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Portland General Electric Co  (NYSE:POR)
Q4 2018 Earnings Conference Call
Feb. 15, 2019, 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 Fourth Quarter 2018 Earnings Results Conference Call. Today is Friday, February 15, 2019. 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 call over to Portland General Electric's Director of Investor Relations and Treasury, Chris Liddle. Please go ahead, sir.

Christopher Liddle -- Director, Investor Relations and Treasury

Thank you, Chelsea; and good morning, everyone. I'm pleased that you are able to join us today.

Before we begin our discussion this morning, I'd 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 two, I'd like to make our customary statements regarding Portland General Electric's written and oral disclosures. There will be statements on this call that are not based on historical fact and, as such, constitute forward-looking statements under current law. These statements are subject to factors that may cause actual results to differ materially from forward-looking statements made today. For a description of some of the factors that may occur could cause such differences, the company request that you read our most recent Form 10-K.

Portland General Electric's fourth quarter and full year 2018 earnings were released via our earnings press release and Form 10-K before the market opened today, both of which are available on our website.

The company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. This Safe Harbor statement should be incorporated as part of any transcript of this call. Leading our discussion today are Maria Pope, President and CEO; and Jim Lobdell, Senior Vice President of Finance, CFO and Treasurer. Following their prepared remarks, we will open the lines for your questions.

Now, it's my pleasure to turn the call over to Maria.

Maria Pope -- President and Chief Executive Officer

Thanks, Chris; and good morning, everyone, and thank you for joining us today. Welcome to Portland General Electric's 2018 earnings conference call. I'm pleased to share our financial results and accomplishments. We will also discuss earnings guidance as well as the Wheatridge Renewable Energy Facility, the winning bid from our renewable RFP process. We're excited about the combination of wind, solar and battery storage. Our first in its scale and cost competitive in delivering carbon-free energy to customers.

Turning to slide four, our full year 2018 financial results of $2.37 per diluted share were near the top-end of our guidance as well as ahead of last year. We're initiating 2019 full year earnings guidance of $2.35 to $2.50 per diluted share as well as providing long-term earnings growth guidance of 4% to 6%. Jim will provide the details on each later on the call.

Turning to slide five. Our service area continues to grow. Our average number of customers grew by 1.3% this year and total retail energies increased 0.4% from 2017 on a weather-adjusted basis. Strong industrial growth of 2.2% more than offset the impact of residential and commercial energy efficiency. Our service area remains attractive to large-scale commercial and industrial developments, especially from data centers and high-tech manufacturing. Furthermore, Oregon continues to see strong immigration and an average unemployment rate of 3.5%.

In 2018, our accomplishments include advancing smart grid technologies, such as our distributed energy resources Test Beds and laying the groundwork with electric avenues and working with our transit authorities to expand transportation electrification.

We also achieved positive outcomes on our 2019 general rate case and successfully resolved the Carty Litigation, receiving $113 million in cash settlement proceeds.

Turning to slide six. After months of regulatory competitive bidding processes, we're proud to announce our collaboration with the NextEra Energy Resources, who will construct the facility that combines 300 megawatts of wind generation, 50 megawatts of solar generation and 30 megawatts of battery storage. This project will be the nation's first major energy facilities to co-locate and integrate these technologies at scale. We will own a 100-megawatt for the project and will buy the balance of the facilities output under a 30-year power purchase agreement with a year 12 purchase option.

The wind component will be operational by December 2020 and will qualify for 100% federal production tax credit. The solar and battery components will be completed in 2021 and will qualify for a 100% of the federal investment tax credits. As such, the overall delivered cost of energy is highly competitive, making the project extremely attractive as we work to lower our carbon impact, while maintaining reliability and keeping customer prices affordable. PGE expects to invest approximately $160 million for its owned portion of the project and this amount is included in our updated capital expenditure forecast.

In addition, we are advancing our green tariff in order to sell 100% renewable energy to our largest commercial and municipal customers. The tariff filing has been supported by several prominent mayors and we expect regulatory review to be complete this quarter. We also plan to file our 2019 Integrated Resource Plan this summer. The plan will outline our long-term resource needs and is a key part of our efforts to pursue safe, reliable and affordable energy. We look forward to continue collaboration with stakeholders.

