Good day, and welcome to the ONE Gas Second Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Brandon Lohse. Please go ahead..

Good morning, and thank you for joining us on our second quarter 2021 earnings conference call. This call is being webcast live, and a replay will be made available later today. After our prepared remarks, we'll be happy to take your questions.

A reminder that statements made during this call that might include ONE Gas' expectations or predictions should be considered forward-looking statements and are covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, Securities Act in 1933, and the Securities and Exchange Act of 1934, each as amended.

Actual results could differ materially from those projected in any forward-looking statements. For a discussion of factors that could cause actual results to differ, please refer to our SEC filings.

Joining us on the call this morning are Sid McAnnally, President, and Chief Executive Officer; Caron Lawhorn, Senior Vice President and Chief Financial Officer; and Curtis Dinan, Senior Vice President, and Chief Operating Officer. And now I'll turn the call over to Sid for opening remarks..

Thank you, Brandon, and good morning. Before discussing our quarterly results, I'd like to share how excited I am to have a new role at ONE Gas, to congratulate Curtis on his promotion to Chief Operating Officer, and to acknowledge the trust that our Board has placed in our leadership team.

ONE Gas is built on a solid foundation of core values and a commitment to our employees, shareholders, communities and investors, and we will continue our tradition of service to each of these stakeholders.

Additionally, our focused business strategy, constructive regulatory environments, stable cash flow and an unwavering commitment to safety remains central to our sustainable business model. Our values, coupled with a well-defined strategy, have guided this company since inception and will continue to keep us on the right path as we move forward.

Regarding our second quarter, our results are consistent with our plan. In response to the unique challenges earlier this year related to Winter Storm Uri and the evolving COVID environment, our employees have remained focused on execution and dedicated to our strategy.

Among the positive results that Curtis will cover is the fact that we continue to see robust customer growth and opportunities for investment. I'd like to turn it over first to Caron to provide an overview of our second quarter financial results.

Caron?.

Thanks, Sid, and good morning. I'll begin with our financial results for the second quarter. Net income was $30.1 million or $0.56 per diluted share compared with $25.3 million or $0.48 per diluted share for the second quarter 2020.

Our results for the quarter reflect an increase in net margin of $11.1 million over the same last year, the primary drivers of which are new rates and customer growth in Texas and Oklahoma. Operating costs increased $1.2 million compared with the same period last year, due primarily to an increase in outside services and employee-related costs.

Offsetting these increases were lower bad debt expense and a decrease in expenses related to the COVID-19 pandemic. While we are still experiencing impact from COVID-19, including lower fees and ongoing expenses, the year-over-year impacts are moderating. Looking specifically at bad debt expense, our year-to-date expense is $5.5 million.

That compares with $7.6 million through June of last year and $3.6 million in 2019. As Curtis will discuss momentarily, we have resumed collections activity throughout our service territory, which is beginning to positively impact our collections and reduced past due balances.

We have not recorded any regulatory assets associated with the pandemic [Technical Difficulty]. There was no significant change in our capital expenditures quarter-over-quarter, and we are on track to achieve our capital plans for the year. Authorized rate base, reflecting our recent regulatory activity is approximately $4 billion as of June 30.

Authorized rate base is defined as the rate base reflected in completed regulatory proceedings, including full rate cases and interim rate filings.

We project that for 2021, our estimated average rate base, which is defined as authorized rate base plus additional investments in our system and other changes in the components of our rate base that are not yet reflected in approved regulatory filings, will be approximately $4.23 billion, with 42% in Oklahoma, 29% in Kansas and 29% in Texas.

Moving on to our financing activity and liquidity. In June, we increased the capacity of our commercial paper program to $1 billion, up from $700 million. This action follows the upsizing of our credit facility to $1 billion earlier this year.

We ended the quarter with $209 million of cash and cash equivalents, no commercial paper outstanding, and no borrowings under our credit facility.

During the second quarter, we generated net proceeds of approximately $15 million from equity issuances under the $250 million at the market equity program we put in place in 2020, leaving us with $221 million of equity available for issuance.

Regarding Winter Storm Uri, we had deferred just under $2 billion of cost as of June 30, which are included in regulatory assets on our balance sheet. Curtis will describe the state of play in each state regarding the process and timeline for recovering these costs through securitization.

On July '19, the ONE Gas Board of Directors declared a dividend of $0.58 per share, unchanged from the previous quarter. Lastly, we are reaffirming our 2021 financial guidance, including net income of $198 million to $210 million, earnings per diluted share of $3.68 to $3.92, and with capital investments remaining at $540 million.

