Portland General Electric (POR) Q1 2022 Earnings Call Transcript

Portland General Electric (POR 1.33%)
Q1 2022 Earnings Call
Apr 28, 2022, 11:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, everyone, and welcome to Portland General Electric Company's first-quarter 2022 earnings results conference call. Today is Thursday, April 28, 2022. This call is being recorded. And as such, all lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer period. [Operator instructions] For opening remarks, I will turn the conference over to Portland General Electric's senior director of Investor Relations, Finance, and Risk, Mr. Jardon Jaramillo. Please go ahead, sir.

Jardon Jaramillo -- Senior Director of Investor Relations and Risk Management

Thank you, Raul. Good morning, everyone. I'm happy you can join us today. Before we begin this morning, I would like to remind you that we have prepared a presentation to supplement our discussion, which we'll be referencing throughout the call.

The 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 earnings press release and our most recent periodic reports on Forms 10-K and 10-Q, which are available on our website.

Leading our discussion today are Maria Pope, president and CEO; and Jim Ajello, senior vice president of Finance, CFO, and treasurer. Following their prepared remarks, we will open the line for your questions. Now it is my pleasure to turn the call over to Maria.

Maria Pope -- President and Chief Executive Officer

Good morning, and thank you, Jardon, and thank you, everyone, for joining us today. Turning to Slide 4. For the first quarter, we reported net income of $60 million or $0.67 per share, compared with net income of $96 million or $1.07 per share in the first quarter of last year. To start, I would like to address the 2022 general rate case order issued earlier this week, which finalizes customer prices and resolves all remaining regulatory issues.

Including power costs, customer prices will increase an average of 3.2%. The order also establishes an earnings test for the treatment of certain deferrals arising in 2020 and 2021. The application of these tests resulted in the reduction of 2020 wildfire and COVID deferral expenses. As such, we are reducing earnings by $17 million or $0.14 per share.

While we were surprised by the establishment of an earnings test for these items within the GRC rather than via separate deferral dockets, the rate case in its entirety is positive with key elements that include our previously discussed 50/50 capital structure, unchanged 9.5% return on equity, an average rate base that is now $5.6 billion. And as you will recall, we filed this case last July with a revenue requirement request of $59 million, which was reduced through settlement proceedings. Key aspects of this include the removal of the Faraday facility as it is now expected to be complete around the end of the year, Lower cost of debt to reflect our very attractive $400 million long-term debt issuance, increased load forecasts, and keeping the collection for Level 3 outages. All but about $5 million of these settlements were constructive, representing operational improvements and the delayed timing of the Faraday repowering.

Ultimately, we achieved a $10 million revenue requirement increase, reflecting our shared interest with the OPUC and keeping customer prices low while providing clarity and certainty as we continue to invest in advancing the reliability and resiliency of our system. Unfortunately, as a result of the establishment of the earnings test for major deferrals and the subsequent reversal, as well as wildfire and vegetation management and other operating costs, which Jim will cover later in the call, we've revised our guidance from $2.75 to $2.90, down to $2.50 to $2.65 per share. Overall, we are reaffirming our long-term earnings growth of 4% to 6% off of the 2019 base year and dividend growth of 5% to 7% annually. Turning to operational highlights and the RFPs.

We continue to experience strong growth in energy deliveries, which increased 4.4% weather-adjusted, led by high-tech and digital customers. Our regional economy continues to trend very strong with in-migration, commercial recovery from the pandemic, and new cloud computing and semiconductor operations, all driving rising demand. Today, our unemployment rate is 3.5%. Our investments in transmission and distribution infrastructure improve reliability and support this growth.

We are also seeing operational improvements and significant efficiency gains resulting in getting more work done, especially in our reliability and, in particular, compliance work. Through advanced analytics and smart grid technologies, we are increasing the reliability of our systems even under certain extreme weather conditions. Over the last couple of years, we've also made increasing investments in technology that enables the integration of greater amounts of renewable energy, increasing system flexibility, and resiliency. We are pleased to announce the shortlist for the RFP that we initiated in 2021.

Final bids were submitted in January, and the shortlist is included in today's press release. As expected, the RFP process was extremely competitive, with over 8,000 megawatts of energy and over 3,000 megawatts of capacity. These bids include a variety of technologies, including wind, solar, batteries, and pump storage. Throughout this competitive process, we remain focused on keeping costs low as possible while selecting bids that improve the best possible mix of reliability and zero-emissions power.

The shortlist will be submitted to the PUC on May 6, and the process will turn to finalize the bids with the selection of the winning bids later this year. This RFP represents the first of several stages of resource acquisition as we seek to reduce our greenhouse gas emissions to meet the 2030 emissions targets and beyond. Following the completion of this RFP, we expect to issue an updated integrated resource plan in spring of 2023. Finally, last month, we released our 2021 environmental, social, and governance report, our ESG report, which demonstrates our progress toward a more equitable, sustainable future for customers, employees, and the communities we serve.

