DTE Energy Company (DTE) — Q1 2024 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 2 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, Chairman and CEO; Joi Harris, President and CEO; and Dave Ruud, Executive 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. I hope everyone is having a healthy and safe year so far. This morning, I will discuss the achievements we have made so far this year as we continue to deliver for all of our key stakeholders, and we continue to achieve successes across all of our businesses. Given that Joi is in charge of operations, she will highlight our significant customer-focused investment agenda to build the grid of the future, maintain reliability and transition to cleaner generation while continuing to focus on customer affordability. And Dave will provide a financial update and wrap things up before we take your questions. Let me start on Slide 4. We are off to a strong start in 2024 and well positioned to deliver on our targets this year. The success that DTE has achieved continues to be the result of our focus and engaged team for our customers and communities. Our team continues to achieve improved health and well-being and cultivate deeper employee engagement, which results in being able to deliver service excellence for our customers and our communities. The engagement of our team at DTE was recognized with another Gallup Great Workplace Award. I am extremely proud of our team for receiving this award 12 years in a row. We continue to deliver for our customers. In fact, at DTE Gas, we have been delivering for our customers for nearly 2 centuries. Our gas company celebrates its 175th anniversary this year. We have been providing safe, reliable and affordable natural gas to customers in Michigan since 1849, 2 years before gas lights even appeared on Detroit city streets. We have come a long way over the years, but the focus on customers has never wavered. An important part of serving customers is to provide energy efficiency opportunities. DTE was recently awarded the ENERGY STAR Partner of the Year Award by the EPA. The award is the highest level of recognition from the EPA, recognizing programs that demonstrate organization-wide energy savings and best practices. We have demonstrated our commitment to help customers identify options to reduce their energy bills without sacrificing performance. This is the third consecutive year DTE has received this award. And again, I am extremely proud of this recognition. We continue to invest in the communities where we live and serve. DTE invested $2.7 billion with Michigan businesses in 2023, creating and sustaining more than 12,000 jobs across the state. Last year, DTE also invested nearly $1 billion with diverse suppliers and nearly $900 million with companies based in the city of Detroit. We continue to be a leader in driving Michigan's economy at all levels. As I said at the start of my remarks, we are having a strong start to the year, and we are well positioned to deliver our 2024 targets. Our long-term EPS growth rate remains at 6% to 8%, with 2023 original guidance as the basis for this growth. In our 2024 annualized dividend of $4.08 per share is consistent with our practice of growing dividends in line with operating EPS. Importantly, we will continue to have a strong balance sheet and investment-grade credit ratings to support this focused capital investment plan. We remain committed to deliver premium shareholder returns that our investors have come to expect and that we will deliver. As DTE Gas celebrates the 175-year milestone, DTE Energy is also celebrating a milestone with 2024, marking the 158th year of continuous listing on the New York Stock Exchange. In fact, DTE's tenure is the 16th longest of any company on the exchange. So I guess these milestones are just another way of saying we have been doing this successfully for a very long time, and I am very excited about the opportunities ahead of us for many years to come. Let's turn to Slide 5 to highlight some of the achievements across our portfolio. We have made strong progress across the company in the early part of this year. Starting at DTE Electric, we received approval to construct a 220-megawatt battery energy storage system at the site of the former Trenton Channel power plant. This investment will be approximately $0.5 billion. This project is expected to be operational in 2026 and will be the largest stand-alone battery energy storage project in the Great Lakes region and it initiates an important investment area in our transition to cleaner generation. Last month, we filed an electric rate case that outlines the investments we need to build a smarter, stronger, more resilient electric grid of the future for our customers and further our transition to cleaner generation. Joi will go over the filing in more detail and how it underpins an important step our long-term investment in grid reliability and cleaner generation transformation while remaining focused on customer affordability. At DTE Gas, we are targeting over 200 miles of main renewal in 2024 as we continue to modernize the gas transmission system. Last year, we hit an important milestone where we completed almost 50% of our main renewal program. In January, we filed a rate case at DTE Gas to support important investments necessary to continue to renew our gas infrastructure, which will minimize leaks and reduce costs. At DTE Vantage, we continue to advance custom energy solutions projects, RNG projects and carbon capture and sequestration projects. One project to highlight is the Ford Motor Company Custom Energy Solutions project that is scheduled to go into operation later this year and is underpinned by a long-term fixed fee contract with no commodity risk. So to wrap up my comments, I'll just say, I'm feeling extremely positive about our start in 2024 and how we are well positioned to continue to deliver now and into the future for our customers, communities and investors. Now I'll turn it over to Joi to give some highlights on our investment agenda and reliability improvements. Joi, over to you.

