WGL Holdings Inc. F1Q09 (Qtr End 12/31/08) Earnings Call Transcript

| About: WGL Holdings, (WGL)

WGL Holdings Inc. (NYSE:WGL)

F1Q09 (Qtr End 12/31/08) Earnings Call

February 5, 2009 10:30 am ET


Bob Dennis - Director of IR

Vince Ammann - VP and CFO

James DeGraffenreidt - Chairman and CEO

Harry Warren - President of Washington Gas Energy Services

Terry McCallister - President and COO

Adrian Chapman - VP of Operations and Regulatory Affairs and Energy Acquisition


Ryan Rosenthal - Sidoti & Company

Ted Durbin - Goldman Sachs


Good morning and welcome to the WGL Holdings Incorporated first quarter fiscal year 2009 earnings conference call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. We will open the conference call for questions-and-answers after the presentation.

The call will be available for rebroadcast today at 1:00 pm Eastern Time, running through February 12th at 5:00 pm. You may access the replay by dialing 1800-642-1687 and entering pin number 82386923. If you do not have a copy of the Earnings Release, you can obtain one at www.wglholdings.com.

I will now turn the conference over to Bob Dennis. Please, go ahead.

Bob Dennis

Thank you, and good morning, everyone, and thank you for joining our call. This morning's comments will reference a slide presentation on our website that you can access by going to www.wglholdings.com, then clicking the Investor Relations path and choosing Event & Webcast from the drop down menu. The slide presentation highlights our first quarter results and the drivers for those results.

A reconciliation of our operating earnings with earnings numbers reported in accordance with Generally Accepted Accounting Principles is provided as an attachment to our press release and is available in the Quarterly Results section of the Investor Relations site at www.wglholdings.com.

For your connivence, we will also be posting a transcript of this call to the Investor Relations section of our website.

This morning, Vince Ammann, Vice President and CFO, will provide a brief recap of the quarter with a focus on the major items that led to our results. Following that, Chairman and CEO, James DeGraffenreidt, will discuss items affecting fiscal year 2009 and our long-term performance and provide updated guidance for fiscal year 2009.

Also joining us on the call this morning and available to answer your questions are Terry McCallister, President and Chief Operating Officer; Adrian Chapman, Vice President of Operations, Regulatory Affairs and Energy Acquisition; and Harry Warren, President of Washington Gas Energy Services.

Finally, we encourage everyone to review our most recent Form 10-K filed with the Securities and Exchange Commission for a more complete discussion of the risks and uncertainties that can cause actual results to vary materially from the forward-looking statements that will be made this morning.

With that, I would like to turn the call over to Vince Ammann.

Vince Ammann

Thank you, Bob and good morning to everyone. Our first quarter results for fiscal year 2009 continue to build on the success of last year's results and underscore our ability to accomplish our strategic objectives even in a challenging economy. We are also raising our expectations for fiscal year 2009 earnings, as James will discuss in a few minutes.

I am pleased to report that we delivered first quarter GAAP net income of $51.8 million, or $1.03 per share. This is an increase of $4.6 million or $0.08 per share, over net income of $47.2 million or $0.95 per share reported for the first quarter of fiscal year 2008. Please note that all per share amounts are referenced on a fully diluted basis.

The current quarter's non-GAAP results for WGL Holdings have offsetting adjustments and are essentially the same as our GAAP results. In the current period, unrealized mark-to-market adjustments for the utility operations together with certain adjustments for storage-related derivatives and the reversal of a prior period lower cost of market adjustments were offset by mark-to-market adjustments for the retail marketing segment.

Last year's first quarter included non-GAAP adjustments for a net increase in operating earnings of $0.01 per share. This included $0.02 per share loss for the reversal of a portion of the cost previously reported for the District of Columbia jurisdiction of our utility operations related to the business process outsourcing and unrealized mark-to-market gains of $0.05, $0.03 of which were related to our utility operations and $0.02 related to retail energy marketing.

Last year's first quarter non-GAAP adjustments also included $0.02 per share of unique regulatory adjustments related to prior period recovery of a tax gain in accordance with our Maryland order and an adjustment for interruptible sharing in the DC jurisdiction.