As we look to the future, we anticipate more focused elements of our cost structure to get them in line with the realities of our commissions' expectations. We're also looking at an ongoing focus on digital solutions to help drive improvements and mitigate cost pressures. We have this continuation of strong economic growth and long-term growth expectations of 1.5%. We're also developing resource plans to move to a decarbonized future and meet our commitments under the state's rules and our own decarbonization goals, and continue to serve customers with reliable, affordable, clean energy.

Now I'll turn it over to Jim. Thank you.

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Thank you, Maria, and good morning, everyone. Turning to Slide 5. Earlier this week, as Maria mentioned, we received the OPUC's final order adopting all stipulations in resolving outstanding issues regarding our 2022 general rate case. The order authorizes a price increase of approximately 3.2% overall.

It authorized our previously disclosed capital structure, return on equity, and average rate base results. The Faraday repowering project which is not yet in service and will be covered by a separate grade proceeding, and we are now evaluating when and how we will pursue the recovery of this project. It was an update to our Level 3 outage mechanism, which now allows PGE to establish a balancing account subject to a cap of two times the annual accrual amount. Further, it included the elimination of our existing decoupling mechanism and the application of an earnings test to certain major deferrals.

Specifically, the order authorized the application of an annual earnings test for the 2020 COVID, 2020 wildfire emergency, and the 2021 ice storm deferrals, allowing collection of costs incurred related to these matters until PGE's regulated ROE reaches certain thresholds at or below our allowed ROE based on the regulatory calculation for these amounts. Recasting the deferrals, the application of the annual earnings test resulted in the reduction of $15 million of previously deferred wildfire restoration expenses and $2 million of previously deferred COVID-19 expenses, which we have now recognized in Q1 2022 earnings. While the order was constructive in its tone, we were surprised that the commission disallowed a portion of costs related to the unique and unprecedented circumstances of 2020. The final recovery of these deferrals will be adjudicated in the existing dockets, and we will continue to work with stakeholders through prudency reviews to address the recovery of these costs.

Holistically, the GRC resolution represents a step forward in our regulatory journey and provides clarity as we move forward under a new rate structure. Moving on to Slide 6. Our first-quarter results reflect the opportunities of our region, the challenges of the current economic landscape, as well as the development stemming from the recent finalization of the 2022 rate case. We continue to witness strong growth fundamentals in our service territory, highlighted by high growth in the commercial and industrial sectors.

Overall, Q1 2022 loads increased by 4.4% weather-adjusted compared to Q1 2021. Residential loads increased 1.8% weather-adjusted. Usage remains elevated when compared to pre-pandemic levels, but we are beginning to see usage patterns normalize. Residential customer count remains steady at 1.1% quarter over quarter.

Commercial load increased 3.2% weather-adjusted as we continue to see recovery from the impact of the pandemic. The high-tech and digital services sectors are continuing to grow at a rapid pace as we saw over 10.4% higher industrial loads weather-adjusted. Milder weather had a 1.4% impact on the overall load growth rate of 3% in Q1 2022. Looking beyond the growth in our service territory, inflation pressures on the macroeconomic front are impacting our year-over-year costs, driven by elevated raw material prices and supply chain constraints, which have been significant across all major commodity categories, including material and labor, as well as service costs.

I'll now cover our financial performance quarter over quarter. As previously discussed, we experienced a $0.14 decrease in EPS as a result of the application of the earnings test on major 2020 deferrals established in the final GRC order. We experienced a $0.01 increase in total revenues. While load was up 3% quarter over quarter, the significant increases in industrial load growth were partially offset by a 1% decrease in residential load, nonweather-adjusted, resulting in some offsetting effects due to the composition of customer prices and mix.

On a weather-adjusted basis, revenue contributed $0.04. Weather was milder quarter over quarter with warmer weather resulting in a $0.03 decrease in revenue. Offsetting this increase was $0.06 of unfavorable power costs due primarily to serving higher customer demand compared to the previous quarter. There was a $0.06 decrease in EPS from higher operating and maintenance expenses.

As a reminder, in 2021, O&M included $11 million of storm restoration costs that were offset in the storm collection balance and are normalized from this comparison. Q1 2022 O&M drivers include $0.02 of additional vegetation management, reflecting incremental work performed in 2022; $0.02 of additional outside service and labor costs for grid reliability and resiliency; and $0.02 decrease from higher administrative expense, primarily driven by wage and benefit increases quarter over quarter. There was a $0.03 decrease due to higher D&A due to larger plant balances in 2022 and then a $0.02 decrease from the impact of higher interest expenses due to larger long-term debt balances from the Q3 2021 debt issuance of $400 million. There was a $0.03 decrease due to lower returns on the nonqualified benefit trust compared to Q1 2021; a $0.09 decrease, driven by a local flow-through tax adjustment recognized in 2021, which did not recur in 2022.

Finally, we achieved a $0.02 increase in EPS due to a $0.03 increase for capital cost deferrals for wildlife and storm restoration and then a $0.01 decrease from other miscellaneous items. Turning to Slide 7, which shows our capital forecast through 2026. We increased our capital expenditure forecast for 2022 by $25 million. This reflects additional opportunities for system resiliency investment.

