Q2 2023 DTE Energy Company Earnings Call
Please standby we're about to begin.
Good morning, ladies and gentlemen, welcome to the DTE Energy second quarter 2023 earnings Conference call. At this time all participants are in a listen only mode and please be advised that this call is being recorded after the speakers' prepared remarks, there will be a question and answer session.
I'd like to ask a question. During this time simply press star one on your telephone keypad and if you would like to withdraw your question simply press Star One again and now at this time I would like to turn things over to MS. Barbara <unk> Director of Investor Relations. Please go ahead ma'am.
Thank you and good morning, everyone before we get started I would like to remind you to read the safe Harbor statement on page two of the presentation, including the reference to forward looking statements. Our presentation. Also includes references to operating earnings which is a non-GAAP financial measure please refer to the record.
Filiation of GAAP earnings to operating earnings provided in the appendix.
With us this morning are Jerry Norcia, Chairman, and CEO , and Dave Ruud Executive Vice President and CFO .
And now I'll turn it over to Gerry to start the call. This morning.
Well, thanks, Barb and good morning, everyone and thanks for joining us.
This morning, I'll be discussing the achievements we've made so far this year and provide a general business update I will discuss the progress of our regulatory proceedings, including the details of our ERP settlement.
Dave will provide a financial update and wrap things up before we take your questions before we dive in I want to take this opportunity to touch on some recent appointments to our regulatory commission here in Michigan.
Governor Whitmer extended chair, Dan scripts term, an additional six years to 2029, the reappointment of chair scripts provides consistency and regulatory leadership and we appreciate the balance he has always brought to the commission.
We congratulate chair scripts and look forward to continuing to work with them.
Governor Whitmer also appointed Alessandra Ekati on as a new commissioner to the M. P. S C.
Filling the vacant role left bites remained Phillips, we look forward to working with her as she comes to this position with a strong background in electrification.
Moving on to slide four.
We remain committed to supporting and delivering for all our stakeholders, including employees customers communities and shareholders.
I always say that employee engagement drives our success and our team continues to operate at top decile engagement levels as measured by the Gallup organization.
Proud that our team's excellence in this area was recognized by earning the Gallup exceptional workplace award for the 11th consecutive year.
We also received great news that DTE was named one of Metro Detroit's best and brightest companies to work for the best and brightest program recognizes companies that have a commitment to excellence and their human resource practices and employee enrichment based on categories, including work life balance employee education.
And diversity.
I'm happy to say that yesterday the M. PSC approved our AARP settlement agreement, which outlines our investment in Michigan's clean energy future two weeks after we filed it.
This demonstrates the supportive nature of our regulatory environment. We are proud that this plan puts our customers first by reducing the cost of our clean energy transformation, while reliably generating the cleaner affordable energy that our customers will rely on for years to come.
I'll provide more details on our settlement agreement in a few minutes.
On the community front DTE was honored to be named to the civic 50 for the sixth consecutive year.
This award presented by points of light recognizes the most community minded companies in the nation.
I am proud that our team continues to put communities we serve at the forefront each and every day in our decision making.
In earning this award year after year recognizes that.
On the Investor front, we are executing on our plan to achieve our 2023 guidance midpoint and our long term financial growth.
As you know we have been facing headwinds with the weather and storms that we experienced earlier this year.
Dave will go into more details on this but the team has made excellent progress on our cost management work across the entire company and we continue to find savings with our continuous improvement efforts.
As well, we are seeing additional favorability across our portfolio of businesses.
We are well position to continue to deliver the strong performance and premium growth at DTE is known for delivering on our 2023 midpoint guidance and also continuing to deliver long term EPS growth of 6% to 8%.
Let's turn to slide five and discuss the AARP settlement agreement.
We want to thank our DTE employees and 21 organizations from across Michigan for their diligent work in this ERP settlement agreement with.
We completed a comprehensive analysis that reflected insights shared by our customers and other stakeholders to build the plant.
The plan offers a balanced and diversified approach for the transition of our generation fleet.
Complementing our commitment to build a reliable and resilient grid, while maintaining customer affordability.