Now I'll turn it over to Curtis to update you on the latest developments for regulatory, commercial and operations.

Curtis?.

Thank you, Caron, and good morning, everyone. I'll start with an update on securitization and other regulatory activity. In all three states where we operate, legislation was passed permitting natural gas utilities to pursue securitization to finance the extraordinary expenses incurred during Winter Storm URI.

On July 30, we made securitization filings in all 3 states.

Oklahoma Natural Gas filed its compliance report with the Oklahoma Corporation Commission, detailing the extent of extraordinary costs incurred and all the required components necessary for the issuance of a financing order, including a proposed period of 20 years over which these costs will be collected from customers.

The OCC has 180 days to issue a financing order. If the OCC approves the financing order, the Oklahoma Development Finance Authority will have 24 months to complete the process of issuing securitized bonds. As of June 30, Oklahoma Natural Gas has deferred approximately $1.32 billion of costs.

Kansas Gas Service filed its compliance report with the Kansas Corporation Commission, which includes a proposal to issue securitized bonds and collect the extraordinary costs incurred over a period of five, seven or 10 years. A procedural schedule will be developed to determine the timeline for evaluating Kansas Gas Services' compliance report.

If the KCC approves the proposed financing plan, then Kansas Gas Service will file an application for a financing order for the issuance of securitized utility tariff bonds. The KCC will have 180 days from the date of this filing to issue an order. If the KCC approves the financing order, we can begin the process to issue the securitized bonds.

As of June 30, Kansas Gas service has deferred approximately $383 million in cost. Texas Gas Service filed an application with the Railroad Commission of Texas for an order authorizing the amount of extraordinary costs for recovery and other requirements necessary for the issuance of securitized bonds.

The RRC has 150 days to consider the application and an additional 90 days to issue a single financing order for all-natural gas utilities participating in securitization, which will include a determination of the period over which the costs will be collected from customers.

Upon issuance of the financing order, the Texas public financing authority will begin the process to issue securitized bonds. As of June 30, Texas Gas Service has deferred approximately $286 million in cost.

We are pleased with the passage of securitization legislation as it represents just one example of how our company has been successful and creatively and strategically engaging stakeholders. I would also like to highlight a few other legislative achievements that our government affairs team has been working on across our jurisdictions.

All 3 of our states have now passed energy choice legislation, ensuring our current and future customers can choose reliable and affordable natural gas for their homes and businesses.

Oklahoma passed the safety bill designed to reduce third-party damages by requiring excavators to validate -- the facilities have been located and marked prior to commencing excavation work.

Finally, Kansas passed the move over bill, requiring motorists to yield the right-of-way to stationary public utility vehicles or workers when engaged in work activities.

These recent legislative successes are just a few examples of how ONE Gas continues to utilize all available means to strengthen its long-term position by improving safety for our employees, communities and the environment, providing customers choice to meet their energy needs and keeping natural gas service affordable for our customers.

Now shifting to our other regulatory activity. In May, Oklahoma Natural Gas filed a general rate case seeking a revenue increase of $28.7 million. The revenue requirement is based on a requested return on equity of 9.95%, applied to a rate base of over $1.7 billion.

The filing also requested the continuation of the performance-based rate change mechanism that was established in 2009. The filing is based on allowed return on equity range of 9.45% to 10.45% and a 9.95% midpoint. The rate case also includes a request to spend $10 million per year on renewable natural gas as part of our gas supply portfolio.

The cost of which would be recovered through our purchase gas adjustment mechanism as well as $10 million of annual capital expenditures for renewable natural gas projects that would be included in rate base. A hearing is scheduled for October 28, and the OCC has 180 days to issue an order.

In June, Kansas Gas service completed the transition period and is now operating the natural gas distribution system at the Fort Riley military base. Also, Kansas Gas Service expects to make a gas system reliability surcharge filing in August, for the period covering July 2020 through June 2021.

In February, Texas Gas Service filed for a $10.7 million increase related to its gas reliability infrastructure program in the Central Gulf service area, and new rates became effective in June. In March, we completed GRIP filings for all customers in the West Texas service area, requesting an increase of $9.7 million.

In July, new rates became effective for all customers, except for the city of El Paso. On June '21, the city of El Paso approved a motion, which found the GRIP filing to be in compliance with the statute. The city then denied the increase and assessed fees associated with its review of the filing.