Thanks, Jerry, and good morning, everyone. I'm happy to be here today with all of you. I will provide more detail on our capital investment agenda and our reliability plans to improve our customers' experience. Our investment plan is focused on building the grid of the future, improving reliability and transitioning to cleaner generation. We have a robust agenda of $25 billion over the next 5 years with about 95% of the investments at our utilities. Our 5-year utility investment plan was increased by $2 billion over the previous plan, driven by investments in cleaner generation that is supported by the IRP, the energy legislation that passed last November and our voluntary renewables program. The distribution plan filed last year outlines our path to building this grid of the future and includes the transition to a smart grid with full automation within 5 years, resulting in less frequent and shorter outages for our customers. We are investing $9 billion in distribution infrastructure and targeting significant reliability improvements over the next 5 years. As Jerry mentioned, we filed an electric rate case last month that represents an important step in our customer-focused investment agenda. This filing addresses our continued infrastructure investments designed to improve reliability and generation investments to bring cleaner energy faster to the state. We will continue to invest in our infrastructure and are focused on improving reliability for our customers, reducing power outages by 30% and cutting outage time in half in the next 5 years. We have already made significant progress on this front, and we can see the work that we're doing is having tangible results. For example, an important part of our grid modernization plan is the replacement of our 4.8 kV system. We are making great strides on this front as the work is progressing across our service territory and in communities where DTE has completed the conversion work. Customers are experiencing a 90% improvement in reliability. We are also making great progress on our restoration initiatives. We did experience a large storm in January, and our team came together and achieved one of the fastest restorations for such a large storm. I'm extremely proud of the team given their effort toward the goal of restoring all customers in 48 hours after a storm. So these investments are working and we have a healthy portfolio of opportunities to invest in our system to greatly improve the customer experience. We are committed to modernizing our electric infrastructure to be more reliable and resilient given increasingly severe weather while also delivering cleaner energy to meet our aggressive carbon reduction goals and Michigan's clean energy legislation, consistent with our most recent IRP. Let's move to Slide 7. The electric rate case represents an important step in achieving our reliability commitment as we continue to build a more resilient and cleaner grid of the future. We are focused on reducing power outages by 30% and outage times by 50% over the next 5 years. We are planning to accelerate the deployment of technology and the transition to a smart grid, upgrade existing infrastructure with equipment like stronger poles and fiberglass cross arms, which can better withstand extreme weather rebuild significant portions of the grid and continue to trim trees as they account for 50% of the time customers are without power. Our goal is to improve reliability to surpass the peer average by 2029, and not only does this improve reliability, enhance the customer experience, it has the potential to unlock significant economic value for the state and customers. While we are executing on our efforts to improve reliability, we remain focused on the important transition to cleaner energy while keeping customer impact on bills low. Our current plan involves ceasing coal use at the Belle River power plant in 2026 and converting it to a 1,300 megawatt natural gas peaking resource. At our remaining Monroe coal plant, we are ceasing coal use at 2 units in 2028 and the remaining 2 units in 2032. We are studying a range of possible replacement technologies for the 2 units of this plant. As Jerry mentioned, we received approval from the MPSC to repurpose the former Trenton Channel power plant into a battery energy storage system project, which will come online in 2026. Battery storage will be an important investment area to support our clean energy transition consistent with the recent energy legislation and our integrated resource plan. We have a great plan ahead of us here at DTE as we transition to cleaner energy resources and remain on track to cease the use of coal in 2032. At DTE, we are focused on continuous improvement and finding ways to improve efficiency in our processes to maintain customer affordability. Based on our recent rate case filing, the forecasted average annual growth of our residential electric bill will likely be less than half the national average. I'm very excited about the opportunities we have in front of us, and I'm confident that we will execute on our plan to improve reliability while we continue our clean energy transition and maintain customer affordability. Now I'll turn it over to Dave to give you a financial update.

