Gerardo Norcia
Chairman & Chief Executive Officer at DTE Energy
Thanks, Barb and good morning, everyone and thanks for joining. I'll give a brief business update and Dave will provide a financial update before we take your questions.
Now let me start by emphasizing a few points, including my confidence in the company and our long-term opportunities. As you know, we have faced unprecedented headwinds this year. And these events have impacted our financial plan by $370 million. However, the combination of these headwinds is truly onetime in nature and the fundamentals of DTE remain strong. We have a solid record of achieving our financial targets and we know how to do so without sacrificing safety or reliability.
This year alone, we have offset $270 million of earnings headwinds from the unprecedented combination of storm activity, unfavorable weather and a low rate order driven by a difference in the sales forecast. The fact that we have been able to offset most of these challenges while maintaining service excellence is a clear proof point of our highly engaged team and commitment to operating excellence. DTE also benefits from strong cash flows and a solid balance sheet that support continued investments that will build the grid of the future and drive the clean energy transition. Our long-term growth plan is robust with numerous opportunities for these investments. And as I said, we have an incredible team of highly engaged employees who are committed to our customers and who know how to execute safely and efficiently.
Our team continues to operate a top decile engagement levels as measured by the Gallup organization. I'm proud that our team's excellence in this area was recognized by earning the Gallup Exceptional Workplace Award for the 11th consecutive year. My confidence in DTE and our ability to deliver for our customers while being a stabilizing force in our communities and creating significant sustainable value for investors over the long term is unwavering. We remain focused on continuing to invest the strategic capital that further supports improved grid reliability in the face of changing weather patterns and further electrification and the transition the cleaner sources of generation.
The heightened storm activity this year also highlights the importance of our investment plan and DTE is delivering on its commitment to automate, harden and rebuild the grid to improve reliability by over 60% over the next 5 years. Our recently filed distribution grid plan provides our road map to improve reliability and automation of our system. Also supporting our investment agenda is the IRP settlement. This plan outlines our investment in Michigan's cleaner energy future while remaining very focused on customer affordability. We are progressing toward a constructive outcome on our electric rate case. This case is critical to support the customer-focused investments that are needed for improved reliabililty and cleaner generation. Our customers and political leaders, including the governor, legislators and municipal leaders are demanding better outcomes and reliability during heavy storm periods. This doesn't happen unless we execute our strategic investment plans to modernize and automate the grid.
We also need to resume our maintenance schedule on noncritical work that we deferred on a onetime basis this year. It is essential to resume this important scheduled work to continue delivering safe and reliable service. We met with the intervenors in the electric rate case and outline the importance of the infrastructure investments we need to make, while also gaining a deep understanding of their priorities. While we were not able to reach a settlement in this case, we have put a compelling case together for the work we need to do for our customers. We are confident that the Michigan Public Service Commission will appropriately support the investment that is needed in the state. The final order is expected in early December.
As I mentioned, our company faced $370 million of unprecedented headwinds this year. This represents nearly 30% and of our total earnings forecast. We said on the second quarter call that we were in a position to deliver at the midpoint of our operating EPS guidance range if normal weather and storm activity occurred through the remainder of the year. However, unfavorable weather and additional severe storm activity did occur in the third quarter and these latest challenges brought over $100 million of additional headwinds to our financial plan. So we are revising our full year EPS guidance midpoint from $6.25 per share to $5.75 per share. This is not the type of result that my team and I like to report to you. In my 10 years as the number 1 and number 2 person in DTE's leadership team, we have consistently met or exceeded our targets. So you can imagine that we don't like reporting these results to you today.
As I mentioned, we are continuing to wait for a final order on our electric rate case. Therefore, we will delay providing the forward-looking disclosures that we typically provide on the third quarter call or at the EEI conference until we get a final resolution in the case. We will then provide these disclosures in December, including our 2024 early outlook and dividends, extending the long-term EPS growth rate through 2028, updated 5-year capital plan, updated 3-year equity plan and our long-term operating earnings for DTE Vantage.
