DTE Energy Company (DTE) — Q1 2022 Earnings Call Transcript

Thank you, and good morning everyone. Before we get started, I would like to remind you to read the Safe Harbor statement on page two of the presentation. Including the reference to forward-looking statements, our presentation also includes references to operating earnings, which is a non-GAAP financial measure. Please refer to the reconciliation of GAAP earnings to operating earnings provided in the appendix. With us this morning are Jerry Norcia, President and CEO; and Dave Ruud, Senior Vice President and CFO. And now, I'll turn it over to Jerry to start the call this morning.

Thanks, Barb, and good morning everyone, and thanks for joining us. On today's call, I'll start off by discussing DTE's strong start for 2022 and provide highlights on our transition to cleaner generation. Dave Ruud will provide a financial update and wrap things up before we take your questions. As shown on slide four, the success that DTE has achieved continues to be the result of our focus on employees, customers and communities. We continue to focus on improving the health and well-being of our team, and cultivating deeper employee engagement, which results in being able to deliver service excellence. Beginning with our team, for the 10th consecutive year, DTE earned the Gallup Great Workplace Award. When we won our first award, they told us the hardest thing to do would be to win it again. And now, we have done it for a full decade. I'm proud of this recognition, which shows the dedication and engagement of our team. And as you know, we've said before, high engagement is the secret sauce that drives our success. I've always said, if we serve each other well, we can deliver for our customers, our communities and our investors, and we're doing just that. On the customer front, one of our top priorities this year is to further harden our system in preparation for the upcoming storm season. As you know, we experienced extreme weather last year and we are working toward building an even more reliable grid of the future. DTE's reliability plan is focused on four strategic pillars: tree trimming, infrastructure resiliency and hardening, infrastructure redesign and technology automation, and we are focusing these efforts on areas that we know are most vulnerable. Tree trimming, we are enhancing our efforts and have greatly increased our investment with a particular focus on the most vulnerable circuits to improve reliability and customer satisfaction. And we know that circuits that have been trimmed have experienced a 70% improvement in interruptions and a 65% improvement in outage minutes. So, we know this effort yields results. We are also converting existing electric circuits to a modern distribution system. Circuits which have been hardened experienced an 80% improvement in the average number of sustained interruptions and a 43% reduction in wire-down events. We continue to increase our investment in remote monitoring and control devices, building an advanced distribution management system, modernizing our system operation center which started operating in February, and enhancing cybersecurity. We remain committed to meeting our long-term reliability targets and improving our customers' experience. Moving onto our communities, we are making strides and providing support through our workforce investment priorities, which include increasing the number of jobs for those with barriers, enhancing job readiness and attracting employers to Detroit and other areas in Michigan. One example of our efforts is the Tree Trim Academy we've built right here in Detroit. This program trains individuals to become apprentices and importantly, it teaches skills to prepare them for the responsibilities of the job. Tree trimming jobs bring prosperity to people who pursue them and also offer a strong pipeline to longer-term opportunities such as overhead line work. Upon completion of the Tree Trim Academy, graduates begin their apprenticeship which takes about 2.5 years to complete. During this time, journeymen tree trimmers make a good wage with full union benefits for themselves and their families. It's a great example of matching a business need with the community need, and that's when we get magic. We are proud that our Tree Trim Academy was recently recognized by Boston College with its innovation award in the category of transformative partnership. With highly engaged employees, satisfied customers, and communities that are resilient and thriving, we will continue to deliver value for our investors. Let's turn to slide five. We delivered a strong first quarter with operating EPS of $2.31, fueled by solid performances across all of our business lines. And we are on track to deliver 7% operating EPS growth from our 2021 original guidance midpoint. At DTE Electric, we filed our first general rate case in almost three years. This rate filing is really about moving our infrastructure investments forward, and we continue to focus on doing this in