A key provision had a settlement agreement is ending dte's use of coal in 2032.
<unk> will provide retraining for employees impacted by the plant retirements and.
And we will continue to partner with the local communities, a new economic development opportunities.
We are continuing our plan to cease coal use at our Belle River power plant in 2026 and convert it to a 1300 megawatt natural gas, peaking resource.
We are retiring two coal units of Monroe in 2028, and accelerating the retirement of our two remaining units from 2035 to 2032.
Which is nearly 12 years earlier than originally planned.
To determine the best replacement alternative for the capacity of Monroe.
We will be studying a range of possible replacement technologies.
Facilitated by these accelerations are 85% carbon reduction goal moves from 2035 to 2032 to support. These retirements, we are transforming how the company generates electricity over the next two decades, we will be developing more than 15000 megawatts of renewables by 2042 to <unk>.
Our homes businesses and industrial facilities.
Additionally, we will build more than 8800 megawatts of energy storage to support the company's clean energy transformation.
Through all of this our focus remains on providing what our customers and communities need clean affordable reliable energy.
This <unk> is also very positive for customer affordability as it provides over $2 $5 billion in future cost savings.
And we will be directing $110 million.
To support our most vulnerable customers, including $70 million to energy efficiency programs.
$30 million and Bill assistance.
And $8 million and home repairs facilitate cleaner energy for low income customers.
Through this ERP, we will be delivering long term customer value by investing over $11 billion in the next 10 years in the clean energy transition supporting more than 32000, Michigan jobs.
Let's move to slide six to discuss how the ERP fits into our plan.
This ERP supports our long term capital plan as it solidifies a large portion of our planned investment in cleaner generation.
As you recall, we will be investing $21 $6 billion and our two utilities in the next five years and 45 billion over the next 10 years.
All to build the grid of the future transition to cleaner generation and modernize the gas transmission and distribution system.
The significant additions of renewables and storage outlined in his plan. In addition to renewables investments we are doing through our voluntary renewable program provides surety to our cleaner generation investment plan.
The RFP provides full recovery of a net book value of Belle River and Monroe.
A portion of the assets are securitized, a balanced customer affordability with the increased investment in clean energy, while supporting our financial plan more.
Belle River, we will be depreciating, the majority of the asset since it will remain in service, earning the authorized ROE currently at nine 9%.
A small portion of the net book value will be securitized after 2026.
For Monroe, we received constructive regulatory asset treatment for the majority of UN depreciated coal unit investment balances with a 9% return on equity.
The remaining portion of the assets will be securitized beginning in 'twenty 32, we will receive our full authorized ROE, which is nine 9%.
Until 'twenty 32 at which point that portion will be securitized.
So this plan is a really great outcome.
Settling this case confirms the constructive nature of the regulatory environment in Michigan, and <unk> ability to gain consensus with key stakeholders, including the M. P. S. C staff the attorney General.
Environmental industrial and regulatory groups.
It is consistent and supports our five year financial plan, and our 6% to 8% EPS growth rate.
It also provides visibility and surety and the long term capital plan and this settlement overall is good for customers and aligns with the state's goals to provide clean affordable reliable energy in Michigan.
We will be updating our full five year financial plan at EI as with any of our plants. We continue to balance increases in investments in clean generation distribution infrastructure and base infrastructure with affordability for our customers.
Now, let's turn to our other accomplishments this quarter on slide seven.
Our team has accomplished a lot so far this year.
At DTE electric we placed Michigan's largest wind park in service the Meridian Wind Park.
Spanning three townships that 225 megawatt wind Park has 77 wind turbines and.
And generates enough clean energy to power more than 78000 homes.
In addition to bringing even more clean energy to the grid and supporting Michigan's overall decarbonization goals. These types of projects help strengthen our economy by creating jobs and by bringing additional tax revenue to our communities.
Additionally, last month Dakota, a native American and women owned automotive supplier joined our voluntary renewable program.
Dakota joins 15 automotive suppliers, who are using my green power to.
To make their operations more sustainable.
