Prepared remarks
Good day, everyone, and thank you for standing by. Welcome to Eversource Energy Second Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. You will then hear a message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. Now it is my pleasure to hand the conference to the Vice President of Investor Relations, Rima Hyder. Please proceed.
Good morning, and thank you for joining us today on our second quarter 2020 earnings call. During this call, we will be referencing slides that are available on our website at eversource.com. As you can see on Slide 1, some of the statements made during this investor call may be forward looking. These statements are based on management's current expectations and are subject to risk and uncertainty, which may cause the actual results to differ materially from forecast and projections. We undertake no obligation to update or revise any of these statements. Additional information about the various factors that may cause actual results to differ and our explanation of non-GAAP measures and how they reconcile to the GAAP results is contained within our news release, the slides we posted last night and in our most recent 10-Q and 10-Ks. Speaking today will be Joe Nolan, our chairman, president, and chief executive officer; and John Moreira, our Executive Vice President, CFO, and Treasurer. Joining us today is Jay Buth, our vice president, controller, and chief accounting officer. I will now turn the call over to Joe.
Thank you, Rima. Good morning, everyone, and thank you for joining us. Starting on Slide 4, as we complete the midpoint of the year, we are pleased with the terrific progress we have made this quarter. Our team is focused on executing the priorities we have established over the past year, including completing the sale of Aquarion, delivering strong operational performance, and strengthening the balance sheet. At the same time, we are continuing to advance the investments needed to support safe, reliable, and more resilient electric and natural gas systems for our customers. As you can see on Slide 5, we have several recent accomplishments. From an earnings perspective, we delivered second quarter recurring earnings per share of $0.87, in line with our expectations, and we are reaffirming our long-term EPS growth guidance of 5% to 7%. We have also delivered on maintaining a strong financial foundation, which is a major focus for us. Our disciplined approach to capital allocation and balance sheet management continues to position us well to fund critical infrastructure investments while preserving the financial flexibility needed to support long-term growth. The recent Moody's change to our outlook from negative to stable is a testament to our consistent execution, commitment to strengthening our balance sheet, and the sustainability of our financial strategy to support our long-term growth. We continue to make progress on key initiatives that will deliver higher growth for our business and further de-risk our business profile. First, we completed the sale of Aquarion, which resulted in net proceeds of $1.7 billion. This sale was a significant milestone in furthering our strategic position as a pure-play regulated pipes and wires utility. It allows us to optimize our portfolio by focusing on our core electric and natural gas operations across New England while efficiently reinvesting capital for the benefit of our customers. Second, the Revolution Wind project continues to progress through advanced stages of construction and commissioning. As we do each quarter, we continue to evaluate our contingent liability associated with the sale of Revolution Wind. Based on revised cost projections of total construction costs, which included cost increases stemming from two stop-work orders, we recognized an after-tax charge of $164 million in the second quarter to increase this liability. As Austin has previously stated, the project is on track to reach its commercial operation date later this year. Lastly, on the FERC ROE decision, we have taken multiple actions to address this decision, appealing to FERC as well as the DC Court of Appeals. We expect that FERC will make a decision on the prospective ROE by November 30. John will cover the process and the timeline for the court appeal. One thing is certain: now, more than ever, the New England region needs more transmission investment and utilities need a predictable regulatory environment to attract long-term capital to fund these investments for the benefit of customers. Our investments in transmission have delivered billions of dollars in savings for customers over the years by eliminating significant congestion costs for the region while also making the grid more resilient. We see ample need and opportunities for transmission infrastructure investment to further alleviate overall costs for customers. In fact, as you can see on Slide 6, following a comprehensive evaluation of six bids submitted in response to ISO New England's 2025 longer-term transmission planning RFP, ISO New England has preliminarily selected the joint proposal submitted by Eversource and Avangrid as the preferred solution. This transmission project is designed to increase transmission capacity between Maine and New Hampshire while strengthening the transmission interface between Northern and Southern New England. Eversource's share of the $2.2 billion project is approximately $700 million with an anticipated in-service date of 2032. There are still significant steps ahead before a final solution is reached in the coming months. If this project is ultimately successful, it will greatly help address the affordability challenge facing New England by enabling increased supply and easing congestion costs. This would mark the second competitive transmission bid awarded to Eversource, following the Boston 2028 solution study project in 2020. That project was successfully completed by Eversource ahead of schedule and