Portland Gen Electric Q3 2026 Earnings Call Transcript

Portland Gen Electric (NYSE:POR) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Portland Gen Electric reported third-quarter GAAP net income of $119 million and non-GAAP net income of $125 million, with impacts from historically mild weather reducing residential and small commercial energy usage.

The company highlighted a significant agreement with Verus for a 420-megawatt facility expected to be energized by 2028, indicating strong industrial demand growth.

Portland Gen Electric revised its full-year adjusted earnings guidance downward due to weather-related headwinds but reaffirmed its long-term EPS and dividend growth guidance of 5% to 7%.

Strategic initiatives include the successful launch of the Extended Day-Ahead Market and progress on clean energy projects, with two new solar and battery storage contracts announced.

The proposed holding company structure remains under review, with unresolved conditions affecting its implementation, though the company’s growth strategy does not depend on it.

Operational highlights include a 12% expected annual capacity growth from large load customers and advancing the Washington acquisition, targeting a mid-2027 close.

Full Transcript

OPERATOR

And all lines have been placed on mute to prevent background noise. After the speaker’s remarks, there will be a question-and-answer period. If you would like to ask a question during this time, press star, then the number 11 on your telephone keypad. To withdraw your question, please press star 11. Again, if you do intend to ask a question, please avoid the use of speakerphones. For opening remarks, I will turn the conference call over to Portland Gen Electric’s Senior Manager of Investor Relations, Erin Schwartz. Please go ahead.

Erin Schwartz (Senior Manager of Investor Relations)

Thank you, Stephen. Good morning, everyone, and thank you for joining us today. Before we begin, I would like to remind you that we issued a press release this morning and have prepared a presentation to supplement our discussion, which we will be referencing throughout the call. The press release and slides are available on our website at investors.portlandgeneral.com. Referring to Slide 2, some of our remarks this morning will constitute forward-looking statements. We caution you that such statements involve inherent risks and uncertainties and actual results may differ materially from our expectations. For a description of some of the factors that could cause actual results to differ materially, please refer to our press release and our most recent Forms 10-K and 10-Q, which are available on our website.

Turning to Slide 3, leading our discussion today are Maria Pope, President and CEO, and Joe Turfik, Senior Vice President of Finance and CFO. Following their prepared remarks, we will open the line for your questions. Now I will turn things over to Maria.

Maria Pope (President and Chief Executive Officer)

Thank you, Erin, and good morning, everyone. We appreciate your joining us today. The third quarter was impacted by the coolest summer in a decade. Against that backdrop, we continued to execute with discipline, actively managing power costs, driving efficiencies in O&M, and identifying additional opportunities to operate more effectively across our business. Importantly, our fundamentals remain strong, with industrial demand growing 9% year over year, driven by continued demand from high-tech and data center customers. In fact, we concluded a significant agreement with Verus for a facility of up to 420 megawatts, which is expected to be energized in 2028 and ramped to full capacity by 2033.

Now, regarding the proposed holding company. The Commission issued its holding company order on September 25. While the order approved certain aspects of the proposal, several conditions were not workable. We filed for clarification and changes to two areas. We support the proposed rate, credit and customer benefits totaling 83 million. If implemented, the holding company would provide additional financial flexibility while maintaining strong customer protections and utility financial strength.

That said, while very important, our growth strategy, capital plan and current guidance do not depend on the holding company implementation. Next, I’ll speak to our financial results and key drivers. This morning we reported third quarter GAAP net income of 119 million for a dollar per diluted share and non-GAAP net income of 125 million or $1.06 per diluted share. Our non-GAAP results excluded business transformation, optimization and acquisition-related expenses, which are not reflective of ongoing operational performance. The third quarter, like the year, was marked by historically mild weather, lower cooling demand in the quarter and significantly reduced residential and small commercial energy usage.