Texas Gas Service filed an appeal with the RRC on July 2. The appeal is on the commission's agenda for today, and we receive notification that they have granted our appeal and approved the rate increase. New rates are effective immediately.

In April, Texas Gas Service made Cost-of-Service Adjustments filings for the incorporated cities and the service areas of the Rio Grande Valley and North Texas. In July, the cities agreed to increases of 3.5 and $1.4 million for the Rio Grande Valley and North Texas service areas, respectively. New rates became effective in August.

Moving on to commercial and operational activities. As Caron mentioned, all collection activities were resumed during the quarter, which was a key contributor to reducing bad debt expense. The primary focus of our customer service teams is to help our customers bring their account balances current.

These efforts include payment arrangement plans and contacts with social service agencies that offer financial assistance. The field operations teams have done a great job of managing the disconnect and reconnect process, as well over 50% of disconnected customers have been reconnected.

At the end of July, and thanks to the efforts of these teams, we've seen a 44% decline in past due balances since March 31. We continue at a near record pace for new customer connections.

We've spoken a lot recently about the growth we're seeing in Austin, at El Paso, Oklahoma City and Tulsa, continue to experience robust demand for housing and new natural gas services. We also continue to make progress on a number of initiatives around renewable fuels.

In addition to the renewable natural gas provisions, we requested in the Oklahoma General rate case that I mentioned earlier, collaboration with Vanguard Renewables continues to progress. We have been working with them on an in-depth market assessment across our territories, and we'll provide updates when appropriate.

And finally, Oklahoma Governor Stitt, signed a new bill creating the hydrogen production, transportation and infrastructure task force. The task force is chaired by Energy's Secretary Wagner and will study issues involving the production and distribution of hydrogen, including using existing pipeline infrastructure to transport hydrogen fuel.

ONE Gas will be an active participant in these studies, and the task force report is due in December. And now I'll turn it over to Sid for his closing remarks..

Thank you, both. Each year, the American Gas Association collects data on the safety performance of member companies. Earlier this year, we were notified that ONE Gas is in the top quartile of all three safety metrics reported by AGA.

In addition, our employees received the AGA Safety Award for the fourth consecutive year, an award given to the company that has the lowest rate of serious injuries compared to our peers. Congratulations to our employees for this recognition and outstanding performance.

As I close today, I'd like to thank Pierce Norton for his leadership as our CEO over the past seven years and for setting a course, that has resulted in a resilient and reliable energy delivery system, while creating value for all of our stakeholders. We wish Pierce and his family well in their future endeavors.

I'd also like to thank Caron, Curtis and the members of our leadership team. They made our leadership transition seamless, and I look forward to our work together as we build on our solid foundation, focused on system modernization, pursuing growth and driving innovation.

I'll close by recognizing that our success this quarter is the result of the skill and dedication of our 3,700 employees, each one, playing an important role in delivering natural gas service safely and reliably every day to our more than 2.2 million customers.

Thank you for living out our core values and serving our customers and communities every day. Thank you all for joining us this morning. Operator, we're now ready for questions..

[Operator Instructions] We'll take our first question from Gabe Moreen with Mizuho..

Maybe if I could start off with kind of what happened in the city of El Paso.

Was that something unexpected? Maybe if you can talk about kind of what you thought the rationale was, does the EBITDA increase? And is that something you expect, I guess, going forward?.

So Gabe GRIP filings are, as it operated, it's very much a -- just a process of following the statute. And you make the filing, it's reviewed to see if you're in compliance with the filing and the rates are improved.

So it was unusual that they did not -- that they found that we had complied with the statute, but then denied the increase, which was the basis for our appeal that we made July 2 and was granted and approved today. So it's not the first time that we've had an appeal in a similar circumstance, then the outcome was the same.

So I don't know that I would call it necessarily a trend. The last time was several years ago. I certainly hope it's not a trend, but the appeal process worked effectively and new rates go into effect today.

And just to clarify my comments earlier to the other cities in the West Texas service area as well as the unincorporated areas that the RRC has jurisdiction over had already approved the new rates or allowed the new rates to go into effect under the statute. So it was a bit of a one-off, I would say..

And then maybe if I can switch gears a little bit to sort of the RNG efforts. And I'm just wondering, I guess, maybe a multipart question here.