under budget. As we have stated previously, incumbent utilities are uniquely positioned to deliver reliable, cost-effective transmission solutions for the region, leveraging their operational expertise, existing infrastructure, and established relationships with stakeholders and communities. This is another example of our keen focus as a pure-play pipes and wires utility to deliver cost-effective solutions that provide benefits to customers. Moving on to the Connecticut regulatory front, on Slide 7, we received our final storm cost decision this week and are pleased that we can now proceed with securitization financing to enable the recovery of these storm costs, something we intend to execute on as soon as possible. We also filed our CL&P rate review earlier this month, the first in almost a decade. Our proposal creates a sustainable path forward that balances affordability with the investments needed to maintain and strengthen the electric system that Connecticut depends on. A safe, reliable, and resilient electric grid is the cornerstone of the state's economy and enables the achievement of many important goals, including carbon reduction and electrification. The decision from this rate review will shape the state's electric infrastructure for the next decade and prepare the state for future economic growth. Over the last 10 years, our customers in Connecticut have enjoyed increased reliability as a direct result of our strategic investments in the electric system. Continued investment is needed to maintain the level of affordable reliability and resiliency that customers have come to expect. This includes addressing aging infrastructure that is nearing the end of its useful life, responding to more frequent and unpredictable severe weather events, and making the necessary upgrades to support the growing electric demand in the state. Since our last rate case in 2017, we have invested over $4 billion to improve and upgrade our electric distribution infrastructure serving our 1.3 million customers across 157 cities and towns in Connecticut. In our rate filing, we have clearly demonstrated how our Connecticut customers have directly benefited from the investments we have made. Nearly half of all power interruptions experienced by customers in 2025 were restored remotely in a matter of minutes. The average customer experiences one outage nearly every two years, which is a 15% improvement since 2017. Additionally, we estimate that more than 1.5 million customer outages were avoided across Connecticut last year thanks to automated technology installed on the system. And lastly, through targeted initiatives such as system upgrades and enhanced system operating training, we have further improved our accuracy in determining and communicating estimated times of restoration during outages by 14% since 2017, resulting in clearer, more consistent information available to customers. At the same time, we recognize the importance of keeping energy bills as manageable as possible and we are committed to working with our regulators and other stakeholders across our service territories to strike the right balance between investing in the future of the energy system and delivering value for our customers and the communities we serve. Affordability and reliability are connected. An electric system that is allowed to degrade becomes less reliable and, over time, more expensive to maintain and fix. This balance between affordability and reliability can be accomplished through efficient operations, rigorous cost control, and strategically investing to maximize long-term customer value at the lowest reasonable cost. Our approach has been to make proactive, strategic investments that address aging infrastructure in a cost-effective manner long before assets fail. From a regional perspective, another area of focus for us is energy supply, which remains the greatest challenge to affordability for customers. While we do not control or earn any profit from energy supply, we want to be an integral part of the conversation to lower costs for our customers. Bringing additional generation to the region is key to reducing energy supply costs for electric customers. Since last year, Eversource has directly supported 2.5 thousand MW of new generation coming into the region. Currently, 80% of this new generation is online. While this is a great step forward for the region, we know that we need more to support the growing electric demand across New England. In fact, if we want to capture economic opportunities around data centers and welcome them to the region, additional generation and expansion of gas capacity is critical. Growing energy supply alongside demand will help moderate cost increases, preserve system reliability, and ensure that all customers benefit from the growth rather than bearing the cost of constrained resources. This is why we support a comprehensive 'all-of-the-above' strategy to tackle energy affordability by evaluating all opportunities, including identifying new sources of energy supply into the region. Another highlight for us this quarter was the publication of our annual sustainability report. As shown on Slide 8, the report showcases our continued leadership in building a clean energy future, fostering a workplace that prioritizes culture and engagement, protecting the environment, and supporting the communities we serve. Overall, we are encouraged by the significant progress we have made during the first half of the year, which is a result of our continued focus on execution on our key priorities. The strength of our operations, the dedication of our employees, and the discipline with which we are executing our strategy gives us confidence in our ability to deliver on our commitments for the balance of the year and continue creating long-term value for our stakeholders. Let me now turn the call over to John to discuss our financial results and outlook as well as provide a regulatory update.
