Operator:

Good morning. My name is Eric and I will be your conference operator today. At this time, I would like to welcome everyone to the DTE Energy Second Quarter 2024 Earnings Conference Call. [Operator Instructions]. After the speaker's remarks there will a question-and-answer session. [Operator instructions]. I would now like to turn the call over to Matt Krupinski, Director of Investor Relations. Please go ahead.

Gerardo Norcia:

Thanks Matt and good morning everyone and thanks for joining us. I hope everyone is enJoiing the summer and staying healthy and safe. This morning I will discuss how DTE is on track to achieve our targets this year and highlight achievements we have made through the first half of the year as we continue to deliver for all of our key stakeholders. Joi will provide you with an update on our capital investment agenda and a great work we are doing to enhance reliability as we continue to build the grid of the future, 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 four. We had a very strong first half of 2024 and we are in a great position to deliver on our targets across the company this year. Our success is a result of our commitment to deliver for our customers and our communities and as I've said many times, this starts with the efforts of our highly engaged employees. As I mentioned earlier, this year the engagement of our team was recognized by receiving the Gallup Great Workplace Award for the 12 year in a row. We were also recognized with the Best Employers award for excellence in health and well being. This award recognizes companies for their commitment to advancing employee well being through innovative initiatives identifying the importance of health equity and an effective culture of employee engagement. I am proud of our team for receiving these awards and being recognized for our outstanding engagement. This engagement is why I am confident that we will continue to deliver for our customers and our communities. On the customer front, our team has done great work to support our customers through the few storms we face this year. Providing our customers with safe and reliable service is paramount to our company's success, which is why one of our key focus areas in 2024 is improving our storm restoration process and we have made great progress on that front as evidenced by achieving some of our fastest restorations for the storms that we have had this year as we work towards restoring all customers within 48 hours after a storm. We also had a period of extreme heat where temperatures in our service territory hit 90 degrees for six consecutive days last month. This was one of the longest heat waves that we have had at DTE in the last 20 years. I'm very proud that our system held up extremely well under these conditions, but I'm even more proud of our team's efforts to take care of our customers in a number of ways. During this time, we distributed hundreds of fans to nonprofit agencies to keep customers cool and delivered nearly 100,000 bottles of water to 30 community partner agencies across southeast Michigan. In addition, the DTE foundation partnered with United Way to provide 500 rides to cooling centers to help keep customers safe and to complete nearly 3000 wellness checks for our most vulnerable customers as the heat intensified. We take pride in supporting the communities where we live and serve and we are recognized for our service as DTE is honored to be named to the Civic 50 for the seventh consecutive year. This award, presented by Points of Light, recognizes the most community minded companies in the nation and it is a testament to our team to receive this award. I'd also like to highlight the expansion of our Energy Efficiency Academy, which is DTE's workforce development program that supports the growing demand for energy efficient home repairs in Detroit, while also building a local workforce that further benefits the community. Building on the academy's successful first year, we are expanding with more partners in Detroit as well as planning an advanced training program in the Grand Rapids area. This has been a great program to help those interested in working in the clean energy industry and a majority of the participants have secured full time employment. Financially, we are in great position to deliver on our earnings targets this year. Our long term operating EPS growth rate remains strong at 6% to 8% with 2023 original guidance as the base for this growth and we will continue to have a strong balance sheet and credit ratings to support our customer focused capital investment plan. We remain committed to deliver premium shareholder returns that our investors have come to expect and importantly, our strong financial health, along with the constructive regulatory environment in which we operate, supports the significant investments we are making for our customers. It allows us to invest more than the cash we generate a from our operations to further improve reliability and transition to cleaner generation. Again, the ability to invest above our cash flows is only made possible by constructive regulatory outcomes. Let's turn to slide five to highlight some of the achievements across our portfolio. As I mentioned, we are on track to achieve our full year guidance in 2024 and we are positioning ourselves continue to deliver strong results in 2025 as well as growth our long term plan. On the regulatory front, we continue to progress toward constructive rate case outcomes for both DTE electric and DTE Gas. Our electric rate case outlines the customer focused investments we need to make to build a smarter, stronger, more resilient electric grid of the future for our customers and to further our transition to cleaner generation. This filing underpins the next important step in our long term investment plan to achieve grid reliability and transform to cleaner generation while maintaining affordability for our customers. We expect intervener testimony in the electric case tomorrow and we look forward to working together with all the parties ahead of the scheduled final order in January. At DTE Gas, our rate case filing supports the important investments necessary to continue to renew our gas infrastructure, which will further minimize leaks and reduce costs. We are in discussions with intervening parties prior to a final order scheduled in November. We continue to make significant strides in our reliability efforts this year and our customers are seeing the benefits of this work. Joi will provide some detail on our progress in this area, but I'll just mention the efforts we are making in automating our electric system. We installed a couple hundred automated re-closers last year and we are ramping up the effort this year. We'll move from the hundreds to the thousands in a very short time as we work to automate our entire system. To put the impact of the reclosers into perspective, the operation of the devices already installed have saved over 250,000 customer minutes of outages this year alone. This demonstrates the significant impact these can make at improving reliability for our customers. To support our advancements in cleaner generation, last month we broke ground on the battery energy storage system that we highlighted on the first quarter call. This project is a 220 megawatt system at the site of the former Trenton Channel Power Plant and is expected to be operational in 2026 and will be the largest standalone battery energy storage project in the Great Lakes region. The project supports our integrated resource plan and Michigan's new statewide energy storage target, both of which align with DTE's net zero carbon reduction goals. We continue to see strong growth in our voluntary renewables program at DTE Electric. Our MIGreenPower program currently has nearly 2500 mw subscribed and nearly 100,000 residential customer subscriptions. And at DTE Gas, we are progressing on our gas main renewal program as we continue to modernize the gas transmission system. At DTE Vantage, we continue to advance custom energy solutions, RNG and carbon capture and sequestration projects. We highlighted the Ford Motor Company custom energy solutions project earlier this year to support Ford's new plant in Tennessee. The project is underpinned by a long term fixed fee contract and is scheduled to go into operation later this year. We also began construction on a RNG project that is expected to go into service in the second half of the year. Let's move to slide six to highlight how DTE is well positioned for growth. Southeastern Michigan continues to be a great region for economic development, attracting many large companies that contribute to the progress of our state and its residents. General Motors, Henry Ford Health and the University of Michigan are among the large companies putting major investments into our service territory, providing significant economic development, including providing thousands of jobs. We continue to collaborate with partners throughout the state to target key business segments to drive further economic growth, particularly in the areas of battery manufacturing, hydrogen and data centers. As you all know, data center development and the impact of the potential load from these centers has been an important focus over the last year. DTE is very well positioned to serve data centers. We are in discussions with a number of potential customers on development opportunities and ensuring that these projects are good for all of our customers. The pending sales and use tax exemption legislation in Michigan would lower the cost of operating data centers, and the governor has indicated a great willingness to sign these bills if they come to our desk, which we expect in the fall or subsequent periods. So, to wrap up my comments, I'll just say I continue to be very excited about our start in 2024 and how we are well positioned to continue to deliver now and into the future for our customers, our communities, and our investors. Now I'll turn it over to Joi to give some highlights on our investment agenda and reliability improvements. Joi, over to you.

David Ruud:

Thanks Joi and good morning everyone. Let me start on slide nine to review our second quarter financial results. Operating earnings for the quarter were $296 million. This translates into $1.43 per share. You can find a detailed breakdown of EPS by segment, including a reconciliation to GAAP reported earnings in the appendix. I will start the review at the top of the page with our utilities. DTE Electric earnings were $279 million for the quarter. This is $101 million higher than the second quarter of 2023. The main drivers of the earnings variance were implementation of base rates and warmer weather partially offset by higher rate base costs. Moving on to DTE Gas operating earnings were $12 million lower than the second quarter of 2023, driven by warmer weather and higher rate base costs partially offset by increased revenue from the IRM. Let's move to DTE Vantage on the third row, operating earnings were $14 million for the second quarter of 2024. This is a $12 million decrease from 2023 due to a combination of some timing and one-time items, primarily in our custom energy solutions and steel related businesses. We continue to be highly confident in our full year guidance for vantage. Compared to the first half of 2024, earnings in the second half will be notably higher. This is driven by the shape of earnings for projects in our custom energy solutions and RNG portfolios and some new projects that come online in the second half of the year. On the next row, you can see energy trading finished the quarter with earnings of $31 million. This is a $5 million decrease from last year, primarily due to lower performance of the physical gas portfolio. We are continuing to experience really strong results through the first half of the year as we realize strong contracted margins in our physical power portfolio and stronger performance in our gas portfolio. With these stronger contracted margins, we should experience some upside at energy trading for the year. However, for now we are maintaining our conservative guidance for this business. Finally, corporate another was favorable by $18 million quarter over quarter due to the timing of taxes which will reverse through the balance of the year, bringing us within the current full year guidance range for our corporate and other segment. Overall, DTE earned $1.43 per share in the second quarter. As Jerry said, we had a great first half of the year and we are well positioned to achieve our targets in 2024. Additionally, we are continuing to work to position ourselves to deliver strong results in 2025 and through our long term plan. Let's move to slide ten to highlight our strong balance sheet and credit profile. As Joi discussed, we need to continue to invest heavily into our utilities to improve reliability and move toward cleaner generation. 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, we still have minimal equity issuances in our plan as we are targeting annual issuances of zero 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 six to 8% long term operating EPS growth target. We've eliminated the interest rate risk of our 2024 debt issuances at all end rates that are better than what we had in our plan and we continue to manage future issuances beyond 2024 through an active hedging program and other opportunities that mitigate interest rate variability. So, for example, we have eliminated interest rate risk on nearly half of the debt refinancing needs at the parent company in 2025. We continue to focus on maintaining our strong investment grade, credit rating and solid balance sheet metrics as we target an FFO to debt ratio of 15% to 16%. Let me wrap up on slide eleven and then we'll 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. DTE is well positioned to serve increased load as opportunities for development continue in our service territory. 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%. We are 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.

Jeremy Tonet:

Hi, good morning. Just want to pick up, I guess, on prior conversations with regards to any updates you might be able to share with conversations with hyperscale or negotiations and how you see, I guess, the timeline of these negotiations developing given the background of the Michigan sales and use tax legislation and I guess lack of clarity on the coming to Fruition at this point?

Jeremy Tonet:

Got it. That's very helpful there. Just turning to the quarter and some of the results there. I was curious in the corporate and other that the timing of taxes, if you might be able to, I guess, quantify a bit more the impact there and should we expect that to kind of reverse in future quarters?

Jeremy Tonet:

Got it. That's very helpful. Just one last quick one for me. If you might be able to share any color for the second quarter earnings, how much came from tax equity advantage and how we should think about that, I guess, trajectory here.

Jeremy Tonet:

Got it. That's really helpful. And just actually one last one, if I could, energy trading, is there any other incremental color you could provide with regards to the type of activities happening there in us on the outside and how to kind of model or think about how that will ebb and flow over time?

Operator:

Your next question comes from the line of Shar Pourreza with Guggenheim Partners. Please go ahead.

Joi Harris:

Morning, Shar. Yes. So we are anticipating testimony tomorrow. If we can get to a contested settlement, our chances of settlement increase. But if not, there are a lot of intervenors in this case. Obviously we would like to settle, but if we don't settle, we feel pretty confident in our ability to receive a constructive outcome regardless. So it's a pretty straightforward case. It's all about the capital we need to invest to improve the reliability for our customers, and we hope that the commission is seeing that in our testimony and it's pretty strong testimony in that regard.

Joi Harris:

Not really. Most of the intervenors are picking up on what least we've seen in the past. There's some interest in just our path forward on our retirement of our plant and then also some other environmental pieces. But generally speaking, there isn't much great design that is contested in the case.

Gerardo Norcia:

Sure. The two most significant opportunities that we continue to pursue are Greenfield RNG, and we've got a good backlog of those projects. And then secondly, our custom energy solutions, which is sort of behind the fence industrial installation, where we're providing cogen services, water services, compressed air services. Those are nice long term contracts, fixed fee without commodity risk. Those are the two primary areas of focus. CCS still is an emerging opportunity for us. We've got a number of parties that have committed to working with us contractually to test the feasibility of carbon capture and storage, and we're in the middle of a handful of those opportunities right now, so more to come on that before it becomes a business line that starts to create value. But we feel good about it. But we're also very focused on the first two business lines that I mentioned.

Gerardo Norcia:

If we see two things, one, is the business growing beyond our 10% We're very committed to the 90/10 -- 90/10 mix between utility and non-utility. That would be one potential trigger. And secondly, after we're sniffing equity needs at DTE, that would be a second trigger to perhaps look at asset optimization and rotation. Right now, we don't. In our current forecast, we don't see that need, but so it doesn't really create incremental value for us to rotate assets.

Durgesh Chopra:

Hey, team. Good morning. Thank you for taking my questions. I just want to -- just want to start off on '24 expectations for '24. Maybe just. Can you remind us, where do you sit year-to-date in terms of weather impacts, I think it was $0.28 to the negative in 1Q. And here it's slightly positive. So maybe just. Is it the $0.27 net number that we see in the first half and you have mitigation underway. Maybe just reconcile that for us?

Durgesh Chopra:

Got it. That's helpful. So basically, slight offset to 1Q weather and still on track for 2024 with your sort of contingency measures in place. Okay, Joi, thanks for sharing all the details on the operational things you're doing, vegetation management, etcetera. Just wondering, how's the liberty consulting review going? And as you made these operational changes, how is that getting factored into the review study and what to expect there as we await a report in fall here?

Operator:

Next question comes from the line of David Arcaro with Morgan Stanley. Please go ahead.

Gerardo Norcia:

Sure. So there's been a lot of interaction and collaboration with the staff on this PBR process, and I would say we're landing on metrics that we feel are really valuable to our customers. So I think we've got strong alignment on the metrics, and I think the process we're in now, David, is to make sure that we've got strong consensus on the initial targets and also on making sure that there's symmetry in the targets. So those are the two remaining things that we're working with the staff and the commission staff on. So we feel like it's progressing well. The fact that it's lining up quite nicely with things that we think are very important to move for our customers.

Gerardo Norcia:

Yes, I would say that two things, several things that make Michigan attractive. One is, natural disasters are not a part of the Michigan's repertoire. So I think that makes it attractive. The access to water, fresh water, cool water, and also our climate being cooler are all attractive. And of course, our energy rates and the fact that we've got capacity available that we could offer immediately I think makes us attractive. So those are the attractive features. I think what will make us even more attractive is the sales and use tax exemption. But there are some aggregators that already have a sales of use tax exemption that got passed in 2015. So I think we're seeing some action. We will see some action from them regardless of the sales and use tax. That's really targeting the hyperscalers, if you will. So more to come on this, you're asked about how much demand are we seeing? Obviously, there are a lot of big numbers floating around in the industry. We're seeing demand numbers in the thousands of megawatts. So that seems encouraging. We want to work to landing the very first one. Hopefully that will, I believe that the sales and use tax exemption is kind of holding some of that momentum back, but once that gets passed, I think that'll break loose a bit.

