PPL Corporation (NYSE:PPL) Q3 2022 Results Conference Call November 4, 2022 11:00 AM ET
Company Participants
Andy Ludwig – Vice President of Investor Relations
Vince Sorgi – President and CEO
Joe Bergstein – Chief Financial Officer
Conference Call Participants
Shar Pourreza – Guggenheim Partners
Durgesh Chopra – Evercore ISI
David Arcaro – Morgan Stanley
Michael Lapides – Goldman Sachs
Paul Zimbardo – Bank of America
Nick Campanella – Credit Suisse
Paul Patterson – Glenrock Associates
Anthony Crowdell – Mizuho
David Paz – Wolfe Research
Operator
Good day, and welcome to the PPL Corporation Third Quarter Earnings Conference Call [Operator Instructions]. Please note, this event is being recorded.
I would now like to turn the conference over to Andy Ludwig, Vice President of Investor Relations. Please go ahead.
Andy Ludwig
Thank you. Good morning, everyone. And thank you for joining the PPL conference call on third quarter 2022 financial results. We provided slides for this presentation on the Investors section of our Web site. We’ll begin today’s call with updates from Vince Sorgi, PPL President and CEO; and Joe Bergstein, Chief Financial Officer, and conclude with a Q&A session following our prepared remarks. Before we get started, I’ll draw your attention to Slide 2 and a brief cautionary statement. Our presentation today contains forward-looking statements about future operating results or other future events. Actual results may differ materially from these forward-looking statements. Please refer to the appendix of this presentation and PPL’s SEC filings for a discussion of some of the factors that could cause actual results to differ from the forward-looking statements. We will also refer to non-GAAP measures, including earnings from ongoing operations and adjusted gross margins on this call. For reconciliations to the comparable GAAP measures, please refer to the appendix.
I’ll now turn the call over to Vince.
Vince Sorgi
Thank you, Andy, and good morning, everyone. Welcome to our third quarter investor update. Turning to Slide 4. We had another solid quarter of financial results as we execute our Utility of the Future strategy. Today, we announced third quarter reported earnings of $0.24 per share. Adjusting for special items, third quarter earnings from ongoing operations were $0.41 per share compared with $0.36 per share a year ago. Based on our strong financial performance year-to-date, today, we increased the midpoint of our earnings forecast from $1.37 per share to $1.40 per share, and narrowed our earnings forecast range to $1.35 to $1.45 per share. Our 2022 earnings guidance reflects a partial year estimate of contributions from Rhode Island Energy, which we acquired on May 25th. Today, we also reaffirmed our projected compound annual earnings per share and dividend growth rates of 6% to 8% through at least 2025. Our per share growth target is based off the midpoint of our pro forma 2022 forecast range of $1.40 to $1.55 per share or $1.48 per share. The pro forma forecast reflects a full year of earnings contribution from Rhode Island Energy.
We remain confident in our ability to achieve our growth projections, even in the current macro environment of rising interest rates, high inflation and high commodity costs. At a time when affordability is paramount for our customers, our strategy and strong balance sheet provide PPL significant resilience. Namely, our current business plan does not rely on rate cases to achieve our stated growth targets. We expect to recover about 55% of our current five year CapEx plan through riders and formularate, reducing regulatory lag and supporting continued strong credit metrics. And our strong balance sheet will support growth without the need for equity issuances over the planned period, while providing financial flexibility to effectively manage market volatility. We also continue to execute our business transformation initiatives, focused on driving efficiency, affordability and improved reliability for our customers. As we outlined in our Q2 call, this includes hardening the system, deploying smart grid technology and leveraging data science across our T&D operations, optimizing our generation outage schedules and nonoutage maintenance costs and centralizing shared services while deploying common systems and platforms. We remain confident that we will achieve our planned O&M savings of at least $150 million through 2025 with the potential for additional upside beyond 2025. Bottom line, we believe we are well positioned to weather current economic conditions while driving substantial value for both customers and shareowners.
