Q3 2023 CMS Energy Corp Earnings Call

Thanks.

Yeah.

Good morning, everyone and welcome to the CMS energy 2023 third quarter results.

Earnings News release issued earlier today and the presentation used in this webcast are available on CMS Energy's website in the Investor Relations section.

This call is being recorded.

After the presentation, we will conduct a question and answer session instructions will be provided at that time.

If it takes off during the conference you to reach an operator. Please press star followed by zero just to.

That will be a rebroadcast of this conference call today, beginning at 12 P. M. Eastern time running through November 2nd.

This presentation is also being webcast and is available on CMS Energy's website in the Investor Relations section.

At this time I would like to turn the call over to Mr stream at Apache Treasurer, and Vice President of Finance and Investor Relations.

Thank you Harry.

Everyone and thank you for joining us today with me are Derek Rochelle, President and Chief Executive Officer, and <unk> Hayes Executive Vice President and Chief Financial Officer. This presentation contains forward looking statements, which are subject to risks and uncertainties. Please refer to our SEC filings for more information regarding the risks and other factors that could cause our actual results to differ materially.

This presentation also includes non-GAAP measures reconciliations of these measures to the most directly comparable GAAP measure are included in the appendix and posted on our website now I'll turn the call over to Gary.

Thank you Sri and thank you everyone for joining us today.

What sets us apart in this industry is clear and it's been proven for over two decades, our simple cleaner and leaner investment thesis we.

We've talked about this in many calls and many investor meetings and it works.

The long and robust capital runway.

Best in class ability to take cost out of the business to create headroom for needed investment and keep bills affordable for customers.

Couple that with a constructive top tier regulatory environment and that is our recipe premium total shareholder return.

Today I want to highlight one part of our investment thesis.

Infrastructure renewal.

It starts with our five year $15 5 billion capital plan, which supports a long runway for important customer investment.

This allows us to do what is most important for our customers deliver safe reliable affordable energy and lead the industry in the clean energy transformation.

We are one of the first vertically integrated utilities to switch from coal to clean by 2025, leading the industry with net zero carbon by 2040 aligned with customers policymakers and our strategic plan positioning us for the future.

In our gas business, we are on pace to net zero methane by 2030 and with a 20% reduction in scope three emissions one of the few in the industry, making the gas system safer and cleaner.

And in our electric distribution system, we are hardening the grid to make it more reliable today, while preparing for the resiliency that will be required for evs connected devices and to mitigate impacts of climate change.

Our electric distribution system is vast.

Covering much of the lower peninsula of Michigan, but its aging and we are seeing more frequent and severe weather, which proves the future will require something different customers because our customers count on us reliable service.

Last month, we filed our electric reliability road map with the Michigan Public Service Commission, which outlines our plan to improve reliability and prepare the system for greater resiliency.

Operator: Good morning everyone and welcome to the CMS Energy 2023 third quarter results. The earnings news release issued earlier today and the presentation used in this webcast are available on CMS Energy's website in the Investor Relations section. This call is being recorded.

Over the last 20 years, we've seen an increase in both the frequency of storms and higher wind speeds.

Operator: After the presentation, we will conduct a question and answer session, instructions will be provided at that time. If it ain't time during the conference, you need to reach an operator, please press star followed by zero. Just a reminder, there will be a referral class of this conference call today beginning at 12 p.m. Eastern time running through November 2nd. This presentation is also being webcast and is available on CMS Energy's website in the Investor Relations section.

Some of the most extreme wins within the last four years.

We're clearly seeing the effects of climate change.

Given this and the increasing dependency on the electric distribution system, we have set for the plan that bolsters the system now Ian builds for the future.

We worked with a leading industry Research Institute FRE benchmarking companies as well as advance.

Sri Maddipati: At this time, I would like to turn the call over to Mr. Sri Maddipati, Treasurer and Vice President of Finance and Investor Relations. Please refer to our SEC filings for more information regarding the risk and other factors that could cause our actual results to differ materially. This presentation also includes non-gap measures.

Advancing technology to build a robust.

Above and comprehensive plan.

This five year electric reliability roadmap calls for $7 billion of capital investment.

Harden the system expand underground update infrastructure increased capacity and advanced automation.

To give you a small snapshot.

Our plan includes roughly 1000 miles of system under grounding in the near term and longer term significantly more underground to ensure our system is prepared to withstand severe weather.

Sri Maddipati: For conciliations of these measures, the most directly comparable gap measure are included in the appendix and posted on our website.

Originally our design standard was for 40 mph wind.

Garrick Rochow: Now I'll turn the call over to Garrick. Thank you, Sri. And thank you, everyone, for joining us today.

With the wind speeds were seeing today, our new standard.

80 mile per hour winds and half an inch of ice loading.

Garrick Rochow: What sets up the part in this industry is clear. And it's been proven for over two decades, our simple cleaner and leader investment thesis. We've talked about this in many calls and many investor meetings and it works along and robust capital runway, a best in class ability to take costs out of the business to create headroom for needed investment and keep bills affordable for customers. Couple that with a constructive top tier regulatory environment. And that is our recipe, a premium total shareholder return.

This plan also includes further automation in machine modeling, adding technology to more precisely locate isolate damage reroute power and better predict problem areas.

More customers online and responding to outages faster.

We've put our stake in the ground, we've identified the steps to improve reliability step change and build an electric grid that can better withstand extreme weather and better serve our customers in the future.

With Commission support this plan will reduce the frequency and duration of outages, while moving us into the second quartile for reliability.

Garrick Rochow: Today, I want to highlight one part of our investment thesis, infrastructure renewal. It starts with our five year 15.5 billion dollar capital plan, which supports a long runway for important customer investment. This allows us to do what is most important for our customers, deliver safe, reliable, affordable energy and lead the industry in the clean energy transformation. We're one of the first vertically integrated utilities to switch from coal to clean by 2025 leading the industry with net zero carbon by 2040 aligned with customers, policy makers and our strategic plan, positioning us to the future.

Coupled with additional customer investment the longer term vision delivers a grid, where no opex will affect more than 100000 customers and no customer will be without power for more than 24 hours.

We expect these investments to be part of our upcoming electric rate case filings.

It will be implemented on commission approval.

And let me be clear, we are already making progress.

We've doubled our investment in vegetation management over the last three years shortening our trim cycle.

<unk> seen greater than 60% benefit where we've done the work we've.

We've increased the amount of customer investments in upgrades using and hardening installing nearly 15000 fuses used devices in the last two years more than we've ever done reducing the number of customers impacted per interruption.

Garrick Rochow: In our gas business, we're on pace to net zero methane by 2030 and with a 20% reduction in scope three emissions, one of the few in the industry, making the gas system safer and cleaner. And in our electric distribution system, we are hardening the grid to make it more reliable today while preparing for the resiliency that will be required for EVs, connected devices and to mitigate impact of climate change. Our electric distribution system is vast covering much of the lower peninsula of Michigan, but it's aging and we are seeing more frequent and severe weather, which proves the future or requires something different because our customers count on us reliable service. Service.

We've increased our maintenance inspection frequency on any potential failures before they occur.

And just last week, we were notified that of the nearly 300 300 companies to apply for grants under the.

Hartman of energy.

We're one of seven companies were awarded $100 million.

We're specializing in improving circuit disadvantaged communities.

This is great for our company and our customers first accelerates investments, which were already part of our $7 billion electric reliability Road map second strikes the important balance of reliability improvement and affordability.

And finally, because these are matching grant provides greater line of sight and certainty recovery of these needed customer investments.

Garrick Rochow: Last month we filed our electric reliability roadmap with the Michigan Public Service Commission, which outlines our plan to improve reliability and prepare the system for greater resiliency. Over the last 20 years, we've seen an increase in both the frequency of storms and higher wind speed, with some of the most extreme winds within the last four years, or clearly seeing the effects of climate change. Given this, in the increasing dependency on the electric distribution system, we have set forward a plan that bolsters the system now and builds for the future.

We take our commitment to serve variously what our customers deserve we wake up every day to deliver.

Why we constructed our electric reliability roadmap.

On slide five I want to take a moment to provide an update on our regulatory calendar.

In September we revised our position in our electric rate case to $169 million and maintained our position for a 10, 5% Roe and.

Garrick Rochow: We worked with the leading industry, research institute, FRI, benchmarking companies, as well as advancing technology to build a robust and comprehensive plan. This five-year electric reliability roadmap calls for $7 billion of capital investment to harden the system, expand underground, update infrastructure, increase capacity, and advance automation. To give you a small snapshot, our plan includes roughly 1,000 miles of system undergrounding in the near term. In longer term, significantly more undergrounding to ensure our system is prepared to withstand severe weather.

51, 5% equity ratio.

We're requesting approval of a 10 mile underground pilot with plans to underground over 400 miles annually, beginning in 2027, which aligns with our electric reliability roadmap.

Small, but important step and.

And building out a program that can be supported by the Michigan Public Service Commission and will deliver significant improvement for our customers.

We also requested a recovery mechanism for investment in our electric distribution system to improve reliability.

<unk> to the mechanism we've utilized in our gas business, which creates greater clarity on the investment and customer benefits, while improving certainty of recovery.

Garrick Rochow: Originally, our design standard was for 40 mile-power wind. With wind speeds we are seeing today, our new standard is for 80 mile-power wind and half an inch of ice loading. This plan also includes further automation in machine modeling, adding technology to more precisely locate and isolate damage, reroute power, and better predict problem areas, keeping more customers online and responding to outages faster. We've put our stake on the ground. We've identified the steps to improve reliability, the step change, and build an electric grid that can better withstand extreme weather, and better serve our customers in the future.

We expect a final order by March of next year.

We also recently received approval from the Michigan Public Service Commission on our gas rate case settlement, providing continued value for our customers and investors.

These rates became effective October one.

We plan to file our next gas rate case in December of this year. This case brings a continued focus on a safe reliable affordable and clean natural gas system will support it needed customer investment.

As we've shared in previous calls and in Investor meetings, we continue to see the Michigan regulatory jurisdiction is constructive and providing a good balance for all stakeholders living up to its ranking as top tier.

Garrick Rochow: With commission support, this plan will reduce the frequency and duration of outages while moving us into second quartile for reliability, coupled with additional customer investment, the longer term vision delivers a grid, or no knowledge will affect more than 100,000 customers, and no customer will be without power for more than 24 hours. We expect these investments to be part of our upcoming electric rate case filings, and will be implemented upon commission approval.

Moving on to the financials for the third quarter, we reported adjusted earnings per share of <unk>.

One and $2 six per share year to date.

