Jeff Martin: Thank you, Allen.
Carly Davenport: Great. Thanks, Allen. Thanks, Jeff, for that color. Great to hear. And then the follow-up was just around the CCM trigger. Could you just remind us kind of the next steps in that process? And then as you think about your earnings expectations for next year, do you embed that 70 basis point improvement in ROE or could there be potential upside there?
Jeff Martin: Thank you for the question, Carly. I know that PG&E spoke to this on their call last week and Edison spoke to it earlier this week. And the way we think about it is the cost of capital mechanism was put in place for situations in our view, when the capital markets move outside the deadband. And with the rising rates that we’ve all seen, that’s what we’ve seen over the last year. Based on the methodology that’s used in California, the cost of capital mechanism has triggered. And accordingly, Carly, we have filed our advice letters last month with the resulting change to rates. You may have seen yesterday, interveners filed their joint filing and we’ll make our reply next week. But from our perspective, at the end of the day, we fully anticipate the commission will support the existing adjustment mechanism that’s in place.
And in terms of 2024 guidance, we reaffirmed that today. We’ve taken this question before and we’ve said that whether it goes forward or doesn’t go forward, it’s within the range that we published.
Carly Davenport: Great. Appreciate that color. Thank you.
Jeff Martin: Thank you, Carly.
Operator: Thank you. Our next question will come from Steve Fleishman from Wolfe. Your line is open.
Jeff Martin: Hi, Steve.
Steve Fleishman: Yes, hey. Good afternoon. Good morning. So first, Kevin, congrats and also congrats to Allen on the Texas Rangers, wow.
Allen Nye: Thank you.
Steve Fleishman: Yes. So just wanted to follow up on the comment about the segmenting in California of the businesses. Is this just a resegmenting for accounting purposes? Are you considering even some type of structural merger of the entities?
Jeff Martin: Steve, it’s something we have under evaluation right now. And as you know, when you think about financial segments, you think about how Trevor and I view the business. And from an accounting perspective, we think this is something that might make sense in terms of how we manage the business across three growth platforms. But, Trevor, perhaps you can provide some additional color from Steve on where you’re at with your analysis.
Trevor Mihalik: I think, again, it is really kind of an accounting analysis. And really, as Jeff said, Steve, this is how we as the chief operating decision makers, will be evaluating the business on a combined basis. That being said, we will still be filing the Q’s and K’s for the individual businesses in our combined consolidated financial statements. So you’ll still have access to that detailed information as well.
Steve Fleishman: Okay, great. My other questions were answered, so thank you.
Jeff Martin: Thank you for joining us, Steve.
Operator: Thank you. Our next question will come from Julien Dumoulin-Smith from Bank of America. Your line is open.
Julien Dumoulin-Smith: Hey, good morning, team. Thank you guys for the time. Appreciate it. And Kevin, I got to echo the congrats again to you too, sir. Thank you for all the help over the years.
Kevin Sagara: Thank you, Julian.
Julien Dumoulin-Smith: Absolutely. Best of luck here. Look, just to come back a little bit in the same direction of some of the prior questions on equity, how do you think about some of these more efficient alternatives here? I mean, certainly maybe minority settle downs have been part of the MO [ph] at various points here. But how do you think about the alternatives to common equity, given the track record of pursuing these kinds of alternative avenues in recent years for LNG, as you think about funding the utility growth?
Jeff Martin: Yeah.
Julien Dumoulin-Smith: Did you sell down a portion of the utility?
Jeff Martin: Sure. No, we’re not selling down any portions of the utilities. No, most importantly, when you see this type of growth that’s in front of our company, it goes back to kind of first principles at Sempra which is being a disciplined allocator of capital, and it’s just as important to match that discipline with efficiently sourcing. And we’ve answered this a couple of different times, Trevor, but maybe you just provide some color on how you’re thinking about again.
Trevor Mihalik: Yes. Again, I think we’ve looked at various ways over the last several years to look at how to source the capital. But at the end of the day, I think from our perspective, I think we’re looking at ways that would be the most efficient and the most timely. And right now, we’re thinking that anytime you have this kind of growth, we will look at all sources of capital needs.
Julien Dumoulin-Smith: Got it. All right. Indeed, I wish you the best of luck as you plan, and I anticipate we’ll hear on fourth quarter on that front. If you may just to pivot in a slightly different direction; as you think about the quantum of CapEx and the potential step up here, how do you frame that against the regulatory lag expectations? Again, I get that you haven’t settled on ten versus 20%, et cetera, but how would you think about lag prospectively, understanding some of the legislative impacts, amongst others, that could also play into the math about keeping up earned returns?
Jeff Martin: Yes. Thank you, Jillian for that question. I would start by referring you to Slide 13 in our slide deck. And just historically, it gives you a sense of how much growth we’ve seen in our capital plan from 2017 to 2023. And it gives you a sense of the question you just asked, Trevor. We’ve been pretty thoughtful about how we source capital and how we allocate capital to growth. In terms of regulatory lag, I think there’s a couple of key takeaways here for the audience. Number one, on our Q2 call and again today, we’ve talked about the quality of the regulatory compact in Texas. Several different bills that Allen walked through specifically reduced regulatory lag, which led to his improvement in terms of expectations of $70 million to $90 million of additional earnings.