Thanks, Joi, and good morning, everyone. Let me start on Slide 8 to review our first quarter financial results. Operating earnings for the quarter were $346 million. This translates into $1.67 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 $194 million for the quarter. This is $93 million higher than the first quarter of 2023. The main drivers of the earnings variance were lower storm costs and rate implementation, partially offset by higher rate base costs and the one-time O&M cost reductions we implemented in 2023. Moving on to DTE Gas. Operating earnings were $160 million, $11 million lower than the first quarter of 2023. The earnings variance was driven by warmer winter weather, higher rate base costs and the one-time O&M cost reductions we implemented in 2023, partially offset by higher IRM revenue in 2024. If you remember, we had a very warm winter last year, and this year was even a little warmer than last year and was the fourth warmest on record. Let's move to DTE Vantage on the third row. Operating earnings were $8 million for the first quarter of 2024. This is a $19 million decrease from 2023 due to an outage at one of our renewable plants in 2024 as well as the timing of RNG project earnings and steel-related sales. We continue to be confident in our full year guidance for Vantage as the shape of earnings will be notably higher in the back half of the year, driven by the timing of earnings for some key projects in our custom energy solutions and renewable portfolios. On the next row, you can see Energy Trading finished the quarter with earnings of $5 million. The favorability to 2023 is primarily driven by performance of the physical gas portfolio which was higher in 2024 as well as continued stronger margins in our physical power portfolio. With these stronger contracted margins, we could experience some upside, though maybe not to the same magnitude as last year. Finally, Corporate and Other was unfavorable by $22 million quarter-over-quarter due to the timing of taxes. Overall, DTE earned $1.67 per share in the first quarter of 2024. While we have faced some unfavorable weather through the first quarter, we remain confident in achieving our annual operating EPS guidance range as we continue to plan conservatively, and we are not facing the additional $200 million of incremental headwinds that we were facing from a less than optimal regulatory outcome in the large ice storm in the first quarter of 2023. Our planning for warm weather coming into the year and our efforts to rebuild headroom after experiencing warm weather this quarter leave us in a strong position to achieve our EPS goals for this year. Let's move to Slide 9 to highlight our strong balance sheet and credit profile. Going forward, we will continue to invest heavily into our utilities. This customer-focused investment is supported by our robust cash from operations, which is shown on our cash and capital guidance slide in the appendix. Due to these strong cash flows, DTE has minimal equity issuances in our plan, targeting annual issuances of $0 to $100 million through 2026. Our long-term financial plan incorporates debt refinancing and new issuances to fund our capital investment plan and is consistent with our 6% to 8% operating EPS growth target. As we came into the year, we had parent company debt financing at our plan. To date, we have hedged or issued about 80% of the debt financing, and we did it at all-in rates below what we had in our plan, making us confident that our full year 2024 debt financing plan will be completed within our conservative planning assumptions. We continue to manage future issuances through an active hedging program and other opportunities that mitigate interest rate variability consistent with our 5-year plan. We continue to focus on maintaining our strong investment-grade credit rating and solid balance sheet metrics, and we target an FFO-to-debt ratio of 15% to 16%. Let me wrap up on Slide 10 and then we will open the line for questions. Our team continues our commitment to deliver for all of our stakeholders. Our robust capital plan supports our customers as we execute on the critical investments that we need to make to improve reliability and transition to cleaner generation while focusing on customer affordability. The 2024 operating EPS guidance midpoint provides 7% growth over the 2023 original guidance midpoint, and we continue to target long-term operating EPS growth of 6% to 8%. DTE continues to be well positioned to deliver the premium total shareholder returns that our investors have come to expect with a strong balance sheet that supports our future capital investment plan. With that, I thank you for joining us today and we can open the line for questions.

I guess, first off is, how are you sort of thinking about the cadence of maybe CapEx updates in light of the kind of the new legislation? Could we see some adjustments to generation plant CapEx kind of in the near term to align closer to the new construct? Or is this kind of further out? And is 3Q or maybe EEI kind of the right cadence for any updates as we're thinking about this new construct?

So I'll start and maybe Dave can add to it, Shar, but we did update our capital plan that reflected our IRP settlement from last summer and also the legislation that passed in the fall. So when we updated our 5-year plan, much of that capital was included, and that created a $2 billion increase that we rolled out. Now I will say that as we get to the last part of that plan, and we roll things up for the next 5-year period, we do anticipate that the IRP and legislation will create an incremental investment opportunity. Dave, do you want to add to that?

