DTE Energy Company (DTE) — Q2 2015 Earnings Call Transcript

Thank you Heather, and good morning, everyone. Welcome to our second quarter 2015 earnings call. Before we get started, I would like to remind you to read the Safe Harbor statement on page two, including the reference to forward-looking statements. Our presentation also includes reference to operating earnings, which is the non-GAAP financial measure. Please refer to the reconciliation of GAAP net income to operating earnings provided in the appendix of today’s presentation. With us this morning is Peter Oleksiak, our Senior Vice President and CFO; Jeff Jewell, our Vice President and Controller, and Mark Rolling, our Vice President and Treasurer. We also have members of our management team with us to call on during the Q&A session. I would like to turn it over to Peter to start our call this morning.

Thanks Anastasia, good morning everyone and thank you for joining us today. As usual I like to start the call by giving a quick update on Detroit Tigers. Good news, the Tigers have won 47 games. Bad news is that they have lost 48. Despite the first half July, the weather here in the Detroit area has been colder than normal; the Tigers have cooled off as well this month. We are hoping that the summer heats up, so do the Tiger bats and I’m still holding out some hope for a playoff berth. Unlike the Tigers here at DTE, we certainly have had a successful first half of the year, and I believe we are well positioned to continue the success in the balance of 2015. As all of you saw in our earnings release, we are raising our 2015 EPS guidance on strong year-to-date results. Jeff and Mark will be going through the second quarter results in more detail, but before we move onto that, I’d like to do a quick overview of our business strategy as well as some highlights of what’s happening at DTE and in Michigan. Our growth plans for the next 10 years at both utilities are highly visible. Our electric utility growth is driven by environmental spend in the near-term and renewal of our generation fleet and upgrading the distribution system in the longer term. Our gas utility growth is driven by infrastructure investments and the main line pipe replacement. Our two utilities are deploying capital in a constructive regulatory environment and we’re working hard to earn this constructive environment every day. I’ll be updating you on some of the regulatory proceedings our utilities are currently working through. Complementing our utility growth, we have meaningful growth opportunities in our non-utility businesses which provide diversity in earnings and geography. Our highly engaged workforce continues to be the key to our success. Last quarter I told you about the third consecutive Gallup Great Workplace Award and just recently DTE Energy received the Development by Design Award from the Gallup organization. The award recognized DTE’s focus on creating personnel team and organizational success through employee training programs. So we definitely continue to make strides in our employee engagement efforts. We have a strong focus on continuous improvement and feel we are distinctive in the industry regarding our approach and outcomes. The combination of these two employee engagement and continuous improvement enables us to deliver both sustainable cost savings and to consistently earn authorized returns at both of our utilities. We are also very focused on operational excellence and customer satisfaction that we believe also are distinctive in our industry. We have certainly seen positive results on this front, as currently DTE gas is ranked highest by J.D. Power among our peers for residential and business customer satisfaction. Earlier this month, we found out that DTE Electric was ranked second in overall customer satisfaction with electric utility residential customers in J.D. Power’s 2015 study. Our dividend continues to grow as we grow earnings and the goal is to maintain a strong BBB credit rating. This strategy provides about 5% to 6% annual EPS growth. On slide six, we provide some highlights of progress in 2015. First in our list is the announcement that we will be increasing our operating EPS guidance for this year from a midpoint of 460 to a midpoint of 472; this is driven by a strong performance in our gas storage and pipeline business as well as our energy trading operations. I’ll provide a more detailed overview of guidance in a few minutes. Keeping in line with our commitment to grow our dividend with earnings, we have recently increased our dividend. Our annual dividend per share was increased from $2.76 to $2.92 which is a 5.8% increase. Regarding Michigan’s Energy policy, I feel there is positive momentum for constructive legislation by the end of the year. This continues to be a priority of the Governor when he publicly called for the need to get legislation done this year. Back in March, representative Aric Nesbitt introduced legislation and recently, Senate lead, Mike Nofs introduced legislation but the process is definitely moving along. I’ll touch more on the Energy Policy in a few minutes. I also want to give a quick update on the various rate proceedings for our two utilities. Our electric utility filed for new rates on July 1 for the ongoing general rate proceeding. We expect to receive a final order by the end of the year. We also implemented our new cost of service rates which resulted in rate reductions for many of our business customers. For DTE Gas, we expect to receive an order this year for our expanded infrastructure recovery mechanism that, if approved, will allow us to double our annual miles of our main line replacement program. We continue to make significant progress in our non-utility businesses. In our gas storage and pipeline business, Millennium had a successful open season and we are working through final contracts now. We expect an expansion of greater than 0.2 BCF. In addition, we are constructing a new eight-mile lateral off Millennium to serve a proposed 650-megawatt combined cycle plant with approximately 0.1 billion cubic feet of natural gas per day. These projects are expected to be in service in the fourth quarter of 2017. This is another major milestone that helps firm our future growth. The next pipeline project is also moving forward nicely towards its fourth quarter 2017 in service date. The first FERC scoping meetings are complete and were relatively routine. We recently signed a number of Tampa Interconnection agreements that could provide potential aggregate load across northern Ohio up to 1.3 BCF per day. This demonstrates strong market support for the project and strengthens the longer