Q1 2024 CMS Energy Corp Earnings Call

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Speaker Change: Good morning, everyone and welcome to the <unk> energy 'twenty 'twenty four for us.

Speaker Change: Of course every golf.

Speaker Change: The earnings news release issued earlier today on the presentation used in this webcast are available on CMS Energy's website in the Investor Relations section.

Speaker Change: This call is being recorded.

Speaker Change: After the presentation, we will conduct a question and answer session.

Instructions will be provided at that time.

Speaker Change: Any time during the conference you need to reach an operator. Please press the star followed by Jay right just to remind that there will be a rebroadcast of this conference call today, beginning at 12 P. M. Eastern time running through May 2nd. This presentation is also being webcast and is available on CMS Energy's website in the investor relation.

Speaker Change: Section.

Speaker Change: At this time I would like to turn the call over to Mr. Jason Sure Treasurer, and Vice President of Investor Relations.

Jason M. Shore: Thank you drew.

Jason M. Shore: Good morning, everyone and thank you for joining us today.

Jason M. Shore: With me are Garik, Rochelle, President and Chief Executive Officer, and Reggie Hayes Executive Vice President and Chief Financial Officer.

Jason M. Shore: This presentation contains forward looking statements, which are subject to risks and uncertainties. Please.

Jason M. Shore: Please refer to our SEC filings for more information regarding the risks and other factors that could cause our actual results to differ materially.

Jason M. Shore: This presentation also includes non-GAAP measures.

Jason M. Shore: Reconciliations of these measures to the most directly comparable GAAP measures are included in the appendix and posted on our website.

Jason M. Shore: And now I'll turn the call over to Gary.

Gary: Thank you, Jason and thank you everyone for joining us today.

Gary: CMS energy.

Gary: 21 years of consistent industry, leading results.

Gary: What sets us apart is our performance and it starts with our investment thesis. It is how we prioritize and focus our work to deliver the service our customers deserve.

Gary: The financial outcomes you expect.

Gary: As we look ahead, we see ample investment opportunity over the long term as we lead the clean energy transformation and deliver the critical work needed to improve the reliability and resiliency of our electric and gas systems.

Gary: This important work is supported by the legislation.

Gary: Constructive regulatory environment, which provides confidence in making required investments to strengthen our system and prepare for a clean energy future.

Gary: We plan ahead through our electric reliability road map natural gas delivery plan and our upcoming renewable energy plan, which all provide visibility and transparency on the work, we'll deliver it to keep our systems safe sound and clean.

Operator: Thank you.

Gary: At CMS energy, we work both sides of the equation.

Operator: Good morning everyone and welcome to the CMS Energy 2024 first 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.

Gary: We make important investments in our systems and.

Gary: And we work to keep bills affordable.

Gary: Our <unk> lean operating system helps us improve our performance increased productivity and take cost out of the business.

Operator: This call is being recorded. After the presentation, we will conduct a question and answer session. Instructions will be provided at that time. If at any time during the conference, you need to reach an operator, please press the star followed by zero. Just a reminder, there will be a rebroadcast of this conference call today, beginning at 12pm Eastern Time, running through May 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. Jason Shaw, Treasurer and Vice President of Investor Relations.

Gary: And we are hard at work to grow Michigan through economic development, ensuring Michigan thrives well into the future.

Gary: These efforts are important and help us keep customers' bills affordable.

Gary: At CMS energy, we make our investment thesis work year after year.

Gary: It continues to set us apart in the industry delivering results for all our stakeholders.

Gary: Today, I'm going to share three focus areas.

Gary: Excited about our future and give us confidence in our outlook.

Gary: First our electric distribution system.

Jason M. Shore: Good morning, everyone, and thank you for joining us today. With me are Garrick Rochow, President and Chief Executive Officer, and Rejji Hayes, Executive Vice President and Chief Financial Officer. This presentation contains forward-looking statements that 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 gap measures are included in the appendix and posted on our website. Now, I'll turn the call over to Garrick.

Gary: As our world becomes more dependent on electricity for business growth technology advancements devices and vehicles, our system needs to be stronger marter and more resilient.

Gary: For our customers.

Gary: But our vast electric distribution system is aging.

Gary: It needs to be modernized and strengthen where increasingly severe weather.

Gary: Over the past five years, we have seen some of the highest wind speeds on record and more frequent storm activity.

Gary: We have responded to this need through our electric reliability roadmap.

Gary: Currently a five year $11 billion plan to improve performance and harden our system for the future.

Garrick J. Rochow: Thank you, Jason, and thank you, everyone, for joining us today. CMS Energy. 21 years of consistent industry-leading results. And what sets us apart is our performance, and it starts with our investment thesis. It is how we prioritize and focus our work to deliver the service our customers deserve and the financial outcomes you expect. As we look ahead, we see ample investment opportunity over the long term as we lead the clean energy transformation and deliver the critical work needed to improve the reliability and resiliency of our electric and gas systems.

Gary: The plan utilizes best practices from across the industry.

Gary: Including designing this system with stronger pool underground sexualizing in further automation.

Gary: And given the size of our distribution system 90000 miles of line nearly 200 substations.

Gary: Historically lower investment per mile compared to peers.

Gary: See a long runway of needed investment.

Gary: We've incorporated roughly half of incremental $3 billion you see on slide four.

Gary: Into our current capital plan.

Gary: Start to see this investment show up in our next electric rate case, which will file in the second quarter.

Garrick J. Rochow: This important work is supported by legislation and a constructive regulatory environment that provides confidence in making required investments to strengthen our system and prepare for a clean energy future. We plan ahead through our Electric Reliability Roadmap, Natural Gas Delivery Plan, and our upcoming Renewable Energy Plan, which all provide visibility and transparency on the work we'll deliver to keep our systems safe, sound, and clean. At CMS Energy, we work on both sides of the equation.

Gary: These important investments will mean fewer and shorter outages for our customers.

Gary: And we are already seeing meaningful improvements from the investments made over the last few years.

Gary: The second focus area I want to share is our continued leadership of the transformation to clean energy in the industry.

Gary: In the past I have shared our approved plans to eliminate coal in 2025.

Gary: Reduced carbon grow energy efficiency in build out renewables in pursuit of our net zero target.

Garrick J. Rochow: We make important investments in our systems, and we work to keep bills affordable. Our CEWA lean operating system helps us improve our performance, increase productivity, and take costs out of the business. And we are hard at work to grow Michigan through economic development, ensuring Michigan thrives well into the future. These efforts are important and help us keep customers' bills affordable. At CMS Energy, we make our investment thesis work year after year, and it continues to set us apart in the industry, delivering results for all our stakeholders.

Gary: And cleaner air for our customers and our planet.

Gary: In late 2023, much of our clean energy targets were bolstered by Michigan, New clean energy law.

Gary: This law is unique in the industry.

Gary: Good for all stakeholders.

Gary: It provides us with the opportunity to further reduce our carbon footprint, while maintaining resource adequacy affordable customer bills.

Gary: And delivering for our investors.

Gary: On the right side of the slide you'll see the opportunities ahead as we prepare to meet Michigan's new clean energy law.

Gary: It is.

Gary: It supports an accelerated plan with the de carbonization of our system.

Garrick J. Rochow: Today, I'm going to share three focus areas that have me excited about our future and give us confidence in our outlook. First, our electric distribution system. As our world becomes more dependent on electricity for business growth, technological advancements, devices, and vehicles, our system needs to be stronger, smarter, and more resilient for our customers. But our vast electric distribution system is aging. It needs to be modernized and strengthened for increasingly severe weather. Over the past five years, we have seen some of the highest wind speeds on record with more frequent storm activity.

Gary: And enhance financial compensation mechanism, which provides for roughly 9% return on clean purchase power agreement.

Gary: In addition, there is an increased incentive on energy efficiency as we target, 60% renewables by 2035, and 100% clean energy by 2040.

Gary: And it gives us important flexibility.

Gary: We think through how to best meet our customers' needs with renewables across the broad MISO footprint.

Gary: This mechanism and the flexibility and the law helps us balance customer affordability as.

Gary: As we work through this transition.

Gary: For our customers.

Garrick J. Rochow: We have responded to this need through our electric reliability roadmap, a five-year, $7 billion plan to improve performance and harden our system for the future. The plan utilizes best practices from across the industry, including designing the system with stronger poles, undergrounding, sectionalizing, and further automation. And given the size of our distribution system, 90,000 miles of line, nearly 1,200 substations, and a historically lower investment per mile compared to peers,

Gary: All of this means stronger more resilient and cleaner energy for.

