NYSE:CMS CMS Energy Q1 2023 Earnings Report $74.99 +1.49 (+2.02%) As of 01:49 PM Eastern This is a fair market value price provided by Polygon.io. Learn more. Earnings HistoryForecast CMS Energy EPS ResultsActual EPS$0.70Consensus EPS $0.66Beat/MissBeat by +$0.04One Year Ago EPS$1.20CMS Energy Revenue ResultsActual Revenue$2.28 billionExpected Revenue$2.32 billionBeat/MissMissed by -$37.38 millionYoY Revenue Growth-3.80%CMS Energy Announcement DetailsQuarterQ1 2023Date4/27/2023TimeBefore Market OpensConference Call DateThursday, April 27, 2023Conference Call Time9:00AM ETUpcoming EarningsCMS Energy's next earnings date is estimated for Thursday, April 24, 2025, based on past reporting schedules. Conference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)SEC FilingEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by CMS Energy Q1 2023 Earnings Call TranscriptProvided by QuartrApril 27, 2023 ShareLink copied to clipboard.There are 12 speakers on the call. Operator00:00:00Good morning, everyone, and welcome to the CMS Energy 2023 First Quarter Results. The earnings news release issued earlier today and the presentation used in this webcast are available on the CMS Energy's website in the Investor Relations section. This call is being recorded. After the presentation, we will conduct a question and answer session. Instructions will be provided at that time. Operator00:00:30Just a reminder, there will be a rebroadcast of this conference call today beginning at 12 p. M. Eastern Time running through May 4. This presentation is also being webcast and is available on CMS Energy's website in the Investor Relations section. At this time, I would like to turn the call over to Mr. Operator00:00:48Sri Madhupati, Treasurer and Vice President of Finance and Investor Relations. Speaker 100:00:54Thank you, Bailey. Good morning, everyone, and thank you for joining us today. With me are Gerrick Rochal, President and Chief Executive Officer and Reggie Hayes, Executive Vice President and Chief Financial Officer. This presentation contains forward looking statements, which are subject to risks and uncertainties. Please refer to our SEC filings for more information regarding the risks and other factors that could cause our actual results to differ materially. Speaker 100:01:18This presentation also includes non GAAP measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in the appendix and posted on our website. Now I'll turn the call over to Gerrit. Speaker 200:01:29Thank you, Sri, and thank you, everyone, for joining us today. Our commitment to industry leading financial performance spans 2 decades, and it's this investment thesis that is foundational to our performance. Over that time, we've experienced changes in commissions, legislatures and governors, unplanned weather and storms, recessions and the pandemic. In each and every year, we have delivered for our customers and for you, our investors. It's the performance you have come to expect from a premium name like CMS Energy. Speaker 200:02:11And this year is no different. We remain squarely focused on our mission at CMS Energy, Making the needed investments in safety, reliability and decarbonization of our system, balanced by customer affordability and our $15,500,000,000 5 year customer investment plan. These investments in our expansive In aging electric and gas systems are critical to enhance reliability and resiliency and are supported by Michigan's constructive legislation and regulatory framework. Our investments are coupled with our lean operating system, the CEWAY, which helps us manage and lower costs. This ongoing drive to see and eliminate waste is evident from the field to the office and helps improve our efficiency, ensuring we deliver customer value While keeping bills affordable. Speaker 200:03:10We are committed to this, and I believe we do it better than most any company in the industry. As we round out the Q1 of 2023, I want to share a few highlights. First, Ford's announcement of the Blue Oval Battery Park. This is another important win, which brings $3,500,000,000 2,500 jobs and adds to the growing lift of economic development projects in our service territory. We saw additional enrollments in our voluntary green pricing program, supporting the build out of our first large tranche of Own Solar, representing 309 Megawatt of a total 1,000 Megawatt approved. Speaker 200:03:56Preparations continue for the acquisition and transition of the covert generating facility scheduled for June as approved by our IRP. And in our gas business, began construction of our mid Michigan pipeline, a $550,000,000 56 mile pipeline to enhance deliverability and safety of our natural gas system. I want to be clear. At CMS Energy, year after year, Regardless of conditions, we are positioned to deliver. Now let me address The extreme weather we faced in the Q1. Speaker 200:04:39In late February early March, we experienced the 2nd largest storm event in our service territory. Speaker 300:04:47Our line crews are some Speaker 200:04:48of the most skilled and experienced in the business, And they showed up with Able Hands and parts of service, and our customers were well served by their dedication. In addition to our crews in the field, there are hundreds of people behind the scenes to support our crews and our communities, including many of our coworkers who volunteered to serve customers throughout the restoration. I know Many of my coworkers joined our earnings call. And from my heart, I want to say thank you to each and every one of you were showing up for our customers and for each other. Because of our team working together to serve, 97% of our customers were with power within 3 days. Speaker 200:05:40In our 135 year history, 8 of the most destructive storms have occurred in the last 20 years. That's a significant data point. The severity and frequency of storms we're seeing highlights the need to enhance critical investment and amplify our efforts on the reliability and resiliency of our electric distribution system. We need more undergrounding. This is an area where we are significantly behind some of our Midwest peers. Speaker 200:06:13We also need to do more sectionalizing, Automated transfer reclosers and looping and overall system hardening. These important investments are critical to improve reliability and resiliency for our customers and will be outlined in our pending electric rate case and in our updated 5 year electric distribution infrastructure investment plan. We also plan to include an investment recovery mechanism and our upcoming rate case to add certainty to our investments. I'm pleased that our commission has been supportive of reliability improvements, doubling our efforts around tree trimming since 2020. This as well as other customer investments has contributed to the 20% improvement in our reliability in 2022. Speaker 200:07:06But There is more work to be done and more needed investment. We will continue to work productively with the commission And the reliability and resiliency of our electric distribution system, so we prepare for increasingly severe weather. We expect further alignment and collaboration on the needed investments in the upcoming storm audit as we work on a common goal of improving our distribution system Speaker 300:07:35for Speaker 200:07:35all customers. I'm confident in our ability to work with all stakeholders Because Michigan has the legislative and regulatory framework in place to enable these investments and to attract the capital needed to drive the changes we all want to see. We have a productive energy law that provides forward looking test years, Constructive ROEs and supportive incentives. It is this environment, which has earned Michigan the rank as a top tier regulatory jurisdiction for the past decade. Now I know many of you will want to dive into the details of the back and forth in both The regulatory and legislative arenas, which we are happy to do in Q and A. Speaker 200:08:20But remember, it's all part of the process. Let me remind you, we have a track record of working with all stakeholders to drive successful outcomes. It's why we settled 3 cases in 2022. Now I want to be clear where we stand today. We saw both unseasonally warm weather in January February as well as significant cost with the ice storm. Speaker 200:08:46As you would expect, we've taken actions early to counteract that impact. Therefore, we are reaffirming all our financial objectives, most importantly, our full year guidance of $3.06 to $3.12 per share with continued confidence toward the high end. In the Q1, we reported adjusted earnings per share of $0.70 We're also reaffirming our long term adjusted earnings growth of 6% to 8% per year with continued confidence for the high end and remain committed to annual dividend per share growth of 6% to 8%. This isn't our first rodeo, Whether it was the pandemic or weather related, we've managed the work to deliver for both customers and investors. Through the CEWAY and other countermeasures already underway, we will offset the unplanned headwinds experienced early in the year. Speaker 200:09:49I have confidence in our team and in our plan for 2023 and beyond given our long standing commitment and performance. At CMS Energy, we deliver for customers. We're consistently delivering industry leading growth. Now I'll hand it over to Reggie to provide some additional details and insights. Speaker 300:10:11Thank you, Garik, and good morning, everyone. For the Q1 of 2023, we delivered adjusted net income of $204,000,000 or $0.70 per share, largely driven by unfavorable weather and costs related to service restoration as a result of the significant storm activity that Geric noted earlier. To elaborate on the impact of weather on sales, given the well publicized warm winter experienced in the Midwest, number of heating degree days in our service territory during the quarter were approximately 18% below Speaker 400:10:45normal weather patterns. Speaker 300:10:46The atypically warm weather coupled with the strong comp in the Q1 2022 resulted in $0.27 per share of negative variance versus the comparable period in 2022 as noted on Slide 7. Rate relief net of investment related expenses resulted in $0.03 per share realized in the Q1 2022 associated with the prior gas rate case settlement as expected. From a cost perspective, as mentioned, our financial performance in the Q1 was significantly impacted by higher operating and maintenance or O and M expenses attributable to storm restoration costs, which resulted in $0.20 per share of negative variance versus the Q1 of 2022. Is worth noting, however, that given the elevated storm costs we've seen over the last few years, we have incorporated fairly conservative assumptions for this cost category and our full year forecast. Looking ahead, as always, we plan for normal weather, which equates to $0.14 per share of negative variance versus the comparable period in 2022 due to the absence of strong sales at the electric utility driven by last year's warm summer. Speaker 300:12:03We anticipate that the estimated negative variance attributable to weather will be more than offset by rate relief, net of investment related costs, which we have quantified at $0.17 per share versus the comparable period in 2022. Our underlying assumptions for rate relief are largely driven by last year's successful gas and electric rate case settlements, and we have assumed a constructive outcome in our pending gas rate case. Closing out the glide path for the remainder of the year, as noted during our Q4 call, we anticipate lower overall O and M expense of the utility driven by the usual cost performance fueled by the CE Way. And in light of the weather related headwinds in the Q1, we have supplemented our planned productivity for the year by limiting hiring, reducing our use of consultants and contractors, accelerating longer term IT cost reduction initiatives and eliminating other discretionary spending among other activities. These cost performance measures will support the $0.28 per share of positive variance versus the comparable period in 2022. Speaker 300:13:06And I'd be remiss if I didn't mention that none of these actions will impact the safety and reliability of our electric and gas systems. Lastly, as we discussed during our Q4 call, we're assuming modest growth at Northstar and the benefits associated with the roughly $0.12 per share of pull aheads achieved in the Q4 of 2022 as per our original guidance. And to offer further risk mitigation of the financial headwinds encountered in the quarter and provide additional contingencies should we need it. We have supplemented these opportunities with anticipated cost savings at the parent, largely in the form of opportunistic financings and tax planning, which in aggregate we estimate will drive $0.36 to $0.42 per share of positive variance versus the comparable period in 2022. Before moving on, I'll just note that though our track record of delivering on Financial objectives over the last 2 weeks 2 decades speaks for itself. Speaker 300:14:01We remain perpetually paranoid in our financial planning process. More bluntly, We always do the worryings where you don't have to. And to that end, I'm pleased to report that we've already begun to see the benefits of the numerous countermeasures implemented in the Q1. As such, I'm highly confident that we'll realize the balance of expected savings over the course of the year. Moving on to the financing plan, Slide 8 offers more specificity on the balance of our planned funding needs in 2023, which are largely limited to debt issuances at the utility, a good portion of which has already been priced and or funded over the past several months. Speaker 500:14:40As we have noted in Speaker 300:14:41the past, the parent's contribution to the funding needs of the Cobrerd acquisition is in place with the roughly $440,000,000 is a forward equity contract. This equity will be issued in connection with the acquisition of the facility, and we've assumed the associated EPS dilution and our full year guidance. While we don't have any further required financing needs at the parent this year, we will continue to evaluate opportunistic financings to derisk our future funding needs if market conditions are accommodative. Our approach to our financing plan is similar to how we run the rest of the business. We plan conservatively and capitalize on opportunities as they arise. Speaker 300:15:20This approach has been tried and true year in and year out and has enabled us to deliver on our operational and financial objectives irrespective of the circumstances to the benefit of our customers and investors, and this year is no different. And with that, I'll hand it back to Gerrick for his final remarks before the Q and A session. Speaker 200:15:40Thank you, Reggie. As you look at Slide 9, I'll remind you again, our track record spans 2 decades of consistent industry leading results Despite changing commissioners, legislatures and governors, recessions, severe weather and storm activity or a pandemic, We're here for the long haul. We have powered Michigan's progress for nearly a century and a half. And as we look ahead, we see great opportunities Support the state's growth through critical infrastructure as we help power Michigan through the next century. With that, Bailey, please open the lines for Q and A. Operator00:16:22Thank you very much, Garik. The question and answer session will be conducted electronically. If you're using a speaker function, please make sure you pick up your headset. We'll proceed in the order you signal us and we'll take as many questions as time permits. On your touch tone phone. Operator00:16:53We'll pause for just a second. Our first question today comes from the line of Jeremy Tonet from JPMorgan. Please go ahead, Jeremy. Your line is now open. Speaker 600:17:06Hi, good morning. Speaker 200:17:08Hey, good morning, Jeremy. How are you? Speaker 400:17:11Good. Thank you. And just wanted to come back to the key focus, I think, in the market At this point, just with the adverse