term earnings potential for the play. We filed our resource reports in June with a focused schedule, and our next major milestone will be to file the FERC application in the fourth quarter of this year. We are also now very focused on optimizing our reduced emissions fuel business. Currently, we have REF facilities operating at eight sites and are in the process of relocating underutilized facilities to a ninth site, which should be operational in the fourth quarter. In addition, in this quarter, we are operating a third-party REF facility. This operating agreement will run through 2020. We continue to work towards further optimization of this business line as it has been a great return business for us, which has generated significant cash flows to help fund our non-utility growth projects. So you can see, we’ve had a successful first half of the year giving us confidence to reach our earnings goal in 2015. Let me now move to updates in Michigan improvements and the economy. Turning to slide seven, we are highlighting the progress the Michigan and the City of Detroit are making. I know many of you are interested in how the local economy is doing and we continue to see economic momentum in the state. Michigan’s unemployment rate in June is 5.5% and this rate has been around 5.5% the last three months, roughly in line with the national average. Michigan’s unemployment rate hasn’t been at this level since 2001. Michigan is identified by Site Selection magazine as the seventh most competitive state for job creation as well as the number one state for new manufacturing jobs since 2009. We continue to see other economic indicators including increases in residential customer and business customer accounts and our forecast shows this trend continuing. I do want to highlight the city of Detroit’s economic progress. One indicator that we show on this slide is the Detroit Metro area, which is ranked number eight in the U.S. for number of new or expansion projects. The City has come a long way since the bankruptcy and with the strong leadership we have in place, I’m confident that the city will continue to move forward. DTE, as well as other city partners are working with them to help continue this momentum. You will see on slide eight that additional changes in state have taken place as the Michigan Public Service Commission has welcomed Norm Saari as the new commissioner replacing outgoing Commissioner Greg White whose term has ended. Commissioner Saari has a deep background in public policy and governmental and community affairs, both in state government and direct utility experience. This is Governor Snyder's third appointment and the Governor has been great at talent selection. The Commission has held Michigan's regulatory environment as one of the most constructive in the country. We believe that Commissioner Saari will continue this supportive environment. Moving onto slide nine, I’m now going to turn to an update on the energy policy. We have mentioned earlier, Governor Snyder has made it clear that energy policy is an important legislative priority for him this year. He called for the need for legislation in his state address and provided more detailed goals in his energy message in March, highlighting this significant transformation in generation sources that our state will undertake over the next 10 to 15 years. Over the last few months, both the House and Senate Energy leaderships introduced proposed legislation to address needed changes in the state. Representative, Aric Nesbitt, who chairs the House Energy Policy Committee introduced legislation in March that’s consistent with the Governor’s goals of reliability and adaptability. He also recommended the elimination of the retail access program here in Michigan which we support. Senator, Mike Nofs, who chairs the Senate Energy and Technology Committee, introduced legislation in June which is also similar to the Governor’s goals. He is recommending to maintain a 10% gap on retail open access, but with a one-time election to enter into long-term capacity commitments with an alternative supplier or to return to the utility. A customer could choose to return to the utility with three years' notice and as the one-time permanent election to return to the utility. We expect legislation to be completed this year and we are confident that Michigan has strong leaders in place who understand energy and utility dynamics and will provide constructive legislation for Michigan’s future. All of the proposals on that legislative joint board represent a positive move forward. In a moment, I’ll turn the call over to Jeff to review the quarter’s results, but before that, I want to highlight some of our outlook and guidance increases. On slide 10, this slide shows our EPS history with our target of 5% to 6% growth. As I mentioned before, we expect to grow our dividend with earnings evidenced by our recent increase. The chart shows a revised 2015 guidance midpoint of $4.72 as well as our EPS guidance midpoint of $4.66 for growth segments. The 5% to 6% future growth that I mentioned is off a new guidance growth segment midpoint of $4.66 per share. Our commitment is to grow both earnings and our dividends, and we are doing just that. Let me get into a little more detail on page 11. We are increasing our 2015 EPS guidance range to $4.54 to $4.90 for DTE Energy. This is a $0.12 increase in the midpoint from our prior range of $4.48 to $4.72. Our EPS guidance range for growth segments is now $4.54 to $4.78. Our guidance increase is driven by the strong start of the year in our gas storage and pipeline segment with increased pipeline and gathering earnings. 2015 operating earnings guidance for this segment has increased from a range of $80 million to $88 million to a range of $90 million to $98 million. The majority of this increase is due to strong underlying performance in the business and therefore we expect the majority of this favorability to flow into 2016. For the energy trading business, we’ve raised our guidance earnings to a range of $0 to $20 million for 2015. Energy Trading is now part of our growth segments and our original guidance was set at zero as we do not rely on this business to achieve our earnings target. As this year is progressing, we are recognizing the strong economic performance and have adjusted our 2015 guidance accordingly. Trading does have seasonality tied to the physical part of its business and those contracts may mostly make money in the first and fourth quarters. And with that, I’d like to turn the call over to Jeff Jewell, our Vice President and Controller to provide more details on the second quarter earnings results.