One, what the survey with Vanguard of sort of low-hanging RNG fruit, what that's kind of produced around your systems, whether those projects are kind of ready to go? And should we assume that, that $10 million in Oklahoma annually is kind of what you feel comfortable with, I guess, from an opportunity standpoint? Or is it just, hey, this is initially what you want to seek out where there's the potential for something greater here based on, I guess, with the Vanguard survey and kind of, canvasing your system has produced?.

So Gabe, first on the Vanguard study, that is still in process. We've seen some preliminary results of it, and we're encouraged by what we're seeing and what the opportunities may be coming out of it.

Many of those will be third-party dollars that develop those projects in our role in the transaction will be as the transporter of the gas through our system because of the potential location of a lot of those facilities.

We do also want to continue, though, to explore, and that's why you saw the 2 items in our O&G rate case, which was, number one, to be able to inject some amount of RNG into our system. And then secondly, to have some level of capital dollars that we could invest directly in that.

As an initial step to see how that process might work and what the benefits would be to our system and to our customers. So we're still, I would say, in spring training in many ways around this process, but we're encouraged by the progress we continue to make, and we'll make more comments because we have more information to share.

Gabriel Philip Moreen Mizuho Securities USA LLC, Research Division – MD And Curtis, if I could just follow up real quick on that. And so the idea would be, hey, you can rate base some of the investments but as far as the cost of the RNG itself, that would basically put through the PGA.

Is that right?.

So you're exactly right on that from the capital request that we've made and then from the ability to purchase RNG just like Wellhead Gas and run that through our cost of gas adjustments. But then secondly, if it is a transport customer that's just using our system to move the product, then we would collect a transport fee for that.

And those gas costs don't get accounted for through our PGA. Those just -- again, they're just a balancing arrangement of transport fee that we collect to provide that service..

[Operator Instructions] We'll take our next question from Stephen Byrd with Morgan Stanley..

Congrats on the new positions as well. A great update. I wanted to just step back on RNG a little bit and talk more broadly. I mean, we're excited about the opportunity for RNG broadly. We do sometimes get pushback about the magnitude and also just about the cost of the environmental benefits relative to your core business.

And as you noted, you've got really strong legislative and policy and political support for your core product.

When we think about longer term potential here, how would you sort of respond in terms of potential skepticism on how big this can be? And also just on the cost of RNG broadly?.

Those are all fair questions. And I think part of the answer depends on what problem you're trying to solve. And so if you're just thinking of a problem as I'm going to compare the cost of RNG to Wellhead gas, we see that the Wellhead gas is cheaper and it's much more abundant.

If you're -- the problem you're trying to solve or the question is more about from an environmental perspective, then that changes the answer because, in terms of reducing the impact of emissions and the cost of doing so, RNG is a really good answer for that.

And you don't have to completely displace all the Wellhead gas from a system to get to a point where you would be on a net 0 emissions basis. So there are some added costs to do that, and it depends on what the goals are that you're trying to achieve.

So I think the important thing for us to do is to know how to be able to respond to both of those environments. We obviously already know how to handle Wellhead gas, but as the focus continues to be around ESG and emissions reductions, that is a great path forward for us to be able to do that.

And that's why we're being so methodical in going through evaluating the sources of RNG that are available, establishing the tariffs and the gas quality specs that would be necessary to bring that product into our system and the interconnect agreement necessary to do that, so that we're prepared for where directionally, we think things are going in the longer term..

And to your question about abundance, one of the things that we often see are studies that make broad generalizations about supply rather than looking at specific footprints. So I would encourage you to look at or we'll be glad to provide additional information at some point that speaks to the capacity in our territory.

As Curtis pointed out, we wouldn't be pursuing the robust nature of the review that's underway, if we didn't have confidence that there was substantial supply to support a meaningful RNG program..

Well, that's really helpful. I'd love to follow up. And it's a fair point that you need to really look at the specifics for you all and how this may play out.

And I guess as a follow-up on this, just when you look at federal policy support, there's a lot of interest in the broader infrastructure package, not the more narrow one, but really the broader one and what that might do.

What do you think in terms of the potential support that you might see for RNG or other initiatives that could be in that broader packages? Could that be beneficial or is it too early to tell, how are you all thinking about that?.

I would say it's really pretty early in that process. There's been a lot of ideas that have been thrown out, whether it's RNG, it's hydrogen or at some of the other provisions that you've mentioned, and we're continuing to watch that.

We're continuing to work with our industry partner being led by AGA in reviewing that as well as trying to have some influence on what may or may not end up in that legislation. So too early to tell, but we continue to stay engaged to see where that bill may end up..