Gary: For our investors and exciting and robust investment runway well into the future.

Gary: Now, let's work the other side of this investment equation.

Gary: The third focus area that I want to share today.

Gary: How we are helping Michigan grow and thrive, which is good for our company.

Gary: And our customers.

Gary: Growth across our service territory is good for Michigan help.

Gary: Helps bills affordable for our customers and provides headroom the investments I just referenced.

Garrick J. Rochow: We see a long runway of needed investment. We've incorporated roughly half of the incremental $3 billion you see on slide four into our current capital plan. You'll start to see this investment show up in our next electric rate case, which we'll file in the second quarter. These important investments will mean fewer and shorter outages for our customers. And we are already seeing meaningful improvements in the investments made over the last few years.

Gary: And I couldnt be more excited about the growth we need in our state.

Gary: Michigan has a strong fiber network access to freshwater temperate climate energy ready sites.

Gary: <unk> energy right.

Gary: In February we secure we secured a contract with a large data.

Gary: Data center and the heart.

Gary: Of our service territory.

Gary: The majority of the 230 megawatts of new load is expected to be online by 2026.

Gary: This is nice load growth.

Garrick J. Rochow: The second focus area I want to share is our continued leadership in the transformation to clean energy in the industry. In the past, I have shared our approved plans to eliminate coal in 2025, reduce carbon, grow energy efficiency, and build out renewables in pursuit of our net zero target and cleaner air for our customers and our planet. In late 2023, much of our clean energy targets were bolstered by Michigan's new clean energy law. This law is unique in the industry and is good for all stakeholders.

Gary: And I'm, even more excited about the manufacturing low growth, we are seeing in Michigan, which is a differentiator for us.

Gary: Our state wide leadership, a project such as Goshen and.

Gary: Unlike semiconductor Ford and many others continues to drive new and expanding load in our service territory.

Gary: These projects bring significant jobs.

Gary: Supply chain commercial growth housing starts.

Gary: In broad Michigan investment.

Gary: The ancillary benefit of manufacturing growth are good for all customers and bolster our confidence in our plan for 2024 and.

Gary: And beyond.

Garrick J. Rochow: It provides us with the opportunity to further reduce our carbon footprint while maintaining resource adequacy, affordable customer bills, and delivering for our investors. On the right side of the slide, you'll see the opportunities ahead as we prepare to meet Michigan's new clean energy law. It supports an accelerated plan with a decarbonization of our system with an enhanced financial compensation mechanism, which provides a roughly nine percent return on clean purchased power.

Gary: Our customers thrive when Michigan thrive.

Gary: And I am proud of the diversity and quality of new logos, our leadership is working to bring to the state.

Gary: Now.

Speaker Change: Let's get into the numbers.

Speaker Change: In the first quarter, we reported adjusted earnings per share of <unk> 97.

Gary: Although we experienced a warmer than normal winter.

Gary: Healthy set of countermeasures, we deployed in 2023.

Gary: As well as our active use of the CE way.

Gary: Continued to benefit us in 2024.

Garrick J. Rochow: In addition, there is an increased incentive for energy efficiency as we target 60 percent renewables by 2035 and 100 percent clean energy by 2040, and it gives us important flexibility as we think through how to best meet our customers' needs with renewables across the broad MISO footprint. This mechanism, the flexibility in the law, helps us balance customer affordability as we work through this transition for our customers.

Gary: We remain confident in this year's guidance.

Gary: And long term outlook and are reaffirming all our financial objectives.

Gary: Our full year guidance remains at $3 29 to $3 35 per share with continued confidence toward the high end.

Gary: Longer term, we continue to guide to the high end of our adjusted EPS growth range of 6% to 8%, which implies and include seven up to 8%.

Speaker Change: With that.

Speaker Change: I'll hand, the call over to Reggie.

Garrick J. Rochow: All this means stronger, more resilient, and cleaner energy for our investors, an exciting and robust investment runway well into the future. Now, let's work on the other side of this investment equation, the third focus area that I want to share today, how we are helping Michigan grow and thrive, which is good for our company and our customers. Growth across our service territory is good for Michigan. It helps keep bills affordable for our customers and provides headroom for the investments I just referenced.

Rejji P. Hayes: Thank you Derek and good morning, everyone.

Rejji P. Hayes: On slide seven Youll see our standard waterfall chart, which illustrates the key drivers impacting our financial performance for the quarter and our year to go expectation.

Rejji P. Hayes: For clarification purposes, all of the variance analysis herein are in comparison to 2023.

Rejji P. Hayes: On our first quarter and nine months to go basis.

Rejji P. Hayes: In summary through the first quarter of 2024, we delivered.

Rejji P. Hayes: Adjusted net income of $288 million or 97 per share, which compares favorably to the comparable period in 2023, largely due to higher weather normalized sales and lower service restoration costs with utility partially offset by mild winter.

Garrick J. Rochow: And I couldn't be more excited about the growth we are seeing in our state. Michigan has a strong fiber network, access to fresh water, a temperate climate, an energy-ready site, and an attractive energy rate. In February, we secured a contract with a large Data Center in the heart of our service territory. The majority of the 230 megawatts of new load is expected to be online by 2026. This is a nice logo.

Rejji P. Hayes: To elaborate on the impact of weather, we experienced another warm winter in Michigan during the first quarter, which had the second lowest number of heating degree days in the past 25 years.

Rejji P. Hayes: The warm winter weather resulted in <unk> per share of negative variance, which appears modest on the surface.

Rejji P. Hayes: Given the historically low number of heating degree days. However, it's important to note that last year's winter was also quite warm.

Garrick J. Rochow: And I'm even more excited about the manufacturing low growth we are seeing in Michigan, which is a differentiator for us. Our statewide leadership on projects such as Goshen, Sunlock Semiconductor, Ford, and many others continues to drive new and expanding load in our service territory. These projects bring significant jobs, supply chain, commercial growth, housing starts, and broad Michigan investment. The ancillary benefits of manufacturing growth are good for all customers and bolster our confidence in our plan for 2024 and beyond.

Rejji P. Hayes: Rate relief net of investment related expenses resulted in <unk> per share of positive variance due to constructive outcomes achieved in our most recent electric rate case and last year's gas rate case settlement, coupled with residual benefits from our 2023.

Rejji P. Hayes: Electric rate case settlement approved last January.

Rejji P. Hayes: From a cost performance perspective, our financials in the first quarter of 2024 were positively impacted by lower operating and maintenance or O&M expenses.

Rejji P. Hayes: <unk> attributable attributable to lower service restoration costs than we experienced last year also as Gary noted, we continue to see benefits from select cost reduction initiatives implemented in 2023, which have offset modest inflationary trends, we experienced in various cash cost categories.

Garrick J. Rochow: Our customers thrive when Michigan thrives, and I'm proud of the diversity and quality of new load our leadership is working to bring to the state. Now, let's get into the numbers. In the first quarter, we reported adjusted earnings per share of $0.97. Although we experienced a warmer than normal winter, the healthy set of countermeasures we deployed in 2023, as well as our active use of the CE Way, will continue to benefit us in 2024. We will remain confident in this year's guidance and the Long-Term Outlook and are reaffirming all our financial objectives.

Rejji P. Hayes: Such as wages as planned and we anticipate this trend to continue over the remainder of the year.

Rejji P. Hayes: And our catch all category represented by the final bucket and the actual section of the chart Youll notice a healthy pickup from <unk> 19 per share largely driven by weather normalized sales, which contributed almost half of stead positive variance, particularly in our residential and commercial customer classes.

Rejji P. Hayes: It's worth noting that the leap year impact comparability with 2023 for weather normalized sales, but even absent the effects of the leap year, our residential weather normalized sales were up about half a percent and our commercial customer class was up almost two 5% versus the prior year.

Garrick J. Rochow: Our full-year guidance remains at $3.29 to $3.35 per share with continued confidence toward the high end. Longer term, continue to guide toward the high end of our adjusted EPS growth range of 6 to 8 percent, which implies and includes 7 to 8 percent. I'll hand the call over to Rejji. Thank you.

Rejji P. Hayes: Which highlights the continued solid performance of our higher margin customer classes.