Thanks, Peter, and good morning, everyone. I will be discussing quarter to quarter earnings results on page 13 and on page 14; I will review our electric sales in order to provide more insight into what we are experiencing. Now turning to page 13. For the quarter, DTE Energy’s operating earnings were $137 million or $0.76 per share and for reference, our reported earnings were $0.61 per share. You can find a reconciliation of the second quarter reported operating earnings on slide 26. For the quarter-over-quarter results, our growth segments' second quarter operating earnings in 2015 were lower by $4 million or $0.03 per share. The electric segment was lower by $18 million. This was primarily due to increased costs associated with rate base growth costs and unfavorable weather partially offset by lower O&M. The gas segment was lower by $3 million, driven by unfavorable weather in the second quarter of 2015. Gas Storage & Pipelines earnings were $7 million above the prior year. This increase was primarily due to the volume growth in the Bluestone Pipeline and Gathering Assets. Our power and industrial project segment was up $5 million versus 2014. Quarter-over-quarter favorability was primarily driven by strong performance across the business line. Our corporate and other segment came in favorable by $5 million versus last year. This variance is mainly due to tax-related timing differences. The overall growth segment results for the quarter were $134 million or $0.75 per share. At energy trading, operating results for the quarter came in at a positive $3 million with economic net income of $19 million, both the power and gas business lines contributed to these results. Please refer to page 24 of the appendix to review the energy trading standard reconciliation page, which shows both economic and accounting performance. Now let’s turn to page 14 to discuss our electric sales results. For the first half of the year, temperature-normalized electric sales were down 0.7%. We are very encouraged by the drivers of this change year-to-date and for the future. This net change reflects both the underlying economic growth in all sectors and that energy efficiency is making positive impacts to reduce customer average usage. The economic increases are being driven by population growth, occupancy rate strength, income growth, and manufacturing at auto production levels that have surpassed pre-recession levels. Energy efficiency which is producing positive results for our customers is a key component of our overall operational and financial plans and is a key priority for the Governor. This efficiency translates into reductions in the average energy bill for our residential customers, which is one of the key components of our long-term strategy to create affordability headroom as we embark on a very intensive capital investment program. Therefore, we are changing our sales forecast as we anticipate our load growth over the next few years to be close to flat as underlying economic growth and energy efficiency play off. That concludes the update on our earnings and sales for the quarter. I’d like to now turn the discussion over to Mark, who will cover cash flow and balance sheet metrics.

