Q1 2022 DTE Energy Co Earnings Call
Modernizing our system Operation Center, which started operating in February .
And enhanced cyber security.
We remain committed to meeting our long term reliability targets and improving our customers' experience.
Moving on to our communities, we are making strides in providing support through our workforce investment priorities, which include increasing the number of jobs for those with barriers enhancing job readiness and attracting employers to Detroit and other areas in Michigan.
One example of our efforts is to treat from Academy, we built right here in Detroit.
This program trains individuals to become a premises and importantly, it teaches skills to prepare them for the responsibilities of the job.
Three trim jobs bring prosperity to people who pursue them.
It also offer a strong pipeline to longer term opportunities such as overhead line work.
Upon completion of the tree trimming Academy graduates begin their apprenticeship.
Which takes about two five years to complete.
During this time journeyman treat tumors make a good wage with full union benefits for themselves and their families.
Great example of matching a business need with the community need and Thats when we get magic.
We're proud that our future Academy was recently recognized by Boston College with its innovation award in the category of transformative partnership.
With highly engaged employees customers are satisfied with their service at.
The communities that are resilient and thriving we will continue to deliver value for our investors.
Let's turn to slide five.
We delivered a strong first quarter with operating EPS of $2 31.
Fueled by solid performances across all of our business lines.
And we are on track to deliver 7% operating EPS growth from our 2021 original guidance midpoint.
At DTE Electric we filed our first general rate case in almost three years.
This rate filing is really about moving our infrastructure investments forward and we continue to focus on doing this in an affordable way.
I'm proud of the work we've done with the Michigan Public Service Commission to develop innovative ways to maintain affordability.
And we will continue to focus on keeping rates manageable as we invest in our system.
Following a very successful 2021 for my Green power, our voluntary renewables program.
We hit an important milestone in early 2022.
With over 50000 residential customers now subscribing to the program.
At DTE gas, we're accelerating the 35% reduction target of scope three customer greenhouse gas emissions a full decade.
From 2015 to 2040.
Advancements in greener technologies like green hydrogen carbon capture and sequestration renewable natural gas and customer voluntary offset programs will enable the company to accelerate this goal.
We also continue our important main renewal work.
Targeted completing another 200 miles in 2022.
Ensuring we can continue providing safe and reliable service to our customers.
Our natural gas balanced program is also progressing.
And we have over 6500 customers subscribed to offset their greenhouse gas emissions.
We are proud of how this first of its kind program is growing.
Additionally, DTE gas launched another project that showcases our commitment to a clean energy future in Michigan.
We partnered with the city of Grand Rapids to help supply of renewable natural gas to fuel their vehicles.
This R&D will supply Dte's natural gas fueling stations as well as power buses and fleet vehicles.
At DTE vintage, we have multiple onsite energy projects and dairy R&D projects coming online in the second half of the year.
This is in addition to the conversion project I mentioned on our year end call that goes into service in 2023.
With this new project DP, and our 50% partner, we will build a new LNG facility to take biogas from.
From a Michigan based landfill and converted into pipeline quality renewable natural gas. Additionally, we have a strong pipeline of projects that support growth in this business, including <unk>.
Additional landfill the LNG conversions.
We feel great about our strong start to the year and we're confident in achieving our 2022 operating EPS guidance.
Our robust utility capital investment plan of $18 billion over the next five years and $40 billion over the next 10 years supports our future growth.
We have a history of achieving the high end of our operating EPS growth target.
And as I've said, we continue to evaluate our long term growth target and expect to provide an update on this later in the year as we update our five year plan.
We're also targeting dividend growth in line with our operating EPS growth.
Now on slide six.
We're more focused than ever on our environmental initiatives.
Including several significant milestones in 2022.
The Blue water Energy Center, our new natural gas plant is on track to go into service later this quarter.
This state of the art facility has an 1100 megawatt capacity and was constructed on time and on budget.
Also this year, our Trenton channel and St. Clair power plants will cease operations.
After this transition roughly 38% of Dts generation mix will be attributable to coal.
And by 2028 after we ceased coal use at our 1000 megawatt Belle River power plant.
Coal will represent less than 30% of our generation mix, we are well on our path toward our net zero emissions goal.
As we highlighted last year, we are filing our integrated resource plan in October of this year do you need to evaluate the opportunity exit coal use of the Monroe power plant earlier than 2040.
We hosted meetings for the public to participate in shaping our clean energy plan.
Getting our stakeholders input early in the process ensures that what matters most of them.
Taken into consideration.
