John M. Moreira
Executive Vice President, Chief Financial Officer and Treasurer at Eversource Energy
Thank you, Joe, and good morning, everyone. This morning, I will be covering our 2022 results, our 2023 earnings guidance, our updated five-year regulated investment capital plan and long-term outlook and give you an update on some current regulatory proceedings.
Let me start with our 2022 results on Slide 14. Our GAAP earnings for 2022 were $4.05 per share compared with $3.54 per share in 2021. In the fourth quarter of 2022, GAAP earnings were $0.92 per share compared with GAAP earnings of $0.89 per share in the fourth quarter of 2021. Results for both 2022 and 2021 include transition and transaction-related costs, primarily associated with integration of Eversource Gas Company of Massachusetts. Also, full-year 2021 GAAP results included charges related to the CL&P settlement agreement. Excluding those non-recurring charges, we earned $4.09 per share in 2022, up 6% from $3.86 that we earned in 2021. For the fourth quarter, excluding these charges, we earned $0.92 per share in 2022 compared with earnings of $0.91 per share in 2021.
To break down our earnings by segments, electric transmission earned $1.72 per share for the full-year 2022 compared with earnings of $1.58 per share in 2021. Higher earnings resulted from continued investment in our transmission system. We invested just over $1.2 billion in our transmission facility in 2021 compared with $1.1 billion in 2021, current -- mostly replace an agent equipment and improving reliability and resiliency for the region.
Our electric distribution segment earned $1.71 per share in 2022 compared with $1.61 per share in 2021, excluding the Connecticut settlement-related charges. Higher revenues and lower pension expense were partially offset by higher O&M, depreciation, property taxes and interest costs. Fourth quarter 2022 results also reflect a $10 million contribution we are making to help some of our customers pay the significantly higher energy bills we have seen this winter. Our higher distribution expense primarily stemmed from our ongoing investments in the distribution system to improve service and reliability for our customers.
We invested about $1.35 billion in our electric distribution system in 2022, up from $1.24 billion in 2021. The higher O&M was driven in part by higher storm costs in 2022. Non-deferred storm expense cost us about $0.05 per share, more in 2022 than it did in 2021. Our natural gas distribution segment earned $0.67 per share in 2022 compared with earnings of $0.59 per share in 2021. Higher revenues and lower pension expense were partially offset by higher O&M, property taxes, interest and depreciation expense, much of it driven by our continued investment to improve the safety, reliability and resiliency of our natural gas distribution system.
Our water distribution system segment earned $0.11 per share in both 2022 and 2021. Excluding the transition and transaction-related charges, Eversource parent and other companies lost $0.12 per share in 2022 compared with a loss of $0.03 per share in 2021. This change was due largely to higher interest expense, particularly in the second quarter of 2022 and higher -- and our higher effective income tax rate. Overall, as Joe covered in his remarks, we are very pleased with our 2022 performance as we successfully overcame many challenges and delivered very positive results for our customers and all of our stakeholders.
From 2022 results, I will turn to 2023 guidance on Slide 15. We are projecting non-GAAP earnings of between $4.25 and $4.43 per share this year compared with $4.09 per share we earned in 2022. The slide shows the factors that we expect to positively and negatively impact earnings in 2023 compared with 2022. One item benefiting earnings is our ongoing program to upgrade our electric transmission system where we expect to invest approximately $1.2 billion again in 2023. I will discuss the principal drivers behind that investment and how it will benefit our customers in a moment when I discuss our long-term capital plan.
We are also -- we also project higher revenues in our distribution companies, as we continue to upgrade and expand our distribution systems. Those higher revenues are due primarily to rate adjustments at NSTAR Gas, EGMA and PSNH that were -- that went effective on November 1, 2022, and at NSTAR Electric just beginning of last month. We expect that they will be partially offset by anticipated increases in depreciation and property taxes. We expect enhanced returns in 2023 on an investment in a fund that we have owned related to various clean energy facilities. Those facilities have significantly increased in value in recent years and have benefited our results for several years and now including 2022.
Interest expense will continue to be a headwind at Eversource parent. It will also be a headwind at our distribution segments. While the portion of interest expense allocated to transmission is tracked, the distribution portion is not and will weigh on earnings. Lower pension expense was an earnings tailwind for us in 2022, primarily due to the extremely strong asset returns that we performed in 2021. In 2023, we expect pension costs to be a slight headwind to earnings of approximately 4% -- $0.04 for the year as compared to 2022.
Here are some reasons why -- behind this modest impact: first, a significant portion of our pension cost or pension benefit is capitalized into our capital projects. Secondly, pension expense or pension cost related to our transmission segment and to our Massachusetts Electric and Natural Gas Distribution segments are fully tracked. Third, a higher discount rate reduces the impact of the amortization of prior year accumulated actuarial losses. And lastly, the higher discount rate means that our pension plan remains fully funded, and we do not anticipate making any contributions in 2023.
From 2023 earnings expectation, I'm going to turn to Slide 16 and cover our five-year plan to invest approximately $21.5 billion in our regulated electric, natural gas and water distribution businesses to continue to provide customers with safe and reliable service, to address ongoing load growth in certain areas of our service territory, and to help our states meet their decarbonization goals. The increased investment is focused primarily within our electric transmission and distribution segments. Much of the increase in the transmission capital projection is due to increased investments in the replacement of older equipment in our substations, overhead infrastructure and underground cables. This investment continues to make our transmission system more reliable even during extreme weather events.