Rejji P. Hayes: Thank you, Garrick, and good morning, everyone. On slide seven, you'll see our standard waterfall chart, which illustrates the key drivers impacting our financial performance for the quarter and our year-to-go expectations. For clarification purposes, all of the variance analyses herein are in comparison to 2023, both on a first-quarter and nine-month-to-go basis. In summary, through the first quarter of 2024, we delivered adjusted net income of $288 million or $0.97 per share, which compares favorably to the comparable period in 2023, largely due to higher weather-normalized sales and lower service restoration costs of utilities, partially offset by mild weather.

Rejji P. Hayes: Looking ahead, we plan for normal weather as always which equates to 22 cents per share of positive variance for the remaining nine months of the year.

Rejji P. Hayes: Even the mild temperatures experienced virtually all of 2023 for.

Rejji P. Hayes: For a regulatory perspective, we're assuming 18 per share of positive variance, which is largely driven by the constructive electric rate order received from the commission in early March. We are also assuming a supportive outcome in our pending gas rate case on.

Rejji P. Hayes: On the cost side, we anticipate lower overall O&M expense of utility driven by the usual cost performance fueled by the CE way and last year's voluntary separation program. Among other 2023 cost reduction initiatives that continue to bear fruit.

Rejji P. Hayes: We also assume lower service restoration costs, given last year's record level of storm activity in our service territory.

Rejji P. Hayes: To elaborate on the impact of weather, we experienced another warm winter in Michigan during the first quarter, which had the second lowest number of heating degree days in the past 25 years. The warm winter weather resulted in 6 cents per share of negative variance, which appears modest on the surface given the historically low number of heating degree days. However, it's important to note that last year's winter was also quite warm.

Rejji P. Hayes: In aggregate, we expect these items to drive <unk> per share of positive variance for the remaining nine months of the year.

Rejji P. Hayes: Lastly, in the penultimate bar on the right hand side, you'll note a significant negative variance, which largely consists of the absence of select onetime countermeasures from last year and the usual conservative assumptions around weather normalized sales.

Rejji P. Hayes: Rate relief net of investment-related expenses resulted in five cents per share of positive variance due to constructive outcomes achieved in our most recent electric rate case and last year's gas rate case settlement, coupled with residual benefits from our 2023 Electric Rate Case Settlement approved last January. From a cost performance perspective, our financials in the first quarter of 2024 were positively impacted by lower operating and maintenance, or O&M, expenses, primarily attributable to lower service restoration costs than we experienced last year.

Rejji P. Hayes: And non utility performance among other items in aggregate these assumptions equate to 52 to <unk> 58 per share of negative variance.

Rejji P. Hayes: Slide eight offers the latest updates on our regulatory forward calendar as Youll note in the top section we plan to file our renewable energy plan, where our EP by mid November which will highlight our strategy for complying with the various renewable energy targets associated with Michigan's new clean energy law, we are.

Rejji P. Hayes: Cited by the prospects of the new law, which will support our net zero carbon by 2040 goal.

Rejji P. Hayes: Also, as Garrick noted, we continue to see benefits from select cost reduction initiatives implemented in 2023, which have offset modest inflationary trends we've experienced in various cost categories, such as wages, as planned. And we anticipate this trend to continue over the remainder of the year. In our catch-all category represented by the final bucket in the actual section of the chart, you'll notice a healthy pickup of 19 cents per share, largely driven by weather-normalized sales, which contributed almost half of said positive variance, particularly in our residential and commercial customer class.

Rejji P. Hayes: And look forward to socializing, our filing with key stakeholders in the coming months.

Rejji P. Hayes: Once filed the commission will have 300 days to issue, an order, which will likely be in the third quarter of 2025. Therefore as mentioned during our fourth quarter call. You should expect for the five year plan that will rollout in the first quarter of 2026 will incorporate a greater portion of the financial impacts of the RVP.

Rejji P. Hayes: Moving on to our general rate case filings you can expect our next electric rate case to be filed in late may to early June timeframe.

Rejji P. Hayes: This file this filing will incorporate some of the initial spend we have outlined in our five year electric reliability roadmap with Derek touched on earlier.

Rejji P. Hayes: It's worth noting that the leap year impacts comparability with 2023 for weather normalized sales, but even absent the effects of the leap year, our residential weather normalized sales were up about half a percent, and our commercial customer class was up almost two and a half percent versus the prior year, which highlights the continued solid performance of our higher-margin customer class.

Rejji P. Hayes: Given the 10 months stipulated period for rate case in rate cases in Michigan, We would expect to receive an order from the commission in the first quarter of 2020 funds and thus the related financial impact.

Rejji P. Hayes: Lastly, we anticipate an order in our pending gas rate case by mid October.

Rejji P. Hayes: Absent a settlement.

Rejji P. Hayes: Looking ahead, we plan for normal weather, as always, which equates to 22 cents per share of positive variance for the remaining nine months of the year. From a regulatory perspective, we're assuming 18 cents per share of positive variance, which is largely driven by the constructive electric rate order received from the Commission in early March. We are also assuming a supportive outcome in our pending gas rate.

Rejji P. Hayes: While we don't always include a balance sheet update and our formal presentation. It is worth noting that Moody's and Fitch reaffirmed our credit ratings in March and April respectively. As noted at the bottom of the table on slide nine.

Rejji P. Hayes: Longer term, we continue to target solid investment grade credit ratings and will continue to manage our key credit metrics accordingly, as we balanced the needs of the business and with that I'll hand, it back to Eric for his final remarks before the Q&A session.

Rejji P. Hayes: On the cost side, we anticipate lower overall O&M expenses at the utility, driven by usual cost performance fueled by the CE way and last year's voluntary separation program, among other 2023 cost reduction initiatives that continue to bear fruit. We also assume lower service restoration costs given last year's record level of storm activity in our service territory. In aggregate, we expect these items to drive nine cents per share of positive variants in the remaining nine months of the year.

Eric: Thank you Rajeev.

Eric: Our simple investment thesis is how we run our business and provides us with confidence for a strong outlook this year and beyond.

Eric: Only one years of consistent industry, leading financial performance.

Eric: 'twenty one proof point.

Speaker Change: <unk> of conditions no excuses.

Speaker Change: The result.

Eric: That drew.

Speaker Change: These open the lines for Q&A.

Speaker Change: Okay.

Rejji P. Hayes: Lastly, in the penultimate bar on the right-hand side, you'll note a significant negative variance, which largely consists of the absence of select one-time countermeasures from last year and the usual conservative assumptions around weather normalized sales and non-utility performance, among other items. In aggregate, these assumptions equate to 52 cents to 58 cents per share of negative variance.

Speaker Change: Thank you very much Greg the question and answer session will be conducted electronically.

Speaker Change: I would like to ask a question. Please do so by pressing the star key followed by the digit one on your Touchtone telephone.

Speaker Change: If you are using a speaker function that please make sure you pick up your handset.

Speaker Change: We will proceed in the order you signal and we will take as many questions as time permits.

Speaker Change: Find that your question has been answered you may remove yourself by pressing the star key followed by the digit too on your touch tone telephone.

Rejji P. Hayes: Slide 8 offers the latest updates on our Regulatory Forward Calendar. As you'll note in the top section, we plan to file a Renewable Energy Plan, or REP, by mid-November, which will highlight our strategy for complying with the various renewable energy targets associated with Michigan's new clean energy law. We are excited by the prospects of the new law, which will support our net-zero carbon by 2040 goal, and look forward to socializing our filing with key stakeholders in the coming months.

Speaker Change: First question today comes from Shar <unk> from Guggenheim Partners. Your line is now open. Please go ahead.

Rejji P. Hayes: Once filed, the Commission will have 300 days to issue an order, which will likely be in the third quarter of 2025. Therefore, as mentioned during our fourth quarter call, you should expect that the five-year plan that will roll out in the first quarter of 2026 will incorporate a greater portion of the financial impacts of the REP. Moving on to our general rate case filings, you can expect our next electric rate case to be filed in the late May to early June time frame.

Shar: Hey, guys good morning.

Shar: Hey, good morning Shar.

Shar: Good morning morning.

Shar: I guess, firstly, just given you have an upcoming electric case, how are you thinking about any kind of incremental construct improvements there would you kind of seeking expanded.

Shar: Im framework and do you need to address it in kind of the rate design issues with C&I rates, especially as just trying to accommodate.

Shar: New load like data center growth, especially as just trying to kind of balance that customer rate impact.

