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PNM Resources Inc (NYSE:PNM)
Q4 2019 Earnings Call
Dec 18, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning and welcome to PNM Resource 2020 Earnings Guidance Conference Call. [Operator Instructions]

I would now like to turn the conference over to Lisa Goodman. Please go ahead.

Lisa Goodman -- Director of Investor Relations

Thank you, Jordan. And thank you everyone for joining us this morning for the PNM Resources 2020 Earnings Guidance Conference Call. Please note that the presentation for this conference call and other supporting documents are available on our website at pnmresources.com. Joining me today are PNM Resources Chairman, President and CEO, Pat Vincent-Collawn; Chuck Eldred, our Executive Vice President and Chief Financial Officer; Don Tarry, our Vice President Controller and Treasurer, as well as several other members of our executive management team.

Before I turn the call over to Pat, I need to remind you that some of the information provided this morning should be considered forward-looking statements pursuant to the Private Securities Litigation Reform Act of 1995. We caution you that all of the forward-looking statements are based upon current expectations and estimates and that PNM Resources assumes no obligation to update this information. For a detailed discussion of factors affecting PNM Resources results, please refer to our current and future annual reports on Form 10-K, quarterly reports on Form 10-Q, as well as reports on Form 8-K filed with the SEC.

With that, I will turn the call over to Pat.

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Thanks, Lisa, and good morning everyone. Thank you all for joining us today on our 2020 earnings guidance call. As a follow-up to our third quarter call, which was National Men Make Dinner Day, December 18th is National Bake Cookies Day. So if you're asking any questions at the end of today's call, be prepared to tell us what kind of cookies you're making. In case -- maybe you are wondering, my favorite cookies our chocolate chip, so feel free to make those and send them to the office.

So let's begin on Slide 4. In our release this morning, we announced that we are raising our 2019 ongoing EPS guidance to a range of $2.13 to $2.16 as our hotter Q3 temperatures quickly turned into to colder winter temperatures. We also announced 2020 guidance of $2.16 to $2.26 per share. Don will walk through the details on those items in a few minutes. Earlier this month, our Board increased the dividend on our common stock by $0.07 to $1.23. This marks our 10th consecutive increase since 2012 and moves our payout ratio to 56% of earnings based on the midpoint of 2020 guidance.

I'd like to highlight a few regulatory items on Slide 5 and talk about a few items to be expecting next year. Hearings for our San Juan abandonment and securitization filing are scheduled to wrap up tomorrow. We feel that our case has been represented well by our witnesses and that there weren't any surprises. We typically expect a Recommended Decision about six to eight weeks after hearings, so that would put us into February, although the holiday is mixed in this time frame. The Commission has a deadline of April 1st for a decision in this case. Meanwhile intervenor testimony on the replacement power side of things, was filed last week and those hearings are scheduled to begin on January 22nd. We continue to support our recommended scenario that balances the associated costs, environmental impacts, reliability and economic considerations for the San Juan community.

We also continue to fully expect the Energy Transition Act to apply to both parts of our filing. New Mexico Governor Lujan Grisham who are proud to say was recently recognized as policy maker of the year by utility dive. Jointly position the New Mexico Supreme Court to direct the commission to apply the rule to our San Juan filings. The President of the Navajo Nation and several legislators, including the speaker of the house, are joint petitioners. There has been progress on the other PNM filings in front of the commission. In our renewable filing the Hearing Examiner issued a Recommended Decision to approve our plan for meeting the renewable portfolio standard, including our 140 megawatt wind purchase contract.

It's worth noting that there is a debate during this case about the application of the Energy Transition Act and the Recommended Decision determined that the law could apply in this case, even though it was filed two weeks before the laws effective date. The next step will be for the commission to consider the recommended decision and issue a final order. In our filing for PNM Solar Direct the voluntary solar program available to municipalities, tribal governments and large customers, hearings began in November but were put on hold in January due to the Hearing Examiners health and other scheduled commitments. We expect the decision in the first quarter of next year.

