Patricia Cosgel - IR Jim Torgerson - CEO Rich Nicholas - CFO Bob Kump - CEO of Avangrid Networks, Inc. Frank Burkhartsmeyer - CEO of Avangrid Renewables, LLC.

Julien Dumoulin-Smith - UBS Greg Gordon - Evercore ISI Chris Turnure - JPMorgan Andrew Levi - Avon Capital Advisors Paul Patterson - Glenrock Associates Steve Fleishman - Wolfe Research Joe Zhou - Avon Capital Advisors

Hello and welcome to the Avangrid First Quarter 2017 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. [Operator instructions] I'll now turn the call over to Patricia Cosgel.

Thank you, Tammy and good morning to everyone. Thank you for joining us to discuss Avangrid's first quarter 2017 earnings results. Presenting on the call today are Jim Torgerson, our Chief Executive Officer and Rich Nicholas, our Chief Financial Officer. A team of Avangrid officers will also be participating on the call to answer your questions. If you do not have a copy of our press release or presentation for today's call, they're available on our website at www.avangrid.com. During today's call, we will make various forward-looking statements within the meaning of the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, based on current expectations and assumptions, which are subject to risks and uncertainties. Actual results could differ materially from our forward-looking statements, if any of our key assumptions are incorrect or because of other factors discussed in Avangrid’s earnings news release, in the comments made during this conference call in the Risk Factors section of the accompanying presentations or in our latest reports and filings with the Securities and Exchange Commission, each of which can be found on our website avangrid.com. We do not undertake any duty to update any forward-looking statements. Today’s presentations also include references to non-GAAP financial measures. You should refer to the information contained in the slides accompanying today’s presentation for definitional informational and reconciliations of non-GAAP financial measures to the closest GAAP financial measures. With that said, I will turn the call over to Jim Torgerson.