Shifting to a few operational highlights on Slide 5. In Kentucky, we continue to evaluate opportunities to advance the transition of our generation fleet, transition that will offer long term value for our customers and help deliver the clean energy transition in Kentucky. We continue to expect to retire 1,000 megawatts of coal fired generation by 2028, with the potential to retire an additional 500 megawatts due to EPA’s Good Neighbor rule. In connection with these expected retirements and following the RFP completed earlier this year, we’re targeting a mid-December filing with the Kentucky Public Service Commission, which would include requests for Certificates of Public Convenience and Necessity, or CPCN, for any supply side assets that would be owned by us. We’re also updating our load forecast to reflect the recent economic development in our service territories, including Ford’s EV battery plant as well as updating demand side management and energy efficiency programs to fully address the demand side of the equation. As we evaluate our supply options, we’re focusing on solutions that are lease cost and will ensure the reliability our customers need and expect. We anticipate these lease cost solutions will be a combination of company owned resources and power purchase agreements and will include solar, energy storage and combined cycle natural gas.
We also expect this generation replacement strategy to significantly improve the carbon intensity of our Kentucky generation fleet. Our mid-December filing will begin a regulatory review process that will conclude with an order from the KPSC. While there is no statutory timing requirement for the KPSC to review a CPCN filing, we would expect to conclude the regulatory review process by the end of 2023. In other updates, our Rhode Island Energy subsidiary expects to file several plans with the Rhode Island Public Utilities Commission by the end of Q4 that will support our customers’ evolving energy needs. We’ve already filed our annual energy efficiency plan in late September, which is critical to our reliability, customer satisfaction, affordability and sustainability objectives. Within the next couple of months, we’ll file the company’s annual infrastructure, safety and reliability plans for both electric and gas, which will outline our plans to enhance the reliability of state’s energy infrastructure while at the same time, preparing the electric grid for more renewable energy, including offshore wind and distributed energy resources. Costs approved through the ISR plan will be recoverable through the ISR rider mechanism, which reduces regulatory lag for these investments between base rate cases. By the end of the year, we also expect to file our advanced metering plans at the Rhode Island PUC, outlining the deployment of advanced meters to our electricity and gas customers in the state.
PPL has experience installing almost 3 million advanced meters and realizing the benefits that those meters can provide. We will leverage this experience in Rhode Island and deliver this value for our Rhode Island customers as well. Our advanced metering plan will be foundational for our grid modernization plan, which we also plan to file by year end. The GMP is a longer term strategic initiative we’re developing in support of the needs of our customers as we deliver the grid capable of connecting 100% renewable energy by 2033, which is now a law in Rhode Island. And finally, in late October, we announced a strategic partnership with the Elia Group to support the development of transmission solutions for offshore wind in the New England region. Specifically, PPL and Elia signed a memorandum of understanding to jointly develop and propose innovative transmission solutions to integrate offshore wind to the onshore grid. We believe PPL and Elia are uniquely suited to support New England in this regard. Elia has been a clear pioneer in developing offshore transmission grid solutions through its subsidiaries in Belgium and Germany as the company has connected 14 offshore wind farms to the onshore grid. Meanwhile, PPL has established a proven track record of successfully citing, building and operating large transmission projects here in the US.
Both of our companies are clear leaders in grid innovation and reliability. And we both share a strong focus on advancing the clean energy future, while keeping energy safe, reliable and affordable. Together, we recently responded to a request for information issued by five New England states that are seeking input on potential transmission system changes and upgrades to integrate future offshore wind generation with current estimates of as much as 30 gigawatts by 2050. Moving forward, we anticipate forming a joint venture with Elia to pursue any potential offshore transmission opportunities that may arise after the RFI. We expect an RFP for proposed transmission projects in New England could be issued as early as third quarter 2023. Many offshore transmission projects stemming from this effort are expected to drive investments beyond 2026, and would be expected to be FERC jurisdictional projects under FERC formula rates. And while we are in the early stages of this process, we’re excited to be participating in the process and are optimistic that PPL and Elia can develop innovative and cost effective offshore transmission solutions for New England. Any investments made through this partnership would be incremental to the $27 billion of capital investment opportunities through 2030 that we highlighted at our Investor Day.