While our current investment plans call for a $3.3 billion investment over the next five years, primarily related to grid resiliency and transportation of electrification, this number does not include any expenditures related to possible RFP ownership options. Turning to Slide 8. We continue to maintain a solid balance sheet, including strong liquidity and investment-grade ratings, accompanied by a stable credit outlook. Total available liquidity on March 31 is $905 million, and we remain one of the least levered companies in the sector.

We plan to fund investments with cash from operations and the issuance of up to $250 million of debt in the second half of 2022. This debt is expected to be issued under our green financing framework as we continue to seek out opportunities to tie our long-term debt to our sustainability strategy through capital investments. On to Slide 9. We published the shortlist of bids for the 2021 RFP within our earnings release today.

The competitive process included specific evaluation criteria that resulted in a shortlist containing experienced project sponsors with good track records deploying proven technologies. We believe this diverse array of bids will lead to cost-effective resources to serve our customers and contribute to our decarbonization targets. While we are pleased that some PGE investment opportunities are included in the shortlist, it's very early in the process and the final outcome remains subject to commercial and regulatory processes that will unfold during the balance of 2022. Company-owned opportunities for individual renewable resource projects range from 120 megawatts to 350 megawatts and from 50 megawatts to 125 megawatts for individual non-emitting dispatchable capacity research projects.

All projects with company-owned components anticipate a build transfer approach. Due to the confidential nature of the bids, we are unable to share additional specific details on the shortlist of bids. For clarity, as you examine the list of projects and those identified as company-owned, there are many permutations and there are overlapping capacities between certain proposals. The next steps in the process include OPUC acknowledgment of the shortlist targeted for July.

At the same time, we plan to begin negotiations with shortlisted bidders. We expect to finalize contracts with the winning bidders in Q4. All projects other than long lead time pumped hydro are expected to be in service by the end of 2024. As we move through the process, we are paying special attention to supply chain and inflation challenges facing renewable development, particularly the challenges in the solar industry.

The combination of diverse technologies and project sponsors will allow us to balance potential development issues as we look to achieve low cost and low risk in these projects. We expect to release our next IRP in the spring of 2023, which will generate additional decarbonization options. Our first-quarter performance reflected strong load growth balanced against operating cost challenges, as well as deferral reversals. As we look ahead to the balance of 2022, we are revising our full-year guidance from $2.75 to $2.90 per share to $2.50 to $2.65 per share.

This reflects a reduction to the full-year guidance for the adjustment of the 2020 deferral amounts and a revision to full-year O&M guidance from $590 million to $610 million to $620 million to $640 million, which includes the $17 million impact from the change in regulatory deferrals, with the remaining increase attributed to higher wildfire mitigation expenses resulting from more work as a result of cost pressures for the full year. We expect continued growth in our economy with a strong pipeline of high-tech and digital growth and continued in-migration, driving weather-adjusted load growth of 2% to 2.5%. While commodity prices have increased significantly in the first quarter, our power cost framework establishes a strong hedging strategy that limits the impact of the run-up of commodity prices in the current year. Cost pressure challenges are likely to continue.

We are taking the following steps to manage O&M for the remainder of 2022. We have placed orders for the entirety of forecasted 2022 and 2023 demand for transformers, wire, and cables. We're going to continue to focus our O&M efforts on high-return risk mitigation activities. We're going to continue the deployment of distribution automation technology, and we're going to optimize our supply chain processes to balance customer needs with cost challenges.

We have to continue to identify and implement efficiencies in 2022, which, coupled with continued low growth, will allow us to achieve our long-term earnings guidance of 4% to 6%. Finally, with respect to dividends, earlier this week, the Board approved a dividend increase of $0.09 per share on an annualized basis, which represents a 5.2% increase. This increase is consistent with our long-term dividend growth guidance of 5% to 7% while observing a dividend payout ratio of 60% to 70%. We also completed our limited share buyback program in Q1 to offset any dilutive effects of shares issued under our compensation programs.

Looking ahead, we anticipate customer growth, ambitious decarbonization efforts, and increasing opportunities to invest in our customers' electrification needs. These themes lay the foundation to deliver value by providing clean, affordable, safe, reliable, and equitable energy to execute long-term financial targets for customers and investors alike. And now operator, we're ready for questions. 

Questions & Answers:

Operator

Thank you, sir. [Operator instructions] Your first question is from the line of Insoo Kim from Goldman Sachs. Your line is now open.

Insoo Kim -- Goldman Sachs -- Analyst

Thank you.

Maria Pope -- President and Chief Executive Officer

Good morning, Insoo.

Insoo Kim -- Goldman Sachs -- Analyst

Good morning, Maria. First question on inflation. I think it's just impacting the whole industry, the whole world right now. Just as you think about whether it's labor or materials and whatnot, beyond '22, any, I guess, insight right now as to how sustained those pressures could be? And depending on your view of that, any initial look into whether the next rate case timing could be sooner rather than later?