an affordable way. I'm proud of the work we've done with the Michigan Public Service Commission to develop innovative ways to maintain affordability, and we will continue to focus on keeping rates manageable as we invest in the system. Following a very successful 2021 for MIGreenPower, our voluntary renewables program, we hit an important milestone in early 2022 with over 50,000 residential customers now subscribing to the program. At DTE Gas, we are accelerating the 35% reduction target of Scope 3 customer greenhouse gas emissions a full decade, from 2050 to 2040. Advancements in greener technologies like green hydrogen, carbon capture and sequestration, renewable natural gas and customer voluntary offset programs will enable the Company to accelerate this goal. We also continue our important main renewal work with a target of completing another 200 miles in 2022, ensuring we can continue providing safe and reliable service to our customers. Our Natural Gas Balance program is also progressing, and we have over 6,500 customers subscribed to offset their greenhouse gas emissions. We are proud of how this first-of-its-kind program is growing. Additionally, DTE Gas launched another project that showcases our commitment to a clean energy future in Michigan. We partnered with the City of Grand Rapids to help supply renewable natural gas to fuel their vehicles. This RNG will supply natural gas fueling stations as well as power buses and fleet vehicles. At DTE Vantage, we have multiple onsite energy projects and dairy RNG projects coming online in the second half of the year. This is in addition to the conversion project I mentioned in our year-end call that goes into service in 2023. With this new project, DTE and our 50% partner will build a new RNG facility to take biogas from our Michigan-based landfill and convert it into pipeline quality renewable natural gas. Additionally, we have a strong pipeline of projects that support growth in this business, including additional landfill to RNG conversions. We feel great about our strong start to the year and we're confident in achieving our 2022 operating EPS guidance. Our robust utility capital investment plan of $18 billion over the next five years and $40 billion over the next ten years supports our future growth. We have a history of achieving the high end of our operating EPS growth target, and as I've said, we continue to evaluate our long-term growth target and expect to provide an update on this later in the year as we update our five-year plan. We are also targeting dividend growth in line with our operating EPS growth. Now on slide six, we're more focused than ever on our environmental initiatives, including several significant milestones in 2022. The Blue Water Energy Center, our new natural gas plant, is on track to go into service later this quarter. This state-of-the-art facility has an 1,100-megawatt capacity and was constructed on time and on budget. Also this year, our Trenton Channel and St. Clair power plants will cease operations. After this transition, roughly 38% of DTE's generation mix will be attributable to coal. And by 2028, after we cease coal use at our 1,000-megawatt Belle River power plant, coal will represent less than 30% of our generation mix. We are well on the path toward our net zero emissions goal. As we highlighted last year, we are filing our Integrated Resource Plan in October this year. We continue to evaluate the opportunity to exit coal use at the Monroe power plant earlier than planned. We hosted meetings for the public to participate in shaping our Clean Energy Plan. Getting our stakeholders' input early in the process ensures that what matters most to them is taken into consideration as we work to achieve the right balance of energy resources that will provide cleaner, affordable and reliable power for decades to come. I'll just round out my comments by telling you how very excited I am about the position of our Company, with the progress we have made and the opportunities we have in front of us. We are off to a strong start in 2022 and we are in a great position to deliver on our targets. We are seeing favorability at both utilities and we are finding ways to use this favorability to create a highly successful year in 2023 as well as the years beyond that. In the longer term, I've highlighted a number of investment opportunities this morning, including the acceleration of coal retirements and transition to more renewable power, building the grid of the future to combat more severe weather and support the prospect of significant demand growth, and finally to continue replacement of cast iron main and steel in our gas utility system, preparing that business for long-term success. As you can see, we have a great line of sight of customer-focused investment in our system for the next decade. This puts us in a strong position to deliver for our customers and investors in both the near term and the long-term. With that, I'll turn it over to Dave to give you the financial update.

