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Portland General Electric Co (POR -0.62%)
Q2Â 2020 Earnings Call
Jul 31, 2020, 11:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning, everyone, and welcome to Portland General Electric Company's Second Quarter 2020 Earnings Results Conference Call. Today is Friday, July 31, 2020. This call is being recorded, and as such all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. [Operator Instructions]
For opening remarks, I will turn the conference call over to Portland General Electric's Senior Director of Investor Relations, Jardon Jaramillo. Please go ahead, sir.
Jardon Jaramillo -- Senior Director, Investor Relations, Treasury and Finance Operations
Thank you, Andrew. Good morning, everyone. I'm pleased that you're able to join us today. Before we begin this morning, I'd like to remind you that we have prepared a presentation to supplement our discussion, which we'll be referencing throughout the call. The slides are available on our website at investors.portlandgeneral.com.
Referring to Slide 2, some of our remarks this morning will constitute forward-looking statements. We caution you that such statements involve inherent risks and uncertainties and actual results may differ materially from our expectations. For a description of some of the factors that could cause actual results to differ materially, please refer to our earnings press release and our most recent periodic reports on Forms 10-K and 10-Q, which are available on our website.
Leading our discussion today are Maria Pope, President and CEO; and Jim Lobdell, Senior Vice President of Finance, CFO and Treasurer. Following their prepared remarks, we will open the line for your questions.
Now it's my pleasure to turn the call over to Maria.
Maria Pope -- President and Chief Executive Officer
Thank you, Jardon, and good morning. Welcome to Portland General Electric's earnings call. I hope that you're all staying safe and healthy during these unprecedented times. Today, I'll provide an overview of our financial results, updates on our economy and actions we've taken in response to the COVID-19 pandemic. Jim will provide more detail on our financial results, as well as the outlook for the remainder of the year.
Before I go through the quarter, I want to first address the social unrest that we are experiencing in our state, across our country, focused on racial inequities and the ongoing protests that have placed Portland front and center. We are reminded daily that we are living in historic time for our community and country. This tumultuous time, corporations have an opportunity to use our influence for positive change. PGE is committed to diversity, equity and inclusion. While we are proud of our work to date and making progress toward our DE&I goals, we know that there is much more to do. We're looking at all the ways, we have impact through policy, employee hiring, promotion and retention as well as supporting the communities we serve. And we will do so while working together collaboratively with customers and communities as we continue to provide safe, reliable, affordable and clean energy.
Now, let's turn to the financial forecast and our performance on Slide 4. On our last earnings call, we lowered our guidance to reflect the COVID-19 pandemic and resulting drop in economic activity. Our response included reducing operating expenses as part of our ongoing commitment to control costs across the organization. For the overall quarter, revenue was strong under the circumstances and was led by high-tech and digital industrial deliveries, favorable hydro and wind conditions across the region resulted in surplus energy and low power prices.
Additionally, we were able to lower operating expenses due to operational efficiencies and lower dispatch rates at our generating plants. As a result, our second quarter 2020, net income was $39 million or $0.43 per share, which represents an increase of $0.15, when compared to 2019. You may recall in the second quarter of 2019, we experienced the opposite condition, record low hydro in the region and unfavorable weather, which negatively impacted our gross margin. With year-to-date earnings per share of $1.34, we are more than halfway to our midpoint of our guidance making a solid first half of the year.
The second half of the year presents challenges as the economic fallout from the pandemic will continue to impact retail revenue and wholesale market condition. Retail deliveries for the balance of the year will also be impacted by the decoupling mechanism. Gross margin will face additional headwinds due to more normal power market conditions. Jim will further address both decoupling and power markets later in the call.
While the first full year financial picture presents challenges, we continue to aggressively manage costs to drive strong business results and are reaffirming our revised full-year guidance of $2.20 to $2.50, reflecting anticipated economic challenges that our customers and our community face. As we move forward, we continue to pay close attention to economic conditions and the course of the pandemic. Our first quarter forecast projected a gradual recovery into 2021, that forecast remains largely unchanged and our outlook for the balance of '21 -- excuse me 2020 remains cautious.
Turning to Slide 5, the economic impact of the pandemic on businesses, communities and residential customers is reflected in the spike [Technical Issues] in the unemployment rate, which rose from historic lows of 3% in March to 14% in April, and is now 11%. In response to the economic hardships faced by our customers, we have paused collection of late fees and service disconnections, and are working with customers to implement flexible payment options. The impact of economic conditions on energy usage has been relatively consistent with our forecast.
