NYSE:CMS CMS Energy Q3 2024 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$0.84Consensus EPS $0.78Beat/MissBeat by +$0.06One Year Ago EPS$0.61CMS Energy Revenue ResultsActual Revenue$1.74 billionExpected Revenue$1.88 billionBeat/MissMissed by -$137.36 millionYoY Revenue Growth+4.20%CMS Energy Announcement DetailsQuarterQ3 2024Date10/31/2024TimeBefore Market OpensConference Call DateThursday, October 31, 2024Conference Call Time9:30AM 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 Q3 2024 Earnings Call TranscriptProvided by QuartrOctober 31, 2024 ShareLink copied to clipboard.There are 12 speakers on the call. Operator00:00:00Good morning, everyone, and welcome to the CMS Energy 2024 Third Quarter Results. The earnings news release issued earlier today and the presentation used in this webcast are available on 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. Operator00:00:26Just a reminder, there will be a rebroadcast of this conference call today beginning at 12 p. M. Eastern Time running through November 7. 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. Operator00:00:41Jason Shaw, Treasurer and Vice President of Investor Relations. Speaker 100:00:46Thank you, Harry. Good morning, everyone, and thank you for joining us today. With me are Gerrick Rochow, 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 100:01:16This 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. And now, I'll turn the call over to Garik. Thank you, Jason, and thank you everyone for joining us today. At CMS Energy, we deliver year over year for all stakeholders. Speaker 100:01:41We do that through our investment thesis. This simple, but powerful model, coupled with our disciplined execution, sets us apart in the industry and has delivered more than 2 decades of industry leading financial performance. Typically, I walk through that investment thesis, but today, I want to offer 3 differentiators at CMS Energy, providing confidence and visibility as we continue to strengthen and lengthen our 6% to 8% EPS growth. First, Michigan's Clean Energy Law. This law is great for our customers, the planet and our investors and ensures we have the right legislation in place to move from coal to clean, providing certainty for the investments we need to make in renewable energy. Speaker 100:02:34And it gives us the flexibility to either own the assets or utilize a power purchase agreement, doing what is best for our customers. Now, here's what's unique. Earning a financial compensation mechanism approximately 9% on a power purchase agreement. No other state that I'm aware of has this provision. And then add to it, requirements for battery storage and an increased incentive on energy efficiency. Speaker 100:03:05There is a lot in this law, very little of which is in our 5 year investment plan, providing a strong tailwind. And we believe we can do this important work affordably for our customers. The flexibility in the law that allows for ownership or power purchase agreements, both within Michigan and outside of Michigan, provides more options for customers and ensures we can utilize lower cost energy. Furthermore, it provides us the ability to replace existing, outdated and above market power purchase agreements with new renewable assets, which keeps costs affordable for customers. Our 20 year renewable energy plan, or REP, that we will file next month will detail our clean energy investments and plans to achieve the targets set by Michigan's Clean Energy Law. Speaker 100:04:02This filing will show the renewable assets needed above and beyond our 2021 Integrated Resource Plan as well as the additional renewable assets needed to meet increasing sales demand and growth in the state. As I shared before, Michigan's Clean Energy Law is great for all stakeholders. It provides the flexibility we need to find the most cost effective clean energy for our customers. The second item I want to highlight is our commitment to customer reliability. I'm very proud of the comprehensive plan we have laid out in our 5 year $7,000,000,000 electric reliability roadmap. Speaker 100:04:47This plan details our actions to move to 2nd quartile reliability performance, or SADI, by the end of the decade through targeted investments in our electric grid, needed investments for our customers because we have recorded some of Michigan's highest wind speeds over the last 5 years and we are seeing more frequent storm activity. This plan is deliberate and comprehensive. It improves reliability in the short term and builds in long term resiliency and it does it proactively versus reactively. This plan means we will begin serious efforts to underground more of our distribution wires, better align with Midwest peers and replace more than 20,000 poles with those designed for more extreme weather. Speaker 200:05:34It also means investing in grid technology Speaker 100:05:36for more automation and machine learning to speed up restoration in weather events. We are also one of the first utilities east of the Mississippi to file a comprehensive wildfire mitigation plan, which lays out the investments needed to prepare for climate change. These customer investments are based on Electric Power Research Institute, EPRI, best practices and will bolster our distribution system to a level of performance our customers expect, particularly as the economy continues to electrify. And our plans have been supported. I'm pleased with the recent outcomes from the Michigan Public Service Commission and the Liberty storm audit, which highlights the vastness of our system, the 1,000,000,000 of dollars in decades needed to improve it and the importance of these strategic investments. Speaker 100:06:29And our customers benefit when we improve the system proactively versus reactively. Making these investments in the system now means we can do it at a 40% to 70% lower cost compared to when we do this work following an outage. Better service, lower customer cost. This is a great story. The third point I want to make today is the nice tailwind of economic development we are seeing in our service area. Speaker 100:07:00I'm excited and encouraged about a true renaissance underway in Michigan. The big story across the industry is sales growth brought by data centers. We are seeing the same and we are happy to talk more about data centers. Our story is different and in my opinion better. In Michigan, we are seeing a manufacturing renaissance bolstered by onshoring, unique state attributes and the inflation reduction and the chips and science acts. Speaker 100:07:31And we love manufacturing growth because it brings jobs, supply chains, commercial activity, housing starts and residential growth where there is greater benefit for the state. We recently updated this slide to highlight several new and diversified examples. Corning, expanding and investing up to $900,000,000 and bringing nearly 1100 jobs to the state. This is the sort of growth we'd like to see significant Michigan investment in job growth. Saab has expansion plans for an integration and assembly facility. Speaker 100:08:07Saab is new to the state, but adding to the nearly 4,000 businesses engaged in defense and aerospace work in Michigan. Two new examples, among many, that speak to the diversified manufacturing growth we are realizing. Over 700 megawatts of signed contracts in 24 months and growing, Our economic development pipeline continues to look promising with over 6 gigawatts of load looking to either move to or expand in our state, 60% of which is manufacturing. As I mentioned earlier, our renewable energy plan will conservatively reflect our updated load growth forecast Speaker 200:08:49based Speaker 100:08:49on the strong economic development tailwind we are experiencing. We work hard every day to win our customers' business and we are honored when businesses see the value in investing in our state and our service territory. Let's take a look at the regulatory calendar for the year. As I shared last quarter, our financial related regulatory outcomes are known for the year given the constructive March electric rate order in the approved gas rate case settlement. This positions us well as we navigate the last quarter of 2024. Speaker 100:09:30Gas rates were effective October 1 and we plan to file our next gas rate case in December of this year. In our current electric rate case, we saw constructive starting position by staff. We saw support for further underground, wildfire mitigation and the continuation of the investment recovery mechanism. I do want to point out that the mechanism for storm recovery and the investments outlined in the electric rate case and in the Liberty storm audit are important for our customers. That probably goes without saying, However, it may require that we go to a fully adjudicated order to get the best outcome for our customers. Speaker 100:10:12Know that we are confident with where we are in the process, the quality of our filing and the proactive nature of the investments we are making to improve reliability for our customers. Speaker 300:10:23If we Speaker 100:10:24go the full distance, we expect the order in March of 2025. Now let's spend a moment on the results. For the 1st 9 months, we reported adjusted earnings per share of $2.47 up $0.41 versus the same period in 2023, largely driven by the constructive outcomes in our electric and gas rate cases. Given our confidence in the year, we are reaffirming all our financial objectives, including this year's guidance range of $3.29 to $3.35 per share with continued confidence toward the high end. We are initiating our full year guidance for 2025 at $3.52 to $3.58 per share, reflecting 6% to 8% growth off the midpoint of this year's range, and we are well positioned, just like 2024, to be toward the high end of that range. Speaker 100:11:26It is important to remember that we always rebased guidance off our actuals on the Q4 call, compounding our growth. This brings you a higher quality of earnings and differentiates us from others in the sector. And like we've done in previous years, we'll provide a refresh of our 5 year capital and financial plans on the Q4 call. With that, I'll hand the call over to Reggie. Speaker 400:11:55Thank you, Derek, and good morning, everyone. On Slide 9, you'll see our standard waterfall chart, which illustrates the key drivers impacting our financial performance for the 1st 9 months of 2024 and our year to go expectations. For clarification purposes, all of the variance analyses herein are in comparison to 2023 both on a year to date and a year to go basis. In summary, through the Q3, we delivered adjusted net income of $736,000,000 or $2.47 per share, which compares favorably to the 1st 9 months of 2023, largely due to higher rate relief, net of investment costs and solid performance at NorthStar. From a weather perspective, the 3rd quarter offered favorable weather versus the prior year to the tune of $0.10 per share, largely due to a warm September. Speaker 400:12:51The strong Q3 weather for the electric business more than offset the mild weather experience in the first half of the year, thus equating to $0.05 per share of positive variance year to date. As mentioned, rate relief net of investment costs, one of the key drivers of our year to date performance resulted in $0.18 per share of positive variance due to constructive outcomes achieved in our electric rate order received in March and the residual benefits of last year's gas rate case settlement. From a cost perspective, our year to date financial performance was largely driven by lower service restoration expense despite a sizable weather system that impacted our service territory in early August. Our favorable variance in this regard has been fueled in large part by cost efficiencies in our storm response efforts. In fact, even though our volume of outages has increased by approximately 10% in 2024 versus the comparable period last year, our restoration cost per interruption has decreased by over 10%, all while restoring customers at a faster rate than the prior year. Speaker 400:14:02These achievements and our storm response efforts are just another example of our lean operating system, the CE Way, driving daily productivity in the business. Quite simply, our workforce uses the tools of the lean operating system to deliver more value to customers with less resources every day. That is the essence of the CE Way. And this favorability and service restoration expense coupled with cost performance throughout the business provided $0.02 per share of positive variance versus the comparable period in 2023. Rounding out the 1st 9 months of the year, you'll note the $0.16 per share of positive variance highlighted in the catch all bucket in the middle of the chart. Speaker 400:14:46The primary sources of upside here were related to solid operational performance at Northstar and a tax related benefit among other factors. Looking ahead, as always, we plan for normal weather, which equates to $0.14 per share of positive variance for the remaining 3 months of the year, given the mild temperatures experienced in the last 3 months of 2023. For a regulatory perspective, we'll realize $0.09 per share of positive variance largely driven by the aforementioned electric rate order received from the commission earlier this year and the constructive outcome achieved in our recently approved gas rate case settlement, which went into effect on October 1, as Garrick noted. On the cost side, we anticipate $0.15 per share of negative variance for the remaining 3 months of 2024 in large part due to additional funding support for select cost categories that have trended above budgeted levels for the majority of the year, such as insurance premium and IT related expenses. Closing out the glide path for the remainder of the year and to put in the penultimate bar on the right hand side, you'll note a significant negative variance, which largely consists of the absence of select one time countermeasures from last year and conservative assumptions around non utility performance among other items. Speaker 400:16:08In aggregate, these assumptions equate to $0.25 to $0.31 per share of negative variance. In summary, we remain well positioned to deliver on our 2024 financial objectives to the benefit of customers and investors. As such, we are reaffirming our full year guidance range of $3.29 per share to $3.35 per share with a continued bias toward the high end. Moving on to the balance sheet, on Slide 10, we highlight our recently reaffirmed credit ratings from S and P in August. We continue to target mid teens FFO to debt on a consolidated basis over our planning period to preserve our solid investment grade credit ratings as per long standing guidance from the rating agencies. Speaker 400:16:56As always, we remain focused on maintaining a strong financial position, which coupled with a supportive regulatory construct and predictable operating cash flow generation supports our solid investment grade ratings to the benefit of customers and investors. Moving on to our financing plan on Slide 11, I'm pleased to report that we've completed all of our planned financings for the year at levels favorable to plan and ahead of schedule, which leaves us with ample liquidity for the remainder of the year and beyond. I'll bring to your attention a relatively modest increase to our 2024 planned financings at the utility, given the need to rebalance the rate making capital structure in accordance with the recent regulatory outcomes and attractive pricing at issuance. It is also worth noting that we remain opportunistic should we see a cost efficient opportunity to pull ahead some of our 2025 financing needs. As I've said before, our approach to our financing plan is similar to how we run the business. Speaker 400:17:59We plan conservatively and capitalize on opportunities as they arise. This approach has been tried and true year in 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 Garik for his final remarks before the Q and A session. Speaker 100:18:26Thank you, Reggie. CMS Energy, over 2 decades of consistent industry leading financial performance, we remain confident in our strong outlook this year and beyond as we continue to execute on our simple investment thesis and make the necessary and important investments in our system while maintaining customer affordability. With that, Harry, please open the lines for Q and A. Operator00:18:53Thank you very much, Garik. The question and answer session