weather and storm headwinds in the Q1, great to see that you're still targeting High end of the guide there and just wondering as you think about contingency flex this year, I guess, if there is anything else that moves against you, Do you have more contingency that could offset that if weather shapes up less than expected or anything else moves against plan? Speaker 200:17:42I have confidence in our ability to deliver. That's the first point, Jeremy. And we know there's a lot of year remaining. And so Really in all our efforts, we look to build contingency out throughout the year. And so maybe if I just take a step back, because I know this is a popular question Today and just talk about our playbook. Speaker 200:18:03Reggie alluded to it, but let me offer a little more specifics. And I'd break it into really 5 areas. The first one is we plan conservatively. And you know this, Geron, we've done this year after year after year. That's what leads to our consistency one of the reasons we had consistent Financial performance. Speaker 200:18:21And also, we talked about this in Q4, what we did in 2022 to de risk the year. And then just adding Rejji's points, we budget for storms and we budget conservatively for storms because we know they occur throughout the year. And so in many cases, this is just a weather story. So the first piece is just we plan conservatively. The second piece of the plan is the CE way. Speaker 200:18:43And you this is another strong suit for us. And I'll remind everybody, it's industrial engineering, And it's a lean operating system. It's science. It's proven throughout the years for many different companies. And I see a great opportunity that we continue to deliver on year after year. Speaker 200:19:00Scheduling optimization is one example underway right now. We're making capital IT investments to get other efficiency improvements. It improves customer satisfaction while reducing costs. Our run rate has typically been around $50,000,000 a year, as you know, and there's a lot more muscle we have there. The 3rd piece is really around the labor piece, And that is what you would expect. Speaker 200:19:20We released some consultants. Our contractors are flexible, so we dial that down a bit. We pinch back on overtime and then we hold on hiring, and so those things help as well. The 4th area is really discretionary spending. It's limiting conferences and travel and some of the training. Speaker 200:19:37And you think that's small, but it's actually big when you apply it across the entire company. And then the 5th piece, and Reggie hit on it, was good tax planning and just opportunistic financing. And so that's the recipe. And as I said, this isn't our first rodeo. If you go back to the pandemic, we had to find $100,000,000 50% of it came Through this DE way, 50% through other actions, very similar to what we're doing right now. Speaker 200:20:01And so we're going to chin this bar, and we're going to add some contingency throughout the year. So I feel very confident in our ability to deliver and to weather whatever Mother Nature throws at us throughout the year. Speaker 400:20:16Got it. That's very helpful. Thank you for that. Yes. Thank you. Speaker 300:20:20And maybe pivoting Thanks. Speaker 400:20:24May be pivoting to the gas case. Just wondering if you could talk Speaker 700:20:28a little bit more about that. Speaker 400:20:29I know the gas case maybe doesn't come as much focus as electric generally speaking, but what are the Few focus points across stakeholders in the gas case at this point and just trying to get a sense for your thoughts on chances for a settlement without getting too far ahead of yourself. Speaker 200:20:47First things first, this is a good and constructive starting point. If I was just to dissect it a little bit for you, what we saw from staff in the AG as far as ROEs Was better than previous staff and AG positions. And so that bodes well for an ROE and some of the financial metrics. The other important piece is we build that remember, we built that case over Q3 and Q4 last year. And so gas prices were rising. Speaker 200:21:14We also saw some expense from pension OPEB perspective. But when you fast forward to today, those have changed. And so gas prices are lower. We snapped the line at the end of the year on pension and OPEB expense. And so we got a $212,000,000 ask, but that effectively pulls that down because The fact pattern is different than what we saw when we built the case. Speaker 200:21:35And then the big piece is this that people are talking about here is the sales forecast. There's about $10,000,000 $12,000,000 difference there. So let me walk through that. We have used this method since 2010 to project sales. It's a 15 year regression type model. Speaker 200:21:54We haven't changed a bit. It's tried and true and it's accurate. And here's the important point. Back in 2010, the commission ordered us. Let me repeat, the commission ordered us to use this method. Speaker 200:22:09That was in case you 15,986. And so we're doing exactly what the commission told us to do. So we feel like really good about where we're positioned there. And so there's other cats and dogs, but bottom line, Take this away. It's a good constructive starting point. Speaker 200:22:25The other thing you asked about settlement, we'll always look for the opportunity for settlement. But again, we sit in a very constructive jurisdiction. So I'm very comfortable taking it to the end And again, a full order from the commission. Speaker 400:22:42Got it. That's helpful. Thank you. Operator00:22:47Thank you. The next question today comes from the line of Shah Pourreza from Guggenheim Partners. Please go ahead. Your line is now open. Speaker 200:22:57Hey, good morning, Shar. You're with us, Shahriar? Operator00:23:05Please do ensure you are unmuted locally. We will move on to our next question. Our next question today comes from the line of Julien Dumoulin Smith from Bank of America. Speaker 800:23:23Hey, good morning team. Hopefully, try to work here. You guys can hear me? Speaker 200:23:28Hey, Julien. We can, Julien. Speaker 800:23:31Excellent. Thank you guys very much. Let me follow-up on the first question here just around the usage, non utility tax and other, you guys elaborated on it. So not only have you pressed some of those levers to see the quarter over quarter change in $0.23 in the range, right, you're talking about $0.36 to $0.42 of positive offsets there now. But in addition to that, you've got further levers to go to the extent to which that they might materialize. Speaker 800:24:01I just want to make sure I understand the comment from earlier. Speaker 300:24:06Yes. Good morning, Julien. This is Reggie. Yes, you've got it exactly right. And Garrick, I think, offered a wonderful dissertation on how we approach Our cost reduction opportunities, the only thing I would add to his comments is that when it comes to cost reduction, we don't discriminate. Speaker 300:24:23We look across the entire cost structure. When you exclude depreciation, it's about $7,000,000,000 annually and about A $1,000,000,000 of that is a combination of interest expense and tax related spend, combination of federal state income tax as well as property tax. And so we look across all of those cost categories to identify opportunities. And what you're seeing in that penultimate bar in that waterfall are opportunities We anticipate around potential pre fundings. As you know, we aggressively look at the maturity profile of our bonds and see if there are opportunities to take out bonds prematurely. Speaker 300:24:55So we'll look at those. And then again on the tax planning side, we're always looking for opportunities to reduce costs, whether that's for state tax, property tax or otherwise. And so that's what's incorporated into that last item. And Again, that's all I would add to Gerrick's good comments on how we approach cost reduction. Speaker 800:25:12Excellent. Fair enough. And then just following up on Some of the conversation on regulatory mechanisms. You talked about including an investment regulatory mechanism in your upcoming case. Can you talk about what that looks like and perhaps talk about that in parallel with some of this conversation on ring fencing here? Speaker 800:25:28I mean, how do you think about ring fencing to isolate spending on Specific subject areas, right? It sounds like this IRM might be related. And then also maybe you could talk about ring fencing in the context of veg management efforts. Speaker 200:25:43Yes. Absolutely, Julian. And you've obviously listened to Terrence Scripps. He's used the word ring fencing around some of the capital investments. So the way we think about it is really I put it in 3 buckets. Speaker 200:25:55And so the first bucket is really We know that in order to deliver reliability and resiliency for our customers, that's going to take more capital investment. Just the nature of an aging system with more severe weather. And so we're all focused on that. The commission, We're certainly focused on a company and so is every one of our coworkers here within CMS Energy and the broader Consumers Energy. So we're squarely focused on that first bucket. Speaker 200:26:23The second bucket really is what you brought up, and that's the commission wants to be able to ring fence it. And They're looking at a prudency, accountability. And typically, when we've asked for large increases, they want to know that we can do the work, We have the resources to ramp up. And so that's an important piece. And this IRM or this tracking mechanism allows Helpful for investors. Speaker 200:26:53And so I see all those 3 working together. And in fact, I want to give you an example. Back in 2011, and I was engaged in 2011. We did similar on our gas business. We're looking to increase the amount we spent on replacing mains and services. Speaker 200:27:07We started a new gas construction group. And the commission and staff at the time were had questions about important questions about how you're going to do that and how you're going to ramp up the resources. And so we did a similar type mechanism then, delivering improved safety for our customers, replacing mains and services and creating that ring fence, that accountability associated with And we were very successful. It started out as $85,000,000 back in 2011, and now it's a $250,000,000 program on an annual basis. And so We're taking that same approach as we go through this case. Speaker 200:27:41Is that helpful, Julien? Speaker 800:27:45Yes, absolutely. So perhaps let me just make sure I'm hearing you right. This IRM, would that help address some lag related considerations, perhaps shift timing of future cases or is this principally about accounting and accountability back to the commission to Just make sure the dollars and cents are getting spent in the right bucket. Speaker 200:28:06The latter is the main focus. And then I mean, over time, it could lead to extend out some rate cases. But our focus right now is just making sure there's the accountability piece And the ring fencing that our that the Chair has referenced in some of his public comments. Speaker 800:28:22Got it. Excellent. And then on Veg Management, just quickly, just with respect to that side of the equation, obviously, been a lot of focus on that front. Your commentary saying that you've increased it from 2020 helpful. Any further efforts in that regard? Speaker 800:28:37Again, obviously, there seems to be an acute desire or need for that. How do you think about allocating even more in that direction at this time? Speaker 200:28:48Yes. So just to give you some real numbers on this. So about in 2020, it was around $50,000,000 on an annual basis. And with support of the commission through different cases, we requested more to address this important aspect of reliability. We're up around $100,000,000 on an annual basis. Speaker 200:29:04And there's a couple components of it. And we're continuing to look at other opportunities to invest more in that, but we're also looking at the efficiency of that. And so this is an area where we're using technology and artificial intelligence and analytics to be able to better predict were to utilize those dollars. And so we've our trees trimmed per mile has actually improved over the time period as well. And so That's helpful in the conversations we have with the commission, and then we'll continue to look for opportunities to look at other areas to invest and improve Reliability, much like I said during my comments around the capital investment. Speaker 200:29:39I know Regi wants to add to it as well. Speaker 300:29:41Yes, Julian, the only thing I would add is that when we think about the planning year and particularly years in which we have a little bit of upside or contingency, usually vegetation management is one of the first items that comes up on the Flex list. And last year, in fact, when we were had a little bit of upside that was weather driven, we did about $5,000,000 or so of Flex related to vegetation management. So our actuals, even though we've been budgeted around $100,000,000 as Gerrick noted for the last year, I think our actuals were closer to $105,000,000 certainly over $100,000,000 And so Flex is an opportunity for us to do additional vegetation management. And then remember, we have that voluntary refund mechanism, which is also A vehicle through which we can do incremental operating expenses. And so the current voluntary refund mechanism that we have outstanding, we've targeted about $8,000,000 towards additional vegetation management this year out of the $17,000,000 that we allocated to the electric business. Speaker 300:30:35And as you know, we obviously pulled that lever in Q4 of last year for $22,000,000 all in and again a portion of that will be allocated towards vegetation management assuming we get commission approval. So that's the other mechanism we have as well. Speaker 800:30:51Excellent. Thank you guys very much. Good luck. Speaker 200:30:55Yes. Thank you, Julian. Operator00:30:57Thank you. The next question today is a follow-up question from Shah Pourreza from Guggenheim Partners. Speaker 900:31:05Please go ahead. Your line is now open. Speaker 600:31:08Hey, guys. Good morning. Sorry about that. Speaker 500:31:10Yes. I got all excited and I hung up on you, Sorry if I missed this, but Speaker 300:31:19I just want to maybe just round out the Storm discussion, Speaker 500:31:23I guess, do the storms, do they will they lead to more resilient spend? Is it Speaker 400:31:28going to increase CapEx Do you see offsets the CapEx? Speaker 500:31:33Are you going to sort of seek any kind Speaker 400:31:34of new mechanisms? I mean, Speaker 300:31:36some things are already in rider like items. Would resiliency kind Speaker 400:31:41of get that similar treatment. I guess, overall, just how do these storms kind of change your thoughts around the 5 year plan? Speaker 200:31:52We share so just to be really crystal clear on this, There's going to be more capital investments needed to improve reliability and resiliency. And it's a reflection of an aging system with more severe weather. And I offered some of that in my prepared remarks. But In this next electric rate case, we're proposing IRM or Investment Recovery Mechanism as a tracker To show and greater certainty around our capital investments. And so that's the intent. Speaker 200:32:21We know we have to invest more. There's a number of ways to do that. One is our storm on it and focusing on that and get alignment with the commission. The other is the rate case and then the other one 5 year electric distribution investment plan. And so all of those different filings, all those different conversations Lead to better alignment and a better support for our electric distribution investments. Speaker 200:32:44And so the long term is yes And this IRM mechanism, we believe, will create greater accountability with the commission. Chair Scripps has talked about ring fencing and then ultimately should lead to more recovery on those capital investments. Is that