Turning to Slide 4 for our strategic priorities. Customer growth: we continue to see strong demand from technology, semiconductor and data center customers. Our new Large Load tariff, effective in July, increased rates for data centers and other large customers while lowering rates for residential and small commercial customers, putting us ahead of many utilities across the country. The tariff contributed approximately 4 million of incremental margin in the third quarter and includes provisions designed to reduce risk and costs associated with serving new large loads.

Essentially, at PGE, growth pays for growth. We now expect approximately 12% annual capacity growth from our large load customers through 2030, up from our prior outlook of 10%. This growth is supported by customers under contract who run already energized facilities or who are actively advancing construction and facility development. As I mentioned earlier in my remarks, we have an agreement with Verus for a facility of up to 420 megawatts. It is backed by customer and shareholder protections in our new Large Load tariff, including minimum payment obligations, direct cost allocation for infrastructure that will strengthen reliability across the region.

The facility also includes integrated battery storage, giving us added flexibility to manage peak demand while maintaining reliability, integrating clean energy and helping keep residential and commercial prices as low as possible. Verus is working through the permitting processes and applications were submitted ahead of any moratoriums. Energization is expected to begin in 2028. Turning to the Washington acquisition, we continue to move forward and advance the regulatory review process. We anticipate a 2027 close, or a mid-2027 close.

Third quarter marked an important milestone with the successful launch of our participation in the Extended Day-Ahead Market, or EDAM, a market PGE helped design and develop. EDAM further advances Western energy markets, lowers costs, reduces volatility and improves reliability. We expect EDAM to create meaningful customer value, contributing to reliability and affordability. Reflected in our 2027 AUT is 14 million of customer savings. I’m proud of the outstanding work our teams delivered to achieve this milestone, another step forward in delivering efficient and affordable energy for our customers.

Clean Energy: we have executed two contracts for non-emitting projects. First, we signed a build-transfer agreement for a combined 200 megawatt solar and 250 megawatt battery storage facility at Bigelow with an anticipated investment of 900 million. Second, we’ve also signed a build-transfer agreement for the Salmonfly project, a combined 199 megawatt solar and 199 megawatt battery storage facility with an anticipated investment of 850 million. Salmonfly is being developed with the Confederated Tribes of the Warm Springs.

The project supports coordinated operations of solar storage along with our existing and jointly owned hydroelectric facilities. Additionally, we continue to make progress on commercial negotiations for other projects from the 2025 RFP. And finally, this month we filed our 2026 Clean Energy Plan and Integrated Resource Plan with the Commission. Turning to risk management and wildfires: against a challenging regional wildfire season, our team executed our risk management plans, maintained enhanced readiness and responded proactively. We declared the end of fire season in our service territory on October 26th. We continue to execute our year-round wildfire mitigation program, including system hardening and enhanced situational awareness and technology investments designed to improve reliability and reduce risk.

Wildfire risk is a societal-wide issue, and we remain committed to working collaboratively with stakeholders on solutions that strengthen public safety, community resilience and an investable energy future for the Pacific Northwest. To summarize, we’re seeing continued strength in customer growth, success executing initiatives such as EDAM, and advancing clean energy resource opportunities. This work positions us to serve our customers, support Oregon’s growth and deliver long-term value for shareholders.

With that, I’ll turn to Slide 5 and our 2026 earnings guidance. As a result of weather-related headwinds, we are revising our full-year adjusted earnings guidance from $3.33 to $3.53 to $3.18 to $3.28 per diluted share. We would have been solidly within our original guidance range if not for weather-related headwinds. In the second half of the year, we continue to reaffirm our long-term earnings and dividend growth guidance of 5% to 7%. I’ll now turn the call over to Joe to walk through our financial results in more detail.

OPERATOR

Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Julianne deMoulin-Smith of Jefferies. Your line is now open.

Julianne deMoulin-Smith (Analyst at Jefferies)

Hey, good morning team. Nice to chat. Thanks for the time.

Maria Pope (President and Chief Executive Officer)

Good morning.