Michael Sullivan:

Hey, everyone. Good morning. Hey, guys just picking up on some of these earlier questions. So it sounds like the trading business is tracking better than expected, but maybe just being conservative for now. But is there any offset year-to-date at the other segments? Like is that weather at the utilities or has that been offset and it's really net net, the entire range is biased higher because of trading or is there an offset somewhere?

David Ruud:

Yes. Michael, just to add to that, I would say that we're feeling like we're going to have a really strong year, and we deferred a lot of non critical maintenance last year that we'd like to pull back into the plan for the benefit of our customers and also for the benefit of creating success in 2025. So I would say in this moment, we're back to our traditional planning process where we feel really good about 2024 and we're looking at what opportunities do we have to eliminate some of the sort of non critical maintenance backlog that eventually becomes critical if you don't get it done. So we're looking to pull that forward, which will not only benefit this year and benefit our customers, but it'll also benefit our planning for 2025, which we are deep into at this point in time.

David Ruud:

Yes, there was a sale of one of our landfill gas projects, and we got a gain on that, on that sale as we were exiting one of those projects.

Michael Sullivan:

Okay, great. And then just last one for me is just how you're thinking about the election and what that means for your future planning, mainly with respect to resource planning and maybe some of the tax credits that you're realizing if anything could change on the margin there in a Trump Presidency Republican sweep scenario?

Operator:

Your next question comes from the line of Andrew Weisel with Scotiabank, please go ahead.

Joi Harris:

It should be pretty straightforward to get there. We may have some trailing areas that we may have to revisit. We are right now we've got about 80% on that five year cycle, so we're cleaning up some of the areas. We revised our tree trim standard. We found that we had to go back to certain areas because the tree growth happened a lot quicker than we anticipated. So I think, Andrew, we can anticipate that the five year cycle will get us back on track and then we'll go back and revisit again and make sure that those areas that we did trim, that the tree growth stays as we anticipate. We may even expand it even further because we're seeing certain areas, the growth is much higher and more quickly returning than what we had initially anticipated.

Andrew Weisel:

Great to hear. Then, more broadly, Joi, on slide eight, you outlined a lot of those reliability efforts in the four categories. Are all of those efforts and the related spending fully embedded in the five year CapEx plan? Or would achieving some of those require incremental spending above and beyond the $25 billion 5-year plan? And how much of that relies on the rate case outcome, both the current one and obviously future cases between now and then?

Operator:

Next question comes from the line of Julien Dumoulin-Smith with Jefferies. Please go ahead.

Gerardo Norcia:

So I'll start now and Dave can add. So when we self build, we find that we're more competitive, which means we end up being more affordable for our customers. PPA's with the financial compensation mechanism makes our product more expensive to our customers, so it chews up affordability room. So that's thought number one. Thought number two, from an investor. So that's, from a customer perspective, self build is much more compelling than PPA's with an adder. Now, secondly, for investors, owning assets provides more value. And I think the EPS value is 2x to 3x for owning versus PPA. And that's fundamentally driven by the fact that these intermittent resources, the FCM, only applies to the output of the product. So that's what fundamentally reduces the value of an SEM for investors. So that. I'm not sure if that answers your question, Julian, but those are the two thoughts I can offer. Dave, did you want to add?

Julien Dumoulin-Smith:

Excellent. Yep, sounds like self build remains the priority here for sure and then related here, just a small nuance. Can you talk a little bit more about the custom energy solutions and steel related businesses? Just any dynamics there on an ongoing basis as it pertains to vantage. I know you've talked a little bit about it, but just to go back on that comment?

Operator:

Your next question comes from line of Anthony Crowdell with Mizuho. Please go ahead.

Gerardo Norcia:

That's a good question, Andrew. Yes, we do target the 15% to 16% FFO to debt. We think it gives us some, it does give us some good headroom to the downgrade thresholds. And we met with all the rainy agencies over the last quarter and I think they're pretty confident in the level that we're at too. So we feel good about where we are with our balance sheet, our balance sheet metrics on that.

Gerardo Norcia:

We do see it about in that range for our base economic sales growth, what data centers and how that comes in could play in a little differently. And then when we look out a little bit further, EV load is another thing that could drive some of our residential load up a little more in the long term as well. But it's pretty consistent with what we're seeing right now is what our longer term forecast is.

Travis Miller:

Thank you. Good morning, everyone. You answered most of my questions, but just go a couple little things here. With respect for the, with respect to the rate case, are there any new intervenors that either you're seeing file or you expect to file here versus the last rate case or rate cases?

Travis Miller:

Sure. Any way to bucket what those new interveners want or their agenda or what they're contesting or not contesting?

Gerardo Norcia:

That's generally what we're seeing. what happened in legislation last year, there was an increase in intervener funding, and that has spurred more intervenors because there's more money. So I think that's part of the challenge that we have and why there's been so much more activity is that the funding allowed by legislation has created much more activity.

Joi Harris:

I would say I think we're all aligned in that we want to approve the reliability of the grid. The question becomes, what's the best way to do that? And we believe that that was the purpose of the audit, is to examine and get everyone aligned on how we go forward in improving the reliability near term and then into the future. So I think the audit results will go a long way in building, I say, alignment and consensus on what the path forward should be.

Travis Miller:

Okay, great. And will those audit results be able to make it into this rate case or will it be future rate cases?

Gerardo Norcia:

But it may influence.

Gerardo Norcia:

The buckets of investment, perhaps.

Gerardo Norcia:

Well, thank you, everyone, for joining us today. I'll just close by saying we're feeling really positive about 2024 as well as our position for future years. And I hope you have a great morning and stay healthy and safe.

Operator:

Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the DTE Energy Q1 2024 Earnings Conference Call. [Operator Instructions]. After the speaker's remarks, there will be a question-and-answer session. [Operator Instructions]. I would now like to turn the call over to Barbara Tuckfield, Director of Investor Relations. Please go ahead.

Joi Harris:

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.

Shahriar Pourreza:

I guess, first off is, I guess, 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?

David Ruud:

Actually, I think that's exactly right. We'll -- 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.

Gerardo Norcia:

I'm sorry, Shar, go ahead.

Gerardo Norcia:

I was going to say in terms of Vantage, certainly, we like that business, but if the opportunity presented itself where we could deploy some recycling of capital and create incremental shareholder value, then we're always looking for those opportunities share. So if equity needs were to change and may make it more impactful, if you will -- but we don't see that right now.

Nicholas Campanella:

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?

Nicholas Campanella:

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?

Jeremy Tonet:

Just want to come back to the comments as you laid out with regards to Vantage and the RNG assets and the potential for portfolio rotation there should the opportunity present itself. And just curious, I guess, the driver to these comments, have others approached you on these assets? Or just trying to get a sense for what you see or how that -- the market is for those type of assets right now?

Jeremy Tonet:

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?

David Arcaro:

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.

David Arcaro:

Great. That's helpful color. Then I was wondering if -- let's see, pivoting to the rate case -- the electric rate case. I was wondering if you could maybe help contextualize some of the Attorney General's comments that were out there on the size of the request. And maybe any early indications or early thoughts on whether you think a settlement could be something that you go after and could be acceptable in this rate case?

Durgesh Chopra:

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?

Durgesh Chopra:

Understood. And then maybe just 1 question on 2024. Obviously, you expressed a lot of confidence here in [indiscernible] numbers. Maybe can you just frame for us what level of contingency, if any, you might have used? I know you go into the year with a healthy level of contingency but you had milder weather in 1Q. So maybe just frame for us how much of that contingency bucket is still left?

Operator:

Your next question comes from the line of Andrew Weisel with Scotiabank.

David Ruud:

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 onetime savings from last year.

Andrew Weisel:

Okay. Great. Good to hear. And then one very small one. The negative earnings at Corporate and Other, and you have a note that there's -- it's related to the timing of taxes. Was that in line with your expectations when you gave the full year guidance? And should that fully offset as the year goes on? Or is that trending a little differently than you had budgeted?

Operator:

Your next question comes from the line of Michael Sullivan with Wolfe Research.

Michael Sullivan:

Okay. Great. You hit all of them. And then just one quick one. The renewable plant outage at Vantage in Q1, was that planned or unplanned? And is it -- if it was unplanned, is it resolved?

Operator:

Your next question comes from the line of Sophie Karp with KeyBanc.

Gerardo Norcia:

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.

Sophie Karp:

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?

Operator:

Your next question comes from the line of Angie Storozynski with Seaport.

Agnieszka Storozynski:

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?

Travis Miller:

You answered most of my questions and discuss most of the topics I was hoping to hit. So just real quick, I saw residential commercial demand looked like it was up. I know this is a small -- relatively small quarter for that. But anything there either relative to plan or notable where you're seeing residential commercial demand pick up a little bit?

Operator:

I will now turn the call back over to Jerry Norcia for closing remarks. Please go ahead.

Operator:

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect your lines.

Operator:

Thank you for standing by. My name is Eric and I will be your conference operator today. At this time, I would like to welcome everyone to the DTE Energy Fourth Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Barbara Tuckfield, Director of Investor Relations. Please go ahead.

Gerardo Norcia:

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'll give you a recap on the accomplishments we achieved in 2023 and provide highlights on how we are well-positioned for 2024 and beyond. Dave will provide a financial update and wrap things up before we take your questions. As you know, 2023 was a challenging year for DTE as we face significant headwinds from an unprecedented combination of weather and storm activity. I am very proud that our company came together to face these headwinds and execute on our plan that offset the majority of the challenges. We achieved operating earnings per share of $5.73 in 2023. This was a result of overcoming $300 million of the approximately $400 million of headwinds that we faced. In the appendix, we included a summary of the headwinds and the one-time actions we took in 2023. As I said during the year, the fact that we were able to offset most of the challenges we faced while maintaining service excellence is a clear indication of our highly engaged team and our commitment to operating excellence. I couldn't be prouder of our team's effort in 2023 and our commitment to deliver for all of our stakeholders will continue into 2024 and beyond. This engagement of our team at DTE was recognized with our 11th consecutive Gallup Great Workplace Award. DTE was also recognized as one of Metro Detroit's Best and Brightest companies to work for as well as one of Time Magazine's Best Companies for Future Leaders. We continue to address our customers' most vital needs by investing heavily in our utilities to rebuild our aging infrastructure, improve reliability, and support the transition to cleaner generation. There have been a number of developments that support our customer-focused investment agenda, including the filing of our distribution grid plan that provides a road map to improve reliability and automation of our system and our integrated resource plan that outlines our investment in Michigan's cleaner energy future while remaining very focused on customer affordability. In 2023, we made strides on our reliability improvement goals. I'll go over this in more detail on the next slide, but I can tell you that our efforts in this area are working. In circuits where upgrades were completed in the first half of 2023, customers experienced 33% fewer outages during the second half of the year compared to the second half of 2022. Also supporting our investment agenda is the constructive electric rate case order we received in December. During the first half of this year, we expect to file our next electric rate case, which will underpin the continued investments in system reliability, grid modernization and cleaner generation. We also recently 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. So, you can see that we continue to invest heavily in our utilities in 2023. DTE Electric invested $3.1 billion on continued improvements in reliability, and cleaner energy generation for our customers, while DTE Gas invested nearly $750 million on infrastructure and main renewal improvements. Reinvesting in utility infrastructure, the drive reliability improvements, far exceeds cash generated from operations, demonstrating our commitment to improving reliability for our customers. Another significant event in 2023 was the passing of new clean energy legislation in Michigan that the Governor signed in November. The synergy policy creates a very clear road map for the development of additional solar, wind and storage assets that is generally consistent with the accelerated renewables build and cleaner generation path that we laid out in our IRP filing. This investment is supported by the Inflation Reduction Act that includes provisions, which reduced the cost of investments in our system, and we pass all of these benefits along to our customers. Our effort to maintain affordability for our customers has been demonstrated over the last four years. Based on the outcome of our last rate order, the average annual growth of our residential electric bill is just over 1% since 2020 compared to a national average annual increase of over 6%. This is supported by a $300 million reduction in our fuel and purchased power costs that went into effect last December to lower customer bills. Through this significant reduction, along with our long history of cost savings through continuous improvement, we will continue to effectively manage affordability for our customers. On the community front, DTE was honored to be named to the Civic 50 for the sixth consecutive year. This award presented by points of light, recognizes the most community-minded companies in the nation. I am proud that our team continues to put the communities we serve at the forefront each and every day in our decision-making. We have a robust investment agenda of $25 billion over the next five years, which is a $2 billion increase over the prior plan, and we have a 10-year capital plan of over $50 billion. 95% of our capital will be invested at our two utilities. Investments in our non-utility businesses are strategically focused on our customers' needs and align with our clean energy initiatives. Our 2024 operating EPS guidance midpoint provides 7% growth from our 2023 original guidance midpoint. Our long-term operating EPS growth remains at 6% to 8%, with 2023 original guidance as the base of that growth and our 2024 annualized dividend of $4.08 per share is consistent with our practice of growing dividends in line with our operating EPS. Importantly, we will continue to have a strong balance sheet and investment-grade credit ratings to support this customer-focused capital investment plan. Now, let's turn to Slide 5. At DTE Electric, our significant capital investment plan is focused on building the grid of the future for our customers and supporting the transition to cleaner generation. Our recently filed distribution grid plan outlines our path to build the grid of the future. This plan includes the transition to a smart grid with full automation within five years, resulting in less frequent and shorter outages for our customers. We are also investing $9 billion on distribution infrastructure over the next five years, targeting reliability improvements of more than 60%. During 2023, a DTE Electric focused on improving the reliability of over 400 of our most challenging circuits, including trimming more than 5,000 miles of trees, installing more than 200 automated reclosers and maintaining our extensive network of electric infrastructure, including replacing pull-top equipment in over 3,500 utility poles. We are continuing to accelerate our tree trimming program. We are also continuing our accelerated preventative maintenance by upgrading more than 10,000 miles of infrastructure with over 1,300 miles upgraded in 2023. Finally, we are accelerating the rebuild of our 4.8 KV system and pursuing undergrounding. We did experience a large storm in January, and our team came together to achieve one of the fastest restorations for a storm of this size. The $2 billion increase in our DTE Electric five-year plan is driven by investment and cleaner generation that is supported by the IRP, the recently passed energy legislation and our voluntary renewables program. Accelerating this investment provides more affordable energy for customers over the long term. Our voluntary renewables program is still exceeding our high expectations. As I mentioned last year, the National Renewable Energy Laboratory recognized DTE as having the largest green tariff program in the country, fulfilling more load under contracted subscriptions than any other program. Now, let's turn to Slide 6. At DTE Gas, we are planning to invest $3.7 billion over the next five years to upgrade and replace our aging infrastructure. Over the years, we have made significant progress and recovered investment through our infrastructure recovery mechanism. Since the program began, we have renewed over 1,700 main miles and plan to complete over 200 more miles in 2024. Our natural gas balance program also continues to grow with over 13,000 customers currently subscribed. The program offers ways for customers to manage their carbon footprint through carbon offsets with our forestry partners in Northern Michigan as well as renewable natural gas. And now let's discuss the opportunities at DTE Vantage on Slide 7. At DTE Vantage, we are planning to invest between $1 billion to $1.5 billion over the next five years. We continue to advance custom energy solutions, RNG and carbon capture and sequestration projects. One project that we'll highlight is the expansion of a long-term fixed fee custom energy solutions agreement with Ford Motor Company to build, own and operate and maintain the central utility plant and distribution infrastructure serving its facility in Tennessee. In addition to the utility generation infrastructure, we will also provide distribution of hot and chilled water, steam, natural gas and electricity, domestic and sanitary water along with HVAC equipment and a wastewater treatment facility. Projects that are organic expansions like this one are attractive to us, given the long-term relationships, strong sites and a utility-like structure. This project, combined with other projects helps position us for future growth. Our development pipeline advantage remains strong. The IRA improves decarbonization opportunities as enhanced tax credits allow our projects to be more economic including carbon capture, RNG and combined heat and power projects. The RNG market growth continues and is supported by the federal renewable fuel standard and California's low carbon fuel standard. With that, I'll turn it over to Dave to give you a financial update. Dave, over to you.