Reggie will provide additional details, but despite a significant storm in the third quarter, we remain on track to deliver on our full year guidance of $3 6 billion.

Garrick Rochow: And let me be clear, we are already making progress. We've doubled our investment in vegetation management for the last three years, shortening our trim cycles. We've seen greater than 60 percent benefit where we've done the work. We've increased the amount of customer investments and upgrades using and hardening, installing nearly 15,000 few devices in the last two years, more than we've ever done, reducing the number of customers impacted per interruption. We've increased our maintenance inspection frequency, finding potential failures before the occur.

$3 12 per share and expect to deliver towards the high end.

Given that confidence we are initiating our full year guidance for 2024.

At $3 27.

At $3 33 per share, reflecting 6% to 8% growth off the midpoint of this year's range.

And we are well positioned just like 2023 to be toward the high end of that range.

Garrick Rochow: And just last week, we're notified that of the nearly 300 companies who applied for grants on the Department of Energy, we're one of seven companies who are awarded $100 million for specializing in improving circuits in disadvantaged communities. This is great for our company and our customers first accelerates investment, which were already part of our $7 billion electric reliability roadmap. Second, this strikes the important balance of reliability improvement and affordability. And finally, because these are matching grants, it provides greater line of sight and certainty for recovery of these needed customer investments. We take our commitment to serve, seriously, what our customers deserve, we wake up every day to deliver, that's why we constructed our electric reliability roadmap.

It is also important to remember that we always rebased guidance off our actuals on the Q4 call.

Owning our growth.

This brings you a higher quality of earnings and differentiates us from others in the sector.

We're also reaffirming our long term adjusted earnings growth of 6% to 8% per year with continued confidence towards the high end.

<unk> committed to dividend per share growth of 6% to 8%.

Like we've done in previous years, we will provide you with an update.

On our 2024 guidance based off of <unk> as well as a refresh of our five year capital plan on the Q4 call.

We continue to be confident in our ability to deliver the year.

And in our longer term outlook, providing exceptional value for all stakeholders.

With that I will.

I'll hand, it over to Reggie to offer some additional detail.

Thank you Derek and good morning, everyone.

Garrick Rochow: On slide five, I want to take a moment to provide an update on our regulatory calendar. In September, we revised our position in our electric rate case to $169 million. And maintained our position for a 10.25% ROE and a 51.5% equity ratio.

As Gary noted, we had a solid third quarter delivering adjusted earnings of 61 per share driven by numerous cost reduction initiatives, which have largely offset the headwinds that we faced throughout the year. Most recently in the form of a severe storm that hit our electric service territory in August.

Garrick Rochow: We're requesting approval of a 10-mile underground pilot with plants underground over 400 miles annually, beginning in 2027, which aligns with our electric reliability roadmap. A small but important step in building out a program that can be supported by the Michigan Public Service Commission and will deliver significant improvement for our customers. We also requested a recovery mechanism for investment in our electric distribution system to improve reliability. Similar to the mechanism we've utilized in our gas business, which creates greater clarity on the investment and customer benefit while improving certainty of recovery.

To put the weather we have experienced in 2023 into perspective.

We are approaching a record level of storm activity this year.

Which further supports the needed investments in our electric system Mccarrick highlighted and we've seen heating and cooling degree days of 11% and 24% below historical levels, respectively on a year to date basis.

That said, we do not make excuses and have implemented numerous countermeasures throughout the year to mitigate these risks and are well positioned to deliver on our financial objectives. This year for the <unk>.

<unk> of customers and investors.

As such we are reaffirming our guidance for the year and on a year to date basis. We are on track with adjusted EPS of $2.06 per share given our progress and the aforementioned countermeasures, which I will elaborate on shortly.

Garrick Rochow: We expect a final order by March of next year. We also recently received approval from the Michigan Public Service Commission on our gas rate case settlement, providing continued value for our customers and investors. These rates became effective October 1st.

In the waterfall chart on slide seven for clarification purposes, all of the variance analysis herein are measured relative to the comparable periods in 2022.

Garrick Rochow: We plan to follow our next gas rate case in December of this year. This case brings a continued focus on a safe, reliable, affordable, and clean natural gas system while supported needed customer investment. As we've shared in previous calls and in investor meetings, we continue to see the Michigan regulatory jurisdiction as constructive in providing a good balance for all stakeholders, living up to its ranking as popped here.

Actuals are quantified on a year to date basis, and the perspective period.

Flex the final three months of the year.

Starting with actuals with respect to whether previously noted unfavorable weather experienced in 2023 has driven <unk> 49 per share of negative currency.

Rate relief net of investment related expenses has resulted in <unk> 20 per share of positive variance driven by last year's constructive electric and gas rate case settlement.

From a cost perspective, our financial performance through the third quarter has been significantly impacted by higher operating and maintenance or O&M expenses to the tune of 21 per share of negative variance due to higher service restoration expenses attributable to the storms.

Garrick Rochow: Moving on to the financials for the third quarter, you reported adjusted earnings per share of 61 cents in two dollars and six cents per share year to date. Reggie will provide additional details, but despite a significant storm in the third quarter, we remain on track to deliver on our four-year guidance of three dollars and six cents, just three dollars and twelve cents per share, and expect to deliver toward the high end.

However, it is worth noting that our operational O&M expenses exclusive of service restoration expense are down roughly 10% versus the third quarter of 2022, which highlights the significant cost performance, we've realized across the business.

Garrick Rochow: Given that confidence, we are initiating our four-year guidance for 2024 at three dollars and 27 cents to three dollars and 33 cents per share, reflecting six to eight percent growth off the midpoint of this year's range. And we are well positioned just like 2023 to be toward the high end of that range. It is also important to remember that we always rebase guidance off our actuals on the Q4 call, and on pounding our growth.

To that end and as previously noted we implemented numerous cost reduction initiatives earlier in the year.

Such as reducing our use of consultants and contractors limiting hiring accelerating longer term projects and eliminating other discretionary spending.

We are also supplementing these efforts with a voluntary separation program or VSP that reduced our salaried workforce by roughly 10% and more importantly, as we leverage the CE way our lean operating system, we will continue to eliminate waste and increased productivity going forward.

Garrick Rochow: This brings you a higher quality of earnings and differentiates us from others in the sector. We are also reaffirming our long-term adjusted earnings growth of six to eight percent per year with continued confidence toward the high end and remain committed to dividend per share growth of six to eight percent.

Rounding out the first nine months of the year Youll note that <unk> 27 per share positive variance highlighting a catch all bucket in the middle of the chart.

We've seen this bar increase throughout the year as a result of our continued success in realizing cost savings with financing efficiencies liability management lung tax planning and favorable non weather sales in our electric business during the summer.

Garrick Rochow: Like we've done in previous years, we'll provide you with an update on our 2024 guidance based off of actuals, as well as a refresh of our five-year capital plan on the Q4 call. We continue to be confident in our ability to deliver the year in our longer term outlook, providing exceptional value for all stakeholders.

As we look ahead to the fourth quarter as always we plan for normal weather, which we expect will have a neutral impact on our financial performance versus the fourth quarter of 2022.

And we expect a similar financial impact rate relief net of investment related costs and the benefits of our recent gas rate case settlement and our 2022 electric rate case settlement are largely offset by the absence of tax benefits associated with a prior gas rate case settlement.

Rejji Hayes: With that, I'll hand it over to Rejji to offer some additional details. Thank you, Garrick, and good morning, everyone. As Garrick noted, we had a solid third quarter delivering adjusted earnings of 61 cents per year, driven by numerous cost reduction initiatives, which have largely offset the headwind that we have faced throughout the year, most recently in the form of a severe storm that hit our electric service toward territory analogous.

Rejji Hayes: To put the weather we have experienced in 2023 into perspective, we are approaching a record level of storm activity this year, which further supports the needed investments in our electric system that Garrick highlighted, and we have seen exceeding in cooling degree days of 11 percent and 24 percent below historical levels respectively on a year-to-date basis. That said, we do not make excuses and have implemented numerous countermeasures throughout the year to mitigate these risks and a well-positioned to deliver on our financial objectives this year for the benefit of customers and investors.

From a cost perspective as noted during our Q2 call we anticipate lower overall O&M expense at the utility driven by the ongoing benefit of said.

Cost reduction initiatives, which equates to 17 cents per share positive variance. It is also worth noting that the Q4 2022 comp for this bucket is notably soft given the higher than average O&M expenses incurred during that period.

Closing out the glide path for the remainder of the year Youll note in the penultimate hedge all bar on the right that we're anticipating 23 to 29 per share of positive variance as we've discussed previously the key drivers here are the absence of significant discretionary actions taken in the fourth quarter of 2022 related to last year's <unk>.

Electric rate case settlement and the filing of our voluntary refund mechanism, which collectively equate to <unk> 12 per share.

Rejji Hayes: As such, we are reaffirming our guidance for the year, and on a year-to-date basis, we are on track with adjusted EPS of $2.6 per year, given our progress on the aforementioned countermeasures, which I'll elaborate on shortly. In the waterfall chart on slide 7, for clarification purposes, all of the variants analysis herein are measured relative to the comparable periods in 2022. The actuals are quantified on the year-to-date basis, and the perspective period reflects the final three months of the year.

The remaining notable items that we anticipate in this bucket are from Northstar, our non utility business, achieving its full year guidance and favorable non weather sales at the utility which have trended well over the past few quarters.

All in we remain confident in our ability to meet our EPS guidance for the year and as always we will take none of this positive momentum for granted and will approach. These last few months of the year with the usual degree of paranoia by maintaining our cost discipline and flex additional opportunities as needed to deliver the consistent financial results.

Rejji Hayes: Starting with actuals with respect to weather, the previously noted unfavorable weather experience in 2023 has driven 49 cents per share of negative damage. Great relief, net investment-related expenses has resulted in 20 cents per share of positive variance driven by last year's constructive, electric and gas rate case settlement. From a cost perspective, our financial performance through the third quarter has been significantly impacted by higher operating and maintenance for own end expenses to the tune of 21 cents per share of negative variance due to higher service restoration expenses attribable to storms.

<unk> you have come to expect.

Moving onto the balance sheet on.

On slide eight we highlight our recently reaffirmed credit ratings from S&P in August as.

As you know we continue to target mid teens episode of debt on a consolidated basis over our planning period to preserve our solid investment grade credit ratings, our financing strategy and strong balance sheet position as well given the market volatility we've seen recently.

Rejji Hayes: However, it is worth noting that our operational own end expenses exclusive of service restoration expense are down roughly 10 percent versus the third quarter of 2022, which highlights the significant cost performance we've realized across the business. To that end, and as previously noted, we implemented numerous construction initiatives early in the year, such as reducing our use of consultants and contractors, limiting hiring, accelerating longer term IT projects, and eliminating other discretionary spending.