As we work to achieve the right balance of energy resources that will provide cleaner affordable and reliable power for decades to come.
I'll just round out my comments by telling you how very excited I am about the position of our company.
The progress we have made and the opportunities we have in front of US we are off to a strong start in 2022, and we are in a great position to deliver on our targets.
We are seeing favorability at both utilities, we are finding ways to use this favorability to create a highly successful year in 2023.
As well as the years beyond that.
And the longer term I've highlight a number.
Number of investment opportunities this morning, including the acceleration of coal retirements and transition to more renewable power.
Building the grid of the future to combat more severe weather and support the prospect of significant demand growth.
And finally, the continued replacement of cast Iron main in steel in our gas utility system.
Repairing that business for long term success.
As you can see.
We have a great line of sight of customer focused investment in our system for the next decade.
This puts us in a strong position to deliver for our customers and investors in both the near term and the long term.
With that I'll turn it over to Dave to give you a financial update.
Thanks, Gerry and good morning, everyone.
Let me start on slide seven to review, our first quarter financial results.
Operating earnings for the quarter were $448 million this translates into $2 31 per share.
You can find a detailed breakdown of EPS by segment, including a reconciliation to GAAP reported earnings in the appendix.
I'll start the review at the top of the page with our utilities.
DTE electric earnings were $201 million for the quarter ahead of our internal plan, but slightly lower than the first quarter last year the.
The drivers of the variance were higher rate based costs and higher O&M, which included the additional investment in the acceleration of our vegetation management program.
This was partially offset by cooler weather and the acceleration of the deferred tax amortization in 2022 that was implemented to delay the filing of a rate case and keep rates flat during the pandemic.
Moving onto DTE gas operating earnings were $196 million.
$27 million higher than the first quarter of 2021.
The earnings increase was driven primarily by the implementation of base rates and cooler weather in 2022.
Actually offset by rate based costs.
Let's move to DTE vantage on the third row.
Operating earnings were $14 million in the first quarter of 2022.
This was $14 million decrease from the first quarter last year due to the sunset of the RF business at the end of 2021, partially offset by higher R&D earnings this quarter.
We remain on track to achieve full year guidance at <unk> advantage.
On the next row, you can see energy trading had another strong quarter, mainly due to strong performance and also some timing in our physical gas portfolio.
The accounting timing favorability was largely due to strategic long positions that support physical positions later in the year.
Due to these timing related gains were not changing our conservative full year guidance as some of the favorability could reverse later in the year.
Finally, corporate and other was favorable $22 million quarter over quarter, primarily due to the timing of taxes.
Overall DTE earned $2 31 per share in the first quarter. So a strong start to the year puts us in a great position for the remainder of 2022.
Let's turn to slide eight.
We continue to focus on maintaining solid balance sheet metrics.
Due to our strong cash flows DT is minimal equity issuances and our plan beyond the equity units that will convert later this year.
We have a strong investment grade credit rating and target an episode of debt ratio of 16%.
We increased our 2022 dividend by 7% continuing our track record of growing our dividend in line with the top end of our targeted EPS growth rate.
In the first quarter of 2022, <unk> completed a green bond issuance of $400 million.
This is ete's fourth green bond issuance in the past five years for a total of over $2 5 billion.
DTE as Michigan's leading producer of an investor in renewable energy and these funds support our net zero emissions goals.
Let me wrap up on slide nine and then we will open the line for questions.
In summary, we feel great about the start to the year.
Through the remainder of the year <unk> will continue to focus on our team customers communities and investors.
We are on track to achieve our 2022 operating EPS guidance midpoint of $5 90 per share, which provides 7% growth from our 2021 original guidance midpoint.
Our robust capital plan supports our strong long term operating EPS growth, while delivering cleaner generation and increase reliability and focusing on customer affordability.
<unk> continues to be well positioned to deliver the premium total shareholder returns that our investors have come to expect with strong utility growth and a dividend growing in line with operating EPS.
With that I. Thank you for joining us today, and we can open up the line for questions.
At this time, if you'd like to ask a question press star followed by the number one on your telephone keypad. If you would like to withdraw your question again Press Star. One. Your first question comes from the line of Shar <unk> with Guggenheim Partners. Your line is open.
Thanks.
Hi, Good morning, Gary and team, it's actually good morning Shar.
Hey, How're you doing.
Congrats on a great quarter and start to the year.
My first question on the IRT.
Michigan had strong recent data points, our biography mechanisms like the regulatory asset treatment.
The increasing administrative support for clean energy.