Thanks, Jeff and good morning to everyone on the call. In addition to the solid earnings results that Jeff just described, we delivered solid cash flow and capital investments for the first half of the year as well. All of that is underpinned by the strength of our balance sheet. Slide 16 lays out our cash flows and CapEx through the first half of the year. Cash from operations is $1.2 billion which is up slightly over last year and in line with our plan. We saw strong cash flow performance throughout all the business units and are reaffirming our full year cash from operations guidance of $1.7 billion. We invested $1.1 billion of CapEx in the first half of the year, and on the right side of the page you can see the breakout by business unit. DTE Electric is higher due primarily to the acquisition of the gas peaker back in the first quarter, partially offset by the timing of wind investments between years. There are some year-over-year timing differences at our nine utility businesses as well. The total year-to-date CapEx is on track with our plan and consistent with our full year guidance of $2.5 billion to $2.6 billion. Finally, to fund this CapEx program and to pay down commercial paper balances, we issued $800 million in loans from debt financing in the first half of the year. Now I’ll move to slide 17 with a look at our balance sheet metrics. In short, our balance sheet remains strong and we project ending the year within our targeted range for both leverage and FFO to debt. We issued $200 million of equity back in the first quarter which fulfilled our equity needs for the year. There is no change in our plans to issue $800 million to $900 million of new equity through 2017. We continue to take advantage of the low interest rates by issuing $300 million of 7-year debt to the parent company which is where we fund most investments at our nine utilities. Earlier in the quarter, we met with the rating agencies and they all reaffirmed our current ratings and outlook which demonstrates our commitment to maintaining a strong BBB credit rating. Lastly, after renewing our credit facility back in April we ended the second quarter with a comfortable $2.2 billion of available liquidity. Now I’ll hand the discussion back over to Peter to wrap up.

Thanks, Mark. Let me finish the presentation with a quick summary on slide 19 and then we can open the line for questions. We had a very good quarter as well in the first half of the year and we are confident that this year’s performance will allow us to achieve an increased 2015 EPS guidance and increase our annual dividend by 5.8% to $2.90 per share, keeping our dividend growth in line with earnings. We anticipate successful outcomes this year for both our utility regulatory filings as well as Michigan Energy’s policy reform. Our balance sheet and cash flow metrics remain strong, and our investments in our utility and non-utility businesses support our target of 5% to 6% EPS growth going forward. I’d like to thank you all for joining our call this morning. I invite you to join us for our Investor meeting in Detroit on September 28. We have a great lineup of speakers for our meeting, and plan to give you insight into the evolution of the Michigan Detroit development and the economic growth that supports our long-term plan. Formal invitations will be delivered in the coming weeks and our business update will be available at the webcast from our investor site. Now I’d like to open it up for any questions that you have, so Heather, you can open up the line for questions.

Hi, good morning it’s Julien.

Good morning, Julien.

So first, I have a quick question regarding sales. I'm interested in understanding the nature of the idling you mentioned in the industrial sector. Could you elaborate on your expectations in that area? Additionally, how are your expectations for lower sales and efficiency influencing your plans for future rate case filings?

The idling primarily occurs in our automotive segments due to model turnarounds, as we're creating new vehicles and models that you will notice periodically. This is typically a one-time occurrence, and the introduction of new models is positive for our automotive companies. On the topic of energy efficiency, we are pleased with the progress we've made in our service area. Over the past five years, we've focused on enhancing energy efficiency and believe we're at the forefront of delivering tools to our customers to help them save energy. For example, during the Governor's March energy address, he showcased our DTE inside app on his smartphone. We have improved our AMI technology to provide real-time data for customers to use effectively. While increased energy efficiency might eventually influence the electric rate, it also reduces customer bills, creating room for rate hikes necessary to fund new capital investments. Regarding your question about our rate case strategy, our rate case timing is closely linked to capital investments exceeding depreciation, so it won't affect the timing. In fact, it's likely to create room for us from a total customer bill perspective to recover those new capital investments.

