Q2 2019 Earnings Call
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Your lead entry number has been confirmed you will now be going to the conference. Please note that an operator will pick up your line to collect your information privately the way we look forward to providing an update to our 10 year capital plan in the fourth quarter.
As we plan for the future the key constraints for our long term capital investment plan will be customer affordability and balance sheet and workforce capacity as the former we remain acutely focused on cost reduction opportunities throughout our cost structure, which offers over $5 billion of opportunities, excluding depreciation and amortization expense.
Over the next decade, the exploration of the high price Palisades, an NCD power purchase agreements should collectively deliver approximately $150 million of annual savings overtime also the gradual retirement of our coal fleet will provide substantial 11 fuel savings beginning with the retirement of our current one into units in 2023, which we estimate will generate approximately $30 million of OEM savings and while we remain coal plant operators, we continue to seek opportunities to reduce our structural costs as evidenced by the recent renegotiation of the fuel transportation costs at our Campbell units, which has led to an estimated $150 million of nominal savings over the next several years. These opportunities on the supply side of the business will be supplemented with capital enabled savings as we modernize our electric and gas distributions.
Which should reduce our.
Operating operations and maintenance expenses lastly, the CE way will serve as a key pillar of our cost reduction strategy over time as we eliminate waste throughout the organization.
These efforts will provide a sustainable funding strategy for our capital plan, which will keep customer bills low on an absolute basis and relative to other household staples in Michigan as depicted in the chart on the right hand side of slide 15.
You are now rejoining the main conference in commercial segments as highlighted in Q1.
As you'll note in the Pie chart and right hand side of the page in 2018, approximately 2% of our customer contributions came from the auto industry.
As we continue to invest capital manage customer prices. We are also dedicated to maintaining a healthy balance sheet and robust access to capital markets on slide 17, we have a snapshot of our credit ratings at the utility and the parent and I'm pleased to report that that that's a positive trend continues.
Moody's recently reaffirmed their ratings utility secured bonds and the parent company senior unsecured bonds at double Athree and BW one respectively.
Page also recently reaffirmed their strong ratings for the utility secured bond today, plus and S&P sits nicely with a single entity utility secured bonds and a triple b rating for the parents senior unsecured bonds. These ratings are reflective of our strong balance sheet and operating cash flow generation, which reduces cost for our customers and fund our capital plan efficiently to the benefit of investors and with that I'll pass it back to patents, including concluding remarks for Fourq unit. Thanks Reggie.
We believe we have a compelling investment thesis that will serve our customers and investors for years to come.
And with that Rocco. Please open the lines for acuity.
Thank you very much bodies the question and answer session will be conducted electronically.
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Well pause for just a second.
Our first question comes from Michael Sullivan of Wolfe Research. Please go ahead.
Hey are on good morning.
Well good morning, Michael.
Hey.
The year is tracking I think one cents better relative to plan and now in Q2 it seems like.
Pretty much on plan, even with some of these.
Headwinds in Q1, and then the Tailwinds in Q2, I guess can you just give us a little more.
Detail on on what the additional levers you have to pull in case.
Weather is below normal or worse than normal and that in the second half of the year since it looks like you're just budgeting for for normal.
Sure Michael So very good question and as always I would just start by saying whatever we prepare financial plan for any given year, we make sure that first and foremost we play conservative but also our plan has sufficient contingency.
Across a number working assumptions to make sure that any of that weather is suboptimal in the event. There is a suboptimal regulatory outcome that we have enough cushion to provide for again any downside case and so again as we always say, we do that we're seeing for the investment community and Thats, where our plan reflects and so as you think about the first couple of quarters that we've had we're penny ahead, we feel like were on plan at this point, even with the I'll say mild weather in June as well as the storm activity in Q1, and so we have managed the cost as we always have and that includes a number of ill say opportunities that we execute on over the course of year. So weve been very advantageous on the non operating side. So weve done refinancings that have provided cost savings in excess of plan. So we did take out a bond in Q2 that provided savings that we had anticipated. We have also found some tax planning opportunities that create additional upside and then the operating side, we continue to look at.