This continues to demonstrate the success of our voluntary renewable program that currently has over 2300 megawatts of commitments, including participation of already 90000 residential customers, making us the largest voluntary renewable program in the state of Michigan and one of the largest in the country.
We are continuing our focus on improved reliability of our electric grid with trim more than 25000 miles of trees over the last five years, and we will trim, an additional 5000 miles in 2023 of which we have completed.
20th Air miles through the first half of this year.
The electric rate case is progressing as we continue to pursue a constructive settlement with all stakeholders.
DTE gas our main renewal work marches steadily along with.
We've completed over 150 miles of renewal in the first half of 2023, our natural gas balanced program also continues to grow.
We now have over 12000 customers subscribed since program inception in 2021.
In the second quarter the city of East Grand Rapids was the first municipality in Michigan.
The joined the program to help lower its carbon footprint and we invite more municipalities participate in this great program.
Moving onto DTE vantage as we mentioned earlier this year, we have placed two projects in service. So far in 2023, one RMG in one custom energy solutions project. We are on track to place two additional R&D projects in service by year end.
And are in advanced discussions on an additional custom energy solutions project. We also continue to advance our development pipeline with strong opportunities in both R&D conversions at a large custom energy solutions projects.
With that I'll turn it over to Dave to give you a financial update.
Dave over to you.
Thanks, Gerry and good morning, everyone.
Let me start on slide eight to review, our second quarter financial results.
Operating earnings for the quarter were $206 million. This translates into 99 cents 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 $178 million for the quarter.
This is $8 million lower than the second quarter of 2022.
The main driver of the earnings variance was cooler weather.
There was also lower residential sales relative to 2022 with the continuation of people returning to work higher.
Higher rate based cost and accelerated deferred tax amortization in 2022.
This was partially offset by the onetime O&M cost reductions that we've implemented in 2023.
Moving onto DTE gas operating earnings were $24 million.
$80 million higher than the second quarter of 2022.
The earnings variance was driven by onetime O&M cost reductions and I R. M revenue in 2023.
Partially offset by higher rate based costs.
Let's move to DT vantage in the third row.
Operating earnings were $26 million in the second quarter of 2023.
This was a $2 million decrease from the second quarter last year, primarily due to planned outage timing at our renewables plants.
On the next row, you can see energy trading finished the quarter with earnings of $36 million, which is $29 million higher than the second quarter last year.
As I mentioned in Q1, there was some timing variability this year that is now positive in the second quarter.
This is primarily due to contracts and our power physical business that include revenue based on fixed prices over the term of the transaction and then these contracts are hedged upon execution.
We sell the energy at a fixed price for these contracts while the recognized cost synergies based on the energy curve, which was higher in January and February .
This timing variance that we saw in the first quarter has begun to unwind as expected.
We also had performance favorability in energy trading this quarter due to robust contract premiums and our physical power portfolio for 2023.
Through the first half of the year energy trading is earnings of $10 million.
Finally, corporate and other was unfavorable by $2 million quarter over quarter, primarily due to higher interest expense.
Overall DTE earned 99 per share in the second quarter.
Let's turn to slide nine to discuss our 2023 guidance.
Let me start at the bottom of the page to tell you that we remain on track to deliver on the overall EPS guidance, we have for 2023, and we have plans to achieve the midpoint of our guidance range.
As we have discussed we have faced headwinds at DTE electric this year.
This includes the lower than expected rate order, we received at the end of last year driven by a difference in sales forecast of approximately $100 million, we had a $70 million impact from the winter storms in the first quarter.
And unfavorable weather of $42 million in the first half of the year.
Through focused onetime cost reduction efforts DTE electric is achieving offsets for over half of these headwinds without sacrificing safety reliability or customer service.
Ever electrical likely still fall below its guidance range as represented by the Red Arrow.
Favorability at each of our other business units will overcome the remaining headwinds and achieve our EPS guidance.
This is depicted by the green arrows, indicating they will likely be above their guidance ranges.
Additional favorability at DTE gas is driven by one time O&M reductions.
DTE vantage favorability is driven by stronger RMG pricing additional projects coming into service and opportunistic contracted sales in the steel business.