Thinking a ahead to the rest of 2020. There are some other noteworthy items on our agenda. We have talked about plans to file a PNM general rate review in the second quarter that would be based on a future test year. We will make our annual filings for the FERC formula rate true up and the PNM renewable rider in June. Our 2020 integrated resource plan is due by July 1, and will highlight our path to meet zero emissions by 2040. At TNMP in addition to our -- to TCOS filings annually to recover transmission investments. We will make our first DCOS filing on the distribution side in April of 2020. We will keep you updated on those items throughout the year and provide the docket numbers for each of the filings. And then finally, in November orders in New Mexico will decide whether the commission moves from five elected members to three appointed members.

So with that, I'm going to turn it over to Chuck. But first, Chuck. What's your favorite cookie?

Charles Eldred -- Executive Vice President and Chief Financial Officer

Well, my favorite cookie and it can vary based on market conditions, but it's a chocolate chip with coconut and macadamia nut, and I get these on Delta flights going from Albuquerque to Atlanta, so -- but they're great. So let me get back to the guidance of course, let me start off by introducing Don Tarry, Vice President, Controller and Treasurer. Don has been with PNM Resources for 23 years. He served in a variety of financial roles over his period of time. And also let our customer service and business technology service groups. He knows our company very well. And many of you have talked with him in Investor Conferences and Analyst Days.

So I'm going to turn it over to Don to walk you through the details of the guidance.

Don Tarry -- Vice President, Controller and Treasurer

Thanks, Chuck. Let's start on Slide 7. As Pat mentioned, we are increasing our 2019 guidance to a range of $2.13 to $2.16 per share. Weather was positive in the third quarter. So we have eased up on some of the cost reductions we had put in place after the extremely mild second quarter. We've moved right from a warm fall to a colder winter almost overnight and we've seen the benefit of that in our earnings. So while we've reinstated some of those previously held cost back into operations, we are still seeing better results. So we're moving the range up to reflect our target of $2.14. For 2020, our ongoing earnings guidance ranges $2.16 per share to $2.26 per share with a midpoint of $2.21. All of the detailed drivers walking from 2019 to 2020 are included in the appendix, but I'll go through the key points for each segment.

Turning to Slide 8. I'll cover our load expectations for PNM and TNMP. At PNM, we are expecting to see increases in our customer counts and overall usage. Our data center load is scheduled to ramp up significantly in 2020 driving the overall increase in load. The data center liens on our systems resources to fill any gaps between their overall energy needs and their dedicated renewable resources. In 2020 their energy usage is expected to grow beyond current dedicated resource levels until new renewable resources come online higher revenues will be collected for these increases on our system. We continue to see inquiries from new data centers and high-tech, manufacturing centers.

Just last week, Ares Power [Phonetic] announced that they will bring an $100 million of investment to state -- to the state beginning in 2020. We have seen earlier this month that fan of -- of Virginia-based company that provides call center and other customer service functions announced an expansion to Albuquerque bringing 700 jobs and beginning operations in January. In the residential and commercial customer classes. We continue to see steady customer growth, but these impacts were offset by energy efficiency efforts that are being implemented by commercial customers. At TNMP, we continue to see growth across our service territory stemming from the strength of the Texas economy. The Texas economic development website features a listing of awards and accolades, everything from Best State for Business for the 15th consecutive year in 2019 by Chief Executive Group, all the way to U-Haul ranking Texas as number one Growth State in America.

Our demand-based growth forecast in 2020 is 4% to 5% and we also continue to see customer growth. In our third quarter earnings call, we increased the amount of capital investments in our plan to support this level of growth while focusing on reliability. We've included a slide in the appendix to give you a better idea of where our investments are being made in our service territory and also some of the key projects in 2020. In addition to upgrades planned for this upcoming year in West Texas that support continued growth in that area. We have transmission lineup grades in the Gulf Coast to interconnect new plants and replacement of our AMI meters to be compatible with current network -- capabilities. We are rebuilding, replacing, and upgrading transmission stations across our service territory. And we are installing substations and upgrades to both distribution and transmission facilities to support growth.

