOEM, as they always have, are going to move forward efficiently.

The leadership and the administration clearly thinks offshore wind is good economically and to meet carbon goals. And we're looking forward to sort of taking advantage of the experience that we have with the only wind farm operating in Federal waters off the coast of the United States today as we expand into something much bigger..

And just one last one, if I could, and I think you've touched on this a bit. But just wondering what you're learning from initial hydrogen efforts here.

How does this inform the relative opportunity between hydrogen and RNG for your gas distribution system going into the future?.

This is Diane Leopold. So just as a reminder on our hydrogen pilot, we're in our very early stages as in days. Our gas distribution business is implementing some blending programs at a training facility starting in Utah. And we just commissioned it and it's started testing just a couple of weeks ago. So we're really moving forward with that.

We're looking to expand that if it's successful to a small customer use application and then follow the pilots in our other service territories. In fact, we requested a similar pilot at a training facility as part of our North Carolina rate case. So we're starting small, very important on hydrogen blending.

So we see a combination of moving forward with continued pilots and testings of hydrogen blending throughout our LDC system, including putting it into the LDC, production and even methanation in the future. as well as an increased percentage of RNG into the system, which is really one for one offset with methane.

So increased RNG, increased hydrogen blending possibly towards methanation as we move to continue to decarbonize the LDC system..

Our next question comes from Steve Fleishman with Wolfe Research..

Good morning, and best to Tom's family and all of you. While we heard from Diane there, just you have been kind of early investor in RNG projects.

And I'd just be curious kind of where that stands and do you see a lot more coming over the next few years?.

So yes, we have been an early investor. We announced our intention to spend about $650 million on two main partnerships. We've been focusing on the agricultural RNG. So the hog farms with Smithfield and the dairy farms with Vanguard renewables. We have one project that's in service as of the second half of last year.

We have three projects under construction now and expect to have about five more under construction later this year. So we're really ramping up on actually bringing forward the projects. On the demand side, we really see a significant strong demand right now from a variety of customers.

You can see people like the refiners that have LCFS obligations to make and we see more states looking to implement LCFS standards. We see utilities, both on the power generation side and direct customer use side.

And then we see a lot of colleges and universities and other corporations that are kind of carbon conscious fires that are looking to offset their fossil usage. So we really see a lot of demand starting to pick up for multiyear contract terms at attractive prices.

So long term, we're still looking at these projects as critical supply sources for our LDCs as an important tool for customers to achieve net zero.

And so starting to access through our green therm tariff that we already have in Utah now and have requested in North Carolina and will continue to do so, but we're really continuing to see strong demand and our projects are ramping up..

I will mention that I had the opportunity last week to actually visit our operating site in Utah. It's quite something with the scale of the farming operation. It's also interesting that it happens to be not too far from one of our solar farms as well as there's a wind farm there, too. So it's become a center of renewable energy.

And we just think that in the scope of what we're doing in our decarbonization investment, there are a lot of opportunities, as Diane described, in RNG that will serve us well for the long term..

And then just one quick question.

Just sales trends in Virginia, South Carolina, any quick thoughts there?.

Sales trends are occurring kind of like we expected. I'll share a few stats. In Virginia, year-to-date, still pretty resilient like we saw most of last year. So year-to-date, up a little over 2%. Residential is still strong, up almost 4%. C&I also up almost 5%. So pretty good.

Keep in mind that one underlying trend, I know we mentioned this a lot, is the continuation of data center growth, that number is up like 25%. Of course, it's small but growing, a third of our commercial segment is data centers. We expect to connect another 20 or so data centers in our service territory this year. We connected 19 last year.

So that trend is very supportive of overall sales and continues to be strong..

Our next question comes from Julien Dumoulin-Smith with Bank of America..

Perhaps if I can pivot off that last question on sales, perhaps, can we talk about the next clean energy filing later this year? Should we be expecting more of the same on resources versus PPAs? But also how are you thinking about that filing against sales trends and also against some of these other headlines from independent IPPs, just looking at accelerating their procurement efforts in and around your service territory maybe by, shall we say, corporate procurements of various flavors and sorts? If you can speak to sort of the overall backdrop, if you mind..

So I think the answer, should it look similar to the filing that we just got approved, the answer to that is, no, and that this next filing will be larger in scale. And I think you particularly asked the split between PPA and utility owned and that will be different going forward.

That's what the Clean Economy Act is, it's quite specific on this point that for the new solar build, 65% is to be utility and 35% is to be third party or PPA, and sort of the total amount of that is on the order of 1,000 megawatts a year for the next 15.

So that's what you should be thinking about, really long term for us is we will match the VCEA proportions and the magnitude going forward.

