Welcome to the Essential Utilities, Inc.'s Quarter Two 2022 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brian. Please go ahead, sir. Good morning, everyone, and thank you for joining us for today's conference call. I am Brian Dingerdissen, Vice President, Investor Relations and Treasurer at Essential Utilities. If you did not receive a copy of the press release, you can find it by visiting the investor relations section of our website at essential.co. The slides that we will be referencing and the webcast of this event can also be found at that website. Here's our forward-looking statement. As a reminder, some of the matters discussed during this call may include forward-looking statements that involve risk, uncertainties, and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward-looking statements. Please refer to our most recent 10-Q, 10-K, and other SEC filings for a description of such risks and uncertainties. During the course of this call, reference may be made to certain non-GAAP financial measures. A reconciliation of these non-GAAP to GAAP financial measures is included in the presentation and also posted in the investor relations section of the company's website. Here is our agenda for today. We'll start with Chris Franklin, our Chairman and CEO, who will discuss the highlights from the quarter and provide a company update. Next, Dan Schuller, our CFO, will discuss our financial results. Following Dan, Matt Rhodes, our EVP of Strategy and Corporate Development, will provide an update on our acquisition program. Lastly, Chris will conclude the presentation with a summary of our guidance before opening the call up for questions. With that, I would like to turn the call over to Chris Franklin. Hey, thanks, Brian. Good morning, everyone. Thanks for joining us. As Brian said, let's start off with some highlights of the quarter. First, we reported year-to-date net income growth of 6.5%, and our quarterly earnings per share were in line with expectations. Dan will take you through that in a little bit more detail in a moment. We continue to enhance shareholder value as the board approved the 7% increase in the quarterly dividend this week, marking the thirty-first consecutive year of dividend increase. It's something we're very proud of. We currently have asset purchase agreements signed for 7 municipal acquisitions, totaling more than $418 million in purchase price. Each of those continue toward regulatory approval and closing. Now, we shared some pretty exciting news just a couple of weeks ago that after a lengthy bid process by the Bucks County Water & Sewer Authority, we were selected by the authority board to engage in exclusive negotiations to purchase their substantial wastewater assets. Matt's gonna take you through that in a little more detail as well in just a few moments. Now, as part of the company's ongoing commitment to the renewal of critical infrastructure, we invested approximately $424 million, $424.6 million to be exact, through throughout our water, wastewater, and natural gas systems in the first half of the year. This compared to $404.6 million from the same period last year. Now, I'm gonna give you a little sense of those projects that we undertook in the quarter in just a few minutes. Now lastly, we remain on track to achieve our ESG targets and our commitments to ESG as well. You can read more about our progress in our 2021 ESG reporting update that was just posted this week. For those of you who follow ESG metrics closely, those updates can be found on our ESG microsite. Now, when we talk about investing $1 billion in infrastructure each year, it often goes, you know, unrecognized that to achieve this level of spending, we have to plan, execute, and account for thousands of projects each year. This is different from a lot of large utilities, you know, think about the electric utility industry, where they have a very few, but very large high dollar projects that make up their capital budget. I wanna provide a few examples of the work that our operations team has accomplished already this year. You know, execution of a vast number of projects in a large capital plan has become one of our core competencies at the company. Investing in our infrastructure is key not only to our company's growth, but critical to protecting our environment and ensuring reliability of service. Now starting on the water side, in Pennsylvania, we're working on the Valley Forge National Park transmission main replacement project. This consists of installing a large 9,100 linear feet, 30-inch transmission main to replace an existing 98-year-old cast iron main. This main helps convey water from one of our largest plants, the Pickering Water Treatment Plant, to roughly 670,000 people. And is being completed in coordination with, you know, all of the services you might imagine, the National Park Service, the Pennsylvania Department of Transportation, local townships, and other utilities, all to ensure that we have minimal disturbance to this really historic area for our country. This $4.4 million project is expected to be completed in 2023. Now in Ohio, we completed the Ashtabula Water Treatment Plant upgrades, which includes the first plate settler water treatment plant process in our Ohio fleet. This allows us to use a smaller footprint to process even more water, obviously making it much more efficient. We also added new flocculation and renovation improvements to our existing conventional filters. Our filter improvements include automation of valves, which is also much more efficient. This $14 million project has yielded improved settled water quality at the front end of the plant, which ultimately yields in savings in power and chemicals, along with improved water quality, just bringing overall efficiency through reduction in O&M costs. A really good, strong project. Finally, in Illinois, we're making significant upgrades to our Kankakee Water Treatment Plant. These are largely compliance-driven updates to meet federal requirements, specifically