will be conducted electronically. Our first question is from the line of Shar Pourreza with Guggenheim Partners. Please go ahead. Your line is now open. Speaker 500:19:32Hey, guys. Good morning. Speaker 100:19:34Hey, good morning, Shar. I heard you didn't like our hold music. I heard that was a thing today. Speaker 500:19:43Oh, God. Hey, I Speaker 100:19:45like your choices. I like your choices. Speaker 500:19:45But it's okay. Speaker 200:19:47Yes, Metallica, but you don't have ACDC. Operator00:19:49If you would Speaker 100:19:49have brought a little ACDC, I would have been there. What's your question today? There you go. Speaker 500:19:55There you go. Speaker 600:19:57So just here on the data center demand, obviously, everyone is mentioning it to kind of a degree. Michigan has obviously started to emerge as a favorable data center environment with some of the hyperscalers doing some land acquisitions there, Grand Rapids to be exact. Do you have sort of existing grid capacity to onboard kind of the new customers without kind of an interconnection lag? What are you seeing on the ground? And do you need sort of a new tariff structure to move ahead? Speaker 600:20:25We've seen some interesting proposals coming out of Ohio, a lot of back and forth there. So big question, but how do you think about those? Speaker 100:20:34Michigan in our service territory, specifically you referenced Grand Rapids and that's in our service territory, is a great place for data centers and investment in Michigan. The temperate climate, the fiber infrastructure, and to your point and really the point of your question here is we have the electric infrastructure to be able to serve. And so we work closely with data centers and other manufacturing customers to meet their timelines for the ramp up in load. And so that makes us advantageous to locate a data center or as I highlighted in my prepared remarks, really manufacturing. There's been a lot of manufacturing growth that's shown up here. Speaker 100:21:09And So that's what's exciting about Michigan. I guess the other thing is too, when they look to our clean energy law, they can see a path to that growing clean energy, the renewables and then the clean energy standard by 2,040, which is also attractive to the data center components. But I would highlight too just what I don't want to lose in this conversation is manufacturing growth. That's really where we're seeing the true renaissance. We've seen a lot of opportunities show up there that will show up in our renewable energy plan as well to serve our customers. Speaker 100:21:39And just going to the question on the tariff. You'll recall, we've already filed ex parte type filing to move the data centers to what we call our GPD rate. That's a better reflection of the cost to serve. And we are working collaboratively with the commission to see if another rate structure is needed for data centers that would ensure our residential customers are not left subsidizing data centers. Speaker 600:22:08Got it. Any timing on that, Garik? Speaker 100:22:13We would expect we continue to make progress. I mean, like I said, the ex parte filing has already approved, and so we're in a good position there from a cost of service perspective. We'll continue to work with the commission. I would expect that to take place over the next 6 months to a year. Speaker 600:22:28Okay. Perfect. And then just lastly, in terms of your takeaways from the storm and resiliency audits this year, is your commitment to cutting outages supported by the current distribution plan? Or would you look to update the DSP to incorporate some recommendations from the audits? Or does it just inform you better to move the $1,500,000,000 incremental CapEx you identified into base plan? Speaker 600:22:51Thanks. Speaker 100:22:53This audit that was completed, we call it the Liberty audit because that was the company that was performing the work, is really balanced and supportive. I mean, you could see that within the context of the support of the work that we need to do, the capital investments and tree trimming to be able to continue to enhance reliability and provide better service. And as my prepared remarks share, we can do that at a lower cost. So, better service, lower cost when we do things proactively versus reactively. And so, we have our 5 year capital plan, that $7,000,000,000 plan that's comprehensive and very deliberate and focused. Speaker 100:23:28We'll take the Liberty audit results and we'll look to incorporate that in that plan. I'll remind you that's a $7,000,000,000 plan. $5,500,000,000 of it is incorporated into the capital plan. So, there's opportunity there to work more of that capital in, of course, with the support of the Public Service Commission staff and commission. Speaker 600:23:49Fantastic. Thank you guys so much. Remember, Garrett, guns and roses next time. Thanks. Appreciate it. Speaker 600:23:54ACDC, ACDC. Operator00:23:59Our next question today is from the line of Jeremy Tonet with JPMorgan. Please go ahead. Your line is now open. Speaker 700:24:08Hi, good morning. Speaker 100:24:10Hey, good morning, Jeremy. Speaker 700:24:15Thanks for taking my questions here. Just want to start off, if you could walk us through a bit more, I guess, on DIG, given everything that we're seeing on the generation side needs their capacity needs, It just with contracts rolling off and how you think about, I guess, the trajectory there going forward? Speaker 100:24:37Northstar and that Northstar business and I'll get to the dig piece continues to perform well. But frankly, I'd expect that. It's a small piece of the earnings mix, but they need to perform and we expect them to perform and that's exactly what they're doing both from an operational and a financial perspective. And of course, DIG is an important part of that mix or Dearborn Industrial Generation. And we continue to see strength both in the capacity markets and the energy markets and we are securing those bilateral contracts throughout time. Speaker 100:25:06And they continue to be above our plan and our expectations. And so it's a great story and we continue to be a tailwind in our overall expectations around 6% to 8% EPS growth. Speaker 400:25:22Jeremy, this is Reggie. All I would add is that we've been Jeremy, just to provide a bit more of a financial lens to Derek's good comments. As you know, we've had a good 25% to 30% open margin in the outer years of our plan. And so we'll provide an update on our Q4 call as we always do around the levels at which we're pricing capacity contracts in that bilateral market. And as you know, we'll bring in a new year in our next 5 year plan and that will have even more open margin and we continue to see reverse inquiry at levels well in excess of what we've historically realized from a capacity price perspective. Speaker 400:26:01And so we're usually around $3 to $3.50 per kilowatt month. We're now seeing 5 6 handles in reverse increase. So it's still a really robust opportunity. And unsurprisingly, it's just because of the real nice technical we're seeing with just supply being reduced in Zone 7 through retirements and upward pressure on the demand curve. So we don't see any reason why that should abate anytime soon. Speaker 100:26:24And one thing I'll remind you, Jeremy, too, it's not linear as well. We get we do have outages to maintain the system out there. So that's an important piece to remember, particularly as we go through the long term plan. Speaker 700:26:39Right. That makes sense. Don't want to get too far ahead of myself there. But maybe just thinking about growth in general, we're seeing some of your peers talk about higher sales forecast and even some kind of lifting the expected long term EPS CAGR expectation. And just wondering how you guys think about this given the incremental opportunities you see in front of you. Speaker 700:27:03I'm expecting strengthening and lengthening, but just want to double check there. Speaker 100:27:10Let me offer some comments and I'm sure Reggie is going to want to jump into this as well. And we provided those differentiators, those tailwinds to give visibility and to instill confidence. And that's what we have. We have confidence about the ability to strengthen and lengthen that 6% to 8% EPS growth. But I want to be clear, what our investors expect is that we continue to deliver year after year. Speaker 100:27:3421 years, we've now industry leading or consistent industry leading financial performance time and time again. And then compounding off actuals, which gives you a better quality of earnings. That's what our investors inspect, that's what we expect and that's what we deliver. And so by providing some insights to those tailwinds, you get some idea of the momentum and how we can, again, strengthen our confidence in delivering this and just doing it year after year, exactly what our investors expect. But certainly, Reggie, I'm sure we'll want to walk into and offer some commentary on this as well. Speaker 400:28:09Jeremy, all I would add to Gerrick's comments is that, when you think about the components of what will drive long term growth, Gerrick walked through in great detail in his prepared remarks, the opportunities on the capital side, whether it's through the capital investments and or earning on PPAs in the context of new energy law. And that's going to be decades of financial opportunity investment in PPAs again. The opportunities to improve the reliability and resiliency of our electric distribution infrastructure that's decades of spend and investment opportunity to the benefit of customers and investors. And then on the gas business, which we didn't talk about as much in this call, but there's still a significant level of investment to be made to continue to harden that system, reduce fugitive methane emissions and continue to keep it safe and reliable, particularly with on our pending regs coming out from FEMSA. And so a lot of investment opportunity. Speaker 400:29:04And with the upward pressure that you alluded to on the demand side that will create the headroom among other benefits to facilitate and enable that investment to come to fruition. And so we see a really nice glide path to deliver on that differentiated 6% to 8% growth for many years compounding off of actuals. And so we're not going to get ahead of our Q4 disclosure and that's when we update our 5 year plan, but we still feel very good about our ability to strengthen and lengthen that growth to Garik's comments. Speaker 700:29:37Got it. That makes sense. That's helpful. Thank you. Operator00:29:43Our next question today will be from the line of Ross Fowler with Bank of America. Please go ahead. Your line is now open. Speaker 800:29:51Good morning, Garrett. Good morning, Randy. How are you? Good morning, Ross. Another solid quarter. Speaker 800:29:56So congratulations on the quarter, another solid one as we've all come to expect from CMS. So just a couple of questions. I think you've talked about the 2.5 gigawatts of storage target in the state. How do you think about could that change if sort of battery tax credit shift? Or does the cost of that change? Speaker 800:30:19Or is there just a lot of support for this at the state level versus what's going on at the federal level potentially after next week? How do you contextualize that investment color for you? Speaker 100:30:31Let me offer the 2 mechanisms that we have to consider, what I'd call supply type assets. 1 is the renewable energy plan, which we'll file here, November 15 in that range around that date. And that will lay out some of the renewable energy assets we need both it will build off the foundation of our 2021 integrated resource plan. But then there's 2 tranches as I see it of additional renewable energy build. That will show up in the terms of meeting the 50% standard for renewable assets for 2,030 as well as the 60% for 2,035. Speaker 100:31:05So that's really tranche 1. And then there is additional renewable assets as a result of economic development and growth and the demand growth that we've seen. So, that's a nice piece of work, a nice tailwind. There will be some reference to storage in there as part of that, but where more of the storage will play out is in our 2026 Integrated Resource Plan. That's where we look at the capacity mix. Speaker 100:31:28That's where we look at the reliability of supply. That's where we'll look at those important components. To the degree there's additional tax incentive or benefit, that will play out in that process, in that selection process. I do anticipate that there's going to need to be quite a bit of storage on the system, maybe even more than what is referenced in the law, but that's certainly a nice pathway to get things started with the certainty of the legislation. So hopefully that's helpful. Speaker 800:32:00That is Garrett. Thank you. Sorry, Richard, go ahead. Speaker 400:32:03Yes. Ross, sorry. I've been a little slow to draw on a couple of my comments, so pardon me. The only thing I would just add and it sounded like you're alluding to when you talked about next week, potential repeal of the IRA and the implications of that on tax credits. Was that the thrust of the second part of your question or did I miss it? Speaker 800:32:22Yes. Just as that where can we contextualize that versus the state incentives that are kind of pushing this forward? Speaker 400:32:29Yes. So I dare not wager or speculate as to the outcome on next week. I think that's a fool's errand and I think it's too difficult to call. But I do think it still remains a low probability that you see a repeal of the IRA, because the reality is, 1, you need a pretty sizable red wave to just repeal the legislation. But even if you did want to hypothesize that that could take place, I think there's also a reality that a number of red states have benefited significantly from the legislation getting passed. Speaker 400:32:57I heard a stat the other day from one of the CEOs in our state who suggested about 75% of the benefits of the IRA have accrued to red states. And so I think again, even if you saw red wave significant enough to which I still think is a fairly remote probability, to repeal the legislation, I still think there'd probably be a real significant discussion offline about whether it would make sense from an economic perspective to go and undo all those benefits accruing really nationally, but again, more concentrated towards the red state. So I still think it's a low probability event. And that said, and if it did happen, again, even if you wanted to take sort of that really remote probability coming to fruition, we still have to comply with the law to Gerrick's comments, albeit it might be at a higher cost. But again, we still have to comply with the law in Michigan. Speaker 800:33:50Yes, perfect. Makes sense. Reggie, you just need more coffee this morning. So go grab a cup of coffee. Yes. Speaker 500:33:58Will do. Speaker 800:34:01The next question I had just kind of back to Jeremy's question a little bit on Northstar and capacity auctions. I mean MISO has sort of adopted a lot of the PJM changes around the VRR curve. So certainly, it seems like that will also go higher in next year's capacity auction, at least that would mirror what happened at PJM. So do you sort of hold off on some closing down some of these open positions further out on capacity until you see what that auction clears out so you have a better idea? Like I'm just trying to figure out the timing of how you work that, Troy? Speaker 100:34:37Our process has been with dig to just layer these in over time. That's really a derisking mechanism for us. And certainly, there are some times where we might strike at a price point that's a little lower than the future, but there are times when it's going to strike at a price point that's a little higher than the future. And so, we've had that approach. It really derisks and becomes a predictable source of earnings by taking these bilateral contracts or just kind of layer them in over time. Speaker 800:35:10Makes complete sense. Ties into the CUA. Thanks guys. Another solid quarter. Thank you. Operator00:35:18The next question today is from the line of Julien Dumoulin Smith with Jefferies. Please go ahead. Your line is now open. Speaker 200:35:26Hey, good morning team guys. Thank you so very much for the time. Appreciate it. Good to chat with you guys. Let's get that coffee going. Speaker 200:35:32So to the extent let's keep it going. Speaking of which, you