Maria Pope -- President and Chief Executive Officer

Sure. That's a great question. And the adjustments that we made to this year as well as to this year's guidance, as Jim noted in his comments, are really quality and efficiency of work-related versus inflationary. And they're focused in primarily on wildfire and vegetation management areas.

As we look farther out, inflation, particularly because much of it is related to hard goods and construction, is going to impact our capital costs more than it will actually even impact our O&M costs. Obviously, both will be affected, but we're looking more at 2023, 2024. And I think this is going to be with us for actually quite a while. We have been talking about this since after we got after our last February ice storm, where we were confronted in March and April with particularly tight supply chains.

And I think at every turn, it's gotten a little worse than we expected. I would add to that a real focus on our RFPs. They're clearly coming in at higher costs than we would have thought and clearly higher than the last projects that we brought into customer prices. And then finally, gas prices.

We have a muted impact on our customer prices because of the hedging that we do. But longer-term, you'll continue to see much higher gas prices roll forward as we continue.

Insoo Kim -- Goldman Sachs -- Analyst

Understood. That's helpful. You've alluded to it but on that RFP shortlist, we did see the schedule out there on your slides of what will happen for the remaining portion of the year. Just given the circumvention investigation that's going on and a lot of the shortlisted projects, including solar in most of them, do you see the potential for this process being pushed out a little bit? I know the actual in-service date is not until 2024, but I guess just in terms of getting more certainty around which projects are the ultimate winners, just timing-wise.

Maria Pope -- President and Chief Executive Officer

Sure.

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Hi, Insoo. It's Jim. So I think that's a very good question. That's entirely up to the PUC.

And the question now arises to what extent you can delay the process and still hold these bids firm, and get underway with them. You'll note that in the schedule, you'll see a series of other types of projects, not only solar but wind and battery capacity. There are some hybrid projects as well. There exists an opportunity for the reconfiguration of some projects to eliminate solar and just do the wind parts or the battery parts.

There are a lot of permutations. But the supply chain is affecting every single one of them. There's no question about that. So it really depends on what the PUC and its independent evaluator surmise about these projects.

It also depends on whether folks are able to hold their bids and pricing and timing when we go about the process of negotiating with them in the second half of the year. So some of it is on the actual proponents themselves of the projects. As I mentioned in the remarks, these are larger, sophisticated project sponsors, with good track records, and proven technologies. But nonetheless, there are some forces that are now impacting everyone's ability to execute.

We've decided to take a build transfer approach in terms of a risk management strategy here really to answer the kind of question that you're raising. So it will all depend on what the PUC wants to do and how the project sponsors show up. I think there's enough time toward the end of '24 to get these projects in service in terms of the PTCs and the ITCs that folks are going after to make the economics work. But bottom line, it's too hard to call right now.

We're just early on in the process. We don't know what the Department of Commerce investigation will yield in August at the first checkpoint. So there's a lot of uncertainty. I really want to stress that.

There's a lot of uncertainty on how we go forward here. But at the same time, I'll conclude by saying this is just one of a series of processes that we'll be heading toward at the end of this decade, a series of procurement efforts that we'll have to complete. So in a way, we're dollar-cost averaging these decarb goals toward 2030. And there's an opportunity here to redo perhaps two, maybe three more RFPs as we get to the end of the decade.

So that's the color I would give you. And so I hope that helps.

Insoo Kim -- Goldman Sachs -- Analyst

Yes. No, that definitely does. I'll pass it on. Thank you.

Maria Pope -- President and Chief Executive Officer

Thank you, Insoo.

Operator

Your next question is from the line of Peter Bourdon from Mizuho. Your line is now open.

Peter Bourdon -- Mizuho Securities -- Analyst

Hi. Thanks for taking my question. Just trying to understand the deferral situation a little bit better. Is the $17 million that is being released this quarter, is related to a disallowance or an actual earnings test? And then going forward, how will the discretion with the commission work? Is that going to be on a quarterly basis or an annual basis?

Maria Pope -- President and Chief Executive Officer

So the disallowance that took place relates to the 2020 activity. It is the entirety of our wildfire expenses that we incurred in that year, and there are about $2 million of COVID expenses that we incurred that year. It's based on an earnings test of the regulated ROE, which is sort of a formulaic regulated set of calculations. And as you'll remember, we had our energy trading issues that year and we reduced our equity, meaning that our regulated equity popped up.

And so the -- while it was a terrible year for the company, the mathematical calculations result in the write-off of those -- of that $17 million. As we move forward, the test will be applied on an annual basis. And it's for the wildfire and the ice storm deferral amounts.

Peter Bourdon -- Mizuho Securities -- Analyst

OK, thank you. And maybe just to confirm, so the remaining amount, I guess, of deferrals, is it correct, it's $71 million for the ice storm and then $23 million for the wildfires?

Maria Pope -- President and Chief Executive Officer

Yes. That's schedules in the materials, yes.