At the utility our annual rate case cadence and the use of forward looking test years allow us to incorporate higher interest rates into our filings and recover the associated cost with minimal lag.

At the parent.

Where our funding costs are non recoverable, we have limited refinancing risk in the near term with $250 million due in 2024, and 2025 and $300 million coming due in 2026.

And as noted during our second quarter call. The 2020 for maturity has already been pre funded with proceeds from our convertible debt issuance in may.

Rejji Hayes: We have also supplemented these efforts with a voluntary separation program or BSP that reduced our salary and workforce by roughly 10 percent. And more importantly, as we leverage a CE way, our lean operating system will continue to eliminate and increase productivity going forward.

It is also worth noting that 100% of the debt at the parent company is fixed and over 40% as hybrid in nature, thus receiving equity credit from the rating agency.

In addition to strong liability management, we continue to plan conservatively.

Rejji Hayes: Board. Rounding out the first nine months of the year, you'll note the 27 cents per share of positive variance, I'd like to catch all bucket in the middle of the chart. We've seen this bar increase throughout the year as a result of our continued success in realizing cost savings, financing, efficiencies, liability management, strong tax planning, and favorable non-weather sales in our electric business during the summer. As we look ahead to the fourth quarter, as always, we plan for normal weather, which we expect to have a neutral impact on our financial performance versus the fourth quarter of 2022.

I know that that funding costs have increased in the current environment. They remain consistent with the assumptions embedded in our long term financial plan.

As always we remain focused on maintaining a strong financial position, which coupled with a supportive regulatory construct and predictable operating cash flow generation supports our solid investment grade ratings to the benefit of our customers and investors.

Moving on to the financing plan slide nine offers more specificity on the balance of our planned funding needs in 2023 in short I am pleased to report our financing plan for the year is largely completed.

Rejji Hayes: And we expect a similar financial impact for rate relief net investment-related costs as the benefits of our recent gas rate case settlement and our 2022 electric rate case settlement are largely offset by the absence of tax benefits associated with a prior gas rate case settlement. From a cost perspective, as noted during our Q2 call, we anticipate lower overall economic expense at the utility given by the ongoing benefits of said cost reduction initiatives, which equates to 17 cents per share of positive variance.

In fact at the utility we've completed all of our planned first mortgage bond issuances for the year at a weighted average coupon of approximately four 8%, which is below our plan estimate.

The only remaining Opco financing is a secured securitization funding to address the recovery of the unappreciated rate base and our recently retired coal facilities.

As for the parent company given the timing of the aforementioned convertible bond issuance, we have been able to delay the settlement of the equity forwards at price last year. So the roughly $440 million before with equity contract will be settled in the fourth quarter.

Rejji Hayes: It is also worth noting that the Q4 2022 comp for this bucket is notably soft given the higher than average economic expenses incurred during that period. Closing out the glide path for the remainder of the year, you'll note in the penultimate, that's all born to right, that we're anticipating 23 to 29 cents per share of positive variance. As we've discussed previously, the key drivers here are the absence of significant discretionary actions taken in the fourth quarter of 2022 related to last year's electric rate case settlement and the filing of our voluntary refund mechanism, which collectively equate to 12 cents per share.

As I've said before our approach to our financing plan is similar to how we run the business, we plan conservatively and capitalize on opportunities as they arise. This approach has been tried and true year on year out and has enabled us to deliver on our operational and financial objectives irrespective of the circumstances to the benefit of customers.

And investors.

And with that I'll hand, it back to Gary.

Final remarks before the Q&A session.

Thank you Rajeev.

Rejji Hayes: The remaining notable items that we anticipate in this bucket are from North Star or non-utility business, achieving its full-year guidance and favorable non-weather sales at the utility, which have trended well over the past two quarters. All in, we remain confident in our ability to meet our EPS guidance for the year, and it's always will take none of this positive momentum for granted and will approach these last two months of the year. We are, with the usual degree of paranoia by maintaining our cross discipline and flex additional opportunities as needed to deliver the consistent financial results you have come to expect.

You hear us say it every year.

We deliver.

Our track record spans two decades of consistently delivering industry, leading results in all conditions for all stakeholders in this year.

No different with that Gary.

Please open the lines for Q&A.

Thank you very much Gary a question answer session will be conducted electronically.

You'd like to ask a question. Please do so by pressing star followed by one on your Touchtone telephone.

If you are using speaker function. Please make sure you pick up your handset.

We'll proceed in the order you signals and we'll take as many questions as time permits.

Rejji Hayes: Moving on to the balance sheet, on slide 8, we highlight our recently reaffirmed credit ratings from S&P in August. As you know, we continue to target mid-teens F-Pota Depth on a consolidated basis over a planning period to preserve our solid investment grade credit ratings. Our financing strategy and strong balance sheet position, as well, given the market volatility we've seen recently. At the utility, our annual rate case cadence and the use of forward-looking test years allow us to incorporate higher interest rates into our filings and recover the associated costs with minimal lag.

If you do the fund that your question has been on since you may remove yourself by pressing star followed by the digit too on your Touchtone telephone.

Just for a second.

Our first question today comes from the line of Jeremy Tonet of Jpmorgan, Jamie Your line is open.

Okay.

Good morning.

Hey, Jeremy how are you good morning.

Good good. Thanks, I just wanted to start with the electric rate case, if I could here.

Yes. Thank you for the color that you provided but wondering if we could dig in a little bit more on how recent conversations have been tracking.

Rejji Hayes: At the parent where a funding costs are non-recoverable, we have limited refinancing risk in the near term, with $250 million due in 2024 and 2025, and $300 million come in due in 2026. And as noted during our second quarter call, the 2024 maturity has already been pre-funded with proceeds from our convertible debt issuance and mess, is also worth knowing that 100% of the debt at the parent company is fixed and over 40% is hybrid in nature, thus receiving equity credit from the rating agency. In addition to strong liability management, we have continued to plan conservatively and though debt funding costs have increased in the current environment, they remain consistent with the assumptions embedded in our long-term financial plans.

In the case could you walk us through the core differences between SaaS recommendation in your proposal.

Should we be looking for more specifically.

Is settlement possible when tracking mechanisms are disputed in is a fully litigated case preferable in this area. So there is no kind of gray areas.

Great Great question Jeremy.

I feel good I feel good about the progress of our electric rate case, just to give you a little flavor on where we're at with that and rebuttal, we came back at $169 million and as I shared.

In my prepared remarks.

10, 5% ROE and 51, 5% equity ratio.

And that reflects just the differences in the business from when we built the case, though to where we're at now on a forward looking test year staffs that $88 million.

Rejji Hayes: As always, we remain focused on maintaining a strong financial position which coupled with a supportive regulatory construct and predictable operating cash regeneration supports our solid investment-grade ratings to the benefit of our customers and investors.

So the gaps pretty small between are asking where the staff is which again I see as very constructive and so we're really in a constructive starting point in the conversation and much of that Delta is made up with it just really the cost of capital ROE and equity ratios. That's a big piece of the difference and then.

Rejji Hayes: Moving on to the financing plan, Slide 9 offers more specificity on the balance of our planned funding needs in 2023.

Rejji Hayes: In short, I'm pleased to report that our financing plan for the year is largely completed. In fact, the utility we've completed all of our planned first mortgage bond issuances for the year had a weighted average coupon of approximately 4.8 percent, which is below our planned estimate. The only remaining op-code financing is a securitization funding to address the recovery of the unappreciated rate base that are recently retired car and coal facilities. As for the parent company given the timing of the aforementioned convertible bond issuance, we've been able to delay the settlement of the equity boards at price last year. So the roughly $440 million before the equity contract will be settled in the fourth quarter.

A few other what I call cats, and dogs important cats and dogs Nonetheless, but.

Things that we are helpful for our customers and so that's the big difference now, let's talk a little bit about settlement in the context of settlement.

Certainly been on a number of these calls where I'm open to settlement and settlement presents itself, that's great and we're certainly receptive to that but as you pointed out there is.

An important mechanism in there and there is underground and those are two key things that we need to see come out of this case.

Investment recovery mechanism to have some certainty on our distribution electric distribution investment and this underground pilot. This was important to get this started.

Rejji Hayes: As I've said before, our approach to our financing plan is similar to how we run the business. We plan conservatively and capitalize on opportunities as they arise. This approach has been tried and true year in and year out and has enabled us to deliver on our operational financial objectives irrespective of the circumstances to the benefit of customers and investors.

And there is a real benefit for our customers and so.

Those are harder to get and settlement just to be fully transparent typically there are black box when you go through settlement and so.

We're prepared to go the full distance and I'll just be honest with the entire call. It's likely we're going to go the full distance and I have confidence that we can get a really constructive outcome.

Garrick Rochow: And with that, I'll hand it back to Garrett for his final remarks before the Q&A session. Thank you Reggie. You hear us say it every year. We deliver our track records fans two decades of consistently delivering industry leading results in all conditions for all stakeholders. And this year will be no different.

Go into a full order.

Got it Thats very helpful. There.

And maybe pivoting a bit could you walk us through your longer term expectations for dig.

Particularly as it relates to re contracting here can you speak to the longer term potential.

Operator: With that, Harry, please open the lines for Q&A. Thank you very much, Gary. The question asked session will be conducted electronically. If you'd like to ask a question, please do so by pressing star followed by the digit one on your touch tone telephone. If you're using speaker function, please make sure you pick up your handset. We'll proceed in the order you signal us and we'll take as many questions as time permits. If you do define that your question has been answered, you may remove yourself by pressing the star key followed by the digit two on your touch tone telephone. We'll pause just for a second.

For this business and for Nonregulated renewables growth in the future as well given.

The changing landscape.

Yeah, our non utility growth continues to be small in the bigger scheme of things. Our primary business continues to be the utility space. So it's about a $95 five mix.

And as shared in the prepared remarks, we expect them to be within the within guidance range and so that's a good piece that continues to be contracted renewables.

Again ready to use these words singles and doubles, we're not swinging for the fences here. So just thoughtful contracted renewables.

Jeremy Tonet: Our first question today comes from the line of Jeremy Tinnett of JP Morgan. Jeremy, your line is open. Good morning. Hey Jeremy, how are you? Good morning. Good, good. Thanks.

Utility like return long term contracts assuming.

No terminal value again really conservative almost utility like.