Second quarter residential loads increased 7% on a weather adjusted basis and the number of customers increased by 1.6%. Industrial deliveries increased 3% on a weather adjusted basis as our digital services and high-tech manufacturing customers continue their long-term trend of steady growth despite the pandemic. These increases were more than offset by the 16% decrease in the commercial sector or declines were concentrated in hospitality, government, education and office buildings.
Turning to Slide 6, we are on track to achieve our strategic targets and major capital projects. We've had no significant supply chain or operational disruptions as a result of COVID-19. Wheatridge and the integrated operation center remain on schedule. In May, we announced our partnership with the Douglas County Public Utility District for a five-year power purchase agreement for capacity that provides up to 160 megawatts of emissions free hydroelectric power. As part of this partnership, we will be providing load management and wholesale marketing and services, leveraging our power portfolio management expertise.
Regarding future resources, we expect to issue one or more RFPs for the new admitting resources. Over the next several years, Portland General Electric and the region sees growing capacity needs as regional coal resources are retired. We will also continue to assess the region's energy needs, given long-term economic consequences of the pandemic and other factors and market dynamics.
With that, I'll turn the call over to Jim. Thank you.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Thank you, Maria, and good morning everyone. Turning to Slide 7, I'd like to walk through our quarter-over-quarter results. As Maria mentioned, earlier, our earnings guidance -- our earnings per diluted share of $0.43 is up $0.15 from the same period in 2019. Starting with $0.28 in the second quarter of 2019 on the slide, first, gross margin increased earnings a total of $0.04 per diluted share. This increase is the result of a $0.01 decrease in retail revenues, which includes the negative impacts of weather for the quarter and the effects of customer class composition on retail deliveries, and a $0.05 increase in net variable power costs, which includes higher wholesale revenues driven by a surplus of hydro and wind in the region.
Next, an $0.08 increase from lower operating and maintenance expense, which consists of a $0.06 from reduced maintenance at our Boardman facility and a reduction in operating expenses for other fleet assets. A $0.07 benefit from lower administrative expenses from savings and outside services and lower incentives, and a $0.05 decrease from higher bad debt expense associated with COVID-19. A $0.01 decrease from higher depreciation and amortization expense due to greater plant in service in 2020 a $0.01 increase from other items including higher returns on non-qualified benefit plan assets, and finally, a $0.03 increase from lower tax expense primarily due to PTC generation from strong wind production.
On the slide 8, we are continuing to monitor our liquidity as economic conditions evolve. Our balance sheet remains strong following actions taken earlier this year to improve our liquidity and ensure that we can continue to best serve our customers. We expect to fund 2020 capital requirements with cash from operations, issuance of debt securities and the issuance of commercial paper as needed. Earlier this week, our Board approved a dividend increase of $0.09 per share on an annualized basis, which represents a 5.8% increase. This increase follows the decision to hold the dividend flat in the first quarter as we assess the potential impact of the pandemic and is consistent with our long-term dividend guidance.
In regulatory matters, last quarter we filed with the Oregon Public Utility Commission to defer expenses associated with the impact of COVID-19 for potential recovery. The Commission is conducting a process to determine the next steps and we have yet to defer any COVID-19 related costs. Last month, Commissioner Letha Tawney was reappointed to the Oregon commission and we are pleased that she continues to represent our customers.
Moving to Slide 9, which shows our updated capital forecast for 2020 through 2024, we are continuing to focus our investments on the reliability and resiliency of our system, while minimizing the impact on customer prices. We are on track to execute our planned capital projects for the year and believe the adjustments to our liquidity and capital plan made last quarter were one-time events.
Finally, I'll cover our earnings outlook for the remainder of 2020. We expect continued impacts from the pandemic on the economy and the regional power picture. As Maria mentioned, we achieved $1.34 on earnings to date, with $1 remaining to reach the midpoint of our earnings guidance, I would like to cover a few considerations. Despite strong gross margin through the first half of the year and retail revenue above expectations, we expect lower gross margin in the second half of the year. We also anticipate a similar load composition to the second quarter and as such we are raising our full year load guidance assumption to flat on a weather adjusted basis. Our commercial customers continue to face risks associated with economic -- with the economic impact of the pandemic in Oregon, but the strength of residential and industrial energy deliveries has mitigated this.