helpful, Shar? Speaker 400:33:02Yes. And I guess the question is, should we be looking at these incremental investments as extending the runway of your growth or accretive to your growth? Speaker 200:33:12We have a long runway and we know we invest we update our plan every year. But that 5 year plan includes about 6 $1,000,000,000 of investments in the electric distribution system. That is up. That was up in this most recent plan. And we'll continue to look at As we model across the system, as there's additional investments, we'll continue to look at opportunities to invest more there. Speaker 200:33:36There's a long runway of opportunity just given the nature of our system. Speaker 800:33:40Got it. Got it. Speaker 400:33:40And then maybe just shifting to financing. Financing has It's been a bit of a tough headwind, but interest rates seem to have moderated year to date. I guess, how are you trending versus the embedded interest Cost and plan in terms of 23 and maybe even opportunities for some cushion versus 2024 since rates have come down versus your original expectations? Thanks. Speaker 300:34:03Yes, Shar, this is Reggie. Great question. So as always, I think we had a word count of about 6 or 7 times in our prepared remarks where we talked Planning conservatively and that has been the case here. And so in our plan, we had pretty conservative assumptions at the operating company and that's where the vast Majority of the issuances are this year and we've been fortunate for the issuances we've done to date to issue those at levels, the interest rate levels below what we haven't planned, so we're seeing upside and that's already flowing through our 2023 numbers and obviously we'll benefit from that in 2024 and beyond because we're issuing a long dated paper. And so Certainly, with interest rates moderating over the last several months, that creates additional opportunities, and that's what we'll be mindful of as we look at the final sort of 6, 7 months of the year and seeing if we can capitalize on, I'll say, the accommodative capital markets that we're seeing right now. Speaker 400:34:57Terrific. Thank you, guys. Appreciate it. And sorry about the tech issues. I appreciate it. Speaker 300:35:01No, no worries. Speaker 900:35:05Thank you. Next question today Operator00:35:07comes from the line of Durgesh Chopra from Evercore. Please go ahead. Your line is now open. Speaker 200:35:13Good morning, Derek. Speaker 600:35:14Hey, guys. Good morning. Hey, good morning, Garik. Just maybe on the just continuing the discussion Can you update us on the investigation that was started by the commission? My understanding is that they were looking for 3rd party consultants. Speaker 600:35:30So maybe just what's the latest there? Speaker 200:35:33Yes, broadly from the storm audit perspective. So they started that last fall, and In the process of selecting the vendor right now or the firm right now, and we anticipate that to start in the September time frame. But I'll remind you the big picture perspective on this storm audit is that we're both aligned, that being the commission And CMS Energy aligned that we need to improve reliability. And so I really view this as an opportunity to be able to get further alignment on the needed investments in our system. I'll give you a great example of undergrounding. Speaker 200:36:10We want to do more undergrounding. And if we look at our Midwest peers, they're around 35%, forty Underground, we're at 10%. Goes back to Shar's question, is there opportunities for investment? There's a lot of them. And so We see that as an important. Speaker 200:36:25You can look at the EPRI, or Electric Power Research Institute, and they'll say undergrounding improves reliability depending on if it's 3 phase or single phase by 50% to 90%. And so this is a great example where we need We can utilize this to get better alignment on immediate investments in the system. And once we have that alignment, Then again, we can move forward and get greater certainty around those investments. Does that help, Durgesh? Speaker 600:36:55Absolutely, it does. But you don't I guess the point is, I know you've said this before, you don't see anything punitive Coming out of those audits as a result as they kind of go through your processes and other things and past practices. Speaker 200:37:09I don't see anything punitive. No. Speaker 600:37:13Got it. Okay. And then just one quick follow-up. I know this is small, but you got a decision on the voluntary refund mechanism Earlier in the month, and I believe there were some disallowances. Can you talk to that and discuss that briefly? Speaker 200:37:29Yes. I'll tag team it with Reggie. Just the context around this, these are pretty small dollars. And Bottom line, we have this option to file a voluntary refund mechanism. We did that in 2022 and dollars are booked in 2022. Speaker 200:37:45But it's not a catwalk, like it's not assured that you're going to get approval. Staff and the commissioners have a say in that, right? And They really telegraphed the importance of incremental forestry and some other things with our customers in terms of helping out those low income customers. And so they've really given us another opportunity at the bat, and we filed that here on April 21 to reflect the commissioner's and staff's comments. And so I feel good about getting to a positive outcome on that. Speaker 200:38:12It's just navigating kind of the back and forth of the process, Durgesh. Speaker 300:38:17Yes. That's the essence of it, Durgesh. Just to give us some specifics The numbers, so when we filed the VRM in late 2022, it was for $22,000,000 $5,000,000 of which was to support our vulnerable customers in the gas of the business that was fully approved by the commission and where there was So I'd say counsel and guidance by the commission was on the balance of the $17,000,000 that we allocated to the electric business. And to Gerrick's comments, they wanted to see direct customer benefits, and so that's why we have recently, as of last Friday, requested service sorry, additional Forestry or vegetation management as well as additional support for vulnerable customers. So that's how it's cut. Speaker 300:38:54Just that $17,000,000 is subject to further approval, and we're confident that we'll get this recent request over the finish line. Speaker 600:39:03I appreciate the color guys. Thanks so much. Speaker 900:39:08Thank you. Next question today Operator00:39:10comes from the line of David Alcaro from Morgan Stanley. Please go ahead. Speaker 900:39:14Your line is now open. Speaker 1000:39:17Good morning. Thanks so much for taking my questions. Good morning. Let's see. There have been some legislative bills drafted in the state with some more aggressive net zero targets. Speaker 1000:39:28I was wondering if that might impact any of your thinking around the next time you address the IRP? Speaker 200:39:36Great question. Let me I think perspective is really important here because often In Lansing, just part of a bill, there's a lot of back and forth and there's media releases and you guys got to kind of clear the air and talk about it from a big And so I'll remind our listeners here that in the governor's first term, she introduced the healthy climate plan. And in fact, one of the members on my direct staff was one of the stakeholders in that process and was involved in The review and kind of the language around it. And then I participated with a group of about 8 to 10 CEOs and the governor in the review process. And so that hurt the governor's, healthy climate plan lines up really well With where we're headed from a state perspective, but also lines up well with our current IRP and the like. Speaker 200:40:30Now the legislature has The Senate specifically has introduced some new bills that are a little bit more aggressive. I want to remind everybody this is the back and forth of Lansing. And That's the first starting point. That's the first valley you might say. And so we're going to continue to navigate that and move forward with that and manage that process. Speaker 200:40:50Ultimately, at the end of the day, if it requires something us to do something sooner, we'll do that sooner. And that will mean more capital investment opportunities. But I want to let everyone know it's really manageable and again well aligned with where we're already headed. Speaker 1000:41:07Got you. Thanks. That's helpful. And could you also touch on just what you're seeing in terms of weather normal Volumes sales volumes and how that's lining up with your expectations so far? Speaker 300:41:20David, hi. This is Reggie. I appreciate the question. Yes, weather normalized trends, I will admit, we were scratching our heads a little bit at the trends that we saw. And just for everyone's benefit, we saw residential about 2.5 a little over 2.5% off versus Q1 of 2022. Speaker 300:41:38Commercial, a little over 3.5% off versus Q1 of 2022, Industrial was flat excluding 1 large low margin customer. And then total was Down about a little over 2.5% versus Q1 of last year. And I would say, it's really early days. We are still Digging into the data, I would just start by saying, as hard as our sales forecasting team works, whether normalized math is a combination of art and science. And when you see, I'd say, dramatic weather like We saw in Q1 of last year where it was extremely cold and then a pretty warm winter as we noted earlier Q1 of this year. Speaker 300:42:21You can See a good degree of imprecision in those calculations. And so I say all that to say, we're looking at it with a little bit of a skeptical eye because the reality is we're still seeing very Economic indicators in the service territory, our customer counts specifically for commercial were up almost 0.5% over 0.5% almost 1 point across the electric and gas businesses residential customer counts are still up. And while we have built into our guidance that continued return to work, we're still seeing a good level of really not every company in Michigan at this point is 4, 5 days in the office. And so we I think as we get into those summer months, we may see some of that favorable mix we've seen in the past. And so I would say early days, there's probably a little bit of noise in the data. Speaker 300:43:06And I'll just say on the industrial side, we were flat again versus where we were last year, but we couldn't have a more robust economic development pipeline born out of a lot of constructive federal legislation that's been passed over the 18 months. And we continue to look at our trends versus pre pandemic and across every customer class, were doing as well, if not better, than what we were doing pre pandemic, particularly when you take into account our energy efficiency which effectively reduced our load year over year by 2%. And so again, I don't think what you're seeing in Q1 and in the data is indicative of the economic conditions in Michigan, I think it's just more weather normalized math versus anything else. Speaker 1000:43:48Yes, understood. That makes sense. Thanks so much. Speaker 600:43:53Thank you. Speaker 900:43:55Thank you. Next question today comes from Operator00:43:58the line of Michael Sullivan from Wolfe Research. Please go ahead. Speaker 900:44:01Your line is now open. Speaker 700:44:04Good morning, Michael. Hey, Garik. How are you? You guys answered a lot here. I just had a couple of Small follow ups on what's already been discussed. Speaker 700:44:13So just on the undergrounding, can you maybe just give us a sense on what the long term target is there? How much of the system you are looking underground? And over what period of time you'd like to get there? Speaker 200:44:30Great question. And it's important to recognize we're not trying to underground the entire system and it's really about selective or sometimes I've used the word strategic Undergrounding. And again, we know from EPRI research across a number of utilities, you're in a 50% to 90% improvement, whether it's 3 phase 1st single phase. And so ideally, we're trying to get to a point where we can do 400 miles a year and then Really over a 10 year period kind of increment that up. So I would say the range of around 10,000 miles is really what we're trying to get to overall. Speaker 200:45:05It's not going to occur overnight, but that does provide a nice opportunity to enhance the reliability and resilience of our system and provide a nice Opportunity from a capital investment standpoint. Speaker 700:45:17Okay, very helpful. And then kind of a similar question just following up on the IRM. I think the Context you gave on the gas side was helpful in terms of where it started and where it's gotten to. Can you maybe frame That on the electric side, and I know you haven't officially filed the next case yet, but just kind of where that could start and ultimately go? Speaker 200:45:42So we're being very thoughtful about our starting point, and we see it as an opportunity to grow from there. Our first Volley will be in the $100,000,000 range for an IRM, and then we'll grow it from there. Speaker 700:45:56Okay. Thanks a lot. Appreciate it. Speaker 900:46:02Thank you. Operator00:46:03Today's question today comes from the line of Andrew Weisel from Scotiabank. Please go ahead. Your line is now open. Speaker 500:46:13Good morning, everybody. Speaker 200:46:15Good morning. Speaker 500:46:16Let me first say congratulations again for selling EnerBank. I'm very glad we're not First question, just a follow-up on undergrounding. So you talked about the 50% to 90% operational improvement estimate from EPRI. Do you have any rough sense to rule of thumb, the cost difference versus traditional aboveground streaming, what a breakeven might look like? Speaker 200:46:47So one of the things, we're doing some we've done a lot of I shouldn't say a lot, but we're doing a lot of work with our undergrounding crews right now. And That price for undergrounding, particularly on a single phase, is approaching the price of overhead. It's not quite there yet, but close. And so We're in the range of on single phase maybe like $250,000 a mile for underground. And again, it's directional bore. Speaker 200:47:11And give or take, it depends on the conditions of the soil and homes and other things, but that's roughly the number. And so they're really quite comparable or growing comparable in terms of that price point. And so again, we've got pretty fertile soils. We have pretty soft soils. And so we're not And rock and some of those things, which helps from a cost perspective. Speaker 300:47:34Yes. Andrew, the only thing I would add to Gerrick's comments, when you think The only thing I would add to Garik's comments when you think about the cost benefit and the potential opportunity, if you look at the last few years of our vegetation management plus Service restoration, we're spending on average based on actuals about $200 plus 1,000,000 per year across those two cost categories. And so the opportunity would be over time with those investments in underground and to potentially reduce that overall cost bucket. And so that's how we would think about the cost benefit in addition to some of the points Garrick raised earlier. Speaker 500:48:07Okay, great. Next one, are you able to tell what's the deferred fuel cost balances now versus at year end? Speaker 300:48:16Yes, I'll take a stab at that, Andrew, and we can follow-up with more precision on offline if needed. Where we ended the year, we had, oh goodness, end of 2022, just over $800,000,000 across power supply costs on the electric side and then gas inventories on the gas side of the business, so call it about a $450,000,000 $400 ish split, so $8,000,000 to $850,000,000 We started to chip away at that. Obviously, we have very Strong cost recovery mechanisms in Michigan, which have been kind of tried and true since the mid-80s. And so we do expect on the gas side to recover the vast majority of that over the course of this fiscal year. And then for electric, we did apply a bit of elegance to our recovery process for power supply costs. Speaker 300:49:02And so of the $450,000,000 we had coming due in January, we filed with the commission a plan to recovered that over a 3 year span, so effectively $150,000,000 per year through 2025. And just given the current environment, we Thought that that was the right thing to do to alleviate the cost burden for customers, and we also thought our balance sheet could accommodate it as well. And it's also the way we've structured it just that the fact that we're no longer going to be recovering those costs through working capital and now through regulatory asset, it's Credit accretive based on how Moody's calculates these their FFO. And so for a variety of reasons, it was a nice opportunity and we've exercised it in the Q1. Speaker 500:49:45Very good. Thank you. One quick follow-up, if I may. Health aid, I know there's not a whole lot new for you to announce, but can you just give an updated thought on the timing of potential updates there with the state versus the timing of your next IRP, which I believe is likely to come next year. Speaker 200:50:05So we do know I mean, it's public information that Holtec, who is responsible for decommissioning the facility and has the operating rights there on the facility, has Requested federal funding. They've also requested state funding within this budget, which is being worked right now, state budget. So that will be figured out this May, June, July time frame. They've asked $300,000,000 in the state budget. Again, this is public information. Speaker 200:50:34What I would expect to see from this is a lower cost We've had Palisades. It's been expensive PPA, and we expect it to be lower given all the tax dollars that are applied there. And that power should flow into Michigan. So those are important components of it. So we expect low cost power, as I've said historically, And we're open to consider a PPA with the financial compensation mechanism. Speaker 200:50:58But at this point, we've got a good IRP in place. And if That comes to fruition, it will shape our next IRP. But it's really too soon to tell on how it would shape upcoming IRPs. Speaker 500:51:12Okay. I guess the more specific question was, would the timing of your IRP potentially be influenced by the timing of Palisade's resolution? Speaker 200:51:24That's too hard to tell. And frankly, this bringing a nuclear plant back has to my knowledge, has not been done. And so there's a lot of hurdles and a lot of unknowns there. I'm not saying it can happen, but there's just a lot of unknowns. And so It's difficult to say whether it will have an impact or not on our next IRP. Speaker 500:51:47Okay, fair enough. Thank you so much. Speaker 900:51:51Thank you. Next question today comes from Operator00:51:54the line of Alex Mortimer from Mizuho. Speaker 1100:52:04So given that everyone in the industry is kind of always walking the tight rope between reliability and then customer bill impact, can you provide sort of any thoughts on what the tone of the commission has been with regards to the underground thing? Is this something that they With regards to the underground thing, is this something that they've suggested or something you're sort of bringing to them unprompted? Speaker 200:52:24There's been a lot of conversations and there will continue to be more conversations on this important work of undergrounding. We'll be doing some Additional piloting within the context of this proposed electric rate case, and then we'll continue to look at other opportunities Build out on that, but going back to the storm audit, this is really our opportunity to further alignment with The commission on the important investments that need to be made to improve reliability and resiliency. And I would suggest this Both the commission, staff and the company and all our coworkers here too are really well aligned On ensuring that we're improving reliability and resiliency. You talked about the affordability piece as well, and that's clearly top of mind. Part of that is We leveraged the CE Way not only to improve our operations and maintenance expense, but we utilize it to improve capital efficiency. Speaker 200:53:17So that dollar goes further. Just like I shared earlier, we continue to look at opportunities to bring the cost down of undergrounding and frankly of all our capital work. Speaker 1100:53:31Understood. Thank you. And then just a little bit more color on sort of the timeline of what this would look at for what this would look like and then potentially the dollar amount of upside to the CapEx plan. And should we think of this as getting you And into the high 7s towards 8% of your long term guidance? Or is this more of extending the 7% out beyond sort of where it is currently. Speaker 200:53:55So when we introduced in Q4 call, we introduced our $15,500,000,000 capital investment plan, And that had more electric distribution, electric related spend in that plan. It was like $6,100,000,000 of that, which was an increase. We're not changing our capital plan at this point because we increased it just here in the last call. That may change over time because we look at that capital plan every year. And as I've shared, there's a long runway of opportunity there. Speaker 200:54:23And so As we get certainty around these investments, as we build out that 5 year electric distribution plan, that will be an opportunity to look at the longer term capital piece. Now going back to the growth piece, 6% to 8%, we said confidence is on the high end and that puts it in that range of 7% to 8%. Historically, I've said this, I'll say it again, there are no sugar highs, and we go for consistency year after year. And so that's We compound off actions. That's the quality of earnings that we aim for and will continue to repeat year after year because we know that's what our investors value. Speaker 1100:55:04Okay. Thank you so much. That's all for me and congrats, Granite, and a great quarter. Speaker 200:55:10Yes. Thank you. Speaker 900:55:12Thank you. Your next question today Operator00:55:14comes from the line of Ross Fowler from UBS. Please go ahead. Your line is now open. Speaker 400:55:21Good morning, guys. How are you? Speaker 200:55:23Hey, Ross. Speaker 500:55:24Good morning. Speaker 400:55:26Hey. So Just a couple from me here. 1, first part is just any commentary on Commissioner Phillips' resignation and I'm on for replacement, cost on replacement. And then not to beat the dead horse here, but you came into the year on my sort of quick math of about $75,000,000 of cost contingency to offset the sort of was a normalization you knew you were going to have to deal with. Now, Garik, as you went through those five things, you've priced that up to about 200,000,000 on a round number, so there's another $125,000,000 or so coming in. Speaker 400:56:06And clearly, you thought about what in that bucket is one time and what's sort of more permanent. Maybe can you contextualize for us how Conversations with the commission have gone around what's one time cost improvement, what's permanent improvement in the past. So we kind of look to the future as to how those negotiations Speaker 200:56:34Let me start with Tremaine Phillips. And it was I have great respect for Tremaine. He was a great commissioner and we saw constructive outcomes and he left a legacy At the commission, and I'd put it into 3 areas. 1, he really moved electric vehicles in the state, and he was forward thinking and progressive about And then addition to that, there was a lot of work on grid monetization and optimization of the grid that he helped position within the commission. And the 3rd piece, and this is It really played out nicely over the course of the pandemic is he was laser focused on low income and vulnerable customers. Speaker 200:57:19And I give him credit as well as the commission for the work. We have the lowest bad debt levels across the industry. And so we've taken care of our low income customers during one of the toughest times during this pandemic. And so much of that credit goes to Maine Phillips. But I'll also refer you to he's got a public statement out there. Speaker 200:57:39He's successful, but so is his wife is successful. And his wife has went after new opportunities. And so many thanks and congratulations to both Tremaine, His wife and his family as they pursue different career opportunities. This commission has functioned well in the past with 2 commissioners. We've got 2 constructive, experienced commissioners in place. Speaker 200:58:04And so I'm not worried about the interim at all. And if you look historically as well as with this governor, Governor Whitmer here, they've been very thoughtful About the placement of commissioners and found experienced and well suited commissioners to continue the constructive environment regulatory environment in Michigan. We do know that the governor is out, the governor's staff is out looking for a new commissioner. That process is underway, but we don't have a deadline or a date out there and when that will take place. But again, I have confidence in our governor to continue the long standing tradition of This jurisdiction and a constructive jurisdiction. Speaker 200:58:44I'm going to pass the call over to Reggie here to talk a little bit about the financial information you the second part of your question. Speaker 300:58:50Hey, Ross, I appreciate the question. So just one last thing on Tremaine, and it's a bit of an advertisement for the Michigan Later than regulatory construct, I mean part of the reason why it's really wonderful to have staggered terms for your commissioners is because when you do have Turnover on an unexpected basis. You still have that continuity of leadership. And so we obviously have Chair Scripps And Commissioner Paratek still in the seat and they obviously have policy or their Philosophies are aligned with the governor's policies, I should say, around healthy climate. So there's that nice continuity there and they have a quorum with 2. Speaker 300:59:27And so we'll still carry on and I'm sure they'll find a suitable Replacement for Commissioner Phillips when the time is right. With respect to your question around the cost opportunities, let me just be very clear. I'll try to get at the numbers you specified as best I can. And if I miss anything, please feel free to follow-up with a question. But if you think about our guidance At the beginning of the year on our Q4 call, we effectively said, as always, we plan for normal weather, and we assumed a level of cost productivity in our plan and so we were showing about $0.04 per share of positive variance related to cost savings and then we had some estimated opportunities as a result of the warm weather we put to work in 2022 in Q4 specifically with the voluntary refund mechanism and some of the pull aheads and opportunities we exercise in the context of the electric rate case settlement. Speaker 301:00:19So that equated to about $0.19 to 0.25 stands of opportunity or positive variance in the original guidance. And so as you fast forward to Q1 and you look at the waterfall we're showing today, what's really changed is that we've now seen $0.21 or just over $80,000,000 pretax in the form of weather hurt, and that's what we're offsetting solving for in the form of cost productivity as well as in that sort of catchall bucket around parent related opportunities. And so we're effectively saying is that there's $80,000,000 of offsets that we need to go identify. And when we look at our track record and we're not trying to be modest We feel very good about our ability to achieve that. And so when you think about 2020 during the pandemic, we took out $100,000,000 And when you think about Sustainable savings versus one timers, about 50% of that in 2020 was in the form of the CE Way, and that's what will flow through rates, and that's what customers will benefit from. Speaker 301:01:13There are one timers that sometimes we do have to resurrect some of those old plays. And so those are sort of opportunities that probably don't get on an offset, this $0.20 or $0.20 plus of weather in the form of CEU Way as well as those opportunities Garrick noted earlier in the call. So whether it's hiring freezes, whether it's external hiring type decisions around contractors and consultants, we will take all of those opportunities as part of this portfolio savings to offset that, call it, dollars 80 plus 1,000,000 of weather. So that's how we Think about it, that's how we'll go get it. And again, a good portion should be passed on to customers, but some will be one timers and those are the ones that you don't necessarily repeat. Speaker 301:02:02Is that helpful? Speaker 401:02:05Yes, it's helpful, Regina. I guess in the past, you've been able to have that discussion with the commission. It's really one time and less permanent In the context of any debate around that, right? As you look at some of that TUA money and then some of the sort of hiring free stuff, I guess the risk from my perspective is the commission would say, well, you have a bunch of one time stuff in there. Is some of that permanent? Speaker 401:02:30Can we get some Bill relief out of them on a permanent basis, but maybe contextualize that risk around discussions you've had about that in the past and and their understanding of what's one time and what's not. Speaker 301:02:43Yes. So to be clear, this is the benefit of Filing annual cases because as we realize those savings, which again, when they're generated through the CEU way, they are sustainable, we will pass them on in subsequent cases or as part of the adjudicated process because when we file rebuttal, we start to bake in some of those savings midstream. And so there is pretty transparent dialogue with the commission staff and other interveners about the opportunities we think are sustainable, and that's what we incorporate into our cases and again that's the benefit of being an annual filer. Speaker 401:03:17Fantastic. So I'm with you on the $80,000,000 in cost cuts and then there's like an incremental 50, between the sort of year end call back in this deck and that other usage category, it kind of went through in the answer to Julian's question. Speaker 301:03:32Yes. The only other thing I'll mention, just to be clear, there is a bit of geography you have to be mindful of as well. And so when we say parent related savings, whether they're tax planning or financing efficiency, some of that's at the holding company, in which case it wouldn't be incorporated into an adjudicated process Just because they're not at the OpCo levels. So some of those will directly go to shareholders. And so I think that's also very clear to the commission and other stakeholders in the context of a rate case. Operator01:04:05No additional questions waiting at this time. So I'd like to pass the call back over to Mr. Speaker 401:04:10Eric Rossell for any closing remarks. Speaker 201:04:14Thanks, Bailey. I'd like to thank you for joining us today. We'll see you on the road soon. Take care and stay safe. Operator01:04:23Concludes today's conference. We thank everyone for your participation.