The sort of second part of your question, where our focus, our growth is in regulated renewables to the extent that we -- and if I'm understanding correctly, to the extent we have customers, important customers who are looking for contracted approaches, we expect to do some of that.

But our focus on growing our solar portfolio is on the regulated side..

And then with respect to South Carolina here, I know that you're coming up on the July time frame, at least we're broadly approaching it. I know we got some updates here in the interim. But feel confident that perhaps by that point in time, we can reach some sort of resolution, if you will.

Is that fair as far as it goes?.

Julien, I used to be a lawyer and as a profession, we seem to be procrastinators. So I wouldn't read too much into the fact that there's two months left. You can get a lot of work done in two months. And as we said in the script, everyone is approaching this constructively. So yes, we think we can get it done..

And if I could squeeze in one last one, just LNG, I know you guys have obviously sold out a chunk here, but you've seen some pretty elevated valuations here in the space of late. Any comments, reactions to that? Just wanted to throw that in there quickly..

I'll repeat what I think what we've said many times before, we very much like our new look and our asset mix. The dynamics you're speaking to, we're not blind to that. At some day, that could be an opportunity to raise capital in a place what we have in our plan for modest continued equity issuance, but no current focus on that topic.

We're aware, following, but we're focusing on executing our plan with our current asset mix..

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

Just a quick clarification, Jim, on 2021 guidance. What are we assuming in terms of the timing on the South Carolina rate case? If you could just clarify that, please..

So on the South Carolina rate case, we've been, again, here consistently saying a couple of things. One is that given the size of that business in relation to Dominion, of course, that's just the electric part of DESC, we're talking about base rates on the electric side.

Any reasonable outcome is going to be within our guidance range, so no material impact. And then as far as the impact of the delay, we've seen some folks suggesting that a delay of a year would be kind of in the $0.05 range.

So take half of that for six months, you're talking about a couple of pennies, that's probably in the ballpark, but still not material and within our guidance..

So basically, regardless of the timing of a final decision there sort of the '21 guidance is intact?.

Any reasonable outcome should lead to that. That's right..

And just a quick one on the nuclear plant extensions.

Does that change or give you an opportunity to deploy more CapEx, or kind of this is in line with your thinking when you sort of develop the CapEx plan four, five years out?.

It's in line with our thinking when we developed the CapEx plan..

There's $1.3 billion of spend related to the nuclear license in our five year plan that we went through on the fourth quarter..

Understood. And it's really a lost, losing, Tom. So my best for Tom and his family..

Our next question comes from Michael Weinstein with Credit Suisse..

On the triennial filing, the revenue deficiency that you guys identified, is that mostly related to rate base and service or is it a new investment, or is it more operationally related?.

So I think you're asking about the '22 test year and our measurement versus a [10.8] ROE. And the answer is just with the way the law works, we project forward sort of known and knowables for year '22 and we calculate what the return is. And in this case, that return is slightly below the [10.8] that we believe is the appropriate authorized ROE.

So I don't know that I can identify any one specific thing, there's a number of sort of components that go into that. But we do that analysis compare it against what we believe is an appropriate ROE, and that's how we end up with that slight revenue deficiency and the regulatory speak..

So a combination of everything. Diane, on RNG, just one other question on that subject.

Do you anticipate a time when blending RNG and maybe even [hydrogen 2] into the system would enable a utility and pure utilities specifically to say that they are greenhouse gas neutral or greenhouse gas zero or even negative and when do you think that will happen? And how many years do you think in the future would you have to wait for that?.

In fact, it was part of our thinking when we committed to net zero by 2050 across both our gas and electric businesses, was blending renewable natural gas and hydrogen into the system as part of a component of that.

So it certainly already worked into the plans, I believe, of numerous utilities in their net zero plans, especially RNG and the agricultural RNG, which is why we're trying to attract so much of it into our LDC systems and with regulators and investing in it to get it in the networks is because it's so much more carbon negative than a lot of other forms.

So instead of just being carbon neutral, you just get a lot of bang for the buck out of smaller quantities of it to help meet those net zero goals..

One last question, on the solar business. Are you seeing any impact as a result of global supply demand tightness in that segment and also shipping logistics issues, chip shortages? We're hearing in the solar industry that the supply is tight and prices are up, just wondering if it's affecting you at all..

We're seeing the same, not in a material way. And the shipping and logistics issue, we're not seeing as much. There’s just some upward price pressure on poly, on glass, on steel. But it's something we're watching, but it's not -- for our business, it's not a material issue but certainly, there is upward pressure on costs right now..

Thank you. Ladies and gentlemen, this does conclude this morning's conference call. You may disconnect your lines and enjoy your day..