WEC Energy Group Inc (WEC) — Q2 2021 Earnings Call Transcript

Excuse me. I'd like to interrupt just for a minute. I'm Peter Feigin, President of the NBA Champion Milwaukee Bucks. And I can tell you firsthand in a big way that you can't have a truly great NBA team without an incredible energy company to power you up. So, I'm proud to introduce a personal friend, one of the terrific minority owners of the Bucks, and the Chairman of one of the best energy companies in America, Gale Klappa. Go Bucks and go WEC.

Oh, my goodness, wonders never cease. Peter, thank you so much for dropping by, and congratulations from all of us to the world champion, Milwaukee Bucks. And I'm not sure I can top all of that, but no pun intended, let's give it a shot. Good afternoon, everyone. Thank you for joining us today as we review our results for the second quarter of 2021. First, I'd like to introduce the members of our management team. Here with me today, we have Kevin Fletcher, our President, and CEO, Scott Lauber, our Chief Operating Officer; Xia Liu, our Chief Financial Officer, and Beth Straka, Senior Vice President of Corporate Communications and Investor Relations. As you saw from our news release this morning, we reported second quarter 2021 earnings of $0.87 a share. Xia will provide you with more details in just a few minutes. But given our strong performance through the first half of this year, we're raising our annual guidance. The new range is $4.02 a share to $4.05 a share. And our expectation is that we will reach the top end of that range. As always, this assumes normal weather for the remainder of the year. Now, as we look across our business lines, I'm pleased to report that every segment is performing at a high level. Our Companies continue to deliver superior reliability and customer satisfaction. The solid economic recovery in Wisconsin with commercial and industrial expansion gives us confidence in our projected sales growth. Our balance sheet is strong. We have no need to issue new equity to fund our ESG progress plan. And our plan is well on track for both our regulated and our infrastructure segments. You may know we expect our ESG progress plan to drive average annual growth in our asset base of 7%. At the same time, it's bolstering our sustainability as we invest in renewable energy and state-of-the-art technology. A good example of our progress is the announcement we made just a week ago about a $400-million investment in the Sapphire Sky Wind Energy Center. Scott will provide you with more detail on this development in just a moment. But I'll tell you that the offtake agreement is with one of the largest high-tech companies in the world, and we expect the project to meet or exceed all of our financial metrics. We've also made great progress on our plan to build 1,800 megawatts of regulated solar, wind, and battery storage. This carbon-free asset will play a significant role in improving our environmental footprint. Recall that back in May, we set near-term goals that are among the most ambitious in the industry: reducing carbon emissions by 60% from our electric generation fleet by 2025 and achieving an 80% reduction by the end of 2030, both from a 2005 baseline. Going ahead, that we now expect only 8% of our regulated electricity supply to come from coal by the end of 2030. We believe we can accomplish these targets with the retirement of older, less efficient units, operating refinements, and the use of existing technology as we execute our ESG progress plan. Of course, our long-term goal remains net-zero carbon emissions from our generating fleet by 2050. And our ongoing effort to upgrade our gas delivery networks and introduce renewable natural gas into our system will help us achieve another aggressive goal, net-zero methane emissions by 2030. You can learn more about these goals and much more in our corporate responsibility report, which we published just last week. And now let's switch gears a bit and take a quick look at our economic outlook. We're still seeing the positive effects of a strong recovery. Wisconsin's unemployment rate, in fact, stands today at 3.9%. Folks, that's 2 full percentage points better than the national average. As I mentioned, business continues to grow with new projects across the region. For example, Milwaukee Tool is expanding its operations again here in Milwaukee. If you're not familiar with Milwaukee Tool, the company has been a leader in the development of battery-powered cordless tools. It now has become the world's number one producer of tools for professionals in the construction trades, utility sector, as well as for auto mechanics. And now, Milwaukee Tool is redeveloping a vacant downtown office tower to provide space for 1,200 new employees over the next 5 years. In addition, a number of other economic development projects are in the pipeline, and we'll be covering those with you in future calls. On that note, I'll turn our call over to Scott for more detail on our sales results for the quarter, as well as an update on our infrastructure segments. Scott, all yours.