Now let's turn to Slide 9 and cover the key earnings drivers for PNM. PNM is expected to increase from a midpoint of $1.64 in 2019 to $1.70 in 2020. In 2018 and 2019 PNM earnings included phase-in of retail rates based on a 2018 test year. In 2020, we do not have any changes to retail rates, but we have increased revenues for a load growth, rate recovery of our renewable rider and FERC transmission formula rates.

The renewable rider incorporates 50 megawatts of PNM solar added to serve retail customers. The increase in FERC formula rate revenues reflect recovery of additional transmission investments. Of course increased investments leads to depreciation expense and property taxes, some key projects will come online in 2020 as well. The BB2 transmission line will be completed in the fourth quarter and construction will begin on the portion of our system that will connect to the Western Spirit transmission line that is expected to be in service in mid 2021. On the O&M front planned outage costs will decrease substantially, as San Juan completed its last planned outage in 2019 in anticipation of its retirement. Partially offsetting this will be an increase in non-outage costs as 2020 cost will return to normal levels compared to reductions implemented in 2019. As we mentioned in the last call that we were delay in our next general rate case filing until the second quarter of 2020. Keep in mind that the filing would be based on a future test year, it would not have an impact on 2020 Earnings.

Now turning to a TNMP on Slide 10. TNMP earnings are expected to increase from approximately $0.70 in 2019 to a midpoint of $0.73 in 2020. 2019 EPS includes $0.04 of weather benefit making the normalized year-over-year increased $0.07. In addition to our semi-annual TCOS filings we -- we anticipate making our first DCOS filing in April of 2020 to begin recovery on distribution investments made over the last two years as our current rates are based on a test year ending in 2017.

In total rate recovery through the TCOS and DCOS mechanism is expected to increase earnings by $0.15 to $0.20 in 2020. Load continues to increase revenues, but the more significant impact of growth is the resulting investment recovered through the TCOS and DCOS mechanism. As we continue to make those investments the expense associated with them will also increase in 2020 depreciation, property taxes and interest expense. We anticipate issuing new long-term debt during the year to maintain our capital structure of 45% equity and 55% debt.

Slide 11, shows the earnings power view for 2020 based on the guidance midpoint of $2.21. At PNM we expect to come in just under our allowed return for the year due to the load growth and lower outage costs. Earnings from the FERC portion of our business will increase in 2020 with the annual formula rate increase. As a reminder, the FERC formula rate increase begins in June of each year creating an inherent drag on current year earned returns. As a result of this inherent lag we expect a 7.5% return in 2020. At TNMP the utilization of the TCOS and DCOS mechanism should help us achieve our allowed return in 2020 on an average rate base, no changes have been made to the 2021 through 2023 rate base our EPS number since our last presentation.

I'll wrap up with dividends on Slide 12. As Pat mentioned, the Board increased our common dividend by 6% earlier this month to $1.23. We target the middle of the payout ratio range of 50% to 60% and this puts us at 56% payout on the 2020 earnings guidance midpoint of $2.21. Going forward, we continue to expect dividend growth to be inline with earnings growth to maintain the midpoint of the targeted payout range.

Pat, I'll turn the call back to you. Thank you.

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Thanks, Don and your favorite cookie?

Don Tarry -- Vice President, Controller and Treasurer

It's peanut butter.

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Wow, OK. Lots of options for you guys to make for us. All right. So before I open it up to Q&A, I'd like to take a moment to thank our teams here at PNM, TNMP and at corporate further work during this year. We wouldn't be where we are without them. As you heard today, we have some great things in store for 2020 and I'm excited to celebrate our accomplishments and successes with everyone here working so hard to achieve them.

Jordan, let's open it up for questions.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Greg Gordon of Evercore ISI.

Greg Gordon -- Evercore ISI -- Analyst

Thanks. Good morning, guys.

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Good morning, Greg.

Greg Gordon -- Evercore ISI -- Analyst

Looking forward to seeing you in a few weeks in Scottsdale, it doesn't look like there are any really significant or substantial changes as I look at the Q3 Slide deck, where you gave the earnings power slide and as it's updated today. It doesn't look like there's any really dramatic changes in the outlook for any of the segments. Is there anything in particular that as you fine-tune the outlook for '20 from Q3 till now that changed as we -- as you look at all the underlying assumptions that's of note or is it all just small changes?