Thank you, Joe, and good morning, everyone. This morning, I will review our second quarter 2020 earnings results, provide an update on regulatory matters, and discuss our balance sheet progress and financing plan. I will start with our second quarter results on Slide 10. Our GAAP earnings for the second quarter were $0.14 per share compared with GAAP earnings of $0.96 per share in the second quarter of 2020. GAAP results for the quarter were impacted by a noncash after-tax charge of $111.4 million, or $0.30 per share, related to the carrying value of Aquarion Water Company as we have closed on the sale. The results also include an after-tax charge of $164 million, or $0.43 per share, related to an increase in our estimated offshore wind contingent liability. Excluding these charges, our non-GAAP or recurring earnings were $0.87 per share for the quarter compared with GAAP as well as non-GAAP earnings of $0.96 per share in the second quarter of 2020. The decrease in recurring earnings over the prior year is primarily due to lower earnings in the Electric Transmission and Gas Distribution segments. Lower earnings in the transmission business were primarily driven by the base ROE rate reduction ordered by FERC back in March. Lower earnings in the gas distribution segment were impacted by a prior year benefit for recoverable expenses. These results were partially offset by increased earnings in the Electric Distribution segment thanks to higher electric distribution revenues. Our results in the parent and other segment were flat as compared to prior year. Moving on to a regulatory update on Slide 11, let me start with the CL&P rate case filing we made on July 14, a rate request that balances affordability and reliability for our customers. This was the first general rate request for CL&P since 2017. The rate request calculates a revenue deficiency of $451 million, reflecting a proposed ROE rate of 10.25%. The proposed increase would result in an 11% impact on the total customer bill. Approximately 90% of this revenue deficiency is related to capital investments, future storm resiliency investments, storm restoration costs, depreciation, and taxes. Only 11% of the filed revenue deficiency is for increased O&M since our last rate increase. Compared to inflation, that is about $45 million in expenses that have been avoided for our customers. We are proud of how the filing demonstrates our commitment to cost control. Additionally, as Joe described, we have clearly demonstrated in this filing that we can deliver strong reliability benefits in an affordable manner. Our customers and our regulators need to know that when we make investments in our system, those investments are being made to protect safety, improve reliability, and achieve state policy goals in the most efficient and cost-effective way possible. The filing also proposes a multi-year PBR mechanism that protects against future rate shocks. This PBR mechanism would provide gradual rate increases over time and ensure that customer bills reflect the fair cost of doing business. In the filing, we have included a plan for implementing AMI for Connecticut with nearly $1 billion of capital investment and $300 million of O&M expense. As detailed in our filing, AMI would deliver customer benefits in excess of this estimated cost. Lastly, I want to highlight the economic development and heat pump rates proposed in our filing. These rates were designed after years of working closely with Connecticut stakeholders and policymakers to align our rate design with customer needs and state policy. Moving briefly to New Hampshire, I want to mention the annual base rate adjustment that was approved on July 21. You will recall that as part of our New Hampshire rate case, we proposed a multiyear PBR plan. The July order approved an increase of approximately $24 million that will be effective August 1. This is another example of how a well-designed PBR mechanism can help moderate rates long term. Moving to Slide 12, I would like to update you on the FERC ROE decision that was issued back in March, which reduced the base transmission ROE rate and ordered a refund going back more than a decade. We have made several filings with FERC and with the courts challenging this decision. As part of these actions, we did receive approval from FERC to extend the refund until mid-2020. We have also escalated our challenge with a petition for review and a motion for a stay of the FERC decision with the DC Circuit Court of Appeals. In our June filings with the DC Circuit Court, we made multiple arguments. First, we argue that FERC exceeded its authority by ordering a refund for a period longer than 15 months allowed by the Federal Power Act. Second, FERC failed to declare that either 11.14% or 10.57% rates were unjust and unreasonable until March of this year. Third, that FERC denied Eversource and other New England transmission owners the opportunity for due process by delaying their