Thank you, Gale. We continue to see customer growth across our system. At the end of June, our utilities were serving approximately 4,000 more electric customers and 18,000 more natural gas customers compared to a year ago. Retail electric and natural gas sales volumes are shown on a comparative basis, beginning on Page 13 of the earnings packet. Overall retail deliveries of electricity, excluding the iron ore mine, were up 7.1% from the second quarter of 2020 and on a weather-normal basis, were up 5.8%. We are encouraged by the economic rebound we are seeing in our service territory. For example, small commercial and industrial electric sales were up 10.4% from last year's second quarter, and on a weather-normal basis were up 9.2%. Meanwhile, large commercial and industrial sales, excluding the iron ore mine, were up 14.8% from the second quarter of 2020. And on a weather-normal basis, were up 13.9%. Natural gas deliveries in Wisconsin were down 4.9%; this excludes gas used for power generation. On a weather-normal basis, natural gas deliveries in Wisconsin grew by 2.5%. Overall, our growth continues to track ahead of our forecast as the economy continues to open up. Turning now to our WEC Infrastructure segment. As Gale noted, we have agreed to acquire a 90% ownership interest in the Sapphire Sky Wind Energy Center. The project is being developed in McLean County, Illinois by Invenergy. The site will consist of 64 wind turbines for a combined capacity of 250 megawatts. We expect it will go into service late in 2022. The project fits our investment criteria very well. We plan to invest $412 million with a 90% ownership interest. We now have eight wind projects announced or in operation in our Infrastructure segment. This represents approximately $2.3 billion of investment. We expect to invest an additional $1.1 billion in this segment over the remainder of our 5-year plan. Our Jayhawk Wind Farm is projected to go into service by early next year, and our Thunderhead Wind investment is now projected to go into service in the first half of 2022. These timelines have been factored into our forecast. In case you're wondering about the impact of inflation on these projects, to date, we have not encountered any significant inflationary pressure. Remember that we primarily invest in turnkey projects with developers. So, we are seeing no reduction of returns. With that, I will turn it over to Kevin for an update on our utility operations.

Thank you, Scott. Touching on some recent developments in Wisconsin, I'm pleased to report that our Badger Hollow 1 Solar project is nearing completion and is producing test energy. As you may recall, we own 100 megawatts of this project in Southwest Wisconsin and Madison Gas and Electric owns the remaining 50 megawatts. This is our second large-scale solar project, and part of our plans for more than triple our renewable energy between 2021 and 2025. We expect the next phase of the project, Badger Hollow II, to achieve commercial operations next year. Now, for a few regulatory updates. Recall that after reaching an agreement with the major customer and environmental groups, we filed a request with the Public Service Commission to forego a rate base for our Wisconsin utilities this year. We expect a decision in the weeks to come. And we're pleased that the Commission has approved pilot programs for electric vehicle charging in our Wisconsin service areas. For these programs, we plan to install charging equipment and electric distribution infrastructure. This is the first step in our effort to promote affordable charging options for electric vehicles. And we also have an update on the rate reviews at two of our smaller utilities. In Illinois earlier this year, North Shore Gas requested a rate increase primarily due to the significant capital investments we have made since the last rate base in 2015. Recently, the administrative law judge on the case issued a proposed order recommending a $4.2 million rate increase on a 9.67% ROE and a 51.6% equity component. We expect the commission's final decision by mid-September. Finally, in Michigan, I'm pleased to advise you that we have reached a settlement with all parties to conclude our rate review for Michigan Gas Utilities. This settlement stipulates a 9.85% return on equity and a revenue increase of $9.25 million with an equity layer of 51.5%. We expect the commission's approval by the end of the third quarter. We have no other rate cases pending at this time. And with that, I'll turn it over to Xia.