the cryptosporidium compliance. Ultraviolet disinfection was our selected method, and we believe that's the optimal treatment process for this situation. The design includes three parallel UV reactor trains with a capacity of 24 million gallons a day. We also made accommodations for future upgrades that could actually increase our plant to about 36 million gallons a day. The project includes four intermediate pumps to accommodate the hydraulic profile requirements of this new UV treatment process. Construction is already underway, and upgrades are planned to be online by December of this year. Additional water treatment plant improvements also include filter upgrades and some upgrades to our backwash pump. This is also a really strong upgrade to our plant there in Illinois. These details might not necessarily be important to you, but this is really important work that our people are executing, and it continues to build the reputation that's so important as we talk to municipalities who are considering a sale of their assets. Because we know that our expertise, our compliance record, and our overall execution act as our resume as we continue to work to grow our company. Now on the gas side, there are a couple of examples that I'd like to highlight as well in the Pittsburgh area. The Fern Hollow Bridge project in the Squirrel Hill area of the city is a $5.5 million project that not only includes replacing the pipeline that was severed, and you may remember this from the last winter when the bridge collapsed in January. Also includes replacing an additional 3,800 feet of 1927 vintage cast iron pipe on each side of the bridge. You might recall this was national news. President Biden was visiting the collapse shortly after it happened. He just happened to be in Pittsburgh that day. The project is expected to be completed in the fourth quarter of this year, which is a pretty fast timeline given what we experienced out there. Now, another project, the Fort Pitt Boulevard project in downtown Pittsburgh, and for those of you who know Pittsburgh, this would be in the Golden Triangle area. This is a $3.5 million project, installing about 2,210 feet of 16-inch coated steel pipe, replacing 1936 and 1939 vintage 16-inch bare steel pipe. This project will also be completed this calendar year. Now, these projects improve the reliability of service, they reduce risk, and they reduce emissions to the environment and obviously support our ESG commitments as well. Now, let's talk about ESG for a moment. We recognize that transparent and detailed ESG reporting is important to many of our constituencies, including many of you who are on the line today. On August 1, we published our 2021 ESG reporting update to our microsite. For those of you who know it's at ESG.Essential.co. You'll recall last summer, we refreshed our microsite and published an expanded 2020 ESG report alongside supplemental reports that summarize key metrics. Now this year, we're updating just the supplemental reports. Then next year, we'll look to publish a new version of our full ESG report. We arrived at this reporting cadence after dialogue with many of our stakeholders, including some of you. Now, through June of this year, we're reporting strong progress on each of our major ESG announcements. These were initially announced in 2021, and it includes large jump to 14% Scope 1 and Scope 2 emissions reduction. Now, this is driven in large part by our January 1 switch to nearly 100% renewable electric power for our water segment operations in Pennsylvania, Ohio, Illinois, and New Jersey. We expect this figure to continue to rise in the right direction as the remaining six months of the year actualize. We also continue to replace aging gas main, as I just was describing, each year, which is the greatest contributor toward our targeted 60% reduction by 2035. Now, lastly, it's not on this slide, but I did want to briefly revisit what I call our industry-leading PFAS commitment, given the recent federal proposed health advisory limit. We consider our 2020 commitment, a great example of strong ESG in practice. We were the first and the only multi-state utility to set its own company-wide PFAS standard. And I think we're uniquely positioned to address PFAS because of our experience and our capabilities with analytical testing and building and operating treatment systems, spending nearly $40 million, to meet the company-wide standard of 13 parts per trillion. You know, the EPA's recent announcement about its revised, you know, the non-enforceable health advisory limit recommends that utilities considering addressing PFOA at a level over 0.004 parts per trillion, which is more than a thousand times lower than the previous advisory limit set in 2016. It's also a thousand times lower than the technical capability to detect this contaminant, which is currently at 4 parts per trillion. Largely, we see this as a political action by the federal EPA, and it's not necessarily based in science. I think we all know at this point that the EPA will be proposing a true PFAS enforceable limit in the fall of this year, which is based on the legal process and requires a cost-benefit analysis. We believe that the MCL or maximum contaminant level that will be issued this fall will require a much higher concentration than the health advisory level they recently announced. We have our key people from the company who are involved in organizations that will be reviewing and discussing this proposal with the EPA up and through the fall. I think we're well-positioned to have adequate input into this decision that the EPA will make. With that, Dan, let me turn it over to you for the financials. Thanks, Chris, and good morning, everyone. Let's move to slide 11. We ended the second quarter with revenues of $448.8 million, up about 13% from last year. Our regulated water segment contributed $269.4 million, and our regulated natural gas segment contributed $167.7 million, with the balance coming from our limited non-regulated