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCMS Energy Q1 202300:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) CMS Energy Earnings HeadlinesCMS Energy: Fairly Valued, But The Stock Has Potential As A Safe-Haven PlayApril 24 at 8:57 AM | seekingalpha.comCMS Energy Reports Q1 2025 Earnings IncreaseApril 24 at 7:06 AM | tipranks.comM.A.G.A. is Finished – This Could be even BetterYou’ve no doubt heard Trump’s rally cry: Make America Great Again. But recently the President made a big change. Make America Wealthy Again (M.A.W.A).April 24, 2025 | Paradigm Press (Ad)CMS Energy Announces First Quarter Results for 2025, Reaffirms 2025 Adjusted EPS GuidanceApril 24 at 6:30 AM | prnewswire.comCMS Energy price target raised to $74 from $71 at Morgan StanleyApril 23 at 10:22 PM | markets.businessinsider.comA Look Ahead: CMS Energy's Earnings ForecastApril 23 at 5:15 PM | benzinga.comSee More CMS Energy Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like CMS Energy? Sign up for Earnings360's daily newsletter to receive timely earnings updates on CMS Energy and other key companies, straight to your email. Email Address About CMS EnergyCMS Energy (NYSE:CMS) operates as an energy company primarily in Michigan. The company operates through three segments: Electric Utility; Gas Utility; and Enterprises. The Electric Utility segment is involved in the generation, purchase, transmission, distribution, and sale of electricity. This segment generates electricity through coal, wind, gas, renewable energy, oil, and nuclear sources. Its distribution system comprises 208 miles of high-voltage distribution overhead lines; 4 miles of high-voltage distribution underground lines; 4,428 miles of high-voltage distribution overhead lines; 19 miles of high-voltage distribution underground lines; 82,474 miles of electric distribution overhead lines; 9,395 miles of underground distribution lines; 1,093 substations; and 3 battery facilities. The Gas Utility segment engages in the purchase, transmission, storage, distribution, and sale of natural gas, which includes 2,392 miles of transmission lines; 15 gas storage fields; 28,065 miles of distribution mains; and 8 compressor stations. The Enterprises segment is involved in the independent power production and marketing, including the development and operation of renewable generation. It serves 1.9 million electric and 1.8 million gas customers, including residential, commercial, and diversified industrial customers. The company was incorporated in 1987 and is headquartered in Jackson, Michigan.View CMS Energy ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of EarningsAmazon's Earnings Could Fuel a Rapid Breakout Tesla Earnings Miss, But Musk Refocuses and Bulls ReactQualcomm’s Range Narrows Ahead of Earnings as Bulls Step InWhy It May Be Time to Buy CrowdStrike Stock Heading Into EarningsCan IBM’s Q1 Earnings Spark a Breakout for the Stock? 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There are 12 speakers on the call. Operator00:00:00Good morning, everyone, and welcome to the CMS Energy 2023 First Quarter Results. The earnings news release issued earlier today and the presentation used in this webcast are available on the CMS Energy's website in the Investor Relations section. This call is being recorded. After the presentation, we will conduct a question and answer session. Instructions will be provided at that time. Operator00:00:30Just a reminder, there will be a rebroadcast of this conference call today beginning at 12 p. M. Eastern Time running through May 4. This presentation is also being webcast and is available on CMS Energy's website in the Investor Relations section. At this time, I would like to turn the call over to Mr. Operator00:00:48Sri Madhupati, Treasurer and Vice President of Finance and Investor Relations. Speaker 100:00:54Thank you, Bailey. Good morning, everyone, and thank you for joining us today. With me are Gerrick Rochal, President and Chief Executive Officer and Reggie Hayes, Executive Vice President and Chief Financial Officer. This presentation contains forward looking statements, which are subject to risks and uncertainties. Please refer to our SEC filings for more information regarding the risks and other factors that could cause our actual results to differ materially. Speaker 100:01:18This presentation also includes non GAAP measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in the appendix and posted on our website. Now I'll turn the call over to Gerrit. Speaker 200:01:29Thank you, Sri, and thank you, everyone, for joining us today. Our commitment to industry leading financial performance spans 2 decades, and it's this investment thesis that is foundational to our performance. Over that time, we've experienced changes in commissions, legislatures and governors, unplanned weather and storms, recessions and the pandemic. In each and every year, we have delivered for our customers and for you, our investors. It's the performance you have come to expect from a premium name like CMS Energy. Speaker 200:02:11And this year is no different. We remain squarely focused on our mission at CMS Energy, Making the needed investments in safety, reliability and decarbonization of our system, balanced by customer affordability and our $15,500,000,000 5 year customer investment plan. These investments in our expansive In aging electric and gas systems are critical to enhance reliability and resiliency and are supported by Michigan's constructive legislation and regulatory framework. Our investments are coupled with our lean operating system, the CEWAY, which helps us manage and lower costs. This ongoing drive to see and eliminate waste is evident from the field to the office and helps improve our efficiency, ensuring we deliver customer value While keeping bills affordable. Speaker 200:03:10We are committed to this, and I believe we do it better than most any company in the industry. As we round out the Q1 of 2023, I want to share a few highlights. First, Ford's announcement of the Blue Oval Battery Park. This is another important win, which brings $3,500,000,000 2,500 jobs and adds to the growing lift of economic development projects in our service territory. We saw additional enrollments in our voluntary green pricing program, supporting the build out of our first large tranche of Own Solar, representing 309 Megawatt of a total 1,000 Megawatt approved. Speaker 200:03:56Preparations continue for the acquisition and transition of the covert generating facility scheduled for June as approved by our IRP. And in our gas business, began construction of our mid Michigan pipeline, a $550,000,000 56 mile pipeline to enhance deliverability and safety of our natural gas system. I want to be clear. At CMS Energy, year after year, Regardless of conditions, we are positioned to deliver. Now let me address The extreme weather we faced in the Q1. Speaker 200:04:39In late February early March, we experienced the 2nd largest storm event in our service territory. Speaker 300:04:47Our line crews are some Speaker 200:04:48of the most skilled and experienced in the business, And they showed up with Able Hands and parts of service, and our customers were well served by their dedication. In addition to our crews in the field, there are hundreds of people behind the scenes to support our crews and our communities, including many of our coworkers who volunteered to serve customers throughout the restoration. I know Many of my coworkers joined our earnings call. And from my heart, I want to say thank you to each and every one of you were showing up for our customers and for each other. Because of our team working together to serve, 97% of our customers were with power within 3 days. Speaker 200:05:40In our 135 year history, 8 of the most destructive storms have occurred in the last 20 years. That's a significant data point. The severity and frequency of storms we're seeing highlights the need to enhance critical investment and amplify our efforts on the reliability and resiliency of our electric distribution system. We need more undergrounding. This is an area where we are significantly behind some of our Midwest peers. Speaker 200:06:13We also need to do more sectionalizing, Automated transfer reclosers and looping and overall system hardening. These important investments are critical to improve reliability and resiliency for our customers and will be outlined in our pending electric rate case and in our updated 5 year electric distribution infrastructure investment plan. We also plan to include an investment recovery mechanism and our upcoming rate case to add certainty to our investments. I'm pleased that our commission has been supportive of reliability improvements, doubling our efforts around tree trimming since 2020. This as well as other customer investments has contributed to the 20% improvement in our reliability in 2022. Speaker 200:07:06But There is more work to be done and more needed investment. We will continue to work productively with the commission And the reliability and resiliency of our electric distribution system, so we prepare for increasingly severe weather. We expect further alignment and collaboration on the needed investments in the upcoming storm audit as we work on a common goal of improving our distribution system Speaker 300:07:35for Speaker 200:07:35all customers. I'm confident in our ability to work with all stakeholders Because Michigan has the legislative and regulatory framework in place to enable these investments and to attract the capital needed to drive the changes we all want to see. We have a productive energy law that provides forward looking test years, Constructive ROEs and supportive incentives. It is this environment, which has earned Michigan the rank as a top tier regulatory jurisdiction for the past decade. Now I know many of you will want to dive into the details of the back and forth in both The regulatory and legislative arenas, which we are happy to do in Q and A. Speaker 200:08:20But remember, it's all part of the process. Let me remind you, we have a track record of working with all stakeholders to drive successful outcomes. It's why we settled 3 cases in 2022. Now I want to be clear where we stand today. We saw both unseasonally warm weather in January February as well as significant cost with the ice storm. Speaker 200:08:46As you would expect, we've taken actions early to counteract that impact. Therefore, we are reaffirming all our financial objectives, most importantly, our full year guidance of $3.06 to $3.12 per share with continued confidence toward the high end. In the Q1, we reported adjusted earnings per share of $0.70 We're also reaffirming our long term adjusted earnings growth of 6% to 8% per year with continued confidence for the high end and remain committed to annual dividend per share growth of 6% to 8%. This isn't our first rodeo, Whether it was the pandemic or weather related, we've managed the work to deliver for both customers and investors. Through the CEWAY and other countermeasures already underway, we will offset the unplanned headwinds experienced early in the year. Speaker 200:09:49I have confidence in our team and in our plan for 2023 and beyond given our long standing commitment and performance. At CMS Energy, we deliver for customers. We're consistently delivering industry leading growth. Now I'll hand it over to Reggie to provide some additional details and insights. Speaker 300:10:11Thank you, Garik, and good morning, everyone. For the Q1 of 2023, we delivered adjusted net income of $204,000,000 or $0.70 per share, largely driven by unfavorable weather and costs related to service restoration as a result of the significant storm activity that Geric noted earlier. To elaborate on the impact of weather on sales, given the well publicized warm winter experienced in the Midwest, number of heating degree days in our service territory during the quarter were approximately 18% below Speaker 400:10:45normal weather patterns. Speaker 300:10:46The atypically warm weather coupled with the strong comp in the Q1 2022 resulted in $0.27 per share of negative variance versus the comparable period in 2022 as noted on Slide 7. Rate relief net of investment related expenses resulted in $0.03 per share realized in the Q1 2022 associated with the prior gas rate case settlement as expected. From a cost perspective, as mentioned, our financial performance in the Q1 was significantly impacted by higher operating and maintenance or O and M expenses attributable to storm restoration costs, which resulted in $0.20 per share of negative variance versus the Q1 of 2022. Is worth noting, however, that given the elevated storm costs we've seen over the last few years, we have incorporated fairly conservative assumptions for this cost category and our full year forecast. Looking ahead, as always, we plan for normal weather, which equates to $0.14 per share of negative variance versus the comparable period in 2022 due to the absence of strong sales at the electric utility driven by last year's warm summer. Speaker 300:12:03We anticipate that the estimated negative variance attributable to weather will be more than offset by rate relief, net of investment related costs, which we have quantified at $0.17 per share versus the comparable period in 2022. Our underlying assumptions for rate relief are largely driven by last year's successful gas and electric rate case settlements, and we have assumed a constructive outcome in our pending gas rate case. Closing out the glide path for the remainder of the year, as noted during our Q4 call, we anticipate lower overall O and M expense of the utility driven by the usual cost performance fueled by the CE Way. And in light of the weather related headwinds in the Q1, we have supplemented our planned productivity for the year by limiting hiring, reducing our use of consultants and contractors, accelerating longer term IT cost reduction initiatives and eliminating other discretionary spending among other activities. These cost performance measures will support the $0.28 per share of positive variance versus the comparable period in 2022. Speaker 300:13:06And I'd be remiss if I didn't mention that none of these actions will impact the safety and reliability of our electric and gas systems. Lastly, as we discussed during our Q4 call, we're assuming modest growth at Northstar and the benefits associated with the roughly $0.12 per share of pull aheads achieved in the Q4 of 2022 as per our original guidance. And to offer further risk mitigation of the financial headwinds encountered in the quarter and provide additional contingencies should we need it. We have supplemented these opportunities with anticipated cost savings at the parent, largely in the form of opportunistic financings and tax planning, which in aggregate we estimate will drive $0.36 to $0.42 per share of positive variance versus the comparable period in 2022. Before moving on, I'll just note that though our track record of delivering on Financial objectives over the last 2 weeks 2 decades speaks for itself. Speaker 300:14:01We remain perpetually paranoid in our financial planning process. More bluntly, We always do the worryings where you don't have to. And to that end, I'm pleased to report that we've already begun to see the benefits of the numerous countermeasures implemented in the Q1. As such, I'm highly confident that we'll realize the balance of expected savings over the course of the year. Moving on to the financing plan, Slide 8 offers more specificity on the balance of our planned funding needs in 2023, which are largely limited to debt issuances at the utility, a good portion of which has already been priced and or funded over the past several months. Speaker 500:14:40As we have noted in Speaker 300:14:41the past, the parent's contribution to the funding needs of the Cobrerd acquisition is in place with the roughly $440,000,000 is a forward equity contract. This equity will be issued in connection with the acquisition of the facility, and we've assumed the associated EPS dilution and our full year guidance. While we don't have any further required financing needs at the parent this year, we will continue to evaluate opportunistic financings to derisk our future funding needs if market conditions are accommodative. Our approach to our financing plan is similar to how we run the rest of the business. We plan conservatively and capitalize on opportunities as they arise. Speaker 300:15:20This approach has been tried and true year in and year out and has enabled us to deliver on our operational and financial objectives irrespective of the circumstances to the benefit of our customers and investors, and this year is no different. And with that, I'll hand it back to Gerrick for his final remarks before the Q and A session. Speaker 200:15:40Thank you, Reggie. As you look at Slide 9, I'll remind you again, our track record spans 2 decades of consistent industry leading results Despite changing commissioners, legislatures and governors, recessions, severe weather and storm activity or a pandemic, We're here