guys had this pretty big swing in the cost number in that waterfall slide, you talked about that minus 0.15 dollars Last quarter that was a plus 9%. You mentioned in your prepared remarks, insurance and IT. Can you speak a little bit of exactly what's going on? Is there a pull forward going in there as well that's timing intra year? Speaker 200:36:00I mean, is there a wildfire impact that's impacting insurance? I'm just trying to understand what are the big pieces? Speaker 400:36:07Yes, Julien, it's Reggie. I appreciate the question. And let me provide a little bit more color on that. And so we have a number of cost related line items that we track throughout the year. We obviously have expectations going into the year and budgeted levels for across every cost category. Speaker 400:36:25And through the course of the year, some of those line items track ahead of budget and not in a good way, so higher than budget. And so we countermeasure that largely through the CEUA and other cost reduction initiatives. And in some cases as we get to Q4 and we don't think we'll have sufficient countermeasures to offset that, there are times we'll just sort of fund those cost categories at levels that we anticipate at the end of the year. And so sorry, I said differently, we had a level of countermeasures as well as Q3 weather health that have given us enough contingency to fund those cost categories to levels that we anticipate than being at the end of the year. And so we're just funding those costs. Speaker 400:37:06Insurance was one example. We had IT related costs that were trending a little ahead of budget. Another one is we also have some regulatory assets that are liabilities that are amortizing that are at higher levels in the prior year associated with our EV programs and others. And so it's a hodgepodge of cats and dogs that were just trending ahead of budgeted levels. And so that's really what we're funding there. Speaker 400:37:30And that's why you see that big increase in the Q4 year to go expectations versus where we were in our Q2 call. Is that helpful? Speaker 200:37:40Yes. So basically you said differently, you would Operator00:37:42have been holding off on funding Speaker 200:37:44some of that into 2025. You realize that you have the ability to do so, so you pull them back forward. Speaker 400:37:51Yes, I wouldn't call them a pull ahead. To be clear, these are not expectations of costs that we'll have in 2025 that we're trying to de risk. These are costs that we are incurring right now and the actuals we've seen in the 1st 9 months of the year in excess of what we've budgeted. And so we're applying some of the contingency that we've accumulated through countermeasures, Northstar outperformance and just plain old fashioned good weather in September and applying that contingency to just fund those cost estimates for the end of the year. So these are just 2024 funding and just basically updating our forecast to reflect the economic reality we're seeing across those cost categories. Speaker 200:38:34Wonderful. Thank you guys very much. Speaker 500:38:36Speak to you guys soon. Speaker 100:38:38Thank Operator00:38:41you. Thank you. Our next question is from the line of Travis Miller with Morningstar. Please go ahead. Your line is open. Speaker 900:38:48Good morning, everyone. Thank you. Speaker 100:38:51Hey, good morning, Travis. Speaker 900:38:52Hi, Travis. Hi. Hi. So on the REP, you've touched on this a couple of times, but the anticipating that sales growth number going up. As you were going through that process, not to front run this too much for the next couple of weeks, but as you're going through that process, did you have enough visibility in terms of sales growth from data centers and what you mentioned on manufacturing some of those kind of 20 fourseven type loads to be able to incorporate again some of the stuff you touched on in terms of storage and perhaps other renewable energy technologies. Speaker 900:39:30Can we see will we see that in this REP? Or is that something to look more for in the IRP? Speaker 100:39:41The short answer is yes, but let me explain more. In the renewable energy plan, we'll start out with the base or the foundation is really the 2021 integrated resource plan, which you'll remember calls for 8 gigawatts of solar and we've built some renewables as part of that as well. So that's the foundation. The first piece, well, the 2021 IRP did not get us to 50% renewables by 2,030 or the 60% number by 2,035. So there's some renewables that will have to be constructed or through a PPA with an FCM that will have to happen. Speaker 100:40:14That's tranche 1. The second tranche is specifically because there's additional sales expected as a result of economic development. And so we forecast that out over 20 years and so we do have visibility to it. But we have to have certainty around it as well. So these are items that we are we have high confidence around and we have signed contracts around. Speaker 100:40:35This is not the pipeline or some hypothetical numbers. It's, again, a reflection of what's coming to the state in terms of so we have, to answer your question directly, yes, visibility to that. That will also drive additional renewable assets or purchase power agreements to meet that need as well. So, if you continue to follow that down, I expect it to be a mix of solar and wind that will make that up. And then, of course, we'll talk about more details of that at EEI as we file that. Speaker 100:41:04So that's part 1. The second part that I would also is the IRP. And remember, the Renewable Energy Plan just deals with energy. You have to deal with the capacity. You have to deal with the reliability of supply. Speaker 100:41:17You also have the opportunity to accommodate additional sales growth. That will show up in the Integrated Resource Plan as well. So I see them as two mechanisms, 2 opportunities where we'll see those tailwinds of again ownership of assets, investments to deliver clean energy on behalf of our customers or through a PPA with the financial compensation mechanism. Speaker 400:41:41Travis, this is Reggie. All I would add is that if you look at Slide 6 in our presentation today, you can see on the left hand side of the page and Garik spoke to that some of this in his prepared remarks. There is a raft of opportunities we've seen from an economic development perspective. And I think we've got 8 or so listed on the page. Only 2 of those are in our current 5 year plan, Goshen and Ford. Speaker 400:42:02The rest of these are additive to our plan. So that offers some bread crumbs as to the additional opportunities we're seeing. And I will tell you that some of the opportunities that are pretty high in probability that we're still not quite in the plan yet are likely going to be coming to fruition in the coming months. And so there's a lot of opportunity that we've already seen since we rolled out last year's 5 year plan. And so at this point that's well stale. Speaker 400:42:26And so again, you'll see that update in our REP. You also see it in the 5 year plan that we roll out in Q4 next year in addition to the IRP as Garrick noted. So you get some visibility on Slide 6 today. And again, we're looking forward to talking about more opportunities in the coming months. Speaker 900:42:44Okay. That's great. Appreciate all that detail. Then one more for me on different subject, the Liberty audit. Would you anticipate on the regulatory side, the potential for putting in regulators to put in some kind of performance mechanism or something some kind of metrics to meet before you get approval for the additional CapEx or operating costs? Speaker 100:43:09I anticipate that we'll take the Liberty audit findings and weave them into our 5 year reliability plan, which will, of course, enhance that plan, provide opportunities for additional capital investments to again address reliability for our customers proactively, offering better service and a lower cost. So that will be part of it. I anticipate there will be additional tree trimming or operation and maintenance expect that will be woven into the plan as well as part of this Liberty audit. And as the commission one of the actions that the commission has already taken is a performance based rate making that's focused on reliability work. And so I anticipate that's woven into this work as well. Speaker 100:43:53I don't think it holds us up from making these important investments, and we're making them now and seeing good performance improvement in terms of reliability, and we just need to continue to do that important work. Speaker 900:44:06Okay, great. That's very helpful. Thanks so much. Operator00:44:12Our next question is from the line of Michael Sullivan with Wolfe Research. Please go ahead. Your line is open. Speaker 1000:44:19Hey, everyone. Good morning. I think it's been asked a couple of times now, but just to level set us for load growth and what's coming in the REP, my recollection is you have historically talked about 2% less 2% energy efficiency and you're kind of flat is kind of your base case today. And then it sounds like you're excited about all this kind of new load growth, but what's actually going to be reflected in the REP is going to be pretty conservative and not some big shift change. Is that a fair characterization? Speaker 400:45:01Michael, good morning. It's Reggie. Thanks for the question. So just to level set, our current 5 year plan that we rolled out in the Q4 this year had about 0.5 percent of electric load growth on a 5 year compound annual growth rate basis. And you're right, that number is always inclusive of energy waste reduction. Speaker 400:45:22And so if you wanted to grow set up, you could think about that as about 2.5% growth. And again, net of energy efficiency 0.5%. We expect pretty significant upward pressure on that growth rate in the IRP sorry, the REP renewable energy plan filing that we'll publicize in the coming weeks. And then we'll get another kick at the can obviously in the IRP filing about a year later. And again between that you'll get more color in the load growth assumptions embedded in the 5 year plan that we roll out in the Q4 of next year. Speaker 400:45:54And so again, you should see pretty material upward pressure. We do plan conservatively guilty as charged, but we do also want to reflect the reality of what we're seeing because remember this is a component in our rate proceedings. And so you will see again upward pressure on that those load growth assumptions. And to Garik's comments, we do really try to incorporate whether it's data centers, industrial companies, we try to incorporate those in the plan when they're close to being signed or effectively signed and moving forward. We really try not to speculate if we've seen some momentum across the state, but it's not coming to fruition. Speaker 400:46:29That's not something we'll put in our plan. So we're conservative from that perspective. But again, the takeaway here is that you'll see upward pressure on our historical growth estimates in this next cut. Speaker 1000:46:39Okay. So significant upward pressure, but conservative. I got it. And then just shifting over to the Elektra case, I also just kind of wanted to level set there. So it sounds like you are going to probably adjudicate this mainly because of the storm mechanism because this is kind of a first go around for that? Speaker 1000:47:02And what specifically are you asking for? And where is staff on that Speaker 100:47:09with respect to the storm specifically? Reggio will walk through the numbers in a moment. But Let me just start out by saying staff's position is a constructive starting point. And as I shared in my prepared remarks, there's a number of things that have been supported in staff's position. But there are some distribution investments for our customers that have, I would say, been left on the table. Speaker 100:47:31And we're focused on improving reliability. We know we can do that, offer better service. We're proving that out by our 5 year plan and we can do that at a lower cost, doing it proactively versus reactively. And so in addition to the storm recovery mechanism, which you referenced, which is also referenced in the Liberty audit as well, but we're also focused on those distribution investments to offer better service for our customers. And so there's a bit of advocacy we are doing on behalf of our customers, so we can make those investments to improve service. Speaker 100:48:00That is also a component of which may push us into an adjudicated order. But I'll remind everybody, I'm open to settlement. It's just going to have to continue to be more than where the staff is currently at. But, Reggie, just share with Mike where things are at from Speaker 600:48:18a cost perspective. Yes. Speaker 400:48:19Michael, the mechanics of the storm restoration tracker that we're proposing in our pending rate case, and if memory serves me, DTE is proposing a similar structure. We're essentially trying to take the 5 year average of service restoration expense and put in Speaker 900:48:36the Speaker 400:48:36equivalent of a true up mechanism where there's a 50% share for investors with customers in the event our level of service restoration expense is above or below what's embedded in our rate case. So to give you a specific numerical example, if we had $130,000,000 of service restoration expense in rates and a year in which we incurred $150,000,000 of actuals, dollars 10,000,000 of that would be absorbed by shareholders. So we'd have $10,000,000 of hurt flowing through our P and L and $10,000,000 would be established in a regulatory asset that we would recover at a later date. And so customers would fund that portion of it. And if we saw the numbers go the other way, you would assume a commensurate level of regulatory liability and so on. Speaker 400:49:21And so as we see it, that provides good alignment of incentives between investors and customers with a mechanism like that. And we will limit a lot of the volatility we've seen in our P and L over the last several years because the levels of service restoration expense embedded in rates have been well below actuals now for the last several years and counting. And so that's the spirit of it and have to spend more time offline on that if need be. Speaker 100:49:45And just to offer some numbers, your staffs had $170,000,000 at a 9.85 percent ROE, 49.9 percent equity ratio. Our rebuttal position were at $277,000,000 at 10.25 percent ROE, 50.75 percent equity ratio. So a little bit of cost of capital difference there as well. But I wanted to just make sure, Michael, you had the revised position of the company. Speaker 1000:50:11Okay. That's great color. Just real quick, staff on the storm specifically though, are they outright against it? Or they're just looking for a different structure than what you just said? Speaker 100:50:22They're not supportive of it, but again not supportive, but we expected that. Just like the investment recovery mechanism, it had to go to the commission. And we anticipate some mechanism like this will require the commission to weigh in on. And so it's not a surprise where the staff is at. And again, if we're going to go after that, it's going to go likely to a full order. Speaker 1000:50:46Okay. Thanks for sending me through all that. Appreciate it. Speaker 100:50:51You're welcome. Have a great day, Michael. Operator00:50:55Our next question is from the line of Andrew Weisel with Scotiabank. Please go ahead. Your line is open. Speaker 500:51:03Hey, good morning, Andrew. Hey, Andrew. I was also going to ask about I was also going to ask about settlement. I guess, I appreciate the detail there. I guess, if there were to be a deal to be made, what would be the window for that? Speaker 500:51:18Or is it a relevant condition that happened? Speaker 100:51:21Yes. We're in that window now. And so really up to a final order is the window of opportunity for us. And so and we'll look again, we'll look, I'm always open to settlement. I've said that on calls before. Speaker 100:51:37If we can make things work for our customers and for all stakeholders, I mean, that's a good place to be. There's just a couple of things in this case that may force us into a full order and we just want to make sure everyone on the call is aware of that. Speaker 500:51:54Yes, understood. New tools are often a policy question, so I understand that completely. The other question I wanted to ask about the CapEx update. I understand