Brian Buckham: Sure. Yes, James, this is Brian. So, a few things you have to look at in terms of how many credits we’ll use. I’ll give you this answer first. You have to look at it separately each year. There’s not a specific number that we would say is going to be used every year. There is an upper limit, right? First of all, there’s an upper limit to credits. Right now, as of the end of the year, we had 86 million in the mechanism. We do expect to add some more to that from the 2023 batteries as they go into service and are paid for. In terms of future additions to the mechanism, that takes regulatory action. We’d actually have to go into the regulator and ask for additional ITCs to be put into the mechanism, whether they’re current balance sheet credits or credits that come off of renewable projects and batteries we install in the future.
Depending on what that balance is, the number is going to depend on a lot. One thing that’s a big factor is equity, for example. When equity is issued, it increases book equity. And as that is incorporated into our financial statements, that could use additional credit to catch up to that higher book equity. Now, that moves EPS as well, of course. And then, we have to look at financial headwinds every year. For example, in 2024, we’ve talked about higher depreciation and interest expense. So, to the extent we have to absorb that, tax credits would be used to absorb some of the financing costs associated with our growth. Beyond that, I would say on the credit side, it’s going to depend on the size of the bucket in any given year as to what we’re going to be using.
So, you can’t just take a straight line look at tax credits. As we go to the regulator and we increase our cash collection, for example, we would expect our rate-based earnings power to eliminate the need for as many credits. So, over time, we would expect the need to rely on credits to earn close to our authorized rate of return would go away. But that’s something that fortunately these credits in the interim do provide us with earnings support.
Lisa Grow: I think it’s also worth noting that the way the mechanism works, we don’t have discretion to decide how many to use. Whatever the number is, that amount is used. So, it’s not — we can’t hold them back as well.
Jamieson Ward: Got it, got it. That’s helpful. Okay, that all makes sense. And I appreciate all the detail there. It sounds like we should continue using the year-end book equity iterative calculation that I think we all use to sort of figure out each year what the need will be. It sounds like that’s still the go-forward practice.
Brian Buckham: That’s correct. Remember that the number can change. So, remember in this particular case, the number fell to 9.12. If the ROE were to go up in subsequent cases, that number would be expected to also move with it.
Jamieson Ward: Absolutely. Got it. Thank you very much. That’s all I have. Thanks for taking our questions. Thanks.
Lisa Grow: Thank you.
Jamieson Ward: Okay.
Operator: And our next question comes from the line of Brian Russo with Sidoti. Brian, your line is open.
Lisa Grow: Hi, Brian.
Brian Russo: Hi. Good afternoon. Hey, good afternoon. So, just to follow up on either limited issue or general rate case, if you filed by June, is it fair to say that you’d have new rates effective in January of 2025? And then what would be the test year and then like to true-up? How much CapEx from your last rate case would you capture in this for rates in 2025 to reduce any lag?
Lisa Grow: So, we’ll start with, yes, we would file in June with the expectation that they would go into effect January 1. We would be using a 2024 test year. And then, what was the other? Sorry, Brian. What was the other part of your question?
Brian Russo: Oh, yes, for true-up. But I guess if you’re going to use a 2024 test year, then it’s basically current rate base would be reflected in rates.
Brian Buckham: Yes, Brian. This is Brian. So, we don’t have that put together yet in terms of what the actual number we would submit to regulators would be. The true-up component is relatively small at this point. But the amount of additional rate base that we plan to cover — plan that we put into service during 2024 that is rate-based eligible is very significant. So, when we have that number, we’ll be able to share that.
Brian Russo: Yes, understood. And it seems like if you kind of back out the amortization of the expense in your 2024 guidance, is it fair to say that, that this case will again really be capital driven and not really operating expense driven?
Lisa Grow: Yes, that’s correct. That’s what we believe with so many other things being settled in the — in this last rate case, we feel like it’s really a matter of in this time where we’re growing so fast, we just simply can’t stay out another decade when we’re spending roughly a billion dollars a year. So, we will be in more frequently.
Brian Buckham: Yes. And Brian, you’ve seen us control our own and keep it relatively flat. You saw it 2010 — ’22 to 2023. We’re pushing to do it again for 2024. The one area where we just aren’t able to do that, of course, is in labor. So, that’s an area that’s very difficult to absorb, particularly as we have to keep people here and employed in order to meet these growth demands. So, we look at that one as an area where if we’re looking at limited scope labor or something, we would look to include in the mix in addition to the infrastructure investment.
Adam Richins: Yes, this is Adam. I think in addition to that, just with the growth we’re seeing in batteries, you’ve got to maintain all this, the new systems that are out there. So, that’s part of the 1M increases we’re seeing as well.
Lisa Grow: And then, I would also add we have some regulatory deferral mechanisms for things like the wildfire mitigation plan that allows us to make those investments now and defer the recovery list until later. So, that helps for other rising costs that are going up.