Thanks Patricia and welcome everybody to the first quarterly call. Avangrid really had an excellent first quarter and we're on track now to meet our target, not only for 2017, but also for our 8% to 10% compound annual growth rate in earnings through 2020. With us today beside Rich and Patricia and our IR team are Bob Kump, who heads up our networks business, Frank Burkhartsmeyer who had been handing up our renewables business and Frank is going to be leaving us next month and really want to thank him for his contribution to Avangrid and the renewable business over many, many years and Frank did just a wonderful job. We wish him very well with great success at his new role at Northwest Natural Gas. The good thing is we have an excellent succession plan and part of our succession plan is to identify people who can step in and take over in the event someone decides to make a change and with that Laura Beane has been named as the new President and CEO of Avangrid Renewables. Many of you may remember Laura. She participated in the renewables workshop we had at our recent Investor Day and Laura's background as she was Vice here she is until today, Vice President of Operations and Management Services for Avangrid Renewables, which is really responsible for all the critical services that support our 6,000-megawatt fleet of renewable energy resources. Before that, Laura was actually Director of Market Structure and Policy at Avangrid Renewables and she's been with Avangrid for about 10 years now since 2007. Before that she spent 10 years at Pacific Corp, which happens to be another affiliate of Avangrid or Iberdrola. So, Laura is well-known to us. We're really enthused about her abilities and we see her taking the company in a great direction and adding more PPAs to what we have. So, we're happy to have a great succession plan and Frank has just done a tremendous job and we're sorry to see him but we really do wish him well. So back to the quarterly highlights, the first quarter net income was $239 million or $0.77 a share. That was up 13% over the first quarter of '16 and the adjusted net income was $227 million or $0.73 a share, which was up 11% over the adjusted numbers for the first quarter of 2016. We are executing on our strategic plan. We had capital spending of about $370 million in the first quarter, which is on track for a year. The first quarter does reflect the implementation of rate plans in both New York and Connecticut and we've executed on 281 megawatts of PPAs and initiated 22 megawatts of repowering. Now of the 281 megawatts, 201 megawatts were ones we had previously announced. We now can identify that the customer is Apple and for the Montech project, we have in Oregon and we've also had 80 megawatts at our Barton facility in Iowa, which will be sold to [Dairyland] Power. This was previously a merchant plant and which now we have a PPA of 80 megawatts. The [Ganay] transmission project in New York was completed on time and within the budget and we're happy that that is now up and running. Our forward 2020 initiative is well underway. We're consolidating our corporate headquarters in Connecticut. We have about 150 people who are already been hired or relocated into Connecticut since the merger and that was actually one of the requirements in Connecticut to have 150 people hired and brought to Connecticut. So, we've pretty much already accomplished that. The Board declared the first quarter dividend which one was paid April 03 of $0.432 a share. The second quarter dividend was declared by the Board last week and that's payable as of July 30, 2017 and I think most of you read the stock price is actually up about 15% already year-to-date. Going the next page, the first quarter net income $239 million up 13%. That really is a result of a couple things. One networks was up 5% to $0.56 a share. That also included and we took a charge of $10 million to reflect sharing in New York and that's 11 months of the sharing. So, we are just going to show that we are actually doing what we said and getting into the sharing range, which is our target. And so, we've had improved results in New York and Connecticut due to new rates and new rate plans put into effect. The renewal production is also up, mainly because of the Amazon Wind Farm US East, which came online in January or actually the end of December and early January with 280 megawatts and so our production has been up. Although still we were seeing wind resources below what we consider average in the first quarter, we've had some positive mark-to-market. We had a lower effective tax rate in renewables. Renewables was actually up though 63% to $0.23 a share and we had a lower -- much lower effective tax rate and this we see for the year now and that offset some decreases in average prices. We had a roll-off of PPA, some lower merchant energy prices but we had higher rest of at the lower merchant prices. Gas storage was actually positive at $2 million versus a loss of $10 million mainly on mark-to-market and we've continued with our cost management implementing our best practices. So, looking at the adjusted earnings results and this is really reflective of our core business, in the first quarter adjusted EPS and this is on Page 7, increased 11% to $0.73 a share. The things that we adjust for are the renewables of mark-to-market and you can see that was $11 million or $0.03 in the first quarter. Gas storage business, which we do not consider to the core and that's $2 million, actually made $2 million or a $0.01 a share and then in 2016, we had the same two items, but also the sale of our equity interest in the Iroquois pipeline and then the impairment that we took on the Northeastern or the direct pipeline. Moving to Page 8, you can see we did sign some new PPAs and we're still on track for the 1.8 gigawatts, we get from renewables between the 2017 and 2020. They are on target for that. We have 802 megawatts secured at this point and we still look at 400 megawatts as highly likely 600 megawatts as likely to meet that 1.8 gigawatt target. The 200 megawatt PPA at Montech which we had identified earlier at our Investor Day and now we're just able to say that Apple is the customer there. So, we have a long-term PPA with Apple. The commercial operation date is estimated to be the end of 2018 and the project will produce over 560 million kilowatt hours of clean renewable energy per year. We also the 880 megawatt Barton wind farm in Iowa. That's an existing wind farm that's in operation today and the new PPA reduces our current merchant exposure. We have a repowering for 22 megawatts