Peter Bourdon -- Mizuho Securities -- Analyst

OK. This would --

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Peter, it's Jim. I just want to make sure that we clearly answer your question. There's no disallowance per se as a result of what you may be thinking of as a prudency test. This is really about the operation of the formula around the regulated ROE.

Is that clear?

Peter Bourdon -- Mizuho Securities -- Analyst

Yes, thank you. And then just to confirm, this is a noncash issue, right. It's really just impacting the balance sheet.

Maria Pope -- President and Chief Executive Officer

Correct.

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

This is a noncash issue, right. It's a 2020 adjustment that we have to take now, of course, because we're reporting now.

Peter Bourdon -- Mizuho Securities -- Analyst

OK. And then maybe just one other last one. Just on the PCAM, it looks like you guys are showing in the benefit position of $10 million. Is that the amount that is baked into the updated guidance for the rest of the year?

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Yes. 

Maria Pope -- President and Chief Executive Officer

Yes.

Peter Bourdon -- Mizuho Securities -- Analyst

OK, thank you.

Operator

Your next question is from the line of Ryan Greenwald from Bank of America. Your line is now open.

Ryan Greenwald -- Bank of America Merrill Lynch -- Analyst

Hey, Good morning, everyone.

Maria Pope -- President and Chief Executive Officer

Good morning.

Ryan Greenwald -- Bank of America Merrill Lynch -- Analyst

Good morning. Maybe just piggybacking off the deferral question here. How are you guys kind of thinking about the treatment of any additional wildfire costs going forward, given the decision by the commission?

Maria Pope -- President and Chief Executive Officer

So the wildfire costs going forward are not subject to the earnings test. But we do have additional wildfire and vegetation management costs, and those are reflected in our revised guidance for the year.

Ryan Greenwald -- Bank of America Merrill Lynch -- Analyst

Got it. So it's really all just historical in terms of the look at the earnings test.

Maria Pope -- President and Chief Executive Officer

Yes, which is one of the reasons why you'll see we did not make an adjustment for 2021, and we don't expect to have an adjustment for 2022. However, let me just – one note of caution. Jim did note that this was not related to any prudence review. We haven't gone through that step yet, which is one of the reasons why we were surprised that this became a two-step process.

Ryan Greenwald -- Bank of America Merrill Lynch -- Analyst

Got it. And then with rate case resolution, how are you guys kind of thinking about when you may revisit the longer-term growth trajectory? Is this ultimately contingent on generation wins? Or is this something that you think you have enough clarity on now, that you can maybe pivot to look at again later this year?

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Ryan, I think that we need to see more progress on the company-owned assets in the RFP. That's going to be the main driver here. We now have the rate case in front of us, so we're obviously able to model that in. But the other important variable is how we come out on the RFP.

If you look at the schedule, there are a lot of variabilities here. And as Peter was asking about earlier, a lot of uncertainty around the timing of the resolution of the RFP. But that's really going to be our next catalyst, I would say.

Ryan Greenwald -- Bank of America Merrill Lynch -- Analyst

Got it. And then maybe just lastly, any reason in particular for including the deferral and operating guidance, given it's more one-time in nature and noncash?

Maria Pope -- President and Chief Executive Officer

Oh, we had a long discussion on that. And we could have gone either way, and there are pluses and minuses to either. And we ended up showing it this way largely because of the size and sort of some issues around sort of accounting treatments and keeping it sort of all within the same. It all gets adjusted out anyway.

Ryan Greenwald -- Bank of America Merrill Lynch -- Analyst

Got you. And sorry, maybe just one more follow-up to that. Would you guys have reduced guidance if this deferral was excluded in adjusted numbers?

Maria Pope -- President and Chief Executive Officer

That's a good question. It all relates to how we interpreted and looked through the order, as well as the work that we're doing as it relates also to the wildfire plan that was recently approved. So it's hard to separate it at all as you look at it all coming from one commission.

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

I'll add something here, Ryan, to Maria's comment. If you take the additional part of the guidance that is reduced other than the deferral amounts, right, and you accumulate those, call it, midpoint to midpoint about a 25% reduction. The question arose for us, how much can we absorb overall and keep the prior guidance? If I were just one of those things or the other, we would say we could manage that. But when you have the accumulation of those additional cost pressures, mostly additional volume and wildfire mitigation and the like, plus the deferral, that got to be too much for us to absorb and offset.

So it was really the accumulation, Ryan, that caused us to move in that direction.

Maria Pope -- President and Chief Executive Officer

Good point.

Ryan Greenwald -- Bank of America Merrill Lynch -- Analyst

Got it. Thank you very much for the time. I'll leave it there. 

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Thank you.

Maria Pope -- President and Chief Executive Officer

Thank you.

Operator

Your next question is from the line of Shar Pourreza from Guggenheim. Your line is now open.

Unknown speaker

Good morning, guys. It's actually Chen for Shar. Thanks for taking our questions. 

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Sure.

Maria Pope -- President and Chief Executive Officer

Thank you.

Unknown speaker

So just on Faraday, is there an option to pursue a limited issue rate? Or will it just have to be the next GRC?