Operator:

Thank you. [Operator Instructions] Your first question comes from the line of Shar Pourreza with Guggenheim Partners. Please go ahead.

Gerardo Norcia:

Morning Shar.

Shar Pourreza:

Good morning. Obviously, just real quick. CapEx is moving higher in the credit metrics just strong and obviously, you're highlighting that you have minimum equity needs in the current plan. I guess, can you just touch on funding sort of incremental spending opportunities maybe using some rule of thumb as we think about the percentage of equity needed to fund every new dollar of CapEx above this base plan. Maybe the answer is zero. And there's been obviously some mentions of an RNG sale in the media. Just given sort of the cash versus earnings attributes to that business, is that an accretive recycling opportunity? Thanks.

Gerardo Norcia:

Yes, Shar, I'll take the non-utility assets. Certainly, we're happy with all our assets there, but we're always looking for opportunities to -- there was an opportunity to create incremental value for our investors. We would take that opportunity in terms of optimizing the portfolio. But I would say at this moment, certainly, we don't have any incremental cash needs in our plan. And so there really isn't anything imminent at this time.

Gerardo Norcia:

Sure. So, if you're referring to a potential electric rate case, we're looking to make a filing late in the first quarter, early second quarter. I would say that most of that filing will be about the capital investments we're making to upgrade the grid and transition to cleaner energy. So, again, it will be a CapEx-driven filing is what we expect at this point.

Gerardo Norcia:

Thanks Shar.

Nick Campanella:

Hey good morning. Thanks for taking my question.

Nick Campanella:

Morning. I guess just a follow-up on the Vantage portfolio optimization comments. Just if you don't have cash needs in the current plan and there is an opportunity to do something, just how do we think about those use of proceeds?

Nick Campanella:

Okay. And then I guess, just as you kind of wrap in the Michigan legislation to your outlook, you're probably looking at changes to the supply portfolio. Can you just remind us what your philosophy is in terms of owning these assets versus doing PPAs? Are you going to target to do a mix? Or do you want to do all renewable ownership? That would be helpful.

Nick Campanella:

All right. Thanks so much for the time today.

Operator:

Next question comes from the line of Jeremy Tonet with JPMorgan. Please go ahead.

Gerardo Norcia:

Hey Jeremy.

Gerardo Norcia:

Yes, Jeremy, if you'll recall, we updated -- we didn't provide an update at EEIX, we're awaiting the outcome of a rate case to make sure that our capital plans were supported in which that happened. And so when we updated in December, it really reflected the IRP settlement and the new legislation were both in flight. And so I would say the combination of those two events, significant events created incremental opportunity in our clean generation space. It accelerated our journey in terms of building out renewables as well as a battery system. So that's really what drove the increase.

Gerardo Norcia:

Yes. Right now, we're showing a $1 billion to $1.5 billion investment over the next five years, which is pretty consistent with our prior five-year forecast. So, we really haven't made any significant change there just yet.

Jeremy Tonet:

Got it. That’s very helpful. And then I just wanted to see, I guess, as it relates to CCS, if you could dive in a little bit more in, I guess, how you think about time line for when that could become more real, I guess, as far as capital is moving in there. And as far as the, I guess, the regulatory environment being supportive enough where you feel comfortable to kind of move forward there?

Jeremy Tonet:

Got it. Very helpful. And one last quick one, if I could, just as far as refinancing new bonds. How much of the I guess the open rate exposure on refinancings has been hedged at this point in derisked?

Jeremy Tonet:

That’s all very helpful, all those details. Thank you very much for taking my question.

Operator:

Your next question comes from the line of Durgesh Chopra with Evercore ISI. Please go ahead.

Gerardo Norcia:

Morning. Hey Durgesh.

Gerardo Norcia:

Yes, we've -- just let me take the storm expense. We've certainly have increased our storm expense in our planning process as we've seen storms increase over time and the cost that, that brings. So, we feel pretty comfortable about the plan that we're carrying right now. And as you know, we also carry one standard deviation of whether, for example, in the winter, warmer than normal weather and/or in the summer, one standard deviation of cooler-than-normal weather. So, that's how we're planning. And at this point in time, we feel pretty good about our plan. We're moving along and right on track. I think the storm that came in January consumed some of the storm expense budget. But of course, as you would expect, we're working to replenish some of that so that we can carry a full summer storm budget. So, that's really where we're at with that.

Gerardo Norcia:

Thanks Durgesh.

David Arcaro:

Hey thanks. Good morning.

David Arcaro:

Let's see, you've got a renewable energy plan filing coming later this year, I think. Wondering if that could be an opportunity to reassess again and potentially increase the renewables in your outlook?

David Arcaro:

And I was wondering, does your current plan kind of fully embed the opportunities arising from the legislation as you're thinking about maybe beyond the renewable energy targets, but also considering energy efficiency and the FCM and the potential upside on PPA contracts?

David Ruud:

And then as we look out past that, we're going to be having to file a new IRP that will take into account this legislation even more. And so that will give us an opportunity to bring some more capital in maybe near the end of the five-year plan, but really probably a little bit past that, just more opportunity to do this clean energy generation.

David Ruud:

Thank you.

Andrew Weisel:

Hi, thanks. Good morning everybody.

David Ruud:

Hi Andrew.

David Ruud:

Yes, the $300 million reduction in 2023, that was really the recovery of the over-collection that was in 2022. So, in 2023, we were kind of on our plan and just recovering what we needed to recover into -- recovering from 2022 and 2023 and then comes off our books for 2024. So, far for this year, there's a little bit under recovery left, but we're forecasting things to be pretty flat with our plan for this year.

Andrew Weisel:

Great. Then one more, if I could just sort of ask you to elaborate on the non-utility CapEx. So I'm going to ask similar questions in a different way. Last year, the CapEx was $167 million. That was well below guidance of $300 million to $400 million and now you're guiding to $550 million to $650 million for 2024. Can you just walk us through that a little bit? I heard you mentioned there's some lumpiness, maybe certain investments were deferred. I'm guessing some of the high spending this year is related to that Ford announcement. I guess just overall, how confident are you in that 2024 number, given how high it is?

Andrew Weisel:

Okay. Thank you very much.

Michael Sullivan:

Hey everyone, good morning.

Michael Sullivan:

Hey guys. Maybe just wanted to ask on the trading business that did really well in 2023. And I think, Dave, you mentioned some of that flows through in the 2024, but just -- how conservative do you feel that range is for 2024? And is this like a new normal that could extend even beyond 2024 based on what you're seeing?

Michael Sullivan:

Okay, great. Appreciate the color. And then I just wanted to pivot to the PBR proceeding at the Michigan PSC. And just what are your guys thoughts on kind of where that stands and how that ultimately plays out?

Michael Sullivan:

Okay, that’s super helpful. Thanks guys.

Sophie Karp:

Hi, good morning. Thank you for taking my questions.

Sophie Karp:

Hi. A couple of questions here. I guess staying on the Energy Trading business topic, right. Could you elaborate a little more on what market conditions are enabling this relative strength and like what should we watch for in terms of this potentially reversing in the future or continuing for longer, if you will?

Sophie Karp:

Got it. And how much visibility do you have in that? It sounds like maybe less than 12 months out because you would be updating us as you go?

Sophie Karp:

Got it. And then I just wanted to be clear on what you're saying about your capital plan. How much of the new energy opportunities is reflected in it? It sounds like what you're saying is that you have reflected opportunities that would be presented by the new energy law in Michigan in your plan already. So, the incremental opportunities stemming from this legislation should be fairly limited. Am I hearing this correctly?

Sophie Karp:

Thank you so much. Appreciate it.

Operator:

Your next question comes from the line of Julien Dumoulin-Smith with Bank of America. Please go ahead.

Gerardo Norcia:

Morning Julien.

Gerardo Norcia:

So, again, the ownership component is reflected in our capital plan, the $7 billion component of clean energy generation that's in our plan. The financial compensation mechanism, we'll have to see what levels we sign the PPAs, obviously, as you know, it's a -- the price that we signed the PPAs for. So, as we sign those, we'll continue to update our plan, but it will provide some incremental value in our plan as we go forward, if that's what you're asking?

David Ruud:

There's thoughts. We have something in there for now. But as we sign PPAs, there should be some upside in the plan to that what we have in there now.

Gerardo Norcia:

Yes, I would say that it's not imminent, some sort of optimization of our are rent portfolio. We like the returns. We like the cash flows from it. And actually, the IRA Inflation Reduction Act has been quite beneficial to that business from an ITC, investment tax credit perspective. It's made projects more attractive and higher return. And we're also seeing positive movement in some of the markets, like the Federal market moved in a very positive direction and our renewable fuel standard that is. And in California, the California Air Resources Board is looking to tighten up the carbon intensity targets. So, I think as that plays out, that will provide even more upside in those markets as we see them today.

David Ruud:

We are monitoring that, and we are commenting, but we're not overly concerned. We don't think that it's really consistent with what the congressional intent was there either. So, we're just continuing -- we're continuing to watch and monitoring comment, but not overly concerned.

Gerardo Norcia:

Thank you, Julien.

Operator:

Next question comes from the line of Gregg Orrill with UBS. Please go ahead.

David Ruud:

Yes. We saw -- we did see some good upside from the RNG because we brought in three new projects in 2022 and in 2023 and associated with some of that, there's some tax credits that come with that, that helped out in 2023. The steel business was the other part that gave us the favorability that we saw in 2023. And probably a little over half of what we saw there. And that was due to some opportunistic sales of some of our byproducts, some of the other products we're making within that business and some other kind of one-time things that we've done there. So it's yes, some good one-time opportunity that we saw in the steel business and the RNG development.

David Ruud:

We have noticed it's gotten a little more competitive as more people have come in. We used to say we got high double-digit unlevered after-tax returns. We're still seeing good returns, particularly what we see it is in our conversion projects, we have projects that now make power that we can convert to make in RNG. And so in those projects, we continue to see very strong returns. And then there's still a good development pipeline that has strong returns as well.

Gregg Orrill:

Okay. Thank you.

Anthony Crowdell:

Good morning Jerry, good morning Dave.

David Ruud:

Hey Anthony.

Gerardo Norcia:

Anthony, we put five miles underground in last year in 2023, and it went really well. And what we're doing is proposing that we continue to do more. This is going to take a few years to ramp, Anthony, as we kind of work with our commission. We actually had the commission staff looking at some of the undergrounding that we did in the last few days. And so they -- I think there's a process here to make sure that we're working together with our commission, come up with a reasonable plan. I would say the key part of it is we need to ensure that on an NPV basis, undergrounding is going to be least equivalent or better than putting it up in the air. We've got 19,000 miles of infrastructure to replace that's very old. It's a 4.8 kV system. So, a huge opportunity from a customer perspective to improve infrastructure for the future. And we'd like to put as much of that underground as we can, but we're going to have to prove out the concept. So, we're in the early stages of proving it out and to ourselves and then secondly, to our commission. So, that's where we're at with it. I think it's going to take a few years before we can ramp it, but we feel pretty good about how smoothly the first five miles went. It's all directional bore through very highly congested urban areas. So, a very cool project. More to come on that.

David Ruud:

Yes, we did end 2023 right around 15%, Anthony. And as we look through the five-year plan, we stay within that range throughout the five-year plan that we talked about, even with the minimal equity that we're issuing.

Gerardo Norcia:

Thank you, Anthony.

Ryan Levine:

Apologize. So, good morning. Hoping to follow-up on the utility ownership for PPA and some of the generation assets. Is your plan largely solidified at that point? Or is there opportunity to convert some of the owned assets into PPAs given the incentives that the law provides.

David Ruud:

No, that's exactly right. It's better for our customers. We've gotten really good at developing these projects. And we're the leading renewable developer in the state and continue to do it and what we see as the lowest price, which is kind of borne out through the auctions that we're in. So we think it's better for our customers. And then on an EPS basis, investing the capital is better for our shareholders as well. So, I don't know that we'll be converting any. We'll do what we need to do. But and the FCM it's great. It's a great addition for the PPAs that we do, but it's still much better for our customers and much better value if we continue to develop these.

Gerardo Norcia:

Are you referring to carbon capture and storage, Ryan?

Gerardo Norcia:

Yes, we are. We've got three transactions that are well advanced with large carbon dioxide producers, and we're looking to capture that CO2 source and stored underground essentially under property. These are very short pipelines, a couple of thousand feet each less than a mile. So, we're looking to finalize those arrangements and also satisfy some of the technical conditions precedent that we want to accomplish before we get too far into that business.

Gerardo Norcia:

Thanks Ryan.

Gerardo Norcia:

Well, thank you, everyone, for joining us today. I'll just go by saying we're feeling great about 2024 and also our long-term plan as well as our position for future years. Have a great morning and stay healthy and safe.

Operator:

Good morning. My name is Emma and I will be your conference operator today. At this time, I would like to welcome everyone to the DTE Energy Third Quarter Earnings Call. [Operator Instructions] Barbara Tuckfield, Director of Investor Relations. You may begin your conference.