at Mountain View in California and this is a full repower retrofit targeted for 2019 and they use vestas turbans at that site. The construction plan is on track to our 208 megawatts of wind farm U.S. East began delivering power in December and reached full commercial operations in February. We have 600 megawatts under construction with the idea those would be in operation by the end of this year. Now Avangrid Renewables has an offshore strategy and we won the Bureau of Ocean Energy Management Offshore Wind Lease Auction in North Carolina as 122,000 acres off the coast of Kitty Hawk North Carolina, which is about 24 nautical miles from the shore. The lease area has the potential and this was identified at the national renewable energy lab of about 1.5 gigawatt and this is going to be well beyond 2020 before anything occurs. The most of you will recognize that projects like this take 8, 10, 12 years to come to fruition. So, this is a long-term view for us and to why we got into this. We're taking a long-term view that things, technology changes, states want renewable energy, they want offshore wind. So, we'll be looking at opportunities to develop that and we're also going to be looking at our growth opportunities in Massachusetts with strong potential. Massachusetts plans to solicit up to 1600 megawatts of offshore wind and with our majority shareholder Iberdrola who has currently about 1.3 gigawatts of offshore wind in in construction and operation, we have the ability to leverage that experience for our own entity. So, we'll be looking at participating. And then on the next page a little more detail in the Massachusetts RFP that they're looking for clean energy. We will be participating in the Clean Energy RFP issued by the distribution companies in the DER and Massachusetts. The RFP actually went out in March 31 for about 9.5 terawatt hours of clean energy per year. The long-term contract implies by 2022. They are really encouraging proposals that would include generation able to commit to deliveries by the end of 2020. Now the eligible big categories would include incremental hydropower on a firm basis, new class one renewables and weather it's wind and solar and eligible generation resources with a contract or could be any combination of them including transmission projects under a FERC. So, they're looking to perhaps marry hydropower with other renewables to backstop that and have a more firm power resource. The Bidders Conferences is tomorrow, than the notice of intent to bid is due early May. Proposals are due to the end of July and then the selection is probably the end of January in 2018. Negotiate contract by the end of the first quarter 2018 and approval in April of 2018 by the BPU. With Avangrid Renewables on Page 11, AMI the settlement process is continuing at a slower pace and this is due to the required storm investigation. We had some storms in New York mainly in the Rochester area in early March. So now we anticipated in order of probably being 2018 because the staff has to focus on the storm outage as well. The net metering, the tariffs implementing this transition from net energy meeting to the value of distributed energy resources we're going to be following those later this week. The earnings adjust in mechanism, we're having collaborative meetings with the staff and others on that already and the Ganay retirement transmission alternate, which I mentioned earlier, that's a $145 million project that went in operation in the first quarter that includes two substations, which allow $345 to $115 KV connections to the grid. That is now in operations and as I said, it was on time and on budget. In Maine, we now have no expectations of filing a rate case in 2017 nor do we for our Connecticut Natural Gas. Our planning on filing a rate case for Southern Canadian Gas midyear this year, really together put in a request for decoupling and also for the infrastructure tracker which would be the same as we have for CNG today. On the FERC ROE complaint, the DC Court of Appeals vacated the 2014 ROE order and remanded the case to FERC for further proceedings. Really, they were determined, the total FERC is determining if the original base ROE of 1114 was unjust and unreasonable prior to determining that the 1057 ROE was reasonable, so really what they're looking at is was it unjust and unreasonable at the time? We all know that the 1114 was in the range of reasonableness that FERC had set out. So, we're waiting to see what FERC will decide to do. Then if they get over that, then we'll have to determine if setting the base ROE at the midpoint of the upper half of the range of reasonableness is just and reasonable in and of itself. So, there to -- the court ordered them to determine the reasonableness of that as well assuming they get over the first hurdle. Complaints two and three, the decisions are pending and complaint for really, we have a Settlement Conference set up for May 03, but I have to believe that they're going to wait and see what FERC does on complaint one and where that really goes. So, turning to Page 12, our strategic plan is on track. Very happy with the performance. We had strong performance in the first quarter. We are committed to deliver the 8% to 10% growth rate through 2020 and we are implementing best practices right now on our forward 2020 project. We're consolidating corporate headquarters. We have about 50 other facilities that we're looking at for potential consolidation. We're looking at fleet optimization, looking to reduce our fleet by about 10% to be around 400 vehicles and we're also focused on other best practice areas. So, we're executing on that as we speak and actually getting opportunities on our core business with the new PPAs and renewables and investments in networks. Everything is coming in line with our expectation and we're positioned for additional long-term growth and when we talk about long-term, we're looking at offshore renewables that would be in the 8 to 10 to 12-year category, but also this Massachusetts Clean Energy RFP and you'll hear more from Rich and others and probably Bob on the projects we have that we will be bidding into the RFP. We have a couple projects in Maine. We have one project of renewables that will be coming out of New York. So, we have a number of projects we're going to bid into this Massachusetts Clean Energy RFP and also this time we're affirming our 2017 adjusted earnings per share guidance, outlook of $2.10 to $2.35 a share. So, with that I am going to turn it over to Rich Nicholas who is going to get into the financials for the quarter.