Maria Pope -- President and Chief Executive Officer

That's what we asked for. And we have done that previously in the past with a very complicated system connected to our Pelton Round Butte facilities, but that was not the decision that was ultimately made. So we will need to either file a single issue rate case or a regular rate case.

Unknown speaker

OK. And then did you mention the subpoena from the Department of Forestry? Can you provide any color on what they're looking at there?

Maria Pope -- President and Chief Executive Officer

Oh, no. I think that goes way back to when we had the wildfires and just some information they were seeking. There's nothing active at all on that. I think it goes back to September of 2020.

Unknown speaker

OK, thank you.

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Sure.

Maria Pope -- President and Chief Executive Officer

Thank you.

Operator

Your next question is from the line of Sophie Karp from KeyBanc. Your line is now open.

Sophie Karp -- KeyBanc Capital Markets -- Analyst

Hi, good morning. Thank you for taking my question. 

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Sure.

Sophie Karp -- KeyBanc Capital Markets -- Analyst

I'd like to go back real quick to the deferral issue, right. So if I'm hearing correctly, what you guys are saying is that the earnings test, the ROE test was applied this one time. And because of the way the formula worked from the rate case, it was an optically higher ROE. So this is why you got this -- you had to effectively remove the deferral, right.

So there's no proactive application of this -- prospective application of this earnings test. Can you give us a little bit more background on the legal basis for the ROE test in the first place? What would stop the commission from deciding to apply it again next time you come for a rate case, for example? It seems a little arbitrary. Is it like -- has it always been a part of their thinking process? Or is it like a one-time issue for some reason? What is the legal kind of foundation of all of this?

Maria Pope -- President and Chief Executive Officer

That's a really good question. And obviously, there are standards with regards to prudency reviews and just and reasonable rates periodically but not in every circumstance. Their commission has discussed and has applied an earnings test. We have it in some other areas that are pretty minor.

We've not seen something like this as broad as this one was, particularly on events that have been disaster-related. And in the testimony, there was a discussion by the commission with regards to sharing on this, which is why they also put the earnings test not at the 9.5%, which is where our allowed is, but at 9.3%.

Sophie Karp -- KeyBanc Capital Markets -- Analyst

So technically, they could potentially do it again in the next rate case.

Maria Pope -- President and Chief Executive Officer

Yes, they could.

Sophie Karp -- KeyBanc Capital Markets -- Analyst

OK, fair enough. Now on the RFPs, a couple of questions I have there. So I guess the world we live in has changed significantly between January '20 when the bids were maybe processed and today. Given all of the evolution of the supply chain and solar regulatory landscape and all of that, is there a scenario where some of those RFPs would need to be rebid?

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Can you repeat, Sophie, the last part of the question?

Sophie Karp -- KeyBanc Capital Markets -- Analyst

Is there a scenario where some of those bids would need to be revised like the bidder would have to come up with a revised bid and do it all over again?

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Yes, quite clearly. Because when we're negotiating with the bidders, including relative to our own bids across the Chinese walls, so to speak, all bidders will be treated the same. They will be asked to confirm their pricing and their schedule. And so we want to make absolutely sure in this scenario, given the headwinds that you talked about, that everybody is firm and is committed before we sign contracts.

Maria Pope -- President and Chief Executive Officer

Yes. Sophie, technically speaking, the terms of the RFP were to submit binding bids, and that is fairly clear from both the instructions from the company but also the independent evaluator. And it would be common practice for firm bids to be submitted. But that does not mean that you've had all of the contractual terms negotiated.

Sophie Karp -- KeyBanc Capital Markets -- Analyst

So what is the process then if, let's say, a bidder from a shortlist is unable to live up to the commitment of the binding bids, right? What's the process with the commission? Why do you go back to square one and kind of go through the process again? Do you come forward in the shortlist, et cetera? Or is that kind of a different process there?

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

It may be the case that some bidders are not able to perform and they drop out. And that's going to be up to them. But as your first question implied, we'll have to make sure that they are confirmed. Maria said those are the bidding rules.

But considering the environment that we're in, there's a lot of fluidity here, right, both in terms of price and schedule. So that's why we're going to make sure that folks can at the end of this process, while we're negotiating contracts, live to their commitments. Some of them may not be. And you noticed the schedule in the earnings release.

There are 8,000 megawatts, not unique megawatts, I want to stress that. But 8,000 megawatts are proposed and 3,000 megawatts of capacity. And the goals, as you may recall, are about 500 and 375, respectively. So there's a great deal of oversubscription here and a great deal of permutations.

So I think we go into this process in the second half of the year with some opportunity for both folks to come forward, but they're also maybe some scenarios where some drop out. We'll find out, and that's what this next phase is all about. First of all, the PUC with the help of its independent evaluator has to confirm the shortlist, right. That's job no.

1. So there's still a funnel here that we have to go through. And then we'll get to the phase of dealing with the issues that you just talked about, I would say in the summertime starting in July.

Sophie Karp -- KeyBanc Capital Markets -- Analyst

Got it. And just to be clear, are you one of the bidders here on the list from like A to H? Are you one of those?