operations. Purchased gas costs increased by $30.2 million due to higher natural gas commodity prices. Thus, gross margin increased year-over-year by $21.5 million. The largest contributors to the increase in gross margin for the quarter were additional revenues from rates and surcharges, customer growth, and increased volumes from both our water and natural gas segments. O&M expenses increased to $135 million for the quarter, up from $127 and a half million in the second quarter of last year. Recently added acquisitions, increased maintenance expenses, and higher water production costs, primarily as a result of inflationary pressures, were the main drivers for the quarter. Net income was up 1.7% year-over-year from $80.9 million to $82.3 million, and GAAP earnings per share decreased to $0.31 from $0.32 for the quarter, given the increase in shares due to the August 2021 settlement of our 6.7 million share forward sale that we did in 2020. Next, we'll walk through the waterfall slide, starting with revenue. In the second quarter of 2022, revenues increased $51.7 million or 13% on a GAAP basis. Similar to the first quarter of the year, you'll notice that the primary driver was the recovery of higher purchased gas costs of $30.2 million due to the significant increase in natural gas commodity prices. Rates and surcharges, organic and acquisition growth, and increased volumes from both our regulated water segment and our regulated natural gas segment provided an additional $23.7 million toward the revenue increase, which was then offset slightly by other. Next, let's look at the operations and maintenance expenses on slide 13. Looking at the operations and maintenance waterfall, expenses for the second quarter increased to $135 million compared to $127.5 million for the same period in 2021. Other expenses contributed $3.5 million for the quarter. Other reflect higher outside services costs in the water segment, some of which will be capitalized in the third quarter, offset by higher capitalization in the gas segment, aligned with the accelerated pace of capital projects this year. Growth, which reflects the O&M costs of acquired systems in Pennsylvania, Illinois, and Texas, contributed $2.2 million, and increased production costs in our regulated water segment added an additional $1.5 million. In production costs, the largest inflation-related increases we are experiencing are for chemicals, many of which have seen significant increases year on year. Employee-related costs added $554,000, and the Gas Customer Assistance Program expenses, which are recoverable through a revenue surcharge, increased $524,000. These increased expenses were offset by decreased bad debt of $788,000 Next, we'll spend a minute on the earnings per share waterfall. Beginning on the left side of the slide, GAAP EPS for the second quarter of 2021 was $0.32. Rates and surcharges contributed $0.03, and growth and increased volume from our regulated water segment added another $0.021 combined. Continuing on, increased volume from our regulated natural gas segment contributed $0.006. These were offset by $0.044 of other items, including increased depreciation, interest, and taxes, and $0.017 of expenses. The result is a GAAP EPS of $0.31 for the second quarter of 2022, which was in line with the street's expectations. As I noted earlier, the $0.31 also includes the impact of 6.7 million additional shares from the forward equity sale that we settled last August of 2021. These shares were thus not in the denominator when the $0.32 from the second quarter of 2021 was calculated. We remain confident in our full year guidance and our ability to deliver on the 5%-7% earnings growth per share expectation that we set at the beginning of the year. Moving on to rate activity and other regulatory matters on slide 15. In 2022 so far, we completed rate cases or surcharge filings in our regulated water segment in Illinois, North Carolina, Ohio, and Pennsylvania, and we completed a rate case in our regulated natural gas segment in Kentucky. The combined total annualized revenue increase is $83.3 million. As many of you are aware, we received our final order in the litigated base rate case for our regulated water segment subsidiary in Pennsylvania. Just to recap, we filed the rate case for our Aqua Pennsylvania subsidiary in August 2021, which included six acquisitions as well as the request for the first water-focused universal services program in Pennsylvania. The primary driver of the rate case filing was the $1.1 billion in capital investments since the last rate case. We were awarded an ROE of 10% by the Pennsylvania Public Utility Commission and additional authorized revenues of $69 million, with new rates effective on May 19, 2022. With that, I'll hand it over to Matt to discuss developments in the municipal acquisition program. Matt? Thanks, Dan. I appreciate it. I'll start on slide 17. Many of you are familiar with the 7 signed asset purchase agreements pending that are shown here in the dark blue boxes, which together add nearly 224,000 customers or customer equivalents and total over $418 million in purchase price. We are pleased to report that last month we received approval by the Pennsylvania Public Utility Commission for the East Whiteland and Willistown wastewater transactions, which is reflected on this slide. We anticipate closing both of those transactions over the next month. Regarding DELCORA, many of you are aware that we submitted a request to the Pennsylvania PUC earlier this year to restart the regulatory approval process after the Commonwealth Court decision on March 3, 2022, wherein the court acknowledged the enforceability of our asset purchase agreement with DELCORA. We are now currently awaiting an order from the Court of Common Pleas that is consistent with the Commonwealth Court of Pennsylvania's decision. On July 14, Pennsylvania PUC also remanded the approval proceeding back to the administrative law judge for review in a prompt manner. The order for this was then formally