Excellent. And just turning to the midstream side quickly. Can you talk about an update on your existing partnerships, specifically on the exit side? And then separately just broadly speaking, strategy as it relates to gathering versus perhaps pipes, etcetera, you have other partnerships and there as well. I would be curious how that is evolving and the nature of the business?

Yes, on the ownership side and I know the private question is around on the Enbridge and the ownership of pipe. So Enbridge is still considering ownership, but they have been very public and very supportive of the pipe. You know our current disclosure assumes the one-third ownership, so they don’t participate in whatever larger ownership of a great project. They are still in the process of considering ownership in the project. On the gathering side and it is evidenced by this year-to-date results and our guidance increase and we’re seeing great results on our gathering business. This is a business that we started in 2012 with a partnership with Southwestern Energy, so as we’ve been going down our learning curve and cost curve it’s really helped us with that relationship. That’s a business that we like as well because as we get into new projects like Nexus, the idea there is to do a very similar blueprint of what we’re seeing in Millennium now that if you work with producers, get gathering and laterals, that will beat international. So we’ve continued to look at those opportunities and I do believe that in the future they will be there for us related to NEXUS.

Excellent. And sorry, just a clarification. In terms of Enbridge's timeline for a decision, do you have any sense?

Yes. I really don’t know – I know they’ve been public about it. They are mainly an oil-based company, an oil pipe, but they are trying to grow their gas piece of the business and they’ve been public about that. But I would imagine they’re going through that process right now and they probably want to maybe make a decision at some point.

All right. Well, thank you very much. Congrats again.

Hey, good morning, guys.

Good morning, Dan.

On the guidance bump for the quarter and kind of resetting the baseline going forward, what structure are you seeing is giving you more confidence to lift the starting point for growth from here?

Yes. On the midstream we are seeing and mainly within the gathering segment and the drilling related to Southwestern. What we saw in the first half is that there is some upside. Some of this was acceleration of drilling which is positive as well, because Southwestern is allocating our capital and drilling to this region even with the relatively low gas price environment, most of the increase is tied to the higher well performance. That oil performance in volumes will continue to flow. The great thing about this is where we talk about our strategies of having these interconnect assets, it really amplifies income. So we’re seeing those volume increases that occur on Bluestone and then occur on the Millennium Pipeline as well. So we’re feeling really comfortable with those volume increases that are tied to the well performance there.

So that step-up is what is giving you confidence in the sustainability; it is not an assumption of sustained higher trading value?

No, no. That’s tied to our midstream segment.

Okay. Got it. And then how should we think about what you guys are going to do to be able to earn your ROEs at electric given this lower demand growth or the flat demand growth outlook between rate case periods?

We will be planning that, so some of that is that we have a forecast for the test year here. We are forecasting and we’ll continue to forecast energy efficiency. One of the things we’re looking at right now from a load perspective is that we are anticipating a flat load at this point in time. At one point in time, we were anticipating probably 0.5% type of increase, but once again we’re pleased with the results as we’ve been really focused on energy efficiency, so we have upped our energy efficiency. If you look at the legislation that is proposed in the governor’s areas of priority, energy efficiency is going to be a key component as we think to our generation planning and our integrated resource planning process. We’ll continue to forecast, so we really are getting the right denominator.

Just one more, sorry Peter, go ahead.

I guess the supplement that we have proven track record around cost management as well, but something it will continue to improve between rate proceedings as well.

Okay. And then I guess just one more on the NEXUS side. Can you walk through what you are seeing, quantifying the gathering opportunities, how much capital can go into that? And what is the level of interest for incremental projects you are hearing from customers at this point?