we'll have to be patient on the numbers. But the two things I wanted to ask about, number 1, just qualitatively, it sounds like there's going to be a lot of things going into that. Speaker 500:52:12There's always the business as usual updates, but you've got spending around the REP, you've got spending around the Liberty reliability audit, you've got the electric reliability roadmap with stuff going in there, plus you've got sort of a step change in demand growth from data centers and manufacturing. What I'm getting at is, should this be a meaningfully bigger increase than what we've seen in recent years? And if so, how should we think about financing that? You previously talked about up to $350,000,000 per year of equity in 2025 and beyond. I'm guessing there might be an upside bias to that given all the pieces that I just mentioned. Speaker 500:52:51How should we think about a rule of thumb about incremental equity needs per incremental dollar of CapEx? Thank you. Speaker 100:52:59Remji and I will tag team this one, but I want to remind you that many of the tailwinds that we described in this call come as a result of approval of the renewable energy plan or approval of the IRP. And so although we'll file it in November of this year, fast forward 10 months, so it's going to be in late Q3 of 2025 before we see where the commission is at with that. So I wouldn't expect some of that good work to show up until our Q4 call of at the end of 2025 or early part of 'twenty six. And then you'd have the same cycle for the IRP, which would start in 2026 and then play out in 'twenty seven. So I see these as tranches that go over time over the 5 years. Speaker 100:53:44Clearly, there's some tailwinds here, but they show up at different points in time. But I'll turn it over to Reggie to offer some additional color. Speaker 400:53:52Yes. I think that's exactly right, Andrew. I mean the governors we've talked about and when we prepare our capital plan, our affordability, balance sheet and then operational feasibility, can we get the work done and those remain governors. But the 4th governor at this point is the pacing to Gerrick's comment. And so just the time for the commission to review the REP, the time for the load opportunities to materialize, yes, we signed contracts, we interconnect these opportunities, but it takes a while for the build out of a manufacturing facility or data center. Speaker 400:54:25So the pacing is going to certainly dictate, when we'll be able to bring in all of this additional capital opportunity and see the load materialize, which effectively will fund those capital investment opportunities. So that's really the 4th governor at this point, but you will see upward pressure for sure on the $17,000,000,000 5 year CapEx number we've provided at this point. So without a doubt, but it'll be pacing before you see the material bump. But I feel very good about the underlying earnings growth and rate base growth that will come from the next vintage. With respect to equity, Speaker 700:54:57as you know and as Speaker 400:54:58you stated, we have said no equity obviously in 2024 and then up to $350,000,000 starting next year and we've said that's a pretty good run rate for the current $17,000,000,000 capital plan. And the sensitivity I'll share with you as you think about incremental capital going into the plan and what that might drive in terms of incremental equity needs. As a general rule of thumb is for every dollar of CapEx we invest at the utility, we usually fund it with around $0.35 to $0.40 of common equity and that has been tried and true for some time. Now what's interesting over the last, I'll say 2 to 3 years is that we've seen downward pressure on that sensitivity in terms of the equity needs and it's really been driven by a few things. 1, obviously, we just continue to generate substantial cash flow in the business because of the forward looking test year and the rate construct in Michigan. Speaker 400:55:48So I'll give an example, our prior 5 year plan of $15,500,000,000 of capital generated about 12,500,000,000 of operating cash flow over a 5 year period in aggregate. This current vintage is $17,000,000,000 We expect $13,200,000,000 of cumulative operating cash flow generation vintage over vintage. So almost $1,000,000,000 of increased vintage over vintage and so just good cash flow generation, that's 1. Number 2, the ability to monetize tax credits afforded to us through the IRA, that's another big driver of liquidity and effectively a new source of equity that's helping our metrics and then just offering another layer of liquidity to fund our capital plan. So that's also helpful. Speaker 400:56:29And we did our first tranche this year about $90,000,000 of dispositions. And we did that at levels better than planned, meaning the discount to par was better than we thought it would be. And so I anticipate us doing more of that over time. And then the last one is just I feel like a broken record. And I said this is we do plan conservatively. Speaker 400:56:49And so for the debt we're going to issue at the holding company, we're assuming it's straight debt with no equity credit, but we've been known to issue subordinated notes or hybrids in the past. Those get now a greater level of equity credit from Moody's as you know. And so we're at 50% now. And so if we start to see pricing for those types of securities improve over time, that creates an opportunity also to put downward pressure on that sensitivity because obviously if we see pricing comparable to what our debt assumptions are in our plan, then we can do hybrids at a level that's credit accretive and EPS accretive to plan. And so those all create opportunities for us to really minimize the equity needs as we increase the capital in our 5 year plan. Speaker 500:57:35Okay. That's extremely helpful details there. Thank you very much. So just to be clear on the CapEx numbers though, so we should not expect numbers related to the REP or IRP, but we should expect upside to CapEx related to reliability and the demand and economic development. Does that maybe a fair way to put it? Speaker 400:57:57Yes. You certainly won't see the full magnitude of opportunities associated with the REP. And the only reason I'm qualifying the comment a little bit, Andrew, is that you start to earn on PPAs effective mid this year. And so we'll assume additional PPAs going forward. And so we'll start to see that opportunity associated with the renewable energy plan scale every year because we're doing PPAs for renewables every year. Speaker 400:58:23We'll probably start to layer in some of the capital investment opportunities in the outer years of the plan. And so you'll see some of that we've done and you'll definitely see your comment reliability and resiliency. But again, the lumpier opportunities associated with the energy law, you won't see until the really starting in the 2026 vintage of our 5 year plan. 6 vintage of our 5 year plan. Speaker 500:58:42Okay. Appreciate you clarifying. I guess maybe I needed some coffee this morning as well or some early Halloween candy perhaps. Thank you guys. Operator00:58:59And as for our next question, we'll move to the line of Angie Storozynski with Seaport. Please go ahead. Your line is open. Speaker 1100:59:07Thank you. Thanks for squeezing me in. So I just have one question. So when I look at your current supply stack on the system, I mean, how much of it is imports from like self generation versus the imports from the grid? And I understand that the MISO dispatches assets, etcetera. Speaker 1100:59:26But I'm just debating how much of spare capacity do you have of your own right now? I mean, if I were to be an industrial customer or hyperscaler, how much could you offer me in megawatts right now? Speaker 100:59:43Well, let me offer you this and then we'll talk a little bit about the mix from MISO and the like. After our 2021 integrated resource plan, we were along from a capacity perspective and there was a couple of things. One, we kept additional assets available to us as part of the settlement. We acquired the covert generating facility, it was 1.2 gigawatts. In the meantime, since 2022 when that was approved, we've also built out renewable assets, both wind and solar and both there's some PPAs as well as some owned assets. Speaker 101:00:13And so that's actually put us in a position where we've been long and we've been able to accommodate a lot of sales growth. And then as a reminder, we have the mechanisms, both the renewable energy plan and the integrated resource plan, with some flexibility in those because we look at them 2 years on a renewable energy plan basis, every 3 to 5 on an integrated resource plan. But we can pull those up and adjust those as needed to be able to accommodate the additional growth. The 3rd piece with these hyperscalers is working with them because they're not going to all come on immediately. And they have plans on when they want to ramp up. Speaker 101:00:45That's also true with manufacturing. And so they may need a starting load in 2026, but their full ramp up doesn't get out to 2028, 2029, 30. And so there's a lot of work that we do with the customers to make sure we get that right. And so there's a lot of flexibility we have to make sure the supply and demand stack match up nicely and we can grow Michigan in the state. Now we do leverage MISO to be able to do that. Speaker 101:01:12And if you look at our total mix, it's about 46%, 40 ish 5% that we either have through PPAs or through purchase off market. Remember those PPAs act as both capacity and energy as well in that mix and then the rest is self generated. Speaker 1101:01:33But again, I'm just again, I'm debating it myself. If I were to cite, like a big industrial facility or a data center, I would probably care about the speed to power, right? So this initial availability of megawatts would probably matter to me. So you're saying you are long power even right now. So even say, the next say, 24 months, there is a spare capacity that you could allocate to such a user? Speaker 101:02:07The short answer is yes, and we work closely with customers to be able to do that. I'll give you a real example, and it just hit the press today. We talked about in Q1, but we couldn't name the company, Switch, which is an existing data center in Michigan, is expanding by 2 30 megawatts. They want to be up by full load in 2026. We're able to do that. Speaker 101:02:28We're able to deliver that. That's the electric infrastructure, both with our transmission partner and the distribution infrastructure as well as ensuring we have the supply. And so that gives you a little nature of our ability to deliver on that. And as we entertain other hyperscalers and other manufacturing, again, we work with them closely to match up the ramp up schedule. I gave the example of Corning as well in my prepared remarks. Speaker 101:02:53Corning wants to have load on by Q1 of 2025. We're constructing the substation right now. We will deliver that. But again, ramp up. They go from a small amount of megawatts up to 90, 95 megawatts, but that of course is over a year. Speaker 101:03:07And so we pace that along with that company. So those are two real examples, real work going on in the state and just gives you an idea how we work with customers to grow Michigan and grow in our service territory. Speaker 1101:03:21And what if there's like a very big site that say a gig of eventual capacity. I mean, is this something that you feel comfortable accommodating? I mean, it is obviously, it would probably require a large well, 2 large combined cycle gas plants to be built. How do you think about those sort of very big projects? Would you prefer to have smaller sites? Speaker 1101:03:47Or is there from like a risk perspective, do you think comfortable accommodating the big loads like that? Speaker 101:03:54We welcome growth in Michigan. I mean there's nothing better than creating jobs. And we've got a constructive I mean we're doing a lot of on shoring. It is truly a manufacturing renaissance. We're certainly open for data centers as well. Speaker 101:04:06And we work with those customers, large sites, small sites, to create opportunity for all stakeholders in the state. And so it doesn't we don't back away from a gigawatt load. Some of those are on one site. Some of those are across multiple sites. And it's really, again, working with that company and their ramp up schedule and when do we need to provide that and match that supply demand mix. Speaker 101:04:30We've been doing this for 135 years. I used to be I started out my business in the business, I should say, on the supply side. So I get this. And that's what we do as a load serving at N and D. And we have the mechanisms within the construct to be able to do that with success. Speaker 1101:04:47And just to make sure, and how do you, for example, ensure that this load actually materializes? Like when we look at power companies, like they have those take or pay contracts. How do you ensure that if you make the investments, actually the load will happen? Speaker 101:05:05One of it's contractually, but it's also, as I shared in my earlier remarks, making sure we've got a good from a rate design perspective, a cost of service model. That's how we operate in the state of Michigan. And so that makes sure that other customers aren't subsidizing that work. And as I shared, we're working closely with commission and commission staff with data centers to see if there's additional rate, compact or construct to be able to further ensure that residential customers aren't subsidizing or footing the bill for data centers. Speaker 1101:05:43Very good. Thank you. Operator01:05:48Our next question will be from the line of Anthony Crowdell with Mizuho. Please go ahead. Your line is open. Speaker 301:05:56Hey, good morning team. Thanks for squeezing me in. I know it's a tough morning with Shah telling you what music to listen to and Ross telling you what to drink. So I'll keep it quick. Just, and I apologize, I think it's up to Mike to follow and Mike Sullivan's question, the load drills update. Speaker 301:06:13Will we get that on the Q4 call on when you file the IRP? Just when is the most up to date of the low growth? Speaker 401:06:25Anthony, this is Reggie. Yes. So you will get a load forecast update in the renewable energy plan that we'll file in the coming weeks. And you will also we will also have a load growth update a few months later, that's supporting the 5 year plan that we'll roll out on our Q4 call in the Q1 of 2025 as we always do. So you'll get a couple of bites of the cherry from a load growth perspective. Speaker 401:06:55And as Garik noted in his earlier comments, you'll also see a load growth update about a year from then, maybe a year and a half in the context of our IRP filing. So we'll have an iterative process for load disclosure. And again, as I said earlier, I expect upward pressure certainly on the current estimate of 0.5% that would certainly go up and it will likely accrete beyond that. So looking forward to sharing those with you in the coming weeks months. Speaker 301:07:20Great. And then just lastly, one of the earlier questions you talked about how the financing needs of the company. Also, I think the amount of equity now maybe 30% to 40% for every dollar spent. You also mentioned tax credits were going to be instrumental. Has the company quantified what we could assume for transferability over the next 5 years? Speaker 401:07:44So the latest number I'll guide you to is what we have embedded in our 5 year plan, Anthony, and that's a little over $500,000,000 But again, I expect that number to increase over time just based on the quality of the execution and also the anticipation of more renewable ownership should allow that number to accrete. And so this current plan has $500,000,000 in aggregate over 5 years. And again, as we provide an update on our 5 year plan on our Q4 call in Q1 of next year, I'll provide a revised number and I'd be surprised if that number doesn't continue to increase. Is that helpful? Speaker 301:08:22Perfect. Thanks for taking my questions and see you in Hollywood. Speaker 401:08:25Yes. See you in Hollywood. Operator01:08:30We have no further questions in the queue at this time. So I would now like to hand the call back over to Mr. Garik Rashel for any closing remarks. Speaker 101:08:38Thanks, Harry. And I'd like to thank you for joining us today. I look forward to seeing you at EEI. Take care and stay safe. Operator01:08:48This concludes today's conference. We thank everyone for your participation.