Despite this upward revision in demand, we are maintaining guidance due to the structure of the decoupling mechanism. Residential customer usage on a weather adjusted basis, that is above the established baseline is refunded to customers while the commercial decoupling collections are capped at 2% of revenue for the commercial customer class. We are also experiencing a unique year in the power markets. We're currently $38 million below the PTM baseline year-to-date due to favorable wind and hydro conditions in the region.
We estimate that we will continue to remain below the baseline at year-end, but within the established deadband range. This increase in power costs for the balance of the year is a result of the interaction of lower power prices in the region and our forward power position to serve anticipated load. Additionally, as Maria mentioned, we are reaffirming our full-year earnings guidance of $2.20 to $2.50 per share based on the assumptions outlined in our press release and our long-term EPS growth target of 4% to 6% over time.
And now, operator, we are ready for questions.
Questions and Answers:
Operator
Thank you. [Operator Instruction] The first question comes from the line of Insoo Kim with Goldman Sachs.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Good morning, Insoo.
Insoo Kim -- Goldman, Sachs & Co. -- Analyst
Good morning, and thank you, and I hope you guys are doing -- staying safe as well in these crazy times. Just a question on the guidance, and thank you for the details on the decoupling mechanism. I think that was something that we had talked about in the last quarter as well. But given just the year-to-date results and I think some of the benefit you had realized from certain -- better than expected demand trends, was the second half impact of the decoupling [mechanism] [0:16:28] somewhat anticipated and if that was so, all else being equal, are you looking at something more in the upper half of the range or are there some other considerations beyond the decoupling that we should be considering?
Maria Pope -- President and Chief Executive Officer
So, thanks Insoo. So first of all, yes, we did anticipate the decoupling mechanism when we reaffirmed our guidance this quarter, but then also when we lowered guidance last quarter. And so we were looking at not only the economic impact of the pandemic, but our regulatory environment as we move forward. Let me let Jim to walk you through a little bit in more detail on how the decoupling mechanism works.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Yes, thanks Maria. Insoo, as I was mentioning in my statement, when we look at the residential customers, they are actually up more than what we originally anticipated, but at the same time we are seeing more of a downside on the commercial side and expected and we are continuing to see strength in the industrial side. So on the residential that's being completely decoupled away, on the commercial as I had mentioned earlier, once you hit that 2% then effectively you can no longer collect from customers in the future point in time associated with that and then the industrial is helping to offset some of what we are experiencing on the commercial side as far as on recovery.
Insoo Kim -- Goldman, Sachs & Co. -- Analyst
Right. So just from what you recorded in the second quarter, the residential benefit that you received and -- that you saw in the second quarter from a income statement or earnings purposes weren't really a benefit to earnings or is there actually a timing component where that was reflected in second quarter, but then you actually have to adjust that in the later quarters?
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
No, it was all reflected in the second quarter. Any -- the refund to customers that would occur associated with amount over the weather-adjusted baseline, that was set in our January -- 2019 January case will be refunded back to customers in the 2022 time period, if I've got it correctly?
Insoo Kim -- Goldman, Sachs & Co. -- Analyst
Understood. And in terms of the capex that you had deferred, whether it's 2020 or 2021 at last quarter, I know you don't really change that for now and you spoke on being more cautious if things start to slowly improve throughout the balance of the year and early into next year. Could you see a bulk of that coming back in the 2021 timeframe? And at this point for 2020, do you not anticipate any reopening of capital for the rest of the year?
Maria Pope -- President and Chief Executive Officer
Because you know Insoo, we have a regular capital forecasting process that we followed at the Company and will remain disciplined on our spending given our cautious stance with regards to the economy and the length of time that we could be in a recessionary environment. One of the things we noted on the prior call was our positive growth in the high tech sector. And if there are new customers that come into our area and there are some in current conversations with us around additional capital investment, they may need, let's say for new substations or for other buildouts [Phonetic] particular to their operations and that would be an upside.
Insoo Kim -- Goldman, Sachs & Co. -- Analyst
Got it. Thank you so much.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Thank you. Insoo.
Operator
Thank you. And our next question comes from the line of Julien Smith with Bank of America.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Good morning, Julien.
Maria Pope -- President and Chief Executive Officer
Good morning, Julien.