Yes. It’s far too early to say what the capital plans will be, but we do see they are out there. There was a recent report that came out that the Utica region reserve forecast has gone up again. Every forecast that’s come out on the Utica Shale it goes higher and higher, so we know that there will be there. As we’re proving out our gathering business plan in Southwestern, that’s really helping us as we’re talking to producers in the region as well. But it’s too early to say, but I would say that there is a lot of opportunity there and it will help as you think through the midstream segment not only in this five-year projection we provided there but beyond that five-year period gathering will be a piece of that.

Got it. Thank you, guys.

Just on the Enbridge ownership stake in NEXUS, is there a point when DTE makes a strategic decision to take on the additional ownership? So like the Enbridge ownership has been open for some time, is there sort of a deadline that you have internally within the company?

We don’t have a specific deadline regarding their involvement in the project. As I mentioned, we value their participation, whether they are involved or not. Currently, we are not exerting pressure since, if they are not engaged, we retain a larger percentage of ownership in a valuable pipeline. If they do participate, it enhances our strategic position because they have an ownership interest in Vector and demand linked to their LDC, which benefits us in the long term. However, there is no set timeline for them at this moment.

Got it. And then as you approach year-end with the Open Access Policy, any idea how it’s going to shake out with obviously three different competing proposals?

Actually, I would characterize the proposals as complementary and they are all focusing on the same thing. All the proposals on the table are really aimed at eliminating – there are two major flaws we have right now with the retail access program in Michigan. One of them is the free option to move back and forth on utility to retail open access backed utilities, so all of the proposals address that. There is either a one-time election to the utility if you’re going out on to the market, you need some type of capacity. The range right now is three to five years in the proposals. The capacity does address the second flaw we have which is there is a heavy subsidization that’s happening right now with our bundled customers to retail open access. It really does have to put in a more level playing field around that as well. So the economics with the customers on retail access will change and because they really get into more of the true costs of being on the program. This more permanent type of election as well will impact the decision. It’s really too early to know how much of the 900 megawatts will come back. If there’s election to come back, you know the timing of that return will be tied to individual contracts with those customers.

I understand. I have one more question regarding the guidance in Energy Trading. It appears that the high end of the guidance assumes an additional $5 million in earnings. Can we assume that this is likely to be recognized in the fourth quarter, considering the segment's historical earnings recognition?

Yes. I would say that, you may experience even a slight loss in the third quarter, because a lot of contracts and earnings are tied not to physical fields with gas and power delivery in the first and fourth quarters.

Excellent. Congrats. Thanks.

Thanks. I have a question with regard to gas service area sales. If you look at the Q2, 2015 numbers versus Q2, 2014 numbers, you had a really big negative swing in residential, commercial, industrial, but then a very positive comp on end-user transportation. Is the former just weather driven and what’s the latter being driven by?

Jeff, do you want to handle that one?

Yes, that’s exactly what we’re seeing. It’s just a combination of the weather. Obviously, the weather is impacting the quarter-over-quarter and year-over-year trends, and ultimately we expect to see more volume in that area due to increased load.

Okay. That was my only question. Thank you.

Thanks, Greg.

Hey, guys. Good morning. Just noticed with the revised guidance that you widened the range a little bit, can you just talk about the key sensitivities you had in the second half and what kind of gets you to the high or low end of the range?

Yes. The widening of the range, a lot of that is tied with the energy trading segment, now that we do have a range for that, so that’s really what that ties there. The key sensitivities, for us just continued strong performance. On the utilities, a lot of that will be tied to what’s happening on the weather fronts and then the weather would be load as well as storm-related activities. The gas utility as well, there is fourth quarter heating load, some variability that will occur there as well, so the utilities, a lot of it at this point in time is tied to weather and weather-related type of income. In our non-utilities, just continued strong performance. For our midstream segment we have upped guidance for that segment, so we’re comfortable now with that range for our Power and Industrial segment that you look at it from a year-to-date perspective. They are roughly $50 million with the top end of guidance at 100, so they continue the performance. We’ve seen in the first half, they potentially could be near the upper end of guidance for that segment.

Got it, thanks. And just a follow up to that. I guess we’re about three weeks into July. How has the weather been I guess so far this quarter? And were you able to factor that into the guidance?