Opportunities to defer potential spend opportunities for stretch goals and things of that nature. So theyre always flex down opportunities that we look out over the course of the year that we will execute on if we see downside and Michael I'll add that we really have ramped up our waste elimination work it is our.
Play of the year for the CE way.
You know, it's the power of the CE way, we've been we're in really our third full year of implementation and we are feeling the benefits of being able to deploy a new capability quickly across the organization and that's what's important about running a lean operation and a lean operation you can adapt to changing conditions. So the conditions. This year are able to benefit from the the great work that we did an 18 to pull ahead expenses since I've already described.
Billing and mailing center for our bills.
When we do construction projects a contractor picks up their equipment rental fees on the equipment. When we don't talk in a timely basis get them to come pick up their equipment can pile up so we've improved our process simply to make sure that the rental equipment gets off our property in off our books in off our ledger as quickly as possible. So it's little things all across the state that add up and allow us to be more nimble as conditions like this change and I would even offer in this most recent storm that we just experienced here in Michigan. Our storm response was extraordinary we were able to get our contractors off the system faster, we are able to get mutual assistance optics system faster because we have done a lot of work utilizing the CE way to improve our processes and improve our storm response, because it's such a major part of the customer experience. So.
All those little things add up and create this nimbleness and provide the confidence that we have that this backend loaded part of our plan Leverages last year's favorable.
Unplanned.
Conditions to deal with unplanned negative conditions that occurred this year. They are outside of our control. What we can control is how we respond and we're doing that extraordinarily well.
Great. Thanks, Thanks for all the color there and just just to clarify is as a follow up the.
The July .
Sales that you are showing their bennett benefit.
That's kind of you guys are also factoring in any any sort of.
Headwind that you may have experienced from from the storms over the last weekend.
So the four cents I highlighted in my prepared remarks that reflects the gross sales that we realized as a result of at least the July weather, we've seen to date the impact of the storm per our preliminary estimates about $8 million of own out I'd say.
That's about a couple of cents and so are the four cents of upside to the July weather does not take that into account, but again going back to my initial comments, we do plan for contingency for a number of our I'll say cost buckets, including storms and so we do have contingency in our service restoration cost assumptions for the year, which will absorb the cost of that store. So we still feel good about the July upside that articulated.
Okay, Great and then one final one just flipping over to that.
Regulatory side I think you've got to.
Lj decision due in the gas rate case next week I was just curious.
How you're feeling about that and potential for for settlement given it seem parties weren't too far apart.
And then just kind of going forward I see you're going to file.
Again, shortly thereafter, and just how you're thinking about maybe being able to space out the cadence of rate cases.
Over that over the long term going forward.
Yeah, you know one thing that became abundantly clear is abundantly clear to the staff's position on this gas rate case, Michael is that.
There is a strong support for gas investment the safety of our system the age of our system warrants strong and diligent attention and so.
That's why I think you would see that in that staff position we were.
You know sometimes it's good to allow a final order go all the way you know, let a case go all the way to a final order we have had success with settlements and I think that that spend.
Representative of the constructive regulatory treatment and environment here in Michigan.
And our relationship with all the extended parties, who participate in a rate filing.
But we think going potentially to a final order in this case would not be a.
Risky outcome, given our mutual commitment for gas investment, we do anticipate filing our next case.
In the fourth quarter of this year and that's simply because we have so much work to do on the gas system to make it safe and the good news is over the last five years for example, we've reduced customers bills by 28%.
Driven both by the commodity price, but also the cost savings that we've delivered on the gas side of the business. So our unit costs for all of the work that we do continue to decline as we implement the CE way and we're able to do more work for less dollars get more value added for customers and that's important because of the volume of work that the system really does require these days. So we do anticipate filing another case at the latter half of this year.