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Yes. So I can't tell you about the specific ones that we represent and what they are. But you'll notice in the schedule, that there is a list of company-owned megawatts on the right-hand column of Appendix A. And that's for the resources, the generation resources.

And then there are company-owned resources for the capacity side at the bottom of the page. So the answer is yes, but you have to look at the schedule to determine which.

Sophie Karp -- KeyBanc Capital Markets -- Analyst

OK, thank you.

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Sure.

Maria Pope -- President and Chief Executive Officer

Thank you.

Operator

[Operator instructions] Your next question is from the line of Travis Miller from Morningstar. Your line is now open.

Travis Miller -- Morningstar -- Analyst

Good morning. Thank you. 

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Sure.

Travis Miller -- Morningstar -- Analyst

Not to beat on this deferral thing, so if I could go back real quick here. You said that there -- it wasn't a disallowance and real potentially prudent. Is there a prudency review going on? And would that impact the future collection of these, the 2020?

Maria Pope -- President and Chief Executive Officer

Yes, Travis. There are dockets set for prudence reviews of each of these. It would be our hope that we could move through that this year. But that absolutely will continue to take place.

So yes, that's why we were concerned and surprised that there's sort of two passes at this.

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

So, Travis, I'll just give you the numbers, just to make sure it's clear. So we began with a balance at the end of March before this order as it was at about $190 million. This change in the deferral balance, given the earnings tests, puts us at about $173 million. That's the $17 million difference.

And so there will be a prudence review as we go forward on those -- on that balance.

Travis Miller -- Morningstar -- Analyst

OK. On the $173 million and then the $17 is gone, OK, regardless of prudence.

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Yes.

Travis Miller -- Morningstar -- Analyst

OK, got it.

Maria Pope -- President and Chief Executive Officer

And Travis, one of the things you should know is that we're working collaboratively and pretty much on positive signs on all fronts with stakeholders, the PUC, and others for securitization. And so it would be our hope that the costs you've just talked about would -- while they represented extraordinary circumstances and significant natural disasters, that they would not have too great of a burden on customers in any one period but represent really the 150, 140 kinds of time -- kind of events that these were.

Travis Miller -- Morningstar -- Analyst

Sure, sure. OK. And then --

Maria Pope -- President and Chief Executive Officer

The first of their kind,

Travis Miller -- Morningstar -- Analyst

Sure, yes. And then in 2021, did I hear the number $71 million for the ice storm, $23 million for the wildfires. Was that -- are those the correct numbers?

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

No, let me just -- the balance at the end of March but after adjustment went from $53 million on wildfire to $37.8 million, to be particular. That's that $15 million number. And then the COVID pandemic one began at just under $38 million and is now at, call it, $35 million.

Travis Miller -- Morningstar -- Analyst

OK. And so for 2021, knowing what you earned, right, would -- are those still available, I guess, to recover, right? Because you already -- you know what you earned in 2021, correct? 

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Yes.

Maria Pope -- President and Chief Executive Officer

Yes. We applied all the same math to 2021 as we did to 2020. And I think we have to also remember, in 2020, we had the unique and very challenging experience with our energy trading losses, which we took accountability for and expense through the P&L and through the equity section of our balance sheet.

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Just to put a fine point on this, we did the earnings test that is addressed in the order for 2020, 2021, and, of course, the forecast for 2022 so that we did a thorough year-by-year look, as is required here, and the result is what we've talked about, that $17 million. And so there were no regulated earnings that were sufficiently triggering the earnings test in 2021. That was your question, 2021.

Travis Miller -- Morningstar -- Analyst

Yes, yes. Got it, OK. No, I appreciate all the technical stuff here. One higher level, the wildfire mitigation plan that you got approved, is there any CapEx that might be added to your plan from that to your CapEx plan for the 2023 and beyond?

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Indeed, there is. There is a fair amount of CapEx but also O&M as well, and the plan speaks to both elements of expenditure. I don't have that right before me. But it's been filed and shall I say blessed, accepted by the PUC.

And we're obviously implementing it. We're sort of on the heavier end of that right now without putting too fine a point on it. You get ready for the season as it were in the first half of the year right through May and June because that's when the risk develops, of course, in the summer. So we're -- so expenditures are more skewed as we speak right now.

Travis Miller -- Morningstar -- Analyst

OK. Would there be upside to that $650 million average number? Or is this wildfire mitigation if I adjust for this year in terms of the CapEx?

Maria Pope -- President and Chief Executive Officer

No, it will go into next year as well, and it will go into the year after that as well and onwards. This is a permanent part of our business.

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Right. And it's an important part of risk mitigation, I would say. So we've incorporated this as an ongoing program of risk mitigation.

Travis Miller -- Morningstar -- Analyst

OK, great. I appreciate you taking all the questions and the time and details.

Maria Pope -- President and Chief Executive Officer

Thank you.

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Thanks, Travis.

Operator

Your next question is from the line of Aditya Gandhi from Wolfe Research. Your line is now open.

