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Southern Co  (NYSE:SO)
Q4 2018 Earnings Conference Call
Feb. 20, 2019, 8:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Good morning. My name is Daisy and I will be your conference operator today. At this time, I would like to welcome everyone to the Southern Company Fourth Quarter 2018 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded, Wednesday, February 20th, 2019.

Your speakers for today are Scott Gammill, Tom Fanning and Drew Evans. I would now like to turn the call over to Mr. Scott Gammill, Investor Relations Director. Please go ahead, sir.

Scott Gammill -- Investor Relations Director

Thank you, Daisy. Good morning and welcome to Southern Company's fourth quarter 2018 earnings call. Joining me this morning are Tom Fanning, Chairman, President and Chief Executive Officer of Southern Company; and Drew Evans, Chief Financial Officer.

Let me remind you, we'll be making forward-looking statements today in addition to providing historical information. Various important factors could cause actual results to differ materially from those indicated in the forward-looking statements, including those discussed in our Form 10-K and subsequent filings. In addition, we will present non-GAAP financial information on this call. Reconciliations to the applicable GAAP measure are included in the financial information we released this morning, as well as the slides for this conference call, which are both available on our Investor Relations website at investor.southerncompany.com.

At this time, I'll turn the call over to Tom Fanning.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Good morning and thank you for joining us. As always, we appreciate your interest in Southern Company. As we report our 2018 results and look ahead to 2019 and beyond, our focus remains on investing in our premier state-regulated utilities and providing outstanding risk-adjusted returns for investors.

2018 was a year of incredible accomplishments for Southern Company. We entered the year with a great deal of uncertainty regarding corporate tax reform and our own first full year as general contractor at Vogtle 3 and 4. First regarding tax reform, we reached timely innovative and constructive outcomes with regulators in multiple jurisdictions, and as a result, are in the process of delivering approximately $1.8 billion of benefits to customers, while preserving our credit quality and improving earnings per share.

At Vogtle Units 3 and 4, we completed our first full year as general contractor. In July, we revised the estimated cost to complete and we recalibrated site production expectations with a sitewide reset. Since then, we have achieved a trajectory of staffing and productive hours worked per week that is ahead of what we targeted on our last earnings call. We continue to have a lot of work ahead of us to sustain this performance, but we are pleased with our progress and are confident that we can meet the schedule approved by our regulators. I'll provide more details on Vogtle 3 and 4, shortly.

We are executing our business model in a world-class manner. Our modernization initiatives have improved customer service and resilience of our system. Through aggressive cost management, we expect to continue to invest in our state-regulated franchise, while keeping rates low, sustaining our outstanding operational performance, and delivering strong financial performance.

In 2018, we successfully completed strategic value accretive transactions totaling over $11 billion, efficiently sourcing equity to strengthen our balance sheet. Notably, we closed on the sale of Gulf Power Company on January 1st of 2019. And we expect to close on the sale of Southern Power's Mankato facility this summer. Our decisive actions substantially reduced our projected equity needs, removed significant risk from financing plans and positioned the Company for future growth.

Customers are at the center of everything we do and we have continued our long-standing track record of providing some of the best customer service in the business. For example, Georgia Power, was the highest-rated utility for both residential and business customer satisfaction by JD Power in the South region in 2018, and Nicor Gas was rated among the most trusted utility brands by residential customers.

Let's turn now to an update on Plant Vogtle Units 3 and 4. Throughout 2018, progress at the site was significant. We achieved our major 2018 construction milestones for the project. Overall, including engineering, procurement, and the initial test plan, the project is approximately 74% complete. During the past three months, several significant milestones were achieved. Unit 3 milestones included: setting the first reactor coolant pump; placement of the third and final containment ring; and setting the main control room roof.

At Unit 4, we set the pressurizer and second steam generator inside the containment vessel. Additionally, since our third quarter earnings call, the remaining two AP1000 units in China, Sandman 2 and Haiyang 2 achieved commercial operation. Lessons learned from China will continue to benefit our project .

On our third quarter call, we detailed solid productivity improvement, and I'm pleased to report today that positive momentum at that site continues. We've successfully added approximately 700 new skilled craft resources, attracting pipe fitters and electricians to the site. We told you in November that we were targeting to ramp up to 140,000 productive hours worked per week by March. So far, for the month of February, we have averaged 141,000 earned hours per week. In fact, last week, we achieved a 146,000 hours with a CPI of 1.08. We are focused on sustaining this progress throughout 2019 and into spring of 2020.

As we have discussed previously, we continue to manage construction on a more aggressive schedule in order to preserve margin to the regulatory approved dates. For reference, we currently estimate that we need to sustain approximately 110,000 weekly earned hours in order to meet the November '21 and November 2022 regulatory approved schedule.

We are currently in the midst of rebaselining our work for Vogtle Units 3 and 4. At a high level, this effort involves a verification of estimates for remaining commodity quantities, hours to install those quantities, staffing trends, testing and system turnover requirements and achievable craft labor production. This rebaselining effort will refine the weekly work plan for the remainder of the project. Our over arching objective in the rebaselining effort is to maintain the aggressive work plan at the site, allowing us to preserve as much margin in our schedule as possible to the November 2021 and November 2022 regulatory approved in service dates.

While it's important to acknowledge that this rebaselining effort is not complete, we continue to expect that the project schedule and capital cost forecast will be consistent with our prior estimates, and based on early indications, we also expect a reduction in the amount of remaining productive hours needed to complete the project. We expect to conclude the rebaseline effort prior to our first quarter call and Georgia Power will file a report with the Georgia PSC reflecting the results no later than May 15. The Public Service Commission staff will then have until July 31st to file their observations on the outcome of the rebaseline process with the Commission.

In the appendix of our slide deck for this call, we've provided the most recent schedule performance index, cost performance index and percent complete metrics. While we continue to believe that these measures are the best indicators of progress at the site, please note that the charts provided for the schedule performance index and percent complete metrics, do not reflect the ongoing rebaselining effort and we believe it is likely that the most recent results shown on those charts are not representative of the current status of the project. We will provide an update on the results of the rebaselining effort, including an update on these key measures on our first quarter earnings call.