Dariusz Lozny -- Bank of America -- Analyst
Hey, good morning. This is Dariusz Lozny on for Julien actually. Just a quick one here. Can you...
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Hey Darius, we can barely hear you.
Dariusz Lozny -- Bank of America -- Analyst
I apologize, this is better?
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Yeah, it's much better. Thank you.
Dariusz Lozny -- Bank of America -- Analyst
Okay, sorry about that. This is Dariusz Lozny on for Julien. Just a quick one on your expectations for your average CWIP balance for the year. I was wondering if you could speak of that at all?
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Yeah, it's unchanged.
Dariusz Lozny -- Bank of America -- Analyst
Unchanged. Excellent. Okay, thank you. That's it from me.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Thank you.
Maria Pope -- President and Chief Executive Officer
Thank you.
Operator
Thank you. Your next question comes from the line of Brian Russo with Sidoti & Company.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Good morning, Brian.
Brian Russo -- Sidoti -- Analyst
Hi. Good morning. Hey, it was nice to see the dividend increase. I was just curious, if you could just elaborate more on what factors the Board considered when raising the dividend now in July verses in April, when it was held flat?
Maria Pope -- President and Chief Executive Officer
So first of all, we recognize that our dividend is important component of our shareholder return and being a steady and financially healthy company. It's really important that as we invest for the long term in infrastructure to maintain a safe, reliable system that having a financially healthy utility is critically important. During the early days of the pandemic, there were a lot of unknowns with regards to our economic environment and we remain taking a cautious stance, but we announced at that point in time that we would continue to reassess our dividend, engaged with the Board on the discussion and what we're doing is proceeding with what otherwise would have been sort of our normal course in terms of maintaining healthy financial environment.
Brian Russo -- Sidoti -- Analyst
Hello.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Brian.
Brian Russo -- Sidoti -- Analyst
I'm sorry.
Maria Pope -- President and Chief Executive Officer
Can you hear?
Brian Russo -- Sidoti -- Analyst
I can hear you now. Thanks for that. And I guess you've kind of reinforces your confidence in your EPS CAGR just based on your target payout ratio?
Maria Pope -- President and Chief Executive Officer
Yes, one of the things that we have moved very aggressively on is cost reduce across our Company. On the O&M, and as you know and we just spoke about, we've also reduced our capital spending. We've brought in additional debt financing into the Company to maintain a stable and healthy balance sheet to ensure that we can weather what comes our way in the future as well as control our own destiny by maintaining a reliable and safe utility system.
Brian Russo -- Sidoti -- Analyst
Okay, great. And then just on the additional debt financing. When I look at the last disclosures versus the updated disclosures, it looks like you're now not forecasting any debt issuances in the third quarter versus previously you were assuming $135 million of debt insurances. So when you sum it all up, it looks like you're going to issue $125 million less debt in 2020 than previously forecasted?
Maria Pope -- President and Chief Executive Officer
So, Jim will give you all the details. One of the things I want to make sure we recognize is that we have been very successful at pulling back our capital expenditures and more importantly we've been successful in lowering our operating costs during this very challenging time. We've used the crisis in many ways to accelerate our use of technology, to reduce costs and to really focus on what matters to customers and we've probably exceeded some of our expectations and our ability to move quickly and we still have -- while we're still having a tremendous amount of work to do.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
And Brian, I'll add to that. We took out 10-year first mortgage bond earlier this year, and then we did a bank loan that help shore up the finances of the Company, because obviously we didn't know where things are going to go from a COVID economic impact perspective. And so as we're looking at our financing for the balance of the year. Given the fact that FERC has come out with a waiver on the imputation or the implications of short-term debt in the AFUDC crediting rate. We are looking at how we are going to time the repayment of that bank loan and whether the timing associated with additional long-term debt we would take out in the -- in probably Q4 of the year around $190 million, possibly.
Maria Pope -- President and Chief Executive Officer
Overall, we remain a net borrower for the year.
Brian Russo -- Sidoti -- Analyst
Understood. And just on the net variable power costs in the PCAM, just remind me real quickly how it works? You were at $30 million below the baseline at the end of the first quarter. [Technical Issues] It looks like you're now [Technical Issues] $38 million, so it was $18 million incremental positive benefit in the second quarter. Is that in the 5% of year-over-year gross margin benefit that you discussed, even though it's below the baseline and it's within the 90/10 sharing, because that calculation isn't made until year end. Is that the simplistic way to think about it?