With that, I’ll now turn the call over to Joe for the financial update. Joe?
Joe Bergstein
Thank you, Vince, and good morning, everyone. Let’s turn to Slide 7. We reported 2022 third quarter GAAP earnings of $0.24 per share. Special items in the third quarter were $0.17 per share, primarily due to integration expenses associated with the acquisition of Rhode Island Energy, commitments made during the acquisition process and impacts associated with the sale of Safari, which we announced in late September and closed on earlier this week. Adjusting for these special items, third quarter earnings from ongoing operations were $0.41 per share, an improvement of $0.05 per share compared to last year. Another strong quarter brings our year-to-date GAAP earnings to $0.77 per share. Adjusting for year-to-date special items of $0.36 per share, our ongoing earnings results are $1.13 per share through nine months of 2022 compared to $0.83 in 2021.
Turning to the ongoing segment drivers on Slide 8. Our Pennsylvania Regulated segment results improved by $0.01 per share year-over-year, excluding share accretion. The increased earnings in Pennsylvania were driven by lower O&M expenses in the period, primarily from lower storm and support group costs. Our Kentucky segment decreased by $0.01 per share year-over-year, excluding share accretion. The decrease was due to various factors that were not individually significant. The addition of our Rhode Island segment increased earnings by $0.04 per share for the quarter. Results at Corporate and Other were $0.01 lower compared to the prior year due to factors that were not individually significant. Finally, our third quarter results were $0.02 higher due to share accretion resulting from the $1 billion of stock buybacks completed in 2021.
Turning to Slide 9. Our results to date support the $0.03 increase in the midpoint of our ongoing earnings forecast to $1.40 per share. As shown on the left of the slide, the primary drivers of the increase in our forecast are at our Kentucky and Rhode Island segments with higher margins due to favorable weather compared to our forecast in Kentucky, as well as lower O&M expenses in both jurisdictions as we execute on our business transformation. Turning to the right part of the slide. We’ve also narrowed our forecast, increasing the bottom end of the range to $1.35 per share from $1.30 per share given our strong year-to-date performance and only a few months remaining in the year. In closing, our financial results to date reflect the improved low risk profile of the new PPL as we continue to deliver for both customers and shareowners. Our strategic actions have well positioned PPL to achieve those results with an excellent financial foundation and a strong balance sheet to navigate the current macroeconomic environment. And we remain confident in our ability to deliver on our growth projections of 6% to 8% in earnings and dividends through 2025.
That concludes my prepared remarks. I’ll turn the call back over to Vince.
Vince Sorgi
Thank you, Joe. In closing, I’m proud of how we continue to execute the strategy we outlined at our Investor Day in June. Across PPL, we are laser focused on creating technology enabled utilities of the future, on delivering the clean energy transition reliably and affordably and on driving long term value for our customers and our shareowners. Our strategy delivers top tier earnings and dividend growth of 6% to 8% annually. And as we said, we remain confident in our ability to deliver this growth. Our growth is supported by $27 billion in investment opportunities through 2030 and one of the strongest balance sheets in our sector. It’s anchored in operational efficiencies in the near term with stronger rate base growth driving earnings growth later in the decade. And we firmly believe it’s the right strategy at the right time to effectively manage the risks associated with the current macroeconomic environment, while continuing to deliver real value for our customers and shareowners. Across our company, we continue to execute our plans for the new PPL and we’re as excited as we’ve ever been about our future.
With that, operator, let’s open it up for questions.
Question-and-Answer Session
Operator
[Operator Instructions] The first question today comes from Shar Pourreza with Guggenheim Partners.
Shar Pourreza
So just a couple of quick ones here. You mentioned again today that a CCGT and some renewables would be leading candidates for new energy and capacity. Has the IRA kind of changed the calculus on your potential ownership of the latter, so being renewables? And I guess, how should we think about scale there?