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCMS Energy Q3 202400:00 / 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.comIt’s absolute chaos in Silicon Valley right now…If you missed out on the big boom in Nvidia… Listen up, because according to Nvidia's own CEO… Elon Musk’s new technology could help launch an entirely new multitrillion-dollar industry.April 24, 2025 | Brownstone Research (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 2024 Third Quarter Results. The earnings news release issued earlier today and the presentation used in this webcast are available on 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. Operator00:00:26Just a reminder, there will be a rebroadcast of this conference call today beginning at 12 p. M. Eastern Time running through November 7. 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. Operator00:00:41Jason Shaw, Treasurer and Vice President of Investor Relations. Speaker 100:00:46Thank you, Harry. Good morning, everyone, and thank you for joining us today. With me are Gerrick Rochow, 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 100:01:16This 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. And now, I'll turn the call over to Garik. Thank you, Jason, and thank you everyone for joining us today. At CMS Energy, we deliver year over year for all stakeholders. Speaker 100:01:41We do that through our investment thesis. This simple, but powerful model, coupled with our disciplined execution, sets us apart in the industry and has delivered more than 2 decades of industry leading financial performance. Typically, I walk through that investment thesis, but today, I want to offer 3 differentiators at CMS Energy, providing confidence and visibility as we continue to strengthen and lengthen our 6% to 8% EPS growth. First, Michigan's Clean Energy Law. This law is great for our customers, the planet and our investors and ensures we have the right legislation in place to move from coal to clean, providing certainty for the investments we need to make in renewable energy. Speaker 100:02:34And it gives us the flexibility to either own the assets or utilize a power purchase agreement, doing what is best for our customers. Now, here's what's unique. Earning a financial compensation mechanism approximately 9% on a power purchase agreement. No other state that I'm aware of has this provision. And then add to it, requirements for battery storage and an increased incentive on energy efficiency. Speaker 100:03:05There is a lot in this law, very little of which is in our 5 year investment plan, providing a strong tailwind. And we believe we can do this important work affordably for our customers. The flexibility in the law that allows for ownership or power purchase agreements, both within Michigan and outside of Michigan, provides more options for customers and ensures we can utilize lower cost energy. Furthermore, it provides us the ability to replace existing, outdated and above market power purchase agreements with new renewable assets, which keeps costs affordable for customers. Our 20 year renewable energy plan, or REP, that we will file next month will detail our clean energy investments and plans to achieve the targets set by Michigan's Clean Energy Law. Speaker 100:04:02This filing will show the renewable assets needed above and beyond our 2021 Integrated Resource Plan as well as the additional renewable assets needed to meet increasing sales demand and growth in the state. As I shared before, Michigan's Clean Energy Law is great for all stakeholders. It provides the flexibility we need to find the most cost effective clean energy for our customers. The second item I want to highlight is our commitment to customer reliability. I'm very proud of the comprehensive plan we have laid out in our 5 year $7,000,000,000 electric reliability roadmap. Speaker 100:04:47This plan details our actions to move to 2nd quartile reliability performance, or SADI, by the end of the decade through targeted investments in our electric grid, needed investments for our customers because we have recorded some of Michigan's highest wind speeds over the last 5 years and we are seeing more frequent storm activity. This plan is deliberate and comprehensive. It improves reliability in the short term and builds in long term resiliency and it does it proactively versus reactively. This plan means we will begin serious efforts to underground more of our distribution wires, better align with Midwest peers and replace more than 20,000 poles with those designed for more extreme weather. Speaker 200:05:34It also means investing in grid technology Speaker 100:05:36for more automation and machine learning to speed up restoration in weather events. We are also one of the first utilities east of the Mississippi to file a comprehensive wildfire mitigation plan, which lays out the investments needed to prepare for climate change. These customer investments are based on Electric Power Research Institute, EPRI, best practices and will bolster our distribution system to a level of performance our customers expect, particularly as the economy continues to electrify. And our plans have been supported. I'm pleased with the recent outcomes from the Michigan Public Service Commission and the Liberty storm audit, which highlights the vastness of our system, the 1,000,000,000 of dollars in decades needed to improve it and the importance of these strategic investments. Speaker 100:06:29And our customers benefit when we improve the system proactively versus reactively. Making these investments in the system now means we can do it at a 40% to 70% lower cost compared to when we do this work following an outage. Better service, lower customer cost. This is a great story. The third point I want to make today is the nice tailwind of economic development we are seeing in our service area. Speaker 100:07:00I'm excited and encouraged about a true renaissance underway in Michigan. The big story across the industry is sales growth brought by data centers. We are seeing the same and we are happy to talk more about data centers. Our story is different and in my opinion better. In Michigan, we are seeing a manufacturing renaissance bolstered by onshoring, unique state attributes and the inflation reduction and the chips and science acts. Speaker 100:07:31And we love manufacturing growth because it brings jobs, supply chains, commercial activity, housing starts and residential growth where there is greater benefit for the state. We recently updated this slide to highlight several new and diversified examples. Corning, expanding and investing up to $900,000,000 and bringing nearly 1100 jobs to the state. This is the sort of growth we'd like to see significant Michigan investment in job growth. Saab has expansion plans for an integration and assembly facility. Speaker 100:08:07Saab is new to the state, but adding to the nearly 4,000 businesses engaged in defense and aerospace work in Michigan. Two new examples, among many, that speak to the diversified manufacturing growth we are realizing. Over 700 megawatts of signed contracts in 24 months and growing, Our economic development pipeline continues to look promising with over 6 gigawatts of load looking to either move to or expand in our state, 60% of which is manufacturing. As I mentioned earlier, our renewable energy plan will conservatively reflect our updated load growth forecast Speaker 200:08:49based Speaker 100:08:49on the strong economic development tailwind we are experiencing. We work hard every day to win our customers' business and we are honored when businesses see the value in investing in our state and our service territory. Let's take a look at the regulatory calendar for the year. As I shared last quarter, our financial related regulatory outcomes are known for the year given the constructive March electric rate order in the approved gas rate case settlement. This positions us well as we navigate the last quarter of 2024. Speaker 100:09:30Gas rates were effective October 1 and we plan to file our next gas rate case in December of this year. In our current electric rate case, we saw constructive starting position by staff. We saw support for further underground, wildfire mitigation and the continuation of the investment recovery mechanism. I do want to point out that the mechanism for storm recovery and the investments outlined in the electric rate case and in the Liberty storm audit are important for our customers. That probably goes without saying, However, it may require that we go to a fully adjudicated order to get the best outcome for our customers. Speaker 100:10:12Know that we are confident with where we are in the process, the quality of our filing and the proactive nature of the investments we are making to improve reliability for our customers. Speaker 300:10:23If we Speaker 100:10:24go the full distance, we expect the order in March of 2025. Now let's spend a moment on the results. For the 1st 9 months, we reported adjusted earnings per share of $2.47 up $0.41 versus the same period in 2023, largely driven by the constructive outcomes in our electric and gas rate cases. Given our confidence in the year, we are reaffirming all our financial objectives, including this year's guidance range of $3.29 to $3.35 per share with continued confidence toward the high end. We are initiating our full year guidance for 2025 at $3.52 to $3.58 per share, reflecting 6% to 8% growth off the midpoint of this year's range, and we are well positioned, just like 2024, to be toward the high end of that range. Speaker 100:11:26It is important to remember that we always rebased guidance off our actuals on the Q4 call, compounding our growth. This brings you a higher quality of earnings and differentiates us from others in the sector. And like we've done in previous years, we'll provide a refresh of our 5 year capital and financial plans on the Q4 call. With that, I'll hand the call over to Reggie. Speaker 400:11:55Thank you, Derek, and good morning, everyone. On Slide 9, you'll see our standard waterfall chart, which illustrates the key drivers impacting our financial performance for the 1st 9 months of 2024 and our year to go expectations. For clarification purposes, all of the variance analyses herein are in comparison to 2023 both on a year to date and a year to go basis. In summary, through the Q3, we delivered adjusted net income of $736,000,000 or $2.47 per share, which compares favorably to the 1st 9 months of 2023, largely due to higher rate relief, net of investment costs and solid performance at NorthStar. From a weather perspective, the 3rd quarter offered favorable weather versus the prior year to the tune of $0.10 per share, largely due to a warm September. Speaker 400:12:51The strong Q3 weather for the electric business more than offset the mild weather experience in the first half of the year, thus equating to $0.05 per share of positive variance year to date. As mentioned, rate relief net of investment costs, one of the key drivers of our year to date performance resulted in $0.18 per share of positive variance due to constructive outcomes achieved in our electric rate order received in March and the residual benefits of last year's gas rate case settlement. From a cost perspective, our year to date financial performance was largely driven by lower service restoration expense despite a sizable weather system that impacted our service territory in early August. Our favorable variance in this regard has been fueled in large part by cost efficiencies in our storm response efforts. In fact, even though our volume of outages has increased by approximately 10% in 2024 versus the comparable period last year, our restoration cost per interruption has decreased by over 10%, all while restoring customers at a faster rate than the prior year. Speaker 400:14:02These achievements and our storm response efforts are just another example of our lean operating system, the CE Way, driving daily productivity in the business. Quite simply, our workforce uses the tools of the lean operating system to deliver more value to customers with less resources every day. That is the essence of the CE Way. And this favorability and service restoration expense coupled with cost performance throughout the business provided $0.02 per share of positive variance versus the comparable period in 2023. Rounding out the 1st 9 months of the year, you'll note the $0.16 per share of positive variance highlighted in the catch all bucket in the middle of the chart. Speaker 400:14:46The primary sources of upside here were related to solid operational performance at Northstar and a tax related benefit among other factors. Looking ahead, as always, we plan for normal weather, which equates to $0.14 per share of positive variance for the remaining 3 months of the year, given the mild temperatures experienced in the last 3 months of 2023. For a regulatory perspective, we'll realize $0.09 per share of positive variance largely driven by the aforementioned electric rate order received from the commission earlier this year and the constructive outcome achieved in our recently approved gas rate case settlement, which went into effect on October 1, as Garrick noted. On the cost side, we anticipate $0.15 per share of negative variance for the remaining 3 months of 2024 in large part due to additional funding support for select cost categories that have trended above budgeted levels for the majority of the year, such as insurance premium and IT related expenses. Closing out the glide path for the remainder of the year and to put in the penultimate bar on the right hand side, you'll note a significant negative variance, which largely consists of the absence of select one time countermeasures from last year and conservative assumptions around non utility performance among other items. Speaker 400:16:08In aggregate, these assumptions equate to $0.25 to $0.31 per share of negative variance. In summary, we remain well positioned to deliver on our 2024 financial objectives to the benefit of customers and investors. As such, we are reaffirming our full year guidance range of $3.29 per share to $3.35 per share with a continued bias toward the high end. Moving on to the balance sheet, on Slide 10, we highlight our recently reaffirmed credit ratings from S and P in August. We continue to target mid teens FFO to debt on a consolidated basis over our planning period to preserve our solid investment grade credit ratings as per long standing guidance from the rating agencies. Speaker 400:16:56As always, we remain focused on maintaining a strong financial position, which coupled with a supportive regulatory construct and predictable operating cash flow generation supports our solid investment grade ratings to the benefit of customers and investors. Moving on to our financing plan on Slide 11, I'm pleased to report that we've completed all of our planned financings for the year at levels favorable to plan and ahead of schedule, which leaves us with ample liquidity for the remainder of the year and beyond. I'll bring to your attention a relatively modest increase to our 2024 planned financings at the utility, given the need to rebalance the rate making capital structure in accordance with the recent regulatory outcomes and attractive pricing at issuance. It is also worth noting that we remain opportunistic should we see a cost efficient opportunity to pull ahead some of our 2025 financing needs. As I've said before, our approach to our financing plan is similar to how we run the business. Speaker 400:17:59We plan conservatively and capitalize on opportunities as they arise. This approach has been tried and true year in 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 Garik for his final remarks before the Q and A session. Speaker 100:18:26Thank you, Reggie. CMS Energy, over 2 decades of consistent industry leading financial performance, we remain confident in our strong outlook this year and beyond as we continue to execute on our simple investment thesis and make the necessary and important investments in our system while maintaining customer affordability. With that, Harry, please open the lines for Q and A. Operator00:18:53Thank you very much, Garik. The question and answer session will be conducted electronically. Our first question is from the line of Shar Pourreza with Guggenheim Partners. Please go