Increased storm hardening and system resiliency has resulted in no transmission-related outages through the last several severe storm events. We also are including the early years of a major new project to build an underground substation in Cambridge, Massachusetts, where the load growth continues to accelerate. A site-in application for this project was filed about a year ago. We are incorporating significant additional transmission investment in the physical security of our major substations and a total of about $450 million for transmission investments in the distributed energy and offshore wind projects Joe mentioned earlier.
On the electric distribution side, our updated forecast now reflects the inclusion of AMI in Massachusetts and the completion of our proposed distributed energy projects also in Massachusetts. Earlier, Joe mentioned that the first cluster of these distributed energy projects have been approved and that the hearings are ongoing for the remaining five. Our forecast also reflects the Massachusetts DPUs recent approval of our multi-year grid modernization and electric vehicle charging program.
Moving on to the natural gas side. Our increased investment is primarily related to increased regulations around natural gas companies construction activities that have evolved since the Merrimack Valley incident several years ago. We've also increased the number of projects to harden our system against flooding and added protection on our low-pressure systems.
In the water segment, our updated five-year capital investment forecast of approximately $1 billion is more than 10% above the previous forecast, primarily reflecting the addition of Torrington Water, the acquisition that we completed last year and the additional water treatment facility investments. It also includes about $70 million of per year to replace nearly 25 miles annually of old water mains. Aquarion has more than doubled the scope of its water main investment program since being acquired by Eversource.
Moving on to Slide 17, which compares year-by-year investment levels in the years 2023 through 2026. They totaled approximately $3.3 billion. This is consistent with the discussions we've been having with investors since last May when we indicated that the increased investment requirements in our regulated infrastructure would likely offset 2026 earnings impact of divesting our offshore wind investments, if that is ultimately the outcome of our strategic review.
Slide 18 shows that some major potential initiatives remain outside of our investment plan. Connecticut regulators continue to review our proposed AMI program. So that investment of approximately $475 million remains outside of our plan as are some[Phonetic] potential related storage projects also in Connecticut. Our transmission system on Cape Cod could interconnect another 1,200 megawatts of offshore wind in addition to Vineyard Wind and Park City Wind. As such, interconnections are now under technical review by the ISO New England, but we have not reflected any potential amount in our plan. In addition, we've not reflected potential transmission projects that likely will be needed to move significant sources of offshore wind generation to load centers. We've also now reflected potential clean energy alternatives we are beginning to explore as alternatives to natural gas.
As you can see on Slide 19, the customer-focused core business investments that are included in our capital forecast would result in a 7.5% rate base CAGR through 2027. Supported by those investments, we have maintained our EPS rate of -- growth rate of 5% to 7%, and believe we will be solidly in the upper half through the forecast period as illustrated on Slide 21.
In addition to our earnings growth, we are enhancing our internally generated cash. Last year, cash flows from operations totaled just over $2.4 billion and that is compared with slightly under $2 billion in 2021. And the 2022 figure included a few cash outflows we do not expect to occur in 2023. As such as -- about $80 million of the pension contributions that we made in 2022 and more than $70 million of customer bill credits related to the CL&P 2021 rate settlement agreement and higher-than-average storm costs.
We expect that the combination of enhancing credit metrics, progress on our strategic review and equity issuance plans will allow us to maintain or in the case of S&P, improve our current ratings. Those strong ratings provide significant benefits to customers by allowing us to borrow at some of the lowest rates in the industry. We also expect an increased level of storm cost recovery compared to 2022 as part of the NSTAR Electric rate decision. Maintaining those levels will require us to regularly infuse equity from our parent company into our regulated businesses.
Slide 21 illustrates the sources of that funding. In addition to improving cash flows, as I mentioned -- previously mentioned, we will require additional debt issuances principally at our regulated utilities. We expect to issue nearly $1 billion of additional equity through our at-the-market program over the coming years. We will continue to use treasury shares to fund our dividend reinvestment and employee incentive programs. Should our strategic review results in a sale of our offshore wind investments, we would expect to use all of the net proceeds on Day 1 to pay down parent debt. This will create increased financial flexibility in the future as we fund our regulated segments.
Moving on to our regulatory update. In the past few years, we have had a lengthy discussion about various regulatory reviews, but this year, that discussion is much briefer. As you can see on Slide 22, we continue to await FERC's ruling on several pending complaints that were filed beginning in 2011, challenging the return on equity authorized for all of New England electric transmission owners. On the distribution side, the only ongoing rate review involves Aquarion, Connecticut, where a draft decision is due shortly. Due to the capital program at Aquarion, as I mentioned earlier, Aquarion's returns have slipped below its currently allowed 9.63% authorized return on equity. We believe we have made a strong case for a reasonable increase in Aquarion's water rates, which are quite low compared to its peers. Elsewhere, we don't expect significant rate review activity in 2023. In Massachusetts, all three of our electric and natural gas utilities are currently operating under long-term rate plans that extend from five to 10 years.
Finally, as you can see on Slide 23, we continue to remind investors that they should consider our long-term track record and attractive risk profile in determining whether to invest in our Company. This slide shows that over the decade since Eversource was created, we have consistently achieved the earnings and dividend growth we targeted, while achieving very strong operating performance. We also have enhanced our ESG profile, which certainly ranks us among the best, if not the best, in the industry.
Thank you again for joining us this morning, and I will now turn the call over to Jeff.