Thank you, Kevin. Our 2021 second quarter earnings of $0.87 per share increased $0.11 compared to the second quarter of 2020. Our favorable results were largely driven by higher earnings from our utility operations. Our regulated utilities benefited from warmer-than-normal weather, recovering economy, continued execution of our capital plan, and our focus on operating efficiency. The earnings package put on our website this morning includes a comparison of second-quarter results on page 17. I'll walk through the significant drivers. Starting with our utility operations, we grew our earnings by $0.09 compared to the second quarter of 2020. First, continued economic recovery from the pandemic drove a $0.06 increase in earnings. This reflects stronger weather-normalized sales, as well as the resumption of late payment and other charges. Also, rate relief and additional capital investment added $0.04 compared to the second quarter of 2020. Lower day-to-day O&M contributed one penny and all other factors resulted in a positive variance of $0.02. These favorable factors were partially offset by $0.04 of higher depreciation and amortization expense. I'd like to point out that quarter-over-quarter, the impact of weather was flat. Overall, we added $0.09 quarter-over-quarter from utility operations. Moving on to our investment in American Transmission Company, earnings increased $0.02 compared to the second quarter of 2020. While we picked up a penny in the current quarter from continued capital investment, this was more than offset by a $0.03 benefit recognized in the second quarter of 2020, related to a FERC order. Recall that this order allowed ATC to increase its ROE from 10.38% to 10.52%, retroactive to November 2013. Earnings at our Energy Infrastructure segment improved one penny in the second quarter of 2021 compared to the second quarter of 2020. This was mainly driven by production tax credits related to wind farm acquisitions, partially offset by less than projected wind resources. Finally, we saw a $0.03 improvement in the corporate and other segments. Lower interest expense contributed $0.02 quarter-over-quarter. We recognized a $0.03 gain from our investment in the fund devoted to clean energy infrastructure and technology development. These positive variances were partially offset by a reduction of $0.01 in rabbi trust performance and $0.01 in taxes and others. In summary, we improved on our second quarter of 2020 performance by $0.11. Now, I'd like to update you on some other financial items. For the full year, we expect our effective income tax rate to be between 13% and 14%. Excluding the benefit of unprotected taxes flowing to customers, we project our 2021 effective tax rate will be between 19% and 20%. As in past years, we expect to be a modest taxpayer in 2021. Our projections show that we will be able to efficiently utilize our tax positions with our current capital plan. Looking now at the cash flow statement on Page 6 of the earnings package, net cash provided by operating activities decreased $153 million. Our increase in cash earnings in the first 6 months of 2021 was more than offset by higher working capital requirements. Recall that despite the natural gas costs seen throughout the central part of the country this February, coupled with higher accounts receivable balances, contributed to this increase in working capital. We were able to improve our working capital position in the second quarter. With normal collection practices underway in our major markets, we expect working capital to continue to improve throughout the remainder of the year. Total capital expenditures and asset acquisitions were at $1.1 billion for the first six months of 2021, a $93 million increase compared with the first six months of 2020. This reflects our investment focus in our regulated utility and energy infrastructure business. On the financing front, we continue to find opportunities to lower our interest costs. In fact, in June, we refinanced $300 million of debt at Wisconsin Electric, reducing the average coupon of these notes by over 1.2% and extending the maturity to 2028. In closing, before I turn it back to Gale, I'd like to provide our guidance for the third quarter. We are expecting a range of $0.72 to $0.74 per share for the third quarter. This accounts for July weather and assumes normal weather for the rest of the quarter. This also takes into account the timing of our fuel recovery and the costs associated with major storms that impacted our system last week. As a reminder, we earned $0.84 per share in the third quarter last year. This includes an estimated $0.05 of better than normal weather. And as Gale mentioned earlier, we are raising our 2021 Earnings guidance to a range of $4.02 to $4.05 per share with an expectation of reaching the top end of the range. This assumes normal weather for the remainder of the year. With that, I'll turn it back to Gale.