On the regulatory front, the Georgia Public Service Commission voted yesterday to approve a stipulation between the PSC staff and Georgia Power that settled all issues in VCM 19, which included combining the filing of VCM 20 and 21 in August of 2019 at the request of the PSC staff. Combining the filings recognizes the ongoing rebaselining effort and is designed to accommodate an unusually busy regulatory calendar in Georgia, which includes Georgia Power's triennial integrated resource plan filing and rate case filings for Georgia Power and Atlanta Gas Light. This action is not without precedent. Some of you may remember that in 2013, we made a similar determination with the PSC staff to combine VCMs 9 and 10 during Georgia Power's 2013 rate case.

I'll turn the call over now to Drew for a financial and economic overview.

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

Thanks, Tom, and good morning, everyone. As you can see from the materials we released this morning, adjusted results for the quarter and the full year exceeded our expectation. Due to the positive impact of weather and cost control for the full year, the related customer refund accruals occurred in the fourth quarter, so comparison of year-over-year adjusted fourth quarter earnings results is not particularly informative and I'll focus on the full year.

For the full year, on an adjusted basis, Southern Company earned $3.13 billion, or $3.07 per share in 2018, compared to $3.02 billion, or $3.02 a share for 2017. A detailed reconciliation of our reported and adjusted results is included in this morning's release and earnings package. Last year, as a result of the impacts of tax reform in our business, we reset the starting point of our expected long-term EPS growth trajectory to $2.87 per share. Our adjusted 2018 results of $3.07 per share were approximately 7% above the mid-point of our original guidance range.

This result was also above our updated guidance range disclosed on the second quarter call, which was increased due to performance through mid-year and the Florida asset transactions. The major drivers versus 2017 were the positive effects of constructive regulatory outcomes and weather at our state regulated utilities, somewhat offset by increased depreciation and amortization, interest expense and share issuance.

Importantly, we have also been successful in holding our non-fuel O&M expense flat at our state-regulated electric utilities year-over-year as we continue to create and seek out operational efficiencies.

Looking at some of the operational highlights, our generation system load was 4% higher in 2018 compared to 2017, representing our second highest load on record. The increase was primarily due to extreme cold temperatures in January and warmer than normal temperatures in September. We also experienced record gas burn and gas generation in 2018, due to higher loads throughout the year and lower gas prices in the second and third quarters.

For 2018, our energy supply mix was comprised of 47% natural gas, 27% coal, 15% nuclear and 11% renewables. Notably, generation from coal plants continue to trend downward, which is in line with our stated carbon reduction objectives.

Moving now to an economic review of the year, we continue to see robust net income -- net-in migration, particularly in the Southeast. Across our regulated utilities, we added 41,000 new residential electric customers and 32,000 new residential gas meters during 2018. Our combined business territories continue to see slightly faster population growth than the rest of the nation, and in particular, Atlanta is currently the fourth fastest growing metro area in the United States.

Retail electric sales growth for the year was approximately 1% on a weather-normalized basis, principally driven by this customer growth, with a minimal decline in customer usage. As we forecast future years, we anticipate the customer growth trend to continue, but we also expect a slight annual decline in customer usage. When looking at these two factors combined, our forecast for retail electric sales growth remains flat to 1%. While we achieved growth at the top end of this range in 2018, our guidance remains flat to 1% for 2019 for sales.

The commercial customer class continues to grow. However, energy efficiency, eCommerce and other changes in business models are challenging overall demand growth. While there were signs of slowing momentum in the fourth quarter in selected industrial segments, industrial sales were strong for the year in 2018, with seven of our Top 10 industrial segments posting year-over-year growth.

Overall total employment growth remains strong in our service territories. Alabama and Georgia both outpaced the national average, with employment growth of 2.2% and 2.5%, respectively. And developers continue to select sites in the Southeast for large-scale economic development projects.

Before I turn the call back to Tom, I'd like to discuss our 2019 EPS guidance range and our long-term outlook. Our 2019 EPS guidance range is $2.98 per share to $3.10 per share. The $3.04 per share mid-point represents growth of approximately 6% from $2.87 per share, the midpoint of our original 2018 guidance range.

In the first quarter of 2019, we estimate that we will earn $0.70 per share, excluding a preliminary gain on the sale of Gulf Power currently estimated to be $1.28 per share, as well as any other adjustments in that period. Our expected long-term EPS growth rate remains 4% to 6%, using the same base of $2.87 per share that we established a year ago. This growth rate is driven by strong fundamentals across our state-regulated electric and gas utilities, and a continued focus on cost control. We expect our state regulated utilities to comprise over 90% of total projected earnings through the five-year horizon.

Our long-term outlook continues to be driven by capital investment in our state-regulated businesses. Our investment plan of $38 billion includes a projected rate base growth at our regulated utilities of approximately 6%. This updated plan reflects a $3.7 billion increase over last year's forecast for 2019 through 2022, excluding the previously disclosed Vogtle cost increase.

The main drivers of the increase are significant incremental state-regulated utility investments primarily related to the closure of ash ponds or environmental spend in Georgia and Alabama as we continue initiatives to modernize and increase the resilience of our electric generation, transmission and distribution infrastructure.

For Southern Power, the cumulative five-year investment plan of $900 million is comprised entirely of previously announced projects and maintenance capital for the existing generation fleet. We expect to remain opportunistic with regard to growth at Southern Power, seeking to deploy new capital for projects that meet our stringent risk and hurdle rate objectives, but any incremental growth opportunities at Southern Power are expected to enhance the long-term financial plan and be largely self-funded.

We currently forecast the total equity need of $2.5 billion to $3 billion over the next five years. We have the capacity to fulfill most or all of our projected equity needs through our robust internal equity plans. However, we will continue to preserve all options and evaluate other potential equity alternatives. We have demonstrated discipline and agility in seeking the most efficient sources of equity in the past. 2018 could not be more indicative of this, and we will remain equally thoughtful and investor focused as we fulfill our future equity needs.

Financial integrity and strong credit metrics provide significant benefit to customers and investors, and it has always been a top priority for us. We've taken significant steps over the past year to deleverage our balance sheet, and in 2019, we expect to continue to strengthen our balance sheet and improve our credit metrics.

Another long-standing priority for Southern Company is providing a regular, predictable and sustainable return to shareholders through our dividend. We have an outstanding track record of dividend payments and growth. Over a 71-year period, dating back to 1948, we have paid 285 consecutive quarterly dividends that have been equal to or greater than the prior quarters. While future dividend policy is the purview of the Board of Directors, we are proud of this track record and we believe our financial outlook continues to support our objectives of growing the dividend $0.08 per year.