for the long haul. We have powered Michigan's progress for nearly a century and a half. And as we look ahead, we see great opportunities Support the state's growth through critical infrastructure as we help power Michigan through the next century. With that, Bailey, please open the lines for Q and A. Operator00:16:22Thank you very much, Garik. The question and answer session will be conducted electronically. If you're using a speaker function, please make sure you pick up your headset. We'll proceed in the order you signal us and we'll take as many questions as time permits. On your touch tone phone. Operator00:16:53We'll pause for just a second. Our first question today comes from the line of Jeremy Tonet from JPMorgan. Please go ahead, Jeremy. Your line is now open. Speaker 600:17:06Hi, good morning. Speaker 200:17:08Hey, good morning, Jeremy. How are you? Speaker 400:17:11Good. Thank you. And just wanted to come back to the key focus, I think, in the market At this point, just with the adverse weather and storm headwinds in the Q1, great to see that you're still targeting High end of the guide there and just wondering as you think about contingency flex this year, I guess, if there is anything else that moves against you, Do you have more contingency that could offset that if weather shapes up less than expected or anything else moves against plan? Speaker 200:17:42I have confidence in our ability to deliver. That's the first point, Jeremy. And we know there's a lot of year remaining. And so Really in all our efforts, we look to build contingency out throughout the year. And so maybe if I just take a step back, because I know this is a popular question Today and just talk about our playbook. Speaker 200:18:03Reggie alluded to it, but let me offer a little more specifics. And I'd break it into really 5 areas. The first one is we plan conservatively. And you know this, Geron, we've done this year after year after year. That's what leads to our consistency one of the reasons we had consistent Financial performance. Speaker 200:18:21And also, we talked about this in Q4, what we did in 2022 to de risk the year. And then just adding Rejji's points, we budget for storms and we budget conservatively for storms because we know they occur throughout the year. And so in many cases, this is just a weather story. So the first piece is just we plan conservatively. The second piece of the plan is the CE way. Speaker 200:18:43And you this is another strong suit for us. And I'll remind everybody, it's industrial engineering, And it's a lean operating system. It's science. It's proven throughout the years for many different companies. And I see a great opportunity that we continue to deliver on year after year. Speaker 200:19:00Scheduling optimization is one example underway right now. We're making capital IT investments to get other efficiency improvements. It improves customer satisfaction while reducing costs. Our run rate has typically been around $50,000,000 a year, as you know, and there's a lot more muscle we have there. The 3rd piece is really around the labor piece, And that is what you would expect. Speaker 200:19:20We released some consultants. Our contractors are flexible, so we dial that down a bit. We pinch back on overtime and then we hold on hiring, and so those things help as well. The 4th area is really discretionary spending. It's limiting conferences and travel and some of the training. Speaker 200:19:37And you think that's small, but it's actually big when you apply it across the entire company. And then the 5th piece, and Reggie hit on it, was good tax planning and just opportunistic financing. And so that's the recipe. And as I said, this isn't our first rodeo. If you go back to the pandemic, we had to find $100,000,000 50% of it came Through this DE way, 50% through other actions, very similar to what we're doing right now. Speaker 200:20:01And so we're going to chin this bar, and we're going to add some contingency throughout the year. So I feel very confident in our ability to deliver and to weather whatever Mother Nature throws at us throughout the year. Speaker 400:20:16Got it. That's very helpful. Thank you for that. Yes. Thank you. Speaker 300:20:20And maybe pivoting Thanks. Speaker 400:20:24May be pivoting to the gas case. Just wondering if you could talk Speaker 700:20:28a little bit more about that. Speaker 400:20:29I know the gas case maybe doesn't come as much focus as electric generally speaking, but what are the Few focus points across stakeholders in the gas case at this point and just trying to get a sense for your thoughts on chances for a settlement without getting too far ahead of yourself. Speaker 200:20:47First things first, this is a good and constructive starting point. If I was just to dissect it a little bit for you, what we saw from staff in the AG as far as ROEs Was better than previous staff and AG positions. And so that bodes well for an ROE and some of the financial metrics. The other important piece is we build that remember, we built that case over Q3 and Q4 last year. And so gas prices were rising. Speaker 200:21:14We also saw some expense from pension OPEB perspective. But when you fast forward to today, those have changed. And so gas prices are lower. We snapped the line at the end of the year on pension and OPEB expense. And so we got a $212,000,000 ask, but that effectively pulls that down because The fact pattern is different than what we saw when we built the case. Speaker 200:21:35And then the big piece is this that people are talking about here is the sales forecast. There's about $10,000,000 $12,000,000 difference there. So let me walk through that. We have used this method since 2010 to project sales. It's a 15 year regression type model. Speaker 200:21:54We haven't changed a bit. It's tried and true and it's accurate. And here's the important point. Back in 2010, the commission ordered us. Let me repeat, the commission ordered us to use this method. Speaker 200:22:09That was in case you 15,986. And so we're doing exactly what the commission told us to do. So we feel like really good about where we're positioned there. And so there's other cats and dogs, but bottom line, Take this away. It's a good constructive starting point. Speaker 200:22:25The other thing you asked about settlement, we'll always look for the opportunity for settlement. But again, we sit in a very constructive jurisdiction. So I'm very comfortable taking it to the end And again, a full order from the commission. Speaker 400:22:42Got it. That's helpful. Thank you. Operator00:22:47Thank you. The next question today comes from the line of Shah Pourreza from Guggenheim Partners. Please go ahead. Your line is now open. Speaker 200:22:57Hey, good morning, Shar. You're with us, Shahriar? Operator00:23:05Please do ensure you are unmuted locally. We will move on to our next question. Our next question today comes from the line of Julien Dumoulin Smith from Bank of America. Speaker 800:23:23Hey, good morning team. Hopefully, try to work here. You guys can hear me? Speaker 200:23:28Hey, Julien. We can, Julien. Speaker 800:23:31Excellent. Thank you guys very much. Let me follow-up on the first question here just around the usage, non utility tax and other, you guys elaborated on it. So not only have you pressed some of those levers to see the quarter over quarter change in $0.23 in the range, right, you're talking about $0.36 to $0.42 of positive offsets there now. But in addition to that, you've got further levers to go to the extent to which that they might materialize. Speaker 800:24:01I just want to make sure I understand the comment from earlier. Speaker 300:24:06Yes. Good morning, Julien. This is Reggie. Yes, you've got it exactly right. And Garrick, I think, offered a wonderful dissertation on how we approach Our cost reduction opportunities, the only thing I would add to his comments is that when it comes to cost reduction, we don't discriminate. Speaker 300:24:23We look across the entire cost structure. When you exclude depreciation, it's about $7,000,000,000 annually and about A $1,000,000,000 of that is a combination of interest expense and tax related spend, combination of federal state income tax as well as property tax. And so we look across all of those cost categories to identify opportunities. And what you're seeing in that penultimate bar in that waterfall are opportunities We anticipate around potential pre fundings. As you know, we aggressively look at the maturity profile of our bonds and see if there are opportunities to take out bonds prematurely. Speaker 300:24:55So we'll look at those. And then again on the tax planning side, we're always looking for opportunities to reduce costs, whether that's for state tax, property tax or otherwise. And so that's what's incorporated into that last item. And Again, that's all I would add to Gerrick's good comments on how we approach cost reduction. Speaker 800:25:12Excellent. Fair enough. And then just following up on Some of the conversation on regulatory mechanisms. You talked about including an investment regulatory mechanism in your upcoming case. Can you talk about what that looks like and perhaps talk about that in parallel with some of this conversation on ring fencing here? Speaker 800:25:28I mean, how do you think about ring fencing to isolate spending on Specific subject areas, right? It sounds like this IRM might be related. And then also maybe you could talk about ring fencing in the context of veg management efforts. Speaker 200:25:43Yes. Absolutely, Julian. And you've obviously listened to Terrence Scripps. He's used the word ring fencing around some of the capital investments. So the way we think about it is really I put it in 3 buckets. Speaker 200:25:55And so the first bucket is really We know that in order to deliver reliability and resiliency for our customers, that's going to take more capital investment. Just the nature of an aging system with more severe weather. And so we're all focused on that. The commission, We're certainly focused on a company and so is every one of our coworkers here within CMS Energy and the broader Consumers Energy. So we're squarely focused on that first bucket. Speaker 200:26:23The second bucket really is what you brought up, and that's the commission wants to be able to ring fence it. And They're looking at a prudency, accountability. And typically, when we've asked for large increases, they want to know that we can do the work, We have the resources to ramp up. And so that's an important piece. And this IRM or this tracking mechanism allows Helpful for investors. Speaker 200:26:53And so I see all those 3 working together. And in fact, I want to give you an example. Back in 2011, and I was engaged in 2011. We did similar on our gas business. We're looking to increase the amount we spent on replacing mains and services. Speaker 200:27:07We started a new gas construction group. And the commission and staff at the time were had questions about important questions about how you're going to do that and how you're going to ramp up the resources. And so we did a similar type mechanism then, delivering improved safety for our customers, replacing mains and services and creating that ring fence, that accountability associated with And we were very successful. It started out as $85,000,000 back in 2011, and now it's a $250,000,000 program on an annual basis. And so We're taking that same approach as we go through this case. Speaker 200:27:41Is that helpful, Julien? Speaker 800:27:45Yes, absolutely. So perhaps let me just make sure I'm hearing you right. This IRM, would that help address some lag related considerations, perhaps shift timing of future cases or is this principally about accounting and accountability back to the commission to Just make sure the dollars and cents are getting spent in the right bucket. Speaker 200:28:06The latter is the main focus. And then I mean, over time, it could lead to extend out some rate cases. But our focus right now is just making sure there's the accountability piece And the ring fencing that our that the Chair has referenced in some of his public comments. Speaker 800:28:22Got it. Excellent. And then on Veg Management, just quickly, just with respect to that side of the equation, obviously, been a lot of focus on that front. Your commentary saying that you've increased it from 2020 helpful. Any further efforts in that regard? Speaker 800:28:37Again, obviously, there seems to be an acute desire or need for that. How do you think about allocating even more in that direction at this time? Speaker 200:28:48Yes. So just to give you some real numbers on this. So about in 2020, it was around $50,000,000 on an annual basis. And with support of the commission through different cases, we requested more to address this important aspect of reliability. We're up around $100,000,000 on an annual basis. Speaker 200:29:04And there's a couple components of it. And we're continuing to look at other opportunities to invest more in that, but we're also looking at the efficiency of that. And so this is an area where we're using technology and artificial intelligence and analytics to be able to better predict were to utilize those dollars. And so we've our trees trimmed per mile has actually improved over the time period as well. And so That's helpful in the conversations we have with the commission, and then we'll continue to look for opportunities to look at other areas to invest and improve Reliability, much like I said during my comments around the capital investment. Speaker 200:29:39I know Regi wants to add to it as well. Speaker 300:29:41Yes, Julian, the only thing I would add is that when we think about the planning year and particularly years in which we have a little bit of upside or contingency, usually vegetation management is one of the first items that comes up on the Flex list. And last year, in fact, when we were had a little bit of upside that was weather driven, we did about $5,000,000 or so of Flex related to vegetation management. So our actuals, even though we've been budgeted around $100,000,000 as Gerrick noted for the last year, I think our actuals were closer to $105,000,000 certainly over $100,000,000 And so Flex is an opportunity for us to do additional vegetation management. And then remember, we have that voluntary refund mechanism, which is also A vehicle through which we can do incremental operating expenses. And so the current voluntary refund mechanism that we have outstanding, we've targeted about $8,000,000 towards additional vegetation management this year out of the $17,000,000 that we allocated to the electric business. Speaker 300:30:35And as you know, we obviously pulled that lever in Q4 of last year for $22,000,000 all in and again a portion of that will be allocated towards vegetation management assuming we get commission approval. So that's the other mechanism we have as well. Speaker 800:30:51Excellent. Thank you guys very much. Good luck. Speaker 200:30:55Yes. Thank you, Julian. Operator00:30:57Thank you. The next question today is a follow-up question from Shah Pourreza from Guggenheim Partners. Speaker 900:31:05Please go ahead. Your line is now open. Speaker 600:31:08Hey, guys. Good morning. Sorry about that. Speaker 500:31:10Yes. I got all excited and I hung up on you, Sorry if I missed this, but Speaker 300:31:19I just want to maybe just round out the Storm discussion, Speaker 500:31:23I guess, do the storms, do they will they lead to more resilient spend? Is it Speaker 400:31:28going to increase CapEx Do you see offsets the CapEx? Speaker 500:31:33Are you going to sort of seek any kind Speaker 400:31:34of new mechanisms? I mean, Speaker 300:31:36some things are already in rider like items. Would resiliency kind Speaker 400:31:41of get that similar treatment. I guess, overall, just how do these storms kind of change your thoughts around the 5 year plan? Speaker 200:31:52We share so just to be really crystal clear on this, There's going to be more capital investments needed to improve reliability and resiliency. And