decision for almost a decade in response to a higher court order for remand. And lastly, we argue that FERC set a 9.57% ROE rate in a range previously found to be unjustly low. The DC Circuit Court will consider our arguments and FERC's actions over the next several months. Staying with the FERC topic on Slide 13, I would like to provide an update on the Section 205 filing we made with FERC on April 30 to determine the prospective ROE rate. As a reminder, our filing calculated the new base ROE rate of 11.39% by using FERC's existing ROE methodology and only updating it to reflect current market conditions. As required by law, FERC issued their order in response to our 205 filing on June 29, accepting and suspending tariff revisions and establishing a paper hearing procedure. FERC's order was in line with our expectations, suspending the implementation of the requested ROE rate for the maximum five-month period allowed by law. Next steps in this process are that parties will file initial briefs by August 28 and reply briefs by September 28. A new ROE rate is expected to go into effect on November 30. Moving to Slide 14 for a financing update, we continue to focus on enhancements to our balance sheet condition. We are pleased that we have closed on the sale of Aquarion on June 30, generating a net cash benefit to Eversource of $1.7 billion. These proceeds will be used to displace debt at the parent company. The closing of the Aquarion transaction leaves our balance sheet in a much stronger position, and we do not currently anticipate any changes to our financing plans as described on this slide. Our equity needs over the five-year forecast period remain in the range of $800 million to $1.1 billion and we do not expect to issue any equity over the remainder of this year. We continue to consider a variety of debt and alternative financing solutions for our future needs, including the securitization of deferred storm costs in both Connecticut and New Hampshire. Next, on Slide 15, I would like to share the latest affirmation of our financial strategy, which is that our FFO to debt metrics remain solid. Our latest FFO to debt ratios as of June 30, 2026 are 14.3% and 15.7% for S&P and Moody's respectively. Consistent with our commitment, these results are each over 100 basis points above the downgrade thresholds. We were also very pleased that Moody's changed Eversource's and NSTAR Electric's outlook from negative to stable in recognition of what we have recently accomplished. These objective measures reflect the successful execution of our previously communicated financing strategy. Looking at Slide 16, we are encouraged by the final storm cost decision we received from PURA two days ago. Of the approximately $975 million that we requested, PURA approved approximately $870 million. PURA is deferring $60 million in storm costs pending the completion of a third-party audit review and an audit, and $40 million in exclusions. Of the $870 million approved, approximately $200 million have already been recovered in rates. This results in approximately $670 million that is expected to be securitized. PURA did not approve the recovery of carrying charges that we requested. We are evaluating our options and next steps. With this final decision, we can now move ahead on the securitization process starting with filing our financing plan at PURA in early fall. After hearings and PURA's review, we expect to receive a final financing plan decision in the first quarter of next year. This will allow us to begin the rating agency review, file the SEC registration statement, and begin marketing. With those steps completed, we anticipate cash in the door approximately one year from now. Next, let me reaffirm our five-year capital plan of $21.5 billion as shown on Slide 17. This reflects our five-year utility infrastructure investments by segment through 2028. I do want to note that we have now highlighted the potential increase to our capital forecast from the announcement of ISO's preliminary decision on the transmission RFP selection, as well as AMI in Connecticut. Turning to Slide 18, we reaffirm our non-GAAP EPS guidance range of $4.52 to $4.72 per share for 2026. This guidance was revised in March for the lower base ROE rate of 9.57% as well as the sale of Aquarion. Lastly, on Slide 19, we remain confident in our ability to deliver earnings growth towards the upper half of our long-term target range of 5% to 7% through 2028. Of note, this guidance currently assumes the 9.57% base ROE rate for transmission investments. As you can see on this slide, we have executed on many of our key initiatives through improved regulatory outcomes such as storm cost securitization in both Connecticut and New Hampshire, the results of the CL&P rate case request in mid-2020, and the sale of Aquarion. We are confident in our ability to achieve higher growth as we move forward. With that, I would like to turn the call back to the operator for Q&A.