Julianne deMoulin-Smith (Analyst at Jefferies)

Hey, so just real quickly, I saw in the 10-Q that this added risk disclosure, I just wanted to dig in a little bit about it, specifically citing some of these delay risks potentially. Can you clarify a little bit of what’s going on with the ’25 RFP, if that impacts both company-owned generation assets or PPAs, or just a little bit more context? Obviously we’ve seen various delayed processes in the past, so it’s not entirely novel to see this as a new novel risk disclosure.

But again, would love to understand a little bit about what specifically is transpiring today.

Maria Pope (President and Chief Executive Officer)

Julia, let me add, first of all, I’m impressed that you’re looking at our risk disclosures in the 10-Q. But one of the things that I think gives us a lot of confidence in our pipeline is the Bigelow 2 project that we announced today as well as Salmon Fly. And the overall cost per kilowatt is pretty close to what we saw out of the 2023, as well as what we see from statistics across the country over the last 12 months. So while we are nervous about inflation and supply chain, the execution of our team has been very strong.

Julianne deMoulin-Smith (Analyst at Jefferies)

Yep, excellent.

Maria Pope (President and Chief Executive Officer)

Thank you.

Julianne deMoulin-Smith (Analyst at Jefferies)

And if I can just follow up a little bit on some of the Holdco dynamics, again, this gets a little bit in the weeds as well. Look, I know that staff has, OPUC staff has filed here in support of some of the clarifications on the retained earnings cap. Can you talk a little bit about some of those alternative cap calculations and do you see that as an acceptable provision? Again, I go back to some of the caveats you guys put in the Q here about moving forward and what this might look like for reconsideration.

I’ll leave it open-ended. Got it. Excellent. Just lastly here on the credit rating side, and obviously this ends up being fairly binary in terms of what exactly happens in terms of notch thresholds. But given the financing benefit, is the one notch threshold like a red line that if the commission doesn’t amend it, you guys wouldn’t proceed with the Holdco? Again, I’m just curious on the relationship between the rating side and your decision to move forward.

Got it. All right, awesome. And anything on wildfires here that you’d offer up in as much as we saw a lot happen in California, I don’t know if there’s anything that you’d flag for your upcoming session or maybe not. Again, maybe a catch all.

Maria Pope (President and Chief Executive Officer)

Thanks, Gillian. First of all, I think it’s against the backdrop of a tough season overall in the state of Oregon as well as across the country with regards to wildfires. And as I noted in my prepared remarks, our team did really well. We did turn the power off a number of times and actively monitored for one of the longest IMT runs that we’ve had in the history of our company. Clearly, wildfire smoke is an issue for Oregon. The damage and destruction, most of which is in the U.S. Forest Service lands or BLM lands, but also for the overall health of the economy of the state.

So you can see in the Oregon Business Plan, in the Governor’s Prosperity Reports and council work a lot of focus on how to address this issue. We’re looking forward to seeing the report that the PUC has commissioned. It’s not out yet. I would expect it to be out in the next couple of weeks. And that should create a foundation for some of the legislative work we can do this session. We’re closely monitoring what’s going on in California and particularly the findings from wildfire that’s in the California Earthquake report done earlier this year.

Julianne deMoulin-Smith (Analyst at Jefferies)

Excellent, guys. Thank you. Speak soon.

Maria Pope (President and Chief Executive Officer)

Thanks, Julian.

OPERATOR

Thank you. Our next question comes from the line of Shar Pourreza of Wells Fargo Securities. Line is now open.

Shar Pourreza (Analyst at Wells Fargo Securities)

Hey guys. Morning.

Maria Pope (President and Chief Executive Officer)

Morning, Shari.

Shar Pourreza (Analyst at Wells Fargo Securities)

Morning. Just real quick on the Holdco, just on the petition, I mean AWEC came in not opposing your changes to conditions 25 and 26. Are you seeing similar alignment from staff and CUB? And is a resolution before the December 7th acceptance date the base case, or should we think of this sliding into ’27 with the shareholder vote?

Maria Pope (President and Chief Executive Officer)

Oh, that’s a good question. You know, we’re continuing to work through the process. The commission should come out pretty soon with their decision and we are monitoring and working through all of the different aspects.