Let's turn to Slide 5. As we discussed through the second quarter, the company experienced the impact of the lower-than-expected rate order that we received at the end of last year, driven by a difference in sales forecast of approximately $100 million, followed by $92 million in impact from storms, including the worst ice storm in nearly 50 years and unfavorable weather of $42 million at Electric and $31 million at gas. On the second quarter call, we said DTE Electric was achieving offsets for over half of its headwinds through focused onetime cost reduction efforts without sacrificing safety, reliability or customer service. And as a result, we noted that electric would likely fall below its full year guidance. However, we had favorability at each of our other business units, helping to overcome the remaining headwinds to achieve our full year EPS guidance. So at the time, we were on track to be at the midpoint of our guidance range if we had normal weather and storm activity and we had already consumed our contingency.
In the third quarter, we had additional pressure of $53 million from storms and $53 million from cooler than normal summer weather. So far this year, we have faced 5 catastrophic storms which is double compared to the average number of catastrophic storms over the last 5 years. We are very proud of our team's efforts to safely restore power during each of these weather events. That being said, these restoration efforts are costly. And while we do budget for storm costs, the number of catastrophic storms this year, including a historic ice storm significantly impacted DTE Electric earnings.
Along with storm activity, we have seen unfavorable weather in our service territory for electric and gas this year. The winter was the fourth warmest winter since 1960. And the summer was one of the coolest in nearly a quarter century. This was very different from the record heat that was experienced across most of the country. Much like for storms, we prepare for unfavorable weather scenarios during our planning process. Our lean and invest plans are structured to cover weather variability. This year, the winter and summer weather combined was much more unfavorable than we have seen. It has been an unusual year, having both high storm activity at electric and unfavorable weather at both of our utilities. This dynamic has certainly created a significant challenge to our company in addition to the low rate case order.
So we faced a combination of 3 major headwinds. And only 2 of these occurred, we would have been able to achieve our original EPS guidance target. Having all 3 factors stack up against us exceeded all reasonable planning scenarios. As a matter of fact, we had our statisticians look at the probability of greater than 1 standard deviation temper [Phonetic] patterns of both utilities and the number of storm customers impacted all occurring in the same year and it is a once in a 50-year probability. Overall, the team has made excellent progress on onetime management actions across the entire company and finding opportunities within our portfolio. However, with the additional challenges in the third quarter, we are now lowering the operating EPS guidance for 2023.
Now let's move to the opportunities we have in front of us on Slide 6. DTE is on track to make significant customer-focused capital investments across our businesses. Two important factors affecting our grid, our climate change and emerging electrification technologies. We need to build the grid of the future to ensure we can continue to provide clean, safe, reliable and affordable energy. We are also making investments to transform the way we produce power as we shift towards renewables and natural gas and away from coal generation. An important part of our clean energy program is our voluntary renewable program, My Green Power. This program continues to grow with a number of new large customers subscribing this year. We have 2,400 megawatts described, including over 90,000 residential customers. Highlighting our success to National Renewable Energy Laboratory has recognized DTE as having the largest green tariff program in the country, fulfilling more load under contracted subscriptions than any other program.
Additionally, at our gas utility, we continue our important main renewal work which further reduces greenhouse gas emissions. DTE makes all of these investments with a sharp focus on customer affordability. Our distinctive continuous improvement culture drives cost management. The shift from coal to natural gas and renewables also helps to further reduce O&M costs. Our diverse energy mix helps to reduce fuel costs as well and allows us to maintain flexibility to adapt to future technology advancements. The IRA supports this transition to renewable energy while achieving customer affordability goals and further enhances opportunities for growth at DTE Vantage.
Before I turn the call over to Dave to read more details on the financials, I want to reiterate what I said at the start of the call. DTE has a strong operating foundation and an excellent team with a proven record of execution, a long runway of investment opportunities and a solid balance sheet to support these investments. So we remain well positioned to deliver premium total returns while providing cleaner, reliable and affordable energy to our customers.
Dave, over to you.