How does that inform or change the outlook for the October <unk> do you see a stronger case for some some of the accelerated retirement that you've been talking about.
We do.
We thought it was a really constructive outcome, which.
<unk> continues to be the case here in Michigan, we have constructive policies energy policies and a constructive commission to administer those energy policy. So we're really encouraged by it and we're also really encouraged by the fact that it's a balanced outcome between renewables and dispatch will resources to ensure both reliability and affordability for the state.
So as it relates to our ERP.
You need to interact with various stakeholders and <unk>.
And their feedback and we are looking to.
Retire Belle River as we mentioned off of coal use in 2028 and converted to gas.
And certainly are looking really hard at how aggressive we can pull forward the retirement schedule for the four units at Monroe, which is our largest coal plant. So much of that is in progress. So we're.
We're highly encouraged by the outcome.
Certainly will support what we plan to file.
Okay.
Thanks.
Paul.
We're thinking about the longer term financing needs youre, notably stand higher than.
Some of the peers on metrics.
Combined with the business mix improvement over the years, the envision more flexibility from rating agency thresholds and is there a range of scenarios, where you could utilize some of that dry powder like you talked about the opportunities on higher fee with LNP et cetera.
Yes, Hi, this is Dave Ruud how are you.
Yes, we do.
Still have that pretty conservative, 16% <unk> to debt number that's in there.
When you look across some of our peers and with the rating agencies that does give us.
Some good headroom to any of the downgrade levels. So we like the position. We're in now we'd like to have that strong position, but.
It's something that we'll continue to think about as we go forward.
Okay.
Excellent and then maybe just.
A quick aside on meeting advantage is the focus still on R&D growth.
You kind of noted the market getting a little bit more competitive.
But there has been some opportunities.
R&D into rate base on the regulated construct is there potential parallel path forward there.
Right now, we're concentrating on greenfield projects in the LNG space and we've been able to find.
Really nice projects that give us a mid teens type of Unlevered returns after tax.
Cash paybacks of three to five year timeframe and I should just stop.
Found a project like that in Michigan, where we're actually converting it.
From power generation to RMG.
Ours are even stronger than the ones I mentioned for those types of projects and we've got a.
Good list of opportunities in that regard.
We're very selective because we're only looking for $7 million to $8 million a year that come from that space and the other half of our growth is coming from on site projects management.
Outside of energy infrastructure in that we've got a good some good prospects in that space as well and those are typically underpinned by long term fixed fee type of arrangements with good arris. So.
Good good pipeline of opportunities there, we're still continuing to see nice growth advantage.
And in terms of rate base.
We do have an R&D project that we're doing with.
The city of Grand Rapids, but its really their wastewater treatment facility is producing LNG in and we're investing to make.
<unk> pipeline quality and injected into our system, so that some opportunity, but I would say that's that modest at this point in time.
Okay understood. That's very helpful. Thanks, so much thanks for taking the questions.
Thank you.
Your next question comes from the line of Jeremy Tonet with Jpmorgan. Your line is open.
Hi, Good morning, it's actually Ryan <unk> on for Jeremy Thanks for taking my question.
Good morning, Ryan.
Good morning, guys I just.
I wanted to follow up on GTE vantage there and.
Hi.
I appreciate you guys keep kind of finding attractive projects, but just thinking through the relative kind of competition in the R&D space would you consider any point, maybe monetizing that asset or partial monetization or do you still kind of.
Yes, a good runway to kind of keep growing it organically.
While we certainly see a good runway to continue to grow organically and we've been really focused on our organic development.
Sure.
Looking at existing operations, they are attracting a very high premium.
So when you asked about would we consider selling that business, we're always looking for ways to optimize and maximize shareholder value.
I think you can see that in our <unk>.
<unk> five three year and one year, we're at the top of the top of our peer set and that's because we always look for ways to maximize value. So we do see an opportunity where it could be valued more than how it is currently valued in our portfolio, we would seriously consider that.
So we're always on the lookout for those opportunities.
Understood I appreciate the color.
And then just one for me on what Youre kind of seeing at this point on the supply chain side.
Solar in particular has been a big focus across the sector.
I don't know if there's anything.
You kind of note that you are seeing across your supply chain or any concerns you have added over the remainder of the year either on the O&M side of the capital side.
Yes, I would say on the solar piece, obviously, that's a big topic in the industry with the recent department of Commerce matter, that's evolved that I'm sure. Many of you are familiar with.
For 2022, there is no impact we have what we need.
It did have a build in 2023.