And, now, I'm pleased to turn the call over to Jim. Thank you.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Thank you, Maria. Turning to slide seven, in December, the OPUC adopted all stipulations and resolved the remaining vested issues in our 2019 general rate case, approving a revenue increase of approximately $9 million that took effect January 1, 2019. This is included in the rate base of $4.75 billion, up from our previously authorized rate base of $4.5 billion, while maintaining our 50% equity capital structure and a return on equity of 9.5%. The commission also authorized an increase to our annual amount of recovery for storm restoration, incorporation of recent weather trends into our load forecast and extended decoupling through 2022.

After evaluating of our financial projections, we've determined that we will not file a general rate case for 2020 with OPUC and we'll continue to reevaluate the need to file on an annual basis.

Turning to slide eight, which shows earnings drivers for 2018. First, gross margin reduced earnings by $0.19 due to our $0.31 attributable to mild weather in 2018 when compared to 2017. And that was offset by $0.12 attributable to lower purchase power and fuel costs, as well as increased wholesale revenues. Second, lower storm restoration cost represent a $0.09 increase in earnings. Next lower plant maintenance expense contributed to an $0.08 increase in earnings, followed by Carty adding approximately $0.11 from the cash settlement. Regulatory items, including tax reforms and capital deferral dockets, contributed to an increase of $0.01. And, finally, a decrease of $0.02 per share due to other miscellaneous items.

On slide nine, we've provided a summary of the company's current capital expenditure forecast from 2019 through 2023 related to investments that support our combined customer growth and development of a more efficient, reliable and secure system. Included in this forecast are capital expenditures for the Wheatridge Renewable Energy Facility, most of which will be in 2020.

Onto slide 10, we continue to maintain a solid balance sheet, including strong liquidity and investment grade credit ratings. As of December 31, 2018, we had first mortgage bond issuance capacity of $1 billion, cash available short-term credit and letter of credit capacity totaling $755 million, and a common equity ratio of 49.8%. In January of 2019, we executed an amendment to our revolving credit facility of $500 million, extending the termination date to November of 2022. In December, we issued $75 million of first mortgage bonds at an interest rate of 4.47% that will mature in 2048. In 2019, we expect to fund estimated capital expenditures with cash from operations, the issuance of debt securities up to $375 million. In April, we issued $200 million of first mortgage bond securities at an interest rate of 4.3%, maturing in 2049.

As shown on slide 11, we're initiating full year 2019 guidance of $2.35 to $2.50 per diluted share, which assumes an increase in retail deliveries of approximately 0.5% weather-adjusted, average hydro conditions for the year, wind generation for the year based on five years of historical levels or forecast studies when historical data is not available, normal thermal plan operations, operating and maintenance costs between $585 million and $605 million, and depreciation and amortization between $400 million and $420 million.

In 2019, we are forecasting an effective tax rate between 10% to 15%, which will be slightly higher than in 2018 due to fewer production tax credits and higher pre-tax book income. We're also forecasting an average CWIP balance of $215 million.

Because we are not filing a 2020 general rate case, we wanted to be able to provide you with some additional guidance around earnings of the company. Therefore, we are providing earnings guidance of 4% to 6% our earnings-per-share growth rate on average for the period 2018 through 2021. We will get there through a combination of three factors: First, continued investment in our system driving efficiencies in our cost structure. For example, investments in our distribution systems, including substation upgrades and replacement of underground cables prior to failures avoid the cost of break fixes. Second, strong economics in our service territory, which drive both investment and growth in demand help to offset operational costs. And, third, investment in renewable and energy storage including the Wheatridge Renewable Energy Facility and our pilot energy storage projects.

And, now, operator, we're ready for questions.

Questions and Answers:

Operator

(Operator Instructions) And our first question will come from the line of Insoo Kim with Goldman Sachs. Your line is open.

Insoo Kim -- Goldman Sachs -- Analyst

Hi. Good morning, everyone.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Good morning.