Also encouraging to see the conversation around resilience. That is a part of the dialogue that is underpinning both of the bills, there seems to be a more general recognition after the events of earlier this year that our systems play a critical role in providing support to the overall energy system.

And so resilience, we think, will be a theme that will continue to go forward, and we look forward to being a part of that conversation..

We will take our next question from Kody Clark with Bank of America..

So kind of sticking with the CapEx theme, but maybe moving away from RNG and talking more about core CapEx, and you kind of just mentioned it and your answer to the previous question here, but you've talked about the potential for additional investment in reliability and resiliency.

But if you could maybe just add a little bit more color on how you're thinking about that as it kind of plays into the shorter-term and where you're seeing kind of the investment here as you look across your system?.

Let me speak to that generally and then let Curtis come in with any specifics that he cares to add. We continue to have confidence in our system modernization strategy. It's allowed us to strategically derisk the system. It also provides environmental benefits as we further tighten our system, and we think it's good capital deployment.

But as you heard in Curtis' remarks, our growth profile encourages us to think about how we fully capture opportunities, both now and in the future. So a couple of points there. Structurally, we redefined the COO role. So as Curtis came into that role, we added the operations vertical to the growth vertical that we had been managing previously.

So that allows us to better coordinate the system safety focus that we've had with the growth opportunities that we are seeing both now and emerging in the future. Second, we've really focused on developing our growth team.

As we think about growth, the opportunity to pick up talent in the industry, particularly some outside the regulated utility space has been meaningful to us, and we think that deep bench is going to -- it bodes well for us as we look to the future.

And finally, it's important to remember, and this goes back to a previous answer, our service territory is unique in many ways. But right now, we are seeing significant in-migration of residents across the service territory. We're also seeing a lot of economic activity of both traditional economic activity and new industries coming into the areas.

And maybe most significantly, there is a bias for natural gas service in the activity in our service territory. So we think that is a bright future and holds promise for us as we seek to pursue that opportunity. Finally, we think there are opportunities for us around ESG.

And while your question focuses on capital deployment, there is an ESG element to that capital deployment that's important and is a lens that we have added to the analysis that we use going forward. So Caron is leading our ESG efforts, and we've added infrastructure to that effort that we think is appropriate for our company.

So focused continuity, I think, is the headline for our capital deployment. We had a good theme. We've executed on that. We'll continue to execute on it. But we do think there are some emerging opportunities that we're excited about, and we are supporting.

Curtis, anything you'd add?.

Just maybe to dig a little deeper into that. We've talked in the past that approximately 70% of our capital expenditures go towards system integrity and reliability projects. That's been consistent since we came out as a stand-alone company and remains consistent today and what our focus continues to be.

So that includes not only replacing older pipe, as Sid was talking about, that has a really good environmental story because you reduce leaks on your system and the resulting emissions as well as that being a really good safety impact as well. But we also spend dollars on reliability of our systems.

So connecting our systems to additional points of supply helps us lower the pressures on the system and increases the reliability that we have.

And those were very key themes that we saw the benefit of during the winter storm this last year where we were able to bring in supply from different points and maintain pressures on our system and have really good performance and reliability for our customers. So just a little additional color on the question you were asking, Kody..

And then maybe shifting to kind of the credit side. And can you kind of give some color on what the most recent dialogue has been with the rating agencies? I mean they still have you, on a negative outlook, though recovery of the extraordinary cost seems largely derisked at this point in Oklahoma and Texas, but that will be issued by the state.

So just any thoughts there, any updated thoughts in the most recent dialogue?.

We had a lot of dialogue during the storm. And when the rating agencies took their action. And at that time, they indicated that they would be patient. Obviously, we're on negative outlook, but that gives us time to work through securitization.

And again, they indicated that they would watch the regulatory process and see how securitization plays out before they make any additional steps. So not a lot of dialogue since we'll be on our annual visit with them in a few months, and we'll go from there..

And then just one last one for me, and it's on the Oklahoma rate case.

So I'm just wondering what the feedback has been so far from parties, especially as it's your first rate case in the state? And is there any chance that you can settle there?.

Well, just a couple of things. One, it's actually our second rate case since spin. We did about year and half after spin, did the first one in the PBR filings that we've been doing the last five years have been the result for the outcome following that rate case. In the current rate case, the responsive testimony is due in the early part of September.

And so that's really when we'll get the first read of where the commission staff, as well as other intervenors, stand on the issues in the rate case. So we'll have a better sense of that once we see their testimony..