Questions and answers
Thank you so much. To ask a question, please press star then the number 1 on your telephone and wait for your name to be announced. To remove yourself from the queue, please press the pound or hash key. One moment for our first question. It comes from Shahriar Pourreza with Wells Fargo. Please proceed.
Morning, guys. Joe, just on the storm cost—obviously, the carrying costs were denied in full, which is kind of material. How does that compare against what you had embedded in the financing plan? What are the offsets and next steps? And what are the components of the $1.8 billion from storm cost securitization—how much is Connecticut versus New Hampshire?
Sure, Shar. This is John. Let me take the storm decision we received a couple of days ago. I think it is important that, first and foremost, we are very pleased to finally have a decision and, more importantly, the number that we can move forward with securitization. Overall, when you read the decision, it is constructive—certainly better than what we have seen from other rate decisions coming out of PURA. However, we are a bit disappointed with a couple of items that we do not agree with, such as the $63 million that they deferred, which does not make sense to us, and certainly the carrying charge denial. We continue to review the decision and assess our options, as I stated in my formal remarks. But we are encouraged that we finally have a number that we can move forward with and get nearly $700 million in the door a year from now. As it relates to the carrying charge specifically, I want to mention we only include things in our forecast that we have a high degree of conviction on. More importantly, we have not recognized one dollar of these retroactive carrying charges. So in our financing plan, because we do not have a high degree of conviction, we did not assume we would get the retroactive piece. But we think we continue to be entitled to it and we will assess our next steps as it relates to the carrying charge.
Got it. Perfect. And then just one last thing on the rate case: Joe, this is a sizable ask at Connecticut Light & Power and PURA's posture in the storm cost decision was not great. What is your read on how PURA approaches a filing of this size, especially in an election year? How informed were stakeholders prefiling—were they surprised? What gives you confidence they will do the right thing?
Yeah, it is a large ask, but we have not filed a distribution rate change since 2017. I am very proud of the reliability metrics and the investments we have made in Connecticut, and I think that will stand up in this proceeding. As John mentioned, only 11% of the deficiency is coming from O&M, so you will see how seriously we are taking cost controls. We feel very good about the investments and believe our regulators will feel good about them as well. The other 90% of the deficiency is CapEx, resiliency, taxes, and depreciation—nothing optional; it's about keeping the lights on and getting fair cost recovery. Not investing in the system would be far more expensive. As I said earlier, I am optimistic. Looking at the past six months of decisions at PURA—whether around Yankee or storm cost recovery—they are a very engaged regulatory body. All five commissioners are on the bench, engaged, and asking very good questions. So we feel very good that we will get a fair hearing in Connecticut. They will see that the money we spent and the money we are seeking in rates is prudent. Keep in mind it is an election year in Massachusetts and Connecticut, which brings additional press and drama, but we will stick to the facts and our record. We are very proud of the effort.
Okay. Perfect. Appreciate it, guys. Have a good morning.
Thank you.
Our next question comes from Carly Davenport with Goldman Sachs. Please proceed.
Good morning. Thanks for taking the questions. Maybe to start on the New England transmission opportunity you highlighted: what are the next milestones we should watch to de-risk that potential investment to the point that you would consider rolling it into the baseline? Would that just be the Q3 call or is there anything else we should watch?