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Yes, that it. You got to keep in mind that $38 million and getting to within the dead band is for the balance of the year. So it gives you an indication as what we're expecting in the power markets.
Brian Russo -- Sidoti -- Analyst
Okay. So, at the very least, you're expecting an $8 million reversal or $8 million incremental costs to get back to that baseline in the second half?
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Well, Brian, we're $38 million below the baseline right now. The dead band is $15 million below. So it would be moving from $38 million into the $15 million range.
Brian Russo -- Sidoti -- Analyst
Okay, got it. All right. Thank you very much.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Thanks, Brian.
Operator
Thank you. And our next question comes from the line of Chris Ellinghaus with Williams [Phonetic].
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Good morning, Chris.
Christopher R. Ellinghaus -- Williams Capital Group, LP -- Analyst
Hey, everybody. How are you?
Maria Pope -- President and Chief Executive Officer
Fine, Chris.
Christopher R. Ellinghaus -- Williams Capital Group, LP -- Analyst
Maria, you talked about being cautious. Can you give us a little more color on what you're cautious about? Is it just the economic recovery, is it how the pandemic will behave for the rest of the year and how that affects the economy? What are your thoughts there?
Maria Pope -- President and Chief Executive Officer
Chris, I think it's all of the above. As an essential service provider during these extraordinary times, delivering consistent reliable power services to our customers is our highest priority, ensuring the continuity of our generation fleet, the interaction and our capabilities in power markets, the transmitting of that power and distributing it to our customers day in and day out is our highest priority.
And I can tell you with the stress that families and customers and the communities that we serve are going through and I'm ensuring that we've minimized outages create payment plans that work for them, access LIHEAP and Oregon HEAT funds to support those that are struggling is -- takes enormous amount of focus. And also as I mentioned, we're using this period of time to really focus on our cost structure, accelerating our use of technology, simplifying our processes on our procedures to ensure that everything that we do is meaningful to our customers and the communities that we serve.
We have a long ways to go with regards to this economic recovery, and there is a tremendous amount of uncertainty and we will remain focused on investing in our system prudently and to ensure reliability. All of us have aging assets. We also have the opportunities to reduce costs through technology.
Christopher R. Ellinghaus -- Williams Capital Group, LP -- Analyst
Okay. Thanks. Maria, can we assume that the Company will plan to revert to the April date for the dividend?
Maria Pope -- President and Chief Executive Officer
That's a really good question, Chris. And we're going to assess that as we go forward. One of the things that we have noted in this process is that we are one of the early companies in announcing our dividend and we're going to think about what's the most prudent and practical thing to do as we move forward. We do recognize that a dividend and a solid dividend policy is important to investors and helps create financial stability for the Company as we continue to move forward into the future.
Christopher R. Ellinghaus -- Williams Capital Group, LP -- Analyst
Okay. Jim, have you got sort of a net impact number for COVID-19 for the quarter?
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
No, we don't, Chris.
Christopher R. Ellinghaus -- Williams Capital Group, LP -- Analyst
Okay. Did I hear you right when you said bad debt was a nickel?
Jardon Jaramillo -- Senior Director, Investor Relations, Treasury and Finance Operations
Bad debt is estimated to be about $15 million when we get to year-end.
Christopher R. Ellinghaus -- Williams Capital Group, LP -- Analyst
Okay.
Maria Pope -- President and Chief Executive Officer
Hey, Chris, you know one of the things, I couldn't be more proud of how we have shown up during the pandemic. With people working from home six feet apart, we have maintained reliability and safety of our system and our employees have really showing up in a remarkable way. We've also worked collaboratively with the communities we serve to enhance our ability to work in the right away, and lower our cost in some instances in serving customers. We will continue to do that, but it's -- we're really working hard to minimize our cost increases due to the pandemic, and use this period of time as I've talked about to accelerate our opportunity for success as we go forward through lowering costs because we know that affordability is that much more important to customers today than it ever has been.
Christopher R. Ellinghaus -- Williams Capital Group, LP -- Analyst
Right. In that O&M number, is it fair to say that some of the reduction was passive in the sense that some things went down because of COVID. And so is some of that be active component in some things like medical expenses and some work that might have been deferred because of customer behaviors was a more passive element. Can you talk about that?