Don Tarry -- Vice President, Controller and Treasurer

Greg, this is Don. Yeah, it's just small changes compared to what we went over at EEI and Q3 earnings call.

Greg Gordon -- Evercore ISI -- Analyst

Okay. Great. What are your thoughts on the San Juan abandonment security -- securitization hearings. As to date in terms of what you've heard in testimony from all the different parties? I think they end tomorrow and you have a decision expected by April 1, but then the replacement power hearings start January 22. Is it possible we get a decision before April 1?

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

You know, Greg, I'll -- it's hard to start in reverse order. Possible, we get a decision before April 1. The commission is taking this is rapidly as they can. But April 1 is sort of the outlier in there with the holiday in the normal six to eight weeks to get a recommended decision could be disrupted. So we're in February now for six to eight weeks it might move to March. So I wouldn't bet on anything before April 1 is a sort of a long way of getting there. We've been pleased so far with the hearings. We think all of our witnesses did a very good job defending our case and we just kind of have to wait and see but we're real pleased with the progress so far.

Greg Gordon -- Evercore ISI -- Analyst

Great. And then when we met with the ODI, you talked about, in part, just given the economic activity in New Mexico I think opportunities for potentially more T&D and substation capex spending, as you look out over the forecast horizon at what point might you in the normal course of conversing with us, have a sense of whether that's, a, feasible and, b, give us those numbers?

Don Tarry -- Vice President, Controller and Treasurer

Yeah, in the PNM service territory, there is a -- significant amount of additional capital we could include related to reliability as well as hardening of our assets and so forth. So right now, we're focused on delivering on the current plan that we have.

Greg Gordon -- Evercore ISI -- Analyst

Great. Have a happy holiday season.

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Thank you, Greg.

Operator

Our next question comes from Julien Dumoulin Smith of Bank of America Merrill Lynch.

Analyst

Hi, good morning. This is Alex calling in for Julien.

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Good morning, Alex.

Alex Morgan -- Bank of America Merrill Lynch -- Analyst

Good morning. Adding in, I also do love a good chocochip cookie, so I'm part of the majority here.

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Will share with you, if we get some.

Alex Morgan -- Bank of America Merrill Lynch -- Analyst

Oh, fantastic. Can't wait. So my first question, I know we talked a little bit about EEI as well. I was wondering if you could provide any more firms details around the equity financing? I know in the slides, it still says the ATM program or the block sale, but it's more or less seemed after the EEI meeting that perhaps the ATM is not the most efficient way. I guess any commentary on type firming up the total amount in timeline or milestones to look for?

Don Tarry -- Vice President, Controller and Treasurer

Good morning. Yes. As we discussed at EEI, we're planning to issue up to $590 million of equity between 2020 and 2023 to fund our capital growth as well as our acquisition of Western Spirits. We're still working on the timing of those issuance and the type of instruments that would be used, and that we would expect to issue in 2020, but it would fit within the guidance range of $2.16 and $2.26. You'll note, we haven't changed any of the modeling assumptions that you've mentioned, but we will update the earnings power with this when the equity financing assumptions and the equity issuance is complete.

Alex Morgan -- Bank of America Merrill Lynch -- Analyst

Okay. Thank you. And then I also wanted to check in on the regulatory updates around securitization in Mexico. What is the next data point we should be looking for from the Supreme Court following the governor's vocal support?

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

While the next data point is that there is no deadline for the court to act on the petition, but on Monday, the court issued an order that requested parties respond to the current petition by January 3. So I would say January 3 is the next data point where there will be some filings and then we'll see from there.

Alex Morgan -- Bank of America Merrill Lynch -- Analyst

Okay. Thank you. And last question from me. I know Greg just previously asked a little bit about the potential increase in capex in the future, whether it's related to T&D or substation spending. Is there any other potential upside that we should be thinking about in the future that's not just T&D related?