Joe (Chief Financial Officer)

So I’ll start with our guidance when we talk to both our 5 to 7% when we talk to our equity plan here we are always viewing this without the Holdco in the first place. Our growth rates and the affirmations we made previously were exclusive to Holdco. But we do think too when we think to the financing of these two projects specifically we start with the tax credit that we’ll receive from the 2023 RFP we disclosed here earlier on the call, somewhere between 350 or 400 million of tax credits that will come from the ’23 RFPs.

Then we’ll look to the debt to finance our draw from the ’25 forward which we had almost 400 million left. And then we have minimal new equity. I think when you look to our equity guidance here we have our equity for 2027, even inclusive of these projects, has increased by about $50 million from our prior disclosure.

OPERATOR

Thank you. Our next question comes from the line of Steve Fleischman of Wolfe Research. Your line is now open.

Steve Fleischman (Analyst at Wolfe Research)

Yeah, hi. Thanks. Just clarity on you said you’ll hear from the commission in the near future. Any more specifics on likely timing and which of these different options they, you know, clarification, you know, which direction, anything,

Maria Pope (President and Chief Executive Officer)

The outside date is December 7th when we would expect to hear from them. So I would assume that we’ll go all the way to December 7th. You know, given that we had a months long, you know, year and a half long process and a negotiated settlement with—so there’s a lot of testimony on the record, a lot of expert statements. You know, my hope is that they are looking at the record and working through the process and they’ll come out with a decision on December 7th. So we’ll know more then.

Steve Fleischman (Analyst at Wolfe Research)

Okay, one other question on that. So in the scenario where they do fix those two conditions appropriately, how are you thinking about the fact that kind of they left double leverage kind of open in the order for a future rate case and just is that an acceptable risk as part of this?

Maria Pope (President and Chief Executive Officer)

You know, I think, Steve, we’ve looked at that from sort of a norm across the country and it’s not something that is always excluded from other holding companies. And so it’s a risk that is typical of some other utilities and we would expect to work through it. We’re also moving towards five-year rate cases. And so I think that the five-year rate case system in the future will create more certainty for investors as we move forward.

Steve Fleischman (Analyst at Wolfe Research)

Got it. That’s helpful.

OPERATOR

Thank you. Thank you. Thank you. Our next question comes from the line of Chris Ellinghaus of Siebert Williams Shank. Your line is now open.

Chris Ellinghaus (Analyst at Siebert Williams Shank)

Hey, good morning everybody. So vis-à-vis the Holdco decision, have you had any ways to get a sense of whether the two key elements sort of in dispute were errors on the part of the commission in haste of trying to make adjustments to the settlement or those were intentional?

Maria Pope (President and Chief Executive Officer)

You know, I don’t think we have a comment on that. You know, we can’t have any ex parte communications during this period of time with the file with the decision outstanding. And so we submitted what we thought were clear and pretty minimal recommendations in our clarification filing a number of weeks ago and tried to make that as workable as possible given all of the discussions over the prior months and the settlement that we had previously had with staff.

Chris Ellinghaus (Analyst at Siebert Williams Shank)

So obviously the settlement was very detailed and really gave the commission a pretty good roadmap for this, but they decided to deviate. Do you think that they understand the impact that that has on investors and how that affects cost of capital when they do things like that?

Maria Pope (President and Chief Executive Officer)

I’ll chime in. I mean, that’s the point of the clarification and honestly the point of our communications. Clearly the material included within the staff addressed that. However, you know, we will work through the record here to hope that they have that clarity. Obviously for us, as you know, that is what’s critical to us. That is the value of this Holdco that allows for the benefits that would go to customers to be paid. And so, you know, we need to make sure they appreciate that it’s a critical structure for it all to come together.

Chris Ellinghaus (Analyst at Siebert Williams Shank)

Okay, Joe, some of the numbers that you quoted were kind of interesting in the absolutes versus the weather-adjusted load numbers. It seems like maybe there might be some other factor because like the residential, you know, the weather-adjusted was still lower and total retail sales weren’t up that much on a weather-adjusted basis either. So is there another factor at play that you can identify that might be dampening load for the quarter beyond the weather for the quarter?