Thanks, Jerry, and good morning, everyone. Let me start on slide seven to review our first quarter financial results. Operating earnings for the quarter were $448 million. This translates into $2.31 per share. You can find a detailed breakdown of EPS by segment including a reconciliation to GAAP reported earnings in the appendix. I'll start the review at the top of the page with our utilities. DTE Electric earnings were $201 million for the quarter, ahead of our internal plan but slightly lower than the first quarter last year. The drivers of the variance were higher rate-based cost and higher O&M, which included the additional investment in the acceleration of our Vegetation Management Program. This was partially offset by cooler weather and the acceleration of the deferred tax amortization in 2022 that was implemented to delay the filing of our rate case and keep rates flat during the pandemic. Moving onto DTE Gas, operating earnings were $196 million, $27 million higher than the first quarter of 2021. The earnings increase was driven primarily by the implementation of base rates and cooler weather in 2022, partially offset by rate-based costs. Let's move to DTE Vantage on the third row. Operating earnings were $14 million in the first quarter of 2022. This was a $14 million decrease from the first quarter last year due to the sunset of the REF business at the end of 2021, partially offset by higher RNG earnings this quarter. We remain on track to achieve full-year guidance to DTE Vantage. On the next row, you can see Energy Trading had another strong quarter, mainly due to strong performance and also some timing in our physical gas portfolio. The accounting timing favorability was largely due to strategic long positions that support physical positions later in the year. Due to these timing-related gains, we're not changing our conservative full-year guidance as some of the favorability could reverse later in the year. Finally, Corporate & Other was favorable $22 million quarter-over-quarter, primarily due to the timing of taxes. Overall, DTE earned $2.31 per share in the first quarter, so a strong start to the year puts us in a great position for the remainder of 2022. Let's turn to slide eight. We continue to focus on maintaining solid balance sheet metrics. Due to our strong cash flows, DTE has minimal equity issuances in our plan beyond the equity units that will convert later this year. We have a strong investment-grade credit rating and target an FFO to debt ratio of 16%. We increased our 2022 dividend by 7%, continuing our track record of growing our dividend in line with the top end of our targeted EPS growth rate. In the first quarter of 2022, DTE completed a green bond issuance of $400 million. This is DTE's fourth green bond issuance in the past five years for a total of over $2.5 billion. DTE is Michigan's leading producer of, and investor in renewable energy, and these funds support our net zero emissions goals. Let me wrap up on slide nine, and then we will open the line for questions. In summary, we feel great about the start to the year. Through the remainder of the year, DTE will continue to focus on our team, customers, communities and investors. We are on track to achieve our 2022 operating EPS guidance midpoint of $5.90 per share, which provides 7% growth from our 2021 final guidance midpoint. Our robust capital plan supports our strong long-term operating EPS growth by delivering cleaner generation and increased reliability, and focusing on customer affordability. DTE continues to be well positioned to deliver the premium total shareholder returns that our investors have come to expect, with strong utility growth and a dividend growing in line with operating EPS. With that, I thank you for joining us today and we can open up the line for questions.

Congrats on a great quarter and start to the year. My first question is on the IRP. Michigan had a strong recent data point for IRP mechanisms like the regulatory asset treatment and the increasing administrative support for clean energy. How does that inform or change the outlook for the October IRP? Do you see a stronger case for some of the accelerated retirements that you've been talking about?

We do, and we thought it was a really constructive outcome, which continues to be the case here in Michigan where we have constructive policies, energy policies and constructive commission to administer those energy policies. So, we are really encouraged by it. We are also really encouraged by the fact that it's a balanced outcome between renewables and dispatchable resources to ensure both reliability and affordability for the state. So as it relates to our IRP, we continue to interact with various stakeholders and take in their feedback. And we are looking to retire Belle River, as we mentioned, if I recall in 2028 and convert it to gas. And certainly, we are looking really hard at how aggressive we can pull forward the retirement schedule for the four units at Monroe, which is our largest coal plant. So, much of that is in progress. So, we are consulting. We are highly encouraged by the outcome and certainly will support what we plan to file.

Thanks, that's helpful. And as we're thinking about the longer-term financing needs, you notably stand higher than some of the peers on metrics. And combined with the business mix improvement over the years, do you envision more flexibility from rating agencies on thresholds and is there are a range of scenarios where you could utilize some of that dry powder like you talked about the opportunities on IRP, resiliency, etc.