Thanks Jim and good morning, everyone. Thanks for joining us today. I'm now on Slide 14 of the presentation where we have the breakout of the business segment earnings results, both on a GAAP basis and on an adjusted EPS basis. As you can see it in the pie chart on the right-hand side there, our adjusted earnings for the quarter about 26% from renewables and 77% from networks and a little bit of a drag at corporate minus 3%. On an adjusted normalized basis, 11% growth overall, 3% in networks, 41% in renewables and minus 18% in corporate. Recall that adjusted EPS reflects the impact of excluding the gas storage business, any mark-to-market changes and also the impacts of sale of Iroquois Pipeline investment and the impairment of the Northeast direct investment last year. So, let's move to Slide 15 and review some of the details. On the networks business, first quarter of '17 versus first quarter of '16, total adjusted net income of $172 million or $5 million, greater than last year. Jim mentioned really driven by new rate plans in both New York and Connecticut. So, we have the full year now of the New York plan in Connecticut as well for UI distribution. The first quarter does reflect the impact of estimated sharing. We're 11 months into the sharing year in New York, with just one month to go. It's probable that we will be into that sharing event and so that was about a $0.02 drag on the quarter to actually accrue that sharing. Also in networks, last year at this time, we had the UI holding company debt within networks. As you recall, that was moved up to Avangrid and so there was about a $0.01 bracket in the quarter on the networks piece offset by $0.01 in corporate. On the renewable side, adjusted net income up $59 million or at $59 million up $17 million from the quarter last year, really due to the combination of higher production driven by the new capacity at the Amazon wind farm in North Carolina and also by a little bit of wind in the first quarter of '17 versus the first quarter of 2016. The benefit from a lower effective tax rate and offset somewhat by lower average prices when you take into account both expiring PPAs and PTCs, new PTCs and we did see the value of RECs go up a little bit in the quarter. It does on an adjusted basis exclude $11 million of renewables mark-to-market or about $0.03 a share. Looking at the corporate segment as I mentioned it does now include the prior UIL holding company debt of about $0.01 a share and compared to last year and excludes the sale of the equity interest in the Iroquois pipeline. Gas storage not part of our adjusted net income, but it was up quarter-over-quarter, primarily due to mark-to-market changes. So, moving to Slide 17, a little more detail on the renewables results. As you can see on the left-hand side, the pie chart there, we have a very diversified portfolio across geographies as well as our thermal plant in Plymouth Oregon and when you look at the changes in gross margin quarter-over-quarter, wind production up about $6 million in gross margin, primarily again due to the Amazon wind farm. And then the wind price that's net of PPAs that expired, new PPAs coming on and offset by the price as I mentioned earlier. And then on PTCs, that is a net of expiring PTCs and new PTCs. So, no net impact there and in the category, we call Other, that's primarily changes in cost of sales at Plymouth thermal plant and some small transmission railing and some of that is timing of recognition as well. So, moving to Slide 18, we continue to have very strong cash flow from operations increased 11% quarter-over-quarter. When we look at cash CapEx of $519 million, that does include payments in the first quarter of '17 for some items accrued at the end of 2016. If we look at the first quarter CapEx on an accrual basis as noted in footnote 2, it was $367 million. So very strong cash flow both from networks and renewables. CapEx up somewhat in renewables with the major projects under construction due to come in service later this year. So, looking at Slide 19 now, as a result of the strong cash flow, good earnings results, we're maintaining our financial strength. Very strong credit metrics with net leverage at 26%, net debt to total cap and net debt to adjusted EBITDA of 2.7 times. The total net debt at this point is five points little better. So looking at the rest of the year on Slide 20, as Jim mentioned, we affirmed our consolidated overall adjusted EPS guidance of $2.10 to $2.35, but we're also maintaining our adjusted EPS guidance by business segment and this reflects a full year of the New York and Connecticut UI distribution rate case results, normal wind for the rest of the year, ongoing integration work that Jim discussed earlier with our forward 2020 project, but it does exclude any mark-to-market impacts in the gas storage business. So, we look to seeing many of you at the upcoming AGA Financial Form in May and now I'll hand it back to our operator Tammy for the question-and-answer session.