Don Tarry -- Vice President, Controller and Treasurer

You know, the T&D would be the primary focus and the replacement power that we already have included in our capital budget as we look forward into the future.

Alex Morgan -- Bank of America Merrill Lynch -- Analyst

All right. Thank you so much and happy Baking Day.

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Thank you, you too.

Operator

Our next question comes from Ali Agha of SunTrust.

Ali Agha -- SunTrust -- Analyst

First question, Pat I know you all are fairly confident -- very confident, in fact, that you know the ETA certainly applies to

San Juan and obviously would go to court, if something negative but to come out of the commission. But just to be clear, if for whatever reason the ETA is denied for this, does the San Juan retirement and replacement go forward regardless or ETA obviously the linchpin in there?

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Yeah. Ali, I mean, it just one data point in the -- I mentioned that the Hearing Examiner said that the ETA applied in the case of the renewable portfolio standard filing and that's a good data point. I think if the commission would oppose hearing examiner's recommendation or does not approve -- excuse approves the Hearing Examiner recommendation that's very helpful data point. But yes, the San Juan shutdown and replacement power would still go forward remember securitization is really just a way to pay for the abandonment of San Juan that saves our customers a substantial amount of money, but the plant itself that shut down.

Ali Agha -- SunTrust -- Analyst

Okay. And then secondly, in the either the hearings or other discussions from the commission, what you say, how seriously are they taking the carbon capture potential and then keeping the plant open? Is that being given any serious constraint at all?

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Well, I think I think Ali everybody is somehow hopeful, I think the newspaper today called at a Hollywood ending for San Juan, but the cost issues around the technology are just pretty hard to overcome even with the federal tax credits, the technology has been proven to work, but not at the scale of San Juan and the cost is just insurmountable. So, I think everyone is looking at it, because they are helpful but I think at the end of the day, the costs are just going to think it.

Ali Agha -- SunTrust -- Analyst

Okay. And then my last question. Chuck you know back at EEI coming back to the financing, the impression, at least I got from our meeting was that at that time you were thinking that the mandatory convert for a variety of reasons seemed like the more attractive option than an equity forward and you're probably leaning more toward that. Just wondering if your thoughts have changed? Or is that still the way you're currently thinking about this?

Don Tarry -- Vice President, Controller and Treasurer

Ali, this is Don. We're still evaluating what the right instrument is to utilize so.

Ali Agha -- SunTrust -- Analyst

Okay. And Don, what would be the trigger mechanism that from a timing perspective causes you to then come to market? Is it market conditions? Is it updated financials? What's sort of going to be the triggering event here?

Don Tarry -- Vice President, Controller and Treasurer

It's optimizing the timing of those issuances and when they would issue. I mean, we have the Western Spirits -- Western Spirit transaction out there in July of 2021, clearly that's a data points. And then just optimizing within our own plan and sharing our balance sheet metrics stay where they need to be, as well as fund the capital growth that is out there.

Ali Agha -- SunTrust -- Analyst

Thank you.

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Thanks. Ali.

Operator

Our next question comes from Paul Fremont of Mizuho Securities USA.

Paul Fremont -- Mizuho Securities USA -- Analyst

All right. Thank you. I guess my first question is, are you expecting the court to issue a decision prior to the April 1 deadline that the NMPRC has in the abandonment proceeding?

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

You know Paul, we just don't know. We -- there is no deadline for them to act and they could act quickly if they if they choose, and they can take a while, if they choose, we just have no line of sight into that.

Paul Fremont -- Mizuho Securities USA -- Analyst

And then I guess it's my understanding that one of the justices were accused themselves. What was the rationale for that decision?

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

There was no explanation given.

Paul Fremont -- Mizuho Securities USA -- Analyst

But somebody, I guess the judge that's not on the Supreme Court then gets a chosen to take their place? Or is that how it works?

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Well, Paul, just to go back, there was no rationale given, but understand that she is the Chief Justice that she recused herself. And one of the -- one of that -- one of her duties is to go to the legislature and ask for budget money, and so this is total speculation she just may have felt that she didn't want to create any conflict of interest, obviously the judge's are all very ethical people so she didn't want to create any kind of conflict, and again that's total speculation on our part. And yes, they pick the judge from Las Cruces to fill in for that.