I think the third quarter call will give you good insight. We are expecting stakeholder comments on August 14 on the preliminary recommendations. Then in August and September, ISO New England will review and respond to the stakeholders. We currently anticipate publication of a final recommendation in September. That should put us in a good position for the third quarter call to give you more updates and allow us to roll that into the plan.
And Carly, regarding how much of the $700 million will be rolled into our current five-year forecast through 2030, you should think of it as probably about half—50%—of that CapEx will be incurred during that forecast period.
Got it. That is great. And then on the incremental Revolution charge this quarter, can you expand on the drivers that were unknown relative to last quarter and whether there is any risk of additional cost slipping incrementally relative to this update?
We have been watching the remaining charges associated with Revolution Wind closely. The two stop-work orders led us to lose a vessel that needed to be remobilized to finish the job, which drove incremental costs. I am encouraged by many factors: we have every component needed to install the remaining pieces, the remaining installation steps are straightforward and there is no uncertainty around them. We are delivering over 300 MW of capacity to the ISO New England grid and are ramping up toward 704 MW. The project is nearly complete with an in-service date in 2026, and we will finish it. I do not see other risks that worry me; we are going to bring this in and I am proud of the work done. We could not control the shutdowns, but we wanted to capture the charges and be upfront about them.
Understood. Great. Thank you so much for the color.
One moment for our next question, please. It comes from Nick Woods with Bank of America. Please proceed.
Good morning, guys. Going back to offshore wind, can you give us a sense of how much of the project is completed at this point? I did not see a percentage completion figure this time. Also, on the FERC order, there are several processes running in parallel. You mentioned you would want an ALJ appointed and a global resolution. Has that view changed and what do you expect from the processes underway?
The project is over 95%, actually about 97% complete, so we are really in the final phase. We feel very good about that. Regarding the FERC process, it is pretty much in line with our expectations, with the exception that no administrative judge was appointed to work with the parties. Settlement is always on the table in any proceeding. What we like is that FERC wants to accelerate the paper hearing to have a reasonable rate going into effect on November 30, which is soon. Once we have that rate, I think it could potentially get parties to reengage and hopefully move towards a global settlement.
Great. Appreciate the time. Thank you so much.
Our next question comes from Sophie Karp with KeyBanc. Go ahead, Sophie.
Hi, good morning. You have said some overhangs and uncertainties are getting into the rearview mirror. Have you given any thought to revising your long-term growth targets or providing higher precision and additional disclosures, such as a rate-based growth target? Is there a path to more detailed disclosure now?
Sophie, we do give enough information. We provide annual CapEx so you can calculate a rough number, and historically our rate base has grown slightly over an 8% CAGR. We include a slide each year with expected rate base by 2030 based on our CapEx, so you can arrive at annual rate base growth from our materials.
Secondly, on AMI, can you talk about the rollout timeline and how that will reflect in rate base?
Let me start with the process: it is really a five-year journey as we near the end in Massachusetts. For Connecticut, we included the AMI proposal in the rate case and also requested an expedited decision outside the rate case to move forward hopefully this fall so we can take advantage of contractual pricing we've locked down with vendors used in Massachusetts. If we get the green light this fall, we would start the project and mobilize next year, and the rollout would take about five years to complete. Some of that $1 billion will fall beyond our current forecast period given that timeframe.
Got you. All right. Thank you very much. That is all for me.
Our next question is from Anthony Crowdell with Mizuho. Please proceed.
Hi. Two quick questions. First, on the FERC refund, there was a decision recently in MISO—does that strengthen or complicate your appeal argument? Second, on slide 15 you show credit cushion metrics. Do you have a targeted minimum credit cushion you operate in? If the FERC refund was upheld and you had to pay it back, would you use other levers to maintain the cushion or fund the refund from your balance sheet capacity?
