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Southern Co (NYSE:SO)
Q3 2019 Earnings Call
Oct 30, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, my name is Mary and I will be your conference operator today. At this time, I would like to welcome everyone to The Southern Company's Third Quarter 2019 Earnings Call. [Operator Instructions] After the speakers' remarks there will be a question-and-answer session. [Operator Instructions]. As a reminder, this conference is being recorded, Wednesday October 30, 2019.

I would now like to turn the conference over to Mr. Scott Gammill, Investor Relations Director. Please go ahead, sir.

Scott Gammill -- Investor Relations Director

Thank you, Mary.Good morning and welcome to Southern Company's Third Quarter 2019 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, that 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, Form 10-Qs 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 all for joining us. This morning we reported strong earnings per share substantially above our estimate. Year-to-date earnings through September have also exceeded our expectations and the fourth quarter is off to a strong start for our electric utilities with unseasonably warm temperatures in early October. Drew will further discuss our earnings results and expectations in a few minutes. Before providing you with an update on our progress at the Vogtle site. I want to highlight our outstanding operational performance this quarter. We experienced record heat in the southeast this summer, recording all time September peak load days four times during the month.

Our electric system demonstrated resilience with record-peak season generation and transmission performance resulting in exceptional reliability for our customers. Importantly, even amid these conditions, a diverse fuel mix enabled Southern Company system to reduce our carbon emissions by approximately 35% compared to the strongest demand of 2007, our benchmark year for carbon emissions. Let's now turn to an update on Plant Vogtle Units 3 and 4.

The site continues to make progress as demonstrated by the achievement of several milestones during the quarter, including the start of integrated flushing activities. We remain focused on meeting the November 2021 and November 2022 regulatory approved in service dates. And we continue to maintain an aggressive work plan on site as a tool to help position us to meet those dates. There is no change in our total estimated cost to complete the project. Last quarter we discussed at length that contingency we established for the project in the second quarter of 2018.

Recall the total amount we established is $800 million for the entire project, of which Georgia Power's share is $366 million. For the quarter, Georgia Power has allocated $30 million of its project contingency into the base project capital cost forecast.There are a host of factors, both positive and negative, that go into that analysis. But the biggest factor in allocating contingency was probably increased cost forecast related to craft attraction and retention.

To give you context, contingency as a proportion of the estimate to complete is larger today than when it was established 15 months ago. We continue to believe that we have sufficient contingency to meet the budget associated with the November regulatory approved in-service dates. Overall, including engineering, procurement and initial test plan activities, the entire project is approximately 81% complete with Unit 3 direct construction currently 77% complete. The project's major milestones for 2019 have been achieved or are expected to begin as planned later this year.

We continue to successfully attract and retain craft labor and currently we believe we have the resources necessary on site to support our aggressive work plan. Over the past several quarters, we have experienced periods of fluctuation in productivity around significant start-up and construction activities. This variability has resulted in a sawtooth or S-curve shape in our performance charts, an effect we discussed on our last earnings call. In August, as we started our integrated flushing activities, we saw a similar effect on Unit 3's productivity.

Production levels have improved in recent weeks and we are seeing the positive impact of a mature workforce with an increased ability to balance the needs of both construction and testing on site. The site has averaged nearly 150,000 earned hours over the past 4 weeks with 2 recent weeks at about 160,000 hours of record on the site. Cumulative CPI remains near last quarters levels, reflecting the construction and testing balance I just mentioned. On previous calls, we are focused on both Units 3 and 4 in the aggregate. At this point in the project, Unit 4 is progressing slightly ahead of its aggressive site plan.

As you can see on Slide 7, Unit 3 construction is currently lagging it's aggressive site plan. The primary driver is a backlog in the installation of electrical commodities and increased system turnover activity trends we discussed last quarter. Southern Nuclear and Bechtel are implementing a productivity improvement plan to address the electrical backlog.Additionally project leadership is utilizing specialized teams to focus on commodities installation and as further enhanced night shift efficiency and has streamlined preparation for system turnovers.

These initiatives have demonstrated initial success as I have already noted and further improvement is expected. With these actions, we believe there is sufficient flexibility in margin in future testing and start-up activities the maintain Unit 3's aggressive site plan milestone targets. To that end, we began the start of integrated flush activities for Unit 3 in August consistent with the aggressive site plan. Integrated flush is proceeding as we expected, at over 60% complete and continues to support the start of open vessel testing later this year, our next major milestone expected for 2019.

Open vessel testing will continue through the first quarter of 2020, as we prepare for cold hydro testing. Additionally, we expect to have the ability to test plant systems from the main control room before the end of the year. Each of these major milestones is important to the successful start-up and operation of the plant and will lay the foundation for commercial operations. We continue to believe the working to an aggressive site plan is the right strategy in support of our primary goal of bringing Vogtle Units 3 and 4 online by the regulatory approved November 2021 and 2022 in-service dates.

This is a very exciting time for the Vogel project. Within a year, we expect construction to be largely complete for Unit 3 and we expect to be preparing Unit 3 for fuel load. Consistent with past practice, we will continue to provide updates on our earnings calls and through the regulatory process as we move toward these major milestones. I'll now turn the call over to Drew to cover our quarterly performance in greater detail.

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

Thanks, Tom, and good morning everyone. In the third quarter of 2019, we achieved earnings per share of $1.34 on an adjusted basis, that's $0.24 higher than the estimate we provided on our last call and $0.20 higher than the earnings per share on an adjusted basis, reported in the third quarter of 2018. A detailed reconciliation of our reported and adjusted results is included in this morning's release and earnings package. A key driver, but not the only driver of our quarterly results compared to last year, was warmer than normal weather at our regulated electric utilities.

Temperatures across our Southeast service territory were significantly warmer than normal during the third quarter of 2019, including the warmest September in the last 50 years, resulting in $0.09 of benefit compared to last year and $0.15 of benefit versus normal. Emphasizing Tom's earlier remarks, our operational performance over this period of prolonged high temperatures was nothing short of extraordinary. Excluding the impact of weather, our $0.11 increase over the prior year was primarily driven by higher revenues at our regulated utilities.The revenue increase reflects the impacts of tax reform and related changes in capital structure.

You'll recall that the majority of tax benefits accrued to customers and we retained a portion at our regulated utilities to maintain credit metrics within those entities. The increase in revenue also reflects other pricing effects and customer growth, net of changes in customer usage. All of these factors more than offset the impact of divested entities. We have also been successful in mitigating inflation related to O&M expense as we operate more efficiently. Taking a look at customer growth through September, we have added over 30,000 new residential electric customers and over 21,000 residential natural gas customers across the regulated utilities. These additions put us on track to meet our full year expectations for residential customer gains across our electric and gas franchises and are comparable to the growth we experienced in the same period last year.