Xia, thank you very much. In addition to raising our annual guidance, we are reaffirming our projection of long-term earnings growth of 5% to 7% a year with a strong bias toward the upper half of that range. And finally, a quick reminder about our dividend. As you may recall, in January, our Board of Directors raised the quarterly dividend by 7.1% to $0.67 a share. We continue to target a payout ratio of 65% to 70% of earnings. We're in the middle of that range now. So, I expect our dividend growth will continue to be in line with the growth in our earnings per share. Overall ladies and gentlemen, we're on track, focused on providing value for our customers and our stockholders. Operator, we're ready now to open it up for the question-and-answer portion of the call.

Hey, good afternoon guys. It's actually James for Shar. Sorry, Gale.

Oh hey, how you doing?

Good, good. Thanks for taking my questions.

Well, what have you done with Shar?

He's still in his bunker in New Jersey.

There you go. Excellent. Okay. Great.

So, I guess just first on the policy side on Illinois, it sounds like negotiations on the comprehensive package hit an impasse recently. I realize it's not heavily focused on gas, but you guys are still involved. Do you guys have any updated thoughts on the prospects for something to get done in the coming weeks?

Well, I think we always thought that getting something done reasonably quickly was a very long shot in Illinois. The one thing that I think stands out post the public discussion of the impasse between the parties is that both the Governor and the Senate majority leader have essentially urged the parties to continue talking. We'll see what happens. But again, very little impact on gas distribution companies in Illinois. This is a major focus if you, as you know, particularly on Exelon and on nuclear power plants. Pass or not, agreement or not, there's really no material impact on our company, on Peoples Gas or North Shore Gas in Illinois.

Gotcha. Thanks.

Thanks.

A little closer to home on the Wisconsin side. WPL's recent settlement had an interesting proposal for the recovery on their retiring Edgewater plan. Have you guys gotten a chance to dig into that, and could that be a template for the balance of the non-power the future fleet, which I think it's just transitioning and Columbia at this point?

Well, we're very aware of the approach that Alliant took, and could it be a template for going forward? It certainly could be. It's an interesting approach. I think it's a balanced approach. And certainly, something we'll be taking a look at. As you know, we're planning to retire the older units at our Oak Creek site. Units 5, 6, 7, and 8. 1960s vintage units, we're planning to retire those. We've announced the retirements in 2023 and 2024. We have plenty of time to continue to work with all the parties involved. But yes, it was a very interesting approach to a settlement and one that really could make a lot of sense going forward.

Got it. That's all I had. Thanks, and congrats on the results and the championship.

Thank you. Appreciate it very much. Tell Shar to behave, okay?

Greetings Julien.

Hey, hey, how are you?

We're good. How about you?

Congratulations, everything is going quite well. Thank you. Congratulations on the recent win here. It must be exciting.

It's been wonderful for the city and the region. I'm really happy for the team and for you. I heard you proposed during Game 6; is that true?

So off of the heading, right? No. Recently, that I can confirm that. It's been exciting. Thank you. Maybe to cut to other exciting news here you guys, if I look at '21 guidance relative to where you are year-to-date here, you're ahead $0.30. How are you thinking about O&M in the back half of this year? I know you guys like to push and pull O&M to ensure a linear trajectory here. But as you think about the relatively conservative nature of your guidance, can you comment a little bit on where you stand on the back half this year?

We have several maintenance projects scheduled for the latter part of the year. Additionally, as Sean noted, we incurred approximately $6 million to $7 million in extraordinary repair costs last week due to severe storms that affected over 100,000 customers in Northern Wisconsin, which included six tornadoes stretching between the Western Milwaukee suburbs and Madison. We also faced significant costs in July that impacted the guidance range that Xia provided for the third quarter. However, we have a number of projects planned for the fourth quarter regarding operations and maintenance. I still anticipate that our regular operations and maintenance expenses will be lower for the year, but we have a strong opportunity to carry out some effective maintenance that will benefit us in 2022.