Gerardo Norcia:

Thanks, Barb, and good morning, everyone and thanks for joining. I'll give a brief business update and Dave will provide a financial update before we take your questions. Now let me start by emphasizing a few points, including my confidence in the company and our long-term opportunities. As you know, we have faced unprecedented headwinds this year. And these events have impacted our financial plan by $370 million. However, the combination of these headwinds is truly onetime in nature and the fundamentals of DTE remain strong. We have a solid record of achieving our financial targets and we know how to do so without sacrificing safety or reliability. This year alone, we have offset $270 million of earnings headwinds from the unprecedented combination of storm activity, unfavorable weather and a low rate order driven by a difference in the sales forecast. The fact that we have been able to offset most of these challenges while maintaining service excellence is a clear proof point of our highly engaged team and commitment to operating excellence. DTE also benefits from strong cash flows and a solid balance sheet that support continued investments that will build the grid of the future and drive the clean energy transition. Our long-term growth plan is robust with numerous opportunities for these investments. And as I said, we have an incredible team of highly engaged employees who are committed to our customers and who know how to execute safely and efficiently. Our team continues to operate a top decile engagement levels as measured by the Gallup organization. I'm proud that our team's excellence in this area was recognized by earning the Gallup Exceptional Workplace Award for the 11th consecutive year. My confidence in DTE and our ability to deliver for our customers while being a stabilizing force in our communities and creating significant sustainable value for investors over the long term is unwavering. We remain focused on continuing to invest the strategic capital that further supports improved grid reliability in the face of changing weather patterns and further electrification and the transition the cleaner sources of generation. The heightened storm activity this year also highlights the importance of our investment plan and DTE is delivering on its commitment to automate, harden and rebuild the grid to improve reliability by over 60% over the next 5 years. Our recently filed distribution grid plan provides our road map to improve reliability and automation of our system. Also supporting our investment agenda is the IRP settlement. This plan outlines our investment in Michigan's cleaner energy future while remaining very focused on customer affordability. We are progressing toward a constructive outcome on our electric rate case. This case is critical to support the customer-focused investments that are needed for improved reliabililty and cleaner generation. Our customers and political leaders, including the governor, legislators and municipal leaders are demanding better outcomes and reliability during heavy storm periods. This doesn't happen unless we execute our strategic investment plans to modernize and automate the grid. We also need to resume our maintenance schedule on noncritical work that we deferred on a onetime basis this year. It is essential to resume this important scheduled work to continue delivering safe and reliable service. We met with the intervenors in the electric rate case and outline the importance of the infrastructure investments we need to make, while also gaining a deep understanding of their priorities. While we were not able to reach a settlement in this case, we have put a compelling case together for the work we need to do for our customers. We are confident that the Michigan Public Service Commission will appropriately support the investment that is needed in the state. The final order is expected in early December. As I mentioned, our company faced $370 million of unprecedented headwinds this year. This represents nearly 30% and of our total earnings forecast. We said on the second quarter call that we were in a position to deliver at the midpoint of our operating EPS guidance range if normal weather and storm activity occurred through the remainder of the year. However, unfavorable weather and additional severe storm activity did occur in the third quarter and these latest challenges brought over $100 million of additional headwinds to our financial plan. So we are revising our full year EPS guidance midpoint from $6.25 per share to $5.75 per share. This is not the type of result that my team and I like to report to you. In my 10 years as the number 1 and number 2 person in DTE's leadership team, we have consistently met or exceeded our targets. So you can imagine that we don't like reporting these results to you today. As I mentioned, we are continuing to wait for a final order on our electric rate case. Therefore, we will delay providing the forward-looking disclosures that we typically provide on the third quarter call or at the EEI conference until we get a final resolution in the case. We will then provide these disclosures in December, including our 2024 early outlook and dividends, extending the long-term EPS growth rate through 2028, updated 5-year capital plan, updated 3-year equity plan and our long-term operating earnings for DTE Vantage. Let's turn to Slide 5. As we discussed through the second quarter, the company experienced the impact of the lower-than-expected rate order that we received at the end of last year, driven by a difference in sales forecast of approximately $100 million, followed by $92 million in impact from storms, including the worst ice storm in nearly 50 years and unfavorable weather of $42 million at Electric and $31 million at gas. On the second quarter call, we said DTE Electric was achieving offsets for over half of its headwinds through focused onetime cost reduction efforts without sacrificing safety, reliability or customer service. And as a result, we noted that electric would likely fall below its full year guidance. However, we had favorability at each of our other business units, helping to overcome the remaining headwinds to achieve our full year EPS guidance. So at the time, we were on track to be at the midpoint of our guidance range if we had normal weather and storm activity and we had already consumed our contingency. In the third quarter, we had additional pressure of $53 million from storms and $53 million from cooler than normal summer weather. So far this year, we have faced 5 catastrophic storms which is double compared to the average number of catastrophic storms over the last 5 years. We are very proud of our team's efforts to safely restore power during each of these weather events. That being said, these restoration efforts are costly. And while we do budget for storm costs, the number of catastrophic storms this year, including a historic ice storm significantly impacted DTE Electric earnings. Along with storm activity, we have seen unfavorable weather in our service territory for electric and gas this year. The winter was the fourth warmest winter since 1960. And the summer was one of the coolest in nearly a quarter century. This was very different from the record heat that was experienced across most of the country. Much like for storms, we prepare for unfavorable weather scenarios during our planning process. Our lean and invest plans are structured to cover weather variability. This year, the winter and summer weather combined was much more unfavorable than we have seen. It has been an unusual year, having both high storm activity at electric and unfavorable weather at both of our utilities. This dynamic has certainly created a significant challenge to our company in addition to the low rate case order. So we faced a combination of 3 major headwinds. And only 2 of these occurred, we would have been able to achieve our original EPS guidance target. Having all 3 factors stack up against us exceeded all reasonable planning scenarios. As a matter of fact, we had our statisticians look at the probability of greater than 1 standard deviation temper [ph] patterns of both utilities and the number of storm customers impacted all occurring in the same year and it is a once in a 50-year probability. Overall, the team has made excellent progress on onetime management actions across the entire company and finding opportunities within our portfolio. However, with the additional challenges in the third quarter, we are now lowering the operating EPS guidance for 2023. Now let's move to the opportunities we have in front of us on Slide 6. DTE is on track to make significant customer-focused capital investments across our businesses. Two important factors affecting our grid, our climate change and emerging electrification technologies. We need to build the grid of the future to ensure we can continue to provide clean, safe, reliable and affordable energy. We are also making investments to transform the way we produce power as we shift towards renewables and natural gas and away from coal generation. An important part of our clean energy program is our voluntary renewable program, My Green Power. This program continues to grow with a number of new large customers subscribing this year. We have 2,400 megawatts described, including over 90,000 residential customers. Highlighting our success to National Renewable Energy Laboratory has recognized DTE as having the largest green tariff program in the country, fulfilling more load under contracted subscriptions than any other program. Additionally, at our gas utility, we continue our important main renewal work which further reduces greenhouse gas emissions. DTE makes all of these investments with a sharp focus on customer affordability. Our distinctive continuous improvement culture drives cost management. The shift from coal to natural gas and renewables also helps to further reduce O&M costs. Our diverse energy mix helps to reduce fuel costs as well and allows us to maintain flexibility to adapt to future technology advancements. The IRA supports this transition to renewable energy while achieving customer affordability goals and further enhances opportunities for growth at DTE Vantage. Before I turn the call over to Dave to read more details on the financials, I want to reiterate what I said at the start of the call. DTE has a strong operating foundation and an excellent team with a proven record of execution, a long runway of investment opportunities and a solid balance sheet to support these investments. So we remain well positioned to deliver premium total returns while providing cleaner, reliable and affordable energy to our customers. Dave, over to you.

Operator:

[Operator Instructions] Your first question comes from the line of Shahriar Pourreza with Guggenheim.

Gerardo Norcia:

Yes. You bet Shar. Sure. So certainly, the fundamentals of our business remain really strong in the long term. The opportunity is to make a tremendous amount of investment in our grid and our transition to clean energy. Those -- the opportunity remains intact. We are awaiting the commission order and that will happen the first week of December. The next scheduled meeting is December 1 but it has to be essentially dealt with before December 10. So sometime in the first week of December, we expect an order. We feel is prudent at this point in time to post that rate order is when we will basically roll out shortly right after the order. We will roll out our 2024 guidance, our long-term growth rate and also our capital investment profile. And we'll do that for both utilities and advantage. So that's the plan going forward, Shar. We don't want to get ahead of the regulatory process at this point in time.

Gerardo Norcia:

Yes. Typically, what we do, Shar and we plan to do the same going forward as we will go back to the original guidance for 2023 that we've posted and then we will grow from there. Got it. Does that answer your question?

Gerardo Norcia:

I was going to say the reason for that is because much of what's happened this year, as you said, we view as anomalous and onetime in nature and that's why we will go back to the original '23 guidance and build our growth rates from there.

Gerardo Norcia:

Thank you. So what you'll see is that much of the cost will flow back in. Some will stick. I think when you go through one of these periods of severe challenge, you always learn new things about your company. But much has to flow back in. So maintenance that wasn't critical this year becomes very critical next year that we can't continue to postpone. We've made that very clear in our final reply brief. And I think we'll see much of that flow back in. Some of that will stick will help for next year. And -- but we plan to plan to return to our normal planning process where we would anticipate certain levels of storm activity and certain levels of weather variation in our planning going forward. So that is our goal at this point in time.

David Arcaro:

Could you elaborate a bit on the settlement discussions that you had in the rate case? Just what challenges may have arisen that prevented from getting across the finish line there. Any kind of learnings and does that potentially continue forward into future challenges and other rate cases in the future? Or are there unique factors here that came into play?

David Arcaro:

Got it. That's helpful context. Were there specific aspects within the case, whether it was the undergrounding, the IRM or specific requests here that led to the sticking points with those other intervenors?

David Arcaro:

Okay, understood. And thinking about the go-forward earnings power. Looking at the 2023 Vantage and trading results, quite a bit stronger than the original guidance on 2023. I was wondering if those could be considered new baselines for growth? Or if you could give us a sense for how much onetime or non-repeatable strength we saw in those 2 businesses? Do those also kind of revert to the original 2023 midpoint as you think about the growth going forward?

Operator:

Your next question comes from the line of Durgesh Chopra with Evercore ISI.

David Ruud:

Yes. In the -- in our rates, there's about $55 million pretax that's in there for storms right now. But we budget differently than that, been building some contingents as well.

Gerardo Norcia:

I think those trackers and deferrals have been pursued in the past, Durgesh and can be pursued in the future. Like as a matter of fact, I think our sister utility is pursuing some of that as well in their current rate case.

Gerardo Norcia:

It is not in our current rate case at this point in time. But as Dave said, typically, we budget for one standard deviation and weather variances that deal with weather variances as well as storm activity variances. I think what was unusual this year is that we had a much cooler than normal summer lineup with excessive storm activity which is very unusual and very anomalous. And beyond our planning scenarios, certainly. When we think about the totality of it, we had about 30% our earnings challenged and we responded with a 21% response and so a pretty significant response in light of extraordinary challenges. So we view it as a very anomalous year.

Gerardo Norcia:

So there's been a very positive set of interactions with Liberty. The exchanges have been very collaborative. They are requesting information which we're providing. I think the next series of steps is they'll conduct some field work as part of their tabletop exercise and we expect a report sometime next summer final report.

Jeremy Tonet:

I think the question has been touched on a number of different ways but I just wanted to be very precise and very clear here. As we think about the base business, as we think about going forward, there's a rate case, it's going to have some impact on 2024 unknown at this point. But if you think about the base business past 2020, '24, does DPE still grow 6% to 8%?

Jeremy Tonet:

Got it. Understood. Maybe pivoting a little bit here. As we look forward, there's been just a change in regime in rates being -- rates moving up a lot recently. And we're kind of tracking holdco refinancing risk in note that DTE has a number of hedges in place to mitigate some of this risk. I was wondering if you could provide specific details on those hedges as far as what the refi looks like? Is this something that's just kind of a short-term hedge? Is this the longer-term hedge? What type of levels -- just trying to get a sense for how much of a headwind refinance risk at the holdco could be?

Jeremy Tonet:

So just to clarify that 25% would be whatever the new tenor of that refinance would be. It 3, 5, 10 years, 25% is hedged for that length of time?

Jeremy Tonet:

Got it. And then, maybe just as you think about forward planning and weather and you provided a lot of helpful thoughts there, that's been great. But if you think about, I guess, the sample set that you apply the standard deviation against -- is the reason to revisit that just given the severity of this year? Or anything could happen in 1 year? Just wondering how to think about, I guess, how to best budget for storm impacts in future years?

Jeremy Tonet:

Got it. That's very helpful. Thank you for all your thoughts today and looking forward to seeing the team at EEI.

Julien Dumoulin-Smith:

Just in the saving, as Jeremy was just asking about on offsets here, you've got [indiscernible] offsets here against these headwinds. How do you think about the sustainability of them but also how do you think about some of the pull-forward items that you pulled in '23 that could come back in '24? I get that there's a question about sustainability going forward of some of these items. But how much slip back, call it, in a onetime basis in '24, how do you think about that in setting up a baseline here as you think about rolling forward, if you will? And again, what kind of items are there? I'll leave it open.

Julien Dumoulin-Smith:

Right. That is, it's not an outsized year in '24 to get back to a run rate in '25, if you will, just to make sure we're...

Julien Dumoulin-Smith:

Got it. Excellent. And Jerry, in the same direction of things, residential weather norm sales of 2.6% year-to-date here. I mean that seems like an outsized impact but obviously, with weather years with outsized weather impacts, it's hard to be precise. Mean how do you think about that impacting '24 onwards and whatever this return to office environment is for you guys on resi [ph]?

David Ruud:

Sure. Yes. Our sales this year have come in pretty much as expected for the year, consistent with our budget, consistent with the rate case filing we had. As you said, residential is down a little as we knew people would be on returning to work. So we saw that come down. As far as our forecast, we -- in the rate case that we forecast residential sales remain somewhat flat. And there's been no dispute in our forecast going forward here either. So we should get that -- that shouldn't be an issue here coming up in this rate case.

David Ruud:

We won't see pressure from residential forecast in '24.

Anthony Crowdell:

Just a quick balance sheet question and a follow-up. I think Moody's maybe put out an update earlier this year with the company's FFO to debt metric is probably the lowest they've been in several years. I guess, the impact of this year's storm activity, mild weather and the rate decision, I guess just where do you think you end up in the end of '23? And how does that rate relative to downgrade threshold and what are you thinking in '24?

Anthony Crowdell:

Great. And then if I could think of Jerry, a longer-term question. I know there's a pending rate case we're all waiting for a decision. But when you think of the volatility, as you just said, Michigan was the only state in the Midwest that had mild weather. It seems that there's much more volatility in weather and storm activity, we're getting in Michigan. It seems every year or 2, there's a catastrophic storm or an ice form something. I mean when you file your future rate cases, thoughts on maybe the risk return or the risk involved in operating or the challenges in operating the utility in Michigan. Can you maybe change what you think the ROE that unit goes up higher?

Operator:

Your next question comes from the line of Andrew Weisel with Scotiabank.

Gerardo Norcia:

Andrew, I would say that we have an infrastructure recovery mechanism built into the current rate case request. If that's adopted by the commission which we hope it will be, we will be in annual rate cases until that builds into a large enough infrastructure recovery mechanism for our distribution capital primarily to keep us out of rate cases for longer periods of time. Like if you look at our gas company, we're able to stay out between 1 and 3 years depending on what's transpiring inside the gas company but it will reduce the frequency of rate cases if the commission chooses to adopt an infrastructure recovery mechanism, it will just take a couple of years for it to happen until that mechanism built into a large enough amount to track enough capital to keep us out for a while.