[Operator instructions] Our first question comes from Julien Dumoulin-Smith with UBS. Your line is live. Julien Dumoulin-Smith: Hi. Good morning. Can you hear me?

Yes, we can hear you fine Julien. Julien Dumoulin-Smith: Excellent. Thank you. So, couple questions if you don't mine. First can you elaborate a little bit more on the situation on New York vis-à-vis the investigation, what exactly the scope of it and timeline and how exactly does it interface with the AMI or any earnings adjustment mechanism in terms of meeting those targets just given what happened with the storm?

So, I think first off with the AMI, it's just because of the staff requirement and the staffing they have, the can't do everything they want. So, it's kind of getting pushed back into the storm review, it's coming persistence of the AMI is going to take second seat I guess is the best way to look at it and just can could take a little more time. So, Bob can comment on what's going on with storm review.

Yes, let me, thanks Julien, let me just give you maybe a little bit of background here. So, the storm that occurred it was March 8 as Jim mentioned earlier was mostly contained within Rochester. We did have some issues in the very western part of New York, but it was mostly Rochester. And the difference between I would say this storm and typically let's view Sandy as an example, Sandy you three four days in advance to prepare. This one the forecast right up until the day of the event or not signifying anything of any significance. So, we had wind gusts, four wind gusts that all were in the top 10 ever recorded wind gust in Rochester. The amount of lines down, the amount of broken poles approached very closely to what we experienced in Sandy. So, it was a very, very significant event. Having said that, one of the requirements post Sandy is that any storm that takes over 72 hours requires the utility to file several different reports when it calls the scorecard. Another one is a more detailed filing, the scorecard was refiled. It was due 30 days after the storm. The second will be due 60 days after the storm and then a complete review. So, we knew all along that this was going to get reviewed anyway and obviously with the Governor statement, there's a lot of scrutiny around this. We're working very closely with the staff. We have as a process. We always go back and look at our performance in a storm to see what we've done differently, but this was a very significant storm and one we're putting now a lot of attention to say what if we learnt from it and what can we do better going better. So that's where we are in that process. Now couple maybe other things that I'll just mention because I think in a couple of hours goes by, I think one was put up, I think maybe Julien you had mentioned in article two, two things just to clarify. So, one in February prior to the storms, Mark who is the President of New York came to me and announced that he wanted to retire by the end of June. Now Mark has done a tremendous job for us over the years anyone that members and covered us back in the days of Energy East knows that we had a pretty horrible relationship with regulators and Mark was really instrumental in his time here improving that to where I think now we have very, very good relationships with regulators and politicians in New York. So, if there's any implication or any anything you read that makes it sound like the two of them are linked i.e. the storm and Mark's retirement, it's absolutely incorrect and Mark's decision was made well in advance of that storm. The other issue is on the management audit that is just starting and it was just announced at the commission session last week. This is a typical management audit the commission requires, one that gets done every five years and we had one five years ago and just got finished with theirs. I think Central Hudson is ramping up theirs and it's our turn again. So again, this management audit has nothing to do with the storm investigation or anything else. It's just it was our time to go through the five-year cycle. So, we'll continue to work very closely with staff. It is though with so many different dockets going on. You can get all the dockets associated with REV, all the dockets associated with management audits and the like. There quite frankly is a tremendous pressure on staff with a lot of things and so AMI has gotten got slow down, but we still expect that as Jim mentioned to be concluded and probably add into this year and the commission decision on that sometime early next year. Julien Dumoulin-Smith: Got it. Excellent. And just can you clarify under the rate cases that the slight delays you think, is that basically you're seeing the confidence that you can continue earning or improve your ROEs on your own or with the contractor there if you can.

I'm sorry little delay on the rate, Julien… Julien Dumoulin-Smith: Just the shift in timing.

Yes, we don't need to file in Maine because we're earning at or above our allowed ROE and the same with Connecticut Natural Gas. There just isn't a need to file right now.

One of the things we I think I've mentioned before, our goals is to avoid rate increases where possible and there is a lot of investment that needs to get done, but we want to avoid that getting put on the backs of our customers. Hence forward 2020 projects and other initiatives where we're looking to be more efficient utilizing best practices. So, as Jim correctly says, what we do as we look at each year for those companies that are not in a multiyear agreement and say do we need to file and we believe that both for CMP on the distribution side and CNG that we can stay out and not file. SCG as much as anything even out the longer of the two gas companies in Connecticut, but they don't have RDM yet and we think it's very important to get that in place. So, we are going to file as Jim mentioned this year for SCG. Julien Dumoulin-Smith: Got it and then just turning to the renewable side quickly, first off congratulations, but second off just wanted to make sure to affirm here, your prospects on the C&I side in particular but overall with side renewals, do you feel confident just as you did at the time of the Analyst Day about executing the targets?

Yes, I think we fully feel confident that our targets are appropriate and we're going to meet them and we're seeing a lot of opportunities, not just in C&I, but also with the traditional utility customers, but if you look at what we have under construction now beside the Amazon wind farm in now Montech, all the others are with traditional utilities. So, we have over 500 megawatts, 536 megawatts that are I think going to utilities. So, it's a combination of the two, but we're seeing increasing demand with the commercial and industrial. I don't know Frank or Laura if you want to comment further on that.

No, I would just affirm that Jim and think you for the complement, I appreciate that. No, we've had very good -- we're making very good progress on the pipeline with both traditional and commercial and industrial customers. So, I would certainly affirm what we said at the Investor Day. Julien Dumoulin-Smith: Excellent. Thank you.

Okay. Thanks Julien.

Our next question comes from Greg Gordon with Evercore. Your line is live.

Thanks. Good morning. Just I think you clarified this in your opening comments, I just wanted to be clear, the 200 megawatts where you identified that Apple was the off-taker that was in your 820 megawatt already secured.

Yes, that's correct Greg.

Okay. But the 80 megawatt PPA at Barton that's essentially moved over from the merchant bucket to the PPA bucket?

Correct, that's exactly right.

Okay. Fantastic that was my only question. Thank you.

All right. Thanks Greg.

Our next question comes from Christopher Turnure with JPMorgan. Your line is live.