I'll now turn the call back over to Tom for some closing remarks.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Thank you, Drew. In closing, throughout 2018, we continued to execute across all our businesses, achieving outstanding results. The foundation of our business remains strong. Our customer-focused business model, with an emphasis on outstanding reliability, best-in-class customer service and rates well below the national average, continues to be the cornerstone of delivering value to customers and shareholders.

Our credit profiles are significantly improved, we continue to project 4% to 6% long-term growth in our business and our employees across the franchise continue to deliver outstanding service to customers and the communities that we are privileged to serve.

2019 will be an extraordinarily important year for Southern Company, with particular focus on Vogtle Units 3 and 4, and investment in our state-regulated businesses. We have a long track record of successfully executing on our business model and believe we are poised for continued success in the months and years ahead.

We appreciate your continued interest in Southern Company. Operator, we are now ready to take your questions.

Questions and Answers:

Operator

(Operator Instructions) Our first question comes from the line of Greg Gordon with Evercore. Please proceed with your question.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Good morning, Greg.

Greg Gordon -- Evercore ISI -- Analyst

Hey. Good morning. Thank you for the time, just numbers look great, near-term outlook looks great. I just wanted to make sure I understand precisely the message you're trying to deliver on Vogtle today. It was just a tad confusing.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Okay.

Greg Gordon -- Evercore ISI -- Analyst

If I heard you correctly, you said, you were at 146,000 -- productivity of 146,000 recently, you're at 140,000 today. The target was to be at 140,000 by March and that if you can maintain at least 110,000, you believe you can deliver the regulatory in-service date in November on the current cost schedule, is that correct?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Yes. In general, we were --

Greg Gordon -- Evercore ISI -- Analyst

Because the reason I'm asking, sorry --

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Go ahead.

Greg Gordon -- Evercore ISI -- Analyst

The reason I'm asking is, because you then said you're now rebaselining and I think -- but the rebaselining, if my understanding is correct, is just delivering a schedule to the regulator that now reflects that aspiration?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

It's all of that. Yes, it's -- every so often. Say, 18 months or so, we'll take a look at the schedule and based on everything -- we have to kind of use schedule in discrete periods, right. We obviously look every week to optimize workflows and process, learnings from China as they have now achieved start-up, all of that goes into our thinking about, what the implications are for the work performed for the remaining construction period of the plant. All of that input goes into what we call rebaselining. And the outputs we believe -- now, it's not gone yet, got to stress this to everybody, but everything that we see right now, as of today, says, cost and schedule are preserved and we expect to have to spend less hours to complete the project than what is currently in our budgets. Okay.

And if I just gave a little more refinement there, what we know today, what we believe today is at least a reduction in hours of around 600,000 hours. Now, there may be more, we'll see what happens, we will deliver that when it becomes public as we conclude the rebaselining effort. So, in general, what we said in October was, we needed to hit 140,000 by March. We've hit 140,000 in February. Last week, we hit 146,000. So we're very happy with the productivity and the staffing resources necessary to deliver productive hours per week. So good track. The challenge for us, can we sustain that from February of '19 to February of '20. You should expect that those numbers may bounce around during that period of time, but if we can average 140,000, we believe right now and this is before baselining is complete, that we'll be able to hit our more aggressive schedules.

Recall, the schedule that we are focusing on, paramount, is November '21, November '22 for Units 3 and 4, respectively. It remains the case that we are working on site to April schedules. The idea there is to deliver more margin to the regulatory approved schedules by the Georgia Public Service Commission. Okay. And we try to give you reference points. And let me just make sure we get those clear. On productive hours worked per week, we think if we average 110,000 hours per week, we could hit November schedules. Hitting anything better than that improves our likelihood of gaining margin to November. That's why we're targeting 140,000 or even above for this remainder of the period, February '19, February of '20. These numbers, we believe, are consistent with the April schedule that we have in place. But again, we got to finish rebaselining, there's a lot that goes on.

Even theoretically you could reduce hours and have a prolonged schedule maybe a week, two weeks, three weeks, a month, something like that. It just depends on a whole lot of sequencing that goes on, but the point is, if we do better than 110,000, we are gaining margin to November. We're targeting 140,000, and we're doing a little better than that right now.

One other point, these charts in the back, we had an argument internally about providing you those charts. That's OK. We fight all the time here.The charts are based on the old schedule, they do not include the new rebaselining and everything else. And let me just give you the reference point there. On CPI, if we can beat -- I think, it's 1.4 -- CPI is 1.4, then we will do better than our budget that we're projecting for the November in-service dates. And schedule, if we can beat 1.3, we will do better than the November schedule. That's how we're evaluating those charts. Those are the reference points.

Now, I'm sorry Greg, I went into a little bit detail, maybe more than you wanted, but I want to be very clear about where we are.

Greg Gordon -- Evercore ISI -- Analyst

No. That's exactly -- Tom, that's exactly what I was asking. So, right now, you're creating margin against the November schedule. You will sort of quantify exactly what the current schedule is in the rebaselining process that you're going to submit to the Commission, and then as long as you can keep on track, you're continuing to create a little bit of above 110,000, you continue to create a little bit of headroom to the November in-service date. I think that's clear. I guess the one final question, then I'll jump to the back. You said you might be able to do it in fewer hours, does fewer hours mean actually a lower cost? I mean is it really this times hour or are there other factors involved?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Yes. There's other factors, the amount of commodities involved, and piping wire, stuff like that, certainly the cost of the units employed. I think we suggested -- there was all this conversation in the past about we need people from Canada and everything else and I still think that would be a good thing to have, what we did on the site was actually increase wages for electricians and pipe fitters to essentially top decile. Now, we were able to absorb those costs in our own variance without touching contingency, but there will be issues along the way that really deal with unit cost. Hours certainly matter and all of the things being equal, you have less hours, you have less cost, you have less schedule, but we can't say that with certainty until rebaselining is complete. So let us finish the work and we'll tell everybody what the results are once it's complete.

Greg Gordon -- Evercore ISI -- Analyst

Thank you, Tom.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

You bet.