Customer growth continues to be driven primarily by strong job and population growth in our Southeast service territory. For the third quarter. Weather-adjusted retail electric sales were down about 2% year-over-year versus last year due to a combination of factors, including continued energy efficiency, technological advancements across all customer segments and continued weaker industrial sales. Industrial sales, particularly primary metals, petroleum, paper and textiles were down due to global trade concerns as well as changes in production levels and demand response programs.

These trends have persisted throughout 2019 with year-to-date electric sales down 1.7%, while the overall usage trend is negative year over year, it is consistent with our expectations. Whether normalization is also less precise in these extreme circumstances and we do not foresee a significant change either positive or negative in our service territories in the near term. With adjusted earnings per share through September of $2.84, we expect to achieve full year earnings at or slightly above the top end of our guidance range of $3.10.

Remember, fourth quarter earnings can vary materially year-to-year due to sharing mechanisms that are regulated electric franchises that help mitigate the customer bill impacts related to extreme weather, a situation we have certainly seen to date this year.

Turning now to some updates on our capital requirements. In early August, Southern Company completed a $1.725 billion equity units offering. When combined with our year-to-date equity issuance from internal plans were approximately $625 million and projected internal equity plan issuances through the end of 2019.

This offering is expected to completely satisfy Southern Company's total equity needs through our 5-year plan period. We do not plan to utilize our at the money equity or ATM program to issue shares and in 2020, we expect to begin open market purchases to satisfy the dividend reinvestment plan. Financial stability and strong credit metrics remain top priorities for us as they provide significant benefits to our customers and investors.

Before I turn the call back over to Tom, I'd like to give you a brief update on our regulatory calendar. We started the year with a full slate of regulatory proceedings, some of which we recently concluded. Earlier this month, the Illinois Commerce Commission approved $168 million annual base rate increase for Nicor Gas, including $65 million related to Nicor's multi-year pipeline infrastructure replacement program already in rates under the investing in Illinois program.

New rates also include a revenue decoupling mechanism for residential customers . This outcome is representative of a credit supportive Illinois regulatory environment and was in line with our expectations. Also Virginia Natural Gas received approval to extend and expand its Save Infrastructure Replacement program, with an estimated investment totaling $370 million through 2024.

In Georgia, we are in the midst of a base rate case proceeding for both Atlanta Gas Light and Georgia Power. We expect these proceedings to conclude in the fourth quarter of this year. Further, Mississippi Power expects to file a base rate case with the Mississippi PSC before the end of the year and we'll keep you posted as that schedule evolves . In addition to these proceedings, in September, Alabama Power filed with the Alabama Public Service Commission, a comprehensive proposal that addresses how the company is strategically planning to meet customer demand during the winter peak.

Alabama Powers proposals include 2400 megawatts of new generation capacity, comprised of long term power purchase agreements, acquisitions, and new constructions with an expected capital investment totaling approximately $1.1 billion. The proposed generation mix is diverse falling for 1800 megawatts of new gas-fired capacity, 400 megawatts of solar projects with paired energy storage systems and 200 megawatts of distributed energy and demand side management. We expect all regulatory approvals to be obtained by the end of the third quarter 2020. Tom, I'll now turn the call back over to you.

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

Thanks, Drew. As Drew outlined, we are very busy on the regulatory front. We've demonstrated over the course of many decades that we're able to effectively manage our business to bring clean, safe, reliable and affordable energy to our customers who are at the center of everything we do. Our regulators share these same broad goals and we are confident that the ongoing proceedings will result in outcomes that support these objectives.

Now before we move to your questions, I'd like to highlight a few accomplishments that earned recognition for the company during the quarter. Both Alabama Power and Georgia Power were named a top US utility for economic development by Site Selection Magazine. Economic development has always been a priority for our regulated utilities and we successfully partner with state and community organizations to bring companies, jobs and investment to the states where we operate each year.

In addition, Southern Company has been acknowledged for our leadership on transparency and disclosure. Southern Company's 2019 proxy statement was named the Number 1 proxy statement in the country in the inaugural US Transparency Awards sponsored by Labrador, a global communications firm specializing in regulated disclosure documents. We were also ranked third in the US for overall disclosure by the same organization. These are all outstanding accomplishments and I am proud of our team.

As we move toward the end of the year, we are very pleased with our performance from both a financial and operational perspective, and believe we are well positioned to deliver adjusted earnings per share for the full year at or above the top of our guidance range. We've also completed our expected equity need through 2023. In the fourth quarter, we should have clarity on some of our remaining regulatory proceedings, it will be in communication with you, as these cases conclude.

We have achieved several key milestones of Vogtle and remain focused on bringing Units 3 and 4 online by their regulatory approved dates of November 2021 and November 2022. Thank you for joining us this morning. Operator, we are now ready to take questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] The first question comes from the line of Greg Gordon from Evercore ISI. Please go ahead.

Greg Gordon -- Evercore ISI -- Analyst

Hey, good morning. Congrats on a great quarter.

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

Thanks bud.

Greg Gordon -- Evercore ISI -- Analyst

A couple of questions. I know you gave us a lot of information with regard to Vogtle and we're all are pleased to hear that it's going well. But can you just clarify what your -- what do you mean when you say that for all intents and purposes now the contingency is a larger piece of the overall budget. Is that because you're doing better on sort of the expected base cost of building the plant before contingency?

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

Yes, sure. Greg. I think that Drew got some great details here. I'll let him fill in the blanks on real details, but is a pretty easy concept. When you put contingency in place, as we talked about last quarter, it's because it's an unknown cost that but you expect to spend as part of the official budget of the plant. As you go through, really we do this thing all the time, but just imagine every month we add up all the positives and negatives around cost and all the different components of the plant and we net those out.

Until this quarter, we have never had the negatives kind of outweigh the positives in evaluating the contingency balance.This minor amount of $30 million that we just pulled out now represent costs that really relate to compensations that we put in place to attract and retain especially electrical workers on the site. When you take into account, how much contingency as a percent of remaining cost was in place when we set up the budget, even accounting for the draw of $30 million to get the contingency account, the percentage left for remaining construction is higher now than it was when we established contingency in the first place. Drew has some even better data there.