Actually, I think that's exactly right. Our 5-year plan was consistent with the IRP. The legislation, the IRP, we're really close to each other in this 5-year period, but there will give us some additional opportunities as we look beyond that.

Yes. That was actually more about looking ahead. Regarding funding the additional capital expenditures as we consider future plans, we have the potential for up to $100 million through 2026. How should we approach the incremental equity for each additional dollar? Should we assume a 50:50 capital structure, or are there still opportunities to monetize assets such as DTE Vantage projects or RNG, or is that no longer an option?

Well, I'll say that our strong cash flow generation and our strong balance sheet allow us to do this capital investment with that minimal equity. And we've said that $0 to $100 million kind of fits throughout our 5-year plan that you're at $100 on equity. A lot of that was because of the IRA and we have a lot of cash coming in from the IRA and the tax credits from the IRA. So we're confident in the capital we have in the plan that we're going to be able to stay within in the equity that we've talked about as well as keep our FFO to debt at that 15% to 16%.

I'm sorry, Shar, go ahead.

No, you go, Jerry. Sorry about that.

I want to emphasize that we appreciate the Vantage business. However, if a situation arises where we can reallocate some capital to enhance shareholder value, we are always on the lookout for such opportunities. If our equity needs were to change, it could make a significant difference, but currently, we don't foresee that happening.

So I guess you're kind of back to your normal course business plan now that we moved past '23. I know you have some execution items out there on the rate case side, but just how do you kind of feel about being able to kind of derisk '25 and beyond here with O&M and otherwise?

I can start again and my team can add to it. We've begun this year in a much stronger position without the $200 million of challenges we faced last year. We're deeply engaged in planning for 2025 and aiming to create opportunities to enhance our flexibility for that year. This is part of our usual planning process. When we feel positive about the current year, we focus more on the next year, and I can assure you we are well into it. We are feeling optimistic about 2025 and working on our plans. Regarding key milestones, both the gas and electric rate cases are coming up later this year and early next year. These cases are quite straightforward, focusing on capital, capital deployment, and improving the reliability and cleanliness of our gas and electric infrastructure. Much of what we are asking from our customers supports these investments, and we've had support for them in the past. Therefore, we are confident about our 2025 plans coming together well.

Appreciate that. And then I guess, I know Vantage, you kind of have this $15 million a year growth cadence in the plan, but it does seem that there are some tailwinds to that business from tax credits and then just stronger cash returns in general. Can you just any way to isolate how large that strength is relative to that assumption that you had in there? And I guess how would you kind of describe where it puts you overall in the business at the midpoint of that 6% to 8% range. Can you get above that range in these certain years? And how should we kind of think about that?

Yes, Nick, there are favorable conditions in our Vantage business due to tax credits associated with both RNG and our Custom Energy Solutions sector, which are driving good growth in that area as well. At the end of the year, we will discuss our plans for 2025 and beyond, specifically regarding how these tax credits will integrate into our strategy. We believe this provides us with greater flexibility and boosts our confidence in achieving the 6% to 8% growth as we progress through these years. Looking further ahead, we maintain strong confidence in sustaining that long-term 6% to 8% growth.

I want to revisit your comments regarding Vantage and the RNG assets and the possibility of portfolio rotation if the right opportunity arises. I'm curious about what prompted these comments. Have other parties shown interest in these assets, or what is your perspective on the current market for those types of assets?

Sure. We appreciate those assets as they have generated exceptional returns and strong cash flows for us, and we still foresee a healthy growth pipeline. We are consistently engaging with the market about value. Currently, according to our long-term value creation plan, we do not identify the chance to generate additional value beyond our expectations. While these assets are highly accretive, we are always looking for ways to enhance value within our long-term strategy. As of now, we do not see that opportunity, but if it arises, we will pursue it without hesitation. We are in constant discussions with the market, and there is a substantial amount of dialogue occurring in this environment.

Got it. That's very helpful there. And then I just want to come back and kind of on the back of some of your earlier comments here, talking about the renewable energy plan. Just wondering if you might be able to peel back a little bit more of the details here, what we should be expecting, what you're focused on for the upcoming renewable energy plan?