Joe (Chief Financial Officer)

Just for the quarter, when we think to residential, we were at 0.6 on a weather-adjusted. But I would agree with you on a year-to-date basis, Chris, as you may recall, in the first quarter we had some unusual load trends that we addressed through our plans and we do agree that there were some unusual load patterns. So when you look to year-to-date results, those patterns obviously still hold. However, as we revised and looked through the third quarter, which is obviously one of our largest load quarters, after adjusting out weather on the residential side, it was pretty, pretty darn close.

Okay, and let me add one other comment. One of the great things about the 2377 large load tariff is that there’s essentially a take-or-pay. So we have pretty significant capacity payments which positively impacted the bottom line. But we had some lower energy usage from a couple of the data center customers. The data center customer energy uses can be kind of choppy at times.

Chris Ellinghaus (Analyst at Siebert Williams Shank)

That reminds me, Maria, I meant to ask, have you got any rule of thumb or any thoughts in terms of when you do have some extremes on the weather side, how that will affect the data centers or large load customers in general, that ambient temperatures really might have an impact on their cooling needs and did you see any of that in this quarter at all?

Maria Pope (President and Chief Executive Officer)

I’ll respond to it. So clearly the data centers have less of a weather sensitivity. You did see a small—weather to your question—to date we haven’t shown that. I believe we have seen that their weather differences in, you know, a couple percentage points. Obviously where you see the residential side acting much more extreme. I agree. Maybe what we can reflect to as we work through our guidance going forward is, you know, potentially as this class becomes more significant, try to give the differing sensitivities because it is—you’re right.

As we go through this, the residential class, even the small commercial class, react much more significantly to weather than these classes that are much more installed. They’re already insulated, right? They already have—they’re trying to be as efficient as possible even without the external factors.

Chris Ellinghaus (Analyst at Siebert Williams Shank)

And lastly, have you got any updates on your expected timing of 2025 resources?

Maria Pope (President and Chief Executive Officer)

So as it relates, if we’re talking to the 2025 RFP, we have the two projects obviously we just announced here. The timing for these projects, as we’re trying to work through tax credits, have in-service dates—and they have a little bit of different in-service dates in 2029. We do continue to work other items on the RFP shortlist that we published at the beginning of the year as we continue to work to fill what we believe is the bucket to serve the system reliably.

Chris Ellinghaus (Analyst at Siebert Williams Shank)

Okay, thanks. Appreciate it.

OPERATOR

Thank you. Our next question comes from the line of Aidan Kelly of JP Morgan. Your line is now open.

Aidan Kelly (Analyst at JP Morgan)

Hey guys, good morning. Thanks for the time today. I guess just picking up on the Holdco or the hypothetical lack-thereof scenario. Could you just walk through how you would finance the Washington acquisition under the existing structure? I guess the question is like do you see this changing the calculus of your capex or would you more look to kind of backfill with more equity in that scenario?

Joe (Chief Financial Officer)

I think to your comment, without a Holdco, I’ll start with we had said that with the Holdco that it would be—Washington would be accretive in the first full year. Our goal without a Holdco would be to be at least a break-even to a slight accretion in its first full year. We would expect that we would not be impacting the capital at our PGE side, but we would be financing this at a balanced cap structure as it relates to that structure. Assuming again, no Holdco.

Aidan Kelly (Analyst at JP Morgan)

Great, that’s super helpful. And then maybe just picking up on the Washington utility acquisition, could you just characterize where staff stakeholders’ concerns are most substantive today and maybe what incremental commitments you believe might be necessary to reach a settlement in Washington at this time?

Maria Pope (President and Chief Executive Officer)

Sure. So first of all, the process is going really well and we’re moving through a lot of important conversations. There’s three main areas that have been raised. The first one is CETA compliance, which is their clean energy compliance in the state of Washington. The second is the hydro facility that is not included in the transaction. That’s facilities that are on the Lewis River off of Mount St. Helens. And then third is the rate credit for customers.