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

Well, its certainly difficult to add that. I'll just say that the estimate to complete is the denominator and the contingency as the numerator and so that ratio is now larger than when we started. I think the only other feature that's worth noting is that if you think about time in our contingency in time, we're 25 months out from hot functional testing, so we're pretty close to construction completion for the delivery of Unit 3. I'm sorry, 13 months. If you look at our delivery expectation, which is November of 2021, that's 25 months. If you look at the amount of time and contingency that we maintain today, it's greater than nearly 25%, so 6 months over those denominators and so I think both the cost factor and the time factor give us some comfort that we can deliver within the regulatory expectations.

Greg Gordon -- Evercore ISI -- Analyst

So Drew, bigger the bread box, it's 24%, 25% now. What was that when we established contingency, round numbers?

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

A little less than 20. So you can see as a percent of total cost contingency now is higher as a percent even accounting for this $30 million than it was when we established it and that really is a function of time.

Greg Gordon -- Evercore ISI -- Analyst

Thanks. I've got 2 more questions. One is, it's also a little bit remarkable that despite the record demand you had this summer, but you were able to keep O&M flat in the quarter. So I mean that's actually to me like a pretty positive marker. Can you talk to how you were able to keep O&M under control even though you had such high levels of demand?

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

Let me give some [Indecipherable]. Drew used to be, CEO of AGL Resources and before that he was the CFO and when we looked in the diagnostics of that company as we were making the acquisition, he and his team there had a great track record of thinking about effective ways to deploy O&M technology, etc. So he's come over, Beth Reese has come over who's key player and they're applying a lot of those concepts here.

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

The cost control is needs to be a long-term discipline. I would say that the vast majority of what's occurring here is not smart people moving over, but really the hard worker folks that operate underlying utilities and as folks move into rate cases, they have to be very focused on cost control. We have to remember that a $1 of cost saved allows $8 worth of capital investment and improvement in modernization of our systems and so rather than looking for a large belt tightening exercise, I think the right discipline for us to be prudent about managing inflations within our business and that's what we're trying to demonstrate this year.

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

And then there's just been the big technology substitutions. You may recall that I think we lead the world in local offices for so many years and that was really important to us. But with the advent of technology, I think Georgia Powers demonstrated, without the local offices, they can still increase customer touch through technology by over 400%. So we can remove physical costs, improve technology and improve customer service all at the same time.

Greg Gordon -- Evercore ISI -- Analyst

Fantastic. My final question is, milestones on the Georgia Power rate case, if we're going to get to a point where we can settle it, what's the usual cadence of that and how do you get to an answer that hopefully retains the integrity of the ROE band that you're currently put at risk/opportunity for achieving in light of the initial staff position being such a low ROE number.

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

Yes, and Greg, you've been following us for 100 years I think and so many of you on the phone have as well. Yes, look, we've had this 3-year rate process, the accounting order process in place in Georgia since 1995 and I think every 3 years since 1995, we've gone through this process. The staff does what the staff does and they -- it's funny, we kind of went back and looked at prior iterations of these rate cases, what they've done in terms of their recommendation is not all that different than what they've done in the past.

Look, let the process continue typically in the past I think we've reached an agreement right before the Christmas holidays. I expect that will be the case this time.

Michael Weinstein -- Credit Suisse -- Analyst

Thanks, guys. Great quarter. Congrats.

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

Thank you.

Operator

The next question comes from the line of Michael Weinstein from Credit Suisse. Please go ahead.

Michael Weinstein -- Credit Suisse -- Analyst

Her, good morning.

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

Michael, how are you?

Michael Weinstein -- Credit Suisse -- Analyst

I'm doing good. How are you doing?

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

Terrific.

Michael Weinstein -- Credit Suisse -- Analyst

Glad to hear it. Hey, could you talk a little bit more about the low or the negative weather normalized sales growth on the electric territories and whether that you think that that's kind of something that's maybe shaping up for the future as well or is this something that's only affecting this year and maybe next year.

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

Yes, I'm going to turn this over to Drew in a sec. I am going to offer my comments. If you look across the board, I always like to take kind of a mega look at this, when we saw these numbers, we said, you know, part of this is an adjustment for weather normal with the extreme weather we had those adjustments are always subject to second-guessing. The other one if you remember, and Mike you around, go back to 2018, we had surprisingly high increases in retail sales. And in fact, I just have the numbers in front of me for the same period for '18, we were 1.7 up, this year we were negative 2.7.

In terms of residential, we were 1.9, up this time, we were 1.9 down, essentially flat over 2 years. Commercial, we were 1.1 up, here a little bit down. Industrially, we were 2.3 up, now we're 3.3 down. My view is, if you take a longer view, these sales are kind of within the range of expectations. There is a whole lot going on right now also in terms of the industrial economy. One of the things we love to talk about is industrial development, economic development always kind of considered that the headlights. As we talk about a lot, capital investment, long-term investment loves calm waters, they love nice stable environments in which to invest.

While our economic development projects are about the same or maybe 5% less year-over-year, but still a good number. The amount of long-term capital associated with our economic development backlog is down a lot, around a half and the jobs associated with that are down a lot, about a half. when you get into these arguments. Well, as there is a function of the Fed is a trade policy is it, I really think that long-term investment on the part of our customers is taking a breather. It's kind of plateaued out a bit, really as a function of the trade issue going on a skirmish, whatever you want to call it.

When we passed new tax law, when we had the advent of smarter regulation, there was an enormous breath of oxygen in the economy and we took all. My sense is, pending the resolution of the trade skirmishes and maybe even the election year in 2020, I think we have the ability to sustain the economy going forward or not, we'll see.

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

Yes, probably the only thing I'd add is the way we plan long-term or have been planning in the more recent term for sales growth has been around an expectation that our customer particularly residential would grow by about 1% a year. We offset that with the expectation of efficiencies, we'll be persistent and that we'll lose used for customer at about the same rate, maybe something a little bit less. This quarter -- actually this year-to-date we're down about 1.7% in total sales across all 3 customer classes and I don't know if we've detailed them for you in the slides, but it's effectively 9-tenths [Phonetic] in residential, 1.7% commercial and about 2.5% in industrial. This weather normalization is something that we have to construct internally. It is based on linear regression to be completely nerdy about it and we've moved into non-linear portions of weather experience, which just means that we've hit some extremes and I'm pretty certain that what we're seeing is maybe just a little bit of disassociation from our curves and not so much a result.