Operator

Thank you. Our next question comes from the line of Julien Dumoulin-Smith with Bank of America Merrill Lynch. Please proceed with your question.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Hey, Julien.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Hey, good morning. Can you hear me?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Yes, sir. Hear you fine.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Excellent. So perhaps following up on Greg's question on Vogtle, if you don't mind. You talk about a reduction in the amount of remaining productive hours. Can you elaborate a little bit more? You may have already touched on this just a tad in the last question, but I want to hit that very specifically here. What is improving in terms of the underlying construction site from a productivity perspective?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Yes. So, if you recall, one of the big issues we talked about -- we kind of stated, we need more people, and once we get the people on the site, we got to get them productive. And I think, we've talked in the past about some guys, some -- an electrician walks on the site, so we got a new person, but it takes him a while to get productive. We estimate that there is a little bit of friction, may take two weeks or so to get the person working at near best capability. So there is this issue of -- what do we get about 75 people per week, getting them up to speed, and so you'll see some friction in the -- especially the CPI metric. But as you get staffing where you need it and everybody starts to become productive, CPI should start to go down, and in fact, that's exactly what we're seeing on the site. So it's a function of getting people, getting them productive and then working better.

The other factor that has been important here is not just attracting, but retaining people. And not only retaining, but also less absenteeism and a variety of other things. All of our compensation practices right now, incent people to stay, to have good attendance and to be productive. And I must say, we've had a terrific partnership with Bechtel. I want to make sure I call out my friend Brendan Bechtel and Jack Futcher and Barbara and the whole team there at Vogtle 3 and 4. We work with them day in and day out. And we continue to surprise ourselves, I think, with more productivity at the site. It goes to material management practices, it goes to work packages, just real kind of meat and potatoes, blocking and tackling kind of stuff. We continue to find ways to improve.

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

Julien I think another --

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Please.

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

Another way for you maybe to think about this is that rebaselining is an effort to understand the number of hours that it takes to complete each of the tasks that are required for completion of the facility. And so, efficiency is an important measure, but after a year or so of operation, just really redefining what each individual task will take in terms of total hours that way we're not tracking against the curve that's incomplete.

And everybody should know, Julien, we know it well, there is still a long way to go. Building margin is just smart, you just don't know what's going to happen in the future, we're showing a really good report today. It's important for us to continue to build the margin, that just insulates us against risk in the future.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

And just to reconcile this, the hiring ramp, I know you're already at these 140,000 plus hours a week. How do you think about that today, given the 700? You just mentioned a second ago about you would like to see potentially Canadian hires, but implied that it wasn't necessary at this point just, just where are we here?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

The Canada comment was just another arrow in the quiver should something else happen. We still have to go through outage season, will people stay with us, a variety of all, but that's just belt suspenders. We feel like everything we are doing right now is getting us the people we need, and in fact, what I would say is, pipe fitters, we're pretty well where we need to be. We do need a few more electricians down the road, but we are where we need to be right now and we'll assess hitting the market for more people later.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Got it. It's composition of people rather than a hiring ramp at this point?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Yes. We're actually very happy with where we are, and in fact, we have a backlog right now. So what does that mean? People see what's happening at the site. I think, word is spreading quickly. We've had great cooperation, Sean McGarvey, US Building Trades, they see this as a quality worksite, a safe worksite. They can count on the hours and so people are really attracted to come here now. So I think what we want to do is continue to see that. We've had more applications come in than we can process or want to process on the site. Like I said, we could process maybe 150 people on the site, but we couldn't make them productive. That would just be a cost measure, our kind of target has been around 75 people per week. And so we have a backlog right now. We feel good about staffing, we feel good about making them productive. And the numbers that we show so far reflect that.

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Excellent. Thank you, guys.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

You bet.

Operator

Thank you. Our next question comes from the line of Jonathan Arnold with Deutsche Bank. Please proceed with your question.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Hi, Jonathan.

Jonathan Arnold -- Deutsche Bank Securities -- Analyst

Good morning, guys. I appreciate the extra information on the slides that you're going to update with the rebaselining. And the one you didn't talk about was that percent complete in your answer to Greg, Tom. And I was just curious, when you look at those December and January numbers, they seem to be a long way short even though you are exceeding your current target zone on hours worked. And should we expect that that gap will effectively be eliminated once you rebaseline? So, is that the right way to kind of think about how that's going to change or anything you could say to that picture?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

That graph, I think is based on the aggressive schedule and it's based on an April target. Okay. And it's on the old data. It's on the old kind of hours worked and everything else. So my sense is, there's really two pieces of information you don't see on that: one is, how does that compare to November; two is, it doesn't include the benefits of rebaselining.

Jonathan Arnold -- Deutsche Bank Securities -- Analyst

Okay. Those sounds like putting them out together, it's safe to assume next time you show it to us, that gap between the blue and the green bars ought to be a lot smaller?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Yes. And Jonathan let me just give you that. We chatted about that just before the call what that would look like. Now, this is highly imperfect. I'm giving you what we believe. We think at kind of this 140,000 plus level, we're going to be completing about 2% per month and that will essentially converge these two lines, but we need to show you that.

Jonathan Arnold -- Deutsche Bank Securities -- Analyst

Perfect.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

We had a real debate about whether to show this or not. We said we would show it to you, that's why we put all these disclaimers up her.

Jonathan Arnold -- Deutsche Bank Securities -- Analyst

Well, having that answer, to explain it was very helpful.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

You bet.

Jonathan Arnold -- Deutsche Bank Securities -- Analyst

Thank you for that. And then just one other, when we look back to some guidance, look back to how you showed your guidance last year, you had this 4% to 6% cone and the numbers coming in at the high-end in 2019, including Vogtle, which you've obviously now affirmed, and then, drifting into the middle in '2, and toward the lower end in '21. I'm just curious, is that still the right kind of trajectory to be thinking about, or is that old presentation now redundant?

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

Jonathan, I think that's still fair. You have to remember that what will actually be reported is still a function of the ROEs that are allowed during the construction period for Vogtle. And so that capital deployment does put a little bit of pressure on what would have been reported normally. Tom and I've talked a lot about this. I think, absent Vogtle, we're quite comfortable with our strength within that cone of earnings.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

We'd be at the top end of the range.

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

We'd be at the top end, but we are comfortable that we can stay within it even with the ROE depression that we get from Vogtle deployment.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

And remember, Vogtle 3 and 4. I think, is 8% of our earnings, somewhere around there?