After adjusting for these items, the current quarter's WGL Holdings results for non-GAAP operating earnings were $51.7 million, or $1.03 per share, a $4.3 million or $0.07 improvement over last year's first quarter $47.4 million or $0.96 per share operating results, as shown on slide three.

The increase for year-over-year first quarter non-GAAP operating earnings was attributable to $0.02 per share for utility operations and a $0.05 per share improvement in non-GAAP results, which include a $0.03 per share improvement in retail energy marketing results and $0.02 per share for design-build energy systems and other activities.

I will now review our first quarter results beginning with our utility operating segment. On slide four, utility operations reported first quarter GAAP earnings per share of $50.9 million or $1.01 per share, an increase of $6.7 million or $0.12 per share over the same period last year. Corresponding GAAP net income in the prior year was $44.2 million, or $0.89 per share.

After recognizing the non-GAAP adjustments mentioned previously, the regulated utility segment reported higher operating earnings of $45.4 million or $0.90 per share, over the $43.5 million or $0.88 in the first quarter of fiscal year 2008.

As shown on slide five, non-GAAP operating earnings for the current fiscal quarter included an increase of approximately 7,600 average active customer meters over the same quarter last year. We continue to be optimistic that we will return to higher levels of customer additions once the market for new housing recovers.

In the interim, we are targeting programs to improve customer awareness of the benefits of natural gas to help stimulate conversions from other energy sources and to add more new multi-family houses and apartments.

Also improving non-GAAP operating earnings period-over-period was a higher level of recovery for carrying costs that resulted from an increase in natural gas prices for gas placed in storage during the spring and summer of 2008.

For the first three months of fiscal 2009, lower labor and benefit cost, due in part, to the outsourcing initiative together with reduced costs for weather protection products, decreased operating and maintenance expense by approximately $0.05 per share and $0.02 per share, respectively.

With the outsourcing transition phase largely behind us, we are beginning to see the benefits of lower labor and benefit costs.

In the District of Columbia, we protect ourselves from the effects of weather volatility with weather protection products that include weather insurance and derivatives tied to heating degree days. In Maryland, we are protected from the weather variations through a revenue normalization mechanism. In Virginia, we have a provision for a weather normalization adjustment.

Partially offsetting these improvements on non-GAAP operating earnings were changes in natural gas consumption patterns between the first quarter of fiscal year 2009 and 2008 that reduced operating earnings by approximately $2.4 million.

Although, the first quarter of fiscal year 2009 was 23% colder than the same period for fiscal year 2008, last year the distribution of that weather, which we referred to as the quality of the degree days, together with other factors, contributed to higher levels of consumption per customer.

On November 27, 2007, we implemented new rates in our Maryland jurisdiction. At the same time, we implemented updated factors for our revenue normalization adjustment or RNA that will allow us in combination with our approved base rates, to recover the anticipated revenues from customers, regardless of changes in weather and customer usage.

Individual monthly revenues that we can collect from our customers under the RNA reflect the pattern of customer usage during the test year used to set the new base rates. Because results for the first quarter fiscal 2008 reflect the combination of customer usage patterns from two different test years, the RNA factors contributed incremental revenue for the first quarter of fiscal 2008 when compared to the same period in fiscal 2009.

With the implementation of the new rates, the RNA factors were updated and incorporated into the rate structure utilized in projecting fiscal year 2009 guidance.

Our asset optimization program delivered operating earnings of approximately $2.1 million for the first quarter of fiscal year 2009, whereas the first quarter fiscal year 2008 operating earnings for the asset optimization activities were $3 million.

Turning now to our retail energy marketing segment, slide six shows that retail energy marketing reported first quarter GAAP earnings of $450,000 or $0.01 per share, versus $3.3 million or $0.07 per share in the same period last year.

For the first quarter of fiscal year 2009, non-GAAP operating earnings for the retail energy marketing segment were $5.8 million, or $0.12 per share. This is an increase of $1.5 million or $0.03 per share over non-GAAP operating earnings of $4.3 million, or $0.09 per share for the same period last year.