If you look at last year, we saw about a 1% increase in retail sales through the third quarter that probably had the same sort of feature in that may be averaging these 2 years gives us a better indication of what's happening in our economy. Residential and commercial, in particular, I think we're probably just seeing normal or expected declines in these areas. In the industrial segment, probably since the fourth quarter of last year, we have seen industrial production, which doesn't have sort of a weather feature, migrate a bit down over the past maybe 4 or 5 quarters, as Tom said, probably due to a little bit of uncertainty in some trade headwinds, but we also have to remember that these are off a pretty significant highs in terms of levels of production at the end of 2018 and so these are just trends that we're monitoring, I would suggest that we look maybe more toward full year weather usage as normalization will become a bit more normalized and that will help us get a better understanding of how we're budgeting for next year.

Michael Weinstein -- Credit Suisse -- Analyst

Hey, one last comment following Andrew's nerdy comments. As I was with the Fed for so many years, one of the things I loved to look at is essentially the first derivative of change, and the momentum statistics. In other words, evaluating how the numbers we're changing over time also indicate this kind of plateauing. I don't know when this will resolve itself trading -- the trade wars or whether it's the election. But of the top 10 industrial sectors, year-over-year, you've seen about 5 of them go negative. So there is negative momentum. About 3 of them are flat and about 2 of them are positive. In the positive, are just less negative year over year. So, I think all that data serves to underscore the fact that we are in a bit of a pause and I think the pause can be resolved.

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

That we'll see.

Michael Weinstein -- Credit Suisse -- Analyst

Okay, one last question, could you just go over, maybe what your future plans are at Southern Power are. Are they going to be more asset sales coming or are we kind of settled down at this point?

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

Well, we've always been in the past year of recycling capital. I think if you look at our track record broadly from an M&A standpoint, we've bought well and we've sold well, and we always look for opportunistic ways to improve shareholder value. What is it Drew? We allocate about $500 million a year, that's way off of where we were. We had been about a billion and a half allocation a year, we've cut that now by two-thirds down to $500 million. But you want to know something, a lot of that is a function of the market. We really see a tremendous amount of competition in the market with shorter terms on -- we love long term bilateral contracts, those are getting shorter, and the margins are getting narrower.

So, when we look at the balance of capital allocation. I think going forward for the next, I don't know, 3 to 5 years worth, 93 plus percent allocating to our core franchise businesses. We think on a risk adjusted basis, that's more attractive than the so-called. Certainly, the organized markets or even the renewables markets right now. We'll keep our eye on it, but that's our positive.

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

Yes, Michael, it's fair to say a lot of the work that we did last year was simplification of that business structure and so we tried to get rid of assets that -- gas assets that were not within our core service territory. Some of the things that we did around wind and solar where optimization of capital deployment, but not outright sale of assets. I think more importantly, we've just recently announced the purchase of Skookumchucks, which is a wind generating asset. We're still very interested in investment in renewables, but as Tom said, we're going to be focused on the risk-adjusted returns on those investments and be very careful about what meets our threshold.

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

And it's just narrower than it was.

Michael Weinstein -- Credit Suisse -- Analyst

Thanks for all the great detail. Have a great day.

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

Thank you.

Operator

[Operator Instructions]. The next question comes from the line of Julien Dumoulin Smith from Bank of America. Please go ahead.

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

Hey, good morning Julien. How are you?

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

Great, thank you. Hey, so just wanted to follow up on a couple little details here. First off, as we think about where you're tracking in terms of dates here, I just want to be extra clear. Heard your commentary about Unit 4, how that's going fairly well. How do you think about the May date for Unit 3 here. Just want to clarify here given all your more constructive commentary.

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

Yes. The site continues to work toward the aggressive plan. We have always characterize the May schedules, both for Unit 3 and 4 as aggressive, OK. We think that is the right way to run this site. Steve Pruzanski, the CEO of our nuclear business; Glen Chick, the guy that really runs the project day-to-day, believe that's still achievable. It is aggressive and we remain committed to that kind of work plan on site. I always want to remind people, our regulatory approved dates are November and I think I've been famous for saying this in the past. If we hit those dates -- we hit anything before that, ticker tape parade time, but we think this approach of keeping an aggressive posture on site avails as margin to achieve ultimately our regulatory approved dates.

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

Got it. I want to understand a little bit more on the contingency. So it sounds like this 30 million here the small utilizations more for construction and some of the higher cost and to keep the qualified individuals around, but when I think about contingency conceptually here as we pivot a little bit, should we thinking about that principally being allocated toward some of these in-service criteria in achieving those on time and on budget? And then even within that, can you clarify how are you thinking about these in service criteria, which of these processes are I-tax should be following or asking you if you are paying attention to most closely as best you see it?

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

Well let me hit I-tax first. I can remember 3 or 4 years ago as we talk through this thing, we had I-tax out there as one of the big risks . Now, let me underscore this, I-tax must be done before we fuel up. So it must be done, but I would say the work of the team in conjunction with the NRC over the years has brought that into a less risky posture. In other words, I believe we have a sound plan working with our regulator to achieve those milestones.

So when I think about, say the top 10 risks on the project. I don't think I-tax are there right now. I think we see our way through. We're making great progress. You may remember, we started a concept called UIS, but essentially I-tax that are complete except for the result of a test of that has been very effective in reducing the bow wave of testing that must be done. So, I guess the other comment I would just make and I guess this goes to the contingency question. You know, when we set that estimate in place, I guess it was July of '18, that included for the whole project $800 million contingency. There are actually buckets of contingency elsewhere, like [Indecipherable] has her own, we have our own. This is the one that we've called out specifically and this is where the 30 million applies on Georgia Power dollars alone. And recall also that when we made this draw, this $30 million. This is an evaluation not of current period, but expected future period costs. So, it is all of the costs that we know about right now through the completion of the project that results in a $30 million draw. So, I think we're in good shape. If that answered your question.

Michael Weinstein -- Credit Suisse -- Analyst

Or maybe to clarify that, you're using this for construction and labor costs. But with respect to some is in [Phonetic] service criteria and just achieving those milestones, you feel pretty good you haven't used any contingency, but should we expect updates on this contingency to be principally focused on in-service or the construction side of this, if one can bifurcate.

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

It could be any and all. I mean there's buckets everywhere and so when we did the $800 million plus everything else I had mentioned that you may have or we may have in our hip pocket somewhere that includes a schedule that concludes in November and includes all known future costs through November.

Michael Weinstein -- Credit Suisse -- Analyst

Okay.