Well, what I would say that is our voluntary plan continues. I'll just replay this that we have one of the largest voluntary renewable development plans in the country based on the size of our company and that continues to exceed our expectations. We currently have about 2,400 megawatts signed and a 2,500 megawatt goal for the next 5 years. So you can see that we're getting very close to having to update that plan. So I would say that's one update that we will provide as we roll forward the next 5-year plan. In addition to that, if the IRP becomes more aggressive as we move forward beyond the current 5-year plan, so I think we'll see some tailwinds from that in the plan as well as we roll it together. So those are the opportunities that we see longer term and near term in renewable energy development plan.

One more Vantage question here. I was curious, are data centers or customer class that you go after? I'm thinking with custom energy solutions. Just wondering if there's any emerging growth opportunities there.

The short answer is yes, but I'll provide a broader perspective for DTE. Both our electric utility and Vantage are well positioned to pursue opportunities with data centers in our area and beyond. Focusing on Michigan, we have excellent access to water, favorable climate conditions, and power plant sites with ample land and grid access, which are very appealing to the data centers we are currently in discussions with. We are seeing significant interest and actively engaging in talks. Notably, changes in legislation that exempt sales and use tax are important; the Michigan House passed related bills in a bipartisan fashion, and they are awaiting Senate approval. The governor has expressed a strong willingness to sign these bills when they reach her desk. Therefore, we believe we are well situated in Michigan with both the electric utility and Vantage to offer on-site energy services. We are in the early stages of these discussions, but the potential is substantial.

That's helpful information. I was wondering if you could provide some context regarding the Attorney General's comments on the size of the electric rate case request. Do you have any early indications or thoughts on whether pursuing a settlement could be feasible and acceptable in this rate case?

Yes. I believe the Attorney General's comments align with our expectations. This rate case is primarily focused on our capital investment. We are directing our capital toward enhancing the distribution infrastructure, aiming to boost reliability and accelerate our transition to cleaner energy sources in the state. Specifically, we plan to reduce power outages by 30% and halve our outage duration over the next five years. The case is progressing as planned, and we have just submitted it. We are aware that the prehearing is set for tomorrow, which will help us better understand the timeline and allow us to gather input from the interveners and staff. The case includes significant investments in our infrastructure aimed at improving reliability and promoting cleaner energy generation. Additionally, there is a storm tracker included, costing around $65 million, based on a five-year average. It is a two-way tracker with a 50-50 sharing mechanism for any costs above or below the rates. The total revenue requirement is approximately $456 million, with a targeted return on equity of 10.5% and a 50-50 capital structure.

In terms of prospects for settlement, David, we've got a lot of interveners in this case, and we will do all we can to settle. But again, as Joi said, since this case is really primarily about capital deployment and well understood and well-known agendas for capital deployment. We're confident that even if it goes to its full course in terms of litigation that we will get a supportive outcome. I think the commission has a strong track record in that way and also the administration supports these investments and knows that they're extremely important for the state to pursue economic development and also provide more value to our customers and our citizens here in the state of Michigan. So we're feeling pretty good about how it's progressing.

Jerry, Joi, just on the discussion on the electric rate case settlement. You guys have discussed or in the past have talked about potentially a partial settlement with some parties and not unanimously. Is that something that you could pursue with this electric rate case?

We could, Durgesh. And certainly, we will. I don't want to place too much hope on a settlement, but we will do everything we can to reach one. As we experienced in our last rate case, we were unable to bring all parties together for various reasons, and that can happen sometimes. Our intention is to settle, but we are also confident that we will achieve favorable outcomes if a settlement is not reached.

Understood. I have a question regarding 2024. You seem quite confident about your numbers. Can you explain what level of contingency, if any, you have used? I know you start the year with a healthy level of contingency, but considering the milder weather in the first quarter, could you clarify how much of that contingency is still available?

Durgesh, this is Dave. As we started the year, we had some contingency plans in place for weather. We experienced weather challenges in the first quarter, as you noted. However, upon recognizing these weather conditions, we immediately took steps to recover and ensure we are well-prepared for the summer. We have successfully done this, and we are in a good position as we move into the summer, which is when we anticipate more significant weather events.

Excellent. I appreciate it. High confidence in 2024 as well...

If I could first ask that O&M question a little bit differently. You were pretty aggressive last year as soon as the year started, given the rate case and the mild winter weather, and obviously, some of that is partly reversed in the first quarter. I guess the way I would word it is, would you say you're back to normal O&M levels? Or are you still sort of catching up from last year? Or again, the last question I asked, are you in lean mode already given the mild winter 2024?