Gerardo Norcia:

Well, certainly, we're very well aware of supply chain challenges with relation to transformers and switch gear and we've expanded our reach beyond U.S. borders and are bringing in that equipment from international sources which is working out quite well so far. We've done a lot of testing and a lot of investigation and due diligence over the last several years and that's taken some pressure off of our supply chain. So right now, we feel good about it, Andrew, in terms of how we're positioned to execute our large capital programs, both on the distribution business as well as the renewables business.

Steven Fleishman:

Great. So, just -- so like in the past, you've had rate cases and been able to give guidance in rate case with rate cases pending. So should we think about this being different just because of what happened last year with the surprise in the sales forecast or just tough conditions this year? Just how should we think about what's different this time versus in the past?

Steven Fleishman:

Okay. And it's -- and how much, if anything is related to just other things than just the rate case? In terms of just wanting to take more time?

Operator:

Your next question comes from the line of Sophie Karp with KeyBanc.

Gerardo Norcia:

I think the straight answer to that and simple answer socket that is absolutely yes. We have to consider all of the above and those are great thoughts that you've offered and certainly, we're thinking about similar approaches as to how to take this volatility out of the plan because as you've mentioned, what it does to a utility, when you get into these volatile environments, storm environments as it starts to whipsaw our maintenance plans and potentially even your capital deployment plans. And we don't want that to happen. We want to make the steady investments and perform the regular maintenance. We need to have in order to run a high-quality grid in a high-quality operation. So very good thoughts. We're very supportive of your thoughts and we'll be pursuing them in the future.

Gerardo Norcia:

So Sophie, I'll say this much, certainly, any good company faced with uncertainty, any type of uncertainty, we do scenario planning. And we're in the midst of that. I think we're well advanced in our thinking. And once we receive a rate order, we'll roll out our plans and our reaction. I don't want to get ahead of ourselves at this point in time and we'll await the order from the commission and then we'll provide our guidance and long-term plan which I believe at this point, will all be very positive. I don't sense at this point, that there would be a disruption in our ability to invest. I feel confident about the need to make the investment and that there's alignment. But then again, in order to be prudent, we were also doing a lot of scenario planning to ensure that we can respond to whatever happens.

Travis Miller:

You've answered most of my questions here. So just 2 real quick ones. In terms of the coming announcements in terms of guidance and capital investment, long-term growth, what about the dividend, the quarterly dividend announcement will that also come after the rate case and the planning?

Travis Miller:

Okay. So definitely after the rate case but potentially...

Travis Miller:

Okay, perfect. And then, the interveners that you mentioned that really weren't all that keen on settling. Have they been in previous rate cases? Have they been interested in settling before? Did you know these people before and were they familiar with the rate case process?

Operator:

Your next question comes from the line of Ryan Levine with Citi.

David Ruud:

Yes. We look -- we've been looking across our company ever since the end of last year for any opportunities that we had. And we saw that we put all we had in place through the beginning of the year. You saw the $270 million of offsets that we had. So -- we've -- a lot of this plays out still through the end of the year. I mean these are annualized numbers may play out through the end of the year but it's going to be a consistent number with what we've been now for cost cuts.

David Ruud:

Yes, we continue to look at that. We've seen the increasing weather patterns also and look at the increasing storm impact that has. And so we do build in some contingency beyond what's and rates. But again, as we've talked about, we're going to look at what we need the budget going forward as well as what are some of the other mechanisms we can use to manage storm going forward.

Gregg Orrill:

You mentioned you're expecting to get some cash back this year in the PSCR, can you quantify that?

Operator:

This concludes our Q&A for today. I turn the call back over to Jerry Norcia for closing remarks.

Operator:

This concludes today's conference call. You may now disconnect.

Operator:

Good morning, ladies and gentlemen. Welcome to the DTE Energy Second Quarter 2023 Earnings Conference Call. [Operator Instructions] And now at this time, I would like to turn things over to Ms. Barbara Tuckfield, Director of Investor Relations. Please go ahead, ma'am.

Gerry Norcia:

Well, thanks, Barb, and good morning, everyone, and thanks for joining us. This morning, I will be discussing the achievements we've made so far this year and provide a general business update. I'll discuss the progress of our regulatory proceedings including the details of our IRP settlement. Dave will provide a financial update and wrap things up before we take your questions. Before we dive in, I want to take this opportunity to touch on some recent appointments to our regulatory commission here in Michigan. Governor Whitmer extended Chair Dan Scripps term an additional six years to 2029. The reappointment of Chair Scripps provides consistency and regulatory leadership and we appreciate the balance he has always brought to the commission. We congratulate Chair Scripps and look forward to continuing to work with them. Governor Whitmer also appointed Alessandra Carillon as a new commissioner to the MPSC, filling the vacant role left by Germain Phillips. We look forward to working with her as she comes to his position with a strong background in electrification. Moving on to Slide 4. We remain committed to supporting and delivering for all our stakeholders, including employees, customers, communities and shareholders. I always say that employee engagement drives our success, and our team continues to operate at top decile engagement levels as measured by the Gallup organization. I'm proud that our team's excellence in this area was recognized by earning the Gallup Exceptional Workplace Award for the 11th consecutive year. We also received great news that DTE was named one of Metro Detroit's best and brightest companies to work for. The best and brightest program recognizes companies that have a commitment to excellence in their human resource practices and employee enrichment based on categories, including work life balance, employee education and diversity. I'm happy to say that yesterday, the MPSC approved our IRP settlement agreement, which outlines our investment in Michigan's clean energy future, two weeks after we filed it. This demonstrates the supportive nature of our regulatory environment. We are proud that this plan puts our customers first by reducing the cost of our clean energy transformation, while reliably generating the cleaner, affordable energy that our customers will rely on for years to come. I'll provide more details on the settlement agreement in a few minutes. On the community front, DTE was honored to be named to the Civic 50 for the sixth consecutive year. This award presented by Points of Light recognized us as the most community-minded companies in the nation. I am proud that our team continues to put communities we serve at the forefront each and every day in our decision-making and earning this award year after year recognizes that. On the investor front, we are executing on our plan to achieve our 2023 guidance midpoint and our long-term financial growth. As you know, we have been facing headwinds with the weather and storms that we experienced earlier this year. Dave will go into more details on this, but the team has made excellent progress on the cost management work across the entire company, and we continue to find savings with our continuous improvement efforts. As well, we are seeing additional favorability across our portfolio of businesses. We are well positioned to continue to deliver the strong performance and premium growth that DTE is known for delivering on our 2023 midpoint guidance and also continue to deliver long-term EPS growth of 6% to 8%. Let's turn to Slide five and discuss the IRP settlement agreement. We want to thank our DTE employees and 21 organizations from across Michigan for their diligent work on this IRP settlement agreement. We completed a comprehensive analysis that reflected insights shared by our customers and other stakeholders to build the plan. The plan offers a balanced and diversified approach for the transition of our generation fleet, complementing our commitment to build a reliable and resilient grid while maintaining customer affordability. A key provision of the settlement agreement is ending DTE's use of coal in 2032. DTE will provide retraining for employees impacted by the plant retirements, and we'll continue to partner with the local communities on new economic development opportunities. We are continuing our plan to cease coal use at our Bell River power plant in 2026 and converted to a 1,300-megawatt natural gas peaking resource. We are retiring two coal units at Monroe in 2028 and accelerating the retirement of our two remaining units from 2035 to 2032, which is nearly 12 years earlier than originally planned. To determine the best replacement alternative for the capacity of Monroe, we will be studying a range of possible replacement technologies. Facilitated by these accelerations, our 85% carbon reduction goal moves from 2035 to 2032. To support these retirements, we are transforming how the company generates electricity over the next two decades. We will be developing more than 15,000 megawatts of renewables by 2042 to power homes, businesses and industrial facilities. Additionally, we will build more than 1,800 megawatts of energy storage to support the company's clean energy transformation. Through all of this, our focus remains in providing what our customers and communities need, clean, affordable, reliable energy. This IRP is also very positive for customer affordability as it provides over $2.5 billion in future cost savings, and we will be directing $110 million to support our most vulnerable customers, including $70 million to energy efficiency programs, $30 million in bill assistance and $8 million in home repairs facilitate cleaner energy for low-income customers. Through this IRP, we will be delivering long-term customer value by investing over $11 billion in the next 10 years in a clean energy transition, supporting more than 32,000 Michigan jobs. Let's move to Slide six to discuss how the IRP fits into our plan. This IRP supports our long-term capital plan as it solidifies a large portion of our planned investment in cleaner generation. As you recall, we will be investing $21.6 billion in our two utilities in the next five years and $45 billion over the next 10 years. all to build the grid of the future, transition to cleaner generation and modernize the gas transmission and distribution system. The significant additions of renewables and storage outlined in this plan in addition to the renewables investments we are doing through our voluntary renewable program provides surety to our cleaner generation investment plan. The IRP provides full recovery of the net book value of Bell River and Monroe. A portion of the assets are securitized to balance customer affordability with the increased investment in clean energy while supporting our financial plan. For Bell River, we will be depreciating the majority of the asset since it will remain in service earning the authorized ROE currently at 9.9%. A small portion of the net book value will be securitized after 2026. For Monroe, we received constructive regulatory asset treatment for the majority of the undepreciated coal unit investment balances with a 9% return on equity. The remaining portion of the assets will be securitized beginning in 2032. We will receive our full authorized ROE, which is 9.9% until 2032, at which point that portion will be securitized. So this plan is a really great outcome. Selling this case confirms the constructive nature of the regulatory environment in Michigan and DTE's ability to gain consensus with key stakeholders, including the MPSC staff, the attorney general, environmental, industrial and regulatory groups. It is consistent and supports our 5-year financial plan and our 6% to 8% EPS growth rate. It also provides visibility and surety and the long-term capital plan. And this settlement overall is good for customers and aligns with the state's goals to provide clean, affordable, reliable energy in Michigan. We will be updating our full 5-year financial plan at EEI. As with any of our plans, we continue to balance increases in investments in clean generation distribution infrastructure and base infrastructure with affordability for our customers. Now let's turn to our other accomplishments this quarter on Slide 7. Our team has accomplished a lot so far this year. At DTE Electric, we placed Michigan's largest wind park in service, the Meridian Wind Park, spanning three townships, the 225-megawatt wind park has 77 wind turbines and generates enough clean energy to power more than 78,000 homes. In addition to bringing even more clean energy to the grid and supporting Michigan's overall de-carbonization goals, these types of projects help strengthen our economy by creating jobs and by bringing additional tax revenue to our communities. Additionally, last month, Dakota, a native American and women-owned automotive supplier joined our voluntary renewables program. Dakota joins 15 automotive suppliers who are using my green power to make their operations more sustainable. This continues to demonstrate the success of our voluntary renewable program that currently has over 2,300 megawatts of commitments, including participation of over 90,000 residential customers, making us the largest voluntary renewable program in the state of Michigan and one of the largest in the country. We are continuing our focus on improved reliability of our electric grid. We trained more than 25,000 miles of trees over the last five years and will trim an additional 5,000 miles in 2023, of which we have completed 2,800 miles through the first half of this year. The electric rate case is progressing as we continue to pursue a constructive settlement with all stakeholders. At DTE Gas, our main renewal work marches steadily along. We've completed over 150 miles of renewal in the first half of 2023. Our natural gas balance program also continues to grow. We now have over 12,000 customers subscribed since program inception in 2021. In the second quarter, the city of East Grand Rapids was the first municipality in Michigan to join the program to help lower its carbon footprint, and we invite more municipalities to participate in this great program. Moving on to DTE Vantage. As we mentioned earlier this year, we have placed two projects in service so far in 2023. One RNG and one custom Energy Solutions project. We are on track to place two additional RNG projects in service by year-end and are in advanced discussions on an additional customer energy solutions project. We also continue to advance our development pipeline with strong opportunities in both RNG conversions and large custom energy solutions projects. With that, I'll turn it over to Dave to give you a financial update. Dave, over to you.

Operator:

[Operator Instructions] We'll go first this morning to Jeremy Tonet at JPMorgan.

Gerry Norcia:

Our target, Jeremy, to settled the rate case is mid-October, and before the PFD is issued. So we have started some conversations and those conversations, obviously, will become a lot more intense through the summer. But I believe we have the ingredients for settlement, and we'll continue to update you on that as we progress.

Dave Ruud:

Yes, Jeremy. So far, we're seeing things start out pretty close to what we had expected. And so as you know, though, August and September can be really big months for us or really big swing months. So continue to watch that closely as the weather plays out.

Dave Ruud:

Yes. We're looking across our portfolio for offsets. And with the ones we have within our steel portfolio, represent that. We have some byproducts that we sell as a process of what we're doing within our steel business and our cope making. And we just got some opportunistic pricing and some really good pricing for that through the year that we've been able to take advantage of this year. And I'll say, Jeremy, across our whole portfolio, we continue to look for these onetime cost reductions and some of these opportunities like this to ensure that we can deliver for the year.

Gerry Norcia:

So just to add to that, we're also seeing some lift in RNG pricing, which is also creating some favorability at Vantage.

Operator:

Thank you. We'll go next now to Shahr Pourreza at Guggenheim.

Dave Ruud:

Yes. As we play out the year, we're looking for the opportunities across the business, again, to ensure that we can offset the challenges that we've seen through storm and weather as we go through the year. And so we're doing that across our portfolio. We as an extended leadership team, we're meeting weekly to ensure that we're finding all the opportunities we can and extinguishing all the risks. And through the year, we've been able to find some additional opportunities that have been able to offset the challenges that we've seen through weather and through the storm we saw in the first quarter. So we'll continue to look for that flex throughout the year.

Shahr Pourreza:

So I guess it would be fair to say kind of no big changes just executing on the plan from 1Q?

Shahr Pourreza:

Excellent. And then maybe shifting to efficient financing. Just how are you thinking about supporting credit metrics on a tighter capital market environment, especially as we continue to see high levels of investment in rate base growth? And just any thoughts on internal versus external balance sheet support? As you mentioned the Vantage assets are potentially helping. But maybe how are those -- the value of those assets stacking up against any future equity needs?

Shahr Pourreza:

Excellent. And maybe last one, housekeeping call out, following up on Jeremy's question on the rate case. There's been some data points on kind of higher ROEs that potentially the ranges that kind of have been recommended and that shows some recognition from stakeholders. Do you anticipate that, that will start to make an impact, whether in the '24 time frame or just in settlement negotiations?

Shahr Pourreza:

Excellent. I appreciate it. Thanks for taking my questions.

Heidi Hauchon:

This is Heidi Hauchon for Julian. Thank you for taking my question.

Dave Ruud:

Hi, Heidi.