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

I think the only couple of components I would add or when we do reestimate of costs, it is a mark to completion of both facilities, and so we're estimating what we think it will take to complete both Units 3 and 4 and so this is not just a feature for the Unit 3 in the near term. In the end though Julien, time is money and so a lot of contingencies as we progress will be related to the amount of time it will take to complete the project. That's -- I don't know that there are any expectations that there are system components that wind being more expensive than estimated.

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

The only thing I would reinforce though is when we set that budget, that budget was set for November, so to the extent you finish sooner than November you get pickups. That saves money.

Michael Weinstein -- Credit Suisse -- Analyst

Great. All right. Thank you. I'll leave it there.

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

You bet. Thanks bud.

Operator

The next question comes from the line of Praful Mehta from Citigroup. Please go ahead.

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

Hello, thank you for joining us.

Praful Mehta -- Citigroup -- Analyst

Yes. Great call and great quarter. So congratulations. Just had a couple of quick questions. Maybe just touching on Vogtle again. As you decide on trying to hit the November deadline, and you have additional money to spend maybe to hit that earlier deadline versus allowing it to slip to November or I guess hit the November deadline. How do you choose on the cost side, like are you looking to invest more to hit the earlier deadline, the May deadline, or are you willing to allow the November deadline or target to kind of get to that and conserve on the cost side?

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

Well, it's any and all, right. Drew said it a second ago, time is money. When you think about the hotel costs, personnel on the site and the work that must be done. To the extent you're able to improve schedule it. It takes a lot of cost to exceed the cost of time. So, it's pretty much a dominant solution. If we can advance the calendar. That's why we keep an aggressive site plan for me. That overwhelms, generally speaking, the cost that we incurred to do that. We always make an evaluation of that point however, in other words, we're not going to do anything stupid in terms of cost just to achieve schedule.

We always balance that. But I'll just tell you, the math is pretty compelling. If you can achieve schedule performance, that does a lot for cost performance and we believe that is prudent behavior.

Praful Mehta -- Citigroup -- Analyst

Gotcha, makes sense. That's helpful and then maybe on the weather normalized sales, again just touching on that, given you have all the capex plans and Alabama Powers investment as well, do you think there's any implication on that load growth concern in terms of what that could do to bills given investment cycles and what you have going on with Alabama Power.

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

I think that's why we've got to focus on our cost structure. I think I mentioned it earlier, but a $1 of cost savings permits $8 worth of capital investment. Alabama, in particular, I think is proposing a resource mix that's important for meeting their winter peaking and makes pretty progressive strides in terms of the environmental content of what they're generating with and so and ultimately I think will reduce total costs if you look at the O&M cost structure around coal-fired generation.

So what we're really trying to do is minimize in total the impact on customer bills over time, but still have good investment in modernization. I suppose, your question was, will lack of customer growth spike with it -- it certainly makes it easier if the underlying is growing, but I don't think it probably reduces from our expectation.

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

Yes, as me and Drew sit here and we sit in the management council meetings at Southern, the objective is no rate change as a result of capital investment. In other words, as we increased revenue requirements, we must take commensurate revenue requirements out in our O&M cost structure. The idea, keeping rates flat as we transition the generating fleet or invest to improve reliability and resilience.

Michael Weinstein -- Credit Suisse -- Analyst

Got that. Super helpful. And just a cleanup question, the income taxes in the third quarter, was the effective tax rate lower than previous and any particular driver on that tax rate?

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

No, I think more of the third quarter of last year was a little bit anomalous, we had to make the assumption that we were going to utilize all of the film tax credits that we purchased, one of the subsidiaries and so the difference really is a little bit on natural in that regard.

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

Hey, probably more think, somebody just warned me and I said, "Yeah, that's probably right." Georgia Power recall and its rate case deferred any rate action 3 years ago . And so if you think about where Georgia. Holy smokes, this rate case really covers essentially 9 years of investment. So, that's a whole lot. The formulation I gave you to have no rate change in the future is a design criteria as you were referencing in terms of the capex going forward transitioning the fleet and building resilience. The design criteria is to make O&M adjustments that compensate and produce no rate increase to customers, that's the design.

Praful Mehta -- Citigroup -- Analyst

Got you. Very helpful as always, thanks guys .

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

Thank you sir.

Operator

The next question comes from the line of Shar Pourreza from Guggenheim Partners. Please go ahead.

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

Hey Shar. How are you?

Shar Pourreza -- Guggenheim Partners -- Analyst

Good. Good morning, guys. How are you doing?

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

Great.

Shar Pourreza -- Guggenheim Partners -- Analyst

So most of the questions were answered. It's very comprehensive. Just one follow-up around the retail sales and sort of the comments around more of the industrial activity . We've seen similar weakness reported by some of your other peers, right. But what turns out is the rate structure of the customers are, I guess, more fixed versus volumetric. So, the EPS impact for deceleration in volumes is diminish. Do you have a sense on sort of the industrial customers and how we should think about their rate structure, volumetric versus fixed and I guess what I'm trying to get a sense on is if you see a prolonged weakness and you don't see a recovery in industrial activity and sort of the global macro concerns are more prolonged. Is there, do you see an impact to fundamentals over a longer term, right? So like obviously short term it's within your plan, but I'm just trying to get a sense on what the sensitivity is to industrial weakness?

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

Well, from a corporate perspective, a 1% change in industrial sales is about $16 million pre-tax and so pretty small impact, the Southeast generally uses industrial customer rate design as a way to promote economic development and bring jobs to the region, so we're significantly less sensitive to it. I probably created too much of a sensitivity to this factor in this quarter because we did have some demand side management programs that worked productively in the period to make sure that we didn't have to curtail any needed delivery to customers and so we had good reliability to commercial and residential customers. And so that will impact some of the sales figures as well. When we look at full year though, I think we'll find that we're probably near our expectation, which is around 1.5, maybe 2% reduction in industrial demand in total.

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

Yes. And just to add to that, I think Georgia Power was the first and big, right. It probably remains the biggest in terms of RTP real-time pricing. That recalls enterprising of the customers and customers on their own can react to it or not. In other words, if they are making more money by driving through a peak period, well good for them. If they want to shut down during a high cost period, they can take that as well . So these are customer driven demand side management kind of issues. This is nothing we do demand, we have the biggest program, I bet you, in the United States, something like, I think 40% to 50% of our industrial and commercial load is subject to real-time pricing. Over the year provides terrific value to our customers.