Insoo Kim -- Goldman Sachs -- Analyst

Just a question on the, I guess, the rate case, as you're not planning on filing a 2020 rate case and with Wheatridge expected to come online by the end of 2020 for the wind, does that imply that you will be filing a rate case, I guess, in the beginning of '20 for the 2021 time period or is there a separate filing you can make for just that project that would require a base rate case?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

In order again -- and so -- because of the RPS that we have here, we have a mechanism we call the renewable adjustment clause. That clause allows us outside of a general rate case to make a filing to bring renewables into customer prices associated with those resources that meet the renewable portfolio standard. And so, it's almost like a rifle shot type of a general -- rate case associated with it. So, we'll track it into customer prices that way.

Insoo Kim -- Goldman Sachs -- Analyst

Understood. And then, in terms of the 100% PTCs associated with the project, does that build on the deferred income tax line? So from a rate base perspective that will have some kind of offset to rate base or is there a more immediate reduction to customer build as a result of that?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Yes, that will continue to build.

Insoo Kim -- Goldman Sachs -- Analyst

Understood. And then, finally for me, the 4% to 6% growth rate for the 2018 to 2021 time period is at the 2018 -- actual result that you guys saw today? And does the midpoint assume continue the 0.5% retail growth rate?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Yes. Our long term growth rate that we've mentioned out there before beyond the next few years is still 1%.

Insoo Kim -- Goldman Sachs -- Analyst

Understood. Thank you very much.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Thanks.

Operator

And our next question comes from the line of Paul Ridzon with KeyBanc. Your line is open.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

Good morning.

Maria Pope -- President and Chief Executive Officer

Good morning.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Good morning, Paul.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

What was the EPS impact of weather versus normal for the year?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

For the entire year, it was $0.07.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

Versus normal? And then 31 versus 2017?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Year-over-year. Yes.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

What should we look -- I'm a little confused about the renewable adjustment clause versus the AFUDC. Will you be booking AFUDC on this wind asset?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Yes, we will be.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

Okay. And can you...

Maria Pope -- President and Chief Executive Officer

The renewable adjustment clause is really just the way that we're able to prevent any regulatory lag associated with renewables and not have to have multiple rate cases in terms of bringing that investment into customer prices. We would enter into those agreements with the PUC after the completion of the facility and that would include the AFUDC that we will be accumulating while the construction is taking place.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

Thank you. So we should look for AFUDC line to trend up this year?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Mostly it would be in 2020.

Maria Pope -- President and Chief Executive Officer

Yes.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

Can you split that $160 million between 2019 and 2020?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Most of it will be in 2020. I can't give you an exact number, right now, Paul, but the balance of it will be in that particular year with a small amount trickling into 2021.

Maria Pope -- President and Chief Executive Officer

When you think about a wind farm and construction projects like this, the vast majority of the early work is civil work and there is not a lot of capital spending until you get at least midway through the project.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

How is the wind resource in 2018 versus normal?

Maria Pope -- President and Chief Executive Officer

We were slightly under by about 2 percentage points. What we have seen in the past is actually greater differentials, but we forecast about 32% between our -- all of our wind resources and we came in right at about 30%. So, pretty negligible difference all considering.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

As far as equity just kind of the normal drip in employee programs for the year?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Yes, we don't plan on issuing any equity.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

And then, lastly, I don't remember where I saw it, but some discussion about pushing construction of the solar and battery component of this to '23?

Maria Pope -- President and Chief Executive Officer

No, that's not accurate. It should -- the entire project will be finished by the end of 2021.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

Do you know where that came from? Was that some proposal somewhere or?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

I haven't heard it.

Maria Pope -- President and Chief Executive Officer

We have no idea where you saw it.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

I will track it. Okay. Thank you very much. Those were all my questions.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Thanks, Paul.

Operator

Thank you. And our next question comes from the line of Travis Miller with MorningStar. Your line is open.

Travis Miller -- Morningstar Inc -- Analyst

Good morning. Thank you.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Good morning, Travis.

Travis Miller -- Morningstar Inc -- Analyst

Question again on the Wheatridge project. How much was the economics beneficial or improved by that integration having all three of those battery, solar, wind versus what you saw in terms of just wind or just solar projects? How much of that integration helped the economics, if at all?