Gerry Norcia:

Sure. So there's been certainly a positive support from the staff for the IRM and we're getting all the right signals that this is something that will be really valuable to our customers. And can help secure the investments that's necessary to move towards a more resilient and reliable grid. That one feels encouraging. In terms of ring-fencing tree, we've essentially done that already through past proceedings where a good portion of it is ring fenced. And we're executing against that plan. And actually in good years when we've had surpluses, we've even put more against tree trimming because we see it as a significant labor in terms of reducing customer outages. So I feel that our positions are productive, positions that we've seen in the various parties, and we're going to work hard to get towards a settlement before the middle of October.

Dave Ruud:

Yes. Our sales have come in exactly as we expected on a weather-adjusted basis this year. If we look back to last year, residential sales are down about 3.5% to 4%. And that's really what we have predicted with people returning to work. Our commercial is down a little bit due to energy efficiency and some other things and our industrial is up as our plants in Michigan are experiencing a lot less downtime. So I think now we've seen that our sales are kind of at the right level or where they are with people return to work and kind of very consistent with what we have forecasted through the year.

Gerry Norcia:

So we did have some storm weather moved in last night. Approximately 92% to 93% of our customers have power at this moment. And we've mobilized about almost 3,000 of our team members to address the storm conditions. So we'll ramp most of it up in the next couple of days. These types of storms are pretty typical in July and August. So nothing out of the ordinary at this point in time. In terms of achieving guidance, as I mentioned and Dave has mentioned, we have seen about $200 million of headwinds, and we have a plan that addresses these headwinds. And those headwinds included some of the firestorm activity and cooler weather that we experienced and warmer weather in the winter. Many of the initiatives will be onetime in nature, but we're learning, as I mentioned, a lot more about our company and which is good for us and good for our customers. And the team is achieving the plan right on top of the plant. We've asked them for some significant delivery on initiatives and they're delivering on that plan. So I'm proud of their accomplishments, and that will land us at the midpoint of our guidance.

Operator:

We go next now to Michael Sullivan at Wolfe Research.

A – Gerry Norcia :

Yes. What we have settled on, Michael, was that we'd file another IRP in several years, and that would really be the, what I would say, the key topic for the last two units of Monroe, retiring those two in 2032. So the agreement between the parties and us, of course, was that look a lot could change in two or three years. But we will need a dispatchable resource there. We have proposed a combined cycle plan with carbon capture. And so we'll have to study that as an option amongst many other options, more batteries, more renewables. But definitely, very large resource that we count on from that part of the service territory to feed our industrial base in Detroit. And so we'll need a dispatchable resource that's going to be high quality and a 24/7 resource. So it will look like that. It would be maybe a mixture of -- it's just hard to tell right now where those studies will take us, but we agreed to study that together as a stakeholder group. So we've got time to do that one.

A – Gerry Norcia :

Go ahead, Dave.

Q – Michael Sullivan :

Okay. And any sense of timing on when that plays out when you know you can get the funds worked on?

A – Gerry Norcia:

Mike, as you know, we have a long list of capital projects waiting to get into the plant. So as we find unique ways to finance some of it, it will allow us to accelerate our journey in other areas like, for example, with our grid. The more opportunity to find like that to make more headroom, we'll take full advantage of it.

Q – David Arcaro :

I was wondering, just in your arsenal of cost-cutting measures or offset measures. I was wondering if there are financial tools that you might have at your disposal that you've considered? Just thinking that CMS, did a tender offer recently on one of their outstanding bonds, things like that? Are those things that you would consider for offsetting weather headwinds this year?

Q – David Arcaro :

Got it. And then separately, could you just give an update on what we could expect to see in the updated distribution grid plan this year and what the timing might be for that?

Operator:

We go next to now to Alex Mortimer at Mizuho.

A – Gerry Norcia :

Well, look, we're a big proponent of transportation electrification for several reasons. One is it's great for the environment. I mean the transportation sector I believe now the largest emitter of carbon in the economy. So I believe it's going to be very valuable for that. But secondly, obviously, we get nice investment opportunity from that in the sense that it creates headroom for our investments as we see more load coming on. It is not fundamental just yet, but we expect that near the end of our 5-year plan, we'll start to see it be pretty significant contribution to margin growth. And that will help finance a lot of these large investments that we're making now to prepare ourselves for the electrification and transportation fleet as well as the deal with the inclement weather that we continue to see. So we're pretty excited about it. We're happy that obviously, our new commissioner is very supportive of that agenda, but the other two commissioners are as well. So lots to do there. And we also have an administration that's quite supportive of electrification. So we're pretty excited about the prospects in the future. But like I said, it will start to become more impactful in our plan from a margin creation perspective later in the 5-year period. From an investment perspective, we're already investing against this opportunity.

A – Gerry Norcia :

I would say that contingency in the electric company has been exhausted, but some of our other BUs still have a bit of contingency, but we are relying on normal weather both from a temperature perspective and storm activity perspective.

A – Gerry Norcia :

I would say the bias is the -- our target and the bias is towards the midpoint at this point in time.

Gerry Norcia:

Well, thank you, everyone, for joining us today. I'll just close by saying I hope everyone has a great morning and a safe day.

Operator:

Thank you for standing by and welcome to the DTE Energy First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Barbara Tuckfield, Director of Investor Relations to begin the conference. Barbara, over to you.

Jerry Norcia:

Thanks, Barbara, and good morning, everyone. And thanks for joining us. This morning I'll discuss the achievements we have made so far this year provide an update on our plans to achieve our 2023 targets and give an overview on the robust opportunities in our long-term plan. Dave will provide a financial update and wrap things up before we take your questions. Let me start on Slide 4 to discuss the storms we experienced in the first quarter starting with the worst ice storm in nearly 50 years which was immediately followed by a major snowstorm. We understand the impact to customers during power outages and our team worked around the clock to get the power back on safely. I want to express my appreciation to all of our DTE employees for their tireless efforts, along with our labor and community partners and the many others who supported our restoration efforts. It was all hands on deck at DTE for these two large storms. We had our front line working through dangerous ice and snowstorm conditions, restoring power and conducting damage assessments. We also had our office staff in the field ensuring public safety from downed wires. Our Gas team was going door-to-door, checking on thousands of seniors and vulnerable customers to make sure they were okay. Our call center agents worked tirelessly to provide customers, the latest information and escalate emergency matters. I am really proud and grateful for how our team showed up for our customers by keeping each other and our communities safe. Our foundation also showed up in a big way by contributing $3 million to replenish food pantries and reaching out through United Way to provide low-income customers with food vouchers at local grocery stores. We remain committed to supporting and delivering for all of our stakeholders including employees, customers, communities and shareholders. I always say that employee engagement drives our success and is the secret sauce of DTE. And our team continues to operate a top decile engagement levels as measured by the Gallup organization. I'm excited to say, we were recently recognized for this top engagement by earning the Gallup Great Workplace Award for the 11th consecutive year. In our effort to continue supporting our communities we partnered with one of the country's largest African-American and women-owned energy efficiency companies to launch the Energy Efficiency Academy. The academy provides training and placement for good paying jobs building a pipeline of talent that will help make our customers' homes, more energy efficient. And on the investor front we are executing on our plan to achieve our 2023 guidance and our long-term financial growth. As you know we are facing additional headwinds with the warm weather and the severe storms that I mentioned. The team has made excellent progress on the cost management work and we continue to find savings with our continuous improvement efforts and one-time initiatives across our portfolio of businesses. We are well positioned to continue to deliver the strong performance and premium growth that DTE is known for with long-term operating EPS growth of 6% to 8%. Let's turn to Slide 5 and discuss the extreme weather events that continue to increase in frequency. As you are aware, Michigan's weather has dramatically changed in recent years with storms that were once considered historic seemingly becoming the new normal. Earlier this year we experienced the most challenging two-week storm period we have ever faced as a company. The first storm that rolled through was the largest ice storm in our area in 50 years. It was followed by a heavy wet snow event the following week. As I mentioned, the ice storm was a very significant event. And having 80% to 90% or the vast majority of our system hold up extremely well through the storm is really a tribute to the investments we have made in the grid so far. We've invested $5.5 billion over the last five years to rebuild poles wires transformers and substations. We have also invested over $800 million in tree trimming over the last five years and we see great results from these investments. It is important that we continue to implement our learnings from these storms and we are implementing a plan that will be bolder in our approach to reducing the impact of these more intense weather events. We need to provide safe reliable affordable energy. Our customers expect this from us and we have the same expectation. And this can only be achieved through infrastructure investments. We agree with all of our stakeholders that we must work together to do more and we must do it faster. Having a resilient grid is critical to providing safe and reliable electricity, as well as enabling transportation electrification and achieving statewide decarbonization, as well as promoting economic development. We have been ramping up our strategic investments to prepare the system for the challenges and opportunities ahead. We know that the investments are having a positive impact and we are looking at ways to accelerate our efforts, while maintaining customer affordability. In communities where DTE completed some of our most focused work on the grid's more challenged infrastructure, customers experienced up to a 70% improvement in reliability. Significant long-term investment is needed to prepare our infrastructure for extreme weather and for increased demand from electrification and economic development. Our focus is to continue to make strategic investments in our grid. Let's turn to slide six to discuss some of these opportunities. We have invested heavily in our electric grid over the years, focusing on hardening infrastructure, replacing aging equipment and completely rebuilding parts of the grid that originated back in the early 1900s. You can see from the data that in areas where we make these investments we see reliability improvements. But to see the type of dramatic improvement we all want across our entire system, we must do more. We will invest $9 billion in the grid over the next five years to further harden the system through a focused strategy. First, we'll continue to invest and enhance tree trimming. We know that the majority of customer outages are due to trees contacting wires. We also know that areas where trees are trimmed perform significantly better than those not trimmed. Second, we will continue preventive maintenance and hardening on the existing infrastructure and continue updating the electric grid, specifically poles, wires and other equipment that makes the system more reliable and more resilient. Third, we will accelerate the complete rebuild of the older sections of our infrastructure. In some instances, it will make sense to pursue the undergrounding of our distribution system. In our most recent rate case, we requested two undergrounding pilots. Since the early 1970s new construction has been developed with underground wires with a-third of our system now underground. There is a significant opportunity to continue this important work on our electrical system and drive down the cost of undergrounding. Lastly, we will accelerate our work to achieve the full automation of the electric grid which will fundamentally reduce the duration of outages. Our distribution plan filed with the MPSC in 2021 envisioned this happening on the same time line as the grid rebuild, but the automation work must be accelerated to improve the performance of the grid for our customers in the near term. With our recent investments in the advanced distribution management system and our new system operations center being complete, we can now bring smart grid technologies into the field, which will enable us to more quickly and efficiently isolate outages on a circuit, so the impact of an outage can be minimized. Our goal is to fully automate the grid within five to six years. Increasing investment in our system is something we have done consistently over the years. We know how important these investments are to provide clean and reliable power to our customers. And we will continue to evaluate opportunities to accelerate investments while maintaining affordability. Now let's turn to slide 7. We are making great progress at each of our business units this year. At DTE Electric, the IRP and rate case proceedings continue to progress. We began settlement discussions on the IRP, which are very constructive and we continue with the audit and discovery process in the rate case. We recently announced that Meridian Wind Park is now operational. This is Michigan's largest wind park spanning three townships. The 225-megawatt wind park has 77 wind turbines and generates enough clean energy to power more than 70,000 homes. DTE Electric continued its progress on the highly successful voluntary renewables program with the recent addition of a 20-year contract with Toyota. We are seeing some promising ongoing economic development in the state, which will continue to drive growth in our service territory. Henry Ford Health System is planning a $2.5 billion investment in Detroit for a hospital expansion, research facility and neighborhood redevelopment in Detroit's New Center area. The University of Michigan and the Ilitch organization announced a commitment for a $1.5 billion investment for an innovation campus that will bring research and innovation firms together. These developments will take place across downtown Detroit including a development adjacent to our headquarters. We also expect to see a meaningful pickup in the potential domestic manufacturing within critical supply chain areas, including solar manufacturing and battery storage in order to comply with and benefit from domestic content requirements under the IRA. Such energy-intensive manufacturing businesses should translate into higher load growth in our service territory. A recent example of this is our next energy EV battery maker that is located in our service territory. And GM is investing $4 billion to convert its Orion Township assembly plant to produce full-size electric pickup trucks. These developments will directly support our ability to deploy more capital, while mitigating customer rate impacts by bringing a potential increase of 50 megawatts of new demand on our system. More broadly, this is also a positive for our Vantage business which has expertise in providing customized energy solutions for commercial and industrial customers. We are seeing increased activity and potential in this business line. Moving to DTE Gas, we completed over 70 miles of main renewal with a target of completing over 200 miles by the end of the year in continuing progress on accelerating the modernization of the gas transmission system. Another major accomplishment for our gas company is the completion of the final phase of a major transmission renewal project in Northern Michigan. This project included the installation of new pipe and facilities, modification work to provide supply redundancy for a growing market. DTE Vantage with a new RNG project and a custom energy solutions project in service and we continue to progress on our growth plan driven by a strong development pipeline in both RNG conversions and large custom energy solutions projects. With that, I'll turn it over to Dave to give you a financial update. Dave, over to you.

Operator:

Thank you Dave, and thank you Jerry for the presentation. [Operator Instructions] And your first question comes from the line of Durgesh Chopra from Evercore ISI. Your line is open.

Jerry Norcia:

Good morning.

Dave Ruud:

Sure. Like we said, we did see headwinds in our electric business from -- in the first quarter from both weather and storm and the storm is in there at -- it was $20 million. We also -- this storm was kind of a heavy one where it hit a lot of our wire, so it was a little heavier O&M. So after tax is around $70 million. But again, we see great opportunity in our other businesses through the year to kind of overcome those headwinds. And again, all the cost reduction work that we've been doing and kind of focused reductions has really been coming through too. So we've had these headwinds in the beginning of the year. We see great opportunities still to work through this. And with normal weather and storms through the end of the year be able to reach our guidance.

Dave Ruud:

Yes. The first quarter the weather and storm we just talked about were pretty impactful. We came into the year with some challenges. So through the end of the year we need normal weather and storm along with some management actions to offset some of that. But we'll need normal weather and storm developed to hit our guidance.

Dave Ruud:

Yes. Our sales that we're forecasting that have just come in they're in line with what we had in our budget, and they're really close to what we had in the current rate case as well. We did see people returning to work a little quicker in the first quarter than we had expected but that will -- we think that will balance off through the end of the year. So it's very consistent with what we saw what is filed in this rate case and a little below what we had in our previous rate case even.

Operator:

Your next question comes from the line of Jeremy Tonet from JPMorgan. Your line is open.

Dave Ruud:

Good morning, Jeremy.

Jeremy Tonet:

I just want to bring maybe a little bit of a finer point to question on contingencies here. As you see the balance of the year you talked about the midpoint the target for the year for EPS. Does that assume kind of you've exhausted contingencies across segments, or are there still contingencies in place should something go adverse to plan?