About 300 megawatts.
There, we're looking to build to support our voluntary program.
If that was delayed into 2024 because of the department of Commerce actions that really have no impact on our 'twenty two 'twenty three earnings.
And we can manage through that quite easily.
If it persists longer term certainly we have a deep portfolio of capital investment opportunities at our utilities.
We could deploy.
Before.
But we're still really excited about our voluntary program, where you've got about 1000 megawatts signed up already.
Another 200, and what I would say late stages of negotiation. So it's still a very active program on our customers' loved the product.
We're hoping that this.
Issue with the department of Commerce resolves itself quickly.
Sounds good thank you.
Your next question is from the line of Julien Dumoulin Smith with Bank of America. Your line is open.
Hey, Good morning. This is Darius on for Julien. Thank you for taking the question.
Good morning, I, just wanted to I just wanted to touch on briefly about.
I think you mentioned in the opening remarks later in the year expecting an update on the long term cadence. Just curious are you waiting on any specific.
Input store developments between now and that expected update or is it more just a preference to maintain your historical cadence.
Giving that update usually in the November timeframe.
Well I would say that.
One of the key things that we're looking to finalize our integrated resource plan.
Which we will file in October .
And that will provide significant.
Construction, if you will in terms of what our long term capital plans will be and so that's why we're timing it with sort of a fall period in terms of updating our long term five year plan and thats pretty traditional how we do it. So I think two reasons one is.
The AARP.
Really well.
We will shed light on our longer term capital plans as we look to transform our generation fleet and secondly, it's usually the time that we do update our five year plan.
Great. Thank you that's very helpful.
One more if I could just on how things are shaping up here in 'twenty two.
It looks like once again, the energy trading segment data quite well in Q1.
Just curious I mean are you expecting now given that strong result in Q1 to be trending to the upper end of your guidance range for the year or perhaps are there other.
Items that youre seeing coming up in later on in the year that might mitigate that.
So I'll start by saying that Dave and I, both mentioned in our opening remarks that all of our views are building contingency or electric company or gas company, primarily due to weather.
And certainly vantage.
<unk> ahead of plan as well and of course, you've seen the results.
At trading which are also tracking significantly ahead of plan. So we will likely provide enough after the second quarter.
Where we are where we expect our EPS to trend towards so we have a good feel for the summer weather shaping up so but I can tell you that we are building contingency above our midpoint at this point in time.
Okay, great. Thank you that's very helpful. I'll pass it along here.
Thank you. Your next question is from the line of Andy storage <unk> with Seaport. Your line is open.
Thank you.
Just wondering.
Given what we saw.
And the MISO capacity auction.
The region clarity.
Scuttling till.
Next rent.
Generation resources, and Glenn just one year forward.
Is there any thoughts that maybe.
Might be rethinking the timing of vehicle plant retirements.
Well thanks for the question Angie.
The retirements that we've made and then essentially replaced almost completely by.
Two acquisitions gas plant acquisitions that we made about five or six years ago.
And also the construction of the new Blue Water Energy Center, which is an 1100 megawatt combined cycle plant.
So we've.
Brought online into our portfolio over 2000 megawatts of dispatch will generation.
Place the 'twenty 300 megawatts of coal retirements. In addition to that we felt wind as well, which also provides energy not necessarily a lot of capacity during the summer months, but certainly provides.
It provides energy supply.
The state is running tight on capacity.
There is concerns about how we.
How the state moves forward in that regard.
But.
We feel like from our perspective.
Got adequate supply to supply or demand.
Now we do have coal plants that have been retired.
We will retire likes the St. Clair power plant for example, 1100 megawatt coal plant debt if necessary.
We could bring back online if there was an emergency situation, but that's certainly something we'll rely on MISO to make a determination.
Yeah.
Okay and then.
Moving on to vantage.
Heard your comments about.
Looking at ways to extract value from discretionary spend.
<unk>.
It would be greater for you guys could provide us with some additional disclosures, especially around that.
And secondly.
So that business.
Now.
When you look at public comps for R&D company.
Sure.
Our district energy.
Do you.
Do you see the differences between the assets that you have and develop that those that have been changing hands.
We think that.
Those public comps.
Good good indicators after that and these assets for your assets.
Yes, we're looking at those pretty hard Angie and watching them and comparing them to how we feel its valued in our portfolio. So we're constantly looking at those and but it's.
It's something that we're looking at very hard always to see are we better or we had a better owners or others better owners of these assets I can tell you that.
Provide nice cash flows nice returns for our current investors but.