The improvement in non-GAAP operating earnings, as shown on slide seven, primarily reflects higher realized margins from the sale of natural gas. These improvements were partially offset by lower natural gas sales reflecting the loss of several large government accounts.

Electric sales volumes are also down first quarter fiscal year 2009 compared to the same period last year. However, the annualized electric load under contract at the end of December of 2008 is 17% higher than at the beginning of the fiscal year, leading to higher electric volume projections for the fiscal year 2009.

The current weak economy has resulted in retail energy services increasing its reserve for uncollectible accounts. Retail energy services bad debt experience is still relatively low because of the quality of the credit screening process used for new customers and the use of a broad set of tools to monitor and address any emerging credit issues with existing customers.

Our design-build energy systems segment, which includes the operations of Washington Gas Energy Systems, Inc., provides design-build energy efficiency and sustainable solutions to government and commercial clients.

These operations reported a net income of $832,000 or $0.02 per share for the first quarter of fiscal year 2009, an increase of $559,000 over a net income of $273,000 reported for the same period of fiscal year 2008. The increase primarily reflects higher revenues and lower cost of sales associated with design-build projects.

We are delighted fiscal year 2009 is off to such a good start with these impressive first quarter results. I conclude my discussion for the quarter and I will now turn the call over to James.

James DeGraffenreidt

Thank you, Vince, and good morning, everyone. As many of you know I announced in late December that I would be stepping down from my position as Chairman and Chief Executive Officer, effective October 1, 2009.

I am pleased that the Boards of WGL Holdings and Washington Gas nominated our current President and Chief Operating Officer, Terry McCallister, to serve on each of the two company's Board.

Shareholders at the Annual Meeting that will be held in March 2009 will vote on his nomination to join the Board as a preliminary step towards ultimately succeeding me as Chairman and Chief Executive Officer when I leave in the fall.

I am proud of our company's many accomplishments. We have maintained an excellent safety record and delivered outstanding operational and financial results that position us well for the future.

As we move ahead with a strong management team and the commitment of our employees to a high performance culture, I am confident that our company will sustain success after I complete my tenure here.

As Vince mentioned, our strong financial results for fiscal year 2008, reported a few months ago, continued into the first quarter of fiscal year 2009. We are clearly achieving success in executing our business and strategic plans to deliver year-over-year improvement and reward our shareholders and customers.

In addition to our strong financial results, we remain focused on our key strategic objectives. We are improving transparency and consistency of our utility earnings by removing the effects of volatility caused by variations in customer usage.

As shown on slide eight, we have improved the stability and transparency of our utility earnings growth by securing Weather Normalization Adjustment Mechanism, or WNA, in Virginia. The implementation of the WNA and our existing declining block rate structures eliminate 90% of the volatility caused by fluctuating gas usage in Virginia, our largest service territory.

Combining the application of the Virginia WNA with the Maryland revenue normalization adjustment or RNA, which is a full decoupling mechanism, we have neutralized the revenue effect of variances from normal usage in over 80% of our service territory.

In the District of Columbia, we used weather protection products to limit our exposure to weather variation. Combined, these initiatives substantially improved the predictability of our utility operating revenue and our earnings.

Our other regulatory initiatives include sharing mechanism with our customers for asset optimization and net revenues.

In Virginia, we now can retain 100% of the benefit after we generate $2.4 million in revenue until the point that we exceed our earnings share and threshold, which has been set at 10.5% rate of return on equity for operations in Virginia.

Above that threshold, we retain 25% of all earnings for the benefit of shareholders, while applying the balance of these earnings as an offset against the GAAP costs on our customers' bill. Asset management revenues generated in our other jurisdictions also allow us to share benefits between customers and shareholders.

Prior to fiscal year 2006, we assigned assets to be optimized to a third-party for a fixed fee. Therefore, benefits were lower for Washington Gas customers and shareholders. By actively managing all of ours assets internally, we are retaining for customers and shareholders a higher level of the benefits.