Shar Pourreza -- Guggenheim Partners -- Analyst

Right. Okay, so just to summarize, if there is weakness in industrial activity worse than sort of what your internal plan assumes, we should not assume that there would be a deceleration in your growth trajectory or fundamentals, just given the fact that it's not that sensitive. Okay. That was terrific. Congrats guys on the results.

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

Thank you, sir.

Operator

The next question comes from the line of Stephen Byrd from Morgan Stanley. Please go ahead.

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

Hello, Stephen. Thanks for joining us.

Stephen Byrd -- Morgan Stanley -- Analyst

Hey, good morning. Congrats on a good quarter.

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

Thank you.

Stephen Byrd -- Morgan Stanley -- Analyst

What questions have been addressed. I just wanted to touch on equipment testing at Vogtle, saw from the latest CCM just the status of overall testing, but just any further color on where you stand with equipment testing, any lessons learned along the way or just any further color on testing the equipment that's at the site.

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

Yes, thanks for that question. You know when was it, maybe a call ago or 2 calls ago, there was a lot of conversation about the wisdom of early testing. You know, does it cost a lot, does it reduce productivity, create a S-curve etc. I think our posture has been to test as early as we could even for partial systems and we think that we have found issues early and have been able to handle them in a very successful way, also as we test early we can bring lessons learned to other parts of the plant and to Unit 4. We think that's really, really helpful. It reduces risk, it assists in our I-tax completions and just to tell you, for Unit 3 we think our civil testing for construction as well over 90% mechanical over 77% and electrical testing on Unit 3 is at 50%. So this testing process we're going through right now is exactly what we want to have happen and here's is the other thing that really also goes to the sawtooth or the S-curve effect, when we enter into the an integrated flush we start testing and we want to find problems. Part of testing is to identify where your weak spots may be as soon as you can so that you can address them and have a successful completion of a milestone ultimately and we think that is really going well. As our testing organization has started out, we have found now over time that their efforts have matured and they are more effective at testing the procedures. The deployment, the coordination with construction has all been getting better over time. I think our recent hours worked kind of indicate that as well. This whole program, while it has been the subject of some conversation, has served us very well.

Stephen Byrd -- Morgan Stanley -- Analyst

That's really great color. My next question is very, very broad. I'm just thinking about your generation mix overall and the evolution of solar economics and looking at your Plant Daniel in Georgia, maybe just think about it, as you think about your generation mix and just the evolution of renewables economics, do you see any potential changes you would want to make to your generation mix over time or are you sort of generally happy with your current resource planning on that?

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

Well, so we do that, we started this actually when I was COO. We do a probability weighted kind of integrated resource plan where we take different shots of different assumptions and probability weight them. In other words, we look at the cost of carbon. We already do that inside our man for our integrated resource plan. So, we say there is no carbon price, and then there is $10, $20. We are now evaluating carbon costs prices as high as $50. We look at high, medium, low gas prices, coal prices all kinds of things. And within all that scenario analysis, we come up with what we think are dominant solutions. Those dominant solution manifest themselves in an evolution where the best generation resources are and because we're not in a so-called organized market,

In an integrated market, you can iterate around generation solutions and transmission solutions, OK. The other big thing I'm kind of nurding out now also, but I'll be our quick, is our reserve margin assumptions really change based on the penetration of renewables. The most important renewable resource for us in the Southeast is solar. We have a pretty good resources, it's very cloudy here but solar makes sense. We just don't have the kind of wind flows that support widespread wind generation.

Our wind is imported through long haul transmission systems, mostly from right now Kansas and Oklahoma. Okay. We go through this analysis and we develop optimal solutions over the next 20 to 30 years, that's both transmission and generation and we do this in conjunction with each of our states, so that this is a well known process. As politics change, say for example someone in a new administration wants to start a carbon tax or there are different environmental costs associated with coal that we've seen over time.

We certainly take those things into account and so what we have is essentially a series of options based solutions where we can move the fleet in general. What you find right now at Southern is between now and 2050, a much bigger share as you get toward the end date of renewables that will mostly be solar we will see a continued importance of gas at some point, very high carbon prices, you would see gas with carbon capture. Over time, because of these costs, we see coal diminishing and we see a constant share of nuclear.

The big swing and how these resources may follow depends upon technology investment, particularly in the realm of storage and the cost of carbon capture. you know that the objective function here is to provide low cost, reliable electricity for the benefit of customers and we have said low-to-no carbon by 2050, that low-to-no delta is really going to be spoken for by the advancement of technology, carbon capture and storage. So we'll see, but that's the broad-brush answer.

Stephen Byrd -- Morgan Stanley -- Analyst

That's helpful. Thank you very much.

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

You bet.

Operator

The next question comes from the line of Sophie Karp from KeyBanc. Please go ahead.

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

Hello Sophie.

Sophie Karp -- KeyBanc -- Analyst

Hey guys, good morning. Congrats on the quarter.

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

Thanks .

Sophie Karp -- KeyBanc -- Analyst

A couple of questions if I may. First, I wanted to clarify and going back to Vogule, I guess the SPI that you keep saying it needs to reach 1.5 in the next 9 months in order to be in line with the regulatory deadline and I guess looking at the VCM file in testimony last week and just it's been built tracking below that so far. Does it need to average at 1.5 or does it need to reach that number or does it mean that you are kind of eaten into that 6 month buffer you have. Can you clarify that a little bit?

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

Oh sure. Yes, look, I think you were just reading it opposite. In other words , we like a low SPI number, OK. What we would say by that 1.5 would be, we would have to average that going forward in order to hit November. To the extent we're below that number as we are right now, I guess cumulative 103, Unit 3, 11, Unit 4, 0.96. Remember we said Unit 4 is tracking slightly ahead of the aggressive plan, that's indicated by a number of less than 1. One would essentially say you're on the aggressive plan. Okay.

Sophie Karp -- KeyBanc -- Analyst

Got it.

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

So, the fact that we're below is good news. That's where you want to be.

Sophie Karp -- KeyBanc -- Analyst

Got it. So you would want to be average, no more than that basically?

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

Yes, you want to be less than something over 1.5.

Sophie Karp -- KeyBanc -- Analyst

Got it. And then maybe a little bit of color on Mississippi as we -- more visibility on the who the nominees are for the commission, sort of how do you expect the regulatory climate there to shape up after the election and is that affecting your time and decision I guess on the rate case filing. Do you plan to go after they have the election?

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

We don't try to time elections or try to guess who's going to win. We think this company, again, you go back to my history. I am in my 39th year for heavens sake. We go through political swings all the time. Our regulatory plans, our service to customers, our notion of reliability. It's something that transcends politics and must be long-term. We always start with long-term answers first and we work like dogs to make the short-term results be beneficial to investors.