And then there's the Dearborn industrial generation or dig and we continue to see upward pressure on energy and capacity prices and so we're fully contracted out to 2025 with energy and capacity and so we're filling in 'twenty six 'twenty, 7% in the out years.

Garrick Rochow: I just want to start with the electric great case of I could here. And yeah, thank you for the color that you provided, but I wonder if we could dig in a little bit more on how recent conversations have been tracking in the case. Could you walk us through the core differences between staff's recommendation and your proposal? What items should be looking for more specifically? Is settlement possible when tracking mechanisms are disputed and is a fully litigated case preferable in this area so there's no kind of great areas.

Plan conservatively.

But those bilaterals.

And the.

The contracts that we are.

Our inking certainly better than expectations now don't read into that a sugar high you've heard me say no sugar highs in the past so you would anticipate 6% to 8% growth.

Again expectation towards the high side of that growth.

Garrick Rochow: Great question, Jeremy, and I feel good about the progress of our electric rate case, and just to give you a little flavor on where we're at with that, in rebuttal, we came back at $169 million and as I shared in my prepared remarks, 10.25% ROE and 51.5% equity ratio. And that reflects just the differences in the business from when we built the case to where we're at now in the forward-looking test year.

So we will continue to reinvest as needed versus the sugar high so hopefully that's helpful. As we see.

Northstar.

Got it understood no sugar highs, but but.

Certainly helpful towards the upper end of the range. There. So thank you for the color I will leave it there. Thanks.

Yes.

Our next question today is from the line of Julien Dumoulin Smith of Bank of America Merrill Lynch Julien Your line is open.

Garrick Rochow: Staffs that $88 million, and so the gap's pretty small between our asking where the staff is, which again I see is very constructive, and so we're really at a constructive starting point in the conversation. And much of that delta is made up with just really the cost of capital ROE and equity ratio. That's a big piece of the difference. And there's a few other, what I call cats and dogs, important cats and dogs and then the less, but things that we are helpful for our customers.

Okay.

Hey, good morning team, Hey, guys doing.

Hey, Julien good morning, Julien congratulations on the on the announcement there in AG could work your team.

I appreciate it. Thank you very much hey look I'm just following up on the speaking maybe we could work the distribution plan right to $7 billion that you guys talked about there can you elaborate just if you think that that's really kind of incremental versus your prior plan. It seems like that's probably a kind of a net 5 billion one bill.

Garrick Rochow: And so that's the big difference. Now let's talk a little bit about settlement in the context of settlement, and I've certainly been on a number of these calls where I'm open to settlement and settlement presents itself. That's great, and we're certainly receptive to that. But as you pointed out, there's an important mechanism in there, and there's undergrounding. Those are two key things that we need to see come out of this case.

The increase over five years can you talk about is that incremental or as you talk about sugar highs is that going to offset capital elsewhere. If you will to smooth things out just curious on how you think about that fitting into the grander plan.

As you update.

I'll state that more holistically.

I'm really excited about this plan.

Garrick Rochow: Investment recovery mechanism tests some certainty on our distribution, elect distribution investment, and this underground pilot. This is important to get this started, and there's a real benefit for our customers. And so those are harder to get in settlement, just to be fully transparent. Typically, there are black box when you go through settlement, and so we're prepared to go to full distance, and I'll just be honest with the entire call. It's likely we're going to go to full distance, and I have confidence that we can get a really constructive outcome going to the fore order.

We've talked about and we've seen the storms this year and certainly we have an opportunity to improve reliability in the here and now and then prepare for an aging system.

Jeremy Tonet: Got it. That's very helpful there.

System, that's being higher wins and more severe weather and preparing for the future. So the team has really done a nice job of putting a good plan together now when I look out five years, it's more than an incremental $1 billion, it's an incremental $3 billion right. What's in the plan right. Now is four 4 billion and our five year plan now I want to be really cares.

<unk> and really clear about this and so when we get to the Q4 call we're going to grow our capital you can expect we're going to grow our capital you can expect with.

Garrick Rochow: And maybe pivoting a bit. Could you walk us through your longer term expectations for DAG, particularly as it relates to, you know, re-contracting here. Could you speak to the longer term potential, you know, for this business and for non-regulated renewables growth in the future as well, given the changing landscape? Yeah, our non-utility growth continues to be small in the bigger scheme of things. Our primary business continues to be the utility space, so it's about a 95-5 mix.

With these needs on the distribution system that it's going to be biased or it's going to be more growth in the on the electric distribution system. So that $4 billion number should grow that's what I would anticipate and expect however, I wouldn't just do the simple math of taken 15, five and adding $3 billion to it that would get you the wrong answer the wrong.

Number it's important that we get commission support and as we go through the steps we will get that in the electric rate case filing and we'll weave that in to that capital plan over time, but it should give you a picture of the strength of our five year plan. It is robust there.

Garrick Rochow: And as shared in the prepared remarks, we expect them to be within guidance range, and so that's a good piece. It continues to be contract renewables, and again, Roger uses these words, singles and doubles. We're not swinging for the fence of here, so just thoughtful, contracted renewables. They have utility-like return, long-term contracts, assuming no term of value. Again, really conservative, almost utility-like. And then there's the Dearborn Industrial Generation or DAG, and we continue to see upward pressure on energy and capacity of crisis.

Plenty of opportunities out there and that extends even beyond 10 years into a really nice loan capital runway. So helpful. Julien.

Absolutely. Thank you for giving a little bit of context there.

Speaking of context.

Capacity markets writ large have attracted a decent amount of attention of late and certainly some of the inflationary dynamics around them.

Garrick Rochow: And so we're fully contracted out to 2025 with energy and capacity, and so we're filling in 26, 27, and the out years. We plan conservatively, but those bilaterals and the contracts that we are inking are certainly better than expectations. Now, don't read into that a sugar high. You've heard me say no sugar highs in the past, so you can anticipate 6-8% growth on this. Again, expectations for the high side of that growth and so we'll continue to reinvest as needed versus the sugar high. So hopefully that's helpful as we see North Star. Got it. Understood. No sugar highs, but certainly helpful towards the upper end of the range there. So thank you for the color.

Can you speak a little bit to the status of dig, but youre contracting status through the long term and more importantly, how you think about your commercial strategy here.

Pricing.

As elevated as it seems to be getting in some of these markets. So just curious on what you guys are seeing and what the opportunity is.

It fits into the plan.

Yes.

Similar similar to my previous answer here I noticed that Dearborn industrial generation, we take a very conservative utility like approach and as you know over time, we've just stacked in contracts for energy and capacity bilateral contracts to make sure that we are avoiding risk and market volatility, but we certainly see some upward pressure on <unk>.

Energy and capacity prices as you noted and so much of the energy and capacities already contracts are already in place through 2025, but we're filling in the gaps in 'twenty six 'twenty seven in out years, we plan conservatively and.

Jeremy Tonet: We'll leave it there. Thanks.

Julien Dumoulin: Our next question today is from the line of Julian Dumoulin Smith of Bank of America, Merrill Lynch. Julian, your line is open. Hey, good morning team. Hey guys doing. Hey, Julien, good morning, Julien. Congratulations on the on the announcement there. Hey, I appreciate it. Thank you very much. Hey, look, I'm just falling up on the speaking of good work. The distribution plan right the $7 billion that you guys talked about there.

Those contracts are I would say exceeding our expectations, we're exceeding our plan, which is which is great.

And so we will continue to operate just as we have historically and are really conservative mode. In a conservative plan, but you can see where we're layering in the future right now and feel good about the opportunities for growth at <unk>.

Awesome excellent and then quickly if you don't mind the status of the solar projects.

That stands in the schedule for bringing those into into right sorry, just to clarify that I just wanted to hit that as last quickly.

Julien Dumoulin: Can you elaborate? If you think that that's really kind of incremental versus your prior plan, it seems like that's probably a net $1 billion increase over five years. Can you talk about is that incremental or as you talk about sugar highs, is that going to offset capital elsewhere if you will to smooth things out?

Yes, we feel good about our renewable build.

And in this electric rate case, we pulled out some of the renewable build but I'll be honest with you two five years in this business has been an engineering and operations much of my career, there's there's.

Garrick Rochow: Just curious on how you think about that, fitting into the grander plan as you update that more holistically. I'm really excited about this plan. You know, we've talked about we've seen the storms this year and certainly we have an opportunity to improve reliability in the here and now and then prepare for the an aging system. It's been seeing higher winds and more severe weather and preparing for the future so that the team has really done a nice job of putting a good plan together.

Theres projects and contracts that move between years.

That's not a big deal and much of our build this year as in wind we're going to be here ended the year at our Heartland wind farm or build another 201 megawatts of wind and so theres a lot of renewable build that's underway in these years and so those projects that were referenced in the electric rate case, where some of those ones that early got caught up in some of the auctions solar.

Complaint related issues, we've talked about that that's been that's been has through in this industry I feel good about the projects. We have in mid development right now we've got line of sight into and the panels, we got good citing pieces.

Garrick Rochow: Now when I look out the five years, it's more than an incremental one billion. It's an incremental three billion right what's right in the plan right now is $4 billion in our five year plan. Now, I want to be really careful and really clear about this. And so when we get to the Q4 call, we're going to grow our capital. You can expect we're going to grow our capital. You can expect with these needs on the distribution system that it's going to be biased or it's going to be more growth in the on the electric distribution system.

Garrick Rochow: So that four billion dollar numbers should grow. That's what I would anticipate and expect. However, I wouldn't just do the simple math to take in 15.5 and add in, you know, three billion dollars to it. I would get you the wrong answer, the wrong number. It's important that we get commission support. And as we go with the steps, we'll get that in the left great case filing and we'll weave that in to that capital plan over time. But it should give you a picture of the strength of our five year plan. It is robust. There's plenty of opportunities out there.

And so that will play out.

Julien Dumoulin: And that extends even beyond 10 years into a really nice long capital. So helpful, Julian. Absolutely. Thank you for giving a little bit of context there.

As part of our ERP build the other thing is these adult projects don't go away.

Remember that these are part of the IRB.

And so they will get constructed here, it's just a matter of timing.

And that timing is being refined here and I think at least one of them is going to go this year anyway. So we're going to see some construction there and remember because they are approved and the ERP they get AFDC.

Along the way so theres no theres no earnings impact it makes sense.

Awesome. Good luck guys. Thank you so much we'll see you soon.

Yeah. Thanks Julien.

Our next question is from the line of <unk> <unk> of Guggenheim.

Your line is now open.

Yeah, sure Hey, guys good morning.

Good morning, good morning, good morning.

Yes.

Reflect on your kind of prior guidance for $3 50 of equity starting in 'twenty $5 is kind of that increased Capex plan moving your equity needs proportionately higher.