In addition, recoveries of cost through regulatory initiatives that we were authorized to implement, provides a stability that our customers and our investors expect us to deliver. We continue investing in our system infrastructure to support the safety and reliability of our system and secure appropriate recovery of and return on that investment.

Slide 10 shows our five-year capital expenditure program and then nearly 26% targeted for replacement program. Included on this slide, you can see the expenditures for the plant, LNG Peaking Plant, which is consistent with our commitment to have adequate natural gas supplies available for our customers during periods of peak demand.

We successfully implemented transformational initiatives to secure long-term operational excellence including service enhancements, cost reduction, and the promotion of performance-based rate making.

With the implementation phase of the outsourcing initiative nearing completion, we are now seeing the benefit through lower labor costs and improved cost efficiencies.

We are continuing to strengthen and grow our unregulated businesses. Environmentally from the energy alternatives and more energy efficient solutions are receiving greater awareness across the nation and are anticipated to be an important part of the new administration's stimulus package.

design-build energy systems and Washington Gas Energy Services are well-positioned to participate in these growth opportunities, and our strong balance sheet will make it possible for us to leverage our abilities to expand our unregulated operations.

For example, at the end of December, Washington Gas Energy Services place into operation one of Maryland's largest solar power systems in Prince George's County. Nearly 9,000 square feet of solar panels cover the roof of an office and warehouse facility, generating a peak of 150-kilowatt, enough electricity to meet more than half the needs of the building.

The building owners will purchase electricity produced by the system from Washington Gas Energy Services at guaranteed prices for 20-year under a Power Purchase Agreement.

In addition the power sale, Washington Gas Energy Services will receive value from the solar power production in the renewable energy credit market and receive federal tax benefits.

While this single project makes only a modest contribution to earnings, it opens the door to evaluating more opportunities in this exciting new market. Our consistent focus on our core strategic objectives will serve us well in this challenging economy. This disciplined approach enabled us to sustain our strong balance sheet and associated excellent credit rating.

These are important corporate assets and provide value to our investors in these difficult times. We also have ready access to liquidity at a reasonable cost to meet our seasonal and long-term financial needs.

Washington Gas enjoys credit ratings that are among the highest in the industry as reflected on slide 11. We target our equity ratio in the mid-50% range, consistent with the capital structure that we were allowed to earn on in all three of our jurisdictions in the latest utility rate cases. With the benefit of retained earnings from our unregulated operations, we currently have a very healthy equity ratio of nearly 60%.

When we consider at the 12-month period ended December 31, 2008 and 2007, we earned a return on average common equity of 11.5% and 11.2%, respectively. Having a healthy balance sheet provides us with tremendous flexibility and opportunity.

Our strong financial position gives us an excellent and secure platform to pursue growth strategies for our businesses as opportunities are identified and the prospects for the economies improve.

I will now move to fiscal year 2009 earnings guidance, which I am delighted to report, we are raising to a range of $2.41 per share to $2.53 per share on a non-GAAP basis as shown on slide 12.

This is an improvement of $0.14 per share for the mid-point of the range over the fiscal year 2009 guidance provided in November. This increase reflects improvement in both the utility and non-utility businesses.

On slide 16, the range of our non-GAAP forecast for the utility segment is increasing to $2 and $2.06 per share, primarily due to a revised estimate for the Virginia performance-based rate sharing mechanism, lower labor and benefit costs partial partially offset by lower asset optimization revenue.

For our unregulated businesses, the range of our forecast for fiscal year 2009 non-GAAP operating earnings, as reflected on slide 17, is increasing from $0.41 to $0.47 per share, or $0.09 per share higher than the previous guidance range.

The increase for our retail energy marketing segment accounts for approximately $0.08 per share of that increase or more than 20% increase over previous guidance. This significant increase is primarily attributable to higher levels of projected gas and electric sales, including additional sales to larger electric commercial accounts and a revised forecast for the effect of energy prices on reported margins over the remainder of fiscal year 2009. Tempering these improvements is an increase in projected bad debt expense.