Jerry Norcia:

The other thing we're seeing Jeremy, as well, as we initiated our continuous improvement efforts and cost reduction efforts we are seeing some favorability there as well, which will also be helpful. And just to be clear for everybody on the line, as we embarked on these cost reduction efforts, which most of them are one-time efforts to move through this year, we are investing at record levels in our distribution grid. This year we'll invest about $1.5 billion in our grid. And also we have not touched our tree trimming budgets, which both of those two combined are the most impactful things that we will do to make our grid more resilient and more reliable.

Dave Ruud:

Yes. So yes, that's what we've signaled is that there's favorability within those businesses that they can offset other things.

Jerry Norcia:

Yes. Primarily our investment opportunities in RNG are driven by assets that are already under our control where we're converting existing landfills to produce RNG. And so that's where we're seeing opportunities. And those are still really nice returns, IRRs that are in sort of the north of 10% and into the teens in some instances unlevered after-tax. So those feel real good to us. We're also seeing a resurgence in our Energy Solutions area where we're – a lot of the sort of repatriation of industrial activity in the United States has given us opportunity to look at incremental investments with some of our large industrial partners. So we're also excited about that line of business.

Operator:

Your next question comes from the line of David Arcaro from Morgan Stanley. Your line is open.

Jerry Norcia:

Good morning.

David Arcaro:

I wanted to see just if there's any appetite from your end or just within the state to pursue decoupling going forward either through a rate case or just overall is that a strategy or a regulatory structure that would be appealing?

David Arcaro:

Got it understood. And thinking – I was curious to your view on as you pursue onetime savings initiatives this year the onetime being you obviously get them reversing going forward are you thinking about 2024? Is there a certain kind of level of headwind or natural offset into 2024 such that there's any risk going forward if you dig too deep on the onetime cuts this year?

David Arcaro:

Yes. Got it understood. I was wondering, how are you thinking kind of strategically about how to manage the more extreme weather that you've been facing in Michigan. I'm wondering if – you've obviously laid out a number of CapEx pursuits in O&M targeting. Is this something that you could bring as kind of a separate initiative to the commission whether it's some kind of undergrounding plan or just whether resiliency type of a plan, or would you expect it to go through the more traditional rate case process over time?

David Arcaro:

Okay. Great. Thanks so much for all the color.

Michael Sullivan:

Hey guys, good morning. Jerry, so maybe just picking up on that last one. Is there any way some of the things you're thinking about on reliability spend can be factored into the currently pending electric rate case, or do you kind of have to wait till this distribution grid plan gets filed and then fold it into future cases?

Michael Sullivan:

Okay. That's really helpful. And maybe just like with all this incremental spend, how we should just be thinking about the CapEx budget and customer rate impacts? Are there other things that get shifted out or do you see incremental headroom to absorb some of this additional spend on the grid?

Michael Sullivan:

Okay. Great. And then last thing I just wanted to circle back to the quarter results and the guide. So, I guess just to confirm if we do get more storms or mild weather at the electric business over the summer how much more can be absorbed there or should we think about that as it starts to become too much to offset?

Dave Ruud:

I think that's right. We are looking -- if we have normal storm and normal weather we're in a good place to hit our guidance. But again, we'd have to find some more offsets, if things are outside of the normal.

Operator:

Your next question comes from the line of Andrew Weisel from Scotiabank. Your line is open.

Jerry Norcia :

Good morning, Andrew.

Andrew Weisel:

First question on the reliability spending and automation in particular should we expect structural day-to-day O&M savings from these investments? I think the primary goal is to reduce outages but would these come with mitigant customer vol pressure?

Andrew Weisel:

Okay. Great. Then the follow-up to that one is you mentioned a few different buckets of reliability spending. In terms of dollars and potential impacts, where do you see the most opportunity or the most value?

Andrew Weisel:

Okay. That's really helpful. And just one last one, if I may. Deferred fuel balances can you talk about where that stands versus year-end levels?

Andrew Weisel:

All right. Thank you so much.

Alex Mortimer:

Hi. Good morning. Thanks for the time.

Dave Ruud:

Good morning.

Dave Ruud:

Yeah, that's a good question. We came into the year with that challenge and went through our normal process of how we would go about that and setting some good targets and budgets for our teams and we're well on our way to achieving that. In fact, we're overachieving a little bit as we've started the year. And again these are -- we've taking advantage of attrition reduced some of our contractor workforce limit over time and then shifted some of our less time-critical work. So it's really going very well for us. We're hitting our numbers. Again, we're not doing anything that impacts our customers, impacts reliability. In fact, we're continuing to invest a lot in everything we need to do to improve and help reliability. But across our business, we're seeing these reductions like really take hold.

Dave Ruud:

Yes, that was putting us on target to hit the midpoint.

Dave Ruud:

Particularly on sales forecasting. And what we had in the last rate case, we are actually seeing the sales come in kind of similarly to what we had forecasted in fact a little below that. The methodology change you're talking about is we're using some Google mobility data that would help us determine the percentage of people coming back to work. That's not available anymore. So we use what's this badge-like data which is from Kastle. And it's really just as accurate or more accurate. But I would say about our forecasting we're doing a good job. We're right on with what we submitted in the rate case, but there's also a lot less variability in how the forecasting will be done now because we are kind of working through this return to work. And so we don't really expect there to be the big variations in forecast across groups as we go through this next rate case.

Jerry Norcia:

Yeah. What will happen is that the governor and her staff will appoint a new commissioner to replace Commissioner Phillips and of course we wish Commissioner Phillips all the best in his future endeavors. So that's what will happen. If one is not appointed two can rule on the rate case and the IRP that's in front of the commission for our company. And I guess the last question you had yes the new commissioner would have the opportunity to weigh in depending on timing of course. If it's late in the process of one or both proceedings then typically they may not choose to participate. But if they have enough time to spend with the case then they typically do rule on it.

Jerry Norcia:

Thank you.

Ross Fowler:

Good morning.

Ross Fowler:

Good morning. So Dave, you've talked about sort of this -- these onetime O&M cuts this year to get back in the range and mitigate some of the storms. Obviously, Jerry you talked about reviewing that as you move forward to what's permanent and what sticks and what's sort of onetime as you look through all of it. I imagine you're going to have to have that conversation with the commission as well. Just maybe give us some color and context as we look forward into that conversation of how that conversation has gone in the past, right? There's going to be a debate about what's onetime and what's more permanent?

Ross Fowler :

Thanks for that. And then following up on sort of Commissioner Phillips. I know every time this happens it's a little bit different, but is there a general like average time it's taken to replace a commissioner when this has happened in the past, or should we not look to that as a guidepost for proving the -- this individual process?

Ross Fowler :

Yes, it’s great color, Jerry. Thank you.

Jerry Norcia :

Thank you. Well, thank you everyone for joining us today. I'll just close by saying I'm excited about the opportunities that we have ahead of us to further strengthen our electric grid, and prepare for increased demand for electrification of our system, as well as really transforming the way we produce power, the way we deliver gas. We are in a historic period at DTE and in our state. So we will also continue executing on our plan to achieve our goals in 2023, and remain well positioned for future growth. I hope everybody has a great morning, and I look forward to seeing all of you at AGA in a few weeks. Thank you.

Operator:

Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the DTE Energy Fourth Quarter 2022 Earnings Conference Call. [Operator Instructions]. It is now my pleasure to turn today's call over to Barbara Tuckfield, Director of Investor Relations. Ma'am, please go ahead.

Gerardo Norcia:

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'll start by giving you a recap on our outstanding 2022 business performance, provide highlights on how we are well positioned for 2023, and give an overview on the robust opportunities in our long-term plan. Dave Ruud will provide a financial update and wrap things up before we take your questions. I'll begin on Slide 4. We delivered another solid year for all our stakeholders in 2022, which included delivering strong financial results, continuing our excellent track record of creating shareholder value for our investors. I continue to be impressed by our amazing team that delivers exceptional service to our customers and to each other. I always say that employee engagement is the secret sauce that drives our success at DTE. And our team continues to operate at top decile engagement levels as measured by the Gallup organization. This engagement was recognized by earning the Gallup Great Workplace Award for the 10th consecutive year, and is evidenced in a way our team shows up every day. Our team continued to deliver for our customers in 2022. I am very proud that DTE Gas is ranked first in residential customer satisfaction as measured by J.D. Power. This recognition signifies our strong commitment to our customers. We also undertook a number of initiatives to continue to improve electric reliability and we see that paying dividends for our customers. We invested more than $1 billion in our electric grid last year to help improve reliability for our customers. In 2022, the electric grid operated without incidence 99.9% of the time. Across DTE's electric service territory, customers experienced 21% fewer power interruptions in 2022 versus 2021, and the average outage duration time was down more than 40%. In communities where DTE completed some of our most focused work on a grid's more challenged infrastructure, customers experienced up to a 70% improvement in reliability. 2022 was a record year for investment in our grid and the result was stronger reliability. In addition, our field crews continued their focus on grid resilience, and trimmed more than 6,500 miles of trees as we continue on our accelerated tree trim program. It's clear that as we invest in a grid, our customers benefit with improved performance and more reliable power. For our broader community, we continue to be the largest producer of an investor in renewable energy in the state of Michigan. We also added significant additional MIGreenPower customers through our voluntary renewable energy program continue on our path to decarbonization. In 2022, we invested $2.5 billion with Michigan businesses, creating and sustaining more than 11,000 jobs across the state. And on the investor front, 2022 was another strong financial year. We delivered operating EPS growth of over 10% from our 2021 original guidance midpoint. And we are well positioned to continue to deliver the strong performance and premium growth that DTE is known for. As you know, we received an order from the Michigan Public Service Commission on our electric rate case last November. Although there were a lot of positive aspects to the outcome for which we are very grateful for, we were disappointed by the projected residential sales volume in the final order. Accordingly, we have implemented a series of one-time O&M actions to address this challenge that will support us delivering the midpoint of our operating EPS guidance range, consistent with the early outlook we provided in November. Dave will go into a lot more detail on the O&M actions that we are taking. DTE and the MPSC share a mutual system, bringing affordable, reliable and cleaner energy to our state and our customers. And the residential sales volume will be reviewed in our recently filed rate case. For 2023, our operating EPS guidance delivered 7% growth from the original 2022 guidance midpoint, and our long-term EPS growth target is 6% to 8%. We are confident in our ability to deliver that growth for our investors. Let's turn to Slide 5. We are making significant customer-focused investments to build the grid of the future and invest in cleaner generation, while modernizing the gas transmission and distribution system. We increased our 5-year utility capital plan by 20% or $3.5 billion over last year's plan. And over the next 10 years, we plan to invest $45 billion in our 2 utilities. The focus of these investments continues to be infrastructure renewal and cleaner generation at DTE Electric. While at DTE Gas, our plan includes main renewal and base infrastructure investments, as we accelerate the modernization of the gas transmission and distribution system. Now I will highlight some of the successes at our electric company and go through the details of our electric capital plan on the next slide. In 2022, we made significant progress on our path to cleaner generation and a more reliable grid. We continued the strong growth in our MIGreenPower power program, signing 2 of the largest utility renewable contracts in the country with Ford Motor Company and Stellantis. We have currently 2,250 megawatts subscribed to this program, supported by 900 businesses and 85,000 residential customers, and it continues to grow daily and exceed expectations. In 2022, we retired 2 coal plants. The shift from coal to natural gas and renewables supports cleaner energy and helps further reduce O&M costs. Our diverse energy mix helps us reduce fuel costs as well and allows us to maintain flexibility to adapt to future technological advancements. Our 5-year plan for cleaner generation is $2 billion higher than the previous plan, including $1 billion for voluntary renewables and $1 billion for solar related to our integrated resource plan. We increased our distribution infrastructure investments by $1 billion. We continue to modernize our electric grid to prepare for increased extreme weather and load growth that we're anticipating from EV adoption. Let's turn to Slide 7 and go into additional details on what supports this plan. Supporting our 5-year utility capital plan is the integrated resource plan we filed in November with the commission. The IRP accelerates our generation transformation to achieve carbon emission reductions at DTE Electric of 85% by 2035, 90% by 2040 and net zero by 2050. This is a significant acceleration from our prior plan. This filing provides updates on our path for decarbonization and our commitment to continue providing cleaner, more reliable, affordable energy to our customers. The IRP supports the mission economy and tax base with power generated in our home state, invest $9 billion over the next 10 years into Michigan's economy, and reduces the cost of our clean energy transition by $1.4 billion from our prior plan. We will pursue a settlement in this case, and we will have an outcome in the second half of this year. The IRP and our investments in cleaner generation are supported by the inflation Reduction Act or the IRA. The IRA includes a lot of positive elements for DTE that benefit both our utility and non-utility businesses. We continue to focus on customer affordability as we go forward with our robust investment plan. Our commitment to a continuous improvement culture gives us confidence we will maintain our affordability goals, and the IRA will help enable affordability throughout our plan. Just a couple of weeks ago, we filed a rate case that underpins investments in system reliability, grid modernization and cleaner generation investments. We intentionally did not request a base rate increase during the COVID pandemic to assist customers with affordability. Since 2020, we invested more than $8 billion in DTE Electric system while keeping base rates nearly flat. In order to continue to make progress that our customers expect and account for the significant investments we have made in the grid and cleaner generation, the electric company needed to file a rate case. After 4 years of essentially no base rate increases, we are requesting an increase that would go into effect at the end of 2023. This request supports investments in Michigan to improve reliability and deliver clean energy while maintaining affordable rates. The majority of the request in this filing is attributable to capital investments, sales reductions and the cost of debt. We are committed to working with all interested parties to pursue a settlement that strikes the right balance between continuing to increase reliability and providing cleaner energy for our customers, all the while maintaining affordability. We also filed for an infrastructure recovery mechanism, or an IRM, in the case. Modeled after our DTE Gas IRM, the electric IRM would allow us to recover the cost of grid infrastructure investments between rate cases. It is our objective that as the IRM grows over time, it would help stretch the time between rate cases as it does for DTE Gas. Let's move to Slide 8 and discuss DTE Gas. At DTE Gas, we are continuing main renewal for reliability improvements and further greenhouse gas emission reductions as well as replacing aging transmission equipment. We successfully completed 220 miles in 2022 and have a target of 200 miles in 2023. We are targeting a reduction of 65% of our greenhouse gas emissions by 2030 and net zero by 2050. As I mentioned earlier, DTE Gas is ranked #1 in residential customer satisfaction, of which we are very proud and thank our DTE team for this tremendous accomplishment. Let's move to Slide 9 to discuss DTE Vantage. We continue to make significant progress in project development. In 2022, we placed an RNG project and another customer energy solutions project in service. In 2023, we are placing 3 new RNG projects and 1 custom energy solutions project in service. We also recently executed a new long-term fixed fee agreement with Ford Motor Company for its new electric vehicle and battery manufacturing complex. This complex, which is expected to be in service in 2024, will be Ford's largest EV manufacturing facility in North America. DTE will invest over $200 million, provide steam, hot and chilled water to Ford, and electricity to Tennessee Valley Authority. We are consistently growing earnings by over $15 million annually with capital investments of $1 billion to $1.5 billion in the 5-year plan. This is underpinned by federal and California low carbon fuel standards and the IRA, which supports a very robust pipeline of projects in both the RNG and custom energy solutions areas. We remain confident in continued growth at this segment. With that, I'll turn it over to Dave to give you a financial update. Dave, over to you.