Maria Pope -- President and Chief Executive Officer

That's a very good question. First of all, this was a competitive bidding process that was highly competitive. There were a number of bidders into the process and we saw equipment costs that have been coming down steadily over the last couple of years and predicaments with some of the things you hear around the rest of the country. So very good in terms of just overall competitiveness in each of the components on a stand-alone basis. What the combination does is, it allows you to utilize a little bit more of the transmission resources as the wind farm is in the Eastern part of the state and transmission is one of our higher cost. So that's where you get incremental increase in economics over time.

Travis Miller -- Morningstar Inc -- Analyst

Okay. Was there any consideration of kind of the qualitative aspect of this or perhaps you'd get more capacity credit, not capacity in terms of what's out there capacity but in terms of available capacity out of this just by having those three, perhaps, solar helping to charge the battery, winds using that battery, how do you think about it? Because there are qualitative...

Maria Pope -- President and Chief Executive Officer

Absolutely. That allows us to essentially generate more wind and solar energy stored and then be able to transmit it into the load regions of Portland and our service territory at higher rates than we otherwise would be able to do so. You're absolutely right.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Yes, so think about it as solar shifting.

Maria Pope -- President and Chief Executive Officer

Yes.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Pulling in energy during the peak hours of the day and we're are able to shift it, because typically what happens is that sun goes down before we get to our peak load and the batteries going to allow us to be able to shift some of that energy to better meet that peak.

Travis Miller -- Morningstar Inc -- Analyst

And then the winds would also supplement that?

Maria Pope -- President and Chief Executive Officer

Absolutely, they all work together.

Travis Miller -- Morningstar Inc -- Analyst

Okay. And then on another topic, how much you guys watching what's going on directly to the south of PGE? How close are you watching it? Do you think there's any kind of industry wide, or even specifically to Oregon, any kind of precedent that could come out of the whole situation however long it takes? Just wondering your thoughts on that.

Maria Pope -- President and Chief Executive Officer

Well, obviously what's happening in California is very complex and the fires that they've has been truly tragic. We have some very significant differences in Oregon law versus California law. We do not have anything that looks like Inverse Condemnation in this state and most states do not. We also operate in a significantly different type of climate. It wiped (ph) out with largely different species of vegetation and different types of forests. That being said, everyone in the industry is making sure that all of our tree trimming, vegetation management, all of our equipment is not subject to some of the same things that they've seen in California and we have always taken the health and safety of our system and the safety of our customers and the communities we serve at the highest priority. So this is really just an extension of what we've always been doing as utility.

Travis Miller -- Morningstar Inc -- Analyst

Okay. Great. Thanks a lot.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Thanks, Travis.

Operator

And our next question comes from the line of Paul Patterson with Glenrock Associates. Your line is open.

Paul Patterson -- Glenrock Associates -- Analyst

Hey, good morning.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Good morning, Paul.

Paul Patterson -- Glenrock Associates -- Analyst

Just on the -- not filing the rate case, it it just because of the renewable track or what have you that you don't have to file? Or is there anything else in terms of the O&M outlook or how CapEx is working within your system -- is there anything else we should be thinking about that is allowing you not to go in for a rate case? Or is there any change in the trajectory there?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

No, it's back to what I said in my prepared remarks, Paul. It's looking at the overall investments and the value that those investments are taking from an OpEx perspective. It's the growth in our service territory, and our customers, kind of the stronger economy that we have out there. So those and several other items are helping us focus on trying to stay out and trying to make sure that we keep our prices low for our customers. We continue to be a very competitive company.

Paul Patterson -- Glenrock Associates -- Analyst

Great. And is there -- and do you have any idea when you might be going back in again or?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

No, we'll evaluate that on an annual basis, Paul.

Paul Patterson -- Glenrock Associates -- Analyst

Okay, great. And then with respect to -- just as sort of follow-up on Travis's question, is there sort of a capacity value quantitatively that's associated with this Wheatridge project, if you follow me, if you look at all the megawatts and what have you. How do we think about sort of the firm capacity that it provide because of battery -- because of the combination, if you follow me? Is it a number...