Right. Excellent. And perhaps just to parse that statement a little bit. You still leave it to be down, but your previous expectation is 2% to 3%?

That was our previous expectation, and certainly a goal we could hit. But as we look at some of the extraordinary storm costs and other work, again, we believe it will be down. It may not be down 2% to 3%, but that doesn't mean that the trajectory is still long-term, not in place. It still is. It's just a matter of looking at a 6-month period if you will.

Got it. Excellent. And lastly, can I just ask, obviously, you're pretty excited about sales, some of the leading indicators of what sales might do. Can you comment a little bit preliminarily on how you're thinking about trends in '22 even? I mean, obviously '21 retail sales coming in 1% below '19 on the normalized basis and sets up pretty nicely here as you think about it. But I'd be curious on how you would characterize some of these larger projects, et cetera, coming in.

Many of the larger projects that we've been referring to, the larger economic development projects, are now under construction. We wouldn't necessarily expect a big uptick in 2022 from those projects, although there will be some. But really, it's 2023 and 2024, and beyond, where we'll see the big impact from some of the economic development projects. But I would say as we look at the landscape, again, you go back to the tailwind of the economic recovery in Wisconsin, which has been very strong. Scott detailed the big uptick in large commercial and industrial demand. And Scott, I think one of the more encouraging things to me on the natural gas side of the business is we continue to see very strong customer growth.

Yeah, that's exactly correct, Gale. We're seeing good customer growth, specifically on the gas side. But on the electric side too, we're hooking up a lot of new services on both gas and electric in Wisconsin and Michigan and Minnesota on the gas side also, so good growth. And the small commercial and industrial really did well this quarter. But remember, it was compared to the first quarter of the pandemic last year, but very happy where the sales are right now.

I do think we have to see how the variant continues to spread. Many companies were planning on a significant return to the office, if you will, in September. We and others have now pushed that off till October at the earliest. So that could have some short-term impact, but overall, as Scott said, we feel very, very positive about our projections for demand growth for both gas and electricity.

Excellent, alright well thank you very much. Take care, see you soon.

You too. Thank you, Julien.

Hey, Durgesh. How are you today?

Hey, Gale. Congrats on both fronts, sports and a great quarter. Just two questions from me. First, for Xia. On the $0.03 gain on Clean Energy Fund, could you elaborate on what that is?

We have a very small investment in a fund that focuses on development stage companies in the renewable energy and charging infrastructure sectors. It's a modest amount, around $30 million, but we're pleased to see the gain.

Got it. Thanks for the information. I wasn't aware that you had that investment. By the way, Gale, do you have any updates on the Wisconsin rate case proceeding and your request to delay it? I assume you haven't received any feedback from the commission yet, correct?

Yes, we have seen the Commission staff memo on the subject, and typically, the Commission will vote shortly after the publication of the staff memo on matters like this, usually within a few weeks. Therefore, I expect that within a few weeks, we will have a committee vote on the stay-out proposal. Overall, the staff memo was acceptable.

Excellent. Congrats again here on back-to-back execution for many years and again this quarter. Thanks.

Thank you, Durgesh. Appreciate it.

Hey, everyone. Congratulations to Gale and the City of Milwaukee on winning the NBA title. I wish my Grizzlies could achieve something like that; I’m rooting for them. I have a question regarding your 5-year capital budget, especially since you're just a couple of months away from providing investors with an update. It seems that the projections for years 4 and 5 are lower than those for the first three years. If that trend continues, it means you would be generating free cash flow. However, if you had to make a prediction at this point, considering that years 4 and 5 are quite a way off, do you think this will happen? If not, what factors could potentially increase the projections for years 3 through 5 beyond what you outlined last November?