We also have an improved fiscal year 2009 outlook compared to previous guidance for Washington Gas Energy Systems, our design-build energy systems business, with a mid-point increase of $0.02 per share due to higher gross margins and additional construction-ready projects.

The design-build energy systems segment has realized improved margins through lower costs and an increase in its capability. We see this business continuing to grow as we leverage our strong reputation for both traditional and alternative energy efficiency solutions.

Our service area, in and around the nation's capital, remains a more resilient regional economy compared to most other parts of the nation. With the nation's third highest job growth and lowest unemployment rate, our service area continues to provide growth opportunities and provide us with operating earnings growth in a range of 4% to 5%.

We continue to look for new opportunities to continue stable earnings growth and to achieve performance ranked among the top quartile of our peers.

Terry, Vince and I look forward to updating you on our progress through the remainder of the year.

That concludes my remarks. We will now be happy to answer your questions.

Question-and-Answer Session


(Operator Instructions). We will take our first question from the line of Ryan Rosenthal with Sidoti & Company. Your line is open.

Ryan Rosenthal - Sidoti & Company

Good morning, everyone.

Vince Ammann

Good morning, Ryan.

James DeGraffenreidt

Good morning.

Ryan Rosenthal - Sidoti & Company

A couple of questions for you. First of all, congrats on the solid quarter and the increased guidance. Concerning the retail energy marketing division, can you discuss the increase in expected volume as well as the margin that you are looking for now and what caused those increases?

Vince Ammann

Ryan, you are breaking up a little bit. I think you asked us to address the increase in volumes and increase in margins and I think Harry is prepared to do that.

Harry Warren

Right. Yes, this is Harry. Yes, let me break down, you know James mentioned in his comments that the change in $0.08 broke down through a few different categories. One was higher sales volumes for electricity and gas, another category was higher margin recognition that we are expecting this coming summer due to the forward prices, and then the third component was the offset of higher bad debt.

I think if we look across for gas and electricity, the higher volumes which in electricity are coming really from the higher sales volumes, as we are increasing our large commercial customer base at this time.

On the gas side, we are seeing a combination of a little bit of increased customer base and also some colder weather over the first four months of the year. The combination of those factors is about $0.04 a share positive, pretty equally split between gas and electricity.

Then we have the offset of the higher bad debt expenses, which is in one of the slides in the presentation. That is about $0.03 offset there. Then that leaves us with about $0.07 of improvement from higher unit margin that we are expecting over the course of the year.

A fair bit of that is coming from the fact that with very low projected summer gas prices right now and with the fact that the forward curve is in a steep upward slope or a contango in trigger language, both of those things have the effect of increasing our reported margins over the course of the summer. So, that is how that is breaking down between margins and volumes.

Vince Ammann

The slide that Harry was referring to was slide 17 in our presentation.

Ryan Rosenthal - Sidoti & Company

Okay. Then the follow-up on that question, regarding our rate CapEx expiration for utility companies across our service territory, does that have any potential in the intermediate term here to help you with volume for your electric marketing business?

Harry Warren

Yes, it does. Let me just clarify a little bit. Actually, at this moment, we do not have much in the way of rate caps expiring across the region that we serve Maryland, Delaware, and DC. You correctly point out that periodically, the rates for standard offer service are being adjusted, and they are a rolling set of contracts.

Well, with the significant declines in electric prices that we are seeing today, actually in the mass market area, especially residential and small commercial customers, we can make price offers to customers that are below those utility rates by a pretty good gap.

So, we actually had been and are continuing to ramp-up our sales activity in those market segment segments. That may create an opportunity for us to grow those mass market businesses in the months ahead.

Ryan Rosenthal - Sidoti & Company

Okay. If I could turn over just to the utility side for a question there, concerning the PBR benefit for Virginia you have added to your guidance for the year, in terms of accretion for the years, can you discuss the benefit there and why you are seeing an increase?

Vince Ammann

Sure. This is Vince, Ryan. The total I have shown on page 16 of our presentation. We are showing a $0.06 benefit in increase in guidance associated with the adjustments to the PBR earnings sharing mechanism.