Aidan Kelly (Analyst at JP Morgan)

Great, thanks for the time today. I’ll leave it there.

OPERATOR

Thank you. Thank you. Thank you. Our next question comes from the line of Anthony Crowdell of Mizuho. Your line is now open.

Anthony Crowdell (Analyst at Mizuho)

Hey, thanks so much. Good morning team. I just wanted to follow up on Chris’ question and maybe two people ago just on the capital plan and I think the higher cost of equity just without the holding company or it’s still not determined yet. Are there any changes to your capital program just as given the higher cost of equity that maybe you guys would have to readdress the capital plan that’s out there. And I have a follow up I think.

Joe (Chief Financial Officer)

Thank you for your question. At this time there really isn’t a change to the capital plan. As I mentioned, the additional financing costs for the RFP projects as they were added, thanks to the ability to monetize the tax credits from 2023, have negligible or slight impact on our equity plan. And we believe we continue to be able to support our 5 to 7% growth with our current financings and without a Holdco. So right now, I mean I don’t think now is the time really to debate any changes to the capital.

Maria Pope (President and Chief Executive Officer)

We agree that with our current stock price and not having a holding company creates challenges, especially given Oregon’s specific clean energy goals. You know, as Joe noted, near term we have levers from the tax credits, our solid balance sheet being able to draw on equity forward as well as other mechanisms. So we’re really focused on working through the process to hopefully come to a solid resolution that works for everyone on the holding company.

Anthony Crowdell (Analyst at Mizuho)

Okay. And then just more of a modeling question, just, you know, most of the calls here this cycle we’ve been talking about maybe a spread between rate base growth and maybe earnings growth or earnings per share CAGR. I’m just curious, what do you think the range is or what’s a good modeling assumption to use for go from rate base growth to earnings growth for Portland.

Joe (Chief Financial Officer)

I don’t think—I don’t have an update yet. We will look to that as we work to the 2027 guidance. I think this spread will hold for the moment until we formalize and layer in everything as it relates to 2027.

OPERATOR

Thank you. Thank you. Our next question comes from the line of Greg Orrill of UBS. Your line is now open.

Greg Orrill (Analyst at UBS)

Hey, good morning. Thank you. Maybe just some housekeeping around the CapEx plan and what the Bigelow and Salmon Fly projects were signed on in October. Was that the reason why you didn’t include them in the $7.4 billion CapEx plan?

Joe (Chief Financial Officer)

That’s right, Craig. Not to do the sort of accounting or disclosures. We’ve always had our CapEx table that we use in the investor materials aligned with the liquidity and capital resources footnote in the 10-Q. The 10-Q is an as-of date. So we’ve tried to hopefully put some pretty adequate disclosures both in the investor deck as well as in the 10-Q to layer that through. I mean that is the only reason is because both agreements have effective dates within the last couple days here.

Greg Orrill (Analyst at UBS)

And are you providing any guidance around how that would, how those projects would impact the EPS growth rate guidance?

Joe (Chief Financial Officer)

You know, for right now, obviously we’ve given guidance on the equity financing plan and we’ve affirmed our five to seven for right now. So at the moment, what we’ve historically said here, which aligns, is that, you know, in years of meaningful RFPs, we expect to achieve a growth rate at our midpoint or, you know, generally at our midpoint or better here, and there’s, you know, these RFP projects don’t change that.

Greg Orrill (Analyst at UBS)

Thank you. Appreciate it. Thank you.

OPERATOR

Our next question comes from the line of David Rolt of BofA. Your line is now open.

David Rolt (Analyst at BofA)

Hey, thanks for taking the question. Just looking at the 4Q implied guide, wondering if you could help us bridge a little better how you get there just with a little more granularity. In other words, if we took your slide six and rolled it forward a quarter, comparing last year to last year or even to 2024, what are the puts and takes you’d flag that kind of ground your confidence in the Q4 number for this year, just given it’s such a meaningful step up from recent quarters?