Andrew we remain very open to.
Creating value always if there is an opportunity to create incremental value. We will we will pursue it.
Okay. Thank you. Thank you repeat Andrew could you repeat the question on the.
Disclosures.
Yes.
You guys showed us I don't see any slide on.
On vantage and today's presentation, I think I did that.
In the past you guys showed us a breakdown of net income.
I was hoping that you could see a breakdown of EBITDA, because altos peers and other private transactions that have happened with like <unk> were done on you guys.
EBITDA multiples and I was just hoping that we could get some insight into that.
Alright, we'll note that and thanks for the thanks for that feedback.
Awesome. Thank you.
<unk>.
Your next question is from the line of <unk>, Kim with Goldman Sachs. Your line is open.
Hey, guys. Thank you first question.
Going back to vantage and just more on a fundamental basis, how do we think about in a higher price gas environment that we're in currently how the.
Demand for R&D projects or.
In that realm gets impacted at all by that just curious on your thoughts on whether you've seen any changes there.
We haven't seen any fundamental changes certainly in demand.
Most of this product goes into the transportation markets, especially the dairy guests really it goes into the California transportation markets.
So we have not seen a change in demand we have seen some changes in the federal pricing for the product as well as the California pricing for the product, but overall.
The pricing is right on top of our pro forma.
Dave if you want to add anything to that.
I think that's right and I think as.
As we're seeing more ldc's put RMG.
Goals into their system, we're actually seeing the demand.
For R&D over time, it still feels like it's going to be rising so I think demand for the product because it's going to it's going to be going up.
Understood Yes.
So I was thinking just wanted to get clarification on there and then my second question.
Yes.
Obviously, whether it's labor or materials inflation on the cost side and impacting the entire world.
I did see on in the electric utility segment, you're pointing out O&M on a little bit.
Just broadly.
Given the contingency fees that you have I think youre relatively comfortable to manage that but just with the trends you've seen have the increasingly whether it's labor costs or materials costs.
More pronounced than than you would've expected I guess when you just.
Just a few months ago, when you gave guidance.
But that's something we're watching very closely and we are planning accordingly, that's sure no negative impacts to our plans.
First I'll say, we've demonstrated long history of being able to manage cost effectively including including inflation.
And so far we're not seeing the impacts of inflation here and I think it's it's really how our.
How we're structured now about 85% of our spend is through services.
We just haven't seen as much inflation there.
And then we also have a lot of long term contracts.
As well through these periods so.
We're not seeing any any negative impacts to our plans for the year our longer term plans.
The O&M at electric was a little higher but that was mainly due to accelerating some of our <unk> spend.
We wanted to get get through quickly to.
To help our reliability as we came through the summer.
Not an inflation impact there.
Okay. That's good color. Thank you so much.
Your next question is from Jonathan Arnold with vertical Research partners. Your line is open hi, good morning, guys.
Good morning.
Advantage.
It's ahead of plan.
And I think you raised a plan last quarter when we look at the quarter came in relative to annual guidance.
Good bit below.
Average run rate would be can you maybe talk a little bit about seasonality in that business.
Right.
And also just to what extent.
Catch up is going to come from new projects et cetera.
Yes, that's a good question I think.
Most of the answer in your question first we do feel really good about the segment and where we are relative to our year end guidance and being able to come in at that.
This quarter is lower than the expected annualized number, but it's primarily due to some known plant outages that we had.
So it's going to be made up through the year as well.
As that happens and then we do have some projects that come online.
<unk> and some industrial energy service projects that come online later in the year.
Still feel really good about our guidance for this segment.
Great. Thanks for that Dave and then just.
On the trading.
You talked about operating and then also some of it was timing can you maybe unpack for us a little bit.
How much is timing that you think may reverse and how much is sort of just trade outperformance.
Yes.
We had a great quarter in trading.
Primarily all came in our gas physical business, where we're serving ldc's producers.
Yeah.
What we saw is a lot of it is.
It is just great performance, but about half of it could be timing that can that will that will play out later in the year.
So that's why we're not raising guidance on this right now because we want to see how that timing plays out, but it's a little over half of it was of their of our perform although it was performance and then theres some that as timing that.
And we have hedged positions that can change or they can come down as we flow the gas later in the year.
So it sounds like Youre, saying it may reverse.
No not.
Necessarily see that.
If there is some that some we know will reverse and some of them may reverse okay.
And then maybe if I could just squeeze in one other I'll just high level on.