Energy trading is seeing favorability in its contracted highly hedged power portfolio, which will continue to provide additional upside to this business.
All the business units implemented onetime O&M reductions and also benefit from onetime corporate O&M reductions at Cascade to all our business units.
Through the performance of our portfolio, we have plans to achieve the midpoint of our operating EPS guidance range for DTE.
And we'll update the business unit guidance after the summer weather plays out.
Our guidance does assume historically average weather for the remainder of the year without the normal contingency that we typically build into the plan.
Our team has really made excellent progress identifying and implementing the opportunities and onetime O&M reductions across the company, while ensuring the reliability and safety that our customers expect this allows us to continue to deliver for all our stakeholders.
The performance this year will allow us to continue to be very well positioned to achieve our long term EPS growth in the premium returns that our shareholders have come to expect from us.
Let me wrap up on Slide 10, and then we will open the line for questions.
In summary through the remainder of the year DTE will continue to focus on our team customers communities and investors.
We are executing on our plan to achieve full year guidance without jeopardizing safety and reliability.
Our utility regulatory filings continued to advance as evidenced by our recent ERP settlement.
We also continued to pursue a constructive settlement in our electric rate case.
Our robust capital plan supports our long term operating EPS growth as we execute on the critical investment that we need to make for our customers to deliver cleaner generation and increase reliability, while focusing on customer affordability.
Our long term plan supports our 6% to 8% operating EPS growth target through 2027 and provides a dividend growing in line with operating EPS.
With that.
Thank you for joining us today, and we can open the line for questions.
Thank you Mr Rigg, ladies and gentlemen at this time to give any question simply press star one and again just to remind you keep on your question has already been addressed you can remove yourself from the queue by pressing star. One again, we will go first this morning to Jeremy Tonet.
J P Morgan.
Hi, good morning.
Good morning, Jeremy Hi, Jeremy.
Hi.
Just wanted to start with the electric rate case proceeding if I could here and I appreciate where we are at the processed only how much can be said, but are you able to expand at all on how this has been progressing and I guess.
Hopes for settlement at this point when that might materialize or just any other color in general would be helpful.
Our target Jeremy.
Settle the rate case as of mid October and that's before the before the PFD is issued so we have started some conversation than those conversations obviously are become a lot more intense through.
Through the summer, but I believe we have the ingredients for settlement and that will continue to update an update you on that as we as we progress.
Got it.
Helpful. Thank you for that and just wondering I guess.
Ability, you're able to comment for weather for the third quarter, obviously, the big swing quarter for the year, how do things look so far in your jurisdictions and kind of like that.
What you can see over the next couple of weeks, just wondering if weather, helping <unk> could.
Could materialize relative to what we saw earlier in the year.
Yes, Jeremy so far we're seeing things start out pretty close to what we had expected and so as you know, though August and September can be really big months for us are really big swing months. So continue to watch that closely as weather plays out.
Got it that's helpful and just last one if I could.
I think for DTE vantage there was some opportunistic steel sales and just wondering if you could expand a bit more on what that was and other are there other items like that that we should look for to kind of serve as offsets.
Yeah, we're looking across our portfolio for offsets and.
With the ones, we have within our steel portfolio represent that we have.
Some byproducts that we sell as a process of what we're doing within our steel business and our coke, making.
We just had got some opportunistic pricing and some really good pricing for that through the year that we've been able to take advantage of this year.
I'll say Jeremy across our whole portfolio. We continue to look for these one time cost reductions in some of these opportunities like this to ensure that we can deliver for the year.
We're also I'll just add to that we're also we're also seeing some lift in R&D pricing, which is also creating some favorability at advantage.
Got it understood I'll leave it there thank you.
Thank you the next not too sharp activity.
Hi.
Hi, Good morning, one gag and one day in the morning Sharon.
Sure.
Hi.
Hi, good morning.
<unk>.
Thank you.
Kind of appreciating the challenging weather and kind of as Jeremy mentioned and it looks like there was another 12, hence the horses normal how shall we think about the flex O&M for the remainder of the year and is there a need to kind of shift anything from what you embedded.