Vince Sorgi
Yes, it clearly has. So the IRA has clearly improved the competitiveness of company owned renewables versus third party PPA pricing, Shar, right? The PTC optionality there plus the additional tax attribute enhancements for certain types of labor, apprenticeship programs and in our case, we’re using coal sites, et cetera. So clearly, the economics are moving in the right direction from where we were before to now post IRA. I don’t want to get too far out in front of the filing in terms of how much of the resources we see. But clearly, I think there’s an opportunity for solar, storage, combined cycle on the solar and storage side. I think we’ll see a combination of PPAs and company owned there and then on the combined cycle, we would expect that to be company owned.
Shar Pourreza
And then just on the Rhode Island filings, Vince, are these sort of the gating mechanisms to maybe potentially narrow that CapEx range you have there? I mean, when you rolled out your plan, the out years had a roughly $200 million range between the bottom and top end. Now that you’ve been on the system, is this something we could see narrowed or even raised next year?
Vince Sorgi
I think that’s a good point. I would say timing wise, Shar, you’re probably right. I think we would see that maybe next year with our ability to narrow those ranges. We really want to get through this first regulatory process in the state. So these filings are our first filings in the state, as you know. And so we would expect to get through those kind of mid next year, and that will set us up for a much clearer view of ’23, ’24.
Operator
The next question comes from Durgesh Chopra with Evercore ISI.
Durgesh Chopra
Just firstly, just I think — can you size the CapEx dollars for us? Or did I hear you say you don’t want to kind of get ahead of the filing in terms of what this might mean. I’m thinking of just the Kentucky generation bucket separately and then Rhode Island separately.
Vince Sorgi
So for Kentucky, I would say the opportunity is probably in the $1.5 billion to $2.5 billion range, Durgesh, in total. The piece that could pull into the five year period would probably be in the $1 billion to $2 billion. So as you know, we had generation replacement in the $15 billion bucket, the $27 billion to $30 billion bucket of our $27 billion. And so as we look at what we’re seeing now with the CPCN filing where I think we’re going to see some of that pull into ’25, ’26 as we prepare for ’27, 2028 in service dates for some of these options. So $1.5 billion to $2.5 billion total, $1 billion to $2 billion moving potentially into the five year period.
Durgesh Chopra
And how about just the Rhode Island opportunity here? You’ve got the AMF, the GMV. How should we — is there a way to kind of handicap what the CapEx upside might be there?
Vince Sorgi
I think the ranges that we provided incorporate what we’re talking about with these current filings. And again, once we get through, I think, this first round in the state, we’ll be able to narrow that range following next year’s — in next year’s update.
Durgesh Chopra
And then just one, hopefully, quickly following up. You have — am I right in thinking about the balance sheet capacity that whether it’s the Kentucky upside or the Rhode Island CapEx upside that you can absorb that without having to issue equity?
Vince Sorgi
Yes. We resized the balance sheet to not only fund the CapEx we had in the plan but those two upsides as well, yes.
Operator
The next question comes from David Arcaro with Morgan Stanley.
David Arcaro
I was just wondering, would you be able to talk about or size the potential upside in transmission CapEx that’s outside of the offshore transmission opportunities, if you’re seeing any?
Vince Sorgi
Are you specifically referring to Rhode Island or more generally, David?
David Arcaro
More generally, I was thinking.
Vince Sorgi
So we continue to look at transmission across the portfolio in all three of our jurisdictions, continue to see opportunity for additional system hardening, as well as smart grid technology in those networks, primarily in Rhode Island and Kentucky. So definitely see additional opportunity there. I would say in the $27 billion, we have that opportunity in there. Again, that’s probably an area where maybe some of that could get pulled in from the back half of the decade into the current five year plan. But that will all be part of our more fulsome update once we get through the regulatory filings in Kentucky and then come out with our normal cadence with our update would be on the year end call in February. But yes, those are all areas that we’re looking at.
David Arcaro
And then wondering if you could give an update, just a level of kind of execution risk in achieving the O&M cost cuts in terms of the backdrop that you’re seeing right now? And just looking over the next 12 months, what’s your level of confidence in being able to kick things off aggressively on that path?