If I could break that down for you, the process that we go throughout 2008 and 2009 is to forecast where we think earnings are going to go on a jurisdictional basis. Then, compare that to our threshold and calculate what we expect the earnings sharing amount to be. Then we book that throughout the quarters of the year.

In 2008, we did that. Then at the end of the year, there was a process whereby on a line-by-line basis, we go back and look at allocation factors for things like depreciation and property and operating expenses, and jurisdictionalize all of those item items. That is a whole another process apart from our estimation process.

Then that contributes to a final number that we then file with the Virginia Commission, which we did just last week for fiscal year 2008. That process contributed $0.01 of the $0.06 pickup, because through the estimation process and the calculations that we made, we had overestimated the accrual. So that is $0.01.

The other $0.05 relates to our change in our expected accrual for fiscal year 2009. That breaks down to applying the logic that we went through for fiscal year 2008's true-up to the remainder of FY '09, and that is about $0.04 to $0.05 pickup just to update '09 for those calculations.

Then as you will see, we also lowered our expected margins from asset optimization activity by a few cents. As that works through the Virginia calculation, we essentially recouped some of that through the earnings sharing mechanism, so we have another $0.01 of the $0.06 associated with lowering our expectations for asset optimization.

Ryan Rosenthal - Sidoti & Company

Okay. Thanks very much. One final question. Just regarding pension expense, your pension liability, is that baked into guidance currently? Are you seeing any significant need to fund that at a greater level considering the current economy?

Harry Warren

Yes. Our pension expense was based on the evaluation done at September 30th. We do not, at this point, expect any change in that number for the remainder of the fiscal year 2009.

Ryan Rosenthal - Sidoti & Company

Okay. Thanks for your time, everybody.


Our next question comes from the line of Ted Durbin.

James DeGraffenreidt

Good morning, Ted.

Ted Durbin - Goldman Sachs

I wanted to ask about what you are seeing in terms of trends on the customer growth side. Maybe you can just talk a little bit about when you see the housing market coming back and growth to come up a little bit more.

Terry McCallister

Yes, Ted. This is Terry McCallister. Let me take a shot at that. Estimating when the housing market is going to come back is almost anybody's guess. What we do know and what we continuously try to make sure everybody understands is the pundits of our area say that, they follow the stuff in our area say that our area is always well-positioned or better positioned than most places around the nation to stage that come back when it actually happen.

So, I do not know that we are projecting that we know when it will come back. We have lowered our housing starts a little bit for this year, just knowing that the economy is dragging on a little more than usual.

We do know we are still adding customer growth for the year, and I do not know that a lot of people can say that, but we do have over 10,000 new customers estimated for our market this year. That is what we do know. We do know the economy is poor, but I would venture to say not as poor in this region as in other regions.

Ted Durbin - Goldman Sachs

Okay. Thanks for that. Related to the economy, can you just give us a little more detail on your assumptions for bad debt for this year?

Vince Ammann

Yes, sure, Ted, this is Vince. You will notice that for the first quarter we did not attribute any of our performance we need to increase our uncollectible reserves. So what we had done at the end of September is we had been making some adjustments in our reserves throughout fiscal year 2008, and we assessed how that would portend for the future and we then updated our accrual rates.

So we are now accruing bad debt expense at the utility at a rates slightly below 1% of revenue for all of the revenues we expect for 2009. At the end of the first quarter, that accrual rate appears to be adequate, and we did not require any additional adjustments. We did have a minor adjustment at WGS, and I do not know if you would like maybe Harry to address some of the facts here.

Ted Durbin - Goldman Sachs

Sure. That would be great.

Harry Warren

Yes. Over on the services side, we are reserving right now and projecting for the year about 0.4% of revenues for bad debt expense. That is up a little bit from last year. We have been hoping we might see some turnaround later in this fiscal year, but we have not seen that yet. So that is about where we are.

We tend to be lower than the utility rate because real a little different customer mix and we can be pretty aggressive on the customers that we acquire.

James DeGraffenreidt

One thing you need to keep in mind, Ted. This is James. Our experience with bad debt and uncollectible rate tend to be far better than the rest of the industry. We attribute that to a couple of major characteristics of the region.