entered on July 26. Given these developments, we remain comfortable in the closing timeline we laid out earlier this year and continue to have DELCORA included in our long-term guidance starting in 2023. We expect to close the other four transactions on this slide by later this year or in the first half of 2023. Moving on to slide 18, I would like to cover the exciting development with Bucks County Water & Sewer Authority. As Chris referenced earlier, last month it was announced that we were selected as the sole company to move forward with discussions regarding the sale of the authority's wastewater assets. Aqua Pennsylvania was granted a one-year exclusivity agreement based on the authority board's determination that our terms were the most beneficial to its customers, employees, and other constituents, along with the residents and taxpayers of Bucks County. We have not yet signed an asset purchase agreement, therefore it is not included in our current pending acquisition numbers, but we did wanna provide you with some of the details regarding the potential acquisition. Our bid is for $1.1 billion in total for the Bucks County Water & Sewer Authority wastewater system assets, with the majority of this paid up front and the rest paid over time. The system serves approximately 75,000 customer connections and approximately 130,000 equivalent dwelling units, given the 14 other wholesale wastewater contracts. There are 15 plants with a combined total capacity of about 50 million gallons per day, approximately 115 pumping stations, and the system has approximately 900 miles of sewer pipe. In addition to Bucks County, the authority also has service areas and owns assets in both Montgomery County and Chester County. This is a very, very exciting opportunity for our company, which will more than double our existing wastewater connections in Pennsylvania. We hope to have more news to share on this exciting development, including the potential signing of an asset purchase agreement in the near future. Moving on to slide 19. In addition to the signed municipal transactions, and with the most recent announcements, our pipeline of opportunities for growth remains strong and healthy. The competitive amount of upfront capital we provide, along with our technical and operational expertise and long-term rate stability, continued to demonstrate our value proposition to municipal systems. We continue to focus on growth in all eight of our water and wastewater states, given we have Fair Market Value legislation in place in each. Currently, we're engaged in active discussions with municipalities and pursuing approximately 410,000 potential water and wastewater customers as illustrated in the table you see here. I will note that this pipeline no longer includes the Bucks County Water and Sewer Authority wastewater customers. Now, I'll hand it back to Chris. Hey, thanks, Matt. I mentioned earlier in the call that when the board met this week, they declared a 7% increase to our quarterly dividend. This marks the 32nd increase in 31 years and the 77th consecutive year of quarterly dividend payments, supporting our consistent record of delivering shareholder value. Now, following the increase, the annualized dividend rate will be nearly $1.15 per share. This slide demonstrates the annual dividend growth that we've consistently provided for shareholders over the years. Let me wrap up on slide 22 by reaffirming our 2022 guidance. We continue to expect to earn between $1.75 and $1.80 per share. We remain confident that our three-year earnings per share growth will be 5%-7% through 2024, and our capital plans remain on track as we anticipate investing approximately $1 billion a year to rehabilitate and strengthen water, wastewater, and natural gas systems through 2024. Rate base is expected to continue to grow 6%-7% for water and 8%-10% for natural gas. Customer growth is expected to be 2%-3% on average for water and stable in natural gas. Finally, we remain committed, as we've discussed, to our ESG targets and will continue to report on our progress as things develop, you know, including a year-end report for all of you. This concludes our formal remarks, and why don't we open the line for questions at this point? Thank you, sir. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will take the first question from Insoo Kim from Goldman Sachs. Your line is open. Please go ahead. Hi, Insoo. Good morning, Insoo. Guys, how are you? First question, on that pending the discussions with the Bucks County, I guess near term, we'll see if there's an APA that's signed. Looking through that, I guess the breakout of the immediate payment versus the ones over time and thinking about potentially the percentage of those that kind of cascaded down into the rate base, any rule of thumb or initial thoughts on how we should think about that? Yeah. I can take that one. Thanks, Insoo. Really, the Bucks County Water & Sewer Authority Board wanted to ensure an ongoing revenue stream over time, and therefore, we entered into a retained capacity agreement for a portion of its wastewater treatment capacity. Basically, as development occurs in their service territory, we'll purchase that retained capacity, and then once we purchase it, we'll be able to include it in our rate base going forward, as you know, in order to service these new homes and businesses that come online. The $195 million that we referenced on the slide will actually be paid out over a very long period of time. It could be, you know, in the range of 50 to 100 years, but it really all depends on the level of development in that service area. In that, the immediate $935 million, any, you know, what percentage that we could think of that ultimately goes immediately into rate base if this does happen and close? Yeah. That's gonna be dependent upon, as you know, the Fair Market Value process and the Public Utility Commission's view of things. We feel good about our purchase price, and we think we'll make a strong case with our UBEs for inclusion