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

Yes.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

And just remember, during that period, especially '20 and '21, we're in that period where we have the lower ROEs associated with incremental expenditures. But recall, once we clear '21 and '22, once you get these units in, the trajectory really accelerates. It looks like an 8% kind of number out there from say '20 to '22, or '21 to '23. So it has a little bit of a shape and it shouldn't surprise anybody. You all have known about the regulatory settlement with Georgia for some time. I'm happy that if you look at our range this year, it shows that the top side, 8% over 287 (ph). And the bottom side is anchored in the bottom of our 4% growth rate.

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

The most significant difference probably year-over-year is that we really are focusing our efforts on this $38 billion worth of investment into regulated enterprise. We continue to identify projects, whether environmental or modernization, and transmission and distribution. We're still exploring opportunity around migration of the generating fleet to a less carbon intensive mode. And so I think that these will be a series of updates as we explore these options through '20 and '21, but this is our single best projection of our future, I think, today.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Yes. And one more just point of interest, the Georgia Commission has always been innovative and creative. For the first time in our IRP, we introduced a section called Resilience, and it really talks about thinking differently about the electric system. In other words, integrating in concepts of resilience beyond transmission lines and generating plants to gas pipelines and what are all the implications of storage and how can we think differently about the make, move and sell concept in terms of improving the reliability and ultimately the resilience to customers. These are really important concepts.

Jonathan Arnold -- Deutsche Bank Securities -- Analyst

Great. And just what one high scheming item, did you end up sharing with customers in Georgia in 2018?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Yes. In fact, and Drew probably knows better than I do, but I said on TV this morning, we shared -- I mean we gave benefits to customers this year of around $2 billion, $1.8 billion from tax reform. They got about two-thirds of the benefit. And then another $200 million or so, perhaps more, $209 million is what people are showing me right now, in terms of sharing.

Jonathan Arnold -- Deutsche Bank Securities -- Analyst

You got it. And equally weighted across Alabama and Georgia?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Yes.

Jonathan Arnold -- Deutsche Bank Securities -- Analyst

Or closely weighted.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

We love to have the regulatory mechanisms. If the Company does well, customers do well.

Jonathan Arnold -- Deutsche Bank Securities -- Analyst

Great. All right. Well, thanks a lot guys.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

You bet. Thank you.

Operator

Thank you. Our next question comes from the line of Angie Storozynski with Macquarie. Please proceed with your question.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Angie, how are you?

Angie Storozynski -- Macquarie -- Analyst

Great. Thank you. So no questions about Vogtle from me for a change. So, we saw the IRP filing from Georgia Power. We're still waiting to see what the Alabama Power files. And given the changes in the sharing mechanism for any over earning, I was just wondering, I mean, we all still expect this earnings pivot during construction at Vogtle, but is there a way to minimize that earnings slowdown from Alabama Power?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

From Alabama Power?

Angie Storozynski -- Macquarie -- Analyst

Meaning like just have some strength in Alabama Power earnings in order to offset the temporary weakness in earnings at Vogtle?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

(inaudible) you're saying. Look, yes, we talk a lot about -- I think our plan, we call it optionality, we've got lots of singles we can hit here, lay aside any home runs, lots of little singles we can hit along the way, that we think we can optimize plants, but particularly in '21, is kind of the year we're focused on. We certainly have the ability to do that.

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

I think ascribing it to Alabama perhaps is a little bit unfair. We'll look at a variety of options across unregulated complex in total, Alabama's going to seek to do what's in the best interest of their customers at all times related to rate and return.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Yes. Thank you, Drew. That clarification is exactly right. And in fact, when we think about -- and we haven't talked about it yet, but this investor friendly asset sales and all the stuff, we were very active last year. We have a lot more opportunity to do things here. I would view it more as pruning. We just announced Mankato and we expect to close that I guess by June or so. There's more of that to do, whether it's Southern Power, PowerSecure, things like that, we'll see.

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

Perfect example is hyper investment in unregulated subsidiary generally leads to some dilution in the near term. We can produce a better earnings profile out of that business in the short term by utilizing its own assets to fund its development. And as Tom said, maybe prune back a little bit and things that are a little less strategic or find opportunities for people have a different view of value than we do.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

And we certainly have done that in '18. And one more comment, boy, we have a great appetite within our operating companies, Alabama, Georgia, Mississippi, the Gas business to where without forcing anything, we're not backing in the numbers, these are things that we can identify, whether it's ash ponds or resilience in the transmission system, get very reasonable on things that we should do for the benefit of customers. The other trade we've made, you've heard about modernization, reducing O&M significantly. Georgia has done a heck of a lot of that. Mississippi, just give you an example, have reduced over the years personnel at that company from 1,500 to now about a 1,000 -- little over 1,000. So we're really taking money out of the business. We are creating headroom to invest in matters of resilience and technology to improve customer service. Georgia Power withdrew from a lot of its local offices -- bill paying offices and yet increased customer touch through technology by four times. We have lots of opportunity to do better.

Angie Storozynski -- Macquarie -- Analyst

Okay. And just one other question, so your large cap peers seem to be pursuing a lots of growth from commercial renewables. I know that you have some growth embedded in your plans for Southern Power? But how do you see this, is this just more as a way to basically give you some flexibility around that 4% to 6% earnings growth or would you think that commercial renewables are still delivering attractive returns and as such should be pursued?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Yes. Angie, that's terrific point to raise, and we've debated about how to talk about this. Let me just tell you what our point of view is and let the other companies speak for themselves. We find -- especially in the current environment, we find that solar and wind margins are shrinking pretty dramatically. And we will still be active. I guess we have a placeholder in our financial plan of something like $500 million a year for this stuff. We don't expect to spend it. We expect more to be in the $200 million range and that's really a function of the market. You recall when the market was hot, we played really hard.

On the other hand, we have a tremendous appetite inside our franchise businesses to spend more CapEx. What you're seeing with us is an intentional reallocation of CapEx away from those markets to our franchise markets. And it really is a function of need and weighted average cost of capital and what we expect the market will deliver.