Yes, some updated thoughts on just where you see customer bill trajectory shaping up relative to inflation out there even with the rate case, we've got fuel costs on the op you've been pretty good at finding ways to mitigate the pressure. So maybe just some thoughts around that.
That too.
Sure, Jonathan maybe I'll start and Dave can add to it but let's start with the.
Electric generation portfolio one of the.
<unk>.
Values of having a diversified portfolio, where we've got wind nuclear.
And coal in our portfolio.
It allows us to.
Whether some of the.
Commodity pressures as well as the fact that with our coal purchases our purchases through 2023 from a price perspective. So we feel really good about our coal purchases, which is the bulk of our.
Generation assets at this point in time.
And of course nuclear is also were purchased through 2028. So we feel good about that as well so I feel on the generation side. The fact that we have a diversified portfolio in that we're somewhat hedged for some time.
Help soften the commodity price pressures that the industry is seeing on the natural gas business D C.
Got it.
North of our more than 75% of our gas purchased for the winter of 'twenty, two 'twenty three and.
And about 25% purchased from a price perspective.
The 'twenty.
324 winter.
And Thats just normally how we bought gas at the LDC for over a decade and it helps smooth.
Ups and downs in gas pricing for our customers.
But if these prices persist for multiple years, then I think we will start to see pressure and that we're starting to look at ways on how we can offset those.
Those pressures through.
Cost reduction initiatives as well as revenue initiatives.
C C.
Opportunities developing in our business.
So I hope that helps.
That helps Jonathan yes, great.
Comtech staff. Thank you Gerry.
Yeah.
Your next question is from Andrew Weisel with Scotiabank. Your line is open.
Hi, Thank you good morning, everyone.
Hey, good morning.
Okay. Thanks. My first question is I wanted to follow up on renewables I. Appreciate your comments on the DSC and supply chain concerns, but what about the more local issues, how big of a challenge our NIMBY NIMBY issues in Michigan, where the debate around rooftop solar and cross subsidization and just sort of how do you think about those rich.
Potentially impacting your near term plans.
So I would say.
We've got a really Andrew we've got a really strong land position for solar.
We're working really closely with municipalities to ensure that there is a productive outcome. When we go for permitting and that's usually where as.
As we've mentioned there can be pressure points.
And we certainly secure more acres than we will likely need because we know that there is always going to be problems with some of the acreage that we have options for the solar developments, but I can tell you that we've option tens of thousands of acres and we feel pretty confident that we can execute the plan that we have in front of us over the next handful of years.
Beyond.
So that feels good in terms of rooftop solar certainly customers are open on a.
The rooftop solar on at any time and I think we've got legislation that limits how much can be highly subsidized.
And there is always a continuing debate as to how much rooftop solar should be subsidized now what I will also say that we're offering solar products to our residential customers.
As I mentioned were over 50000, I think we're around 55000 customers signed up already and we're signing up customers every week because the cost of utility scale solar is about a third of the cost of rooftop solar and you don't have to drill thousands of holes in your roof.
So it's it seems to be a desirable product that were offering so not only.
Is it customers can do it if they like.
They can do as much of it as we'd like.
But without subsidy and we can also offer them an alternative.
It is a continuing debate.
Yeah.
Great. Thank you that's helpful and my follow up is forgive me I'm going to ask about the AARP, even though it's still months away my question to almost more philosophical.
Green generation Capex might exceed what's in the current plan for the next few years would you scale down spending in other categories like distribution in light of either affordability concerns your balance sheet pressures or would that just be upside.
We are obviously in order to inject more capital into the plan, we have to find ways to create room for from an affordability perspective by overall we've got.
Very large inventories of capital that we could deploy in the distribution side and certainly even on the generation side as we start to build out our renewables portfolio first first and then eventually build base load plants to support the retirement of large coal infrastructure.
The limiting factor for us is always affordability, so as we introduce more capital.
In the the plan, we have to find ways to offset it with affordability.
Affordability initiatives and some of those affordability initiatives are enabled by our renewables investments. So for example.
This year, we filed for the first time in my memory and a reduction in O&M expense on an absolute basis in our rate case because of the conversion from coal to gas and renewables. The operating expense is much lower.
And so there is an offset that our capital programs do create but our capital program is also be create pressure. So long way of saying is that we will manage the affordability and we will drive distinctive growth for our investors.
Thank you that's very helpful.
Your next question is from the line of Ryan Levine with Citi. Your line is open.
Thank you for taking my question.
What's your current airlines for volumetric trends for residential and industrial customers.
A portion of the year.