Great. Thanks, a lot.
Yes, Thanks, Michael.
And our next question today comes from Greg Gordon of Evercore. Please go ahead.
Hey, good morning.
Good morning, Greg.
So I know you specifically Reggie specifically addressed this in part on the call by Tom When you talked about the sales growth for the year.
That you're seeing reasonably good strength in higher margin residential sales, but.
Have you seen.
A lag.
Commercial and industrial sales relative to what your plan was.
And is that if so or if not how is that really not related to what's going on with.
Trade tariffs etcetera and.
Pressure, we're seeing on the auto industry.
Yes. Good question, Greg So I would say first let me start with the commercial side, we actually had been.
Quite encouraged with the commercial activity, we've seen relative to plan and so when we talk about favorable mix, it's not just residential but also commercial and so commercial actuals to date.
Still exceed our expectation along with residential and so I'll point you to the numbers that we have in our disclosure, but we're about half a percent down at a weather normalized basis year to date versus 2018, as we've said in the past that's net of our energy efficiency programs. So obviously when you gross up the 1.5% reduction in customer uses that we worked with you every year.
Were actually up about a point on commercial loans. So the customer accounts really look good on the commercial side, we're up about 1% on a rolling LTM basis, and so customer counts are for commercial as residential and then for industrial while we've seen a little bit of softness there.
Down about 2% with energy efficiency included in that about half a percent grocer, taking out energy efficiency, we're actually seeing a pretty good story.
Omar smaller industrial customers, because if you take out basically one large low margin customer were basically flat.
Net of energy efficiency as you think about that again, excluding energy efficiency up about 1.5%. So we continue to be encouraged by the trends were seeing across all of our customer classes. I do think there is a little bit of a slowdown we're seeing at least the first part of your for some of our larger industrial customers and whether that has to do with trade wars or broader economic effects. I think remains to be seen I mean, we always highlight in the upper left hand corner of that sales slide that we're continuing to see very good trends economically in Grand Rapids, which is in the heart of our service territory and so whether its GDP, whether it's on employment population growth building permits all that continues and trying to quite well. So we still think it's a very nice economic story in our service territory and I think it's too early to tell whether there are any broader macro themes, taking place nationally or globally.
Great. Thank you clear.
Thank you.
And our next question today comes from Eric.
Thanks Maria from Merrill Lynch. Please go ahead.
Hi, good morning.
Good morning, Eric.
Hey, so just.
Shifting gears, a little bit in terms of thinking about the longer term opportunity ahead could you speak a bit to renewable prospects beyond initial 1.1, gigawatts laid out and RP approval as well as just.
Maybe the PPA, earning aspects in regard to that in the longer term mix for rate base NPPA there.
Sure.
Obviously our.
IR PR paints, a very clear picture of by year, when we'll be adding these additional 6000 megawatts of specifically solar while we're also doing the demand response and energy efficiency to to soften the peak and reduce that demand that is required on peak that the whole system is built around and so as we look at our 6000 megawatt path.
It was important that we build the plan to pre build that solar before the big PA MCV and the remaining coal plants come offline, we need to make sure that that solar is installed working as planned that we've learned how to optimize and dispatch.
That much solar across our system and so we have a pretty methodical plan as we go across actually the years in the neighborhood of three to 500 megawatts of solar beginning in 2021 and going all the way to 2030, we we end at 600 megawatts of solar by 2030.
Per year so.
That ends up then when you add all of that up that 6000 megawatts total of solar by the end of our 2040 IR P time horizon.
So you can see it's pretty systemic now keep in mind that one of the great things that we negotiated in our IR P. settlement is this agreement that we would build half.
And rate base that half of the solar and that's to potentially build on transfer perhaps will build and ourselves we're going to have to do we enter fact want to do an annual RFP to set the proper price for that new solar being added to the system, which really bodes well for customers and allows us to make sure. We had the lowest cost new solar every single year, taking advantage of the cost curve and the technology curves and solar the other half of them would be built by others.