Yes. Constantine, this is Dave Ruud. Yes, we do still have that pretty conservative 16% FFO to debt number that's in there. And when you look across some of our peers and with the rating agencies, that does give us some good headroom to any of the downgrade levels. So we like the position we're in now. We like to have that strong position. But it's something that we'll continue to think about as we go forward.

Excellent. And maybe just a quick aside on DTE Vantage, is the focus still on growth and we have noted the market getting a little bit more competitive. And there has been some opportunities to include R&D into rate base on the regulated construct. Is there a potential parallel path forward there?

Currently, we are focusing on new projects in the renewable natural gas sector and have identified some promising opportunities that offer mid-teens unlevered returns after tax and a cash payback period of three to five years. For example, we found a project in Michigan where we are converting power generation to RNG, which has even better internal rates of return than previously mentioned. We have a solid list of potential projects but are selective, aiming for an annual contribution of $7 million to $8 million from this sector. The other half of our growth will come from managing onsite energy infrastructure projects, which are also backed by long-term fixed-fee arrangements and offer attractive returns. We have a healthy pipeline of opportunities and continue to experience growth advantages. Regarding our rate base, we have an RNG project with the City of Grand Rapids, which involves their wastewater treatment facility producing RNG. We are investing to ensure it meets pipeline quality for injection into our system, but at this stage, the opportunity is modest.

Okay, understand. That's a very helpful update. Thank you so much. Thanks for taking the questions.

Thank you.

This is actually Ryan Karnish on for Jeremy. Thanks for taking my question.

Good morning, Ryan.

Good morning. I guess I just wanted to follow-up on DTE Vantage there. And I appreciate you guys keep kind of finding effective projects, but just thinking through the relative kind of competition in the RNG space, would you consider at any point maybe monetizing that asset or partial monetization or do you still kind of see a good runway to kind of keep growing it organically?

Well, we certainly see a good runway to continue to grow organically and we've been really focused on organic development. When you are looking at existing operations, they are attracting a very high premium. So when you asked about would we consider selling that business, we're always looking for ways to optimize and maximize shareholder value. I think you can see that in our TSR, the 10-year, 5-year, 3-year and 1-year were at the top of our peer set, and that's because we always look for ways to maximize value. So, if we do see an opportunity where it could be valued more than how it's currently valued in our portfolio, we would seriously consider. We're always on the lookout for those opportunities.

No, understood. I appreciate the color. And then, just one for me on what you're kind of seeing at this point on the supply chain side. I know solar in particular has been a big focus across the sector. I don't know if there's anything that you kind of note that you're seeing across your supply chain or any concerns you have over the remainder of the year, either on the O&M side or the capital side?

Yes, I would say on the solar piece, obviously that's a big topic in the industry with the recent Department of Commerce matter that's evolved, that I'm sure many of you are familiar with. And for 2022, there is no impact. We have what we need. We did have a built in 2023, about 300 megawatts that we're looking to build to support our voluntary program. If that was delayed into 2024 because of the Department of Commerce actions, they really have no impact on our 2022, 2023 earnings and we can manage through that quite easily. If it persists longer term, certainly we have a deep portfolio of capital investment opportunities at our utilities that we can deploy, as we've mentioned before. But we're still really excited about our voluntary program where you've got about a 1,000 megawatts signed up already and another 1,200 megawatts, what I would say is late stages of negotiations. So, still a very active program and our customers love the product. So, we're hoping that this issue with the Department of Commerce resolves itself quickly.

Good morning. This is Darius on for Julien. Thank you for taking the question.

Good morning.

My question is about the long-term cadence update you mentioned in your opening remarks. Are you waiting for any specific inputs or developments before that expected update, or do you prefer to keep the historical routine of providing that update around November?

One of the key things we are looking to finalize is our Integrated Resource Plan, which we will file in October. This will provide significant guidance regarding our long-term capital plans. That's why we are timing it for the fall when we usually update our long-term 5-year plan. There are two reasons for this: first, the IRP will illuminate our long-term capital plans as we work to transform our generation fleet, and secondly, it aligns with our typical schedule for updating the 5-year plan.