Paul Fremont -- Mizuho Securities USA -- Analyst

Great. And -- I think that's it. Thank you very much.

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Thank you, Paul. Looking forward to the cookies from you.

Paul Fremont -- Mizuho Securities USA -- Analyst

Absolutely.

Operator

Our next question comes from Jonathan Reeder of Wells Fargo.

Jonathan Reeder -- Wells Fargo Securities -- Analyst

Okay, Pat. My favorite is oatmeal raisin, but around Christmas time, I definitely like some good snickerdoodles. So send me..

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

You're making me hungry, Jonathan.

Jonathan Reeder -- Wells Fargo Securities -- Analyst

I am actually hungry, so I was just thinking about it. It kind of went a little fast, but can you reiterate what the expected earned ROEs in 2020 are? I think you might have said New Mexico is going to earn-out and Texas might be below, but I'm...

Don Tarry -- Vice President, Controller and Treasurer

Yeah. And Jonathan, I'll refer you to the earnings power we have them in their kind of the midpoint of the midpoint of the earnings range for 2020. So PNM retail, we expect to earn right there at its ROE at 9.5%, we expect TNMP to earn at 9.65% right, it's allowed our ROE. And PNM FERC, we expect to earn at the 7.5% due to the inherent lag associated with the timing of the formula rate.

Jonathan Reeder -- Wells Fargo Securities -- Analyst

Okay. So the FERC that has the lag. Got you.

Don Tarry -- Vice President, Controller and Treasurer

Yeah.

Jonathan Reeder -- Wells Fargo Securities -- Analyst

And then impact the six to eight weeks for the end of the Hearing. Is that for the Hearing Examiner recommended decision? Or is that final decision?

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

That's set for the hearing examiner -- excuse me, the commission. I'm having one of those mornings, Jonathan.

Jonathan Reeder -- Wells Fargo Securities -- Analyst

Okay. I have every morning, so if you have only one, you're good. So that's the PRC's final decision is typically six to eight weeks from the end of the hearings and the Recommended Decision would be some time in between. Is there some sort of like prescribed timeframe between the recommended decision and final decision that has to be like 30 days or something?

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

No. And I would -- if I was marking a day on my calendar, I'd mark April 1.

Jonathan Reeder -- Wells Fargo Securities -- Analyst

Okay.

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Yeah, good.

Jonathan Reeder -- Wells Fargo Securities -- Analyst

And then you mentioned the renewable docket Hearing Examiner to determine the ETA was applicable. So does that make you more optimistic that, I guess, the conclusion of the ETA -- or sorry, in the SGA GS [Phonetic] docket could be similar? Is it the same hearing examiner or different hearing examiners and everything?

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

It gives us more optimism, right? Things can change, hearing examiners and commissions can take different positions, but it does give us more optimism that the law does apply.

Jonathan Reeder -- Wells Fargo Securities -- Analyst

Okay. Is it the same Hearing Examiner or different?

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

It's one of the two Hearing Examiners. Remember, there's two Hearing Examiners on the San Juan case and the Hearing Examiner on the renewable case is one of those two Hearing Examiners, so yes.

Jonathan Reeder -- Wells Fargo Securities -- Analyst

Okay. That's good. And then lastly, can you update on the potential repurchase of the power of earlier leases. I think you have to indicated by mid-January about the larger of the 2 [Phonetic] the 104 megawatts?

Don Tarry -- Vice President, Controller and Treasurer

Yeah, Jonathan, this is Don. Yeah, the 104 of the 114 megawatts on January 15, we have to decide whether we're going to return them or keep them and then go through a purchase process we're still in that analysis right now, I would point that we do need the megawatts out there. So if we do return them, then we will have to replace those megawatts, but we haven't made any decisions at this point.

Jonathan Reeder -- Wells Fargo Securities -- Analyst

Okay. And then is that something that would just be a regulatory filing or is this something you would press release? How I guess, when would we kind of get the update what your preferred path is?