And we would then earn.
Our financial compensation mechanism, which is currently at 5.8%, which is an approximation of our weighted average cost of capital.
To as a financial compensation mechanism on top of.
The price of those PPA case.
So we think it's very good on many fronts and most importantly set the level playing field here in Michigan for the implementation of new solar that's to the benefit of both the planet and our customers and therefore, then you our investors through both that financial compensation mechanism and the fact that we will be rate basing half of that.
Got it and just.
Quickly.
In regards to that.
Is there potential for perhaps beyond the initial 1.1 more rate base or even maybe say a higher at Sam.
You know we re file the RP.
Anywhere from every where required by law to file it within five years, we agreed in our settlement to file another IR p. in three years and you know I can't predict what will come out of that settlement or another I or p., rather, we'll obviously always look to adapt and change as conditions change as the market changes to the benefit of customers and investors and so.
Each filing that we do will of course have opportunities to improve the framework.
Got it.
When should we think about store expand kicking in more meaningfully I know you spent some time on that earlier.
Yes, right now we have it at the latter part we have 450 megawatts at the latter part of the ERP and personally you know.
Your guess is as good as mine, but I would be shocked if sometime in the next 20 years there isn't some breakthrough in storage given the commitment of automakers to electric vehicles does create.
Marketplace for technology and R&D in storage, we are so closely linked to the R.U.S. automakers here in Michigan, and our partnership with GM and Ford.
And Chrysler has been very strong.
And so we will I think be in a position to take advantage of smart storage.
Sooner than later, we have a pilot we're running this summer with residential storage application. We've got a couple of batteries installed at some commercial locations. We were doing a lot of learning and I forecast.
The as we file subsequent IR piece will be able to model additional reductions in costs on storage going forward. We're hopeful for that because we think it will be a better way to balance the system overtime with renewable energy as a primary energy source.
Great good to hear and one last question and I'll shift back to Q.
What do you think about the potential for.
Maybe a celebrated coal retirements and new renewed renewable development given.
Control appetite at the MPSV.
You know.
We did a lot of studying in our plan about the right timeline for our current our remaining coal plant retirements.
Of course, again every RP will consider but here's something really important to remember with the coal plant retirements.
I have co workers, there who have dedicated their lives to delivering energy for the people of Michigan and so both for our coworkers in the communities where those plants are important tax base. It's important that we recognize that giving them an accurate date of closure. So they can plan their lives. So those communities can plan for redevelopment. It's important that we stick to the plan that we published so that they don't feel like we're taking advantage of them and so when we talk about our triple bottom line of serving people the planet and profit.
This people aspect of the transformation of our energy system is equally important to serving the planet and then delivering earnings for investors. So that is a key component of driving the timeline and.
Frankly, we also have to build out all the solar and make sure. It works as intended and make sure that we have the capacity that we need when we retire those plants. So those two factors really do drive our current timing and we feel good about the current timing, we think it's well ahead of.
Much of the country will end up with an 80% carbon reduction by 2030, and 90% over 90% carbon reduction by 2040, that's a decade ahead of the Paris climate accord that the decade ahead of most.
Many of.
Our peers and so we do feel like our aggressive actions that we've taken to date retiring a gigawatt of coal already.
Does.
Reiterate our our commitment to the planet, but we also think the triple bottom line is important and the execution Eric the only thing I would add an additional pad is good remarks around the resource adequacy operational and employee like say implications of an accelerated cold shutdown is there also is.
Consideration from a balance sheet perspective, and so you still have Moody's which continues to include Securitizations in their credit metric calculations and so you could definitely anticipate a scenario in which you had accelerated coal retirement plan that led to a significant leverage on the balance sheet because remember when you securitize. These assets effectively get 100% funded by debt. So while you still have that constraint in place I think it really does hamper any accelerated coal retirement case, and so thats also key constraint worth noting.