Joe (Chief Financial Officer)

Okay, sorry, sorry, I didn’t mean to talk too soon. Good morning. I always love the roll-forward questions where I get to just put the numbers in the air here. But so yeah, there’s a meaningful change from last fourth quarter to this fourth quarter. Just as a reminder, last year had a pretty, there was a pretty material weather effect in the fourth quarter, mainly in December. So when you think to the biggest, the biggest puts and takes are weather, right?

You know, weather-normal assumption. So that in and of itself is $0.17. The timing of the DSP, so the distribution system planning, recovery in Seaside was only a partial quarter last time. So the DSP and Seaside will drive that. We have a change, or a more favorable move, on net variable power cost. We have additional cost management. And then the last one is just the mechanical timing of the way the costs roll through the AUT. But, you know, when you take this, the super majority of the variance between when you look fourth quarter last year to what we anticipate fourth quarter to be this year is in margin.

There’s a little bit in the O&M management side, but the majority is these margin items that I laid out here plus some O&M favorability.

David Rolt (Analyst at BofA)

Okay, great. Thank you.

OPERATOR

Thank you. Our next question comes from the line of J.C. Vidalis of Ladenburg Thalmann & Co. Your line is now open.

J.C. Vidalis (Analyst at Ladenburg Thalmann)

Hi, good morning. Just a quick clarification. If the commission were to take action consistent with staff’s recommendations that they put out on the 22nd, would that be enough to accept the commission’s order if they kind of go ahead and approve staff’s recommendations, or would you consider that an unacceptable recommendation?

Maria Pope (President and Chief Executive Officer)

If we took the recommendations with the one-notch credit downgrade before dividends stopped, we would not be able to accept that. That’s not a, one notch, as you all know, occurs sometimes for the sector as a whole and through ordinary course of business, and we have an ordinary course of business item. Risk to dividends is not something that we’re willing to accept whatsoever.

J.C. Vidalis (Analyst at Ladenburg Thalmann)

Okay, great. And then just on the Washington portion, I believe the utility is somewhat earning around the mid single digits. I mean, do you think that’s enough to make it either break even or be slightly accretive if there is no Holdco?

Joe (Chief Financial Officer)

So I think I mentioned a little earlier here, obviously our plan here, we said it would be accretive in the first full year with the Holdco. You know, our comment was that, you know, the transaction does not need a Holdco, which we fully support. We said it would take a little while longer to be accretive without a Holdco. However, as we continue to work forward, our goal is in the first full year of the WashCo to at least, you know, to at least be breakeven.

That is what we are shooting for. We believe if we hit our operational goals here, that is an achievable result.

J.C. Vidalis (Analyst at Ladenburg Thalmann)

Okay, and then just along those lines, I mean, if it closes mid-2027, when would you suspect you would be going in for your first rate case in Washington?

Maria Pope (President and Chief Executive Officer)

I want to, we’re still evaluating when that would be. I think when we would go in for a rate case would potentially even be part of this agreement. So I don’t, I don’t have an exact date at this point in time.

J.C. Vidalis (Analyst at Ladenburg Thalmann)

Okay, great. Thank you. See you all at EEI.

OPERATOR

Thank you. Thank you. Thank you. As a reminder to ask a question, you’ll need to press star 11 on your telephone. Our next question comes from the line of Travis Miller of Morningstar Inc. Your line is now open.

Travis Miller (Analyst at Morningstar Inc.)

Hi, everyone. Thank you. Quick modeling question here. The large load tariff, what is or will be the impact either from a net revenue and or earnings for either the rest of the year or next year?

Joe (Chief Financial Officer)

Good morning. So I’ll start, Maria may add on this one. So for the third quarter, the first quarter large load tariff has been in effect, I believe we disclosed it’s around $4 million. We think for the second half of the year, you know, potentially that same, if not a little bit more, and then next year as we work through. Obviously we haven’t given guidance. There’s no reason to think that those type of numbers wouldn’t occur for the first part of the year.