Good morning. I wanted to get a sense of the quarter-to-quarter kind of unfolding of renewable guidance over the course of the year. May be kind of starting with that and with the first quarter in particular, the adjusted gross margin, I think went up maybe $5 million. And that includes a gross up of BTC as you guys highlighted in that particular slide there. But then net income went up by $17 million. So, for the first quarter, at least, what was behind the bigger step up in adjusted net income? Was it cost cuts, what is a tax benefit outside of the change in PTCs, etcetera?

Chris, it's Rich Nicholas. We did see a reduction in the effective tax rate. We're looking now for the year of about a 30% effective tax rate. So, it was a benefit from that. Also, a small benefit from cost reductions especially as I mentioned in claimant that affected gross margin as well as the bottom line. But our forward 2020 is across all the business, not just networks and some we're looking to manage costs wherever we can.

Okay. And then as we think about the next three quarters of the year here for 2017, are there any other one-time or is there anything that was in the 2016 numbers that would not repeat or other tax benefits that you'll think you'll be able to achieve there?

We're maintaining our guidance for the renewable segment. So, we're confident in our ability to hit that.

Okay. And then switching gears to the renewables for the network side of the business, you mentioned that you did have a headwind in the first quarter from the sharing charge in New York. But if I heard you correctly, it sounded like there was, I guess, a retroactive element of that. So, what was booked in the first quarter didn't sound like it applied to actual first quarter performance in and of itself. How can we think about that and how can we think about the rest of the year and what's baked into guidance?

Sure, the rate plan as you may recall runs from May 1 to April 30 and so the sharing is calculated at the end of April. So, we're 11 months into the 12 months and when you get to a point where there is a high probability that you're going to be there that we need to box up and so we did at the end of the first quarter for 11 of the 12 months and we'll see where it finally comes out with April results, but we expect to be in the sharing there.

Okay. So, then the guidance for all of 2017 would reflect you, let's say, earning roughly your authorized ROE or something about that minus a onetime retroactive hit for the seven or eight months of 2016 that was booked already in the first quarter?

Yeah, I wouldn't characterize it as a retroactive adjustment. You've got to look at the sharing as you go through the plan. When you're one month into it, you really don't have any idea. Even sometimes it's six months in, it's very hard to tell and so we've reached the point at the end of the first quarter where it was probable and therefore we booked it. So again, I wouldn't characterize it as retroactive. It's been a normal process with the sharing calculation.

And I think when you look at our guidance it does reflect that the continuation of earning at or above the allowed return and as we said, we target to get into the sharing event.

Okay. Great. Thanks.

Sure.

Our next question comes from Joe Zhou with Avon Capital Advisors. Your line is live.

Hey guys, it's Danny Levi. I think my question was answered, but just back on the 30% tax rate, what was the reason for the lower tax rate?

We got the factor of PTCs as well as some adjustments as you true up to your return under APB 28 what you expect for the year. I think last year at this time it was about 33%, so we're down to 30%.

Okay. So, the first part just on the wind side, so that was -- that was just due to the higher production -- slightly higher production, is that the reason why.

Primarily yes Andy.

And then the second thing I'm not familiar with…

Well, you look at the whole year, so where you think your taxes are going to come out, make an estimate, you true that estimate out every month. And so, on a consolidated basis it reflects everything from networks, renewable, corporate, any changes like in New York class show some things that were full through, went to normalized and so all those adjustments fall in, we estimate what you think your effective tax rate will be and then you start to poke to as you go through the year.

Goes to the second piece you call it AB something…

ATV 28, that's the accounting guidance on how to book taxes.

Okay. Is that a New York State?

No, that’s a U.S. GAAP.

U.S. GAAP. So, the reason that was lower is kind of hodgepodge of thing or was it because of wind again?

No, all of the above.

All of the above, okay, and then I assume that was part of your guidance or not? Like did you assume a 30% because you’re 30% for the rest of the year…

The difference was enough that we stay within the ranges.

Different was enough…

Yes, we didn’t exactly – we have new information now at 30%, it's actually a little better than where we thought we would be for the year.

But that's still in the range of the guidance that we had, so no reason to change.

Right, did you - I don't remember, I have a bad memory in fact. Did you guys give it tax rate guidance or not, was 35…

It was higher certainly than 30 that we’re looking to now.

I think it was 35 - so are you guys trending towards the high end of your guidance at this point or is it too early to know that?

One quarter of the year gone we’ll know more coming second quarter.

But the lower tax rate should be a quite a big headwind, right?

Should be a benefit absolutely.

Okay, we'll watch it. Thank you very much.