Speaker Change: Sure you want me to get into rate design that you guys are all going to fall asleep on this call if I go on to rate design.

Speaker Change: That was very thorough.

Speaker Change: With that.

Shar: Well, let me start out with the fundamentals of this electric case that I think this is really <unk>.

Rejji P. Hayes: This filing will incorporate some of the initial spend we have outlined in our five-year electric reliability roadmap that Garrick touched on earlier. Given the 10-month stipulated period for rate cases in Michigan, we would expect to receive an order from the Commission in the first quarter of 2025, and thus, the related financial impact. Lastly, we anticipate an order in our pending gas rate case by mid-October, absent a settlement. While we don't always include a balance sheet update in our formal presentation, it is worth noting that Moody's and Fitch reaffirmed our credit ratings in March and April, respectively, as noted at the bottom of the table on slide 9.

Shar: You've heard me time, and time again, whether it's investor meetings or calls on the importance of improving reliability.

Shar: We've seen higher wind speeds more frequent storm activity and.

Shar: And just this is our focus of the company, how do we improve reliability and the longer term resiliency of our electric system. You can also get that from the commissioners the very clear about that expectation and so I would say, there's really good alignment there and this reliability roadmap does just that it's aimed at those important capital improvements.

Shar: Theres some O&M work associated with that as well. These are best practices in the industry, which we're deploying across our system and I was going to build meaningful benefit for our customers.

Shar: In addition to that we're focused on the affordability piece the solid fundamentals of this great to invest the capital, but you also have to be focused on the affordability piece for our customers and so it's driving down unit cost through the CE way. It's other cost offsets there's a whole range of things we're doing to make sure. This next electric rate case delivers for our customers in terms of proved reliability and.

Rejji P. Hayes: Longer term, we continue to target solid investment grade credit ratings and will continue to manage our key credit metrics accordingly as we balance the needs of the business. And with that, I'll hand it back to Garrick for his final remarks before the Q&A session.

Shar: <unk> from a cost perspective.

Shar: So that's the fundamentals of the case.

Shar: So we're going to look at different mechanisms in that case as I've shared before I would anticipate that.

Shar: Again take advantage of our infrastructure recovery mechanism that was supported in the last case.

Shar: Look at a storm recovery mechanism.

Shar: Utilize that in previous cases, we'll continue to look at that Optionality and what that could look like in this case.

Garrick J. Rochow: Our Simple Investment Thesis is how we run our business and provides us with the confidence for a strong outlook this year and beyond. 21 years of consistent, industry-leading financial performance. 21 Proof, regardless of conditions, no excuse. Just results. With that, Drew, please open the lines for Q&A. Thank you very much, Garrick.

Shar: Again longer term, we'll file this in the May 1st part of June I feel confident about what we're putting together based on the important merits of the case, they're going to improve reliability and will balance the important components of before affordability now your question on rate design, there's a lot in rate design.

Operator: Thank you very much, Garrick. The question and answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the star key, followed by the digit one on your touchtone telephone. If you're using the speaker function, please make sure you pick up your headset. We'll proceed in the order you signal us, and we'll take as many questions as time permits. If you do find that your question has been answered, you may remove yourself by pressing the star key followed by the digit two on your touchtone telephone. Our first question today comes from Shah Pourreza from Guggenheim Partners. Your line is now open, please go ahead. Hey guys, good morning.

Shar: Really we'll put you to sleep if I go there, but we're going to make sure as the state expands and we have this important low growth that both energy and capacity.

Shar: Components that cost of service mechanism is appropriate is appropriately allocated to where those costs are that's what we've done historically, that's what the commission supported and so we'll look at that certainly within the context of this case, but it's really smaller in the Grand scheme of the important work of this case.

Speaker Change: Got it perfect and then and then lastly.

Shahriar Pourreza: Good morning, morning. I guess firstly, just given you have an upcoming electric car, how are you thinking about any kind of incremental construct improvements there? Would you kind of seek an expanded IRM framework? And do you need to address any kind of rate design issues with CNI rates, especially as you're trying to accommodate, you know, new load like data center growth, especially as you're trying to kind of balance that customer rate impact?

Shar: Thinking about the energy law construct in Illinois, I guess, what are some of the first changes you can implement especially as we're thinking about the upcoming IRB update would you lean more on sort of that MCM construct and is any of this kind of embedded in your longer range growth guidance. Thanks.

Shar: It's still early days on some of this modeling so we'll file our RVP of renewable energy plan November 15th and.

Shar: And as I've shared historically here previous here, there's a broad spectrum of ownership.

Garrick J. Rochow: and the Rayt Design. All right. Let me start with that. Let me start with that.

Shar: Versus Ppas Ppas obviously.

Garrick J. Rochow: Well, let me start out with the fundamentals of this electric case because I think this is really important. You've heard me time and time again, whether it's investor meetings or in our calls, on the importance of improving reliability. We've seen higher wind speeds, more frequent storm activity, and this is just what our focus as a company is. How do we improve reliability and the longer-term resiliency of our electric system?

Shar: We have the opportunity for the financial compensation mechanism or.

Shar: If youre going to Youre going to.

Shar: Build everything and own everything obviously have the opportunity to.

Shar: To earn your ROE So there's a broad spectrum you can do all.

Shar: Either and those are the bookends I think it's somewhere in the mix and there's a lot of variables we need to consider that we're modeling out right now and that's why we're not prepared to share what that looks like.

Garrick J. Rochow: You can also hear that from the commissioners. They're very clear about that expectation, and so I would say there's really good alignment there. And this reliability roadmap does just that. It's aimed at those important capital improvements. There's some O&M work associated with that as well.

Speaker Change: But let me hand, it over to <unk>. Some additional thoughts on this sugar shar. Good morning. Thanks for the question all I would add to guarantee comments is that.

Speaker Change: And our current five year plan, what we've incorporated as just a modest amount.

Garrick J. Rochow: These are best practices in the industry which we're deploying across our system and are going to build meaningful benefits for our customers. In addition to that, we're focused on the affordability piece. This is how it was fundamental to this. Great to invest in capital, but you also have to be focused on the affordability piece for our customers. And so it's driving down unit costs through the CE way. It's other costs offset.

Speaker Change: Of Ppas with the financial compensation mechanism and that's solely because of the fact that any PPA.

Speaker Change: Put in place after June of this year would be subject to the new FCS, which is around 9% versus the prior of about five 5% and so we have a portion of that albeit a small portion incorporated in this five year plan. We've also incorporated the enhanced economic incentives associated with energy efficiency and so that's flowing through.

Garrick J. Rochow: There's a whole range of things we're doing to make sure this next electric crate case delivers for our customers in terms of improved reliability and offsetting from a cost perspective. So that's the fundamentals of the case. And so we're gonna look at different mechanisms in that case. As I've shared before, I would anticipate that we would again take advantage of our infrastructure recovery mechanism that was supported in the last case. We'll look at a storm recovery mechanism.

Speaker Change: Our plan as well and remember historically, we've on the electric side been reducing load about 2% year over year and before the new energy law, we'd get a 20% incentive on top of that spend that's now 22, 5%.

Speaker Change: So that's also a source of financial upside embedded into this plan, but to Garik. Joe Your comments are much more expansive opportunities, whether it's scaling contracts or the ownership opportunities or more specifically the rate base opportunities. Those are not incorporated into our five year plan and really won't be until 2026.

Garrick J. Rochow: We've utilized that in previous cases. We'll continue to look at that optionality and what that could look like in this case. Again, longer term, we'll file this end of May, first part of June. I feel confident about what we're putting together based on the important merits of the case that are gonna improve reliability and well balance the important components of affordability. Now, your question on rate design. There is a lot in rate design. I really will put you to sleep if I go there.

Speaker Change: Okay perfect. Thank you guys appreciate it Gary for the record your rate design answer was not boring at all thanks guys.

Garrick J. Rochow: But we're gonna make sure as the state expands and we have this important low growth that both the energy and capacity components of the cost of service mechanism are appropriately allocated to where those costs are. That's what we've done historically. That's what the commission supported. And so we'll look at that certainly within the context of this case. But it's really small in the grand scheme of the important work.

Speaker Change: [laughter].

Speaker Change: Yes.

Speaker Change: Our next question comes from Nick <unk>.

Nick: From Barclays. Your line is now open. Please proceed.

Nick: Good morning, everyone and thanks for taking it.