Maria Pope -- President and Chief Executive Officer

Yes, that's a really good question. This was in RFP for energy and as we begin to study and work with the battery and solar components, we will know a lot more going forward. As we indicated in some of the press materials, this is a first of its kind in the country at this kind of scale. And so, we have a lot to learn and we're very much looking forward to being able to understand the capacity values. But this was an energy RFP.

Paul Patterson -- Glenrock Associates -- Analyst

Okay. So the capacity value that one would assume with the combination is there, that's not really factored into economics that will allow to win the RFPs. Is that appropriate to say?

Maria Pope -- President and Chief Executive Officer

It's all factored in, but it's factored in on a much more of an energy basis, because that was the criteria of the RFP.

Paul Patterson -- Glenrock Associates -- Analyst

Okay. And you said it was extremely competitive, can you quantify any more than that?

Maria Pope -- President and Chief Executive Officer

No, unfortunately we can't.

Paul Patterson -- Glenrock Associates -- Analyst

Okay. And then just finally, there is -- I think there might be some legislation that comes -- any outlook on legislation and sort of carbon outlook and what that might mean for you guys? Can you elaborate a little bit on that?

Maria Pope -- President and Chief Executive Officer

Sure. And just for others who may not be aware, one of our Governor's top priority is a capping trade legislation. It's consistent with the States' targets to reduce emission, carbon emissions 80% from '19 to 90% levels by 2050. And of is also consistent with the plans that we've been talking about as a utility for a while and our decarbonization studies that we did ourselves. At present, we are looking very closely at the legislation, which is just any detail for about 10 days now and working collaboratively with legislators and the Governor's office. Our main interest is making sure that customers don't pay twice as we reduce the carbon impact of our generation and that we continue the trajectory of adding renewables and producing less carbon emitting electricity as we go forward.

Paul Patterson -- Glenrock Associates -- Analyst

Okay, great. Thanks a lot.

Maria Pope -- President and Chief Executive Officer

Thank you.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Thank you.

Operator

Thank you. And our next question comes from the line of Gregg Orrill with UBS. Your line is open.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Good morning, Gregg.

Maria Pope -- President and Chief Executive Officer

Good morning.

Gregg Orrill -- UBS -- Analyst

Hi. Thank you. I was wondering, is the basis for the growth rate guidance, $2.37 in '18?

Maria Pope -- President and Chief Executive Officer

So, yes, in $2.37, one thing you should recognize is that we do have the one-time gain from the Carty Settlement, which is a non-operational item.

Gregg Orrill -- UBS -- Analyst

And that's the only adjustment?

Maria Pope -- President and Chief Executive Officer

Yes.

Gregg Orrill -- UBS -- Analyst

Thank you.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Thanks, Gregg.

Operator

And our next question comes from the line of Vedula Murti with Avon Capital. Your line is open.

Vedula Murti -- Avon Capital -- Analyst

Good morning.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Good morning.

Vedula Murti -- Avon Capital -- Analyst

Just to follow up on Gregg's question and as far as I recall, I think the -- that one-time gain was a $0.12, I recall, so actually the 46% should be off of a $2.25 numbers, is that correct?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

No, $2.37 base. Year-over-year associated with that gain was $0.11.

Vedula Murti -- Avon Capital -- Analyst

Okay. So the $2.37 is the correct base?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Yes.

Vedula Murti -- Avon Capital -- Analyst

Okay. And I see, obviously with the elevated capital spend, rate base is growing rate that could induce 4% to 6%. When you go back out to 2022 and 2023, back to 500, given DD days and 400 plus right now, the rate base growth slows back down again. So I'm wondering if you can discuss a little bit about any backfill opportunities and potential magnitudes there that you're evaluating and -- at this point in terms of rate base?

Maria Pope -- President and Chief Executive Officer

Thank you for your question. As you know, we take a look at our capital on a regular basis and have a tradition of updating It pretty substantially in the fall. At this point in time, we will -- we have a lot on our plate and we will be looking at those added years as we move forward. So, there's nothing to update you on right now.