Andrew, I'll start by saying this year feels a lot different than last year. We had weather last year, too, but we also had the storm in the first quarter in the rate case. So we were in a very different position this year. And we did a lot across the company to achieve what we needed to do last year. Some of those reductions continue naturally into this year, but for the most part, those were all one-time savings from last year. So we're back into what I would say is our normal efforts on productivity and efficiency improvement, putting into place our lean and invest as needed as we continue to manage affordability and ensure we're going to deliver for our customers. So I'd say it's more into the normal DTE mode of productivity and efficiency improvements.

Okay, great to hear. I have a quick question about the negative earnings at Corporate and Other, which you noted are related to the timing of taxes. Was that in line with your expectations when you provided the full year guidance? Should that fully offset as the year progresses, or is it trending differently than you had planned?

That is all consistent with what we budgeted, and it will all reverse by the end of the year too.

I wanted to maybe dig a little deeper on the rate case and some of the kind of nontraditional aspects of it. I guess on the storm cost tracker, what do you think chances are that, that goes through? Or does this need to iterate through a couple more cases? If you had that in place last year, would that have been enough to put you in a position to have hit the original guide? And then on the IRM, how much is that ramping up from the last case? And do you think that can help space out cases in the future? Sorry, that was a bunch there, but any color would help.

Yes. So you're first question around the storm tracker, the $65 million. If that were in place last year, yes, that would have been helpful. Certainly, given the cost that we experienced in the first quarter and then throughout the balance of the year. Do I think that we'll get some support for it? I think there's a lot of conversation that happened early on. There is a good chance that we'll get the support. I think we're aligned with consumers in pursuing this type of tracker. And more will come in by way of testimony, we'll know here shortly once the schedule is set and we start to see the intervenor and staff testimony how much support we actually get. In terms of the IRM, what's in the IRM? For 2026, the IRM includes $530 million worth of capital. And then for 2027, it's $720 million worth of capital. Previously, we had filed for $62 million in 2024 and $290 million in 2025, and we're well positioned to execute on our '24 plan, and we certainly have plans for '26 and '27. Do I think that it will keep us out of future rate cases? I think it will have to continue to grow in order for us to achieve, I think, a delay in the rate case cadence that we have right now. And that will take us several years to arrive at that ramp.

Okay. Great. You covered everything. Just one quick question. Was the renewable plant outage at Vantage in Q1 planned or unplanned? If it was unplanned, is it resolved?

It was unplanned. It actually started last year and it is resolved. So it's coming back online for the rest of the year.

I was just wondering if you could maybe talk a little bit big picture rate with a pretty impressive investment plan that you have over the next few years, right? And I'm sure there's going to be more rate cases come into account for that. Longer term, what do you see as an offsetting factor, I guess, to customer bill increases here? Is that maybe industrial load that's growing and including data centers? Or some of the current automation you put in would cut on OpEx? Like if you could give us some sense on kind of like big picture, how would you, I guess, offset customer build pressures with that?

Well, I would say, Sophie, thanks for the question. I mean we are undertaking a historic transformation here at DTE. As we think about the way we deliver energy, our wires business, the way we're transforming the way we produce power over the next 5 years. And as you can see in our capital plan, we have $25 billion in our 5-year capital plan with more than 90% of it directed at our 2 utilities, and we also continue to transform the way we deliver natural gas, and that's well underway. Now in terms of affordability perspective, you can see we're extremely well positioned with our bills to our residential customers being well below the national average. Our goal is to maintain that position. And the way we maintain that position is, as you described, a lot of these investments are pointed at assets that will reduce costs, for example, as we continue to improve reliability in the electric wires business. We'll start to see our trouble costs and storm costs that fundamentally will start to decline. And that will help finance this as well. And that's just one example. Even the transition from coal to natural gas and renewables, that's creating significant cost reductions, operating cost reduction. So a lot of our CapEx will yield lower operating costs, which will obviously be transferred to the benefit of our customers. In terms of revenue growth, we see several opportunities as we look forward, a lot of discussion in the industry about data centers. Certainly, that will help as we start to land those and we need enabling legislation to get that done. We also see EVs even though they've slowed down a bit, we're still connecting 1,000 EVs a month or more which is encouraging. And we see that growing, and we see the big 3 here working heavily to bring new models to bear. So I think we'll see that help finance some of these investments. So I would say 2 things, just to summarize, very significant capital agenda, $25 billion over the next 5 years, $50 billion over the next 10 years. So if you're an investor of DTE, you should be really excited about long-term investment opportunities and the fact that a lot of this investment will help moderate bills over time.