We appreciate your time.
Thanks, Eric.
And our next question comes from Michael Weinstein of Credit Suisse. Please go ahead.
Hi, guys good morning, Hey, Michael.
Hey, My question is about the long term capital plan.
In light of the.
RP approve.
Just wondering at what point do you anticipate at this time rolling that into the long term plan the 10 year plan.
Jenny and what can you say about it now and in advance of the official rolling out those numbers.
Yes, Michael I would say.
Yes from a prepared remarks, we anticipate at some point in the fourth quarter will provide color on a new tenure plan. So.
I would say it would either be on our Q3 call, which takes place in the fourth quarter or potentially.
He is one of those two scenarios, most likely and as we've said in the past our expectations are.
Elyse quite high that it will be in excess of the prior 10 year plan that was rolled out in September 17 of about 18 billion or reaffirm that during that investor.
Day, and so we'll be in excess of that given the opportunities afforded by the ARPU, but we also have a significant capital investment backlog as we've talked about in the past on our wires and pipes of both the electric and gas distribution systems and so we do think there are incremental capital investment opportunities and the key constraint will be customer affordability.
As well as balance sheet or worse workforce constraints and so we have to make sure that all of that works out. So we're going through the math, where the front end of our planning cycle. The ARPU as a gating item, which is now behind us, but there we have to go through all those machinations and think through what our customers can afford as well as our investors and employees. What we can get the operational perspective. So those are all the key things were thinking for.
Hi, as you and your thought process on the six to.
8% growth rate is that that would be unchanged, even with a higher plan right.
So we don't provide EPS guidance beyond the five year period. So the current five year plan of 11 billion that from our perspective can deliver six 8% EPS growth.
I wouldn't even suggest that when we roll out a 10 year plan will provide tend to repeat his guidance because I think that maybe an unprecedented in the history of fortune 500 companies. So we'll see where we end up but we have plenty of a five year plan in Q1 of next year that will likely have some estimate around dps growth and for 10 year plan that will just be on the capital side not much color beyond that.
Hi, Thanks, you guys are.
I've always been Trendsetters so.
No.
Thanks, Mike.
[laughter] nice Liberia.
Hi, Thanks, Thanks, a lot right. Thank you.
And our next question today comes from performance.
Citigroup. Please go ahead.
Hi, guys.
Hi, Praful, how high so maybe firstly on the cost spark and the OEM because clearly in 2019, you're benefiting from some of the stuff that you did in 2018 to bush costs around how should we think about going forward from a profile perspective, given if you have kind of have.
In a reduced cost and 2019 does that mean that we should think about that kind of growing up back again in 2020 just from a profile perspective, how do we think about those costs.
No I think profit really 2018 should not be viewed as any sort of comp for future years.
And that's why it's difficult when you think about the way in which we manage the business the way in which we manage the work 2018, obviously, we had almost $100 million of weather weather driven upside and so we really ramped up the operating and nonoperating pull ahead of the course that year, which is why we were I think just under 1 billion. One of only have costs in this year, we expect to be well below that so when we think about a baseline.
Well look at what we budgeted for 2019.
And we will try to take 2% to 3% off of that as we often do on a net basis and that will dictate where we end up for the 2020 plan and beyond and as we think about just in general our cost structure. There really are kind of two approaches for how we think about our financial planning there. Our planned cost savings are incorporated in our budget and so we look at non operating and operating opportunities like waste elimination as Patti highlighted we've talked about attrition management in the past tax planning revised and then we have planned initiatives during the year. So we're doing a lot of work in the supply chain to take advantage of economies of scale I T solutions, adding more automation across the organization to realize cost. So those are planned opportunities that we incorporate in the budget and the intra year as we get into years, we see I'll say unforeseen sources of upside or downside, then we flex and so a year like this year, where we've seen historical levels of service restoration costs attributable to storms as well as mild weather. That's when we start looking at things like Okay should we defer some ambitious plans we have that are.