Yes. We factor that into the guidance. And so far the first half like Peter mentioned in his opening comments, the first part of July was a little cooler, but then so far here in the last week or so it's been above and so we’ll just see how that plays out, but yes, all that’s been contemplated in our guidance.

Thanks. And then just on the lower load growth expectations going forward, you’ve kind of addressed this, but just big picture, how does that affect your long-term expectations? And does it affect your earnings guidance for DTE Electric, the long-term earnings guidance you’ve provided and are there kind of offsets that we should be considering?

There is no impact on the earnings guidance for the utility. The utility business is currently focused on new capital investments and the power generation replacement strategy related to coal retirement, as well as our distribution company which is undergoing a significant replacement and upgrade plan. We will discuss more about this at our Analyst Day in September. Our load growth has been flat and modest, even before this change, at 0.5%. We are currently focusing on the total bill metric for customers, which reflects the power supply cost that decreases when usage is down. Despite base rate increases tied to distribution investments, customers are experiencing lower total bills when their usage is reduced.

And if I could just ask one more. How confident are you that there will be energy policy legislation this year? And are there any kind of key dates we should be thinking about?

That combination can be with a political process, but I know the governor has been pretty strong around signaling. He wanted to be done by the end of the year, even recently Senator Nofs has been out there publicly saying he wants it done by the end of the year. So all the signals and momentum are for this to get done at this year.

Thanks a lot. That’s all from me.

Thanks, Matt.

Hey, good morning everyone.

Good morning, Andrew.

First question on retail open access. You touched on this, but I want to ask in a slightly different way. If we take the Nofs proposal at face value, I am sure things will change. But if it were exactly as written, how much of the load do you think would come back and how quickly?

It’s really too early to determine from the details of that. I would imagine for him, he did have – you need to – if you’re going to stay on the program, first of all, there’s an election. If you take the election back to utility it's one time, so that free option is going away, we’ll probably have some of the retail open access customers take a pause and wanted to whether they return or not. If they do stay in the program, they’re going to have to get capacity and Nofs's proposal I believe was that from a three-year perspective. So each customer has individual economics and the changes through economics. That and coupled with market prices and our sense is that market prices will be increasing as supply, demand, and supply tighten as well. So that’s really I guess roundabout, Andrew, it’s really too early to say. I can say I would imagine some of the 500 megawatts would probably be coming back, given the changes, the structural changes that will be occurring with all the proposals that are out there. The timing of that, it could be relatively quick, but a lot of that will be tied to the individual contracts with these retail open access customers.

And how long do those contracts typically run?

We don’t really have insight into that.

Okay. Fair enough. My next question is about energy efficiency. Are your new expectations for load growth based on the Nofs proposal or a different perspective from DTE regarding the future of energy efficiency programs?

It is the DTE Energy forecast. Some of that is we’ve been working hard at this for five years as I mentioned. In many ways I think, in many cases I said, we’re leading edge. It is realizing the adoption of these energy efficiency programs. They are occurring even faster which is great for us and our customers. It’s really tied to what we’re seeing there and the projecting of that going forward. Now both, the Nofs and the Nesbitt proposals are having a mandate, kind of working that and integrating that part of the integrated resource planning process. The governor is really public around energy efficiency. That’s going to be part of our generation planning, will be what level will be covered off and energy efficiency. As you know even the clean power plan, the EPA requirements gives you credit for energy efficiency.

Okay, great. Lastly, I know there are proposals discussing electric decoupling. What are your thoughts on that? Considering our discussion about the load growth forecast, would you prefer full decoupling or just for energy efficiency?

We will work through those details, but I can say broadly that we are supportive of energy decoupling.

Fully or partially?

We’re still working through that. I’d say that this first I think we’re having some it is as we’re thinking through there’s probably merits to both either one of those different proposals.

Okay. Thank you very much.

Yes. Hi, good morning. Just one other question on the Gas Storage and Pipelines upside. So, you guys typically give kind of like a five-year look on these businesses, and I know you mentioned you expect this to continue into 2016. All else equals, is this something that you see as kind of benefiting the five-year look?