Yes.
You probably saw a quarter over quarter results and our residential versus last year was down about 1% and our commercial with back up 2% and our industrial.
Overall pretty flat overall load was flat versus last year.
While we are still seeing as you know.
Some increased residential usage from what we would've thought we're we'd be pre COVID-19 , we expect that to start coming down and we're starting to see that come down as more people returning to work. So we expect that to trend trend back down, but we're still seeing some upside there, but overall load pretty flat according or versus last year.
Okay.
And then on energy trading I, just want to make sure I heard it described because youre, saying about 50% of the car.
First quarter is and then the other happens more volumetric exposure.
And later in the year that kind of places you're at the high end of that range just during the first quarter contribution.
Is there any reason to believe that you won.
Continue to earn.
On that segment for the remaining question a year.
One place you above your range.
Well, we just.
We'd like to manage that business really really conservatively and hubs have some contingency built in there.
So we tend to do do well in the second half of the year as we have some of these things flow, but we just want to remain conservative right now in this area. So we're not moving our guidance at this point.
Okay, and then what role is.
Green bonds have for the future financing plans for <unk> and what are the drivers of the recent financing decision.
We see the green bonds is supporting our renewable.
Green initiatives.
Industrial opportunity fund investors an opportunity to participate in that so as we continue to.
To grow our renewable portfolio, we expect to have more of that and be able to utilize more more of that in the future that will help support that.
Is there any contingencies around uncertainty renewable generation content per player.
These go into specific projects and assets and so they have to be.
They have to go towards those assets.
They work so it is not known to the overall portfolio, but theyre there.
We're aimed at particular renewable assets.
Okay. Appreciate it thank you.
Your next question is from the line of Michael Sullivan with Wolfe Research. Your line is open.
Yes.
Hey, everyone. Good morning.
Good morning, Michael.
Hey, Jerry just wanted to follow up quick.
On the sales commentary there in Q1.
Maybe just for Dave actually.
It looks like industrial actually ticked down a little bit, whereas the recent trend has been.
Kind of upward so is that just like a one quarter thing or any any additional color around that.
Yes, it's more of a quarter thing it's.
It's because of the chip shortage that we're seeing across.
Across some of the items and some of the areas that we just had have.
I have a dip there.
I don't think its not a long term theres not been any additional shutdowns are closing or is it just the chip shortage manufacturer for the manufacturing sector.
Okay, great Yeah that makes a lot of sense.
And then also just wanted to clarify on <unk>.
The DLC impact on solar.
And maybe you could just give me like what the current plan is for solar additions like I think you said, you're all good on 'twenty, two but how much solar or are you, adding this year and then next year. The 300 megawatts. That's impacted is that all of this or do you have some additional that is uninfected.
Maybe just one more on that.
Yeah.
Yes. This year, we're good we're sitting at about 500 megawatts built.
For our voluntary program through this year and then next year, we are planning to build about 300.
We would build it in 200, and we would expect in Ppas.
So.
Right now our vendors or tell us, they're going to furnish, but what the DLC.
Sure.
Or.
Thinking in the worst case that it gets pushed the year into 2024.
And.
Certainly we can manage that and our plan for next year.
If it was pushed beyond 24, which we highly doubt but.
And then we are starting to think about what other contingencies, we could pull in terms of capital deployment, we've got as you.
Deep pool of potential investments, we can bring forward and pull forward. So that's how we're thinking about it right now.
Okay, great how much is planned for 2024.
It is right now.
I don't think we put that out there yet.
Dave for Barb.
I mean 2500 megawatts as what we got over five years.
I could give you a feel as to how big the program is over over a five year period.
Awesome, Okay. Thanks, Gerry appreciate it.
Thank you.
Your next question is from the line of Anthony <unk> with Mizuho. Your line is open.
Hey, good morning, Jerry Good morning, Dave.
Anthony how are you.
You guys seem to have a high class problem like less than 10% of your business generates all of the questions. I guess, that's a good thing versus everybody questioning 90% of your business.
We think we have a high class company Anthony for sure.
Just most of my questions are answered just a quick one I have.
I think a nice data point with the IRB filings with CMS, reaching a settlement do you guys have a pending electric case.
Haven't settled any electric.
Environmental I think 2006.
Sure.
Is it likely that you settle here or the company continues on the track of maybe going fully litigated.
Well, we're going to certainly engage all of our stakeholders.
Pension settlement.