TJ for operational nature that.
We will not need to be done this year do we look at things around from plant noncompliance opportunities on the training side. So thats when we start to look at entry your opportunities, but generally.
The baseline is usually what has been planned for the current year that we try to take 2% to 3% off of that so 2018 really isn't a proxy for what a run rate over them as for us So helpful.
Yeah, that's very helpful. Thanks, Reggie good good detail color, which always is helpful.
And then maybe secondly on the credit side, and you talked about Reggie little bit above the securitization also I think the BPH good get imputed as debt from a rating agency perspective, So how should we think about the credit and the equity needs going forward, you've clearly benefited from some of the tax piece is that you've got in terms of empty credits, but going forward. How should we think about that and the 150 a year in terms of equity is that still kind of the plan or do you see that moving around a little bit.
Yes, we'll look to see I mean, obviously, we've just commenced our five year planning cycle.
And so we're not going to roll out new five year plan.
Until Q1 of next year that will incorporate I'll see some the implications around the ire p. in card and some of the puts and takes I still generally believe that our five year plan will.
Very similar to the current plan, where we're maybe a little over 11 billion, but we'll have I'll say, a relatively modest amount of equity issuances per year that allow us to keep.
The credit metric range of call it 17% to 18% FFO to debt. So remember we have managed the balance sheet very conservatively for the last several years. When we did have really hospitable capital markets. We didn't go in an M&A binge, we didnt do any levered repos, we just chipped away at our balance sheet with equity issuances to fund our capital plans and grow the business organically and some even post tax reform Thats given us a lot of a lot of latitude that continue to modestly fund the business with equity and we think even if theres a car or when there is a card retirement in a securitization so that it shouldn't really balloon out our equity needs and remember with the PPA days, even though there will be a levering effect of that the financial compensation mechanism does partially offset that because we will get earnings on those PPA isn't that in fact part of the reason why we structured that way. So we feel very good about the balance sheet going forward, but it's premature to talk about exactly what the equity needs will be until we rollout of new five year plan in Q1 of next year.
Got your again Super helpful with the details of it. So we should think about it in the range of the same 150 is that still fair.
I think directionally, that's correct, but I will be more precise clearly when we rollout the plan next year.
Got it thanks, so much guys. Thank you.
And our next question today comes from Travis Miller of Morningstar. Please go ahead.
Good morning, Thank you.
Morning Travis.
I was wondering if outside the utility now if you could update.
Strategic direction thoughts there for enterprises, and then also if anything's changed within or bank.
Yes.
Nothing new on Enerbank as we've repeated on the last couple of calls no new news there they continue to be.
A part of our portfolio a very small part that is relatively essentially self funded.
And so not no changes there.
Enterprises.
You will have noticed that they've done a couple new renewable projects very small very targeted customer driven they've been driven by a customers approaching us that we have served in either our enterprises business or our utility business outside of our.
Regulated service area and so we've been able to meet the needs of say Lansing board water in light with it 24 megawatt solar.
Installation, there a 105 megawatts of wind.
In Ohio for General Motors, but those are more opportunistic in nature, and we do feel well positioned we like to say, we're big enough to matter, but small enough to care and and for example in Lansing Those Lansing Board wireline is right here in Michigan and.
They had multiple developers go out of business in their attempts to install and build out this when price or the solar project and so we have the capability of doing those projects, but we you know we don't show up in our private Jets, we drive our little truck over from across the street and help them do their work and that's a good positioning for us and for enterprises.
And so where we do have additional projects, we won enterprises to grow as the utility gross and.
But don't be confused our utility business is the primary driver of earnings and our our plans for growth.
Okay, Great and then just two quick on the enterprise is based on what your said there. One is what do you think that market is how large do you think the market is for.