it's a reflection of an aging system with more severe weather. And I offered some of that in my prepared remarks. But In this next electric rate case, we're proposing IRM or Investment Recovery Mechanism as a tracker To show and greater certainty around our capital investments. And so that's the intent. Speaker 200:32:21We know we have to invest more. There's a number of ways to do that. One is our storm on it and focusing on that and get alignment with the commission. The other is the rate case and then the other one 5 year electric distribution investment plan. And so all of those different filings, all those different conversations Lead to better alignment and a better support for our electric distribution investments. Speaker 200:32:44And so the long term is yes And this IRM mechanism, we believe, will create greater accountability with the commission. Chair Scripps has talked about ring fencing and then ultimately should lead to more recovery on those capital investments. Is that helpful, Shar? Speaker 400:33:02Yes. And I guess the question is, should we be looking at these incremental investments as extending the runway of your growth or accretive to your growth? Speaker 200:33:12We have a long runway and we know we invest we update our plan every year. But that 5 year plan includes about 6 $1,000,000,000 of investments in the electric distribution system. That is up. That was up in this most recent plan. And we'll continue to look at As we model across the system, as there's additional investments, we'll continue to look at opportunities to invest more there. Speaker 200:33:36There's a long runway of opportunity just given the nature of our system. Speaker 800:33:40Got it. Got it. Speaker 400:33:40And then maybe just shifting to financing. Financing has It's been a bit of a tough headwind, but interest rates seem to have moderated year to date. I guess, how are you trending versus the embedded interest Cost and plan in terms of 23 and maybe even opportunities for some cushion versus 2024 since rates have come down versus your original expectations? Thanks. Speaker 300:34:03Yes, Shar, this is Reggie. Great question. So as always, I think we had a word count of about 6 or 7 times in our prepared remarks where we talked Planning conservatively and that has been the case here. And so in our plan, we had pretty conservative assumptions at the operating company and that's where the vast Majority of the issuances are this year and we've been fortunate for the issuances we've done to date to issue those at levels, the interest rate levels below what we haven't planned, so we're seeing upside and that's already flowing through our 2023 numbers and obviously we'll benefit from that in 2024 and beyond because we're issuing a long dated paper. And so Certainly, with interest rates moderating over the last several months, that creates additional opportunities, and that's what we'll be mindful of as we look at the final sort of 6, 7 months of the year and seeing if we can capitalize on, I'll say, the accommodative capital markets that we're seeing right now. Speaker 400:34:57Terrific. Thank you, guys. Appreciate it. And sorry about the tech issues. I appreciate it. Speaker 300:35:01No, no worries. Speaker 900:35:05Thank you. Next question today Operator00:35:07comes from the line of Durgesh Chopra from Evercore. Please go ahead. Your line is now open. Speaker 200:35:13Good morning, Derek. Speaker 600:35:14Hey, guys. Good morning. Hey, good morning, Garik. Just maybe on the just continuing the discussion Can you update us on the investigation that was started by the commission? My understanding is that they were looking for 3rd party consultants. Speaker 600:35:30So maybe just what's the latest there? Speaker 200:35:33Yes, broadly from the storm audit perspective. So they started that last fall, and In the process of selecting the vendor right now or the firm right now, and we anticipate that to start in the September time frame. But I'll remind you the big picture perspective on this storm audit is that we're both aligned, that being the commission And CMS Energy aligned that we need to improve reliability. And so I really view this as an opportunity to be able to get further alignment on the needed investments in our system. I'll give you a great example of undergrounding. Speaker 200:36:10We want to do more undergrounding. And if we look at our Midwest peers, they're around 35%, forty Underground, we're at 10%. Goes back to Shar's question, is there opportunities for investment? There's a lot of them. And so We see that as an important. Speaker 200:36:25You can look at the EPRI, or Electric Power Research Institute, and they'll say undergrounding improves reliability depending on if it's 3 phase or single phase by 50% to 90%. And so this is a great example where we need We can utilize this to get better alignment on immediate investments in the system. And once we have that alignment, Then again, we can move forward and get greater certainty around those investments. Does that help, Durgesh? Speaker 600:36:55Absolutely, it does. But you don't I guess the point is, I know you've said this before, you don't see anything punitive Coming out of those audits as a result as they kind of go through your processes and other things and past practices. Speaker 200:37:09I don't see anything punitive. No. Speaker 600:37:13Got it. Okay. And then just one quick follow-up. I know this is small, but you got a decision on the voluntary refund mechanism Earlier in the month, and I believe there were some disallowances. Can you talk to that and discuss that briefly? Speaker 200:37:29Yes. I'll tag team it with Reggie. Just the context around this, these are pretty small dollars. And Bottom line, we have this option to file a voluntary refund mechanism. We did that in 2022 and dollars are booked in 2022. Speaker 200:37:45But it's not a catwalk, like it's not assured that you're going to get approval. Staff and the commissioners have a say in that, right? And They really telegraphed the importance of incremental forestry and some other things with our customers in terms of helping out those low income customers. And so they've really given us another opportunity at the bat, and we filed that here on April 21 to reflect the commissioner's and staff's comments. And so I feel good about getting to a positive outcome on that. Speaker 200:38:12It's just navigating kind of the back and forth of the process, Durgesh. Speaker 300:38:17Yes. That's the essence of it, Durgesh. Just to give us some specifics The numbers, so when we filed the VRM in late 2022, it was for $22,000,000 $5,000,000 of which was to support our vulnerable customers in the gas of the business that was fully approved by the commission and where there was So I'd say counsel and guidance by the commission was on the balance of the $17,000,000 that we allocated to the electric business. And to Gerrick's comments, they wanted to see direct customer benefits, and so that's why we have recently, as of last Friday, requested service sorry, additional Forestry or vegetation management as well as additional support for vulnerable customers. So that's how it's cut. Speaker 300:38:54Just that $17,000,000 is subject to further approval, and we're confident that we'll get this recent request over the finish line. Speaker 600:39:03I appreciate the color guys. Thanks so much. Speaker 900:39:08Thank you. Next question today Operator00:39:10comes from the line of David Alcaro from Morgan Stanley. Please go ahead. Speaker 900:39:14Your line is now open. Speaker 1000:39:17Good morning. Thanks so much for taking my questions. Good morning. Let's see. There have been some legislative bills drafted in the state with some more aggressive net zero targets. Speaker 1000:39:28I was wondering if that might impact any of your thinking around the next time you address the IRP? Speaker 200:39:36Great question. Let me I think perspective is really important here because often In Lansing, just part of a bill, there's a lot of back and forth and there's media releases and you guys got to kind of clear the air and talk about it from a big And so I'll remind our listeners here that in the governor's first term, she introduced the healthy climate plan. And in fact, one of the members on my direct staff was one of the stakeholders in that process and was involved in The review and kind of the language around it. And then I participated with a group of about 8 to 10 CEOs and the governor in the review process. And so that hurt the governor's, healthy climate plan lines up really well With where we're headed from a state perspective, but also lines up well with our current IRP and the like. Speaker 200:40:30Now the legislature has The Senate specifically has introduced some new bills that are a little bit more aggressive. I want to remind everybody this is the back and forth of Lansing. And That's the first starting point. That's the first valley you might say. And so we're going to continue to navigate that and move forward with that and manage that process. Speaker 200:40:50Ultimately, at the end of the day, if it requires something us to do something sooner, we'll do that sooner. And that will mean more capital investment opportunities. But I want to let everyone know it's really manageable and again well aligned with where we're already headed. Speaker 1000:41:07Got you. Thanks. That's helpful. And could you also touch on just what you're seeing in terms of weather normal Volumes sales volumes and how that's lining up with your expectations so far? Speaker 300:41:20David, hi. This is Reggie. I appreciate the question. Yes, weather normalized trends, I will admit, we were scratching our heads a little bit at the trends that we saw. And just for everyone's benefit, we saw residential about 2.5 a little over 2.5% off versus Q1 of 2022. Speaker 300:41:38Commercial, a little over 3.5% off versus Q1 of 2022, Industrial was flat excluding 1 large low margin customer. And then total was Down about a little over 2.5% versus Q1 of last year. And I would say, it's really early days. We are still Digging into the data, I would just start by saying, as hard as our sales forecasting team works, whether normalized math is a combination of art and science. And when you see, I'd say, dramatic weather like We saw in Q1 of last year where it was extremely cold and then a pretty warm winter as we noted earlier Q1 of this year. Speaker 300:42:21You can See a good degree of imprecision in those calculations. And so I say all that to say, we're looking at it with a little bit of a skeptical eye because the reality is we're still seeing very Economic indicators in the service territory, our customer counts specifically for commercial were up almost 0.5% over 0.5% almost 1 point across the electric and gas businesses residential customer counts are still up. And while we have built into our guidance that continued return to work, we're still seeing a good level of really not every company in Michigan at this point is 4, 5 days in the office. And so we I think as we get into those summer months, we may see some of that favorable mix we've seen in the past. And so I would say early days, there's probably a little bit of noise in the data. Speaker 300:43:06And I'll just say on the industrial side, we were flat again versus where we were last year, but we couldn't have a more robust economic development pipeline born out of a lot of constructive federal legislation that's been passed over the 18 months. And we continue to look at our trends versus pre pandemic and across every customer class, were doing as well, if not better, than what we were doing pre pandemic, particularly when you take into account our energy efficiency which effectively reduced our load year over year by 2%. And so again, I don't think what you're seeing in Q1 and in the data is indicative of the economic conditions in Michigan, I think it's just more weather normalized math versus anything else. Speaker 1000:43:48Yes, understood. That makes sense. Thanks so much. Speaker 600:43:53Thank you. Speaker 900:43:55Thank you. Next question today comes from Operator00:43:58the line of Michael Sullivan from Wolfe Research. Please go ahead. Speaker 900:44:01Your line is now open. Speaker 700:44:04Good morning, Michael. Hey, Garik. How are you? You guys answered a lot here. I just had a couple of Small follow ups on what's already been discussed. Speaker 700:44:13So just on the undergrounding, can you maybe just give us a sense on what the long term target is there? How much of the system you are looking underground? And over what period of time you'd like to get there? Speaker 200:44:30Great question. And it's important to recognize we're not trying to underground the entire system and it's really about selective or sometimes I've used the word strategic Undergrounding. And again, we know from EPRI research across a number of utilities, you're in a 50% to 90% improvement, whether it's 3 phase 1st single phase. And so ideally, we're trying to get to a point where we can do 400 miles a year and then Really over a 10 year period kind of increment that up. So I would say the range of around 10,000 miles is really what we're trying to get to overall. Speaker 200:45:05It's not going to occur overnight, but that does provide a nice opportunity to enhance the reliability and resilience of our system and provide a nice Opportunity from a capital investment standpoint. Speaker 700:45:17Okay, very helpful. And then kind of a similar question just following up on the IRM. I think the Context you gave on the gas side was helpful in terms of where it started and where it's gotten to. Can you maybe frame That on the electric side, and I know you haven't officially filed the next case yet, but just kind of where that could start and ultimately go? Speaker 200:45:42So we're being very thoughtful about our starting point, and we see it as an opportunity to grow from there. Our first Volley will be in the $100,000,000 range for an IRM, and then we'll grow it from there. Speaker 700:45:56Okay. Thanks a lot. Appreciate it. Speaker 900:46:02Thank you. Operator00:46:03Today's question today comes from the line of Andrew Weisel from Scotiabank. Please go ahead. Your line is now open. Speaker 500:46:13Good morning, everybody. Speaker 200:46:15Good morning. Speaker 500:46:16Let me first say congratulations again for selling EnerBank. I'm very glad we're not First question, just a follow-up on undergrounding. So you talked about the 50% to 90% operational improvement estimate from EPRI. Do you have any rough sense to rule of thumb, the cost difference versus traditional aboveground streaming, what a breakeven might look like? Speaker 200:46:47So one of the things, we're doing some we've done a lot of I shouldn't say a lot, but we're doing a lot of work with our undergrounding crews right now. And That price for undergrounding, particularly on a single phase, is approaching the price of overhead. It's not quite there yet, but close. And so We're in the range of on single phase maybe like $250,000 a mile for underground. And again, it's directional bore. Speaker 200:47:11And give or take, it depends on the conditions of the soil and homes and other things, but that's roughly the number. And so they're really quite comparable or growing comparable in terms of that price point. And so again, we've got pretty fertile soils. We have pretty soft soils. And so we're not And rock and some of those things, which helps from a cost perspective. Speaker 300:47:34Yes. Andrew, the only thing I would add to Gerrick's comments, when you think The only thing I would add to Garik's comments when you think about the cost benefit and the potential opportunity, if you look at the last few years of our vegetation management plus Service restoration, we're spending on average based on actuals about $200 plus 1,000,000 per year across those two cost categories. And so the opportunity would be over time with those investments in underground and to potentially reduce that overall cost bucket. And so that's