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

We're certainly not turning away from the concept of renewables. In fact, Georgia Power included over 1,000 mega watts of renewables within their most recent IRP. And so, I think you might see the form of that investment change a little bit, but as Tom said, as we look at things in the unregulated space, it's not only the margins that have declined, but perhaps the duration of contract and the credit quality of counter party. It simply falls through some of our return expectations. And so we just have to evaluate these things on a case-by-case basis and make sure they're accretive to shareholder value.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Let me -- he made such a good point, so let me underline it. Value is a function of risk and return. Returns are down in that market in our opinion, risk is up because the duration of the contract available is down, we don't find that all that attractive.

Angie Storozynski -- Macquarie -- Analyst

Great. Thank you very much.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

You bet.

Operator

Thank you. Our next question comes from the line of Praful Mehta with Citigroup. Please proceed with your question.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Praful, how are you?

Praful Mehta -- Citigroup -- Analyst

Good, how are you?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Super.

Praful Mehta -- Citigroup -- Analyst

Well, thank you for taking the question. I guess going back to Vogtle, if you don't mind. Great progress so far and great to see that you're tracking to your faster internal schedule. I guess, just wanted to understand a little bit on the testing phase. I know that, that will start at some point in terms of testing all the equipment. How would you see that and do you see any uncertainty being added to your schedule as you get to that testing phase?

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

Man, you're right on the money. This is the next big thing to talk about. So coming out the July reset and then into the October earnings call or November earnings call, whenever it was, setting the trajectory, and getting people on-site and getting them productive was the most important thing we could do. We already have been involved in some turnover from construction to start up. So that actually has been ongoing. None of those systems that in the past have been all that critical in terms of critical path to schedule. Frankly, we haven't done as well as we would like to do on those early efforts, but we are now laser focused on what it's going to take in order to move out of construction phase in the start-up phase.

Let me just tell you, if we stay on this April schedule, conceivably, you could have fuel load as early as for Units 3, October of 2020, that's 18 months away. So we are right now in a big-time mode on focusing, taking in systems, turning them over to the start-up folks and that's not only the construction and operation, but the paperwork and all the stuff we have in place to get the i-tags (ph) complete to go to high fuel load. We have integrated teams in place, we have some of the best people around the United States, out own people, Bechtel, and we're very happy with kind of where we are right now.

You should know also, this is an area of great learning from China. We have seen what they've done at Sandman and Haiyang. We've taken best practices, and in fact, we are thinking -- even in the part of the rebate lining is, rethinking the schedule and sequence of the major events in the schedule to give us more certainty on the turnover package issue. This will be the next big thing to talk about. And we have talked internally about some graphics and some other ways to give you some transparency as to how this is going. Right now, we want to make sure we've got people, got them productive. The next thing will be our progress on the question you raised.

Praful Mehta -- Citigroup -- Analyst

Got you.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

And man, let me just add two more things. One way to talk about this is, just what are the big kind of systems that you should watch: one is, initial Energy Station, we think that's going to happen in the second quarter; and then the integrated flush of the system. This is essentially where you take water and move it through the pipes, you clean out the pipes, and you get ready to operate. That's kind of the integrated flush, third quarter. And that's one way to talk about, but you got imagine there is lot of systems that go -- underlie all these big issues. If we hit these big issues on time, we should hit the little issues on time. So, we're going to work hard to find a way to communicate this with you.

Praful Mehta -- Citigroup -- Analyst

Got it. And that is super helpful. So as you think about the testing phase, building in some cushion through the current phase as you enter testing is probably what you're trying to track for given there is a little bit of uncertainty at least in terms of how that testing would go, is that fair?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Sure. Hey, let me add one more thing that is just important. I know people love to complain about government and everything else, I would argue that this administration has been very helpful. Congress has been very helpful. In fact, even the past administrator was helpful on building Vogtle. The NRC is a very tough regulator. They are very exacting and requiring, as they should be, and we work well with them. One of the things that when we got the AP1000 technology approved, if you remember, way back then by the NRC, there was a lot of first of a kind issues with that technology. Now, with Sandman and Haiyang operating, we were able to work with the NRC to eliminate what had been required as first of a kind test issues. So, those issues have been eliminated or lessened and that has added about three weeks to our margin. So we're very happy to continue to work with the NRC to look for innovative, creative ways to help achieve the schedules we have in place.

Praful Mehta -- Citigroup -- Analyst

As usual very comprehensive answer So, really appreciate that.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

You bet.

Praful Mehta -- Citigroup -- Analyst

I guess just quickly moving onto the finance side. Just to quickly test, on the equity, you've mentioned $2.5 billion to $3 billion over five years. Was there any clarification around strategic asset sales or other M&A transactions as a part of that? I wasn't clear on that point. So just wanted to clarify. Could that equity number come down as you look at more M&A transactions?

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

First, I think a simple answer to your question is, absolutely, it could. What we wanted to demonstrate though is that we can meet the requirements of the plan that we've laid out for ourselves just using the internal plans at our disposal. And so, it's basically dividend reinvestment in any option exercise that occurs. I think '18 has been very indicative of the approach that we'll take, but I would say the majors have been done or are in process for 2019. We're always looking to prune and make sure that there are opportunities to kind of refocus smaller business lines and we're going to be as opportunistic around those things as we possibly can this year.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

And if I could just beat some good news accomplishment. I think, we bought well and we sold well. I think we demonstrate terrific discipline in that. I think the AGL acquisition was a terrific one for shareholders. I think SONAT was a terrific one for shareholders. When you think about what we were able to do in '18, we sold our a gas business in New Jersey and a few other places for 37 times earnings. The highest multiple ever paid for a gas business. The Florida gas business we sold was I think tied -- right at tied for the second highest multiple ever paid. Gulf was the highest multiple paid in our knowledge for any electric company.

When you think about just other ways to dimension that, we were carrying assets at the time at $45 a share and sold them for $90 bucks a share. We sold 5% of our earnings for 12% of our market cap. So, it wasn't just that we were raising money. We were historically raising money with valuations that people hadn't seen before. These were all very accretive, very friendly to shareholders.

Praful Mehta -- Citigroup -- Analyst

Got it. Well, thanks again, guys. Appreciate it.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

You be.

Operator

Our next question comes from the line of Michael Weinstein with Credit Suisse. Please proceed with your question.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Hi, Michael.