At the end of the first quarter.
Yes.
As we play out the year, we're looking for the opportunities across the business again to ensure that we can offset the challenges that we've seen through storm and weather as we go through the year. So we're doing that across our portfolio.
<unk>.
Extended leadership team, we're meeting weekly.
Ensure that we're finding all the opportunities we can and extinguishing all the risks and through the year, we've been able to find some additional opportunities available offset.
The challenges that we've seen through through weather and through the storm we saw in the first quarter.
So we'll continue to look for that that flex throughout the year.
Yes, just.
Color with some of the areas, where we're diving into.
To look for these opportunities, we're taking taken full advantage of attrition.
So we're only hiring critical operating roles that make sure that we are safe reliable operations.
Some of the other onetime initiatives are happening across all the all the stats.
Groups as well in terms of attrition a significant reduction in overtime.
Deferred noncritical maintenance and pulling out some of the bank maintenance that we did when we had.
Surpluses in prior years.
Had contractor workforce reductions and then of course as Dave mentioned, we're seeing favorability market favorability.
In our gas business as well as that advantage and trading for that matter.
In addition, we've also start to renegotiate supply chain contracts with long term relationships that give us some some value. So we're we're hitting all the buttons and we're learning a lot about our company and some of these will stick, but by far and large most of them are one time, but.
I'm really proud of the team because we're hitting all the targets that we've given them.
The offset these significant headwinds.
So I guess I guess it would be fair to say kind of no no big changes and just executing on the plan from <unk>.
That's correct.
Excellent and then maybe shifting to efficient financing.
How are you thinking about supporting credit metrics on a tighter capital market environment, especially as you continue to see high levels of investment and rate base growth.
Thoughts on internal versus external balance sheet support and if you mentioned.
<unk> assets are potentially helping but maybe how are those the value of those assets stacking up against any future equity needs.
Well, yes, if you look at our overall financing plan, we have some good headroom to our <unk> to debt levels at the rating agencies. So we have some room, there and as we've said in our our equity plan and our plan on equity is.
Zero to $100 million over the next few years, so very low equity needs that we would do through internal methods.
So we're seeing that we're still in a really good place on our on our balance sheet from both a debt and equity equity standpoint.
Yes.
Thanks, Paul and then maybe last one housekeeping called out following up on <unk> question on the rate case there've been some data points on kind of higher ROE is potentially in the range of that kind of have been recommended in Charleston recognition from stakeholders.
As stated that we'll start to make an impact whether in the 'twenty four time frame or just in settlement negotiations.
While we have filed for a higher ROE I mean, it will be part of the.
Settlement negotiations.
Pattern I think that we've seen from the commission in the past that it's.
A slow up in a slowdown so it'll be whatever happens it'll be extremely gradual but.
Certainly we have asked for higher <unk> and that will be part of our settlement discussions.
Excellent I appreciate it thanks for taking the questions.
We'll go next to Matthew Julien Dumoulin Smith of Bank of America.
Hi, Good morning. This is Heidi Hagen on for Julien. Thank you for taking my good morning.
Hi, good morning.
And just my first question and then kind of a follow up to the rate case.
Yes.
Going stakeholder feedback to some of your proposals and the electric rate case like that Iran. And then following intervenor testimony are you exploring any incremental mechanism such as for example ring fencing of vegetation management spend or something similar.
Sure So there's been.
Certainly positive support from the staff.
For the IRS and we're getting all the right signals that this is something that will be really valuable to our customers.
And help secure the investments that's necessary to move towards more resilient and reliable grid that one feels encouraging in.
In terms of ring fencing tree, Sharon, we've essentially done that already.
Through past proceedings, where a good portion of it is the ring fence.
And we're executing against that plan that actually and good good.
Years, when we've had surpluses, we've even put more against rich I mean, because we see it as a significant labor in terms of reducing customer outages. So.
Feel that positions our productive positions that we've seen in the various parties and we're going to work work hard to get towards a settlement.
Before the middle of October .
Okay.
Kind of severity of these storms relative to uhm expected storm activity E or a normal step storm activity and then finally on your level of competence and cheap and guidance in light of storms I know, we've touched on weather, but specifically I'm storms. Thank you.