Nick: Alright.

Nick: I guess just.

Nick: Thinking about the other outside opportunities.

Speaker Change: Can you maybe give us an update on your conversations around digs and the re contracting opportunity there and how those discussions have been progressing is this something that we can maybe see an update on by year end or is it more of a $25 26 item maybe just.

Shahriar Pourreza: Got it. Perfect.

Garrick J. Rochow: And then, and then lastly, as we're thinking about the energy law construct, and you want to write, I guess, what are some of the first changes you can implement, especially as we're thinking about the upcoming IRP update? Would you lean more on sort of that FCM construct? And is any of this kind of embedded in your longer-range growth guidance? Thanks.

Speaker Change: Talk about timing there thanks.

Speaker Change: Yeah. Good morning, Nick This is Reggie and appreciate the question.

Rejji P. Hayes: As we talked about on our fourth quarter call, we still have about 30% to 35% open margin in the outer years of our plan really starting in sort of 2026 for the second half of 'twenty six going through 2028, we certainly are seeing attractive reverse inquiry for that open margin on the capacity side were sold through.

Rejji P. Hayes: It's, it's still early days on some of this modeling. So we'll follow our REP, Renewable Energy Plan, on November 15. And as I've shared, historically here, and previously here, there's a broad spectrum of ownership versus PPAs. The PPAs, obviously, have the opportunity for the financial compensation mechanism, or if you're gonna build everything and own everything, obviously, you have the opportunity to earn your ROE. So there's a broad spectrum, you do all You know, either end, those are the bookends.

Rejji P. Hayes: On the energy side through 2028 through the duration of this five year plan, but there still are opportunities on the capacity side.

Speaker Change: We'll be thoughtful we never are too aggressive in selling down that open margin, we'd like to have a little bit of optionality, particularly with a really attractive technical that we continue to see in zone seven with the tightening of supply and upper pressure on demand and so we will provide an update in our next five year plan as we always do and I expect that we'll be selling down.

Rejji P. Hayes: I think it's somewhere in the mix, and there are a lot of variables we need to consider that we're modeling out right now, and that's why we're not prepared to share what that looks like. But let me hand it over to Rejji. I know he has some additional thoughts.

Rejji P. Hayes: Shahriar, good morning. Thanks for the question. All I would add to Garrick's comments is that in our current 5-year plan, what we've incorporated is just a modest amount of PPAs with the financial compensation mechanism, and that's solely because of the fact that any PPA put in place after June of this year would be subject to the new FCM, which is around 9% versus the previous of about 5.5%. And so we have a portion of that, albeit a small portion, incorporated into this 5-year plan.

Speaker Change: A portion of the open margin ratably over the coming months and quarters, but should still have probably a little open margin as we provide a new five year plan in the first quarter next year is that helpful.

Speaker Change: That is helpful. I appreciate that.

Speaker Change: Yes.

Speaker Change: And about the rate case cadence an outcome on the electric side.

Speaker Change: The last case, you kind of pursued a fully litigated outcome.

Speaker Change: But on the gas side, you just received testimony and I think gradually I heard you say you get an order in the fourth quarter absent a settlement.

Speaker Change: So just what's your reaction to staff starting point here and what are your thoughts on being able to settle the gas case.

Rejji P. Hayes: We've also incorporated the enhanced economic incentives associated with energy efficiency, and so that's flowing through our plan as well. And remember, historically, we've, on the electric side, been reducing load about 2% year over year, and before the new energy law, we'd get...

Speaker Change: I'd go back to the fundamentals of that case payment for a safe natural gas system.

Speaker Change: You're continuing to reduce methane across that and deliver affordable natural gas to our customers and so again, the imbalance that equation of making the investments in the natural gas system also just like we're doing the electric business aiming for an improved affordability across the gas system through unit cost through cost out using the CE way and the like so those fundamental.

Speaker Change: Our true staffs position I would categorize as constructive constructive starting point and so we'll look once we have that position, we're going to look for the opportunity for settlement we've been.

Shahriar Pourreza: Okay, perfect. Thank you, guys. I appreciate it. And, Garrick, for the record, your redesign answer was not boring at all. Thanks, guys.

Speaker Change: Been able to work with a number of the intervenors in the past and have a good track record there, but also here this.

Speaker Change: I'm confident in the testimony and the merits of the case, so we need to go the full distance, we will and get a constructive outcome, both for our customers and stakeholders.

Operator: Our next question comes from Nick Campanella from Barclays. Your line is now open, please proceed.

Nicholas Joseph Campanella: Hey, good morning everyone. Thanks for taking... Lauren, um, I guess, you know, just thinking about the other outside opportunities. Can you maybe give us an update on your conversations around DIGS and the recontracting opportunity there and how those discussions are progressing? Is this something that we can maybe see an update on by year end? Or is it more of a 25-26 thing? Maybe just talk about timing there.

Speaker Change: Alright, thanks, so much have a great day.

Speaker Change: You too Nick.

Speaker Change: Our next question comes from Jeremy Tonet from Jpmorgan. Your line is now open. Please go ahead.

Speaker Change: Okay.

Jeremy Bryan Tonet: Hi, good morning.

Jeremy Bryan Tonet: Good morning, Jeremy.

Jeremy Bryan Tonet: [laughter].

Rejji P. Hayes: Yeah, good morning, Nick. This is Rejji, and I appreciate the question. Yeah, as we talked about on our fourth quarter call, we still have about 30 to 35 percent open margin in the outer years of our plan, really starting in sort of 2026 or the second half of 2026 going through 2028. We certainly are seeing attractive reverse inquiry for that open margin on the capacity side. We're sold through on the energy side through 2028 or through the duration of this five-year plan, but there are still opportunities on the capacity side.

Jeremy Bryan Tonet: Thanks, just wanted to dive in I guess to the sales outlook came in a bit better than expected I guess for the first quarter and for the balance of the yield looks like that's trending.

Jeremy Bryan Tonet: Trending better than expected and I'm, just wondering by customer class if you could dive in a bit more on the <unk>.

Speaker Change: Drivers that youre seeing that.

Speaker Change: Within each class that is leading to this uptick.

Speaker Change: Yeah. Jeremy this is Reggie I appreciate the question. So yes, we were pleased with the first quarter performance of non weather sales, we provide good color on that.

Rejji P. Hayes: And we'll be thoughtful. We never are too aggressive in selling down that open margin. We like to have a little bit of optionality, particularly with the really attractive technicals that we continue to see in Zone 7 with the tightening of supply and upper pressure and demand. And so we'll provide an update in our next five-year plan, as we always do. And I expect that we'll be selling down a portion of the open margin gradually over the coming months and quarters but should still have a little open margin as we provide a new five-year plan in the first quarter next year. Is that helpful?

Rejji P. Hayes: Our earnings Digest, what you probably saw but going through the customer classes we saw.

Rejji P. Hayes: Residential up just under one 5% versus Q1 of 2023 and so on the surface that looks quite good but it's important to note that the leap <unk> leap day in the quarter because it is a leap year.

Rejji P. Hayes: Drove about two thirds of that but still even absent the lead there as I mentioned in my prepared remarks still up about a half a percent I still think we continue to see continued upside of the return to work or return to facilities trend, where I think we had pretty conservative assumptions about return to facilities and we are seeing a stickiness to folks having a corporation.

Nicholas Joseph Campanella: That is helpful. I appreciate that.

Nicholas Joseph Campanella: You know, I guess thinking about the rate case cadence and outcomes, you know, on the electric side, the last case, you kind of pursued a fully litigated outcome, you know, but on the gas side, you just received staff testimony. And I think, Rejji, I heard you say you get an order in the fourth quarter absent a settlement. So just what's your reaction to the starting point here? And what are your thoughts on being able to settle the gas case?

Speaker Change: <unk> retaining what I would describe as a hybrid workforce and so that is still I think delivering some surprise to the upside and it is a higher margin.

Speaker Change: Customer classes, you know on the commercial side really quite pleased with what we've seen and so.

Speaker Change: The number was just under three 5%.

Garrick J. Rochow: I'd go back, Nick, to the fundamentals of that case. Aiming for a safe natural gas system, you're continuing to reduce methane across that and deliver affordable natural gas to our customers. And so, again, the imbalance, that equation of making the investments in the natural gas system, also, just like we're doing in the electric business, aiming for improved affordability across the gas system through unit costs, through cost out, using the CEA and the like. So those fundamentals are true.