Garrick Rochow: In fact, speaking of context, you know, capacity markets writ large have attracted a decent amount of attention of late and certainly some of the inflation dynamics around them. Can you speak a little bit to the status of dig both, you know, your contracting status through the long term and more importantly, how you think about your commercial strategy here with pricing. As elevated as it seems to be getting in some of these markets.

Sure. This is Reggie yes, so we're still in the relatively early stages of building out.

Sorry, Chuck.

Sure. This is Jim here.

So we're in the early stages of rolling out our five year plan. So we are still calibrating.

Garrick Rochow: So just curious on what you guys are seeing and what the opportunity is and how that fits into the play. Yeah, and similar, similar to my previous answer here on this, that Dearborn Industrial Generation, we take a very conservative utility-like approach. And as you know, over time, we've just stacked in contracts for energy and capacity, bilateral contracts to make sure that we are avoiding risk and market volatility. But we certainly see some upward pressure on both energy and capacity prices, as you noted.

What the financing needs will be as I've said before the estimate that we have in our current five year plan, where we set up to $350 million a year of equity starting in 2025, I don't see that number materially changing now as the Capex plan increases again, we always recalibrate you may see a slight shift upward, but we have to take a look at all of them.

The.

Puts and takes the capital investments the cash flow generation.

And I think at the end of the day, you're not going to see us with any sort of need to do block equity I still think even without seeing the numbers, we'll be able to dribble out equity.

Garrick Rochow: And so much of the energy and capacity is already—contracts are already in place through 2025, but we're filling in the gaps of 26, 27, and out years. We plan conservatively, and those contracts are, I would say, exceeding our expectations or exceeding our plan, which is great. And so we'll continue to operate just as we have historically in a really conservative mode and conservative plan, but you can see we're layering in the future right now and feel good about the opportunities for growth at DIG. Awesome. Excellent.

Those outer years, but again still early days on those calculations.

Okay, perfect and then just from a stakeholder perspective, whereas the NPS C going with sort of the investigation will distort at this point and I guess, what's the range of outcomes.

We anticipate and we've seen some comments filed but there seems to be a negatively skewed mechanism penalties versus rewards.

Yes.

So there is there's two pieces.

I wouldn't put a negative take on it.

Garrick Rochow: And just quickly, if you don't mind the status of the solar projects, just where that stands and the schedule for bringing those into interest. Sorry, just to clarify that. I just wanted to hit that as last quickly. Yeah, we feel good about a renewable build. And, you know, in this electric rate case, we pulled up some of the renewable build. But I'll be honest with you, 25 years in this business, been an engineering operations much of my career.

All the conversations we have with staff and commissioners continue to be constructive.

And frankly, we're both aligned in the same the same thing we want to improve reliability. They have a longer term view of resiliency and when more aligned it makes for constructive conversations but.

There is two pieces that I am hearing your question Shar Theres. One there is the audit that's underway that will start in September.

Garrick Rochow: There's projects and contracts that move between years. That's not a big deal. And much of our build this year is in wind. We're going to be COD here into the year at our Heartland Wind Farm. We're building another 201 megawatts of wind. And so there's a lot of renewable build that's underway in these years. And so those projects that were referenced in the electric rate case were some of the ones that early got caught up in some of the oxen solar complaint related issues.

Liberty Consulting group is the one doing the work they have participated with other utilities very skilled organization right now they are in the data collection phase and that's well underway.

We expect the interim report about the end of the year and then a full report likely in the September ish timeframe, it's been about a year.

Report then.

I'll just be fully transparent with you and honest I want reliability improve in the state I want resiliency and improving mistake for our customers and so if they have findings and how we can do work better my gosh I'm just going to agree to them like we should build that into the electrical electric rate case, we should do that because we wanted better for our customers and so.

Garrick Rochow: We've talked about that. That's been that's been hashed through in this industry. I feel good about the projects we have in mid development right now. We got line aside in the panels. We got good sighting pieces. And so that'll play out as part of our IRP build. The other thing is these little projects don't go away. I remember that. These are part of the IRP. And so they'll get constructed here. It's just a matter of timing.

It doesn't bother me at all I think this is good that we have an outside party looking and looking at how we can improve it is only going to add to our reliability Road map.

Garrick Rochow: And that timing is being refined here. And I think at least one of them is going to go this year anyway. So we're going to see some construction there. And remember because they're approved in the IRP, they get AFUDC along the way. So there's no earnings impact. Makes sense? Awesome. Good luck guys. Thank you so much. We'll see you soon. Good. Yeah, thanks, Julian.

And the other thing is.

On this performance base rates or PBR work group's underway it was initiated in the.

First second quarter timeframe April ish time frame I believe.

And so that conversation is underway straw proposal was put out.

We have put comment through that process, we're continuing to participate and work groups at the end of the day I think youre going to have a nice balance of.

Shahriar Pourreza: Our next question is from the line of Sharia Puyriza of Guggenheim. Sharia, your line is now open. Hey, Shara. Hey guys, good morning. Good morning. Just as we reflect on your kind of prior guidance for 350 of equity starting in 25, there's kind of that increased CAP-X plan. Movie or equity needs proportionally higher. Shara, this is Reggie. Yeah, so we're still in the relatively early stages of building out. Sure, this is where we can hear that.

Incentives disincentives from electric reliability perspective, but the important piece for US is making sure. There is a nice line of sight into capital and the capital recovery and there is certainty that's why we are.

So focused on this investment recovery mechanism. We also think the same thing as required for storm.

Some of the O&M expense that occurs near as long as we can navigate all of that and get to that point I.

I feel good I feel good this will lead to good outcomes for our customers.

Got it perfect. Thanks, Gary I appreciate it thanks Rajiv.

Gotcha.

Our next question today is from the line of Andrew Weisel with Scotiabank. Your line is open.

Shahriar Pourreza: So, we're in the early stages of rolling out our five-year plan. So, we're still calibrating, you know, what the financing needs will be. As I've said before, you know, the estimate that we have in our current five-year plan, will be set up to $350 million a year of equity starting in 2025. I don't see that number materially changing now. As the CAPEX plan increases, again, we always recalibrate. You may see a slight shift upward, but, you know, we have to take a look at all of the puts and takes, the CAPO investments, the cash flow generation.

Shahriar Pourreza: And, you know, I think at the end of the day, you're not going to see us with any sort of need to do block equity. I still think, even without seeing the numbers, you'll be able to double out the equity. Those outer years, but again, still early days on those calculations.

Hey, good morning, everybody.

Shahriar Pourreza: Okay, perfect.

Hi, Andrew good morning.

My first question.

My first question is about supply chain I know, it's still there has been in focus I think you just alluded to that a moment ago, but how about the availability of critical level equipment like transport merger switch gears and if you do see shortages as there are risks that might slow down your planned pace of spending.

Well first of all I appreciate you are now.

Analysis, you did a nice right up on that.

A week ago, two weeks ago. So some good work of what's going on in the industry and so we're highly highly focused on the supply chain.

I'll give it over here to regiment.

Garrick Rochow: And then just from a stakeholder perspective, where is the MPSC going with the sort of their investigations and the storms at this point? And, I guess, what's the range of outcomes you guys anticipate? And we've seen some comments filed, but there seems to be a negatively skewed mechanism for penalties versus rewards. So there's two pieces. And I wouldn't put a negative take on it. All the conversations we have with staff and commissioners continue to be constructive.

He has responsibility for that area they've been a lot of good work to be able to secure and have line of sight and so when I think about the projects. We have underway, particularly those that are in mid development. The team has done a much better job to make sure we have panels transformers and the like so we can we can do that build now there is longer lead times most definitely.

So you've got to be prepared and you got to be planned and that but the team has just done a phenomenal job with your team is doing great work, maybe add to it yes. Thanks Garik and appreciate the question Andrew So Garik is exactly right. We have really been attacking challenges and supply chain for the last 18 months or so and what we've done to really make sure that we've got sufficient supply not.

Garrick Rochow: And frankly, we're both aligned in the same thing. We want to improve reliability. We have a longer term view of resiliency. And when we're aligned, it makes for constructive conversations. But there's two pieces that I'm hearing in your questions, Shar, there's one that is the audit that's underway. That was started in September. Liberty Consulting Group is the one doing the work. They've participated with other utilities, very skilled organizations. Right now they're in the data collection phase.

Just on the solar side, but really across the business as we've been very focused on diversifying our vendor sources and so that has been a very concerted effort again over the last 12 months to 18 months. We've also done what we would describe as value engineering and looking looking at other alternatives, particularly in the context of transformers that can be compatible with our electric grid.

Garrick Rochow: Let's well underway. We expect an interim report about the end of the year, and then a full report likely in the September-ish timeframe. They said about a year report then. But I'll just be fully transparent with you and honest, I want reliability improving the state. I want resiliency improving the state for our customers. And so if they have findings on how we can do work better, I'm just going to agree to them.

So we've historically used a standard of green oriented steel, we're now using amorphous core and introducing that into our system.

We've also been very successful and refurbishing damage Transformers and using a variety of third parties to help us with that and so all of those countermeasures have really led to us getting to a sufficient level of supply across our most highly used transformers now there are still issues in the supply chain across a variety of materials and we're spending a lot of time on hyper care, but for those.

Garrick Rochow: Like we should build that in the next electric, electric, great case. We should do that because we want it better for our customers. And so it doesn't bother me at all. I think this is good that we have an outside party looking and looking at how we can improve. It's only going to add to our reliability roadmap. And the other thing is on this performance base rates or PBR, the workgroups underway.

Highest velocity materials, we feel like we're in really good shape at this point so really appreciate the question.

I just got a note something.

The register dexterity, Great CFO and when you can talk about more for score that's really awesome to see.

[laughter].

Garrick Rochow: It was initiated in the first second quarter time frame, April-ish timeframe, I believe. And so that conversation is underway. Straw proposal was put out. We have put comments through that process. We're continuing to stay in work groups. At the end of the day, I think you're going to have a nice balance of incentives, disincentives from an electric reliability perspective. But the important piece for us is making sure there's a nice line of sight into capital and the capital recovery.

Okay.

Yes.

One other question for the team here can you give us any update on the legislative environment for Michigan I'm talking about the fact that Democrats have full control. So is there any talk of potential updates either big change to the 2016 law or maybe more likely incremental marginal support for clean energy are you hearing any potential around that.

So I'll start with the Big picture.

The governors first term she came out with their healthy climate plan.