So, we're going to file the rate case, independent of any assessment of politics and I think really since the Kemper, we've been treated really well in Mississippi. We think we've been treated fairly. We expect that to continue no matter who's in office.

Sophie Karp -- KeyBanc -- Analyst

Got it. Thank you.

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

You bet.

Operator

Our next question comes from Andrew Weisel from Scotia Howard Weil. Please go ahead.

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

Hey, Andrew.

Andrew Weisel -- Scotia Howard Weil -- Analyst

Hey, good morning everybody.

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

Good morning.

Andrew Weisel -- Scotia Howard Weil -- Analyst

First question on financing. Can you talk a little bit about the decision to issue the equity units in August as opposed to the prior plan of using internal programs or even a block or more of plain vanilla equity forward. And just to clarify, when you say that the equity unit satisfied your needs through the 5-year period. Does that assume you will or will not use the full contingent fees for nuclear construction?

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

Well, I guess, take them in 2 pieces. I'll start with the second one first. It does assume that we use contingency that's embedded in the way we accounted for the cost reestimation last summer and our expectations for construction, although I would say that the delta is somewhat immaterial to the corporation in total We'll do $8 billion to $9 billion worth of capex every year for the next number of years or $38 billion or $39 billion over the plan period and Vogtle represents only $3 billion or @4 billion of that in aggregate. Your first question was related to the equity units offering, which was a mandatory convertible preferred security that we issued in August. You know, it had a number of features that I think drew us there, but not the least of which is that we are quite bullish or comfortable that we'll complete the nuclear construction within the regulatory window and we thought that the issuing units that convert after the first unit goes into service is probably to our benefit. We think the share price has a bit of room to regain ground to historical trading levels and that instrument allowed us to share in any upside and so we will literally share an upside through the high '60s, maybe low '70s in terms of its conversion price when it does convert in August of 2022.

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

Hey and let me just offer my own commercial here. I can tell you this, this instrument was debated a lot internally. We knew that it was absolutely the right decision, but the math to me is pretty compelling for the future and there is no promises here. I can't say whatever, but when you think about Southern Company and people are already making these bets I think in our stock prices when think about Southern Company ex-Vogtle, there is no question in my mind this company has been trading kind of on par recently, we should trade at a premium.

So think about what a couple more turns may mean to the stock price in our PE ratio. And recall, we're in a period in our Georgia regulatory framework, where essentially our ROEs coming of Georgia look flattish. That's part of the rate design we had when we had being approved recently. As we clear these assets to in-service, the trajectory of earnings increases significantly. I mean evolved on your own modeling. When you think about a healthier PE ratio and you think about a much faster trajectory of EPS, stock prices could be significant above this. We thought the taking risk off the table and at these attractive levels, made a whole lot of sense for us and just took another issue of overhang office staff.

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

Yes, the only thing I would add just to be clear, we do not plan to utilize the ATM program at all throughout our plan period and we thought it was an important signal to equity investors that we were complete in our equity issuance and the instrument that you're describing allowed us to do that.

Sophie Karp -- KeyBanc -- Analyst

Great. Thanks. That's a lot of good detail there. And just to clarify, this slide that you will be issuing new shares for incentive compensation, what ballpark would be the annual meet for that?

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

Let me, I don't want to give you a halfway answer. So let us handle that may be in a call after we can give you an absolute number, but we will keep the -- we will issue shares under the DRIP for balance of the year. There are still some options that are open to be exercised, where we don't control the timing and there'll be some modest issuance relative to the total shareholder base related to executive compensation. But I can't offhand give you a number with much accuracy.

Sophie Karp -- KeyBanc -- Analyst

Not a problem. I'll follow up offline. Then just one last one if I may. Regarding the Alabama Power IRP or other conditions to certification, the migrated [Phonetic] says that 1.1 billion setting new gas plants, now the capacity is incremental to the 5-year capex plan that you've previously laid out. And if so, would we expect that to be upside when you roll the plan forward with the fourth quarter results or would you de-prioritize spending either in that state or other states for things like affordability, year the balance sheet or whatever else?

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

No, we do think it's incremental to our 5-year plan and we're comfortable that we can handle it within our expected cash generation capitalization goals

Sophie Karp -- KeyBanc -- Analyst

Great, thank you so much.

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

Thank you.

Operator

Our next question comes from the line of at the Agustina Coletseal [Phonetic] from MISO Securities. Please go ahead.

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

Agustina, thanks for joining us.

Agustina Coletseal -- MISO Securities -- Analyst

Thank you. I just wanted to clarify one thing, so around the time when [Indecipherable] with you was filed, basically I think they were identified like a total of $1.4 billion contingency, which basically consisted of $800 million cost contingency and $600 million of schedule contingency. So just wanted to understand if those $600 million are still unallocated.

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

They are allocated as schedule, assuming we hit November.

Agustina Coletseal -- MISO Securities -- Analyst

Okay. Perfect.

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

So it could technically finish sooner than November, you would need into that.

Agustina Coletseal -- MISO Securities -- Analyst

Exactly, yes. Okay, perfect. And then, one other thing, if you could just talk a little bit about what would be the top 3 risks for Vogtle going forward?

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

All right. It's a good one. So we think about that a lot. To limit it to 3 is always fun. But here's what I would say, top 3 risks are going to be probably hitting our milestones. I know we put out our, but milestones of the big deal and it's not just when we began, it's when we finish and did we run into the testing program where we had some equipment failure, where we had some issue that we just don't expect.

That could prolong the successful test of any particular milestone. We know of nothing right now that would suggest that, but I would say that is a risk. Another risk will be just kind of maintaining the kind of recent productivity that we have had now. We are building margin. The wisdom on site of keeping an aggressive site plan gives us margin to November and we want to preserve that as much as we can. We went through a very tough summer where it was very hot, hard working conditions, the sawthooth effect of new work fronts being op ened, new people coming in. Can we maintain the kind of productivity improvements that we have seen recently in the last couple of weeks 160,000, last 4 weeks about 150,000. That's a really good performance. Can we maintain it?. I guess that's the last thing and then I think just before fuel load, that's going to be awfully important. Do we wrap up everything that even beyond hot functional test is non-critical path? I would say those 3. People will argue about that , but I think that's it -- I think that's a fair summation.

Agustina Coletseal -- MISO Securities -- Analyst

Perfect. Thank you so much.

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

And let me just say, most of that translates to schedule. There are cost elements to that. That's probably it.