Speaker Change: Increase versus Q1 of 2023.

Speaker Change: And the leap year only affected about a third of that so pro forma for the leap year. We were still just under two 5%. So very pleased with that and our speculation we've seen some of the subsectors.

Speaker Change: Within commercial that have performed pretty well agriculture mining up about six 5%. We also saw our entertainment up about 3%.

Nicholas Joseph Campanella: Staff's position I would categorize as constructive, a constructive starting point. And so we'll look, once we have that position, we're going to look for the opportunity for settlement. We've been able to work with a number of interveners in the past and have a good track record there. But also hearing this, I'm confident in the testimony and the merits of the case. So if we need to go to the full distance, we will and get a constructive outcome, both for our customers and for stakeholders.

Speaker Change: And so we've seen some of the Subsectors performed pretty well, but we also think because folks are actually going to the office at least three days a week that does create foot traffic in communities and folks are going to cafes and things of that nature. So that's also part of it as well, but that's a bit more speculative, but that's our sense.

Speaker Change: And then within industrial if you exclude one low margin.

Speaker Change: Large customer.

Speaker Change: Just over.

Speaker Change: Sorry, just slightly up let's say about 2025 basis points in the leap you did have a big impact on that class and so pro forma for the leap year, you're down about 1% I'll always caveat to things whenever we talk about weather normalized sales. One remember those numbers include the fact that we're reducing our load by 2% each year and electric do.

Garrick J. Rochow: All right, thanks so much. Have a great day. You too, Nick.

Operator: Our next question comes from Jeremy Tonet from JP Morgan. Your line is now open, please go ahead.

Speaker Change: The energy efficiency. So all of these numbers should be on a gross basis up 2% and so you should provide that color to these industrial numbers. The other thing I always caveat is that weather normalization math as good as our team is as hard as they work to get it right as a very imperfect science.

Jeremy Bryan Tonet: Thanks. I just want to dive in, I guess, to the sales outlook. Came in a bit better than expected for the first quarter and for the balance of the year. Looks like that's trending better than expected. And just wondering, by customer class, if you could dive in a bit more on the, you know, the drivers that you're seeing within each class that is leading to this update.

Speaker Change: So there it is very difficult to get these numbers exactly right, but what I would say in terms of industrial that we feel very good as Derek noted in his prepared remarks about the economic outlook and just have a robust pipeline.

Rejji P. Hayes: Yeah, Jeremy, this is Rejji. Appreciate the question. So yeah, we were pleased with the first quarter performance of non-weather sales. We provide good color on that in our earnings digest, which you probably saw, but going through the customer classes, we saw a residential up just under one and a half percent versus Q1 of 2023. And so on the surface, that looks quite good.

Speaker Change: In a very diversified pipeline of industrial opportunities, which really are reflected in our numbers at this point it won't be until the outer years of our plan and we'll be disappointed if that opportunity doesn't continue to bear fruit for the next several years now.

Speaker Change: That's the color I can offer across Egypt customer class, but certainly happy to take any follow ups as needed.

Speaker Change: That's very helpful. Thank you for that and maybe just pivoting a bit here. It seems on the sides I think lay out there's a bit of cushion to hitting the guidance.

Rejji P. Hayes: It's important to note that the leap day in the quarter, because it's a leap year, drove about two-thirds of that, but still, even absent the leap day, as I mentioned in my prepared remarks, it was still up about half a percent. I still think we continue to see continued upside to the return to work or return to facilities trend, where I think we have pretty conservative assumptions about return to facilities, and we are seeing a stickiness to folks having or corporations retaining what I would describe as a hybrid workforce. And so that is still, I think, delivering some surprise on the upside, and it is a higher-margin customer class, as you know. On the commercial side, I'm really quite pleased with what we've seen.

Speaker Change: <unk> 24, and so just wondering I guess, how you feel confidence level guidance 24 at this point does it put you in a position to start thinking about 25% just wanted to get a sense for how that stance.

Speaker Change: Yes, well I would say Jeremy early days.

Speaker Change: We were delighted that 2024 is not 2023 and that we don't have a big storm as well as mild weather to start off the year, which we obviously saw that last year, but to be clear, we still saw a negative variance in terms of whether topline related weather and so there is still some work to do and so we are our countermeasure.

Rejji P. Hayes: And so the number was just under a three and a half percent increase versus Q1 of 2023, and the leap year only affected about a third of that. So pro forma for the leap year, we were still just under two and a half percent, so very pleased with that. And our speculation, we've seen some of the subsectors within commercial that have performed pretty well. Agriculture and mining up about six and a half percent.

Speaker Change: And again very confident in the outlook, but it's a little early before we start thinking about derisking 2025 and beyond.

Speaker Change: Got it fair enough I'll leave it there thank you.

Speaker Change: Thank you.

Speaker Change: Our next question comes from David <unk> from Morgan Stanley. Your line is now open. Please go ahead.

Rejji P. Hayes: We also saw entertainment up about three percent. And so we've seen some of the subsectors perform pretty well, but we also think because folks are actually going to the office at least three days a week, that does create foot traffic in communities, and folks are going to cafes and things of that nature. So that's also part of it as well, but that's a bit more speculative, but that's our sense. And then within industrial, if you exclude one low margin, large customer, we're just over, sorry, just slightly up, let's say about 20, 25 basis points.

David: Oh, great. Good morning, Thanks, so much.

David: Good morning, David.

David: I was wondering what your I was wondering what youre seeing in terms of maybe data center demand in the pipeline any uptick in.

David: Further request to connect beyond the big kind of megawatt addition that you called out.

Speaker Change: Wondering if if.

Speaker Change: That.

Speaker Change: Customer class I guess.

Speaker Change: That would potentially be involved in the voluntary renewables plan any upside potential there.

Speaker Change: Thanks for your question David.

Rejji P. Hayes: And the leap year did have a big impact on that class, and so pro forma for the leap year, you're down about a percent. But I will always caveat two things whenever we talk about weather-normalized sales. 1, remember those numbers include the fact that we're reducing our load by 2% each year in electric due to energy efficiency. So all these numbers should be on a gross basis up 2%. And so you should provide that color for these industrial numbers.

Speaker Change: A couple of things on this I typically don't like to talk about the pipeline just because it's pretty speculative on that in many of these data center companies are are testing the waters.

Speaker Change: In a variety of different utilities, and so we typically typically talk in terms of contracts and when we talk about economic development, whether it's manufacturing or data centers, it's secured contracts, which we again feel really good about let me reflect a little bit on this project.

Rejji P. Hayes: The other thing I always caveat is that weather normalization math, as good as our team is, and as hard as I work to get it right, is a very imperfect science. And so it is very difficult to get these numbers exactly right.

Speaker Change: I'll talk I will highlight the pipeline and we'll get to your answer.

Speaker Change: This particular project is data center expansion that we mentioned in the prepared remarks is 230 megawatts.

Rejji P. Hayes: But what I would say, in terms of industrial, we feel very good, as Garrett noted in his prepared remarks about the economic outlook and just have a robust pipeline and a very diversified pipeline of industrial opportunities, which really aren't reflected in our numbers at this point and won't be until the later years of our plan. And we'll be disappointed if that opportunity doesn't continue to bear fruit for the next several years. So that's what Color can offer across each customer class, but certainly happy to take any faults as needed.

Speaker Change: Online by 2025 majority of the load in place by 2026, and so that does speak to our ability and capabilities to be able to deliver for these customers and then you see Michigan and I should say.

Speaker Change: Some of my remarks temperate climate, which is great for the heating and cooling load of a data center a lot of fresh water and then energy ready sites attractive.

Speaker Change: Attractive energy rates.

Speaker Change: Good fiber network all that comes together to make Michigan really attractive I will say within the state of Michigan. There is a sales and use tax that exists where well.

Jeremy Bryan Tonet: That's very helpful. Thank you for that.

Rejji P. Hayes: And maybe just pivoting a bit here, it seems on the slide as they lay out, there's a bit of cushion to hitting the guiding 24. And so just wondering, you know, I guess how you feel about the confidence level guiding 24 at this point. Does it put you in a position to start thinking about 25? Just wanted to get a sense for how that stands.

Speaker Change: Roughly.

Speaker Change: A dozen states that have the sales and use tax in place about 6%.