Our next question comes from Paul Patterson with Glenrock Associates. Your line is live.

I wanted to ask you about - just on the ROE case, has that changed - the DC circuit remand - has that changed your assumptions at all with respect to the earnings or anything, given the ruling?

No, not really because we really don't know what FERC is going to. So, it puts it back to FERC and now FERC is going to have decide do they demonstrate that the rates that they chose were just unreasonable and that's really what the court told them to do, to look at - to justify why the original rates were unjust and unreasonable and if they could, then to justify why they chose the range - the top end of the range halfway between the midpoint and the top end of the range as good point. So, it really goes back in the FERCs camp and so we haven't changed anything as far as our forecast or our guidance do that.

Okay. So, the ROE – I think it was the – what they gave in the first compliant is what you guys have been assuming, am I correct about that?

Yes, we were using the 10.57%.

Okay, great. And then just a follow-up on Julien's question on the smart meters and I understand sort of the other things going on and they got busy schedule. But given rev and given CARNet already having smart meters approved to what have you. I'm just wondering what the big issue is with you guys, I mean what the most significant item that being negotiated. I mean could you elaborate a little more on that?

I wouldn't say there's an issue per se other than one of resources and timing. We've had several collaborative discussions on it. A couple of things we are looking at. You have to put forth this benefit cost ratio, we've done that. We did that with the original filing and that looks good. We've been refining that. We're also I think as I mentioned in February we're putting in as a part of our energy smart community project significant 20,000 meters there, so we’ll be looking to see what we’re going from that. But other than it's really just a resource and timing constraints. You had a shortage -- remember we had just this week the governor announced to the new chair would be - we've been without a chair and two other commissioners is only two out of five seats right now as we speak filled, and so there is just a host of things that it's causing a backlog if you will.

I saw the thing about the nice guy, is there is any, have there been any other appointments or…

That's the only one that been announced. So technically you still have two more vacancies beyond him coming on us as chair.

Okay. And then, there've been some -- the Maine Governor has talked about industrial competitiveness in electric rates, and we've seen some rather significant numbers on arrearage with some of the utility customers not necessarily all years in Connecticut. Just trying to get a sense, do you see this as a typical stuff that's coming out, or are you seeing increased concerns regarding affordability or competitiveness such as the Maine Governor was talking about it being more of an issue potentially in New England?

I've not seen any increase from what we've experienced in the past. In fact, the fact that the last two years the weather in the winters have been very mild has quite frankly been a huge benefit to consumers and still from arrearage standpoint one that we've not seen any kind of a issues there at all either. In Maine it's typically we have a very close relationship with the Governor there and he had from day one when he took on the role, his focus has been on how we can lower the energy cost in the state and so as we think about the Massachusetts' RFP and the projects that we had submitted in the previous RFP and now at this one, we're looking at projects that we think not only will obviously benefit Massachusetts and help them reach some of their renewable targets, but also projects that could help consumers in Maine by lowering energy prices in Maine. So, I think we have a number of ideas in that regard and as Jim mentioned, we plan on submitting those as part of the RFP in Massachusetts.

Okay. Great and then finally I know this is directly associated with you, but it is energy-related and it is in Connecticut, the nuclear millstone centered budget inflation, do you have any sense about the outlook for that or I know you guys are involved in all sorts of issue and it does have some customer issues there associated with it. So, I was wondering if you had any outlook on that?

Well it's still in the legislature right now. It would put more cost back on to the customer. I think Dominion would say, you would lower the cost, I think it actually raises a little somewhat, and the legislature is debating it right now. I know it went through the committee, but I think people are looking at it and with the what our Secretary Perry just issued the letter to his Chief of Staff looking at a review for baseload generation, thing that may color things a little bit and you would have to wonder if the federal government is looking at this and maybe the state legislature maybe want to slow down a little bit and figure out where that ends up because that's a 60-day review. The session I believe and shortly there. Anyways it ends, latest it would be June. So, their timing is getting critical right now, but I am not really sure where it's going to end up at this point. I think it is a lot of things in play and there is a lot of people that are saying, wait a minute, are they making money or not and that's really what people are wondering.

Yeah, I think that's the issue that I've seen that is probably the difference for example from what we've experienced in New York when we had to sign a support agreement to keep Ganay running until we got our transmission project complete. In that instance, there was complete disclosure with regards to the cost structure and negotiations of the plant, so that we could negotiate a rate in agreement that balance the interest of keeping that plant running from our reliability perspective in that region with minimizing the cost implications to consumers by understanding in this instance here in Connecticut at this point there's been really no detailed information provided to be able to make a determination as to whether that plant truly needs to get a subsidy or not to continue to run and what kind of profitability it has. I think that's the biggest rub right now that's going on with Millstone and Connecticut.