ahead. Your line is now open. Speaker 500:19:32Hey, guys. Good morning. Speaker 100:19:34Hey, good morning, Shar. I heard you didn't like our hold music. I heard that was a thing today. Speaker 500:19:43Oh, God. Hey, I Speaker 100:19:45like your choices. I like your choices. Speaker 500:19:45But it's okay. Speaker 200:19:47Yes, Metallica, but you don't have ACDC. Operator00:19:49If you would Speaker 100:19:49have brought a little ACDC, I would have been there. What's your question today? There you go. Speaker 500:19:55There you go. Speaker 600:19:57So just here on the data center demand, obviously, everyone is mentioning it to kind of a degree. Michigan has obviously started to emerge as a favorable data center environment with some of the hyperscalers doing some land acquisitions there, Grand Rapids to be exact. Do you have sort of existing grid capacity to onboard kind of the new customers without kind of an interconnection lag? What are you seeing on the ground? And do you need sort of a new tariff structure to move ahead? Speaker 600:20:25We've seen some interesting proposals coming out of Ohio, a lot of back and forth there. So big question, but how do you think about those? Speaker 100:20:34Michigan in our service territory, specifically you referenced Grand Rapids and that's in our service territory, is a great place for data centers and investment in Michigan. The temperate climate, the fiber infrastructure, and to your point and really the point of your question here is we have the electric infrastructure to be able to serve. And so we work closely with data centers and other manufacturing customers to meet their timelines for the ramp up in load. And so that makes us advantageous to locate a data center or as I highlighted in my prepared remarks, really manufacturing. There's been a lot of manufacturing growth that's shown up here. Speaker 100:21:09And So that's what's exciting about Michigan. I guess the other thing is too, when they look to our clean energy law, they can see a path to that growing clean energy, the renewables and then the clean energy standard by 2,040, which is also attractive to the data center components. But I would highlight too just what I don't want to lose in this conversation is manufacturing growth. That's really where we're seeing the true renaissance. We've seen a lot of opportunities show up there that will show up in our renewable energy plan as well to serve our customers. Speaker 100:21:39And just going to the question on the tariff. You'll recall, we've already filed ex parte type filing to move the data centers to what we call our GPD rate. That's a better reflection of the cost to serve. And we are working collaboratively with the commission to see if another rate structure is needed for data centers that would ensure our residential customers are not left subsidizing data centers. Speaker 600:22:08Got it. Any timing on that, Garik? Speaker 100:22:13We would expect we continue to make progress. I mean, like I said, the ex parte filing has already approved, and so we're in a good position there from a cost of service perspective. We'll continue to work with the commission. I would expect that to take place over the next 6 months to a year. Speaker 600:22:28Okay. Perfect. And then just lastly, in terms of your takeaways from the storm and resiliency audits this year, is your commitment to cutting outages supported by the current distribution plan? Or would you look to update the DSP to incorporate some recommendations from the audits? Or does it just inform you better to move the $1,500,000,000 incremental CapEx you identified into base plan? Speaker 600:22:51Thanks. Speaker 100:22:53This audit that was completed, we call it the Liberty audit because that was the company that was performing the work, is really balanced and supportive. I mean, you could see that within the context of the support of the work that we need to do, the capital investments and tree trimming to be able to continue to enhance reliability and provide better service. And as my prepared remarks share, we can do that at a lower cost. So, better service, lower cost when we do things proactively versus reactively. And so, we have our 5 year capital plan, that $7,000,000,000 plan that's comprehensive and very deliberate and focused. Speaker 100:23:28We'll take the Liberty audit results and we'll look to incorporate that in that plan. I'll remind you that's a $7,000,000,000 plan. $5,500,000,000 of it is incorporated into the capital plan. So, there's opportunity there to work more of that capital in, of course, with the support of the Public Service Commission staff and commission. Speaker 600:23:49Fantastic. Thank you guys so much. Remember, Garrett, guns and roses next time. Thanks. Appreciate it. Speaker 600:23:54ACDC, ACDC. Operator00:23:59Our next question today is from the line of Jeremy Tonet with JPMorgan. Please go ahead. Your line is now open. Speaker 700:24:08Hi, good morning. Speaker 100:24:10Hey, good morning, Jeremy. Speaker 700:24:15Thanks for taking my questions here. Just want to start off, if you could walk us through a bit more, I guess, on DIG, given everything that we're seeing on the generation side needs their capacity needs, It just with contracts rolling off and how you think about, I guess, the trajectory there going forward? Speaker 100:24:37Northstar and that Northstar business and I'll get to the dig piece continues to perform well. But frankly, I'd expect that. It's a small piece of the earnings mix, but they need to perform and we expect them to perform and that's exactly what they're doing both from an operational and a financial perspective. And of course, DIG is an important part of that mix or Dearborn Industrial Generation. And we continue to see strength both in the capacity markets and the energy markets and we are securing those bilateral contracts throughout time. Speaker 100:25:06And they continue to be above our plan and our expectations. And so it's a great story and we continue to be a tailwind in our overall expectations around 6% to 8% EPS growth. Speaker 400:25:22Jeremy, this is Reggie. All I would add is that we've been Jeremy, just to provide a bit more of a financial lens to Derek's good comments. As you know, we've had a good 25% to 30% open margin in the outer years of our plan. And so we'll provide an update on our Q4 call as we always do around the levels at which we're pricing capacity contracts in that bilateral market. And as you know, we'll bring in a new year in our next 5 year plan and that will have even more open margin and we continue to see reverse inquiry at levels well in excess of what we've historically realized from a capacity price perspective. Speaker 400:26:01And so we're usually around $3 to $3.50 per kilowatt month. We're now seeing 5 6 handles in reverse increase. So it's still a really robust opportunity. And unsurprisingly, it's just because of the real nice technical we're seeing with just supply being reduced in Zone 7 through retirements and upward pressure on the demand curve. So we don't see any reason why that should abate anytime soon. Speaker 100:26:24And one thing I'll remind you, Jeremy, too, it's not linear as well. We get we do have outages to maintain the system out there. So that's an important piece to remember, particularly as we go through the long term plan. Speaker 700:26:39Right. That makes sense. Don't want to get too far ahead of myself there. But maybe just thinking about growth in general, we're seeing some of your peers talk about higher sales forecast and even some kind of lifting the expected long term EPS CAGR expectation. And just wondering how you guys think about this given the incremental opportunities you see in front of you. Speaker 700:27:03I'm expecting strengthening and lengthening, but just want to double check there. Speaker 100:27:10Let me offer some comments and I'm sure Reggie is going to want to jump into this as well. And we provided those differentiators, those tailwinds to give visibility and to instill confidence. And that's what we have. We have confidence about the ability to strengthen and lengthen that 6% to 8% EPS growth. But I want to be clear, what our investors expect is that we continue to deliver year after year. Speaker 100:27:3421 years, we've now industry leading or consistent industry leading financial performance time and time again. And then compounding off actuals, which gives you a better quality of earnings. That's what our investors inspect, that's what we expect and that's what we deliver. And so by providing some insights to those tailwinds, you get some idea of the momentum and how we can, again, strengthen our confidence in delivering this and just doing it year after year, exactly what our investors expect. But certainly, Reggie, I'm sure we'll want to walk into and offer some commentary on this as well. Speaker 400:28:09Jeremy, all I would add to Gerrick's comments is that, when you think about the components of what will drive long term growth, Gerrick walked through in great detail in his prepared remarks, the opportunities on the capital side, whether it's through the capital investments and or earning on PPAs in the context of new energy law. And that's going to be decades of financial opportunity investment in PPAs again. The opportunities to improve the reliability and resiliency of our electric distribution infrastructure that's decades of spend and investment opportunity to the benefit of customers and investors. And then on the gas business, which we didn't talk about as much in this call, but there's still a significant level of investment to be made to continue to harden that system, reduce fugitive methane emissions and continue to keep it safe and reliable, particularly with on our pending regs coming out from FEMSA. And so a lot of investment opportunity. Speaker 400:29:04And with the upward pressure that you alluded to on the demand side that will create the headroom among other benefits to facilitate and enable that investment to come to fruition. And so we see a really nice glide path to deliver on that differentiated 6% to 8% growth for many years compounding off of actuals. And so we're not going to get ahead of our Q4 disclosure and that's when we update our 5 year plan, but we still feel very good about our ability to strengthen and lengthen that growth to Garik's comments. Speaker 700:29:37Got it. That makes sense. That's helpful. Thank you. Operator00:29:43Our next question today will be from the line of Ross Fowler with Bank of America. Please go ahead. Your line is now open. Speaker 800:29:51Good morning, Garrett. Good morning, Randy. How are you? Good morning, Ross. Another solid quarter. Speaker 800:29:56So congratulations on the quarter, another solid one as we've all come to expect from CMS. So just a couple of questions. I think you've talked about the 2.5 gigawatts of storage target in the state. How do you think about could that change if sort of battery tax credit shift? Or does the cost of that change? Speaker 800:30:19Or is there just a lot of support for this at the state level versus what's going on at the federal level potentially after next week? How do you contextualize that investment color for you? Speaker 100:30:31Let me offer the 2 mechanisms that we have to consider, what I'd call supply type assets. 1 is the renewable energy plan, which we'll file here, November 15 in that range around that date. And that will lay out some of the renewable energy assets we need both it will build off the foundation of our 2021 integrated resource plan. But then there's 2 tranches as I see it of additional renewable energy build. That will show up in the terms of meeting the 50% standard for renewable assets for 2,030 as well as the 60% for 2,035. Speaker 100:31:05So that's really tranche 1. And then there is additional renewable assets as a result of economic development and growth and the demand growth that we've seen. So, that's a nice piece of work, a nice tailwind. There will be some reference to storage in there as part of that, but where more of the storage will play out is in our 2026 Integrated Resource Plan. That's where we look at the capacity mix. Speaker 100:31:28That's where we look at the reliability of supply. That's where we'll look at those important components. To the degree there's additional tax incentive or benefit, that will play out in that process, in that selection process. I do anticipate that there's going to need to be quite a bit of storage on the system, maybe even more than what is referenced in the law, but that's certainly a nice pathway to get things started with the certainty of the legislation. So hopefully that's helpful. Speaker 800:32:00That is Garrett. Thank you. Sorry, Richard, go ahead. Speaker 400:32:03Yes. Ross, sorry. I've been a little slow to draw on a couple of my comments, so pardon me. The only thing I would just add and it sounded like you're alluding to when you talked about next week, potential repeal of the IRA and the implications of that on tax credits. Was that the thrust of the second part of your question or did I miss it? Speaker 800:32:22Yes. Just as that where can we contextualize that versus the state incentives that are kind of pushing this forward? Speaker 400:32:29Yes. So I dare not wager or speculate as to the outcome on next week. I think that's a fool's errand and I think it's too difficult to call. But I do think it still remains a low probability that you see a repeal of the IRA, because the reality is, 1, you need a pretty sizable red wave to just repeal the legislation. But even if you did want to hypothesize that that could take place, I think there's also a reality that a number of red states have benefited significantly from the legislation getting passed. Speaker 400:32:57I heard a stat the other day from one of the CEOs in our state who suggested about 75% of the benefits of the IRA have accrued to red states. And so I think again, even if you saw red wave significant enough to which I still think is a fairly remote probability, to repeal the legislation, I still think there'd probably be a real significant discussion offline about whether it would make sense from an economic perspective to go and undo all those benefits accruing really nationally, but again, more concentrated towards the red state. So I still think it's a low probability event. And that said, and if it did happen, again, even if you wanted to take sort of that really remote probability coming to fruition, we still have to comply with the law to Gerrick's comments, albeit it might be at a higher cost. But again, we still have to comply with the law in Michigan. Speaker 800:33:50Yes, perfect. Makes sense. Reggie, you just need more coffee this morning. So go grab a cup of coffee. Yes. Speaker 500:33:58Will do. Speaker 800:34:01The next question I had just kind of back to Jeremy's question a little bit on Northstar and capacity auctions. I mean MISO has sort of adopted a lot of the PJM changes around the VRR curve. So certainly, it seems like that will also go higher in next year's capacity auction, at least that would mirror what happened at PJM. So do you sort of hold off on some closing down some of these open positions further out on capacity until you see what that auction clears out so you have a better idea? Like I'm just trying to figure out the timing of how you work that, Troy? Speaker 100:34:37Our process has been with dig to just layer these in over time. That's really a derisking mechanism for us. And certainly, there are some times where we might strike at a price point that's a little lower than the future, but there are times when it's going to strike at a price point that's a little higher than the future. And so, we've had that approach. It really derisks and becomes a predictable source of earnings by taking these bilateral contracts or just kind of layer them in over time. Speaker 800:35:10Makes complete sense. Ties into the CUA. Thanks guys. Another solid quarter. Thank you. Operator00:35:18The next question today is from the line of Julien Dumoulin Smith with Jefferies. Please go ahead. Your line is now open. Speaker 200:35:26Hey, good morning team guys. Thank you so very much for the time. Appreciate it. Good to chat with you guys. Let's get that coffee going. Speaker 200:35:32So to the extent let's keep it going. Speaking of which, you guys had this pretty big swing in the cost number in that waterfall slide, you talked about that minus 0.15 dollars Last quarter