Yes. It definitely helps. I would say it's firming up that five-year projection.

Okay. When you say firm up, were you referring to that small portion in the bar chart? Is that what you mean?

We are still going – we’re in the midst right now of our longer-term planning process. We’ll be providing an update at our Analyst Meeting.

Okay. And then I know going to the P&I business, I think in some meetings we’ve had, you have talked about cogeneration being maybe a potential growth area. Any updates on opportunities there?

We do see opportunities in cogeneration and are actively working on them. We have several projects underway that are nearing completion. There may not be many updates since our last meeting, but we remain optimistic about this segment's growth potential over the next five years.

Okay. Thank you.

Thanks, Steve.

Good morning.

Good morning, Paul.

Just a few quick ones following up on the energy efficiency. With the flat growth, how much of this is based on your efforts at energy efficiency? In other words, if we were to take out your efforts of energy efficiency, what would you guys estimate the impact of sales growth to be?

Yes. Without the energy efficiency, it is roughly about 0.5%.

Yes.

We look through and what we’re doing right now. We are in the new era right now with this energy efficiency, because historically you look at your load growth tied directly to economic activity. So we still look at that, but now with the energy efficiency that’s after that. Our customer counts are increasing, so that’s one thing we look at and the overall level of activities within the businesses is really the usage that defines.

Do you see any difference between an IRP versus the mandate in driving energy efficiency going forward? Those have been two differences in legislations.

I would say no, because the IRP really that’s going to be like one-stop shop for us. Right now, really the movement is potentially away from these mandates where we have a mandate for RPS or mandate for energy efficiency which is all tied to generation-related spend to have it in one place. In that IRP process they will discussions and agreements on energy efficiency as well as renewable spend. I would say it doesn’t, it’s really just change the location of where the discussions and the process for the discussions will be occurring.

Is there any one of the proposals and legislation you outlined in the presentation that we should consider as having a significant impact on your earnings outlook or that would alter your position within the range?

I think they all are relatively close.

Okay.

Aric Nesbitt has the elimination of the retail open access program. We support that the most. But all the proposals are addressing. Probably the one area that I think we’re focus on as you are as well as the retail open access but all the proposals address the unfairness of the current program.

Okay. Regarding NEXUS, there have been some lawsuits concerning access for surveying and related matters. Are these significant events? They appear to be occurring in local courts. Are they typical cases or is there something more to it?

The FERC community meetings and the associated process are progressing well, and we are confident about it since it has been quite routine. A significant part of this involves finalizing the route of the pipeline, which makes these meetings essential. As we determine the final path, it aids us in preparing for our application filing in the fourth quarter.

Okay. And then just on the Gas Storage and Pipelines, it sounds like you guys were having a very good 2015 but that there may be a little bit of a slowdown in 2016. I don't know if I heard that correctly. Could you just elaborate that? That was in your prepared remarks. I just wanted to understand what the outlook is going forward with Gas Storage and Pipelines?

It is, and what I have indicated is that we’re seeing the first half of the year increase in our gathering and pipeline business that the majority of that will flow through. Some of that is acceleration of drilling which is also positive to the Southwest and is really resourcing and allocating drilling resources here in the region. But we have our new growth segment, our EPS midpoint we are now saying we’re going to grow 5% to 6% off of that, so we…

Okay, so generally speaking, it seems you are confident in raising your guidance and your growth rate. It doesn’t appear that anything from 2016 is being pulled into 2015 that would impact your long-term growth rate, is that correct?

Yes. The growth rate is off our new growth segment guidance midpoint. So as we took a look at that for 2016 and what we’re seeing here in the midstream segment as overall what’s happening in the businesses and we were feeling comfortable and confident of not only raising the midpoint of guidance this year, but saying their 5% to 6% will be on that new growth segment.

Once again, I’d like to thank everybody for joining us on the call today. And if you all could say – and I’m trying to root on my Tigers a little bit, I would appreciate that. I also want to once again remind you on September 28 we have our event here in Detroit. So if you can kind of save that date, I look forward to seeing you there. Have a good day.