So we did have some stole more than moved in last night, approximately 92 to 93 per cent of our customers are power at this moment.
And no we've mobilized.
Almost 3000 of our team members to address the other storm conditions that will wrap up most of it up in the next couple of days. These types of storms are pretty typical in July and August .
So nothing out of the ordinary at this point in time.
Of achieving guidance as I mentioned in Davis mentioned, you know, we've we have seen about $200 million ahead headwinds.
And we have a plan that addresses these headphones and those headwinds included some of the prior storm activity in cooler weather that we experienced in warmer weather in the winter.
Many of the initiatives will be a one time in nature, but we're learning as I mentioned, a lot more about our company and which is good for us and good for our customers and the a team is achieving the plan right on top of the plant. We've asked them for some significant the delivery of on initiatives and the other delivery on that plan. So I'm proud of.
They're accomplishment in battle and us at the midpoint.
And were guidance.
Alright. Thank you for taking my question brings some grandson.
Thank you the next night to Michael Sullivan at Wolf Research.
Hey, good morning.
Morning.
Okay Jerry.
I just had a quick one on the on the I R. P was just wondering if we could get a little more color on you know you mentioned like studying technology to replace Monro and kind of what that could look like I think originally in the plan you may have had a gas plant with carbon capture and their <unk>.
Making it into the official plan or what what sort of other solutions are on cable there.
Yeah, what we settled on Michael was that you know we'd file another irve in several years and that that would really be the what I would say the key topic for the last two units of Monroe.
Retiring those two and 2032 so the agreement between the parties and US of course was that look at you know locked to change in two or three years, but.
But we will need a special resource there you know we had proposed I can buy a cycle plan with carbon capture.
And so we'll have to study that as an option amongst many other options you know more batteries more renewables, but definitely a very large resource that we count on from that part of the service territory to Peter Industrial base in Detroit and Uhm. So we'll need a dispatch will resource that's gonna be of high quality and 24 by.
Seven the resource so it'll look like that it'd be maybe a mixture of.
It's just hard to tell right now where the where they'll studies will will take us, but we agreed the study that together as a stakeholder group.
So we got the time to do that one.
Okay, Great and then another one on the I R. P. I think somewhere in there was mentioned.
Potentially you're looking at.
<unk> funding for the Dell River conversion can can you talk a little bit about that in and out on me you know help customers or your plan.
Well I certainly the <unk> go ahead <unk> <unk>, yeah, what we what we mentioned there for the Bell River conversion with some of the D. O U phones that are now available for.
Replacing or Repowering energy infrastructure that gets east and it kind of fits right into what this Pearl River conversion is so along with some other capital investment opportunity we have.
Gonna look right at Uhm Bell River and see if there's some D O refunding that can come in and they can give.
Lower interest rate that could really help with customer affordability as we're building out our our infrastructure renewal and cleaner generation plan.
Okay, and any sense of time and I'm like when that plays plays out when when you know you can get the funds Oregon.
It'll as we get closer will know it'll be you know over the next few years. Those those funds are available for I forget the timing for five years on that so we have some time to get that but just the opportunity to get some lower interest rates for our customers and lower overall expenses.
Okay and <unk>.
Yeah like as you know we got a we have a long list of capital projects waiting to get into the plan you know as soon as we find unique ways to finance some of it it will allow us to.
Accelerated our journey and other areas like for example, with our grid. So lots of you know the more opportunity we could find like that to make more headroom, we will take full advantage of it.
Awesome. Thanks, Thanks again.
And we're gonna come out to David Arcaro at Morgan Stanley .
Oh, Hey, good morning, Thanks for taking my question.
Good morning.
Hey, I was wondering just in your Arsenal of.
Cost cutting measures are offset measures I was wondering if there are financial tools that you might have at your disposal that you've considered I'm just thinking that CMS did a tender offer recently on one of their outstanding bonds things like that are those at the things that you would consider for offsetting whether headwind.
This year.