Garrick Rochow: And there's certainty that's why we're so focused on this investment recovery mechanism. We also think the same thing is required for storm and some of the ONM expense that occurs in the air. And as long as we can navigate all that and get to that point, you know, I feel good. I feel good. This will lead to good outcomes for our customers.

And that was a nice plan support of the planned very pragmatic and balanced clean energy reliability of supply and affordability and the governor came out in August and said.

Now in her second term and came out and said Hey, I want to make a portion of this into law.

And that's been in the Senate right now it started out in committee and.

And so there were a number of bills that were put together on that and as you imagine in committee. There is a discussion and we're actively engaged in that discussion and so thats moved on now to the full Senate.

Garrick Rochow: [inaudible] very much, thank you very much, thank you very much Plan. And that was a nice plan, support of the plan, very pragmatic and balanced and clean energy, reliability of supply and affordability. And the governor came out in August and said, now in her second term, he came out and said, hey, I want to make a portion of this into law. And that's been in the Senate right now. It started out in committee.

For consideration still has not made it to the house and so there is important work going on to define what that what that looks like but just again stand back and look at the bigger picture of this a much like 2008 2016 this legislative.

Body as well as the public service Commission continues to provide a constructive approach to the future and we see a constructive out of these bills if they even move forward if they even get agreement, we see a path of constructive regulation going forward in a constructive policy going forward and so.

But that's currently where it stands Andrew.

Okay.

Okay, we will stay tuned thank you very much.

Yes. Thank you.

Our next question today is from the line of <unk> Chopra of Evercore ISI. Please go ahead.

Yes.

Good morning, Hey.

Hey team. Thanks, Good morning, Gary Thanks for taking my question I had a few questions.

<unk> answered them, just maybe just on the O&M savings, obviously, you've done a great job youre offsetting weather and storms.

Big number like $60 70.

To date, the combined impact from from from weather and storms.

Like is there a wave for you to quantify for us what the.

The <unk> savings that you're using.

Does your offsetting whether its stronger this year how much of that can be carried forward to 2024 and beyond I'm just looking for what level of these savings are sustainable or are these truly onetime in nature.

Their guests. This is Reggie I appreciate the question and I. Appreciate also the compliment we are really proud of the work done for the first three quarters of the year offsetting the headwinds we've seen on the weather side, both in terms of mild weather as well as the storm activity and the organization has really rallied around the cause.

Obviously, when it comes to cost savings, we never discriminate when it comes to operational versus non operational and we've been quite expansive in our approach to get to the spirit of your question I think it's difficult to quantify.

To what degree the savings will be sustainable, but I do think a decent portion will be because when you think about the separation plan that I mentioned, we reduced our salaried workforce by roughly 10% we will we do not.

Assume that we will go and re staff that over the next year or two or even next several years and so we will see sustainable savings from that and that'll be a significant portion some of the other bigger opportunity. So in Q2, the tender financing and obviously that is a one timer and so we wouldn't count on that being sustained but there are other opportunities we've executed on we've been really.

<unk> and rationalizing our contractor base and some of the consultants were working with again, we'd like to think we can sustain that and as I mentioned in my prepared remarks, we accelerated some longer term.

Projects and we think we will see productivity from those actions for some time now so I would say, it's tough to really ascribe a specific percentage to but I'd say decent portion should be sustained going into next year.

We will provide.

Garrick Rochow: And so there are a number of bills that were put together on that. And as you imagine in committee, there's the discussion and we're actively engaged in that discussion. And so that's moved on now to the full Senate for consideration, still has not made it to the House. And so there's important work going on to define what that looks like. But just, again, stand back and look at the bigger picture of this.

Some tailwind when you think about not just our guidance next year, but also affordability because we always look forward to passing on those savings on to customers in the last thing on that is on the financing side, we've seen quite a few efficiencies with the convert where we pulled ahead. Some costs that we were going to have some financing needs. We had in 2024, that's going to have a sustained level of saving.

And the operating company financings, we've done those and really efficient fashion at a weighted average coupon of four 8% below plan and so we will see sustained savings from that so I would say on the operational and nonoperational side, you've got some one timers and then some that will be sustained but I can't give you a specific percentage at this point.

Garrick Rochow: Much like 2008, much like 2016, this legislative body as well as the Public Service Commission continues to provide a constructive approach to the future. And we see a constructive, you know, out of these bills, if they even move forward, if they even get agreement, we see a path of constructive regulation going forward and constructive policy going forward. And so that's currently where it stands, Andrew.

That's very helpful color Roger I appreciate it and then maybe one just quick clarification on the financing plan I'm not trying to jump the gun here, but you mentioned you're going to update us on the Q4 call but for 2020 for next year is still no equity that's still accurate correct.

That's exactly right.

Thank you.

Thank you.

And our next question today is from the line of David <unk>.

Shahriar Pourreza: Okay, we'll stay tuned. Thank you very much. Yep, thank you.

Morgan Stanley David Please go ahead.

Hi, David.

Durgesh Chopra: Our next question today is from the line of the gas chopper of ethical, sorry, the gas please go ahead. More interviews. Hey team, thanks. Good morning, Gary. Thanks for taking my question. I have a few questions you've already answered them. Just maybe just on the O&M savings, obviously you've done a great job here offsetting weather and storms. That's a big number like 60, 70 cents a year to date combined impact from from from weather and storms.

Thanks, so much for taking my questions.

Yeah.

You alluded to this on the last question, but maybe just directly on as you look into 2020 for what's your comfort level.

Pulled a lot of cost levers for this year.

Extent, there are any incremental challenges into 'twenty four or do you still feel like youre spending up with the same kind of quantum of flexibility around cost structure and.

Durgesh Chopra: What like is there a way for you to quantify for us what, you know, these O&M savings that you're using. Did you offsetting weather and storms with this year? How much of that can we carry forward to 2024 and beyond? I'm just looking for what level of these savings is sustainable or are these truly one time in nature? Yeah, Durga, this is Reggie appreciate the question and I appreciate also the compliments.

And the overall expense structure as you as you.

Look toward hitting your guidance next year.

Yes, David appreciate the question. This is <unk>. So as you think about the glide path to deliver on the guidance we initiated today.

We're.

Guiding $306 to $3 12 in 'twenty.

'twenty three and then three.

$3, 27% to 333% in 2024, and so that implies somewhere around 20.

Pick up year over year to get to midpoint to midpoint or thereabouts and so as I think about it obviously the weather we had this year. We're looking at roughly 30 of Weatherford and Thats just the mild weather experienced over the first.

Durgesh Chopra: We are really proud of the work done for the first three quarters of the year offsetting the headwinds we've seen on the weather side both in terms of mild weather as well as the storm activity. And the organization is really rallied around the cause. You know, obviously when it comes to cost savings, we never discriminate when it comes to operational versus non operational and we've been quite expansive in our approach to get to the spirit of your question.

Three quarters of the year, and we anticipate basically being flat in the fourth quarter. So you have to imagine that because we plan for normal weather, we shouldnt anticipate that 30 of <unk>.

Weather impacting us next year now the reality is there have been some one timers as I've mentioned.

Durgesh Chopra: I think it's difficult to quantify, you know, to what degree the savings will be sustainable. I do think a decent portion will be because when you think about the separation plan that I mentioned, we reduced our salary workforce by roughly 10%. We will do not assume that we will go and re staff that over the next year or two or even next several years and so we'll see sustainable savings from that and that'll be a significant portion.

In my prior remarks.

On the sort of tender financing side, and so wed have to assume that those don't recur as well and so when you net the two of those that you get about 10 cents a pickup and then if you think about the pending rate case that we have we had a very constructive gas rate case settlement.

In the third quarter of this year that was approved by the commission. We've got a pending electric rate case, and then we'll file another gas rate case in December of this year and with the anticipation of constructive outcomes on those proceedings that offers about per preliminary estimates maybe somewhere between 10 to 15 <unk>.

Durgesh Chopra: Some of the other bigger opportunities, so in queue to the tender financing, you know, obviously that is a one timer. And so we wouldn't count on that being sustained, but there are other opportunities we've executed on. We've been really disciplined and rationalizing our contractor base and some of the consultants are working with again. We'd like to think we can sustain that. Now, as I mentioned in my prepared remarks, we accelerated some longer term IT projects and we think we'll see productivity from those actions for some time now.

Net of investment related costs of pickup.

And then again a lot of the cost savings I numerator earlier, we expect a decent portion of those to be sustained and so we will get additional pick up there and so you can get to a glide path of that 20 per share again for that year over year growth.

Durgesh Chopra: So I'd say it's tough to really describe a specific percentage to, but I'd say decent portion should be sustained going into the next year and will provide some tailwind when you think about not just our guidance next year, but also affordability because we always look forward to passing on those savings on the customers. And the last thing I'll notice on the financing side, you know, we've seen quite a few efficiencies with the convert where we pulled ahead some costs that we're going to have or some financing needs we had in 2024.

Relatively.

Easily when you look at those pieces now there are always puts and takes and again there are some things that will roll off going into 2024, and I think what is highly debatable as where we see the same quantum of service restoration expense going into next year, because clearly we've had a record level of storm activity as I noted in my prepared remarks, and so as we think about the glide path that's going to be a combination of rate relief.

Net of investment related costs with our pending proceedings, we will see the weather roll off we'll see some of the one timers roll off and then we expect some of the savings from a lot of the cost reduction initiatives to provide a tailwind on a net basis next year as well and so that's what gives us confidence that we can deliver on the 2024 guide does that helpful.

Durgesh Chopra: That's going to have the sustained level savings and the operating company financing we've done those in really efficient fashion. I had a weighted average coupon of 4.8% below plan and so we'll see sustained savings from that. I'd say on the operational and non operational side, you get some one timers and then some that will be sustained, but I can't give you a specific percentage at this. Point. That's very helpful, color-red you, I appreciate it.

Yes, very helpful. I appreciate all the color all good points.

And let's see was also just going to check on could you just give the latest update in terms of what youre seeing with the voluntary green pricing program potential upside from that program and just expectations for.

Durgesh Chopra: And then maybe one just quick clarification on the financing plan, I'm not trying to jump again here, but you mentioned you're going to update us on the Q-Focal, but for 2024, next year, still no equity, that's still accurate, correct? That's exactly right. Thank you.

How customer interest customer additions could trend from here.

Yes, it continues to be very positive and so remember we're in the what I'd call a tranche of 1000 megawatts.

David Arcaro: And our next question today is from the line of David Arcaro of Morgan Stanley. David, please go ahead. Hi, David. Good morning. Thanks so much for taking my questions.

It is.

Being contracted out there is significant demand.

From our customers for those products.

We're well over 400 400 megawatts of contracted lower and that continues to grow.