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Well, there is all different types of components embedded in the change in O&M. I mean there are some one-time items that are structural in nature that occurred. I mean, we did mention that incentives have gone down for the company, given the change and the EPS target for us. There are items that -- we don't have too many employees who are jumping on airplanes. Actually, I can't imagine anybody jumping on airplane for us. We are maintaining our headcount and trying to reduce it. As Maria had mentioned, we are using more and more technology to be able to find operational efficiencies and processes that we have in the Company. And we've got 2,000 employees who are now working from home. So we're doing that very effectively and we're evaluating what the next normal looks like on a going forward basis for our Company.
Christopher R. Ellinghaus -- Williams Capital Group, LP -- Analyst
Okay. One last thing. In the other bucket, the equity returns for the quarter were quite extraordinary. Were there any offsets to the equity return benefit in that other bucket?
Maria Pope -- President and Chief Executive Officer
So what you're referring to is our pension returns and other investment returns?
Christopher R. Ellinghaus -- Williams Capital Group, LP -- Analyst
Yes.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Yes. Not that I wouldn't really classify it as that, I mean incremental interest expense that we incurred associated with the additional liquidity that we brought into our balance sheet, but that's about it.
Christopher R. Ellinghaus -- Williams Capital Group, LP -- Analyst
Okay, great. Thanks for the color. Appreciate it. Stay safe, guys.
Maria Pope -- President and Chief Executive Officer
Thank you. You too.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Thank you, Chris.
Operator
Thank you. Our next question comes from the line of David Peters with Wolfe Research.
David Peters -- Wolfe Research -- Analyst
Hey. Good morning.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Good morning, David.
David Peters -- Wolfe Research -- Analyst
You guys reiterated the 1% load growth expectation over the long-term. I'm just wondering, do you have an expectation of how that might shape, looking into next year versus flat this year? Meaning, do you expect things to kind of rebound at that level or should we interpret that is more long dated?
Maria Pope -- President and Chief Executive Officer
I think you should interpret it as long dated. And we feel very fortunate to operate in a region where people want to move and locate their businesses here. We're forecasting a pretty modest to almost flat rise in residential deliveries. We are hoping that commercial will certainly come back and we talked a little bit in our prepared remarks around what we're expecting in terms of our forecast.
Long-term 0.5% increase in our commercial deliveries is our expectation. And where we really benefit and we've been talking about for quite a while is the growth in high tech and digital manufacturing in our region. And we're looking at just under 2% sort of ongoing growth in that area. So we are very fortunate to again, operate in an area where people want to live and locate their businesses and that gives us the opportunity to continue to serve them.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Yes. The in-migration is still a positive for the state and we continue to grow faster than other states.
David Peters -- Wolfe Research -- Analyst
Great. And then the deferral docket that's sitting at the commission, do you have any sense when they might look to act on that. Has there been any sort of procedural schedule put forth? And is there anything that would give you guys comfort in deferring some of those costs as you kind of work through this?
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
David, No schedule has been set at this particular point in time, continuing to work through the process to make sure that we've got all the information on the table. We're working collaboratively with all of the other parties. We are concerned that as we move -- as this process takes longer, we start getting closer and closer to the winter time period, which will have bills that are at higher levels. So we're trying to move everybody along.
David Peters -- Wolfe Research -- Analyst
Okay. And then lastly, just given everything that's transpired this fall with COVID and wanting to demand for customers, has it shaped at all how you might think about the timing for your next rate case filing?
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
No, it's still -- we're looking at the base economics of the Company. Yes, we are having some reduction in operating costs, that's helping us is our consideration. We're still investing in, as Maria talked about, in reliability of the system and with new MLA or master or minimum load agreements that we've been entering into with customers and so on and so forth. We are making capital additions.
We also have the Wheatridge facility coming in, but that will come in through Renewable Adjustment Clause. And then we're making to the point of reliability of our system, especially, we designed this facility for an earthquake, and now we're dealing which who knows when that one is going to happen, but it's key to the recovery of the state and the communities that we serve. But now we're dealing with something else we didn't predict and that's a pandemic. So it just increases the importance of completing that integrated operating center to be able to support our customers and our communities.
David Peters -- Wolfe Research -- Analyst
Great. Thanks, guys.
Maria Pope -- President and Chief Executive Officer
Thank you.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Thanks, David.
Operator
Thank you. Your next question comes from the line of Travis Miller with Morningstar.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Good morning, Travis.