Aditya Gandhi -- Wolfe Research -- Analyst

Good morning. Thanks for taking my question. I just -- could you quickly clarify, so on the 2021 deferrals, the $71 million for the ice storm and the $73 million for the wildfire, you already applied the same earnings test to 2021 and then your forecast for '22. And there should be no hit to -- what I'm trying to get to is there should be no hit to '23 numbers from any deferral reductions, right.

Could you please clarify that?

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

I'm not sure. You went from '21 to '23 in between '22. So can -- maybe you can help me understand where you're focused. But I'll just offer what I said previously.

We've done extensive work around the earnings test for '21, and there is no exposure there in our view. And that set of deferrals are probable of collection based on the test that we had to perform. Does that help you, Aditya?

Aditya Gandhi -- Wolfe Research -- Analyst

OK. It does. That's helpful. Thank you.

And then just how should we -- given these deferrals and given the elevated inflation, that is looking like it's going to persist well into the year. How should we think about the 4% to 6% long-term EPS growth rate that you'll have?

Maria Pope -- President and Chief Executive Officer

Yes. So as we think about it, we recognize where it is in the context of the industry and where it is in the context of our overall growth. As Jim noted, we look at it regularly, but we are waiting to see the ultimate outcome with regard to the RFP projects. That's an important component of our company in terms of decarbonizing our energy supply.

And we -- there's a lot of uncertainty here, and we need to go through the process, which will take much of the year. Jim, anything you want to add?

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

No, I just -- actually, I'm thinking about your prior question, Aditya. And there's no 2023 impact due to the earnings test. I just want to make sure you're aware of that. I think you were trying to get me there, but I probably skipped over your question.

So just to be clear, no '23 impact on the earnings test.

Aditya Gandhi -- Wolfe Research -- Analyst

Right. That's exactly what I was getting to. Sorry, I should have been more clear. Thank you.

That's really helpful. Thanks, Jim. Thanks, Maria.

Maria Pope -- President and Chief Executive Officer

Thank you.

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

You're welcome.

Operator

Your next question is from the line of Nicholas Campanella from Credit Suisse. Your line is now open.

Maria Pope -- President and Chief Executive Officer

Good morning.

Nick Campanella -- Credit Suisse -- Analyst

Hey, good morning, everyone. Good morning. Thanks for getting me on here. And I know I came on late, so I'm sorry if someone already asked.

But I'm just curious, there's clearly a lot of renewable opportunities in your service territory driving some outsized capital needs, recognizing just kind of the balance sheet being where it is because of the legacy trading loss. Like how do we kind of just think about growth equity versus balance sheet fixing equity, if at all, if you do need it? And any timing around that? Thank you.

Maria Pope -- President and Chief Executive Officer

Yes. Jim will take it.

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Yes. Thanks, Nick. So quite clearly, I would say this is a growth equity story. We are in the process of sizing the future growth opportunity, taking into effect what you've identified here as a balance sheet matter.

But I will tell you that it's -- as I look at the opportunities in front of us, it's mostly a growth equity story. And we'll be efficient and very thoughtful in our execution around that as we eventually get into the market. But I want to find out what the real opportunity is, as you can see in the schedule today, there is a fair amount of opportunity listed. However, it comes with a great deal of uncertainty just because of the macro-environment that we're in with supply chain inflation, partners, equipment vendors, and the like.

So I want to nail that first and then look at the balance sheet and come to the market efficiently.

Nick Campanella -- Credit Suisse -- Analyst

Yes, OK. Definitely respect that. And it has been some time since you kind of just updated us on the actual kind of growth rate and rolling it forward for just another year. So when can investors expect to see that?

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Well, I think it will depend on the RFP results, right. That is -- I mentioned earlier on the call that that would be the catalyst for doing that.

Nick Campanella -- Credit Suisse -- Analyst

Sorry to miss that. Thanks for the time today. 

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

You're welcome, Nick. Take care. 

Maria Pope -- President and Chief Executive Officer

Thank you.

Operator

There are no further questions. Presenters, please continue.

Maria Pope -- President and Chief Executive Officer

OK. Thank you very much for joining us today. We appreciate your interest in Portland General Electric, and we look forward to connecting with you one-on-one in the future, as well as the conferences and in our next quarterly conference call. Thank you.

Operator

[Operator signoff]

Duration: 56 minutes

Call participants:

Jardon Jaramillo -- Senior Director of Investor Relations and Risk Management

Maria Pope -- President and Chief Executive Officer

Jim Ajello -- Chief Financial Officer, Senior Vice President of Finance, and Treasurer

Insoo Kim -- Goldman Sachs -- Analyst

Peter Bourdon -- Mizuho Securities -- Analyst

Ryan Greenwald -- Bank of America Merrill Lynch -- Analyst

Unknown speaker

Sophie Karp -- KeyBanc Capital Markets -- Analyst

Travis Miller -- Morningstar -- Analyst

Aditya Gandhi -- Wolfe Research -- Analyst

Nick Campanella -- Credit Suisse -- Analyst

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