David Arcaro: You know, you alluded to this in the last question, but maybe just directly on, as you look into 2024, with your comfort level, you know, you've pulled a lot of cost lovers for this year to the extent there are, you know, any incremental challenges into 2024, or do you still feel like you're you're setting up with the same kind of quantum of flexibility around cost structure and in the overall extent structure, as you look toward hitting your guidance next year? Yeah, David, appreciate the question.

And then thats driving to more build from a renewable perspective, and so we've announced even within the quarter and the intent to build a solar facility on the carnival.

Our coal facility.

That will help meet some of that a portion of that of that need. So again very robust and continued strong interest from our for our commercial and industrial customers.

Okay, great. Thanks, so much.

David Arcaro: This is Reggie. So as you think about a glide path to deliver on, the guidance we initiated today, you know, we're, you know, guiding 306 to 312 in 2023, and then 327 to 333 in 2024. And so that implies somewhere around 20 cents of pickup year over year to get the midpoint to midpoint or thereabouts. And so as I think about it, obviously, the weather we had this year, we're looking at roughly 30 cents of weather hurt.

And our next question today is from the line of Nicholas competitive of Barclays. Please go ahead.

Okay.

Alright, Thanks for taking my question everyone.

Just one for me a lot of them have been answered, but I guess just looking at the resiliency plan you kind of start to show the safety scores improving 'twenty five 'twenty six but I was just trying to dig in more on how youre thinking about operational risk production for 24, just given the lessons learned from last year's storm cycle and I assume.

David Arcaro: And that's just the mild weather experience over the first three quarters of the year. And we anticipate basically being flat in the fourth quarter. So you have to imagine that, you know, because we plan for normal weather, we shouldn't anticipate that 30 cents of weather impacting us next year. Now, the reality is there have been some one-timers, as I've mentioned in my prior remarks on the sort of tender financing side. And so we'd have to assume that those don't recur as well.

You are probably actively deploying some of this technology now so just how should we kind of think about storm risk 24 versus this year. Thanks.

Great question, and Im glad youre digging into it Thats a fund plan to look at.

Okay.

Right now and that's why I shared some of my prepared remarks, like we're not waiting and the commission has been supportive of additional tree removal or vegetation management.

David Arcaro: And so when you net the two of those out, you get about 10 cents of pickup. And then if you think about the pending rate case we have, we have a very constructive gas rate case settlement. And the third quarter of this year that was approved by the commission, we've got a pending electric rate case. And then we'll file another gas rate case in December this year. And with the anticipation of constructive outcomes on those proceedings that offers about, you know, preliminary estimates, maybe somewhere between 10 to 15 cents net of investment related costs of pickup.

That's more than doubled our spend over the last three years. So thats active work. That's underway. There is close to 300 crews that are on our system contracted crews are out doing that work today and have been over the course of the year than we were.

And those areas, where we do the work, we see greater than 60% improvement well underway. In addition to that it's using a.

15000, fuzes over the last two years and a plan to do more next year as well.

David Arcaro: And then again, a lot of the cost savings I numerated earlier, we expect a decent portion of those to be sustained. And so we'll get additional pickup there. And so you can get to a glide path of that 20 cents per share, again, for that year over year growth, relatively easily when you look at those pieces. Now they're always puts and takes. And again, there's some things that will roll off going into 2024.

That takes when there is an interruption on the system.

Use box in your home and so rather than the whole home going out you might lose the bathroom or kitchen same type of thing on the electric refusing that so when there is an interruption less customers are impacted we're seeing safety performance improvement already from the deployment of those of those views as we've never done this level fusing never across our history.

David Arcaro: And I think what's highly debatable is will we see the same quantum of service restoration expense going into next year? Because clearly we've had a record level of storm activities I noted and are prepared remarks. And so as we think about the glide path, it's going to be a combination of rate relief, net of investment related costs with our pending proceedings. We'll see the weather roll off. We'll see some of the one-timers roll off. And then we expect some of the savings from a lot of the cost reduction initiatives to provide a tailwind on a net basis next year as well.

We continue to add automation I just saw great one the other day.

Being able to one of the things that are high voltage distribution system, we've got what's called a Victor insulator and El Victor insulators are prone to failure.

It's a known problem, but once you put them on the grid back in the seventies, we didnt have the best kind of <unk>.

Control on where those went in so to be able to identify them you've got to be able to see the small it will be on top of the Victor insulator before we got to stick a bucket truck up there to see that that's very inefficient now with drones with ability to automatically.

Rejji Hayes: And so that's what gives us confidence that we can deliver on the 2024 guide. Is that helpful? Yeah, very helpful. Appreciate all the color. All good points.

Paul from a picture to see that little B, we're able to find that fine.

Rejji Hayes: And let's see what's also just going to check on, could you just get only to stop date in terms of what you're seeing with the voluntary green pricing program, potential upsack from that program and just execute those for how customer additions could trend from here? Yeah, I continue to be very positive. And so remember we're in what I call a trance of a thousand megawatts that is being contracted out. There's significant demand from our customers for those products.

Those Victor insulators and be very strategic about replacing those so I'm excited about the technology, we're bringing to bear as well and so those are just a few examples there are hundreds of examples like we are not satisfied with our reliability performance, we are going to make it better we've seen the improvement.

Over 2022, we continue to be on a good pace this year, even with the storms and so and we're going to keep the.

Sorry, with the analogy here going put the keeping the foot down on the floor on the accelerator on this.

Rejji Hayes: We're well over 400, 400 megawatts of contracted low and they can continue to grow. And then that's driving to more build from a renewable perspective. And so we've announced even within the quarter the intent to build a solar facility and the car and wet up a coal facility that will help meet some of that portion of that need. So again, very robust and continued strong interest from our commercial and industrial customers.

Alright I appreciate it thank you.

Rejji Hayes: Okay, great. Thanks so much.

Yes.

Our next question today is from the line of Travis Miller of Morningstar. Please go ahead.

Good morning, everyone. Thank you.

Hi, Travis.

Hi on the distribution plan I was wondering if you could talk a little bit about what do you expect the timing of the regulatory review on that to be.

Okay.

Well, it's going to be into those will get woven into the electric rate case filings and so.

The planned by itself, we will get some comment, but that's not a contested.

Nicholas Campanella: And our next question today is from the line of Nicholas Campanella of Barclays. Nicholas, please go ahead. Hey, thanks for taking my question, everyone.

Dialing what'll happen is those that'll be it's truly a roadmap it's truly a vision of where we're headed and the important pieces that have to come together for that and so that will get brought into electric rate case filings and then with commission support they can be approved I would just highlight one thing one announcement, we've had here in the last couple of weeks, though.

Garrick Rochow: Just one for me, a lot of them been answered, but I guess just looking at the resiliency plan, you know, you kind of start to show the safety scores, improving 25, 26, but I was just trying to dig in more on how you're thinking about operational risk reduction for 24 just given lessons learned from last year's storm cycle. And I assume you're probably actively deploying some of this technology now. So just how should we kind of think about storm risk 24 versus this year?

Department of energy grant of $100 million that really jumpstart some of this important work.

And so again to the previous question, we're not waiting around we see some opportunities to put this.

To work immediately.

Garrick Rochow: Thanks. Great question. I'm glad you're digging into it. That's a fun plan to look at. Right now, and that's why I shared some of my prepared marks, like we're not waiting and the commission has been support of additional tree removal or vegetation management. That's more than doubled our spend over the last last three years. So that active work that's underway, there's also 300 crews that are on our system contracted crews are out doing that work today and have been over the course of the year.

Again, the regulatory processes through the rate cases.

Okay.

That suggests you probably continue that annual.

Run rate of electric rate cases, and even potentially gas rate cases, but especially the electric cars.

Roughly correct.

Yes, you should expect an annual rate case type filing and I would just offer two in these.

Particularly with interest rates the way. They are 10 month rate cases, and forward looking test years, and the kind of the annual strategy really eliminate some of that drag that you get with higher interest rates and so there's a lot of benefits of that approach.

Garrick Rochow: And we were in those areas where we do the work, we see greater than the 60% improvement well underway in addition to that. Fusing 15,000 fuses over the last two years in a plan to do more next year as well. That takes when there's an interruption on the system, like a fuse box in your home. And so rather than the whole home going out, you might lose the bathroom or the kitchen.

Okay, and then just real quick what the investment recovery.

It won't change that timing at all or still even if you get that still kind of a one year.

Garrick Rochow: Same type of thing on the electric get refusing that. So when there's an interruption, less customers are impacted. We're seeing sady performance improvement already for the deployment of those of those fuses. We've never done this level of fusing, never across our history. We continue to add automation. I just saw a great one the other day. Being able to one of the things on our high voltage distribution system, we've got what's called a Victor insulator now Victor insulators are prone to failure.

Right.

It'll it'll still be a one year approach the IRS is not big enough at this point to starting spot.

Time, we'd look to enhance that.

First step is to get it in place, which is part of this current electric rate case.

Yes, Okay very good that's all I had thanks.

Thank you Travis.

Our next question today is from the line of Sophie Karp Pico <unk>. Please go ahead.

Garrick Rochow: That's a known problem. But once you put them on the grid back in the 70s, we didn't have the best kind of control on where those went. And so to be able to identify, you got to be able to see the small little V on top of the Victor insulator before we got to stick a bucket truck up there to see that. That's very inefficient. Now with drones with ability to automatically pull from a picture to see that little V. We're able to find that find those Victor insulators and be very strategic about replacing those. I'm excited about the technology we're bringing to there as well. Those are just a few examples.

Hi, Good morning, Thank you for taking my questions.

Sure.

And as have been answered, but I wanted to ask you about the cost of capital and like the Roe's right.

So I think that that pushed Poland and Michigan.

The states right now and just kind of curious how the conversations about.

The need for higher ROE, you sell land and with the stakeholders at the commission.

I'm not sure if people are catching onto how fast.

Garrick Rochow: There are hundreds of examples. Like we are not satisfied with our reliability performance. We are going to make it better. We've seen the improvement over 2022. We continue to be on good pace this year, even with the storms. And so we're going to keep the, you know, sorry with the analogy. We're going to put the foot, we're keeping the foot down on the floor on the accelerator, on this. All right, I appreciate it. Thank you. Yep.

Rates have risen and that truly need to.

You're going to have some adjustment to the house that are easily viewed I guess in the last few years. So any color on that would be helpful.

Sophie it's Reggie I appreciate the question.

Let me just start by saying, we're we're certainly making the case and have made the case really for the last.

Few years around the need to have a higher ROE just given the changing cost of capital environment I think treasuries.