Okay. I appreciate the color. Thanks a lot.

Okay.

Our next question comes from Steve Fleishman with Wolfe Research. Your line is live.

Hello. I just wanted to follow up on the FERC remand. This case may take a long time before FERC could kind of make a decision like we don't even obviously had a FERC really. So, I just want to clarify while we're awaiting, you're just going to continue to talk book the 10.57 even though the order is vacated.

Yes. Steve at this point, we don't have any better information as we should do anything differently as they do have the order which was vacated, but the information we would have to say where it's going to go. So, I don't know. I'll let -- the accounting folks will have to decide it, but right now I can't see it being anything different.

And it is our current clarifying funnel based on the 10.57.

Okay. And just when you I am just curious kind of your reaction to that court order in terms of -- on the one hand you could interpret it is as may be none of these reviews should have occurred if the 11.17 was in just and reasonable. On the other hand, you could interpret is there a risk of using above the midpoint. Just how did you interpret the court order and implications for the future FERC.

Yeah, I think the way I looked at it Steve was first off it was within the range of reasonableness that FERC had and what the court was saying is they never demonstrated that it was unjust and unreasonable to keep the rates where they where. So, from I look at it positively. Now the other hand as you say if they come back and prove that it was truly unjust and reasonable then they go to next phase which would be looking at what is the right rate and they changed precedent by going to the upper end of the range, how will they demonstrated that that's just and reasonable. So, you look at it with mixed reaction. The first part seems positive and the second part not so much and we're not sure where they end up and I would -- you back with Phil Moeller when he was on the commission that they never should've gone with the first one to begin with, that's probably how most of us felt.

To your point, Steve I think that the hope would be that maybe as we get renewed commissioners there as well like in New York that maybe they revisit the whole process and see if they can find a process whereby you avoid this pancaking where we now have four different complaints on the same issue.

Okay. Thank you.

Thanks Steve.

And we have another question from Joe Zhou's line. You are with Avon Capital. Your line is live.

I am with Avon Capital. Hi just a quick question, follow-up, just back on the tax rate, so I was just going through kind of the stuff from the Analyst Day, so basically you had guided to like a 35% tax rate actually and at the same time -- right and now you're saying it's going to be 30% and then I must tell you it guided to I think a higher PPA price, well the price assumption was flat excuse me, and now it seems a little down in the first quarter. So, I am just trying to reconcile in my head where we're at. Obviously, you have the lower tax rate, how much of a benefit on an annual basis is the lower tax rate for 2017 having a 5% lower rate?

I don't have that at my fingertips, but we can get that out.

I would assume it's fairly significant, I guess I could figure it out too, but I guess my point is that without that lower tax rates you'd actually trending towards the low end of your guidance right or I am just trying to interpret the lower tax rate because it seems if 5% is the significant number and I'm not -- at that end I think going forward, should we be again I know you haven't given guidance beyond '17, but in your growth rate of 8% to 10%, is that assume a 35% tax rate or 30% tax rate. I am just trying to understand because a percent here or a percent there I don't really care about but 5% is significant and…

They change year-to-year Andy, depending on the various deductions and what have you and so we did have 35% baked into the long-term plan and we haven't changed that assumption at this point. Probably the bigger issue will be what happens with tax reform, but the order conversation.

I will find that tomorrow but I guess because 5% for this year it seems that a big number and I guess without that the number would've been significantly lower this quarter and I'm not sure what to think about of the year, but I guess away from the second and third quarter to come out at Judge there.

One other thing to consider to is we did have -- the wind resources were also down in the first quarter and so this helped to offset that a little bit.

Running about 6% below normal and our guidance that assumes normal wind. So, all in plusses and the minuses we were comfortable maintaining our guidance without changing it.

Yeah that explains it because I saw when the earnings came out, I knew there was something in and I knew you had the comment about the tax, but the tax being explained by the number was high and why it was a good quarter beyond obviously the operations being very good as well. So, okay, thank you very much.

Thanks.

I have no further questions in queue at this time.

Okay. Well, we want to thank you all for participating today and again we had a great quarter and I want to thank everybody and we thank Frank again for his contributions and we're looking for great things from Laura and if you have any other questions, obviously, you can call our IR team and I'm sure they’ll be very helpful. So, thanks again.

This concludes today's teleconference. You may disconnect your lines.