Great question, Michael. Historically, in our 5-year capital plan, we tend to see years 4 and 5 taper off slightly. This is part of our approach, as we prefer not to include many undefined items in our plan. Therefore, we typically present concrete proposals for the first 3 years based on what we know will be approved and built. In all the time I have been here, years 4 and 5 have consistently shown a downturn compared to the first 3 years. To directly answer your question, I don’t expect to see a decline in years 4 and 5 when we update our capital plan in early November. I would be surprised if that were the case, particularly given the strong investment opportunities ahead of us. As for what we might focus on, we will emphasize investing in renewables and battery storage, upgrading distribution, and connecting new customers. It will be comprehensive, and we have a significant momentum as we push forward with our ESG initiatives and ambitious environmental targets. I wouldn't be overly concerned about years 4 and 5 right now; those categories will certainly be filled. Scott, do you have anything to add?

I think you're exactly right, Gale. We've always had a tendency to be a little bit lower on those other years. And as Kevin mentioned in his prepared remarks, we're just seeing the start of the electric vehicle pilot we have. So, we already got some interest in that, and then we don't even have the order yet. So, I think there's a lot of opportunities ahead on the generation and the distribution side.

Got it. And then one follow-up. Gale, you made a comment about inflation. What are you seeing in terms of cost input for things like gas distribution mains, or other equipment; things like copper, et cetera? And even on the regulated side of the business, which is a larger part of the business, how does that impact your CapEx projections?

Currently, copper prices were higher 4 to 6 months ago but haven't changed much since then. We are not observing a significant impact at this moment. This is partly due to how we manage our infrastructure segment, where we have established prices with developers that historically allow us to secure favorable pricing. Therefore, on the infrastructure front, we haven't noticed any substantial effects. On the regulated side, most of the projects we have are already in the procurement phase, so we aren't experiencing much inflationary pressure at this point. However, we have seen some inflationary effects in natural gas commodity prices, which recently exceeded $4 per million BTU. With the reduction of the natural gas surplus across the country, elevated prices are expected for the upcoming winter, and this is where we are beginning to see indications of inflation. Looking ahead, it's uncertain how persistent the inflation figures will be. I often reflect on Milton Friedman's view that inflation is primarily a monetary phenomenon. We monitor the money supply growth, which has started to slightly decline. Although it's still significantly high, this tapering gives me some optimism that while we might encounter increased inflation rates over the next year, it could eventually return to a more normal level.

Got it. And hey, one last question, and this is just a modeling one. Can you remind me about the in-service dates for Thunderhead and Jayhawk?

Yup. Scott?

Yes. Thunderhead is going to be in the first half of next year. And then Jayhawk should be probably in the first quarter.

Got it. So, did both of those move slightly from the original in-service dates?

Well, Jayhawk, maybe a month or two, no big deal. Thunderhead we ran into a problem with something called the American burying beetle, which has now been removed as I understand it from the endangered species list. Actually, the construction on Thunderhead is about done. It's a matter of the substation completing construction now that all of that has been worked through in terms of moving forward post the issue with the American burying beetle.

Got it. Thank you, guys. Much appreciated.

Right. You’re welcome, Michael. Thank you for your questions.

Hello, Jeremy. How are you today?

Good afternoon. Thanks for having me.

It's been nice being here. Now, go right ahead.

I want to follow up on the recent wind announcement, which indicates that roughly half of the planned infrastructure investments have been identified. Are there any timing or tax factors that might hinder further acceleration? Additionally, how do you perceive the market environment considering the broader infrastructure discussions in Washington, D.C.?

We have strategically timed the size and timing of our infrastructure segment investments over the past five years to align with our tax position and our ability to capitalize on production tax credits. However, we're open to modestly accelerating these investments. We're currently ahead of schedule with high-quality projects. There's been much discussion in the industry about lower returns, backlogs, and delays, but our pipeline of potential projects remains strong. We're collaborating with developers who have proven track records and we see no reduction in the quality of the projects we're pursuing for our infrastructure segment. More importantly, we do not see a significant decrease in returns. In fact, both Scott and I mentioned that Sapphire Sky has the potential to be one of our best return projects. Overall, we are focused on high-quality projects with strong developers, and we are very optimistic about our pipeline. I hope this answers your question.