Thank you, that's very helpful. I have one more question about how things are looking for 2022. It seems that the Energy Trading segment performed very well in Q1. I'm wondering if you now expect to trend toward the upper end of your guidance range for the year, or if there are other factors you anticipate later in the year that might affect that.

I'll start by saying that both Dave and I mentioned in our opening remarks that all of our building contingency units, our electric company, and our gas company are performing well, primarily due to weather conditions. Vantage is also tracking ahead of plan, and the trading results are significantly better than expected. We may provide an update after the second quarter regarding our expected EPS trends. We have a good sense of how summer weather is shaping up, and I can confirm that we are building contingency above our midpoint at this time.

Thank you. I was curious about the MISO capacity auction results, which indicate that the region is having difficulty managing the load with generation resources. I understand it's only a one-year outlook, but are you considering reconsidering the timing of your coal plant retirement?

Thank you for the question, Angie. The retirements we've made have been nearly fully offset by two gas plant acquisitions we completed about five or six years ago and the construction of the new Blue Water Energy Center, which is a 1,100-megawatt combined cycle plant. This has added over 2,000 megawatts of dispatchable generation to replace the 2,300 megawatts of coal retirements. Additionally, we have also developed wind energy, which contributes to our energy supply, although it may not provide a significant amount of capacity during the summer months. The state is experiencing tight capacity, raising concerns about future management. However, from our viewpoint, we believe we have sufficient supply to meet our demand. We do have coal plants that have been retired, like the St. Clair power plant, which is an 1,100-megawatt facility that we could potentially bring back online in case of an emergency, but we will rely on MISO to make that determination.

Okay. Moving on to Vantage, I appreciate your comments about exploring ways to derive value from this business. It would be helpful if you could provide more detailed disclosures, especially regarding the business’s segment performance. When you compare your assets to public comps for RNG companies and district energy, do you observe significant differences between what you have developed and the assets that are being bought and sold, or do you believe those public comps serve as reliable indicators of your assets' value?

Yes, we're examining those closely and assessing how we believe they fit into our portfolio. We're always looking at these opportunities to determine if we are the best owners or if others might be better suited for these assets. I can assure you that they generate strong cash flows and returns for our current investors. We remain very open to creating value whenever possible. If an opportunity arises to generate additional value, we will actively pursue it. Could you please repeat the question regarding net disclosures?

Yes, I noticed that there isn’t a slide on Vantage in today's presentation. In previous presentations, you provided a breakdown of net income, and I was hoping we could also see a breakdown of EBITDA. This would be helpful, especially considering the comparisons with peers and recent private transactions involving companies like Seewen or Veolia. I would appreciate any insights you can provide on this.

Right, we'll note that. And thanks for that feedback.

First question, regarding Vantage and on a fundamental level, how do we assess the impact of the current higher gas prices on the demand for RNG projects? I'm curious if you've noticed any changes in that area.

We haven't seen any fundamental changes, certainly in demand. Most of this product goes into the transportation markets, especially the RNG goes into the California transportation markets and so we have not seen a change in demand. We have seen some changes in the federal pricing for the product as well as the California pricing for the product. But overall the pricing is right on top of our pro forma. I don't know, Dave, if you want to add anything to that?

I believe that's accurate. As more local distribution companies integrate renewable natural gas into their systems, we are witnessing an increase in demand for RNG over time, which seems to be on an upward trend. Therefore, I anticipate that demand for this product will continue to rise.

Understood. I just wanted to get clarification on that. My second question is about the impact of labor or materials inflation on costs, which is affecting the entire world. I noticed in the Electric utility segment you mentioned O&M a bit. Given the contingencies you have, I think you're relatively comfortable managing that. However, based on the trends you've observed, has the rise in labor or materials costs been more significant than you anticipated a few months ago when you provided guidance?