Because that's a pretty straightforward case, I mean really we're not asking for more O&M expense, we're actually asking for less and it's really all about infrastructure, that's very necessary for the state primarily pointed to our electric grid and also the continued transformation of our generation fleet, so pretty straightforward case.
Our strategy is that we'd like to settle.
We will know more in the middle of May Anthony when we see the stat filings and intervenor filings.
And then we will engage and try to close it out before the end of the summer if we can.
But.
Whether we settle or litigate, we've said very very constructive outcomes as you've seen in the state of Michigan.
Great and then.
I guess, just lastly on I think your potential ERP, which is maybe one difference between yours and the other IOP is.
I think your plan also includes new generation being built and as you did mentioned earlier that the state is maybe running tightening capacity do you think that maybe George any additional scrutiny or just the capacity needs in the state of really outweighing.
Lloyd dispatch will need for generation really outweighs anything else.
Certainly.
We have a very pragmatic.
Commission and and administration and there is an understanding that.
No.
We want to Decarbonize the economy.
But we have to do it in a way that still make sure the lights come on and at our industrial base continues to function properly and reliably and that its affordable. So we will file for new Baseload generation assets in ERP I expect to do so just because.
We've got over 3000 megawatts down on Monroe that will come off line over a period of time than that.
We have to have.
This natural generation in that part of our system in order to make the system work to make the grid work and I think that's understood. I think there are people there will be people that won't like that but there are people that will love. The fact that we're going to build.
Five to 7000 megawatts of renewables. So it is a balanced portfolio.
That will achieve all of the objectives reliability and decarbonization.
And affordability.
Great. Thanks for taking my question I really appreciate it congratulations on the quarter. Thank you Matt. Thank.
Thank you Anthony.
Your next question is from the line of Travis Miller with Morningstar. Your line is open.
Good morning, everyone and thank you.
Hey, good morning.
You answered most of my questions in particular had a question about the customer bill affordability, but just to follow up a little bit on that what about the rate case are there any levers that you can pull or adjustments you could make per haps earnings neutral adjustments in the rate case that would mitigate some of the potential customer bill impact.
Either later this year or next year.
Okay.
I didn't want to take that yes.
Yes, I think I think what we are what we do focus on to mitigate the customer bill impact is really focusing on our own O&M and what we can what we can flow through there. So we continue to focus on our continue.
Continuous improvement efforts are protected productive productivity and efficiency improvement and playing that through.
I think as far as individual things within the rate case, I think where we're in the active filing there. So I think that's probably already in there.
For future affordability, that's really where our focus is ensuring that we have the best cost structure that can allow the.
Capital focused investment.
We're focused investment we need to do for reliability and.
In clean generation.
Sure.
Travis in addition to that.
We've stayed out of a rate case for two and a half years by being really creative and we did that intentionally because the pressure our customers are under they are encoded and.
Thank you.
So.
We've gotten creative in the past and as Dave said, we will be creative in the future and I think our continuous improvement culture also continues to find unique and rare.
Eight of ways to keep driving our cost structure down.
So we expect more than plus our capital investments are appointed in many instances at structurally removing costs to operate our system.
Sure Okay, great. Thanks, and then just real quick any updates in terms of electric vehicle.
The initiatives there anything this quarter that our last quarter.
So it's worth mentioning while we can.
Yeah, we continue to deploy our.
You know.
Electrification program, where we have that we're in a second tranche of $14 million, we had $14 million of investment approved in the past and now we're in the middle of the next $14 million and I can tell you this that.
The number of Evs connecting to our system is going up.
We're seeing it well north of 500.
Attachments.
Especially if I got to around about 1000 attachments a month so it's a.
It's a good program and its moving attachment four and that's up from a couple of hundred just a couple of years ago. So we're seeing significant growth, that's still pretty small pretty modest not going to move the needle just yet.
I was talking to some of the senior people at Ford Motor Company, and General Motors, I mean theyre back.
Factories got huge backlogs for EV orders and Theyre trying to figure out how they're going to build all this.
Built for all of this demand so tremendous demand so we expect.
The pattern of significant growth to continue over the next several years.
Oh, great. Thanks, so much that's all I had.
There are no further questions at this time I will now turn the call back over to Mr. Jerry Norcia.
Thank you Brent and thank you all for joining us today I'll, just close out by saying that <unk> had a very successful first quarter. We're feeling really good about the remainder of 2022 as well as our positioning for future years I hope everyone has a great morning, and we look forward to seeing many of you at <unk> and a few weeks.
Good day.
Ladies and gentlemen, thank you for your participation. This concludes today's conference call you may now disconnect.
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