That's very helpful. I also wanted to ask you a quick question on Vantage, right? So I guess to the extent you keep in this business, how should we think about the size of it relative to the utility businesses that you have? Is there a certain kind of like contribution to earnings that you want to keep it under like not let them go beyond? Like what is your thinking there?

Yes, our investment strategy focuses on selecting high-quality investments that come with low risk and high returns. We have been successful in this approach. However, we aim to keep the earnings contribution from these investments at 10% or less as we move forward. Our utilities are growing rapidly, which allows us the opportunity to continue expanding Vantage as well.

So just wondering, in the past, I remember there was always this discussion about your approach to coal plant retirements and reliance on the grid versus self-generation. It was always of an impression that you guys were long power. I hope that's still the case. So just 2 things. As the long growth accelerates and as we are more cognizant of the importance of dispatchable resources, is there a chance that you're going to make any changes to generate? And number two, as I said, I'm assuming your long power and that could sort of attract data centers, would that simply improve affordability of electric bills for existing customers? Or would it be actually incremental to earnings? Again, I feel like we're seeing this pickup in the long growth that other utilities without any necessarily comment on increase in earnings. And so I'm just wondering how you envision it given your generation footprint.

Great question, Angie. I'll address them one at a time. Regarding reserve margins, when we submitted our last Integrated Resource Plan, we did so with sufficient reserve margins as we proceed with the retirement of our coal plants. We've successfully constructed a modern combined cycle facility that is now operational as part of our coal plant retirement strategy. Additionally, we are converting the Belle River power plant from coal to natural gas, which will continue to operate as a dispatchable plant, expected to be completed in 2025 and 2026. We've also started investing in battery storage to enhance our short-term dispatchability. This strategy aligns well with our portfolio goals through 2028. As we approach the next phase of our Integrated Resource Plan, which aims to fully exit coal by 2032, we will need to develop more dispatchable generation. We're exploring current technologies that allow us to utilize natural gas with carbon capture and storage, as highlighted in our plan. We anticipate increased dispatchable generation as we transition away from coal. The new plant will also be capable of using hydrogen if it becomes a feasible fuel resource. Regarding growth, if demand accelerates, particularly from entities like data centers that operate continuously, we will need to establish more reliable 24/7 dispatchable generation and renewable energy resources. This mixed approach may expedite our next Integrated Resource Plan if demand increases. As for our customers, we anticipate that our investments will ultimately pay for themselves and potentially reduce electric bills. This is our initial stance, and we believe it's very achievable. These investments will also enhance value for our investors since they will be added to the rate base and yield typical returns. Overall, we see this as advantageous for everyone involved.

And based on your discussions, when would this incremental load potentially materialize? Are we talking like 2028 and beyond? I'm just wondering how soon we could see the earnings impact?

Angie, it's too early to tell. These conversations, as I mentioned earlier are very early. They are sizable conversations in terms of the load that we're talking about. And again, we're really well positioned. But in terms of timing, we haven't gotten that far just yet. But I think that will come. I think the key catalyst here in Michigan will be this legislation that needs to pass on the sales and use tax. That's a big deal for the data centers that are considering Michigan and considering investing at some of the sites that we put in front of them. That should happen. We expect that to happen hopefully this summer. But with an election year, it is a volatile year, as you know.

You addressed most of my questions and covered many of the topics I wanted to discuss. I noticed that residential commercial demand seemed to be increasing. I realize this is a relatively small quarter for that. Is there anything noteworthy regarding your plans or anything significant about the increase in residential commercial demand?

Yes, we did see residential up quarter-over-quarter. I would say that for the year, we're expecting it to come in on plan and probably pretty well consistent with last year. We have a lot of energy efficiency we do and that and the growth kind of work together and will be fairly flat to last year.

Well, thank you, everyone, for joining us today. And I'll close by saying that we're feeling really confident about 2024 and of course, our long-term plan beyond that in terms of providing value for our customers and for our investors. Have a great morning. Stay healthy, and stay safe.