Well, this is something we are watching very closely and we are planning accordingly to ensure no negative impacts to our plans. First, I'll say, we've demonstrated long history of being able to manage costs effectively, including inflation. And so far, we are not seeing the impacts of inflation here and I think it's really how we're structured now. About 85% of our spend is through services and we just haven't seen as much inflation there. And then, we also have a lot of long-term contracts that service well through these periods. So overall, not seeing any negative impacts to our plans for the year or longer-term plans. The O&M at Electric was a little higher, but that was mainly due to accelerating some of our tree trim spend that we wanted to get through quickly to help our reliability as we came through from summer, but not an inflation impact there.

Regarding Vantage, you've mentioned that it's performing better than expected and that the plan was increased last quarter. However, when we assess the recent quarterly results in relation to the annual guidance, it appears to be significantly lower than the average run rate. Could you discuss the seasonality in that business after the resiliency and also clarify how much of the recovery will arise from new projects?

Yes, that's a good question. I think you nailed most of the answer in your question. First, we do feel really good about this segment and where we are relative to our year-end guidance and being able to come in at that. This quarter is lower than the expected annualized number, but it's primarily due to some known plant outages that we had. And so, it's going to be made up through the year as that happens. And then we do have some projects that come online, some RNG and some industrial energy service projects that come online later in the year. So, we feel really good about our guidance for this segment.

Great, thanks for that, Dave. And then just on trading, you talked about operating and then also some of it was timing. Can you maybe unpack for us a little bit how much is timing that you think may reverse and how much is sort of just straight out performance?

Yes, we had a great quarter in trading, mainly from our gas physical business where we're serving LDCs and producers. While we experienced strong performance, about half of it might be due to timing that could impact results later in the year. That's why we're not adjusting our guidance right now; we want to see how the timing evolves. Just over half of our performance was due to actual results, while some of it is related to timing as we have hedged positions that could change as we manage the gas later in the year.

So it sounds like you're suggesting it could change, but you're not entirely certain about that?

There is some that we know will reverse and some that may reverse.

Okay. Could you share some updated insights on how you expect customer billing trends to develop in relation to inflation? You've dealt with the rate case and we're seeing rising fuel costs. While you've been effective in finding ways to manage these challenges, there is still some pressure. I’d appreciate your thoughts on this.

Sure, Jonathan, I’ll begin and Dave can elaborate. Let’s focus on the Electric Generation portfolio. One of the advantages of having a diversified portfolio that includes wind, nuclear, gas, and coal is that it helps us manage commodity pressures. We have secured our coal purchases through 2023, which makes us confident about them, as they are a significant part of our generation assets. We also have our nuclear purchases secured through 2028, which adds to our confidence. Overall, having a diversified portfolio and a hedge for a while helps to mitigate the commodity price pressures the industry is experiencing. In terms of our natural gas business, over 75% of our gas purchases for the winter of 2022-2023 are already secured, along with about 25% for the winter of 2023-2024. This has been our standard approach for gas procurement at the LDC for over a decade and it helps stabilize gas pricing for our customers. However, if these prices remain high for several years, we might begin to feel pressure. We are actively exploring ways to offset these pressures through cost reduction and revenue initiatives, as we see development opportunities in our business. I hope that provides some clarity, Jonathan.

My first question is, I want to follow up on renewables. I appreciate your comments on the DOC and supply chain concerns, but what about the more local issues? How big of our NIMBY issues in Michigan or the debate around rooftop solar and cross-subsidization? And just sort of how do you think about those risks potentially impacting your near-term plans?

We have a strong land position for solar and are closely collaborating with municipalities to ensure a smooth permitting process, which can sometimes present challenges. We have secured more land than we might ultimately need, anticipating potential issues with some of the acreage set aside for solar projects. We've optioned tens of thousands of acres and are confident in executing our plans over the next few years and beyond. Regarding rooftop solar, customers are generally receptive to it, although there are legislative limits on subsidies and ongoing discussions about the extent of those subsidies. We are also providing solar products to our residential customers, and currently have about 55,000 signed up, with new customers joining weekly. The cost of utility-scale solar is approximately one-third that of rooftop solar, and it offers a more convenient installation without needing to make extensive alterations to homes. Customers can choose to engage with our offerings without subsidies, which gives them an alternative. This remains an ongoing discussion.