Michael Weinstein -- Credit Suisse -- Analyst

Hi. Good morning. On rate-base growth versus earnings growth, it looks like the -- especially on the electric side, it looks like the electric rate base growth profile is a little higher, about 1% higher and that's taking out Gulf Power and I guess replacing it with more ash pond CapEx. I'm wondering if that's going up and it looks like the incremental equity is a little bit less than half of the incremental CapEx overall. All those things would seem to indicate higher guidance growth rate going forward, but the growth rate is basically the same growth rate off that 2018 mid-point. Is that -- maybe just talk about what is it about the translation from rate base growth to earnings growth that's keeping the earnings growth about the same?

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

So, this is a little like the question, I think, we took earlier and really relates to the shape of our -- or the path of our growth through that 4% to 6% earnings expectation. We know that we're going to have pressure related to Vogtle, with construction investment over the next three-year period, and so it doesn't translate as you see it here, 6% growth in state-regulated -- or 6% growth in electric utility to a full 6% growth at the Corporation. I don't know that we'd be particularly doing ourselves a benefit by moving our growth ranges around to the time when we are really focused on execution on Vogtle, but we'll kind of revisit that idea when we are substantially complete there.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

But even with Vogtle, we're within the 4% to 6% count. And if you look at the end, like I suggested before, the shape, for whatever flatter kind of performance you will get through '21, it really takes off once you start clearing 3 and 4. And it looks more like 8% growth at that point.

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

And Michael, you are correct, the vast majority of the change here relates to environmental CapEx and also some modernization of the T&D infrastructure over that period. But our change is little over $4 billion or kind of in that proximity and really is almost entirely in regulated enterprises.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Yes. And I just want to add, these aren't made up numbers. They're not like what do we need to fill a hole and let's create CapEx to do that. These are projects that we know about, they are sensible and they help customers.

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

Identified and largely filed.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Yes.

Michael Weinstein -- Credit Suisse -- Analyst

No. I appreciate your comment also about I guess the increased competitiveness on the non-regulated renewables side. I'm also noticing that the amount of CapEx that's going into the gas pipelines segment declines over time. And I'm just wondering if that is also an area that you might be thinking about divesting at some point?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Divesting, it's an interesting question. I think we will continue to look at opportunity within the midstream. We really enjoy the investment there that we have in SONAT, Dalton, the construction that was completed a year and a half ago that's brought tremendous benefit I think to the customers of Georgia. The same can be said of other two constructions, although they are much smaller in terms of relative contribution to the -- particularly the first one that I mentioned, but divestiture, I don't know, I think as these things get to commercial operation, we'll just have to assess whether they're better held by us or by others.

Yes. And the old joke around here is, strategic means the numbers don't work. SONAT is strategic and the numbers work. It's a wonderful annuity. That's another one, where we bought well, I think. And as you mentioned, Dalton, is perfect for our system. There's high synergy with those assets.

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

The primary goal is to bring low cost gas into our service territories and to the extent that we can continue to do that, SONAT certainly does into the Southeast for both the gas and electric businesses. ACP or PennEast Pipeline into Illinois, anything that's in service of customer, probably fits in our portfolio.

Michael Weinstein -- Credit Suisse -- Analyst

And just one final question about PowerSecure. So I mean that was a relatively recent purchase. And I guess you're thinking about it being a nonstrategic asset at this point, does that mean you are --

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

No. Hope I didn't communicate that, PowerSecure, we think is a really important thing. In fact, somebody -- I think it was Angie asked before about generation in commercial and industrial realm. In fact, that's what we've seen. The last three win deals we've done have been General Mills, General Motors and a cruise line. Here's the point, we see the age of big iron making, moving and selling at scale, central station power units, as potentially slowing down and dissipating over time, won't go away. And I can't tell you the timeframe in which this is happening, but I think it's happening to some degree now.

And then what we see in its place is something we refer to as distributed infrastructure. So now think about make, move and sell on the customer premises. And so we think that a certain combination of Southern Power as it applies to Angie's question, the commercial and industrial segment, along with the strategic portion of PowerSecure really do matter. And also we are finding in the market elements of Sequent, really include Sequent in our guidance and all that stuff. That is a subsidiary that's part of the gas infrastructure. Their major purpose in life beyond managing the pipeline investments we have, like SONAT< is to make sure that the pipelines are full of gas, and that we have efficient operation. Customers are finding now that if we can handle their fuel management issues, that synergy along with distributed infrastructure has great appeal and may fill up this gap that's developing on what we call distributed infrastructure. There's a whole lot about PowerSecure that is a very strategic. There are elements perhaps that may not be. And we'll figure that out over time.

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

You have to really put that investment in context of size and it does show up in our capital deployment. It's just not as capital intensive as the core business is.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

It's tiny.

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

This is -- an experiment is not the correct word, probably very important for us to be able to understand how the distributed generation market develops. We have a good sense of it in our own service territories, but there are others that are further along in their journey, whether that's sort of out west of us or otherwise. And so, I think we'll continue to invest in that business to understand how distributed generation might change the utility business in total, it's a very important way for us to understand the markets.

Michael Weinstein -- Credit Suisse -- Analyst

Okay. Well, thank you very much for your time. Appreciate it.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

You bet. Thank you.

Operator

Thank you. Our next question comes from the line of Michael Lapides with Goldman Sachs. Please proceed with your question.

Michael Lapides -- Goldman Sachs -- Analyst

Hey, Tom. Thank you for taking my question. Mine is going to be really, really quick. When looking at the capital spend guidance, the one thing that kind of stood out is, there's very little at the regulated electrics for any new generation in the next few years, meaning, next three or four, three to five years. Just curious, are you guys being conservative about whether there's an opportunity to build renewables in rate base or whether as you potentially retire or run your coal units even less often, whether new gas fired generation in rate base would be needed?

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

I'd say if you look at the projections today, it's more the lack of having these items here, or probably more around the uncertainty of whether or not there will be -- the IRPs will reflect them. However, we are in process with IRPs in Georgia and ultimately in Alabama and expect at least 1,000 megawatts of renewables will be built within the Georgia portfolio .

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

And we're always looking over our hand in terms of the economics of the best mix of capacity we've got. It wouldn't surprise me, we've announced some stuff in the IRP at Georgia, Hammond, Macintosh, to see more of that thinking elsewhere in the system. It's just huff to think about all of the expense, whether it's O&M, environmental, everything else supporting the coal fleet. We think that is a drumbeat that will continue and as technologies developed, whether they are renewables or new, highly efficient gas or storage, we will take that into account as well.