that was a plus 9%. You mentioned in your prepared remarks, insurance and IT. Can you speak a little bit of exactly what's going on? Is there a pull forward going in there as well that's timing intra year? Speaker 200:36:00I mean, is there a wildfire impact that's impacting insurance? I'm just trying to understand what are the big pieces? Speaker 400:36:07Yes, Julien, it's Reggie. I appreciate the question. And let me provide a little bit more color on that. And so we have a number of cost related line items that we track throughout the year. We obviously have expectations going into the year and budgeted levels for across every cost category. Speaker 400:36:25And through the course of the year, some of those line items track ahead of budget and not in a good way, so higher than budget. And so we countermeasure that largely through the CEUA and other cost reduction initiatives. And in some cases as we get to Q4 and we don't think we'll have sufficient countermeasures to offset that, there are times we'll just sort of fund those cost categories at levels that we anticipate at the end of the year. And so sorry, I said differently, we had a level of countermeasures as well as Q3 weather health that have given us enough contingency to fund those cost categories to levels that we anticipate than being at the end of the year. And so we're just funding those costs. Speaker 400:37:06Insurance was one example. We had IT related costs that were trending a little ahead of budget. Another one is we also have some regulatory assets that are liabilities that are amortizing that are at higher levels in the prior year associated with our EV programs and others. And so it's a hodgepodge of cats and dogs that were just trending ahead of budgeted levels. And so that's really what we're funding there. Speaker 400:37:30And that's why you see that big increase in the Q4 year to go expectations versus where we were in our Q2 call. Is that helpful? Speaker 200:37:40Yes. So basically you said differently, you would Operator00:37:42have been holding off on funding Speaker 200:37:44some of that into 2025. You realize that you have the ability to do so, so you pull them back forward. Speaker 400:37:51Yes, I wouldn't call them a pull ahead. To be clear, these are not expectations of costs that we'll have in 2025 that we're trying to de risk. These are costs that we are incurring right now and the actuals we've seen in the 1st 9 months of the year in excess of what we've budgeted. And so we're applying some of the contingency that we've accumulated through countermeasures, Northstar outperformance and just plain old fashioned good weather in September and applying that contingency to just fund those cost estimates for the end of the year. So these are just 2024 funding and just basically updating our forecast to reflect the economic reality we're seeing across those cost categories. Speaker 200:38:34Wonderful. Thank you guys very much. Speaker 500:38:36Speak to you guys soon. Speaker 100:38:38Thank Operator00:38:41you. Thank you. Our next question is from the line of Travis Miller with Morningstar. Please go ahead. Your line is open. Speaker 900:38:48Good morning, everyone. Thank you. Speaker 100:38:51Hey, good morning, Travis. Speaker 900:38:52Hi, Travis. Hi. Hi. So on the REP, you've touched on this a couple of times, but the anticipating that sales growth number going up. As you were going through that process, not to front run this too much for the next couple of weeks, but as you're going through that process, did you have enough visibility in terms of sales growth from data centers and what you mentioned on manufacturing some of those kind of 20 fourseven type loads to be able to incorporate again some of the stuff you touched on in terms of storage and perhaps other renewable energy technologies. Speaker 900:39:30Can we see will we see that in this REP? Or is that something to look more for in the IRP? Speaker 100:39:41The short answer is yes, but let me explain more. In the renewable energy plan, we'll start out with the base or the foundation is really the 2021 integrated resource plan, which you'll remember calls for 8 gigawatts of solar and we've built some renewables as part of that as well. So that's the foundation. The first piece, well, the 2021 IRP did not get us to 50% renewables by 2,030 or the 60% number by 2,035. So there's some renewables that will have to be constructed or through a PPA with an FCM that will have to happen. Speaker 100:40:14That's tranche 1. The second tranche is specifically because there's additional sales expected as a result of economic development. And so we forecast that out over 20 years and so we do have visibility to it. But we have to have certainty around it as well. So these are items that we are we have high confidence around and we have signed contracts around. Speaker 100:40:35This is not the pipeline or some hypothetical numbers. It's, again, a reflection of what's coming to the state in terms of so we have, to answer your question directly, yes, visibility to that. That will also drive additional renewable assets or purchase power agreements to meet that need as well. So, if you continue to follow that down, I expect it to be a mix of solar and wind that will make that up. And then, of course, we'll talk about more details of that at EEI as we file that. Speaker 100:41:04So that's part 1. The second part that I would also is the IRP. And remember, the Renewable Energy Plan just deals with energy. You have to deal with the capacity. You have to deal with the reliability of supply. Speaker 100:41:17You also have the opportunity to accommodate additional sales growth. That will show up in the Integrated Resource Plan as well. So I see them as two mechanisms, 2 opportunities where we'll see those tailwinds of again ownership of assets, investments to deliver clean energy on behalf of our customers or through a PPA with the financial compensation mechanism. Speaker 400:41:41Travis, this is Reggie. All I would add is that if you look at Slide 6 in our presentation today, you can see on the left hand side of the page and Garik spoke to that some of this in his prepared remarks. There is a raft of opportunities we've seen from an economic development perspective. And I think we've got 8 or so listed on the page. Only 2 of those are in our current 5 year plan, Goshen and Ford. Speaker 400:42:02The rest of these are additive to our plan. So that offers some bread crumbs as to the additional opportunities we're seeing. And I will tell you that some of the opportunities that are pretty high in probability that we're still not quite in the plan yet are likely going to be coming to fruition in the coming months. And so there's a lot of opportunity that we've already seen since we rolled out last year's 5 year plan. And so at this point that's well stale. Speaker 400:42:26And so again, you'll see that update in our REP. You also see it in the 5 year plan that we roll out in Q4 next year in addition to the IRP as Garrick noted. So you get some visibility on Slide 6 today. And again, we're looking forward to talking about more opportunities in the coming months. Speaker 900:42:44Okay. That's great. Appreciate all that detail. Then one more for me on different subject, the Liberty audit. Would you anticipate on the regulatory side, the potential for putting in regulators to put in some kind of performance mechanism or something some kind of metrics to meet before you get approval for the additional CapEx or operating costs? Speaker 100:43:09I anticipate that we'll take the Liberty audit findings and weave them into our 5 year reliability plan, which will, of course, enhance that plan, provide opportunities for additional capital investments to again address reliability for our customers proactively, offering better service and a lower cost. So that will be part of it. I anticipate there will be additional tree trimming or operation and maintenance expect that will be woven into the plan as well as part of this Liberty audit. And as the commission one of the actions that the commission has already taken is a performance based rate making that's focused on reliability work. And so I anticipate that's woven into this work as well. Speaker 100:43:53I don't think it holds us up from making these important investments, and we're making them now and seeing good performance improvement in terms of reliability, and we just need to continue to do that important work. Speaker 900:44:06Okay, great. That's very helpful. Thanks so much. Operator00:44:12Our next question is from the line of Michael Sullivan with Wolfe Research. Please go ahead. Your line is open. Speaker 1000:44:19Hey, everyone. Good morning. I think it's been asked a couple of times now, but just to level set us for load growth and what's coming in the REP, my recollection is you have historically talked about 2% less 2% energy efficiency and you're kind of flat is kind of your base case today. And then it sounds like you're excited about all this kind of new load growth, but what's actually going to be reflected in the REP is going to be pretty conservative and not some big shift change. Is that a fair characterization? Speaker 400:45:01Michael, good morning. It's Reggie. Thanks for the question. So just to level set, our current 5 year plan that we rolled out in the Q4 this year had about 0.5 percent of electric load growth on a 5 year compound annual growth rate basis. And you're right, that number is always inclusive of energy waste reduction. Speaker 400:45:22And so if you wanted to grow set up, you could think about that as about 2.5% growth. And again, net of energy efficiency 0.5%. We expect pretty significant upward pressure on that growth rate in the IRP sorry, the REP renewable energy plan filing that we'll publicize in the coming weeks. And then we'll get another kick at the can obviously in the IRP filing about a year later. And again between that you'll get more color in the load growth assumptions embedded in the 5 year plan that we roll out in the Q4 of next year. Speaker 400:45:54And so again, you should see pretty material upward pressure. We do plan conservatively guilty as charged, but we do also want to reflect the reality of what we're seeing because remember this is a component in our rate proceedings. And so you will see again upward pressure on that those load growth assumptions. And to Garik's comments, we do really try to incorporate whether it's data centers, industrial companies, we try to incorporate those in the plan when they're close to being signed or effectively signed and moving forward. We really try not to speculate if we've seen some momentum across the state, but it's not coming to fruition. Speaker 400:46:29That's not something we'll put in our plan. So we're conservative from that perspective. But again, the takeaway here is that you'll see upward pressure on our historical growth estimates in this next cut. Speaker 1000:46:39Okay. So significant upward pressure, but conservative. I got it. And then just shifting over to the Elektra case, I also just kind of wanted to level set there. So it sounds like you are going to probably adjudicate this mainly because of the storm mechanism because this is kind of a first go around for that? Speaker 1000:47:02And what specifically are you asking for? And where is staff on that Speaker 100:47:09with respect to the storm specifically? Reggio will walk through the numbers in a moment. But Let me just start out by saying staff's position is a constructive starting point. And as I shared in my prepared remarks, there's a number of things that have been supported in staff's position. But there are some distribution investments for our customers that have, I would say, been left on the table. Speaker 100:47:31And we're focused on improving reliability. We know we can do that, offer better service. We're proving that out by our 5 year plan and we can do that at a lower cost, doing it proactively versus reactively. And so in addition to the storm recovery mechanism, which you referenced, which is also referenced in the Liberty audit as well, but we're also focused on those distribution investments to offer better service for our customers. And so there's a bit of advocacy we are doing on behalf of our customers, so we can make those investments to improve service. Speaker 100:48:00That is also a component of which may push us into an adjudicated order. But I'll remind everybody, I'm open to settlement. It's just going to have to continue to be more than where the staff is currently at. But, Reggie, just share with Mike where things are at from Speaker 600:48:18a cost perspective. Yes. Speaker 400:48:19Michael, the mechanics of the storm restoration tracker that we're proposing in our pending rate case, and if memory serves me, DTE is proposing a similar structure. We're essentially trying to take the 5 year average of service restoration expense and put in Speaker 900:48:36the Speaker 400:48:36equivalent of a true up mechanism where there's a 50% share for investors with customers in the event our level of service restoration expense is above or below what's embedded in our rate case. So to give you a specific numerical example, if we had $130,000,000 of service restoration expense in rates and a year in which we incurred $150,000,000 of actuals, dollars 10,000,000 of that would be absorbed by shareholders. So we'd have $10,000,000 of hurt flowing through our P and L and $10,000,000 would be established in a regulatory asset that we would recover at a later date. And so customers would fund that portion of it. And if we saw the numbers go the other way, you would assume a commensurate level of regulatory liability and so on. Speaker 400:49:21And so as we see it, that provides good alignment of incentives between investors and customers with a mechanism like that. And we will limit a lot of the volatility we've seen in our P and L over the last several years because the levels of service restoration expense embedded in rates have been well below actuals now for the last several years and counting. And so that's the spirit of it and have to spend more time offline on that if need be. Speaker 100:49:45And just to offer some numbers, your staffs had $170,000,000 at a 9.85 percent ROE, 49.9 percent equity ratio. Our rebuttal position were at $277,000,000 at 10.25 percent ROE, 50.75 percent equity ratio. So a little bit of cost of capital difference there as well. But I wanted to just make sure, Michael, you had the revised position of the company. Speaker 1000:50:11Okay. That's great color. Just real quick, staff on the storm specifically though, are they outright against it? Or they're just looking for a different structure than what you just said? Speaker 100:50:22They're not supportive of it, but again not supportive, but we expected that. Just like the investment recovery mechanism, it had to go to the commission. And we anticipate some mechanism like this will require the commission to weigh in on. And so it's not a surprise where the staff is at. And again, if we're going to go after that, it's going to go likely to a full order. Speaker 1000:50:46Okay. Thanks for sending me through all that. Appreciate it. Speaker 100:50:51You're welcome. Have a great day, Michael. Operator00:50:55Our next question is from the line of Andrew Weisel with Scotiabank. Please go ahead. Your line is open. Speaker 500:51:03Hey, good morning, Andrew. Hey, Andrew. I was also going to ask about I was also going to ask about settlement. I guess, I appreciate the detail there. I guess, if there were to be a deal to be made, what would be the window for that? Speaker 500:51:18Or is it a relevant condition that happened? Speaker 100:51:21Yes. We're in that window now. And so really up to a final order is the window of opportunity for us. And so and we'll look again, we'll look, I'm always open to settlement. I've said that on calls before. Speaker 100:51:37If we can make things work for our customers and for all stakeholders, I mean, that's a good place to be. There's just a couple of things in this case that may force us into a full order and we just want to make sure everyone on the call is aware of that. Speaker 500:51:54Yes, understood. New tools are often a policy question, so I understand that completely. The other question I wanted to ask about the CapEx update. I understand we'll have to be patient on the numbers. But the two things I wanted to ask about, number 1, just qualitatively, it sounds