Great, thank you. That's helpful. And my follow-up is, forgive me, I'm going to ask about the IRP even though it's still months away. So my question is almost more philosophical. To whatever degree generation CapEx might exceed what's in the current plan for the next few years, would you scale down spending in other categories like distribution in light of either affordability concerns or balance sheet pressures, or would that just be upside?

In order to inject more capital into the plan, we need to find ways to create room for it from an affordability perspective. Overall, we have substantial capital available for deployment in distribution and even in generation as we begin to expand our renewables portfolio, eventually leading to the establishment of baseload plants to replace large coal infrastructure. The primary consideration for us is always affordability. Therefore, as we introduce more capital into the plan, we must identify ways to balance it with affordability initiatives. Some of these initiatives are supported by our investments in renewables. For instance, this year we filed for the first time a reduction in operational and maintenance expenses in our rate case, due to the shift from coal to gas and renewables, which has significantly lowered our operating expenses. This provides an offset created by our capital programs, although these programs can also exert pressure. In summary, we will manage affordability while driving distinctive growth for our investors.

What's your current outlook for volumetric trends for residential and industrial customer load for the remaining portion of the year?

Yes, you probably saw our quarter-over-quarter results. Residential usage compared to last year was down about one percent, while our commercial sector was up two percent, and our industrial sector remained mostly flat. Overall, our load is flat compared to last year. We are observing some increased residential usage, which is higher than we anticipated pre-COVID. We expect that to start decreasing as more people return to work, and we are beginning to see that trend decline. However, there is still some growth in that area. In summary, the overall load is relatively flat compared to last year.

Okay. And then on Energy Trading, just want to make sure I heard this correctly. So, you are saying about 50% of the contribution for the first quarter is cemented and the other half is more volumetric as opposed to later in the year. That kind of puts you at the high end of the range just from the first quarter contribution. Is there any reason to believe that you won't continue to earn from that segment for the remaining portion of the year, that one push you above your range?

We prefer to manage that business conservatively and have some contingencies in place. As a result, we usually perform well in the second half of the year as these factors play out. However, we want to stay cautious in this area for now, so we’re not changing our guidance at this time.

Sure. What role do green bonds have in the future financing plans for DTE, and what are the drivers behind the recent financing decision?

We see the green bonds supporting our renewable and green initiatives and providing bond investors an opportunity to participate in that. As we continue to grow our renewable portfolio, we expect to have more of that and to utilize it more in the future to help support that.

Is there any contingencies around certain renewable generation content within your portfolio?

These funds are allocated to specific projects and assets, so they must be directed towards those particular renewable assets rather than the overall portfolio.

Jerry, I wanted to quickly follow up on the sales comments. In the first quarter, it seemed like industrial sales decreased slightly, while the recent trend has been upward. Is this just a one-quarter occurrence or is there more insight you can provide on that?

Yes, it's more of a one-quarter occurrence. The dip we're experiencing is due to chip shortages affecting some items in specific areas. I believe this is not a long-term issue; there haven't been any new shutdowns or closures. It's solely related to the chip shortage in the manufacturing sector.

Okay, great. That makes a lot of sense. And then, I also just wanted to clarify on the DoC impact on solar, maybe you could just give me like what the current plan is for solar additions, like I think you said you're all good on 2022 but on solar, are you adding this year and then next year? The 300 megawatts that's impacted, is that all the solar or do you have some additional that is unimpacted, maybe just a little more on that.

Yes, this year we're in a good position. We have about 500 megawatts completed for our voluntary program this year, and for next year, we're planning to build around 300 megawatts, along with an expected 200 megawatts from Power Purchase Agreements. Currently, our vendors are indicating they will provide the necessary resources, but with the Department of Commerce situation, we anticipate that in the worst-case scenario, this could be delayed by a year into 2024, which we can manage in our plans for next year. If it were to be delayed beyond 2024, which we believe is unlikely, we are considering other contingencies in terms of capital investments. As you know, we have a wide range of potential investments that we could accelerate. This is our current approach.