and rate base. You know, it's hard for us to predict exactly what that will be before we run through the process. Got it. I guess somewhat related to that, from a balance sheet and financing perspective, given that this pretty large potential, you know, acquisition is out there, when we look over the next 12 months, or beyond, you know, is the larger potential equity issuance going to be tied to potentially this agreement and the acquisition, or could we see something a little bit sooner? Yeah. I think, you know, that's something we're still evaluating today. I mean, this is relatively new news in terms of Bucks County, and then of course, you know, we've got expectations around DELCORA. We're really reevaluating how much equity need and what the timing is of, for that equity and really the means of raising that equity. Yeah. Just to add to that, Dan, you know, we know that upon signing of the asset purchase agreement, we probably have, call it 9-12 months, as you all know, of regulatory process. Given we're not quite at the signing of the APA, we have plenty of time to consider timing of equity needs, as Dan said. Correct. Okay. Just one more, if I could, on that, on the balance sheet aspect. Over whether it's trailing twelve months or whether your expectations are for 2022 from a FFO to debt perspective, you know, accounting for the future potential equity with the acquisitions, are you looking to get to at least the 13% level? I think when we look at our FFO to debt and, you know, the conversations with both agencies have effectively had 12% as our downgrade threshold. The way that's been communicated is if we were consistently below 12%, we would be having conversations with respect to that. You know, it's our intent as we finance transactions and once we finance our significant CapEx program to keep that FFO to debt above that 12% level on an ongoing basis. I wouldn't say that 13% is, you know, a near-term target for us into. Got it. That's helpful. Thanks, guys. Thanks, Insoo. Thank you. The next question from Durgesh Chopra from Evercore ISI. Your line is open. Please go ahead. Hey, Durgesh. Hey. Good morning, Chris, Dan, and I saw the added responsibility for Mr. Dingerdissen, so he's never going home now. Congrats, Dan. That's right. Now that we've brought him into finance, you're absolutely right. There you go. Okay, so just congrats on the Bucks County deal. All you've answered all the questions that I had there. I just wanted to just check in on the Inflation Reduction Act. You know, obviously you won't qualify from a size perspective for the alternative minimum tax, so that's not an area of concern. Anything that us and investors should be watching that impacts your business on the Inflation Reduction Act? No. I mean, I think that's the primary one that's like sort of the quickest to identify and kind of look at and say, "No, we're not hitting that billion-dollar threshold yet, so we wouldn't be impacted by that minimum tax immediately." Like everybody else, I think we're still wading through it to understand what the real impacts could be. Nothing at this point is hitting the radar screen as being significant. Got it. I just wanted to check in. Yep You know, on pension, can you remind us what your accounting policy is as we think about 2023? Some of your electric and water utility peers use this mark-to-market accounting, where they could have a significant headwind next year. Maybe just any color there, and can you remind us what your accounting policy is? Yeah. Let me give you a few points on the pension. The Aqua pension, which is the majority of the employees you think about. That pension's been frozen since 2003 to new entrants. We have people that are in it, but they joined it before 2003. In the last few years, we started a glide path in terms of our investment allocation there. In that, as we've become more fully funded, we've materially reduced our exposure to equities and other risk assets. At this point, Durgesh, we're effectively 100% funded for the bulk of our obligations, and we've continued to have pension contributions as part of our rate structure. When we think about pension, it's something that we manage, but it's not something that we worry about. Got it. Thanks, guys. Appreciate the time. Thanks, Durgesh. The next question from Ryan Connors from Northcoast Research. Your line is open. Please go ahead. Hey, Ryan. Great. Thanks for taking me. Hey, guys, thanks for taking my question. Wanted to talk about the M&A pipeline from a little different perspective, and I wanna get your thoughts on sort of the public narratives out there. Obviously, as you add larger deals to the pipeline in a major press market like Philly, you also raise more press coverage, which tends to skew kind of locally here, and then you bring more of the Food & Water Watch types, you know, in greater numbers. And that's been apparent at some of the local, the recent coverage locally. I'm curious, my question is. We do believe that that has been a factor in some of the pushback on DELCORA funnels up to some of those leaders. What is your strategy for kind of taking control of that narrative and making sure that your side of the story gets out there? I mean, you did some great comments on this call, Chris, but this obviously isn't the forum to reach that broader audience. I mean, just curious how you can strategize around, you know, making sure you get equal play with some of the detractors there. Yeah. A couple of observations, and Matt may have some as well, but I think, number one, we have a pretty defined strategy, communication strategy, which includes, you know, we're up with microsites and websites that put full information out there. For the hearings that we had for Bucks County, we organized them much like an expo so that constituencies interested would get a full view of the company's expertise, its people, and how we perform. It wasn't rows of chairs and everybody throwing rocks at each other. It was a much more collaborative. I realize