Brian Russo: Okay, great. And you mentioned earlier inquiries for data centers. Could you just add more context behind that? And when you might need additional generation capacity, which I assume would have to be some base load or gas-fired generation, maybe along with renewables and then tie that into maybe when we can expect the next IRP?
Lisa Grow: Yes, so it is a time right now where it is the amount of megawatts that are sort of kicking the tires. It used to be that three to five megawatts was big. These are showing up at hundreds or more. So, it’s an ongoing process that it feels like we’re just in a perpetual IRP analysis. So, Adam, you want to give a little more color?
Adam Richins: Yes, this is Adam. Maybe just to add to that, when we track large load requests, we consider a large load of megawatts or more. This year, in 2023, we had more requests and inquiries on our system than ever in the history of the company. We used to get, as Lisa mentioned, one, two, three, four megawatts. These requests are now in the hundreds to even thousands. Now, whether they will actually come to our service territory is an open question, and obviously those discussions are confidential. But if we did see a significant amount of these entities decide to come here, you could see us having to move forward with, for example, a gas plant sooner than what our IRP showed. Just as a reminder, in our IRP, we now look at large load scenarios.
And so, as we move forward with future IRPs, we’ll do the same. And what that could show is the need for gaps may increase even as early as the 2030, 2029 timeframe. But, again, it all depends on what loads come to fruition and whether these companies decide to site in Idaho or somewhere else.
Brian Russo: Okay. And then, maybe just a more detailed update on B2H. You mentioned it shifted a little bit, yet you’re still expecting to break ground this year. I mean, what’s the likelihood that it’s the earliest 2026? Is that still realistic and on track?
Lisa Grow: Yes, so you’ve been following us for quite a while. So, this has been quite the process to get to where we are. So, we’re feeling good about getting to the finish line with permits. Right now, there have been some delays in getting the notice to proceed. It’s mostly due to just the responsiveness of the agencies. But I will have Adam give you a little more color on it. But I feel like we’re getting to the end. I think it won’t be any sooner than 2026 for sure.
Adam Richins: Yes, you hit on most of it. The issue we’ve run into is just a little bit of delays related to the notice to proceed from the Oregon Department of Energy and from the BLM. We still do plan to start construction this year, hopefully in the first-half of this year if possible. And our end date is still 2026, given what we’re seeing. So, as long as we can work with agencies, get some of these final notices to proceed, we have some right-of-way work to also do. And then, we’re doing some micro-siting and some amendments on that front. If it all comes together, yes, construction would start in 2024 and it would end before the end of the year in 2026.
Brian Russo: Okay, great. And lastly, just given new rates, and I suppose it might be tiered rates during the peak demand season along with the ADITCs, which are partly due to the battery storage revenue being transferred there, anything we should be aware of in terms of the quarterly dispersion of your margins or earnings as it relates to your full-year guidance?
Brian Buckham: Brian, not from my perspective, I mean, one of the things we’ve done in the past is we’ve used ADITCs. We have made an estimate early in the year of the full-year ADITC usage amount. And then, we record that pro rata over the year, not based on anticipated sales each quarter. So, you’d expect us to do that again this year with the ADITCs. But otherwise, yes, there were some minor changes in the case to tiering, but I wouldn’t expect it to have a dramatic impact on seasonality. We should still have seasonality that’s similar to what we’ve seen in the past, driven more heavily by weather than by any changes to rates.
Brian Russo: Okay, thank you very much.
Brian Buckham: Thanks, Brian.
Lisa Grow: Thank you.
Operator: And your next question comes from the line of Bill Appicelli with UBS. Bill, your line is now open.
Brian Buckham: Hi, Bill.
Lisa Grow: Hey, Bill.
Bill Appicelli: Hi, good afternoon. Thanks for taking my question. A lot of stuff has already been asked and answered, but just to clarify on the ADITC balance. So, Brian, I think you said you ended the year at 86 million. And then, we should add to that, I guess, the full amount from the batteries, right? Is that 50 million? I know you referenced to 25, but the total value of the batteries in terms of what it adds to the ADITC balance, is that 50 million or what is that? So, then you sort of add to that and then we back off what you assumed to utilize this year, right? And then we’ll have what you assumed to utilize this year, right? And then we’ll have the residual balance for moving forward. Is that the way to think about it?
Brian Buckham: You’re correct, Bill. So, we had 45 million originally authorized by the regulators. We had planned to use some of that in 2023, but did not. So, we had the $45 million balance. And then, we’re authorized to add to that all of the credits that are generated from the batteries that we installed in 2023. We don’t get the credits until they are installed and paid for. And so, we have some outstanding payments on some of the batteries right now. The 86 million is the bulk of it. That’s the total amount, 45 plus the amount we added. We expect another 15 million to 20 million to be added to that from portions of the batteries that were 2023 batteries, but are not yet on the books for purposes of the mechanism, so, ending closer to around 100 million of tax credits eligible in the mechanism for 2024.