Customers coming to you.
Presumably warning.
Renewables in the future and then also would enterprises be eligible to apply for some of those or participate in the RFP.
From the utility side.
Yes.
Your second question first.
Our affiliate has not allowed to compete for the renewable projects.
But I would also offer.
You know, we don't have an eye on the specific market size, because again as I mentioned were really opportunistic as these projects come to us and so more so I what I can tell you. Though is there are a lot of our utility customers large industrials brands that you would recognize that have made commitments to 100% renewable energy and we've been able to provide a large customer tariff with the utility. So they don't have to rely on our non utility business, but in other states we have opportunities to serve those very same customers.
But again, we don't have it's not.
You know we're not in hunt of that it really does have come to us opportunistically.
Okay, Great I appreciate it.
Okay.
And our next question today comes from Paul Patterson of Glenrock Associates. Please go ahead.
Good morning.
Let me know.
And I'm going to ask you to just to.
Go over again through long bread Gordon's question on sales growth that was a little bit I just want to make sure I fully understand it.
Could you once again, just sort of go through.
What your.
Weather adjusted sales growth has been and how much energy efficiencies impacting it and I guess.
How much energy efficiency that you guys are your programs your utility sponsored programs are responsible for.
Absolutely and let me know.
Well Paul to us to eat materials. It came out in the press release slide on page 13, or 14 that has our weather normalized electric utility statistics right there talking to them. So what could that reference, but I'll reiterate so what we've seen year to date relative to the first half of 2018.
Ah for residential were down half a percent.
Commercial down half a percent and industrial were down just under 2% at 1.9% and those numbers again are weather normalized they also take into account.
The reduction in customer usage suitable to our energy efficiency programs and so by design.
We look to reduce electric power.
From the prior year by one that person I know, we get economic incentives to do so and so our effective really going back to the 2008 law and executing on those plans and so I always try to highlight that the reduction in customer usage is incorporated into those numbers and so it back that out or back the effects of those programs out you can really add 1.5% to the numbers, you'll see on that page and so think about potential down half a percent on a gross basis. Excluding the energy efficiency programs are on point same for commercial and then industrials down about half a percent again grossed up for the insight effects of energy efficiency and so thats, what we think about that on a blended basis were down about a little under 1%. So again grossing that up here a little over half a percent when you exclude the effects of energy efficiency. So thats, what we think about it and we also look at the customer accounts.
Just to make sure that what we believe is taking place.
Across residential commercial does reflect those grossed up numbers and so we've seen customer counts go up residential about half a percent on a rolling latest 12 months basis, we've seen commercial up about <unk> percent and so we're seeing very nice trends there.
And the other point I've made in the past and I'll make it again is that weather normalization math is a very complicated and imperfect science and so if you take into account some of that I'll say weather extremes, we saw last year and tried to back that out.
As hard as our folks work to get that math right its still quite complicated.
And so that's why we state these numbers and report them.
They are all not always perfect or precise as we'd like them to be and then for industrial the only other point I'd make there is that we continue to see good performance from our small industrial customers and so.
We have seen if you carved out one large high or low margin customer you can actually effectively add about 1% to our blended electric weather normalized sales performance. So like I said were down about a little less than 1% weather normalized.
And when you take out that one large low margin customer were basically flat in our industrial or is it just that is a little below 2%.
You take out that one large customer were up over a percent and so we've seen just very good performance across our customer classes and particularly when you exclude the effects of our energy efficiency programs, which are designed to reduce customer usage.
No that is helpful and I didnt want to belabor I, just want to make sure that I understood that that wouldn't have percent.
He is based on your utility.
Energy efficiency efforts.
That's exactly right okay. Okay.
Just one quick follow up on that.
On the gas side I know, it's a small quarter for gas usage, but it did seem to grow.
Pretty rapidly I think thats on page 14 or.
I have to re let me find it but if you follow what I'm, saying the residential grew like 14.3%.