Speaker Change: There is an exemption process as being a bills that are being considered in the house and Senate. It's passed the house in a bipartisan way it's moved over to the Senate for consideration, we think thats going to move forward that exemption.

Jeremy Bryan Tonet: Yeah, I would say, Jeremy, it's early days. Obviously, we're delighted that 2024 is not 2023, in that we don't have a big storm as well as mild weather to start off the year, which we obviously saw last year. But to be clear, we still saw negative variance in terms of weather, top-line related weather. And so there's still some work to do. And so we are counter-measures and, again, very confident in the outlook. But it's a little early before we start thinking about de-risking 2025 and beyond.

Speaker Change: Probably in the June July timeframe at the end of this session before they go on.

Speaker Change: Or break and that will open up Michigan a bit more for that pipeline. There are companies that are exploring Michigan right now large data center providers names that you would recognize but again with a little bit they are testing the water in a lot of different locations and so.

Speaker Change: We'll see how Michigan progresses, we're certainly an attractive place to do business and we will look to.

Speaker Change: Track that low growth appropriately.

Speaker Change: But as I stated in my previous remarks, I want to make sure. There's a good balance that they're picking up the cost associated with that with that load as well both from an energy and capacity perspective. So that's all the things we are working to balance David.

Jeremy Bryan Tonet: You got it.

Jeremy Bryan Tonet: Got it. Fair enough. I'll leave it there. Thank you.

Operator: Our next question comes from David Arcaro from Morgan Stanley. Your line is now open. Please go ahead.

Speaker Change: Hopefully that provides some light to your question, let me know if I didn't strike the right balance there.

David Keith Arcaro: Great. Good morning. Thanks so much. Good morning, David. I was wondering what you're seeing in terms of maybe data center demand in the pipeline, any uptick in further requests to connect beyond the big kind of megawatt addition that you called out, and wondering if, if that Customer Class, I guess, would potentially be involved in the Voluntary Renewables Plan, any upside potential there.

Speaker Change: It does that's helpful. Yes.

Speaker Change: Are you thinking there could be upside to your longer term load growth expectations or is it still early.

Speaker Change: We've got a we have between the manufacturing load is contracted in the data center load that's contracted.

Speaker Change: As ready set it where it is.

Speaker Change: A nice piece of low growth that will be factored in Italy. The later years. This five year plan, but future five year plans and we're excited about what that means.

Garrick J. Rochow: Thanks for your question, David. There are a couple things on this. I typically don't like to talk about the pipeline, just because it's pretty speculative in that regard, and many of these data center companies are testing the waters in a variety of different utilities. And so we typically talk in terms of contracts. And when we talk about economic development, whether it's manufacturing or data centers, it's secure contracts, which we, again, feel really good about. Let me reflect a little bit on this project, and then I'll talk.

Speaker Change: And there is a strong pipeline both from a manufacturing perspective.

Speaker Change: Okay.

Speaker Change: And to degree of the data center perspective, as well I'd be disappointed if some of those projects in the pipeline didn't materialize.

Speaker Change: Okay.

Speaker Change: Okay, great. Thanks, that's helpful.

Speaker Change: Separate topic I was wondering if you are.

Speaker Change: Just latest expectations for the performance based rates process in terms of timing and where that outcome might be headed.

Speaker Change: That's progressed in a constructive way we had.

Garrick J. Rochow: I will highlight the pipeline, and then I will get to your answer. This particular project, this data center expansion that we mentioned in the prepared remarks, is 230 megawatts. Online by 2025, with the majority of the load in place by 2026. And so that does speak to our ability and capabilities to be able to deliver for these customers. And then you see Michigan, and I said this in some of my remarks, has a temperate climate, which is great for the heating and cooling load of a data center.

Speaker Change: Close to 10 or a dozen metrics that were originally proposed.

Speaker Change: Mero, two four metrics that our bench marketable and theres good standards and so again, a constructive process plays out there's more work to do from our perspective, when we filed comments in the February March timeframe were expecting a report from the Michigan Public Service Commission staff in May and so we will see the next round of thinking.

Speaker Change: I would suggest that the couple electric rate cases away.

Garrick J. Rochow: A lot of fresh water and then energy-ready sites, attractive energy rates, a good fiber network, all that comes together to make Michigan really attractive. I will say within the state of Michigan, there is a sales and use tax that exists where, well, you know, there are roughly a dozen states that have this sales and use tax in place, about 6%.

Speaker Change: This case, perhaps the next case.

Speaker Change: Before we see implementation.

Speaker Change: But again this is the <unk>.

Speaker Change: <unk> process with the public Service Commission.

Speaker Change: Okay, great. Thanks for all the color.

Speaker Change: Yes, Thank you David.

Speaker Change: Okay.

Speaker Change: Our next question today comes from Michael Sullivan from Wolfe. Your line is now open. Please proceed.

Garrick J. Rochow: There is an exemption process that's being used for bills that are being considered in the House and Senate. It passed the House in a bipartisan way. It's moved over to the Senate for consideration. We think that's going to move forward, that exemption, probably in the June or July timeframe at the end of this session before they go on summer break.

Michael P. Sullivan: Hey, good morning.

Michael P. Sullivan: Hey, good morning, Michael.

Michael P. Sullivan: Hey, Garik, just sticking with the data center conversation. It sounds like you are kind of optimistic on this legislation and if that does pass and start to bring more interest to the state.

David Keith Arcaro: And that will open up Michigan a bit more for that pipeline. There are companies that are exploring Michigan right now, large data center providers, names that you would recognize. But again, a little bit. They're testing the water in a lot of different locations. And so we'll see how Michigan progresses. We're certainly an attractive place to do business.

Michael P. Sullivan: What do you think about the potential for.

Michael P. Sullivan: Dig being used in its entirety as like a behind the meter solution for like a larger.

Michael P. Sullivan: Type data center build out I know, there's been a lot of focus on that on the nuclear side of things elsewhere, but.

Garrick J. Rochow: And we'll look to track that load growth appropriately, but as I stated in my previous remarks, we want to make sure there's a good balance, that they're picking up the cost associated with that load as well, both from an energy and capacity perspective. So that's all the things that work in the balance, David. Hopefully, that provides some light to your question. Let me know if I didn't strike the right balance there.

Michael P. Sullivan: People talking about gas as well so just curious your thoughts there.

Michael P. Sullivan: Yes.

Speaker Change: Similar to <unk> comments.

Michael P. Sullivan: And in energy perspective, energy tolls and our capacity of the bilateral contracts much of big has been spoken for.

Michael P. Sullivan: At attractive really attractive position.

Michael P. Sullivan: That either meets our expectations versus above our expectations and so theres really unless you are beyond 2028, and maybe even the 2000 <unk> a decade <unk> has really not available because it's already been secured and with again attractive energy tolls in bilateral contracts for capacity.

David Keith Arcaro: It does. That's helpful. Yeah. Are you thinking there could be upside to your long-term load growth expectations, or is it still early?

Garrick J. Rochow: We have, between the manufacturing load that's contracted and the data center load that's contracted, as Rejji said, it's a nice piece of low growth that will be factored in not only the later years of this five-year plan but future five-year plans. We're excited about what that means. And there's a strong pipeline, both from a manufacturing perspective and, to a degree, from a data center perspective as well. I'd be disappointed if some of those projects in the pipeline didn't materialize.

Speaker Change: Okay Fair enough makes sense and then just on your upcoming audit your case filing here just to set expectations I know one of your peers in the state.

Michael P. Sullivan: Recently filed and got a pretty quick response from from the AG.

Michael P. Sullivan: Are you anticipating something similar with your should we just be perhaps for that.

Michael P. Sullivan: [laughter].

David Keith Arcaro: Okay, great. Thanks. That's helpful. On a separate topic, I was wondering your just latest expectations for the performance-based rates process in terms of timing and where that outcome might be headed.

Michael P. Sullivan: It is.

Michael P. Sullivan: We got primaries in August and that means early early.

Michael P. Sullivan: Early.

Michael P. Sullivan: <unk>.

Michael P. Sullivan: <unk> balance started in June and so its political season already in Michigan, and so I would anticipate.

Garrick J. Rochow: That's progressed in a constructive way. We had, you know, close to 10 or a dozen metrics that were originally proposed. That's narrowed to four metrics that are benchmarkable, and there are good standards.

Michael P. Sullivan: I would anticipate that look.

Michael P. Sullivan: Turning to general participates in all of our cases, that's been historical historical practice.