Agustina Coletseal -- MISO Securities -- Analyst

Perfect. Great, thank you so much.

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

Thank you, ma'am.

Operator

The next question comes from the line of Ali Agha from SunTrust. Please go ahead.

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

Ali always great to have you.

Ali Agha -- SunTrust -- Analyst

Thanks Tom, good morning. Good morning group.

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

Good morning.

Ali Agha -- SunTrust -- Analyst

I've just a couple of things to clarify. One, I wanted to go back, you ended up earning $0.24 above what you had budgeted for the quarter and I know you mentioned the weather as a factor, but can you flush that out a little more, what else came in better than expected and are these 2019 issues or some of them actually go into the future years, we should think about positives as we are looking at earnings in '20 and beyond?

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

The weather was certainly the single-largest factor, sort of $0.09 of the positive variance. The 2 things that were different than our expectation were levels of operations and maintenance expenses and so we were able to control to a greater degree than where we had budgeted and then revenue related to real-time pricing. The system Lambda, the system average cost was actually quite low through the time period, but there was some congestion that led to a slightly higher rate signaling to some industrial customers.

Ali Agha -- SunTrust -- Analyst

And so, Drew. is that at least the non-whether piece, should we think that could continue the O&M and even maybe pricing as we're looking at '20 and beyond?

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

Certainly things that we're working on our RTP real-time pricing is more a function of the condition in the period and so it's not something we view as being persistent. And let me just correct, weather is $0.15 greater than expectation, although it's only $0.09 higher than where we were a year to year.

Ali Agha -- SunTrust -- Analyst

Got it. And then secondly on Vogtle, Tom, if there was to be a change in either costs or schedule versus the way you're budgeting it right now, is the VCM the forum where you would give us an update or would it be in some other session of forum?>

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

Oh gosh, Ali if it was significant, we do an 8K. I mean it really just depends on the magnitude

Ali Agha -- SunTrust -- Analyst

I see, OK. And then lastly, can you just remind us as you're looking forward, now '19 obviously is coming in well above what you were expecting at the beginning of the year, but can you just recalibrate for us the longer-term growth aspirations, the EPS growth aspirations that you're looking at and what's the base from which you're looking at that growth?

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

Yes, it was 4% to 6% of 287, which was our 2018 guidance.

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

Yes. And even with this kind of base that we're in right now with Georgia, we're well within that cone and when you start to clear these units into the rate base., the trajectory really takes off. So it's 4 to 6. And of course, next year will update all that, so we are well within what we said.

Ali Agha -- SunTrust -- Analyst

And I think Tom you said you could hit 4 to 6 every year or is it like a cumulative growth rate?

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

It's kind of the cumulative growth rate of 2000, whatever it is '18,

Ali Agha -- SunTrust -- Analyst

But we do expect to hit within that 4% to 6% range in each year.

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

Yes.

Ali Agha -- SunTrust -- Analyst

Of of the 287 base. If you think about that as a cone of growth emanating from 287 will be within that band through the plan period is the expectation.

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

That's the expectation.

Ali Agha -- SunTrust -- Analyst

I got you. Thank you.

Operator

Our last question comes from Michael Lapides from Goldman Sachs. Please go ahead.

Michael Lapides -- Goldman Sachs -- Analyst

Hey guys, thanks for taking my call and congrats Tom and guys on a good quarter. I have a question. There was something in the Georgia Power rate case testimony that stood out a little bit, which was one or 2 of the interveners, I forget which one made commentary about instead of having coal ash spend run-through rate base, albeit on an expedited amortization schedule actually seeing if we could get securitize that would be better for the rate payer for the customer in terms of the bill impact. Just curious for your thoughts on that whether it's even viable and under Georgia statute and if not, is there mechanism or a method that would make sense to do so?

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

Yes, well, let me give a couple of comments. Number one, that idea whether it's a good idea or not will require legislation in Georgia. We don't have such a thing. The other thing was, I would also go back to the IRP discussion, where this issue was considered and approved on in the IRP, but let the process work out and let the commission and in the company and all the intervenors come to a successful conclusion. We think will be treated well there.

Michael Lapides -- Goldman Sachs -- Analyst

Got it. Okay, thanks Tom. Just a housekeeping question, the 2018 numbers for in the release for things like O&M etc. that includes or excludes the businesses sold in the last 12 to 18 months. Meaning last year's data. I'm just looking at O&M, it actually shows a down more than $100 million. I wanted to make sure that was apples to apples.

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

The '18 figure includes the O&M, for the businesses that were owned in those years.

Michael Weinstein -- Credit Suisse -- Analyst

Okay. Can you, I forget you may have done it. If I missed it, my apologies. Can you quantify what the O&M change would have been without those business, so like for like?

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

About flat, I guess is the right way to think about it, but we can give you some detail.

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

So instead of a decrease, it would be flat.

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

Yes. And that it, how we characterize I think the O&M, for the call here. And Drew's kind of big, big plan is to eat inflation every year.

Michael Lapides -- Goldman Sachs -- Analyst

Got it. Okay, thank you guys. Much appreciated.

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

Thank you, sir.

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

Well, I just want to thank everybody for joining us. This is an awfully exciting time for us all. And you know, I know we all get focused on Vogtle 3 and 4. But the thing I want to reinforce is the thousands of people at Southern that are making this business hum, that even despite these really extreme loads we had really through the summer and even into October. There was one day very early October where we do a system weighted temperature, that system weighted temperature in October was 91 degrees. This is the time we are normally hitting outage season and you're taking a lot of resources out of play.

The system responded beautifully, the transmission people, the generation people and we proved our flexibility and resilience in this kind of extreme condition. We continue to serve customers well. By all fronts, this company is hitting all cylinders right now. So, I know we all get excited and focused on Vogtle. I know I am, but I want you to know that the rest of the business is doing great. Thank you for your followership and look forward to talking with you soon. Take care.

Operator

[Operator Closing Remarks]

Duration: 77 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

Michael Weinstein -- Credit Suisse -- Analyst

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

Praful Mehta -- Citigroup -- Analyst

Shar Pourreza -- Guggenheim Partners -- Analyst

Stephen Byrd -- Morgan Stanley -- Analyst

Sophie Karp -- KeyBanc -- Analyst

Andrew Weisel -- Scotia Howard Weil -- Analyst

Agustina Coletseal -- MISO Securities -- Analyst

Ali Agha -- SunTrust -- Analyst

Michael Lapides -- Goldman Sachs -- Analyst

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