Yeah, we look we always look across the portfolio for opportunities you know we've looked at convertible that we don't have much more corporate that we need to do this year and will look for other opportunities like that but right now we don't see a similar opportunity of what they brought up you know and of course anything we do we want to make sure that we maximize.
So overall value for shareholders too.
Got it thanks and then.
Separately.
Could you just give an update on what we could expect to see in the updated distribution grid plan. This year and let the time he might be for that.
We will file that before the end of the year is required by the commission and you know it'll really address four major buckets. The continued.
Surge of three <unk>, which we expect to end in three years, but then we'll be more of a maintenance cycled <unk> that'll be a key feature what we call Pull-top maintenance, which is you know replacement of press arms insulators equipment that pulls themselves that'll be a big part of the plan on our aging system <unk>.
<unk> trying to accomplish pull out emotion to the grid and.
In five years that'll be a major component of the plan you know we.
As we've seen more frequent storms and more sizeable storms over the years automation will be a big big lever for us to roost duration, how 'bout. It just and then lastly, you know as I've mentioned before one third of our grid, there's quite old it's 4800 volts system.
And that was installed in the early 19 hundreds through the through the sixties and we need to replace that that's about 16000 miles. So that'll be also a part of this updated plan to really accelerate our journey to try and get that done over the next 15 or 20 years, but those are the the major components that you'll see there'll be other things there, but those with.
Four big hitters, and the distribute distribution grid plan.
Okay, Great. That's helpful color. It thanks, so much.
Okay. Thanks.
Thank you for the next match you, Alex <unk> and <unk>.
Hi, good morning.
Okay, Alright out.
But the new commissioners focused on electric vehicles, how do you think about the upside for load Capex in rate base above like my what you might currently have included in your plan.
Well I like it you know, we're a big proponent of transportation electrification for several reasons. One is it's great for the environment I mean, the transportation sector.
I believe now the largest emitter of carbon and the economy. So I I believe it's it's gonna be very valuable for that but secondly, obviously, we get <unk>.
Make an investment opportunity from that in the sense that crepes bedroom for our investments as we see more load coming on it is not fundamental just yet.
We expect that the near the end of our five year plan will start it will start to see it'd be pretty significant contribution to the margin growth and and that'll help finance a lot of these large investments that we're making now to prepare ourselves for real application with the transportation fleet as well as the the deal with the inclement weather, though it convenient see.
So we're pretty excited about it we were happy that obviously are new.
Commissioner is very supportive of that agenda, but the other two commissioners are as well so lots to do there and we also have an administration is quite supportive of electrification. So we're pretty excited about the prospects in the future, but like I said it'll start to become more impactful in our plan.
From a margin creation perspective later and a five year period.
From an investment perspective, we're already investing against this opportunity.
Okay, I understand and then just given the additional headwinds present this quarter <unk> essentially understand that all contingency has been exhausted at this point and you know need normal weather for the balance of the year to achieve the the state of gold midpoint of guidance.
I would say that you know contingency in the electric company has been exhausted, but some of our other be you still have a bit of contingency, but we are relying on normal weather, both from temperature perspective, and storm activity perspective.
Okay, and then other than whether in a more kind of quote unquote normal year Uhm, what would get you to the high middle and low point of your guidance is the bias still towards the middle and a more more normal year.
I would say the biases the target antibiosis towards the mid point.
<unk>.
Okay. Thanks, so much that's all for me.
Thank you and it appears we have no further questions. This morning, Mister Mercier I'd like to turn things back to you for your closing comments.
Well. Thank you everyone for joining us today I'll, just close by saying I'm excited about the opportunities. We have ahead of us including are accelerating our path to cleaner generation.
And to further strengthen our electric grid and prepare the increased for the increased demand electrification on our system.
We continue to execute on our plan to achieve our goals in 2023 and remained wall position for longterm future growth I hope everyone has a great morning, and a safe day.
Thank you Mr. Mercy, it ladies and gentlemen that will conclude the D. T E energy second quarter of 2023 hearing conference call again, we'd like to thank you also much for joining us and wish you all a great remainder of your day Goodbye.
Please rate the conference will begin shortly.
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