like there's going to be a lot of things going into that. Speaker 500:52:12There's always the business as usual updates, but you've got spending around the REP, you've got spending around the Liberty reliability audit, you've got the electric reliability roadmap with stuff going in there, plus you've got sort of a step change in demand growth from data centers and manufacturing. What I'm getting at is, should this be a meaningfully bigger increase than what we've seen in recent years? And if so, how should we think about financing that? You previously talked about up to $350,000,000 per year of equity in 2025 and beyond. I'm guessing there might be an upside bias to that given all the pieces that I just mentioned. Speaker 500:52:51How should we think about a rule of thumb about incremental equity needs per incremental dollar of CapEx? Thank you. Speaker 100:52:59Remji and I will tag team this one, but I want to remind you that many of the tailwinds that we described in this call come as a result of approval of the renewable energy plan or approval of the IRP. And so although we'll file it in November of this year, fast forward 10 months, so it's going to be in late Q3 of 2025 before we see where the commission is at with that. So I wouldn't expect some of that good work to show up until our Q4 call of at the end of 2025 or early part of 'twenty six. And then you'd have the same cycle for the IRP, which would start in 2026 and then play out in 'twenty seven. So I see these as tranches that go over time over the 5 years. Speaker 100:53:44Clearly, there's some tailwinds here, but they show up at different points in time. But I'll turn it over to Reggie to offer some additional color. Speaker 400:53:52Yes. I think that's exactly right, Andrew. I mean the governors we've talked about and when we prepare our capital plan, our affordability, balance sheet and then operational feasibility, can we get the work done and those remain governors. But the 4th governor at this point is the pacing to Gerrick's comment. And so just the time for the commission to review the REP, the time for the load opportunities to materialize, yes, we signed contracts, we interconnect these opportunities, but it takes a while for the build out of a manufacturing facility or data center. Speaker 400:54:25So the pacing is going to certainly dictate, when we'll be able to bring in all of this additional capital opportunity and see the load materialize, which effectively will fund those capital investment opportunities. So that's really the 4th governor at this point, but you will see upward pressure for sure on the $17,000,000,000 5 year CapEx number we've provided at this point. So without a doubt, but it'll be pacing before you see the material bump. But I feel very good about the underlying earnings growth and rate base growth that will come from the next vintage. With respect to equity, Speaker 700:54:57as you know and as Speaker 400:54:58you stated, we have said no equity obviously in 2024 and then up to $350,000,000 starting next year and we've said that's a pretty good run rate for the current $17,000,000,000 capital plan. And the sensitivity I'll share with you as you think about incremental capital going into the plan and what that might drive in terms of incremental equity needs. As a general rule of thumb is for every dollar of CapEx we invest at the utility, we usually fund it with around $0.35 to $0.40 of common equity and that has been tried and true for some time. Now what's interesting over the last, I'll say 2 to 3 years is that we've seen downward pressure on that sensitivity in terms of the equity needs and it's really been driven by a few things. 1, obviously, we just continue to generate substantial cash flow in the business because of the forward looking test year and the rate construct in Michigan. Speaker 400:55:48So I'll give an example, our prior 5 year plan of $15,500,000,000 of capital generated about 12,500,000,000 of operating cash flow over a 5 year period in aggregate. This current vintage is $17,000,000,000 We expect $13,200,000,000 of cumulative operating cash flow generation vintage over vintage. So almost $1,000,000,000 of increased vintage over vintage and so just good cash flow generation, that's 1. Number 2, the ability to monetize tax credits afforded to us through the IRA, that's another big driver of liquidity and effectively a new source of equity that's helping our metrics and then just offering another layer of liquidity to fund our capital plan. So that's also helpful. Speaker 400:56:29And we did our first tranche this year about $90,000,000 of dispositions. And we did that at levels better than planned, meaning the discount to par was better than we thought it would be. And so I anticipate us doing more of that over time. And then the last one is just I feel like a broken record. And I said this is we do plan conservatively. Speaker 400:56:49And so for the debt we're going to issue at the holding company, we're assuming it's straight debt with no equity credit, but we've been known to issue subordinated notes or hybrids in the past. Those get now a greater level of equity credit from Moody's as you know. And so we're at 50% now. And so if we start to see pricing for those types of securities improve over time, that creates an opportunity also to put downward pressure on that sensitivity because obviously if we see pricing comparable to what our debt assumptions are in our plan, then we can do hybrids at a level that's credit accretive and EPS accretive to plan. And so those all create opportunities for us to really minimize the equity needs as we increase the capital in our 5 year plan. Speaker 500:57:35Okay. That's extremely helpful details there. Thank you very much. So just to be clear on the CapEx numbers though, so we should not expect numbers related to the REP or IRP, but we should expect upside to CapEx related to reliability and the demand and economic development. Does that maybe a fair way to put it? Speaker 400:57:57Yes. You certainly won't see the full magnitude of opportunities associated with the REP. And the only reason I'm qualifying the comment a little bit, Andrew, is that you start to earn on PPAs effective mid this year. And so we'll assume additional PPAs going forward. And so we'll start to see that opportunity associated with the renewable energy plan scale every year because we're doing PPAs for renewables every year. Speaker 400:58:23We'll probably start to layer in some of the capital investment opportunities in the outer years of the plan. And so you'll see some of that we've done and you'll definitely see your comment reliability and resiliency. But again, the lumpier opportunities associated with the energy law, you won't see until the really starting in the 2026 vintage of our 5 year plan. 6 vintage of our 5 year plan. Speaker 500:58:42Okay. Appreciate you clarifying. I guess maybe I needed some coffee this morning as well or some early Halloween candy perhaps. Thank you guys. Operator00:58:59And as for our next question, we'll move to the line of Angie Storozynski with Seaport. Please go ahead. Your line is open. Speaker 1100:59:07Thank you. Thanks for squeezing me in. So I just have one question. So when I look at your current supply stack on the system, I mean, how much of it is imports from like self generation versus the imports from the grid? And I understand that the MISO dispatches assets, etcetera. Speaker 1100:59:26But I'm just debating how much of spare capacity do you have of your own right now? I mean, if I were to be an industrial customer or hyperscaler, how much could you offer me in megawatts right now? Speaker 100:59:43Well, let me offer you this and then we'll talk a little bit about the mix from MISO and the like. After our 2021 integrated resource plan, we were along from a capacity perspective and there was a couple of things. One, we kept additional assets available to us as part of the settlement. We acquired the covert generating facility, it was 1.2 gigawatts. In the meantime, since 2022 when that was approved, we've also built out renewable assets, both wind and solar and both there's some PPAs as well as some owned assets. Speaker 101:00:13And so that's actually put us in a position where we've been long and we've been able to accommodate a lot of sales growth. And then as a reminder, we have the mechanisms, both the renewable energy plan and the integrated resource plan, with some flexibility in those because we look at them 2 years on a renewable energy plan basis, every 3 to 5 on an integrated resource plan. But we can pull those up and adjust those as needed to be able to accommodate the additional growth. The 3rd piece with these hyperscalers is working with them because they're not going to all come on immediately. And they have plans on when they want to ramp up. Speaker 101:00:45That's also true with manufacturing. And so they may need a starting load in 2026, but their full ramp up doesn't get out to 2028, 2029, 30. And so there's a lot of work that we do with the customers to make sure we get that right. And so there's a lot of flexibility we have to make sure the supply and demand stack match up nicely and we can grow Michigan in the state. Now we do leverage MISO to be able to do that. Speaker 101:01:12And if you look at our total mix, it's about 46%, 40 ish 5% that we either have through PPAs or through purchase off market. Remember those PPAs act as both capacity and energy as well in that mix and then the rest is self generated. Speaker 1101:01:33But again, I'm just again, I'm debating it myself. If I were to cite, like a big industrial facility or a data center, I would probably care about the speed to power, right? So this initial availability of megawatts would probably matter to me. So you're saying you are long power even right now. So even say, the next say, 24 months, there is a spare capacity that you could allocate to such a user? Speaker 101:02:07The short answer is yes, and we work closely with customers to be able to do that. I'll give you a real example, and it just hit the press today. We talked about in Q1, but we couldn't name the company, Switch, which is an existing data center in Michigan, is expanding by 2 30 megawatts. They want to be up by full load in 2026. We're able to do that. Speaker 101:02:28We're able to deliver that. That's the electric infrastructure, both with our transmission partner and the distribution infrastructure as well as ensuring we have the supply. And so that gives you a little nature of our ability to deliver on that. And as we entertain other hyperscalers and other manufacturing, again, we work with them closely to match up the ramp up schedule. I gave the example of Corning as well in my prepared remarks. Speaker 101:02:53Corning wants to have load on by Q1 of 2025. We're constructing the substation right now. We will deliver that. But again, ramp up. They go from a small amount of megawatts up to 90, 95 megawatts, but that of course is over a year. Speaker 101:03:07And so we pace that along with that company. So those are two real examples, real work going on in the state and just gives you an idea how we work with customers to grow Michigan and grow in our service territory. Speaker 1101:03:21And what if there's like a very big site that say a gig of eventual capacity. I mean, is this something that you feel comfortable accommodating? I mean, it is obviously, it would probably require a large well, 2 large combined cycle gas plants to be built. How do you think about those sort of very big projects? Would you prefer to have smaller sites? Speaker 1101:03:47Or is there from like a risk perspective, do you think comfortable accommodating the big loads like that? Speaker 101:03:54We welcome growth in Michigan. I mean there's nothing better than creating jobs. And we've got a constructive I mean we're doing a lot of on shoring. It is truly a manufacturing renaissance. We're certainly open for data centers as well. Speaker 101:04:06And we work with those customers, large sites, small sites, to create opportunity for all stakeholders in the state. And so it doesn't we don't back away from a gigawatt load. Some of those are on one site. Some of those are across multiple sites. And it's really, again, working with that company and their ramp up schedule and when do we need to provide that and match that supply demand mix. Speaker 101:04:30We've been doing this for 135 years. I used to be I started out my business in the business, I should say, on the supply side. So I get this. And that's what we do as a load serving at N and D. And we have the mechanisms within the construct to be able to do that with success. Speaker 1101:04:47And just to make sure, and how do you, for example, ensure that this load actually materializes? Like when we look at power companies, like they have those take or pay contracts. How do you ensure that if you make the investments, actually the load will happen? Speaker 101:05:05One of it's contractually, but it's also, as I shared in my earlier remarks, making sure we've got a good from a rate design perspective, a cost of service model. That's how we operate in the state of Michigan. And so that makes sure that other customers aren't subsidizing that work. And as I shared, we're working closely with commission and commission staff with data centers to see if there's additional rate, compact or construct to be able to further ensure that residential customers aren't subsidizing or footing the bill for data centers. Speaker 1101:05:43Very good. Thank you. Operator01:05:48Our next question will be from the line of Anthony Crowdell with Mizuho. Please go ahead. Your line is open. Speaker 301:05:56Hey, good morning team. Thanks for squeezing me in. I know it's a tough morning with Shah telling you what music to listen to and Ross telling you what to drink. So I'll keep it quick. Just, and I apologize, I think it's up to Mike to follow and Mike Sullivan's question, the load drills update. Speaker 301:06:13Will we get that on the Q4 call on when you file the IRP? Just when is the most up to date of the low growth? Speaker 401:06:25Anthony, this is Reggie. Yes. So you will get a load forecast update in the renewable energy plan that we'll file in the coming weeks. And you will also we will also have a load growth update a few months later, that's supporting the 5 year plan that we'll roll out on our Q4 call in the Q1 of 2025 as we always do. So you'll get a couple of bites of the cherry from a load growth perspective. Speaker 401:06:55And as Garik noted in his earlier comments, you'll also see a load growth update about a year from then, maybe a year and a half in the context of our IRP filing. So we'll have an iterative process for load disclosure. And again, as I said earlier, I expect upward pressure certainly on the current estimate of 0.5% that would certainly go up and it will likely accrete beyond that. So looking forward to sharing those with you in the coming weeks months. Speaker 301:07:20Great. And then just lastly, one of the earlier questions you talked about how the financing needs of the company. Also, I think the amount of equity now maybe 30% to 40% for every dollar spent. You also mentioned tax credits were going to be instrumental. Has the company quantified what we could assume for transferability over the next 5 years? Speaker 401:07:44So the latest number I'll guide you to is what we have embedded in our 5 year plan, Anthony, and that's a little over $500,000,000 But again, I expect that number to increase over time just based on the quality of the execution and also the anticipation of more renewable ownership should allow that number to accrete. And so this current plan has $500,000,000 in aggregate over 5 years. And again, as we provide an update on our 5 year plan on our Q4 call in Q1 of next year, I'll provide a revised number and I'd be surprised if that number doesn't continue to increase. Is that helpful? Speaker 301:08:22Perfect. Thanks for taking my questions and see you in Hollywood. Speaker 401:08:25Yes. See you in Hollywood. Operator01:08:30We have no further questions in the queue at this time. So I would now like to hand the call back over to Mr. Garik Rashel for any closing remarks. Speaker 101:08:38Thanks, Harry. And I'd like to thank you for joining us today. I look forward to seeing you at EEI. Take care and stay safe. Operator01:08:48This concludes today's conference. We thank everyone for your participation.Read morePowered by