Garrick J. Rochow: And so, again, that constructive process plays out. There's more work to do from our perspective, and we filed comments in the February-March time frame. We're expecting a report from the Michigan Public Service Commission staff in May, and so we'll see the next round of thinking. I would suggest it's a couple of electric rate cases away, not this case, perhaps the next case before we see implementation. But, again, this is an evolving process with the Public Service Commission.

Michael P. Sullivan: So those are more public.

Michael P. Sullivan: And then other times, we stand as I shared earlier by the merits of the case both in our gas case, that's that's underway right now and its electric rate case.

Michael P. Sullivan: The team just went through a walk through this week and I couldn't be more proud of the work. The team has put together on it as I shared earlier in my in my questions.

Michael P. Sullivan: Sponsors to questions.

Michael P. Sullivan: We're focused on reliability, that's going to improve for our customers that is absolutely the right thing to do well aligned with that.

Michael P. Sullivan: The public service Commission, we are working hard to create affordability and we're good at that.

David Keith Arcaro: Okay, great. Thanks for all the color. Yeah. Thank you, David.

Michael P. Sullivan: The CE way to reducing power supply cost or unit cost or execution of capital when you get that mix right that equation right. It makes it.

Operator: Our next question today comes from Michael Sullivan from Wolfe. Your line is now open, please proceed.

Michael P. Sullivan: You get good outcomes.

Michael P. Sullivan: And so I'm excited about this case, it's certainly going to be a step up in capital there's going to be some O&M work to let's focus on reliability, but there's also some offsets that are really exciting.

Michael P. Sullivan: Michael. Hey, Garrick.

Michael P. Sullivan: They make us.

Michael P. Sullivan: Get me excited as you can tell by the tone of my voice about what we're filing will put together, it's going to be good for customers and it's going to be good for all stakeholders.

Garrick J. Rochow: Yeah, just sticking with the data center conversation, it sounds like you're kind of optimistic about this legislation. And if that does pass and start to bring more interest to the state, what do you think about the potential for dig being used in its entirety as a behind-the-meter solution for a larger-type data center build-out? I know there's been a lot of focus on that on the nuclear side of things elsewhere, but people are talking about gas as well, so just carry your thoughts there.

Michael P. Sullivan: Yeah.

Speaker Change: Alright, Yeah, you sound pretty pumped sounds good thank you.

Speaker Change: <unk>.

Speaker Change: Yeah.

Speaker Change: Our final question comes from Andrew Weisel from Scotia Bank. Your line is now open. Please go ahead.

Andrew Marc Weisel: Hey, good morning, everybody.

Garrick J. Rochow: Similar to Rejji's comments, from an energy perspective, energy tolls, and capacity of the bilateral contracts, much of DIG has been spoken for at an attractive, really attractive position that either meets our expectations or is above our expectations. And so there's really, unless you're beyond 2028, maybe in the 2030s decade, DIG's really not available because it's already been secured and with, again, attractive energy tolls and bilateral contracts for capacity.

Andrew Marc Weisel: Hey, good morning.

Andrew Marc Weisel: On the rate case this year.

Andrew Marc Weisel: Hey, Thanks, just a couple of follow ups on the rig.

Andrew Marc Weisel: Firstly I think you just alluded to this to the electric side Youre going to have more capital and more O&M just from a headline perspective should we expect a larger revenue increase request and what we've seen in past filings.

Andrew Marc Weisel: As a percent increase to customer bills.

Speaker Change: Yes, the short answer is yes, but again.

Andrew Marc Weisel: Important work from a capital investment perspective on reliability and we've done a lot to offset so the O&M costs.

Michael P. Sullivan: Okay, fair enough. It makes sense.

Andrew Marc Weisel: Important to this.

Andrew Marc Weisel: To strike that right balance.

Andrew Marc Weisel: That's what I mean by the important fundamentals of merits of the case.

Michael P. Sullivan: And then just on your upcoming auditor case filing here, just to set expectations, I know one of your peers in the state recently filed and got a pretty quick response from the AG. Are you anticipating something similar with yours? Should we just be prepared for that?

Speaker Change: Okay very good and then procedurally on the gas side I know this case is unique in that there is no ALJ does that change the timeline at all or the potential for settlement you talked a bit about settlement and believe the lack of ALJ does that factor in at all.

Garrick J. Rochow: It is, you know, we have primaries in August, early absentee ballots start in June, and so it's political season already in Michigan, and so I would anticipate that. Look, the Attorney General participates in all our cases. That's been a historical practice. Sometimes those are more public than other times.

Speaker Change: No the team is.

Speaker Change: It seems excited about the opportunity to get to get to the table now that we have staffs position now that we know where intervenors are at to talk settlement.

Speaker Change: As I shared.

Speaker Change:

Speaker Change: We've been able to navigate that with success in the past with all with all intervenors all stakeholders and so we'll look to do that.

Garrick J. Rochow: We stand, as I shared earlier, by the merits of the case, both in our gas case that's underway right now and this electric gray case. The team just went through a walkthrough this week, and I couldn't be more proud of the work the team put together on it. As I shared earlier in my questions, our responses to questions, we're focused on reliability. That's going to be good for our customers. That is absolutely the right thing to do, well aligned with the Public Service Commission.

Speaker Change: But also here my confidence in the merits of the case that if we need to go the full distance we will and.

Speaker Change: And I know that we'll get a good outcome for our customers and for stakeholders.

Speaker Change: Alright sounds good appreciate all the updates today.

Speaker Change: Yeah. Thank you Andrew.

Speaker Change: That concludes the Q&A portion of today's call I'll now hand back over to Garrett.

Garrick J. Rochow: We're working hard to create affordability, and we're good at that. CEWay, they're reducing power supply costs, their unit costs, their execution of capital. And when you get that mix right, that equation right, it makes it, you get good outcomes. And so I'm excited about this case. It's certainly going to be a step up in capital. There's going to be some O&M work, too, that's focused on reliability, but there are also some offsets that are really exciting that make us, that get me excited, as you can tell by the tone of my voice, about what we're filing and what we're putting together, because it's going to be good for customers and it's going to be good for

Garrett: Thanks drew.

Garrett: I'd like to thank you for joining us today.

Garrett: I look forward to seeing you on the road soon.

Speaker Change: Take care and stay safe.

Garrett: Yeah.

Speaker Change: That concludes today's call. Thank you for your participation you may now disconnect your line.

Speaker Change: [music].

Michael P. Sullivan: All right. Yeah, you sound pretty pumped. Sounds good. Thank you.

Speaker Change: Okay.

Speaker Change: So.

Speaker Change: [music].

Operator: Our final question comes from Andrew Weisel from Scotiabank. Your line is now open, please go ahead.

Andrew Marc Weisel: Hey, good morning, buddy. Hey, good morning, Andrew. How are you today?

Andrew Marc Weisel: Good, thanks. Just a couple follow-ups on the rate increases. So first, I think you just alluded to this for the electric side, you're going to have more capital and more O&M. Just from a headline perspective, should we expect a larger revenue increase request than what we've seen in past filings, in terms of the percent increase on customer bills? Yes.

Andrew Marc Weisel: Yes, the short answer is yes. But again, important work from a capital investment perspective on reliability, and we've done a lot to offset some of the O&M cost components of this to strike that right balance, and that's what I mean by the important fundamentals or merits of the case.

Garrick J. Rochow: Okay, very good. And then procedurally on the gas side, I know this case is unique in that there's no ALJ. Does that change the timeline at all or the potential for settlement? You talked a bit about settlement, but the lack of an ALJ, does that factor in at all?

Andrew Marc Weisel: No. The team is excited about the opportunity to get to the table. Now that we have staff's position, now that we know where interveners are at to talk settlement, and as I shared, we've been able to navigate that with success in the past with all intervenors, all stakeholders. And so we'll look to do that. But also, my confidence in the merits of the case means that if we need to go the full distance, we will, and I know that will achieve a good outcome for our customers and for stakeholders.

Garrick J. Rochow: All right. Sounds good. I appreciate all the updates today.

Andrew Marc Weisel: Yeah, thank you, Andrew.

Operator: That concludes the Q&A portion of today's call. I'll now hand over to Garrick.

Garrick J. Rochow: Andrew, I'd like to thank you for joining us today. I look forward to seeing you on the road soon. Take care and stay safe.

Operator: That concludes today's call. Thank you for your participation. You may now disconnect your line.