Okay, great. How much is planned for 2024 as is right now?

I don't think we've put that out there yet. Dave or Barb, I mean 2,500 megawatts is what we got over 5 years. So, I could give you a feel as to how big the program is over a 5-year period.

You guys seem to have a high-class problem, like less than 10% of your business generates all the questions. I guess that's a good thing versus everybody questioning 90% of your business.

We think we have a high-class company, Anthony, for sure.

Most of my questions are answered, but I have a quick one. Considering the recent IRP filing with CMS reaching a settlement, you have a pending electric case that hasn't been settled since 2006 in the new electric rate environment. Is it likely that you'll reach a settlement here, or will the Company continue down the path of possibly going fully litigated?

Well, we are going to certainly engage all the stakeholders in a potential settlement and because it's a pretty straightforward case, I mean really, we're not asking for more O&M expense, we're actually asking for less, and it's really all about infrastructure, that's very necessary for the state, primarily pointing that our electric grid and also the continued transformation of our generation fleet, so pretty straightforward case. Our strategy is that we'd like to settle. We'll know more in the middle of May, Anthony, when we see the staff filings and intervener filings and then we'll engage and try to close it out before the end of the summer, if we can.

Great.

But whether we settle or litigate, we've had very, very constructive outcomes as you've seen in the State of Michigan.

Great. Lastly, regarding your potential IRP, it seems that a key difference from others is that your plan includes new generation being built. As you mentioned earlier, the state may be experiencing tightening capacity. Do you think this could lead to additional scrutiny, or do you believe that the capacity needs of the state are so significant that they overshadow the need for more dispatchable generation?

We have a practical approach to commission and administration, recognizing the need to decarbonize the economy while ensuring that our power supply remains reliable, functional, and affordable. Therefore, we will be filing for new baseload generation assets in the Integrated Resource Plan, as we anticipate needing to address the over 3,000 megawatts at Monroe that will be decommissioned over time. This dispatchable generation is essential for maintaining system and grid functionality. While some may disagree with this approach, many will appreciate our commitment to building between 5,000 to 7,000 megawatts of renewable energy. This strategy creates a balanced portfolio that meets the objectives of reliability, decarbonization, and affordability.

You answered most of my questions. In particular had a question about the customer bill affordability. Just to follow-up a little bit on that, what about in the rate case, are there any levers that you can pull or adjustments you could make, perhaps earnings neutral adjustments, in the rate case that would mitigate some of the potential customer bill impact, either later this year and next year?

Dave, you want to take that?

Yes, we are focused on minimizing the impact on customer bills by managing our operating and maintenance costs. We are committed to continuous improvement and enhancing productivity and efficiency. In terms of the rate case, we are currently in the active filing stage, so those considerations are already included. Moving forward, our main priority will be to establish a cost structure that supports necessary capital investments and customer-focused initiatives related to liability and clean energy generation.

Travis, we have successfully avoided a rate case for 2.5 years by being innovative. We made this choice intentionally to alleviate the financial pressure on our customers during COVID. As Dave mentioned, we have a history of being creative, and we will continue to be so in the future. Our culture of continuous improvement drives us to discover unique and innovative ways to reduce our costs. We anticipate more of this, in addition to our capital investments, which are often aimed at permanently lowering costs to operate our system.

We are continuing to roll out our electrification program with the second tranche of $14 million underway. This follows the previous approval of another $14 million investment. I can report that the number of electric vehicles connecting to our system is increasing, with around 1,000 new attachments each month, up from just a couple hundred a few years ago. While this growth is significant, it is still quite modest and won't have an immediate major impact. However, conversations with senior personnel at Ford and General Motors reveal that their factories are facing substantial backlogs for electric vehicle orders as they work to meet this growing demand. We anticipate that this trend of significant growth will continue over the next several years.

Thank you, Brent, and thank you all for joining us today. I'll just close up by saying that DTE had a very successful first quarter and we're feeling really good about the remainder of 2022 as well as our position for future years. Everyone, have a great morning. And we look forward to seeing many of you at AGA in a few weeks. Have a good day.