[Operator Instructions] We'll take our next question from Vedula Murti with Hudson Bay Capital..

Let's see, in terms about the -- given the initial regulatory filings core securitization were on the 180-day calendars for Oklahoma and Kansas and the 150 plus 90 in Texas.

At what point will the prudence of the conduct of the activities and everything like that be addressed will be within these 180-day processes such that we will set any question as to prudence or dollars or whether full dollars or partial dollars.

How should we be thinking about that?.

So let me take that by each state separately. So you're correct in Texas that in that 150 day period is when those items are being reviewed, similarly in Oklahoma, it's during the 180-day period that those costs are being reviewed for prudency.

In Kansas, just to clarify, the first thing that happens is the filing that we made and a procedural schedule still has to be established by the commission to evaluate our compliance report. So we filed the compliance report, and it begins that process. But until they review that and approve it, then the 180-day clock starts at that point.

So there's not a set time line in that first step to review that compliance report. And we'll have a better sense here over the next few weeks as a procedural schedule gets established..

Given that all the various constituencies knew that these filings were coming and these timelines were there.

Can you help us think about what feedback you've gotten from them in terms of addressing the issue of prudence or is it more about duration of recovery period? Is it more about the carry cost rate? How has people already been kind of interacting with you in anticipation of these volumes?.

Well, all of those issues that you just raised are part of the consideration. And at the end of the day, it's really about the impact to the customers' bill. So that each of the commissions are sensitive to that.

Obviously, everyone would like to have a very short period and get this behind, but it's also, in some cases, not as possible to do that because of the impact that it would have on the customer's bill. So there have been lots of discussions around that, the time periods for recovery.

And as an example of that, you saw in our Kansas compliance report that we proposed a five, seven or 10 year recovery period. And that's really based upon what the objective is, that the commission would like to see in terms of the customer bill impact, once the financing moves forward. So everything you just raised are part of the discussions.

We'll have to see how the next several months play out as to where we end up in each state..

Was it maybe perhaps fair to characterize though that the conversation has been focused more on the duration and the carryout rate and things of that nature as opposed to the prudence of the conduct and prudence of the dollar amounts that are being discussed here?.

No, I don't think one excludes the other because the prudency reviews are very important. They were very important to us as we reviewed the invoices and reviewed the contracts and the Naseby agreements under which those volumes were delivered to make sure everything was in compliance.

And now that commissions will go through that same process to make sure that what we paid for the gas was in compliance with those things. And just maybe as a reminder, we do have compliance reviews every year. So while the dollars are much bigger, the process isn't really different from our normal prudency reviews..

Because it does not appear at least as far as I'm aware that anyone has fundamentally questioned your practices or the prudence of how you do your operations during this period. Okay.

Is that accurate?.

Well, in terms of our commissions, that's why we're doing the compliance report. So we're getting them the information so they can make that evaluation..

I thinking more about third parties and other stakeholders. Well, I don't know if I can comment on all stakeholders and other third parties and comments that they've made.

The important part is that the compliance that we're doing with our regulators that have the authority to review our costs and determine the prudency of the actions that we took during the winter storm. So that's really the piece that matters most to us. Okay.

And just one last thing in terms of, obviously, with the growth opportunities initiatives and other capital opportunities.

How should we be thinking about the balancing of funding those and the cost recovery of those versus having to down SAP with the cost recovery associated with, early in these historical costs?.

Those are all things we consider in evaluating what our investments are going to be each year in terms of the capital dollars that we spend. And we've given guidance on what to expect from a financing standpoint, and Caron can certainly provide more context around that.

But we go through that process each year of determining what our capital spend is likely to be where we're allocating that spending. We consider the impact. One of the things is the resources to physically get the work done. Second, the financial ability to fund the work and also then the impact that it has on the customer bill.

So all those things are considered. The one data point I would share with you is that an average customer on our system, their monthly bill averages about $60. And so that includes the gas cost as well as the return of and the return on our capital and the cost of service.

So that gives you some perspective of the actual natural gas bill that customers have in relation maybe to some of the other bills they have every month..

With no additional questions at this time, I'd like to turn the call back over to Mr. Lohse for any additional or closing remarks..

Thank you all again for your interest in ONE Gas. Our quiet period for the third quarter starts and we close our books at the end of September and extends until we release earnings in early November. We'll provide details on the conference call later date. Have a great day..

That will conclude today's call. We appreciate your participation..