Travis Miller: Next question today is from the line of Travis Miller of Morningstar. Travis, please go ahead. Good morning, everyone. Thank you. Hi, Travis. Hi, I'm the distribution plan.

Probably a couple of hundred basis points higher than where they were when we first had nine 9% of established as the prevailing Roe across our electric and gas businesses in dt's at parity as well and so we're certainly making the case and I think the case becomes stronger and stronger every day as we see continued hawkish monetary policy. So I think.

Garrick Rochow: I'm wondering if you could talk a little bit about what you expect the timing of the regulatory review on that to be. What's going to be, and those will get woven into electric rate case filing. So the plan by itself, we'll get some comments that that's not a contested filing. What will happen is that'll be the, it's truly a roadmap. It's truly a vision of where we're headed in the important pieces that have to come together for that. And so they'll get brought into electric rate case filings. And then with commission support, they can be approved.

Give you any confidence I think we.

We feel very good about the fact that theres a good floor at the nine 9% prevailing our way, but we're going to continue to make the case that it should be higher as Derek noted, we're seeking 10.25% and our pending.

Pending electric case, and again I think the data support.

That point of view and we try to make the case. In addition to all the different ways in which you can calculate the cost of equity. The fact is that we compete for capital against other utilities and other jurisdictions and given the quantum of capital that we have not just in our current five year plan, but in what we anticipate being our next and subsequent five year plans we do.

Garrick Rochow: I would just highlight one thing. One announcement we've had here in the last couple of weeks though, Department of Energy grant of $100 million. That really jumps starts some of this important work. And so again, to the previous question, we're not waiting around. We some see some opportunities to put this to work immediately. But again, the regulatory process is through the rate cases. Okay.

Do think we need to be as competitive as possible on all fronts.

Because you can take your dollars elsewhere as investors and so we've been making the case loudly and clearly I think DTE is as well and hopefully we can start to see.

A change in the wind here with respect to ROE.

Garrick Rochow: So that suggests you'd probably continue that annual type run rate of electric rate cases and even potentially gas rate cases, but especially the electric. Is that roughly correct? Yes, you should expect an annual rate case type filing. And I would just offer to in these particular interest rates the way they are. Ten month rate cases and four looking test years and the kind of the annual strategy really eliminates some of that drag that you get with higher interest rates. And so there's a lot of benefits of that approach. Okay.

Okay.

Got it got it. Thank you and then maybe if I can squeeze one more in.

You've been doing the underground and pilots and I'm just curious what have you learned so far from data from this pilot projects, maybe in terms of cost store.

It needs to be taken make I am curious if you can provide any color on how that is going.

Well just a point of clarification, what's introduced in the electric case is a pilot a pilot 10 miles and as I shared small but important so that the public service Commission has the opportunity to evaluate now we do do underground already we do it in the kind of in the context of subdivisions and the like and we have done a couple of trial.

Garrick Rochow: And then just real quick, would the investment recovery mechanism change that timing at all or still even if you get that still kind of a one year. Right. It'll still be a one year approach. The IRM is not big enough at this point, the starting spot. And over time, we'd look to enhance that. The first step is to get it in place, which is part of this current electric rate case. Yeah. Okay. Very good.

Runs and what we've seen is a very cost effective.

Because of our gas business directional drilling underground is one of our specialties, we certainly have the equipment and the expertise to do that and so we're able to be very competitive from an underground perspective now our plan stays out of congested areas stays out of three phased construction and so we're talking to single phase more rural construction, where you have the right.

Garrick Rochow: That's all thanks. Yeah.

Soil conditions, and we do over much of Michigan, which helps from a cost perspective, and so we've shared historically earn historically more current I guess in the $350000 a mile.

Sophie Karp: Thank you, Travis. Our next question today is from the line of Sophie Cobb. Keith, Sophie, please go ahead. Hi, Sophie. Hi, good morning. Thank you for taking my questions. A lot of questions have been answered, but I wanted to ask you about the cost of capital and like ROEs, right? So a bit of a push poll in Michigan as in many other states right now. I'm just going to curious how the conversations about the needs for higher ROEs that land in with the stakeholders at the commission.

We think very achievable.

Alright, thank you so much.

Thank you.

And our next question today is from the line of Anthony crowd.

Anthony Your line is open.

Yeah.

Hey, Hello, My question, but I answered thanks, so much I'm good.

Sophie Karp: I'm not sure a few people are catching on to how fast the rates have risen and that's really neat to you're going to have the adjustment to the, you know, how the are with you against the last few years. So any color on that would be helpful. Sophie, it's Reggie. Appreciate the question. Let me just start by saying we're certainly making the case and have made the case really for the last few years around the need to have a higher ROE's just given the changing cost to capital environment.

Good to hear from Anthony.

Great. Thank <unk> next question is from the line of Ross Taylor of UBS Ross Your line is now.

Okay.

Hi, Gary Hi, Richie how are you.

Good morning, Ross Ross how are you.

Good morning, let's let's take it to the full hour why not.

And again, there's many auto.

Sophie Karp: I think treasuries probably a couple hundred basis points higher than where they were when we first had 9.9% established as the prevailing ROE across our electric and gas businesses and DTs at parity as well. And so we're certainly making the case and I think the case becomes stronger and stronger every day as we see continued hawkish monetary policy. So I think if, give you any confidence, I think it's, we feel very good about the fact that there's a good floor at the 9.9% prevailing ROE but we're going to continue to make the case that it should be higher as Garrick noted, we're seeking ten and a quarter percent in our pending electric case.

So analogies as you'd like in the answer to your question, but.

I just I just wanted to get update on the estimated bills meter installation issue given the commission filed that show cause a couple of days ago. So I know ready we've kind of talked about this back when I saw you in August but just an update there and then the second part of the question is do you think that has any sort of lateral impacts on the on our rate case proceeding or.

Your perspective is the commission really looking at these as two separate filing.

<unk> filings and issues.

Yeah.

So I don't know if I have any auto ashish.

For this one.

We talked about this in great detail and I provide probably.

Long answer maybe too long an answer on the on the Q2 call. So I'll try to be brief but this is just the next step in that and so what I shared back again briefly what I shared.

Sophie Karp: And again, I think the data support that point of view and we try to make the case in addition to all the different ways in which we can calculate the cost of equity. The fact is that we compete for capital against other utilities and other jurisdictions and given the quantum of capital that we have not just in our current five-year plan but in what we anticipate being our next and subsequent five-year plans we do think we need to be as competitive as possible on all fronts because you can take your dollars elsewhere as investors. And so we've been making the case lably and clearly I think DTs as well and hopefully we can start to see a change in the wind here with respect to ROEs.

In Q2.

Recall that we had some <unk> meters that were no longer supported.

Our vendor could not meet some of the supply chain needs again considered a carryover from the pandemic and did not meet some of the.

The Reed required reads out in the field and so that creates some billing issues for our customers that's a problem.

The public service Commission clearly identified that.

And so we shared.

In our Q2 call that that issue is behind US we file the report in August and this is the next step to reach resolution and so I don't.

Garrick Rochow: Proud of got it, thank you. And then maybe if we can squeeze one more in. You've been doing the underground in pilots and I'm just curious what have you learned so far from these from this pilot project maybe in terms of course or approach that needs to be taken make accuracy if you can provide any color on how that is going. Well just a point of clarification what's introduced in the electric case is a pilot, a pilot ten miles and if I shared small but important so that the Public Service Commission has the opportunity to evaluate.

It's an important step that gets us to the final end of this.

With the commission I don't see any spillover impact into the electric rate case or in any other and any other filings.

Alright, Thank you very much.

Thank you Ross.

Thank you and we have no further questions in the queue today, so I'd like to hand back to Mr. Xiao for any final remarks.

Thanks Harry.

Thank you for joining us today, we'll see you at EI.

Garrick Rochow: Now we do do undergrounding already we do it in the context of subdivisions and the like and we have done a couple of trial runs and what we've seen is a very cost effective because of our gas business directional drilling underground is one of our specialties we certainly have the equipment and the expertise to do that and so we're able to be very competitive on an underground and perspective. Now our plan stays out of congested areas, stays out of three phase construction and so we're talking single phase more rural construction where you have the right soil conditions and we do over much mission which helps from a cost perspective and so we've shared historically or historically more current I guess in the 350,000 dollars a mile is we think very achievable.

Please take care and stay safe.

This concludes today's conference we thank everyone for your participation.

[music].

Yes.

[music].

Sophie Karp: All right thank you so much. Thank you.

Yes.

Anthony Crowdell: And our next question today is from the line of Anthony Crowdell of Masuho Anthony your line is open. Hey hey oh my question but I answered thanks so much I'm good. Good to hear from Anthony.

Yes.

[music].

Ross Fowler: Great, now for my next question is from the line of Ross Fowler of UBS. Ross, your line is now open. Hi, Gary Karp, Reggie, how are you? Morning, Ross. Hey, where are you? Morning. Let's take it to the full hour. Why not? Um, and I guess you're allowed as many auto, uh, auto analogies as you'd like in the issue with question. But, um, I just, uh, I just want to get update on the estimated bill's meter installation issue, uh, given the commission filed that show cause a couple days ago.

Ross Fowler: So I know where he would kind of talk about this back when it's not in August, but it's just an update there. And then the second part of the question is do you think that has any sort of lateral impacts on the on the rate case proceeding or from your perspective is the commission really looking at these as two separate, uh, filings and issues?

Garrick Rochow: So I don't know if I have any auto analogies for, for this one. Uh, we talked about this in in great detail. And I provide a, probably a long answer, maybe too long an answer on the, on the Q2 call. So I'll try to be brief, but this is just the next step in that. And so what I shared back again, briefly, what I shared in Q2 was recall that we had some 3G meters that were cannot meet some supply chain needs.

Garrick Rochow: Again, considered a carryover from the pandemic and did not meet some of the, uh, the read required reads out in the field. And so that creates some billing issues for our customers. That's the problem. And the public service commission clearly identified that. And so we shared in our Q2 call that that issue is behind us. We filed a report in August. And this is the next step to reach resolution. And so I don't, it's an important step.

Garrick Rochow: It gets us to the final end of this, um, with the commission. I don't see any spillover impact into the electric rate case or in any other, in any other filings. All right. Thank you very much. Thank you, Ross. Thank you.

Operator: And we have no further questions in the QTA.

Garrick Rochow: So I'd like to hand back to Mr. Garrett Prachow for any final remarks. Thanks, Erie. And I'd like to thank you for joining us today. We'll see you at EEI. Please take care and stay safe.

Operator: This concludes today's conference. We thank everyone for your participation.