that that's not what our opponents want. They want rows of chairs so that they can yell and scream. Also, an observation I would make that we've seen more recently is outsiders, Food & Water Watch in this case, and to some degree, other local organizers who have become professionals at this, I think are viewed and have been viewed in some of the Bucks County work as outsiders. Remember, even in this case, and I'll use this as an example, but it would apply to Chester and DELCORA and others. We live here, we work here, we're part of the fabric of this community. We're not from Washington, D.C., coming up here trying to agitate. You know, I think those are important factors. I'm not saying that there weren't, you know, involved constituencies who, you know, had a say, particularly in some of these, because there are. I would say the most active agitation is being led by outsiders. I think that's being recognized. Yeah. Look, I think we have a very compelling value proposition for municipalities, and I think municipalities see it, right? They understand everything we bring to the table, but we're not always gonna be able to convince these outsiders that don't really know the whole story, right? They have a set agenda and, you know. We're less concerned with those folks and more worried about making sure the value proposition gets to the people that need it in our communities, right? Those outsiders are largely anti-privatization. It's not, how do I operate my wastewater or my water plant? It's really about, I don't want my assets privatized. It's a philosophy rather than an economic or a common sense approach. I hope, Ryan, over time, that those win the day, but we have to take these one at a time, and as you know, we take them very seriously. Yeah, it's great color. I wanted to ask also about. It was an interesting hearing this week on SB 597, which I guess is the Water Quality Accountability legislation in PA. Mark and Chris did a great job there, and wanted to see if, Chris, if you had any updated thoughts on whether that becomes law or not, and what the impact of that could be for Aqua. Yeah. We're very proud of the team who testified up there, and we try to be very thoughtful in our comments. Listen, you know, Ryan, you've studied this stuff. This is simply leveling the playing field. We can make this a cost item or however the opposition wants to portray it. But the reality is, we're just asking all utilities to provide the same level of service and replacement cycles and everything else that we do under the guidance of the Public Utility Commission. We think it's very reasonable. You know, it's hard to read legislators in terms of how they'll react, but I think they're probably at this point in the process of digesting all of that information and testimony, and I think we'll get a much better read on the options for proceeding through the committee and then to the floor of the House, as we did in the Senate, in the coming weeks when the legislature comes back into session in September. Listen, I think it's important legislation and we're gonna continue to press hard. Ultimately, it'll be up to the committee chairman and legislators. Yep. Okay. Lastly, just this is more of a housekeeping. Dan, and apologies if you mentioned this, I might have missed it, but the tax rate did kind of jump, and kind of more of the higher ones we've seen in a few years. Is this any forward guidance for us or on what we expect now on the tax line? Yeah. Ryan, I would look for full year 2022 to be just below zero, meaning a little bit of a benefit on the tax line. As you know, kind of at this point, you know, we're getting a tax benefit on the Peoples side because of where we are in terms of repair cycle. We have a normal provision, if you will, on the water side, and you blend these two together. I think it's, you know, it's an interesting quarter tax-wise when you look at it, but I think look also, you know, look year to date, but think slightly, a slight negative effective tax rate, or think of it as a benefit for full year 2022. Got it. Okay. Hey, great. Thanks for your time. Yeah. Thanks, Ryan. The next question from Travis Miller from Morningstar. Your line is open. Please go ahead. Hey, Travis. Good morning, Travis. Hey. First question, I was thinking about customer bills. I think you have a unique perspective in that you have the gas side and the water side. How are you seeing the trajectory, especially on that commodity side, between the gas bills and water bills? Obviously, gas prices being high. How is that gonna affect the winter? And then what are you seeing in terms of water bills relative to what we've been seeing on gas bills? Well, let's start with water. Clearly, we don't have the same kind of commodity or fuel charge that we have in natural gas. The commodity is relatively inexpensive. The cost really associated with that is the pipe to get there and our replacement projects, along with the enhancements of our plants, as we talked about with PFOS, PFOA. Clearly, the trajectory is going, you know, going higher. What we've tried to do in this inflationary period is contain cost as best we can, right? We're continue to focus on capital projects that reduce operating expense. On the water side, the cost increases or rate increases, if you will, are largely based on capital investment and, you know, some now on inflation, but we're working very hard to mitigate some of those. On gas, obviously, the commodity cost is up. Now, there's been some moderation as we put about 49% of our gas in the ground during the summer, that we'll ultimately use in the wintertime. We try to take advantage of that as best we can. But clearly, when we look at it on a year-over-year basis, natural gas is much higher this year than it was last. Therefore, the winter bills our customers will see in the winter coming up will be higher based on that commodity cost than they were last year. Dan, you wanna put more color on that? Yeah, real quick, Chris, I guess, you know, I think of it as