One is the, obviously, strong demographics that we have here. Beyond that, I like to remind people that we have a residential essential service tariff that has been in place in the District of Columbia since either the late '80s or early '90s, and that has been extended to Maryland in the last five years.

That means that our most at-risk customers in the low income category have a discounted rate that is subsidized by all other rate payers. On top of that, we aggressively promote the eligibility and sign-up for the residential essential service tariff along with a coordinated effort on all the other safety net services in the District of Columbia and in the various local governments in the region so that customers tend to avoid getting in trouble, here.

So our rate of uncollectibles is still below 1% and we see that continuing. One of the building blocks of the fundamentals of our business in the regulatory sector includes that what we think is a relatively unique rate design item.

Ted Durbin - Goldman Sachs

Okay. If I can just quickly on the follow-up, with commodity prices down, then, where should you see a benefit then with lower prices or is there a lag in terms of when you made your purchases versus where spot prices are?

Vince Ammann

Are you talking, Ted, for the regulated utility or--?

Ted Durbin - Goldman Sachs

Yes, well for both really, but for the regulated utility, to start.

Vince Ammann

Well, as we go through this winter, the spot price prices do not necessarily have as dramatic effect on the cost of gas that we are charging through the winter months because we are putting gas into storage through the spring and summer, the previous spring and summer, and then making some hedging commitments, fixed price commitments, for certain supplies through the winter.

So, we do not have that great of a benefit through the winter months from the lower prices. Where we see the benefit, I think, is as we come into the spring and summer and prepare for next year, we will be putting gas into storage at much lower rates than we have been in the past. So that, I think, will forecast some much easier times for our customers in paying their bills, as we get into the spring and summer.

Ted Durbin - Goldman Sachs

Got it. If I could, just one more question. I know there is an investigation into the asset optimization in Maryland, and I know that there was intervener testimony filed yesterday, maybe Adrian can give us a sense of the case there and where you see it going and things like that.

Adrian Chapman

Sure. This is Adrian Chapman. That proceeding is ongoing, and we have had the testimony of all parties now filed. They are in the public domain and can be seen on the commission's Website.

I would summarize by saying that as our asset management activities have resulted in higher revenue opportunities for both customers and shareholders, the parties have been more interested in seeing an update to the sharing mechanism. So that is probably where the issue will be most pointed, and the records still not fully complete on that.

Rebuttal Testimony, as well as a hearing will come forward through the remainder of this spring, and we will not have a decision from the commission until later this year. I think that is probably the highlight issue for that proceeding at this point in time.

Ted Durbin - Goldman Sachs

Okay. Then how much revenue could you generate from asset optimization in Maryland, and how much did you share?

Vince Ammann

I do not think we have provided the breakdown by jurisdiction. Just to give you an order of magnitude, for most of the system supply in Maryland we are already sharing it at an 80% rate and for most of the asset optimization revenues, in broader terms we usually think about Maryland as being about 40% of our revenues.

As we look at what we have forecasted to retain for the company, the benefit in the current year and in subsequent years is in around about $15 million range after sharing with Maryland and D.C.

So I do not have the number in front of me, Ted. Saying that we generate total company-wide before sharing revenues around $25 million to $30 million is probably a pretty good guess about the level before sharing with any of our jurisdictions.

Ted Durbin - Goldman Sachs

Okay. That is really helpful, thanks, Vince. Thanks for your time.


At this time, there are no further questions in queue. (Operator Instructions).

While we wait for people to queue in, I would like to remind everyone that you can listen to a rebroadcast of this conference call at 1 pm Eastern Time today, running through February the 12th at 5 pm. You may access the replay by dialing 1-800-642-1687 and entering the pin number 82386923.

If there are no further questions, I will turn the call back to Mr. Dennis for any additional or closing remarks.

Bob Dennis

Thank you for joining us this morning. If you do have any further questions, please do not hesitate to call me at 202-624-6129. Thank you for joining us.


Thank you very much. This concludes our conference call for today. Thank you for participating. All parties may disconnect now.

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