Vedula Murti -- Avon Capital -- Analyst

Okay. And, at this point, given that the tracker mechanism will put in the RFP assets into rates, should we assume that come post-2021, that you'd still be able to -- because of growth and efficiencies, you'll be able to continue to stay out?

Maria Pope -- President and Chief Executive Officer

Yes.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

We...

Maria Pope -- President and Chief Executive Officer

Yes.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

As I mentioned earlier, we are looking at it on an annual basis as to whether we will need to file a general rate case or not.

Maria Pope -- President and Chief Executive Officer

Yes. And we do remain very enthusiastic about the growth of our regions. We have a number of industries that are finding the -- this area very attractive for a variety of reasons.

Vedula Murti -- Avon Capital -- Analyst

Do you believe that you can sustain the growth that you just highlight here for the 2018 through 2021 period beyond 2021?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

We are not giving any guidance beyond 2021 time period, just to clarify.

Vedula Murti -- Avon Capital -- Analyst

Okay. Thank you very much.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Thanks.

Operator

Thank you. Our next question is a follow-up question from Paul Ridzon with KeyBanc. Your line is open.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

Thank you, again.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Welcome back, Paul.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

Getting pinged with a little bit of what I think is some confusion on -- what was the Carty gain again and just to clarify the base for the 4% to 6% is $2.37?

Maria Pope -- President and Chief Executive Officer

Yes.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Yes. You got that right. The gain on Carty was $0.11. That's the year-over-year.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

So that is the drop off of some expenses in 2017 and then the cash payment?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Yes.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

And then what was the average quick balance in 2018?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

$250 million.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

Thank you, again.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Okay. Thanks, Paul.

Maria Pope -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Greg Reiss with Centenus. Your line is open.

Gregory Reiss -- Centenus Global Management -- Analyst

Hey, guys. How is it going?

Maria Pope -- President and Chief Executive Officer

Good morning.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Good. Thanks.

Gregory Reiss -- Centenus Global Management -- Analyst

Just wanted to clarify the base rate, but seems like you guys are saying it's $2.37 and you don't have to strip anything out of that number?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Yes.

Maria Pope -- President and Chief Executive Officer

Correct.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

That's right, Greg.

Gregory Reiss -- Centenus Global Management -- Analyst

Perfect. And then another quick question, just on the $45 million that you guys reserved to give back for tax reform, is that fitting in cash on the balance sheet or is there like a regulatory liability on the balance sheet for it?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

It is a regulatory liability. We'll be passing it back to customers over the next two years.

Gregory Reiss -- Centenus Global Management -- Analyst

And does that flow into rate base or is that -- or is the aided-portion (ph) a different number?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

That's a good question. All right. Greg, I'll get back to you on that one. I think it's a rate base, but I want to make sure I give you the right answer. And I'll have Chris follow-up with you.

Gregory Reiss -- Centenus Global Management -- Analyst

Not a problem. That's all I have. Thank you, guys.

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Okay. Thanks, Greg.

Operator

Thank you. And we have a follow-up question from Paul Ridzon with KeyBanc. Your line is open.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

Is there a reason you're not backing that $0.11 in? Does it offset somewhere or?

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

No.

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

Okay. Thanks.

Maria Pope -- President and Chief Executive Officer

Thanks, Paul. And thank you, everyone. We appreciate your questions and interest in joining us for today's call. For those who are attending the Bank of America Merrill Lynch or Williams Conferences in March, we look forward to seeing you. And we also invite everyone else to join us for our first quarter call in late April. Thank you very much, and have a good day.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a great day.

Duration: 33 minutes

Call participants:

Christopher Liddle -- Director, Investor Relations and Treasury

Maria Pope -- President and Chief Executive Officer

James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer

Insoo Kim -- Goldman Sachs -- Analyst

Paul Ridzon -- KeyBanc Capital Markets -- Analyst

Travis Miller -- Morningstar Inc -- Analyst

Paul Patterson -- Glenrock Associates -- Analyst

Gregg Orrill -- UBS -- Analyst

Vedula Murti -- Avon Capital -- Analyst

Gregory Reiss -- Centenus Global Management -- Analyst

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