That was very helpful. Thank you for that. Maybe just shifting gears a bit here, and given the elevated market attention on coal generation. And when you think about power, the future coal here, just wondering if you could update us on how you balance local reliability needs with this backdrop and maybe the potential to repower the asset with natural gas. And how near-term could this potentially be if you decide to go in that direction?

That’s a great question. I’ll have Scott share his views on this as well. I want to highlight a couple of quick points. The retirement of all the core 5 units has already occurred in our system. After 2025, very little coal-fired capacity will remain. Regarding the new units at our Oak Creek site, they are some of the most efficient thermal power plants globally. It’s important to separate the value of these units from their fuel source. The new Oak Creek units are well-positioned on the transmission grid in the Midwest and are crucial for reliability in not just Wisconsin, but the broader Midwestern region. We built these units with some flexibility; in fact, there is natural gas available on site. We have successfully co-fired these units with both coal and natural gas multiple times. Additionally, it is technically feasible to convert the units from coal to natural gas in the future. We are currently assessing the engineering and cost aspects of this potential transition. Scott, do you have anything to add?

No, that's the exact right tail. And when you think about the reliability, as you brought up the reliability of the system, and when we look at it and when we talk about 8% of energy from coal in 2030, that still gives a potential for about 17%, 18% of capacity as needed on that really, really peak day to make sure we have the energy that's needed. And Gale, that is exactly right. We can look at potential conversion there in the future. We really have to look at how do we keep the reliability and affordability and clean energy in the system?

And one other point, our goal for 2030 of 80% reductions in carbon does not assume any conversion of the new Oak Creek units away from coal to natural gas. So that just gives you a sense of how effective we can be in continuing to reduce CO2 even with very efficient coal-fired units at the new Oak Creek site still in place.

Got it. Sounds like nice optionality going forward there.

And I think that's a great way to describe it. We have a lot of options with a very key asset again to reliability for the region.

Great, thanks. And just one last one if I could sneak it in here. Thanks for the update on the Wisconsin rate case process there. Just wondering, are you focused on any other regulatory items locally in advance of filing next year?

No, it's pretty calm. I mean, it really is. And Kevin described the ALJ proposed order at North Shore Gas, one of our smallest Companies in Illinois, just agreed to a settlement of a rate case in Michigan for Michigan Gas Utilities. But other than that, and the normal course filings, it's pretty steady as she goes.

Yeah. The Commission will continue to look at the solar projects we have on the solar and battery projects so we can get approval on those and start implementing that.

Yeah, that's a good point. We've made several multiple filings, if you will, over the course of the first half of this year, to move forward with that 1,800 megawatts of wind and solar and battery storage regulated for Wisconsin. That's going well.

Greetings, Sophie.

Hi, this is actually signed details for Sophie. Thanks for taking my question, though.

Sure.

About the Oak Creek and Columbia units that you plan to reach higher, can you tell us if they're part of the regulated utility on the unregulated part?

No, those are all part of our regulated asset base in Wisconsin.

As you consider retiring more units in the future, does it matter which one you choose to retire first? I'm trying to understand the factors that are taken into account when selecting units for retirement.

Well, that's really a very simple answer, and that is, as we look to retire additional capacity, we look first and foremost at older units that are less efficient. So, it's all driven by age and efficiency, what kind of capital it might take to keep those units alive. It's really not a complicated formula. We look at age, efficiency, and whether or not it makes any sense from a capital investment standpoint to spend the dollars that would keep those units alive. And of course, as I mentioned, the next units to be retired on our system would be the older Oak Creek units. They've been part of the Wisconsin retail rate base since the 1960s. That's units 5, 6, 7, and 8 at our older Oak Creek site. And then, we're a joint owner with Alliant for the Columbia Units 1 and 2. Scott, those would retire in the same timeframe, correct?

Correct, 2023 and 2024.

Okay. Great. Thanks so much.

You're welcome.