Travis Miller -- Morningstar -- Analyst
Good morning. I was wondering real quick back to the O&M. How does that $0.08 of savings in the quarter relate to the $570 million to $590 million guidance range. Does that put you -- is that already incorporated in that range? Does that put you at a high or low end, you had mentioned some one-time items in there? And just wondering kind of where that fits in terms of the full-year outlook?
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Well, all I say Travis is when we get to year end, we anticipate being within that range. So that's where I'll continue the guidance to be based on everything that we've been able to do from one-time to structural to timing, we believe that we will be in that guidance range.
Travis Miller -- Morningstar -- Analyst
Okay.
Maria Pope -- President and Chief Executive Officer
The cost reduction work and focus on O&M is a really important component to us staying in that range for the balance of the year.
Travis Miller -- Morningstar -- Analyst
Okay. So that $570 million to $590 million would include what you would call some one-time items -- net any other one-time items or other changes in Qs one, three and four?
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
That's correct, Travis.
Travis Miller -- Morningstar -- Analyst
Okay.
Maria Pope -- President and Chief Executive Officer
Correct, as well as the ongoing work to keep our costs under control.
Travis Miller -- Morningstar -- Analyst
Sure. Okay. And then real quick just high level, wondering if you're seeing any additional battery or storage in general opportunities? What the pipeline or backlog might look like in that area? Anything going forward or change from the last couple of quarters apart from Wheatridge and the other smaller ones you got?
Maria Pope -- President and Chief Executive Officer
Yeah. So in terms of projects that we have going on that we're taking into our capital forecast in the near term, no. However, there is no question that we are seeing an acceleration in the interest of our customers in renewable energy, and a clean energy future. We're seeing an acceleration of interest in electric vehicles and battery storage. And we are really excited about the long-term opportunities, which we think will come at us at a faster pace than they otherwise would have, if not, but for the pandemic. And so the focus across all sectors on technology and using technology better to solve problems for our Company as well as for society in general.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
And we're going to be installing batteries in some of our residential customer homes in order to test out the capability and benefits associated with that, along with putting batteries in one of our substations and then also next to one of our generating stations in order to help with black start and with variations from the renewable energy resources that are on our system. So we're really looking forward to this. This is going to be an exciting time.
Travis Miller -- Morningstar -- Analyst
Okay. With all these, the rate base opportunities?
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Yes, we believe so.
Maria Pope -- President and Chief Executive Officer
Yes, they're all to serve customers.
Travis Miller -- Morningstar -- Analyst
Okay. And then, sorry, just one quick follow-up on that. Is there any kind of gating period? I know you go through the IRPs and such. Is there any next period where we might see a large battery or storage commitment show up in some of the capex numbers? Or will this be something that's just incremental quarter-to-quarter depending on opportunities out there? If you get my gesture [Phonetic].
Maria Pope -- President and Chief Executive Officer
Yes. No, absolutely. And we just received acknowledgments in May on our IRP in our Action Plan. We've entered into a contract with Douglas PUD. We will be filing an update to that IRP. And then also at the tail end of this year and into next year, we will be issuing RFPs. First step in that process will be the selection of an independent evaluator. And overall, our focus on capital additions on the generation or storage side are focused on not admitting resources.
Travis Miller -- Morningstar -- Analyst
Okay. Great. Appreciate it.
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Thanks, Travis.
Maria Pope -- President and Chief Executive Officer
Thank you, Travis.
Operator
Thank you. I would now like to turn the call over to President and CEO, Maria Pope, for closing remarks.
Maria Pope -- President and Chief Executive Officer
Thank you very much for joining us today. We appreciate that these are extraordinary times and we value your interest in Portland General Electric, and we hope to connect with you virtually in the future. Thank you very much and have a great day.
Operator
[Operator Closing Remarks]
Duration: 43 minutes
Call participants:
Jardon Jaramillo -- Senior Director, Investor Relations, Treasury and Finance Operations
Maria Pope -- President and Chief Executive Officer
James Lobdell -- Senior Vice President of Finance, Chief Financial Officer and Treasurer
Insoo Kim -- Goldman, Sachs & Co. -- Analyst
Dariusz Lozny -- Bank of America -- Analyst
Brian Russo -- Sidoti -- Analyst
Christopher R. Ellinghaus -- Williams Capital Group, LP -- Analyst
David Peters -- Wolfe Research -- Analyst
Travis Miller -- Morningstar -- Analyst