Vince Sorgi
We’re feeling very confident in our ability to hit at least the $150 million by 2025. Again, we talked about a potential upside to beyond 2025. Joe talked about for the 2022 forecast, really two main areas there, weather and then O&M. The real source of O&M, both in Rhode Island and Kentucky is the result of our business transformation and centralization efforts. And so I would say we’re ahead of schedule on that, David, which is great. And so it just gives us further confidence that we’ll be able to at least hit the $150 million going into 2025.
Operator
Next question comes from Michael Lapides with Goldman Sachs.
Michael Lapides
Just curious on the Kentucky generation transformation opportunity, can you remind us how much does that depend on an acceleration of coal plant retirements? And what’s your — like, has your forecast of the timing of shutting down some of the coal plants in the state changed?
Vince Sorgi
So the transformation initiatives in Kentucky are really not, I would say, directly tied to — well, they’re certainly not tied to accelerating our coal plant retirement. So our existing retirement dates other than one unit that we had in 2034 that we think may need to be pulled up into the 2020s as a result of the EPA Good Neighbor rule. But other than that, our existing end-of-life depreciation dates are what’s in the plan, Michael. On the transformation initiatives or the O&M reduction initiatives, we’re just — that’s enabling us to just be more prudent in how we’re looking at outage scheduling and overall O&M on those plants that we’ll be retiring in 2024 and 2028. So there’s some linkage there, but I wouldn’t say it’s really dependent. And then in terms of overall acceleration of coal plant retirements, we’re really not factoring that into our update today, again, other than that one 2034 plant and the potential for that to get pulled in. But again, as we see economics continue to change, freight regulation continue to change, that’s certainly something that we will continue to keep an eye on. But our existing depreciation dates are really what’s driving the CapEx opportunity there.
Michael Lapides
So if you don’t build a combined cycle in the next five to seven years, do you see yourself having a shortage of effective base load or non-intermittent generation by the latter part of the decade?
Vince Sorgi
I don’t necessarily want to speculate on that, Michael. I think we’re kind of finishing the analysis right now for the CPCN. We’ll make that filing with the commission and then we’ll go through the regulatory process there. So would rather not speculate on what is like that until we get through the process with the commission.
Michael Lapides
So in other words, the CPCN filing will show a supply and demand for the service territories in Kentucky and therefore, will show whether there’s a potential — effectively the supply need?
Vince Sorgi
Absolutely. So we’re updating the load forecast. So we’re including all of the economic development that we’re seeing in the state. So that’s an increased load. We’re updating our DSM and energy efficiency plan. So that will be a decrease to load. So we’ll have a full blown updated load forecast. We’ll look at all the capacity that’s retiring and then the amount of the capacity and energy required to meet that load on a 24/7 basis. So yes, all of that will be included in the filing, that will all be public on the KPSC’s Web site. You’ll see all of the input and output assumptions that we made from the modeling that we’ve done. The only thing we’ll do is we’ll see confidential protection on any commercially sensitive information like the actual bid prices from the RFP. But other than that, you’ll get a very clear picture of the supply need and the lease cost solution to solve that.
Operator
The next question comes from Paul Zimbardo with Bank of America.
Paul Zimbardo
Just want to check on the interest rate side of the house. I know in the past, you’ve been active on hedging. And just have you added any new additional swaps, hedges, anything like that? Just broadly, if you could comment on comfort about the variable rate exposure?
Vince Sorgi
I’ll let Joe take that.