Don Tarry -- Vice President, Controller and Treasurer

We would have to file a notice with the commission of what our decision is. So it would be around that time frame right around the January 15 time frame.

Jonathan Reeder -- Wells Fargo Securities -- Analyst

Okay. All right. Thank you. Hope you guys have a great holiday.

Don Tarry -- Vice President, Controller and Treasurer

You too John.

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Same to you Jonathan.

Operator

[Operator Instructions] Our next question comes from Chris Ellinghaus of Siebert Williams Shank.

Chris Ellinghaus -- Siebert Williams Shank -- Analyst

Hey everybody. How are you?

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Good, Chris. Good morning.

Chris Ellinghaus -- Siebert Williams Shank -- Analyst

Good morning. I'm a little bit surprised by the reaction of the stock today, I mean your guidance range, your earnings power has been within this range for a couple of years now. So really no major changes like Greg was sort of suggesting. Are you aware of any investors that had higher expectations that would lead to the reaction today?

Charles Eldred -- Executive Vice President and Chief Financial Officer

Chris. This is Chuck. We're waiting for your note to change from a sell to buy, and that might help us out a little bit. But there's no issues that were reflected as you've just pointed out in our guidance, it looks like the market, the sector is down. I know there's a couple of analysts that put out notes this morning. Again, nothing new and unusual. So I think it's just where the market is, but hopefully this Guidance Call will get absorbed well in the market and investors will return back to be comfortable and we'll start seeing the stock moved upwards again.

Chris Ellinghaus -- Siebert Williams Shank -- Analyst

Okay. Thanks. The DCOS, can you give us a little insight into how you see that process looking for next year?

Don Tarry -- Vice President, Controller and Treasurer

Yeah. Sure, Chris. That DCOS filing is pretty standard in Texas where you file that first week of April. And a couple of elements that are a little bit different than the TCOS is, the DCOS, you can't be over-earning so in that April file and you file your earnings monitoring report with the Texas Commission as well. A couple of other differences that go into the DCOS is they do update for your ADIT, and that DCOS filing can only be done once a year and you can only be done during that period of time. And then after you file that September 1st is when the rates would go into effect.

Chris Ellinghaus -- Siebert Williams Shank -- Analyst

Okay. So just to be clear that you do have some small stub for a DCOS assumption in the guidance?

Don Tarry -- Vice President, Controller and Treasurer

There is a DCOS assumption in the guidance. Yes.

Chris Ellinghaus -- Siebert Williams Shank -- Analyst

Okay. Great. And Chuck, by the way, the correct answer is chocolate chip.

Charles Eldred -- Executive Vice President and Chief Financial Officer

Okay.

Patrick Apodaca -- Senior Vice President and General Counsel

And Chris, I think the reason our stock is reacting the way it is, is that the market doesn't like Chuck's choice of cookie.

Chris Ellinghaus -- Siebert Williams Shank -- Analyst

But you know the chocolate chip there I just..

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Yeah.

Operator

This concludes our Q&A session. I would now like to turn the conference back over to Pat.

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Thank you, Jordan. And thank you all for joining us this morning. We are eagerly awaiting the boxes of cookies coming our way, have a happy and safe holiday season and we look forward to seeing you all in 2020.

Operator

[Operator Closing Remarks]

Duration: 35 minutes

Call participants:

Lisa Goodman -- Director of Investor Relations

Patricia K. Collawn -- Chairman, President and Chief Executive Officer

Charles Eldred -- Executive Vice President and Chief Financial Officer

Don Tarry -- Vice President, Controller and Treasurer

Patrick Apodaca -- Senior Vice President and General Counsel

Greg Gordon -- Evercore ISI -- Analyst

Analyst

Alex Morgan -- Bank of America Merrill Lynch -- Analyst

Ali Agha -- SunTrust -- Analyst

Paul Fremont -- Mizuho Securities USA -- Analyst

Jonathan Reeder -- Wells Fargo Securities -- Analyst

Chris Ellinghaus -- Siebert Williams Shank -- Analyst

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