8.3% for commercial just was wondering is there anything going on there that I mean, it just seemed like a relatively high number on a weather normalized basis.
Yes, So I'll first go again point to the weather normalized mapping the imperfections, but we've actually seen pretty good customer accounts across gas as well and so we do think that part due to.
I will say that a positive spillover effects. When you have good industrial activity and so you start with decent industrial activity that leads to residential increases and then you get the commercial activity and so there is a very nice spillover effect, taking place in gas and I think thats what were seeing in these numbers, but again.
I want to.
Temper expectations, both on the downside and the upside is a very difficult piece of that too.
I follow you.
It does sort of jumped out at me, Okay, yes, but I understand it take it with a grain of salt I get to a certain degree but okay.
Thanks, so much guys.
All my other questions were answered and have a great one.
Thanks, Tom I'll see it.
And our next question comes from David Fishman of Goldman Sachs. Please go ahead.
Hi, guys good morning.
Hey, David David.
Hi.
Just going back to a little bit at the long term capex guidance that we might receive should we expect to see I guess distribution investment plan sort of similar to what we saw with the EBIT for electric data potentially outlines long kind of opportunity there.
Kind of with an expanded I'm in mind.
You know I, Yes, you said were working on that as we speak which is another reason why we're going to wait till the latter half of the year to publish the 10 year plan.
I can't promise that it will result in an IRS him, but I do think that.
It will paint a nice clear picture and I think our commission has done a really good job.
Soliciting. These plans these multiyear plan so that as they're making an annual determination during a rate case, they have a better perspective of where it fits into a longer term plan and frankly, they can hold us accountable, even if it's not a formal program to doing what we said, we're going to do and we're up for that kind of scrutiny because.
We're pretty good at planning and and we want to be able to.
Be trusted in our ability to execute so we've been working on a long term gas plan, we know how important the safety of the system is for the state of Michigan.
And so we'll look forward to sharing that more publicly over the next.
Here are some.
Okay. So thats something for over the next year or so not necessarily alongside long term Capex plan.
Some of it might be published with our long term Capex plan it definitely key driver for it.
But we may wait until.
Early 2020 to formally publish it.
That makes sense and then one quick housekeeping item just on your drivers slide I think you added the more explicit eight cents of enterprises benefit I just want to make sure.
New all the drivers that's mostly because the MISO capacity.
Rolls off into better negotiated kras contracts and then how much of that.
Proportionately as about as you kind of the new energy contracts versus maybe the incremental Ohio wind farm.
Yes. So you have a few pieces there I think you highlighted the largest driver and so as you roll off.
Of the MISO planning resource auction to 20 tenants implications in the back half you start to see capacity sales tick up.
I can't give you exact pennies per share, but it's the vast majority of that pick up and then you have two other components you rightfully noted some of the effects of northwest, Ohio, It's interesting that a wind project, which is on the implication there is that their production tax credits that we expected to realize resulting from that project early in the year, but because we had a slow start for enterprises, we didnt actually realize the affects of the production tax credits at enterprises in the first half years will pick that up also in the second half of the in the last thing I'll. Note is if you think about the comp relative to 2018, we did have a write off in the second half of the year of about three and a half million attributable.
Got to Filer city, because we were no longer planning to convert that plant from coal to natural gas and so the absence of that write offs that three and a half million.
Pre tax that's about a penny and then you've got I think the vast majority from capacity sales as well as the realization of production tax credit. So those three things that largely get you back.
Our plan EPS contribution of 14 cents from their prices for the year.
Okay.
That's great color and if those are my questions. Congrats on a great first half.
Thank you thanks, David.
This concludes the question answer session, let's turn the conference back over to Mr., probably for any closing remarks.
Thanks, everyone for joining US again this morning, and certainly we look forward to senior written about and upcoming events.
Thank you.
This concludes today's conference.
Thanks, everyone for your participation have a great day.