Joe Bergstein
So from a variable rate exposure, about 15% of our consolidated long term debt portfolio is floating rate. So the total debt portfolio is about $13 billion. We feel comfortable with that level of floating rate exposure and really don’t see any material impact to the plan from fluctuations that we’ve seen to date in interest rates. And so maybe I could just make a couple of comments overall on interest rates broadly even outside of the floating rate exposure. We still feel very good about our plan despite the recent rise in interest rates. And obviously, we reaffirmed our long term growth forecast this morning. We’ve discussed several times and on our Investor Day that we’ve developed a plan that’s low risk and contemplated the macro headwinds that we see, including interest rates. And there are several factors that we have and levers that we have within our plan to help offset the higher rates. Those are tracking mechanisms that we have in our jurisdictions to help mitigate exposure, 55% of our capital runs through some form of tracker or rider. Obviously, we’re very focused on operational efficiencies. We have the potential to outperform on our savings targets within this plan period. And then from a load perspective, we’ve not incorporated any load growth in our current business plan. And we do continue to see load growth in both Pennsylvania and Kentucky. And in Kentucky, we have known incremental upside as well with the economic development that’s been announced recently within the state. And then just on Rhode Island, we are decoupled there, so load is not a factor.
Paul Zimbardo
And just following up on the load side actually. I was kind of curious, things seem to be moving around a bit between Kentucky, Pennsylvania. Residential was a little weak in Pennsylvania, but strong Kentucky and the opposite for industrial. So just if you could give a little bit more insight on what you’re seeing on the ground?
Vince Sorgi
So I would say in both jurisdictions, the general economy continues to be strong. You’re seeing that in Pennsylvania C&I load, even in Kentucky C&I — commercial is up. Industrial is down in Kentucky really due to one steel manufacturer and this is really just a year-over-year anomaly where last year, there was a lot of pent up demand coming out of the pandemic. And so the production was higher than we’ve ever seen it. And so we’ve kind of, I would say, normalized back to normal levels for that one steel customer. And then on — so really no underlying issues with the economy there. And then you’re right, on the residential, we saw a bit of a dip in the third quarter versus last year. We really think that, that’s related to just customers’ immediate response to the high commodity prices that we’re seeing now flow through our bills. So the wholesale prices are up and where we’re adjusting our prices accordingly. And so we think there’s some level of just conservation going on within the residentials to try to manage their bills there. But again, no underlying impacts around the general economy, and I think that continues to look strong.
Operator
The next question comes from Nick Campanella with Credit Suisse.
Nick Campanella
So I just wanted to ask on the credit side. And I’m sorry if I’m making you repeat yourself. I don’t know if I heard it, but just as we think about the kind of potential megawatt additions that you’re contemplating in Kentucky. Can you execute on those without additional, call it, growth equity capital?
Vince Sorgi
Yes, we can, Nick.
Nick Campanella
And then just how does IRA kind of affect your credit stance, if at all?
Vince Sorgi
Not a major impact on credit. So really the AMT provision is probably maybe where you’re going on that. Again, we don’t see any impact on our cash flows coming from the AMT. We generally use our tax attributes. When we sold WPD, we were about a 15% taxpayer in our projections anyway. Of course, they modified the rules there at the very end. There’s still a lot of regulation that still needs to come from treasury on the final act. So when we look at it, Nick, really not anticipating any impact on our cash position as a result of AMT. And then on the other provisions, the clean energy provisions, obviously, those are supportive of us being more competitive on company owned renewables versus third party PPAs. But again, that’s not going to really drive any credit impacts.
Operator
The next question comes from Paul Patterson with Glenrock Associates.
Paul Patterson
Just a few quick follow-ups. The remuneration component in Rhode Island that I think you guys are foregoing in the RFP. I just wasn’t clear why that was taking place, or could you give a little bit more color as to the thought process behind that?
Vince Sorgi
The way the final law came out on that, Paul, was that we were only able to earn that remuneration up until 2026. And if you look at the — when those contracts will actually come online that would not happen within the window that was allotted in the law. So there really wasn’t any reason to try to go after any remuneration when the reality is we wouldn’t be able to pick up any given the timing constraints in the law.
Paul Patterson
And then the Elia JV, I read the release, I think, from last week. Just other than Elia’s expertise and our experience in Europe. Is there anything else that you can elaborate on in terms of the competitive advantage you guys think that you guys are mentioning today and on the release, I mean, sort of like what do you think — could you give a little bit more color with respect to that?