Anthony, I would say no impact from the MISO decision. Our facts and circumstances are quite different from MISO. The MISO impact was a couple of basis points; here in New England the impact is much greater, and our legal position differs. We feel good about our legal position. We have filed a motion for a stay and are waiting for the court to rule, which could come any day. Regarding the credit cushion, our guidance is to be 100 basis points above the downgrade thresholds, and we have been successful at that. If we were in a position where we had to refund the incremental $880 million, we would do that in a balanced manner and we remain committed to maintaining our cushion.
Great. That is all I had. Thanks for taking my questions.
One moment for our next question. It comes from David Pass with Wolfe. Please proceed.
Good morning, guys. With Aquarion closed and the orders in place, and assuming securitization as it stands today, is it fair to say your equity need is $800 million to $1.1 billion through 2030 without setting aside for a refund?
That slide does not assume you would be in a position to refund the FERC amount other than the 15-month refund that we have already accounted for and booked. We do not expect to issue any equity over the remainder of this year.
Got it. And on the parent and other drag, is the first half of this year a good indicator for the full-year run rate for 2020, and how should we think about that beyond 2026?
Year over year, the parent and other has been pretty much flat. I think modeling a steady-state run rate is reasonable. We do not have very much at the parent and other other than taxes and interest, so taxes are what can cause variability.
Right. Okay. That is it. Thank you.
Thank you so much. Our next question is from Jeremy Tonet with JPMorgan. Please proceed.
Hi, this is Aidan Kelly on for Jeremy. Could you break down the key assumptions that comprise the $1.8 billion estimate in storm proceeds in your plan? Beyond the $700 million from Connecticut, could you quantify the cash flow drivers elsewhere across your jurisdictions?
Let me start with what makes up the $1.8 billion. We have the approximately $700 million from the Connecticut decision that we will move forward with securitization. We are sitting on about $450 million of New Hampshire storm costs that we are waiting for the final tranche to be approved; that is now supported by legislation. The difference between those two items and the $1.8 billion would be the carrying charges pertaining to the Connecticut storms. As I mentioned, we are reviewing the decision, looking at our options and next steps, and we feel there is a path forward to seek recovery of the carrying charges, which would be within our five-year period. So that is the composition of the $1.8 billion.
Great. That is very helpful. Thanks, John.
Thank you. And our last question comes from Julien Dumoulin-Smith with Jefferies. Please proceed.
This is Tanner James on for Julien. I wanted to follow up on the AMI filing in Connecticut. The benefit-cost analysis shows a slightly positive nominal net benefit that turns negative on an NPV basis. Can you provide details regarding the proposal and prospects for implementation given the negative NPV? Also, on long-term EPS guidance, you project a 5% to 7% CAGR through 2030. Could you provide an update on the shape of the earnings profile or factors to consider regarding targeted EPS growth?
Regarding the AMI docket, it has been open for multiple years. If we had approval earlier, the cost-benefit analysis would have been much stronger and more positive. Because we did not have assurance of recovery previously, we have not invested. We updated the analysis and costs have increased, so the cost component changed while benefits have not materially changed. Over time, we think AMI is the right thing to do and it will give customers tools to manage their energy consumption and bring value, but the timing and costs have affected the current analysis.
On the long-term EPS guidance, we see the trajectory of growth between now and 2030 moving toward the upper half of the 5% to 7% range. We expect that by 2028 you will see the growth that puts us in the upper half, so on a sustainable basis you would conclude that 2028, 2029, and 2030 together help get us to that upper half by the end of 2028. That is the trajectory we are communicating.
Great. Thank you very much. Appreciate it.
Thank you so much. This concludes our Q&A session, and I will pass it back to Joe Nolan for final remarks.
Thank you for joining us today. We are pleased with our progress year to date. We remain confident about our execution momentum into the second half of the year. With a strengthened balance sheet, robust five-year capital plan, and ample opportunities for investment, we are well positioned for higher growth. Operator, this ends today's call. Thank you all for joining us.
Thank you. And this concludes today's conference. Thank you for participating, and you may now disconnect.