our customers tend to use kind of 90 MCF a year, maybe 100. In rough numbers, you know, think about for each dollar in the increase, the commodity cost, the bill would increase by $90-$100. If we're at, it's $2 more per year this year, you can think about it as the annual bill being maybe $200 more in 2022-2023 heating season than we saw last year. Yeah. Now, Travis, we have significant safety nets in place, right? Not only the federal LIHEAP dollars for natural gas and LIHWAP dollars on the water side, but we also have CAP programs or customer assistance programs. On the gas side, you know, call that in the range of $35 million a year. On the water side, it's growing because we just put the universal service program in with the last rate case. It was that was finalized in May of this year. It's not as significant as natural gas, but we are working hard to make sure that the safety net is there for folks who really have a hard time paying their bills. Okay. Got it. Makes sense. If we go back to the comments you made earlier on the EPA federal regulations, would you classify that more as a capital investment opportunity, or is there some risk there that that can increase O&M costs that you might not get recovery of? No, we'd expect full recovery of all investments to comply with federal law. We don't think there's any exposure there. I will say that, you know, when we talked about our initial commitments, when we put the 13 parts per trillion standard in against an HAL, Health Advisory Level, of 70 parts, we did take some level of risk that some of that wouldn't be recovered because it was in some ways exceeding federal law. The discussion with regulators has been very positive. So far there have been no regulators who had thought we should not recover those operating or capital expenses. Now, we'll see where the maximum contaminant level comes in this fall, and if that should drop our standard from, call it 13-10 or less, we would of course move immediately to comply with that federal law like everybody else would be. We would expect full recovery. We also expect that that could open up some opportunities for us to help other municipals who may not be able to afford it or don't have the expertise that we have in meeting those compliance rules. Okay. Got it. No, appreciate the thoughts there. That's all I had. Yep. Thank you. Thanks, Travis. The next question from Ryan Greenwald from Bank of America. Your line is open. Please go ahead. Hey, Ryan. Hey, Ryan. Hey, guys. Good morning. Good morning. Brian, congratulations on the new role. Thank you. Maybe just to follow up on the equity. I think you guys have talked about potential for a $500 million ATM. Is that still kind of in the cards in the near term, or is that on pause right now, kind of pending firmer developments on Bucks and maybe some other moving pieces? Yeah, it's really the latter of those. I think given that the recent progress on Bucks and as we think about DELCORA, the exact timing and format and quantum of the equity raise is still in flux. Got it. Any initial expectations on benefits that could accrue to you guys from the recent move by the governor to reduce the tax rate in Pennsylvania and how that could kind of factor into any rate case dynamics here? Yeah, actually, in Pennsylvania, we have it's called STAS, but it's really a process by which as their state tax rate changes, those result in an adjustment to the rates that our customers charge. As the corporate rate comes down, we'll be passing those benefits back to our customers. Understood. Any updated thoughts just in terms of Chester? Yeah. We continue to move through the legal process. You know, the case is still at the Supreme Court, and they have not yet ruled. You know, the receiver continues his work. We expect him to wrap up actually next year. In the meantime, there will be a board member change. Every five years, the board of the Chester Water Authority comes up for renewal. We expect that there will be at least three new members of that board. They're up, call it August 15 or in that range. We'll see what the new board has an appetite for. I think, you know, we'll watch to see those developments. Other than that, I think it's on course to wait for the court hearings. Great. I'll leave it there. Thanks so much. Take care, Ryan. Next question from Jonathan Reeder from Wells Fargo. Your line is open. Please go ahead. Hey, Jonathan. Hey, good morning, team. Good morning. How are you guys? How are you, Chris? Well, good, Jonathan. Good, good. On DELCORA, besides the commission voting to restart the process and kicking it back to the ALJ, have there been any other developments, like has a timeframe for getting a new proposed decision been outlined? Well, you know, the ALJ has asked for the preliminary hearing, which I think is in the next week here on Tuesday. We expect that schedule would come as a result of that hearing. I would say in the next week or so, we'll know what that schedule looks like. We hope that the ALJ would adhere to the commission's desire to move swiftly, promptly, as they said. Can you remind us, I know you said you're comfortable kind of your assumptions around DELCORA and closing. Can you remind us what is assumed in your guidance as it relates to, you know, kind of the timing of the close? I'm assuming it's the current purchase price that you guys assume, stuff like that. Just run through that stuff again. What we have included in our guidance would be full year 2023. We'd have DELCORA included in our numbers. If you do kind of simple rate-based math on the purchase price, you'll get pretty close to the net income assumption there. Okay. You're kind of assuming year-end 2022 close, and then the $277 million purchase price. All right. Correct. Got you. Dan, for you last in terms of like O&M expense. You know, it looks like it did kind of normalize a bit in Q2 after, you know, the Q1 abnormalities. Did you say, you know, some of the stuff in that kind of other bucket that had the $3.5 million increase