But just as a reminder, all of this gets rolled into a rate case. One of the more important factors for the large load tariff, as much as we talk about the additional charging and the balancing to the data centers, is the residential customers also did experience a bit of, a little bit of a rate credit reduction, around 1% here that came through starting at that same period of time.

Travis Miller (Analyst at Morningstar Inc.)

Okay, perfect. And then higher level question for your system as you look at it today in terms of energy coming from renewables and then the need for capacity, and particularly clean capacity, should we expect most of the incremental projects to come with some type of battery solution? Again, just given the balance between energy and capacity that’s on your system now?

Maria Pope (President and Chief Executive Officer)

That’s a great question. We have been very fortunate to be out front in implementing battery storage, and it’s a really important part of our reliability mix today. Being able to add batteries to existing renewable facilities as well as with additional renewables enables us to better leverage existing transmission through the system and really create positive synergies. We would expect to continue to add batteries. The more you add, as you get to a little bit of diminishing returns.

One of the things that we, as part of U-2377 and all of our large load work, is the capacity that many of those customers bring. So as I noted, Verus is bringing battery storage to their project and we have other data centers that do the same thing. So we also are watching very closely the run-up in battery storage prices and are fortunate to have as much in construction and moving forward at the prior pricing.

Joe (Chief Financial Officer)

I do think, just as a numbers part, that is interesting. When we work through these 2025 RFP and PPAs that are out there from the others, we will have batteries on the system well in excess of 1,000 megawatts on a system with a peak load of somewhere around 4,500 megawatts right now. So it’s a pretty, you know, right. Even now, as we have some standalone batteries, it’s a pretty impressive battery population relative to the overall system.

Travis Miller (Analyst at Morningstar Inc.)

Yeah, that’s great. Those are big numbers relative. So. Okay. That’s all I need. Thanks so much.

OPERATOR

Thank you. Our next question comes from the line of Paul Fremont of Ladenburg Thalmann. Please go ahead.

Paul Fremont (Analyst at Ladenburg Thalmann)

Hey, thanks. Just curious what your plans are for your ownership interest in Colstrip. Are you still planning to exit ownership of the plant in 2028?

Maria Pope (President and Chief Executive Officer)

Good morning, Paul. How are you? So Colstrip, you know, we continue to own Colstrip and our interest. We do not currently have a disposition plan for Colstrip. We do know that under current Oregon law that the electrons related to Colstrip, or the power coming from coal generation, is not to be served for retail load, at least as currently written. We just continue to work with all the constituents on what is the best, you know, the best alternatives as it relates to the future distribution, you know, the future status of that plant for us.

Paul Fremont (Analyst at Ladenburg Thalmann)

So would you consider continued ownership of the plant if you couldn’t sell to retail customers?

Maria Pope (President and Chief Executive Officer)

We honestly will have to work with the regulators. I think it’ll be a, you know, just an interesting dialogue to have considering the status of the law and the ownership interest. But we’re open to work with them. Obviously it is not, it is inexpensive energy, but by view of Oregon it is not clean energy. But we are open to work through many different scenarios on how to resolve our structure with Colstrip.

Paul Fremont (Analyst at Ladenburg Thalmann)

Great. Thank you.

OPERATOR

Thank you. This concludes the question and answer session. I would now like to turn it back to Maria for closing remarks.

Maria Pope (President and Chief Executive Officer)

Thank you very much. Clearly, as we’ve discussed this morning, a lot of work to continue to be doing on the holding company structure. But as we’ve also noted, we’ve taken up our growth rate from our data centers from 10% to 12% underpinned by really positive results from our large load tariff. We have two exciting RFP projects that are moving forward, offsetting some of the other reductions in capital for this year. And then as we look at O&M, we’ve exceeded our goals. Solid operating performances as well as through the day-ahead market. We’re seeing great results on the power cost side. We appreciate your time this morning and we look forward to seeing you all at EEI in a couple of weeks.

OPERATOR

Thank you. Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.

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