Vince Sorgi
Well, I certainly don’t want to talk about where we think our competitive advantages would be versus competing bidders in that process. But again, I would just say, given Elia’s deep expertise in offshore and our deep expertise in onshore and ISO, understanding of the ISOs and siting, operating and building transmission here in the US. I think our partnership creates a great opportunity for us to bring innovative solutions to New England. But I don’t want to get into any more detail on that.
Paul Patterson
I don’t want you guys to give away your competitive advantage. But I just — could it be anywhere beyond — I mean, you mentioned New England. But is there any thought of — anything wider than New England or just New England?
Vince Sorgi
Potentially, there could be opportunity there. Obviously, the New England opportunity is in front of us right now, and that’s where we’re focused. But again, I think the opportunity for a long term partnership with Elia is certainly there. And given our two skill sets, it’s not unique to necessarily to just New England. But clearly, that’s where our focus is right now.
Operator
The next question comes from Anthony Crowdell with Mizuho.
Anthony Crowdell
Quick following up on Paul’s question earlier on load. You gave some nice detail and I know Rhode Island is decoupled, so it really doesn’t matter. But you mentioned you are seeing some residential load cutback maybe because of high builds. Just thought on where you’re forecasting load growth in ’24 or even in your five year period, if you’ve provided that.
Vince Sorgi
So our current plan, we have really no load growth built in for [PA] in Kentucky, so we’re relatively flat across that period.
Anthony Crowdell
Does the change in residential cause concern on your plan, or do you think it’s going to be more temporary and that you’ll be able to hit your plan [on fly]?
Vince Sorgi
I think it’s likely temporary, but it’s also just the way our tariff structures are, Anthony, we’re really most heavily weighted to load fluctuations in Kentucky. PA, we do have some impact from load but it’s not as impactful as Kentucky just because of the way we have demand charges, fixed charges in PA versus those levels in Kentucky. But what we’re seeing in PA, one, I think you’re right, that will probably be more of a temporary reaction to the pricing but also just the tariff structure doesn’t give us really cause for concern.
Anthony Crowdell
And just lastly, you gave some great detail earlier on, on a lot of CapEx opportunities. if I could just take a step back and wonder. Do you think there’s any ability within the current five year plan of changes to the rate base growth rate, or that if those plans come to fruition that, that’s more something on the back end of the decade? You talked about AMI, you talked about some RFP in Kentucky. Just is that the ability for that to maybe hit the five year plan?
Vince Sorgi
As I talked earlier, again, I think the total CapEx opportunity in Kentucky is probably in the $1.5 billion to $2.5 billion range, Anthony. But I think $1 billion to $2 billion of that could actually come into the five year period, which obviously would raise rate base growth compared to what our current plan shows.
Operator
The next question comes from David Paz with Wolfe Research.
David Paz
You may have just addressed this, but let me maybe ask it differently. When you update your long term EPS growth outlook in February, will you incorporate the Kentucky CPCN filing into your growth target? And if so, how much do you anticipate the gap between that long term rate base and EPS growth targets to narrow?
Vince Sorgi
Joe, do you want to talk to that?
Joe Bergstein
So we’ll incorporate at least some of that CapEx that we would file relative to the CPCN when we update our plan next year. As far as closing the gap between rate base and earnings growth, I think it’s a little early to say exactly how much that will close. It will certainly close because if you think about the generation need in Kentucky and those units coming off-line, the whole units coming offline in 2028, we’ll need the new generation to be ready to serve load at that time. And so construction would have to start probably beginning in 2025. So I think you’d see incremental capital related to replacement gen in ’25 and ’26, which certainly would help to close the current gap between rate based growth and earnings growth.
Vince Sorgi
David, I would just say that update will be a fulsome update. So we will not just update it for Kentucky CapEx related to generation, but across the portfolio where we see incremental capital needs. Again, we’ve talked about transmission in prior questions. So we’ll do a fulsome update to Joe’s point, that will help close the gap between the two.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Vince Sorgi for any closing remarks.
Vince Sorgi
Great. Thank you. Just want to thank everybody for joining us today, and we’re looking forward to seeing everybody at EEI. Stay safe, and we’ll see you soon.
Operator
The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
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