how we would think about the cost benefit in addition to some of the points Garrick raised earlier. Speaker 500:48:07Okay, great. Next one, are you able to tell what's the deferred fuel cost balances now versus at year end? Speaker 300:48:16Yes, I'll take a stab at that, Andrew, and we can follow-up with more precision on offline if needed. Where we ended the year, we had, oh goodness, end of 2022, just over $800,000,000 across power supply costs on the electric side and then gas inventories on the gas side of the business, so call it about a $450,000,000 $400 ish split, so $8,000,000 to $850,000,000 We started to chip away at that. Obviously, we have very Strong cost recovery mechanisms in Michigan, which have been kind of tried and true since the mid-80s. And so we do expect on the gas side to recover the vast majority of that over the course of this fiscal year. And then for electric, we did apply a bit of elegance to our recovery process for power supply costs. Speaker 300:49:02And so of the $450,000,000 we had coming due in January, we filed with the commission a plan to recovered that over a 3 year span, so effectively $150,000,000 per year through 2025. And just given the current environment, we Thought that that was the right thing to do to alleviate the cost burden for customers, and we also thought our balance sheet could accommodate it as well. And it's also the way we've structured it just that the fact that we're no longer going to be recovering those costs through working capital and now through regulatory asset, it's Credit accretive based on how Moody's calculates these their FFO. And so for a variety of reasons, it was a nice opportunity and we've exercised it in the Q1. Speaker 500:49:45Very good. Thank you. One quick follow-up, if I may. Health aid, I know there's not a whole lot new for you to announce, but can you just give an updated thought on the timing of potential updates there with the state versus the timing of your next IRP, which I believe is likely to come next year. Speaker 200:50:05So we do know I mean, it's public information that Holtec, who is responsible for decommissioning the facility and has the operating rights there on the facility, has Requested federal funding. They've also requested state funding within this budget, which is being worked right now, state budget. So that will be figured out this May, June, July time frame. They've asked $300,000,000 in the state budget. Again, this is public information. Speaker 200:50:34What I would expect to see from this is a lower cost We've had Palisades. It's been expensive PPA, and we expect it to be lower given all the tax dollars that are applied there. And that power should flow into Michigan. So those are important components of it. So we expect low cost power, as I've said historically, And we're open to consider a PPA with the financial compensation mechanism. Speaker 200:50:58But at this point, we've got a good IRP in place. And if That comes to fruition, it will shape our next IRP. But it's really too soon to tell on how it would shape upcoming IRPs. Speaker 500:51:12Okay. I guess the more specific question was, would the timing of your IRP potentially be influenced by the timing of Palisade's resolution? Speaker 200:51:24That's too hard to tell. And frankly, this bringing a nuclear plant back has to my knowledge, has not been done. And so there's a lot of hurdles and a lot of unknowns there. I'm not saying it can happen, but there's just a lot of unknowns. And so It's difficult to say whether it will have an impact or not on our next IRP. Speaker 500:51:47Okay, fair enough. Thank you so much. Speaker 900:51:51Thank you. Next question today comes from Operator00:51:54the line of Alex Mortimer from Mizuho. Speaker 1100:52:04So given that everyone in the industry is kind of always walking the tight rope between reliability and then customer bill impact, can you provide sort of any thoughts on what the tone of the commission has been with regards to the underground thing? Is this something that they With regards to the underground thing, is this something that they've suggested or something you're sort of bringing to them unprompted? Speaker 200:52:24There's been a lot of conversations and there will continue to be more conversations on this important work of undergrounding. We'll be doing some Additional piloting within the context of this proposed electric rate case, and then we'll continue to look at other opportunities Build out on that, but going back to the storm audit, this is really our opportunity to further alignment with The commission on the important investments that need to be made to improve reliability and resiliency. And I would suggest this Both the commission, staff and the company and all our coworkers here too are really well aligned On ensuring that we're improving reliability and resiliency. You talked about the affordability piece as well, and that's clearly top of mind. Part of that is We leveraged the CE Way not only to improve our operations and maintenance expense, but we utilize it to improve capital efficiency. Speaker 200:53:17So that dollar goes further. Just like I shared earlier, we continue to look at opportunities to bring the cost down of undergrounding and frankly of all our capital work. Speaker 1100:53:31Understood. Thank you. And then just a little bit more color on sort of the timeline of what this would look at for what this would look like and then potentially the dollar amount of upside to the CapEx plan. And should we think of this as getting you And into the high 7s towards 8% of your long term guidance? Or is this more of extending the 7% out beyond sort of where it is currently. Speaker 200:53:55So when we introduced in Q4 call, we introduced our $15,500,000,000 capital investment plan, And that had more electric distribution, electric related spend in that plan. It was like $6,100,000,000 of that, which was an increase. We're not changing our capital plan at this point because we increased it just here in the last call. That may change over time because we look at that capital plan every year. And as I've shared, there's a long runway of opportunity there. Speaker 200:54:23And so As we get certainty around these investments, as we build out that 5 year electric distribution plan, that will be an opportunity to look at the longer term capital piece. Now going back to the growth piece, 6% to 8%, we said confidence is on the high end and that puts it in that range of 7% to 8%. Historically, I've said this, I'll say it again, there are no sugar highs, and we go for consistency year after year. And so that's We compound off actions. That's the quality of earnings that we aim for and will continue to repeat year after year because we know that's what our investors value. Speaker 1100:55:04Okay. Thank you so much. That's all for me and congrats, Granite, and a great quarter. Speaker 200:55:10Yes. Thank you. Speaker 900:55:12Thank you. Your next question today Operator00:55:14comes from the line of Ross Fowler from UBS. Please go ahead. Your line is now open. Speaker 400:55:21Good morning, guys. How are you? Speaker 200:55:23Hey, Ross. Speaker 500:55:24Good morning. Speaker 400:55:26Hey. So Just a couple from me here. 1, first part is just any commentary on Commissioner Phillips' resignation and I'm on for replacement, cost on replacement. And then not to beat the dead horse here, but you came into the year on my sort of quick math of about $75,000,000 of cost contingency to offset the sort of was a normalization you knew you were going to have to deal with. Now, Garik, as you went through those five things, you've priced that up to about 200,000,000 on a round number, so there's another $125,000,000 or so coming in. Speaker 400:56:06And clearly, you thought about what in that bucket is one time and what's sort of more permanent. Maybe can you contextualize for us how Conversations with the commission have gone around what's one time cost improvement, what's permanent improvement in the past. So we kind of look to the future as to how those negotiations Speaker 200:56:34Let me start with Tremaine Phillips. And it was I have great respect for Tremaine. He was a great commissioner and we saw constructive outcomes and he left a legacy At the commission, and I'd put it into 3 areas. 1, he really moved electric vehicles in the state, and he was forward thinking and progressive about And then addition to that, there was a lot of work on grid monetization and optimization of the grid that he helped position within the commission. And the 3rd piece, and this is It really played out nicely over the course of the pandemic is he was laser focused on low income and vulnerable customers. Speaker 200:57:19And I give him credit as well as the commission for the work. We have the lowest bad debt levels across the industry. And so we've taken care of our low income customers during one of the toughest times during this pandemic. And so much of that credit goes to Maine Phillips. But I'll also refer you to he's got a public statement out there. Speaker 200:57:39He's successful, but so is his wife is successful. And his wife has went after new opportunities. And so many thanks and congratulations to both Tremaine, His wife and his family as they pursue different career opportunities. This commission has functioned well in the past with 2 commissioners. We've got 2 constructive, experienced commissioners in place. Speaker 200:58:04And so I'm not worried about the interim at all. And if you look historically as well as with this governor, Governor Whitmer here, they've been very thoughtful About the placement of commissioners and found experienced and well suited commissioners to continue the constructive environment regulatory environment in Michigan. We do know that the governor is out, the governor's staff is out looking for a new commissioner. That process is underway, but we don't have a deadline or a date out there and when that will take place. But again, I have confidence in our governor to continue the long standing tradition of This jurisdiction and a constructive jurisdiction. Speaker 200:58:44I'm going to pass the call over to Reggie here to talk a little bit about the financial information you the second part of your question. Speaker 300:58:50Hey, Ross, I appreciate the question. So just one last thing on Tremaine, and it's a bit of an advertisement for the Michigan Later than regulatory construct, I mean part of the reason why it's really wonderful to have staggered terms for your commissioners is because when you do have Turnover on an unexpected basis. You still have that continuity of leadership. And so we obviously have Chair Scripps And Commissioner Paratek still in the seat and they obviously have policy or their Philosophies are aligned with the governor's policies, I should say, around healthy climate. So there's that nice continuity there and they have a quorum with 2. Speaker 300:59:27And so we'll still carry on and I'm sure they'll find a suitable Replacement for Commissioner Phillips when the time is right. With respect to your question around the cost opportunities, let me just be very clear. I'll try to get at the numbers you specified as best I can. And if I miss anything, please feel free to follow-up with a question. But if you think about our guidance At the beginning of the year on our Q4 call, we effectively said, as always, we plan for normal weather, and we assumed a level of cost productivity in our plan and so we were showing about $0.04 per share of positive variance related to cost savings and then we had some estimated opportunities as a result of the warm weather we put to work in 2022 in Q4 specifically with the voluntary refund mechanism and some of the pull aheads and opportunities we exercise in the context of the electric rate case settlement. Speaker 301:00:19So that equated to about $0.19 to 0.25 stands of opportunity or positive variance in the original guidance. And so as you fast forward to Q1 and you look at the waterfall we're showing today, what's really changed is that we've now seen $0.21 or just over $80,000,000 pretax in the form of weather hurt, and that's what we're offsetting solving for in the form of cost productivity as well as in that sort of catchall bucket around parent related opportunities. And so we're effectively saying is that there's $80,000,000 of offsets that we need to go identify. And when we look at our track record and we're not trying to be modest We feel very good about our ability to achieve that. And so when you think about 2020 during the pandemic, we took out $100,000,000 And when you think about Sustainable savings versus one timers, about 50% of that in 2020 was in the form of the CE Way, and that's what will flow through rates, and that's what customers will benefit from. Speaker 301:01:13There are one timers that sometimes we do have to resurrect some of those old plays. And so those are sort of opportunities that probably don't get on an offset, this $0.20 or $0.20 plus of weather in the form of CEU Way as well as those opportunities Garrick noted earlier in the call. So whether it's hiring freezes, whether it's external hiring type decisions around contractors and consultants, we will take all of those opportunities as part of this portfolio savings to offset that, call it, dollars 80 plus 1,000,000 of weather. So that's how we Think about it, that's how we'll go get it. And again, a good portion should be passed on to customers, but some will be one timers and those are the ones that you don't necessarily repeat. Speaker 301:02:02Is that helpful? Speaker 401:02:05Yes, it's helpful, Regina. I guess in the past, you've been able to have that discussion with the commission. It's really one time and less permanent In the context of any debate around that, right? As you look at some of that TUA money and then some of the sort of hiring free stuff, I guess the risk from my perspective is the commission would say, well, you have a bunch of one time stuff in there. Is some of that permanent? Speaker 401:02:30Can we get some Bill relief out of them on a permanent basis, but maybe contextualize that risk around discussions you've had about that in the past and and their understanding of what's one time and what's not. Speaker 301:02:43Yes. So to be clear, this is the benefit of Filing annual cases because as we realize those savings, which again, when they're generated through the CEU way, they are sustainable, we will pass them on in subsequent cases or as part of the adjudicated process because when we file rebuttal, we start to bake in some of those savings midstream. And so there is pretty transparent dialogue with the commission staff and other interveners about the opportunities we think are sustainable, and that's what we incorporate into our cases and again that's the benefit of being an annual filer. Speaker 401:03:17Fantastic. So I'm with you on the $80,000,000 in cost cuts and then there's like an incremental 50, between the sort of year end call back in this deck and that other usage category, it kind of went through in the answer to Julian's question. Speaker 301:03:32Yes. The only other thing I'll mention, just to be clear, there is a bit of geography you have to be mindful of as well. And so when we say parent related savings, whether they're tax planning or financing efficiency, some of that's at the holding company, in which case it wouldn't be incorporated into an adjudicated process Just because they're not at the OpCo levels. So some of those will directly go to shareholders. And so I think that's also very clear to the commission and other stakeholders in the context of a rate case. Operator01:04:05No additional questions waiting at this time. So I'd like to pass the call back over to Mr. Speaker 401:04:10Eric Rossell for any closing remarks. Speaker 201:04:14Thanks, Bailey. I'd like to thank you for joining us today. We'll see you on the road soon. Take care and stay safe. Operator01:04:23Concludes today's conference. We thank everyone for your participation.Read morePowered by