this quarter will reverse or be capitalized in the back half of 2022? Yeah, that's correct. We identified some things after the quarter close that were outside services expenses, which should be capitalized. We'll turn those around in the third quarter. Okay. I think it was around like close to 6% increase this quarter. We should actually be thinking kind of lower than that. Yeah. based on those reversals and. Take the 5.9% that you see. I'd remove the impact of the acquired systems from that, and then the impact of the customer assistance program for gas because that just floats based on gas price, and there's a revenue offset to it. You'd come down to an increase of about 3.7%. If you take into account these reversals, it would bring that number to a more moderate level. Inflation, as of now, you have it kind of under control with impacts. I would say yes, but those inflation impacts are certainly out there in spots related to both capital and expense. Okay. Yep. Fuel. Yeah, Jonathan, just think about fuel, right? As one chemical is another. Chemicals are another. Yep. As we said, I think we mentioned chemicals in the prepared remarks, with certain things like chlorine have you know effectively doubled in price. Now, it's small volume, small part of our cost structure, but some significant increases are out there. Yeah. Okay. Well, great. Good luck in the upcoming months in terms of DELCORA and getting Bucks signed, sealed and delivered. Thanks very much. Thanks, Jonathan. Talk soon. We're working hard at it. Again, press star one to ask a question. We will take the next question from Gregg Orrill from UBS. Your line is open. Please go ahead. Hey, Greg. Yep. Hey, thank you. On Bucks County, when would you see that being accretive to earnings, and how would that ramp up with fair value accounting? Well, I think a couple of ways to think about that. One, we have an asset purchase agreement that we have signed, right, that they have not yet signed. I think it could be tweaked, right, before it's signed, so we're not entirely clear. Secondly, you know, it'll be accretive, certainly in rates. I don't think we're ready to say what that accretion looks like before we put it in rates, like so many of these. Then depending on the period of time it takes for us actually to get a signed APA, hopefully that's sooner than later, that time period between the now and when we file our next case also could be longer or shorter. I think there's a lot of considerations to that. Certainly as we look at this, the long-term accretion is positive. It's a matter of getting it to rates initially. Okay, thank you. We have a follow-up question from Insoo Kim. Your line is open. Go ahead. Hey, thanks for taking one more question from me. Might ask this a little bit cautiously. I guess, you know, then in the utility industry, I think over the past year, there have been, maybe a couple of utilities that when they had the financing needs through equity have sold at least just a portion of one of the utility jurisdictions or assets that they may have. I know, you know, we've discussed the strategy about water and gas and whatnot, and now that Bucks and, you know, potentially a couple of other chunkier acquisitions may be in the front window. Is there any consideration or thought that maybe a partial sale of the gas utility ownership may be on the table to finance the equity portion? It's a good question. I'll reiterate you know, where we've been, and that is that, you know, we really like these gas assets. They're outperforming all of our expectations, earnings, safety, capital program, and everything else. We're really comfortable. Having said that, you know, you make an important point and, you know, we think about, you know, all of our options. As we think about whether Bucks becomes real, whether we can get DELCORA closed in the next quarter here, you know, there's a lot to think about. I would say, you know, we're evaluating all of our thoughts on capital raise at this point. Matt, do you have any other thoughts? No, I think you said it correctly, Chris. Yeah. Okay. Different, a lot of different options on the table. Got it. Thanks a lot. Yep. Next question from Verity Mitchell from HSBC. Your line is open. Please go ahead. Hi, Verity. Hi, morning everyone. Hey, Verity. Hi, congratulations to Brian on the new role. Fantastic. I just wanted. Thank you. To comment on your ESG report. Obviously you've done a huge amount of work, which I've been plowing through. This is a question for Chris, and you might not thank me for this, but just kind of blue sky. How do you think the risks are changing? Or would you say the risks are changing more in gas rather than water? And are they growing? How do you think about the environmental risk of the two businesses? Thank you. The question is, what is that ultimate energy mix down the road, many years down the road? I would suggest to you that natural gas will continue to play a significant role for 30 or 40 years. Maybe, you know, the technology advances and things like carbon capture and hydrogen and play larger roles. Natural gas in places that get cold, in particular, will continue to play an important role in the energy mix. I think as I just mentioned, the technology advances could mitigate risks. The replacement of pipe and the tightening of our systems to reduce methane, stray methane, are important aspects and we're, as you know, fully engaged in that. If you just simply said how do we think about the work around ESG and the environment and our two businesses, clearly an elevated focus in natural gas. Great. Thanks. Very helpful. You're welcome. That's all the time we have for questions. Mr. Chris Franklin, at this time, I will turn the conference back to you for any additional or closing remarks. Thanks so much. Obviously, folks, we'll be available for follow-up questions. Brian, Dan, myself, Matt, all available and at your disposal. Have a great day. Thanks for joining us. This concludes today's call. Thank you for your participation.