Michael Lapides -- Goldman Sachs -- Analyst

Got it. Thank you, guys. Much appreciated.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

You bet.

Operator

Thank you. Our next question comes from the line of Ali Agha with SunTrust. Please proceed with your question.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Hey, Ali, how are you?

Ali Agha -- SunTrust -- Analyst

Good. Thanks, Tom. Good morning.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Good morning.

Ali Agha -- SunTrust -- Analyst

First question, I just wanted to be certain, in the past you all have given us a net income profile for Vogtle depending on the construction timeline and the ROE hits that you've been alluding to. Is that still a good profile to be using for modeling purposes?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

I think so. If it's not, we'll cover that with you offline, but I don't think anything has changed materially there.

Ali Agha -- SunTrust -- Analyst

Okay. Also a couple of your utilities have obviously seen an increase in there all-tied (ph) equity ratios in the recent past. Again, for your planning purposes, as you look out long-term and the 4% to 6% growth, are you assuming that those higher equity ratios stay where they are or how are you thinking about that as future rate cases are coming up?

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

We are assuming that they stay in place, assuming that tax law stays as it is. You'll probably remember that the adjustments to capital structure really were simply for maintenance of the current credit quality of the utilities, as they existed prior to reform. And so, Ali, we do expect that will continue. That'll be adjudicated in Georgia over the next few months for both Atlanta Gas Light and Georgia Power. We are working to make some progress in the State of Illinois. And Alabama, had I think really, really strong commitment from their regulators to maintain the credit quality of their business and so, comfortable with how we've described in the projections.

And let me tell you something, if I could give a quick policy argument, tax reform as they've done it, has been so beneficial to so many people. The argument against it is, only the fat cats, the rich people benefit. It's dead wrong in our business. The way we've structured it, something like $1.8 billion of some sort of rate reductions accrue, whether they're refunds or other sort of rate reductions accrue to customers. And 46% of our customers make less than $40,000 a year and when you look at that segment, energy budget is a high part of their disposable income. This has a direct positive impact on some of the people in our economy that needed the most. This has been a great outcome.

Ali Agha -- SunTrust -- Analyst

Got you. And just one quick question. The effective tax rate, if we get little bit right on your adjusted earnings was slightly lower than I think what you were expecting earlier, is this a good sort of run rate to be thinking about in future years as well?

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

I think the largest change year-over-year was the impact of tax reform. But let me get back to you in terms of the effective rate and the cash tax rate. I don't think it's very differently, significantly from our original expectation. Little bit of movement perhaps related to gains on sale of assets, but that would be the principal difference.

Ali Agha -- SunTrust -- Analyst

I got you. Thank you.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Yes, sir. Thank you.

Operator

Our next question comes from the line of Paul Patterson with Glenrock Association. Please proceed with your question.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Paul glad to have you with us.

Paul Patterson -- Glenrock Association -- Analyst

Good to be here. Listen, I mean you guys have really pretty much covered everything with Vogtle, just a quick follow-up on the staff testimony in November, sort of raised some concerns about the 29 month extension and what have you and I was just wondering, 29 months, right?

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

Yes.

Paul Patterson -- Glenrock Association -- Analyst

And I just wanted to get a sense as to what changed between November and now, other than what you guys have already gone over? I mean, I guess it would appear that things have really improved quite a bit. And perhaps that skepticism, if they were to write it today, would be less and I'm not asking you to speak for them, but if you can address, I mean you guys never really I think filed rebuttal testimony or anything. So that's why, I was just wondering if you could just fill in a little bit there as to why they had so much skepticism then and the outlook now?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Yes. So you hit my first answer right on the head. And that is, I don't want to speak for the staff. Look, if you just look at the facts right now, whether it's productive hours per week, a 110,000 versus a 140,000 plus hours work per week, we're developing margin to November. And we are able to get the staff we need. We haven't eaten into any of the contingency. So, schedule, costs, productivity, these numbers look pretty good. Now, we have to sustain them, and maybe things that we don't know, the unknown are unknowns. We have the units in China working well. So we know the technology works. So, here's the thing, I think -- just as I indicated on an earlier question, I think that we're able to demonstrate we get staff, we get them productive, we are working. I think the next big issue is going to be turnover. And I know Dr. Jacobs, who we dearly love, he is a really smart guy and works with us, and sits in all our meetings, that's part of his area of expertise, but how we move from construction now to the start-up, looking toward half fuel load, potentially as soon as '18 months away, is kind of the big issue right now. And we'll talk more about that in calls ahead.

Paul Patterson -- Glenrock Association -- Analyst

Okay. Listen, everything else has been answered and congratulations.

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Thank you. Really appreciate it.

Paul Patterson -- Glenrock Association -- Analyst

Okay. Hang in there.

Operator

And that will conclude today's question and answer session. Sir, are there any closing remarks?

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

No. We're really happy to be able to report these results. It's the productive work of thousands of people, making thousands of good decisions every day. I want to call out Bechtel, our partner on this important Vogtle journey that we're on. I think we're in good shape right now. The challenge is going to be keep the momentum going, sustain the progress and continue to execute the way we have. The financial plan is awfully robust.

I think, we've demonstrated agility in being able to respond to changed conditions in some of the best regulatory environments in the United States. We expect that will continue. Lots of important work ahead in '19, but I think we're poised to execute and do well during this year. Thank you for your followership of this Company and we'll continue to work on your behalf as hard as we can. Have a great week.

Operator

Thank you, sir. Ladies and gentlemen, this concludes the Southern Company first quarter 2018 earnings call. You may now disconnect.

Duration: 72 minutes

Call participants:

Scott Gammill -- Investor Relations Director

Thomas A. Fanning -- Chairman, President and Chief Executive Officer

Andrew W. Evans -- Executive Vice President and Chief Financial Officer

Greg Gordon -- Evercore ISI -- Analyst

Julien Dumoulin-Smith -- Bank of America Merrill Lynch -- Analyst

Jonathan Arnold -- Deutsche Bank Securities -- Analyst

Angie Storozynski -- Macquarie -- Analyst

Praful Mehta -- Citigroup -- Analyst

Michael Weinstein -- Credit Suisse -- Analyst

Michael Lapides -- Goldman Sachs -- Analyst

Ali Agha -- SunTrust -- Analyst

Paul Patterson -- Glenrock Association -- Analyst

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