Gerardo Norcia:

Dave and Brent, before we open it up for questions, I would just like to let the community -- investment community know that we had one of our largest ice storms roll through our service territory yesterday and across the whole state of Michigan. And we've got over 400,000 customer outages at this point in time. And I want to give a shout out to our people. Over 2,000 people were in the field today, first thing this morning, dealing with this on a safe -- and trying to restore our customers safely and as quickly as possible. We understand certainly the inconvenience that this causes our customers, but again, our goal with several thousand people in the field this morning is to restore our customers as quickly and as safely as possible. So with that, let's open up for the first question, Brent.

Constantine Lednev:

It's actually Constantine here for Shar. Congrats on a great quarter. Certainly appreciate the disclosures around the lower revenue approval. Can you maybe just talk about the changes that are now embedded in that reiterated '23 guidance? And maybe just contrasting with prior years, I think you called out around $100 million of kind of contingency flex. So what would be a good proxy for '23, specifically as we think about lean actions? And what portion was built up in '22, like weather and reinvestment versus more recurring and prospective reductions?

David Ruud:

And I'll just add to that. As soon as we knew that this rehearing was a possibility or that we saw the sales, we went into action building our plans. And now we're tracking this daily in a lot of times and weekly, and we're executing on our plans really well so far this year.

David Ruud:

Yes, it is. At the highest level, we've incorporated increasing interest rates in our plans for our 5-year plan. At the holding company, right, we don't have any retirements in '23 other than this $800 million of outstanding term loan. And for that, we've entered into some floating defects to make sure we reduce any exposure to interest rate volatility in '23. And then in '24 and '25 and beyond, we've conservatively modeled rates in our plan and look for opportunities to bring that in even more favorably as we go forward.

Gerardo Norcia:

I can start, and Dave can add. Certainly, we're seeing very aggressive values for RNG transactions. That's encouraging in terms of value for our assets. And we are starting to look at a handful of opportunities in carbon cash in storage, especially with the IRA providing significant tax credit uplift in that business. And we're looking at very small projects to sort of get our feet wet, if you will, in that process with our expertise in storage and pipeline work as well as processing. So Dave, do you want to add to that?

Constantine Lednev:

And just any thoughts on capital rotation within that business or more kind of toe-in-the-water approach?

Operator:

Your next question is from the line of Nick Campanella with Credit Suisse.

Gerardo Norcia:

Sure. So our intent -- we've got 2 major regulatory initiatives this year. One is the integrated resource plan that will conclude in the second half of this year and then our electric general rate case that will conclude in December. We are very interested in settling both. And I would say that in the first instance, with the integrated resource plan, many of the parties that are involved are very interested in settlement discussions. We've had our first set of discussions, which are encouraging, and we seek to settle that case, which is the integrated resource plan. Later in this year, we will start those conversations for settlement around the electric rate case. We do have a history of settling gas cases in many of our renewable regulatory filings as well as our cost recovery factor filings and GCRs have been settled in the past. So we know how to do this and have done it, and we will pursue it in these 2 major regulatory initiatives this year.

Gerardo Norcia:

Well, certainly, the contingency that we walk into the year with is exactly for these purposes, whether it's deviations in weather or -- we do carry a storm budget as part of our base plan. And then, of course, if storm costs exceed plan, and that's what contingency may be used for, or it maybe used for weather variations. So I would say that we have adequate contingency at this point in time based on what we've seen so far in the year. And as we consume contingency, as I mentioned before, we go into deeper lean actions to try and restore contingency, especially as we head into the summer season, which is really our biggest opportunity to create value for our shareholders. That's when we really want to make sure that most of our contingency is intact.

Unidentified Analyst:

This is for Julien. And congrats on today's results. Just the first question, kind of coming back to the 2023 O&M cuts. You mentioned historic success in executing on these cuts with COVID in the last recession. Do you perceive any risk, I guess, at this time around, once again executing on O&M costs, given, A, the inflationary cost backdrop we've seen; and then B, a bit higher scrutiny from Michigan regulator across Michigan utilities on vegetation management efforts, particularly with the 2022 storm docket?

David Ruud:

Yes. And as we built these plans, we were very careful to ensure that we weren't going to impact -- first of all, never impact safety. Nothing that would impact reliability or our ability to deliver for our customers. And so these plans are built with that in mind. So it should fit well even though they're unsustainable in the future should fit well with what we're trying to continue to do for our customers.

Gerardo Norcia:

Certainly, last year, General Motors announced the battery plant and battery operation -- assembly operations in our service territory. And certainly, we're really excited about that. In the past year, we also saw One Energy announced a new battery plant in our service territory. In addition to that, the University of Michigan announced a multibillion-dollar investment program right next door to our headquarters for an innovation center, which will drive economic growth and development in the city of Detroit. And most recently, the Henry Ford Hospital system is rebuilding their hospital campus in downtown Detroit with a multibillion dollar investment as well, which will create new jobs, new economic development activity. And those are some of the big ones that I mentioned, but there are so many others. In my time at DTE, this has probably been the most active economic development period that I've seen. So we're pretty excited about growth both in the industrial and commercial sector, which ultimately, as you know, will drive growth in residential investment as well and commercial investment to support those industries.

Agnieszka Storozynski:

So just going back to the rate case strategy. And I know that we are maybe over analyzing this. But I'm just -- I mean, you have another rate case filing, a big one, this time. Are there any lessons learned from the previous case then that you've embedded in this filing? So any changes in the strategy? Some, I don't know, outreach to the commission and the staff ahead of it? So that's one. Number 2 is, how are the residential sales trending vis-a-vis the past rate case and the current rate case? I mean, are you seeing any deterioration in sales versus what you had expected? And then lastly, you mentioned, I think, as far as the gas rate cases that you might elongate the time in between the rate cases. And I'm just debating with myself if that's the right strategy given that, that maybe increases the amount of the ask in the next rate case, if you stay out. Again, just trying to have some lessons learned from the outcome of the last rate case on the electric side.

David Ruud:

Sure. Yes, Jerry. Yes. As Jerry mentioned, our sales are tracking pretty well to our forecast. And I think as end-to-end to what we have in the filing. And I think what will be the benefit going into this filing is we'll have some more stability because you saw our sales and particularly our residential sales from 2022 versus 2021. They were down about 3% with people returning to work. As we look to our forecast in our test year, it's down a little under 2% from that level. So far in the early months, we're seeing that we're tracking like right on that level. And so we think we'll come in at a forecast that will be a lot more agreeable as we go forward. And overall, from pre-pandemic levels to where we are in our test year, it's up about 1.5% to 2%, too. So I think it's all triangulating really well.

Agnieszka Storozynski:

Okay. And then -- just 1 follow-up. So one is you mentioned all of this outreach. I mean, what -- again, I want to believe. But what I'm trying to say is that this rate case is -- next electric rate case happened in such a proximity to the decision in the previous rate case. And I'm just, again, wondering how -- how could you have embedded the lessons learned in such a short period of time. So that's one. And number 2 is, probably even more importantly. So over the years, you guys have always had this early earnings look, right, guidance and then it would gradually increase through the course of the year. And I'm -- and as we look from a far, we're just wondering if a conservative sales forecast where partly the reason why you were able to historically beat numbers -- i.e., should we assume that the current guidance is also conservative, even given the outcome of this electric rate case?

Operator:

Your next question is from the line of David Arcaro with Morgan Stanley.

Gerardo Norcia:

Well, the positive side of the IRM is that we've been talking to the commission about it for years. And as you saw in the last rate case, they invited us to file one. So there's strong alignment in order -- in terms of creating the IRM. And we think that, that, as you know, in our gas company has simplified greatly the regulatory process for capital that's not disputed, if you will, that needs to be invested. And it's going to be primarily directed -- actually not primarily, it will be directed at the grid. That's what the IRM will be used for. And it will build over time. So it's going to take a few years before it starts to have an impact on the timing of rate cases. But to give you an example, as we built it up in the gas business, it allowed us to stay out for 2 and 3 years at a time. And that's certainly the case this time. We've stayed out for at least several years already in the gas company. So we expect that to happen with the electric business. As we build confidence in the IRM, we'll start with modest amounts going into the IRM, as you've seen in our rate case filings, and that will build over a 3-year period. And we'll get used to working together on that because it does take some time to build confidence in the execution as well as the management of the IRM. So we're taking a page out of the gas playbook to build up this IRM and achieve our goals of making the necessary investments as well as starting to put time between rate cases. So it will take a few years as my answer before we start to see a significant impact on timing of rate cases.

Gerardo Norcia:

They're seeing it right now. As a matter of fact, I was talking to the President of the gas company the last couple of days. We're going to lower the factor by about $1 here in the next little while. So we're seeing the prices come down quite nicely from their peak.

Gerardo Norcia:

I think we've already seen a year-over-year decline, and it will continue to decline. We've made a series of reductions already in the last several months in our gas prices. Our gas recovery, that's a factor. And the most significant one is coming here very shortly. It's about $1 decline in price.

Michael Sullivan:

Maybe just wanted to flip over to the IRP. I think we have intervenor testimony coming up in the next couple of weeks here. Just what should we expect from that? And then -- in terms of settlement timing, what should we think about as coming first between the IRP and the electric case?

Michael Sullivan:

Okay. Great. That's helpful. And then maybe a question for Dave. Just in terms of the FFO to debt, you target the 15% to 16%. Can you give us an indication of where 2022 finished up? And then to what extent you're still waiting on deferred power fuel cost recovery into this year?

Operator:

Your next question is from the line of Andrew Weisel with Scotiabank.

Gerardo Norcia:

We had built that in, Andrew, into IRP forecast. Now of course, what we do in an IRP is we provide for scenarios for demand increases, both the largest demand increase opportunity is really EV attachments and some of the economic development activity that we expect in the near term. But we try to build an IRP that not only addresses point estimates, but also a range and scenarios and forecast. And that's something that is required by the IRP filing guidelines, and I think -- we think it's a very wise thing to do because, obviously, over a period of 20 years, there can be a significant amount of variability in demand forecast. So we provide low, medium and high type of forecast.

Gerardo Norcia:

Yes. Yes.

David Ruud:

Yes. Our goal there will be to keep that as low as possible, obviously, and how we generate cash and how we get cash through our plan will be one of the big drivers of that and how we use it in CapEx. So we see in our plan minimal equity issuances, hopefully in that around 0, but it could be in the 0 to 100 range as we go forward.

David Ruud:

It's a possibility. I would expect some internal equity issuances that we have through our internal sources, though.

Anthony Crowdell:

Well, again, I hope the restoration efforts go quickly. I'm sure it's a grind for all the workers out there. So fingers crossed.

Anthony Crowdell:

Yes, I'm sure we all take for granted the service we get provided in our electric system and gas. Just 2 quick ones. One on the IRM filing or request. And I apologize if I had this wrong, has DTE requested that for the Electric segment before? And just what -- if so, what gives you this optimism that this time, maybe it gets approved?

Anthony Crowdell:

Do you guys ever estimate or provide what the cost is to file a rate case if I think of all the DTE personnel that have to go around aggregating data, all the test running, you add all that up. Is there a value that you guys have put out on that, that may be an IRM and again, you guys have been very clear and very modest in the beginning. It will take years before you start seeing ever delay rate filings. But what's the potential savings that a customer sees if you're able to lay a rate filing?

Anthony Crowdell:

Great. And just lastly, DTE Vantage, I love the guidance you've given out, I believe, till 2027. Can I think of the growth from '23 to '27 as linear? Or is it more back-end loaded? Like, just any clarity on the growth in earnings at DTE Vantage?

Operator:

Ladies and gentlemen, that is all the time we have for questions today. I would now like to turn the call back to Mr. Jerry Norcia.

Operator:

Ladies and gentlemen, thank you for participating. This concludes today's conference call. You may now disconnect.

Operator:

Good morning, and welcome to DTE Energy's Q3 2022 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Barbara Tuckfield, Director of Investor Relations. Ms. Tuckfield, please go ahead.

Jerry Norcia:

Thanks, Barb, and good morning, everyone, and thanks for joining us. Let me start by saying that three quarters of the way through 2022, we are on track for a very successful year, and we continue to be well positioned for the future. This morning, I will highlight some of the successes we have accomplished this year, and Dave will provide a financial update and wrap things up before we take your questions. We are very well positioned to achieve our operating EPS guidance. The $6 guidance midpoint provides over 8% growth from our 2021 original guidance midpoint. As many of you know, we will be filing our Integrated Resource Plan or IRP next week. This filing will provide updates on our path for decarbonization and our commitment to continuing to provide clean, reliable and affordable energy to our customers. Our team has been working hard on this filing going through multiple scenarios and taken into account stakeholder feedback to develop a plan that works best for all of our customers, as well as incorporating the benefits of the Inflation Reduction Act or the IRA. I'm extremely proud of all of our team members, who have put their energy into this filing. Naturally, the IRP will impact our five-year capital plan, and we are excited to provide further details in a couple of weeks at EEI. Along with our capital plan update, we will provide an update on our long-term growth strategy at this conference. We will also provide updates on our voluntary renewables program, MIGreenPower, which continues to show substantial growth. Just this week, we subscribed a new 400-megawatt customer, increasing the program to 2,100 megawatts of subscription. As climate change remains our generation's defining public policy issue, DTE is committed to doing our part by continuing to invest for our customers and to ensure reliability. Our electric grid needs to be modernized to be resilient against extreme weather and also be able to accommodate significant new demand that will be coming in the future. Our electric grid will continue to see increased load as the pace of electric vehicle adoption accelerates. We are focusing on updating and improving our aging infrastructure for this additional demand while continuing to provide safe, reliable and affordable energy. Recently, we saw the passage of the IRA. We see the IRA as a positive overall for our company with benefits for both our utility and nonutility businesses. Dave will go into the specifics in a few minutes on the positive impacts of the IRA. Let's move to Slide 5 to discuss how we are delivering for all of our stakeholders. We know that with our engaged and talented team, we will continue to deliver for our customers, communities and investors. We are working hard on all these fronts, and I'm pleased to highlight some of the recognition we have received. DTE was recently named a top 10 employer in the State of Michigan by Forbes Magazine. Additionally, after our most recent engagement survey with Gallup, DTE ranks in the top 4% of companies worldwide in employee engagement, which continues to give me confidence that our team will deliver for our stakeholders. We also continue our efforts to support our customers. As I mentioned earlier, we will be filing our IRP next week. This will provide detail on our plans to generate safe, clean, reliable, affordable energy as we accelerate our decarbonization efforts. We continue to be an integral part of the community. We recently joined the City of Detroit and the White House to form the Detroit Tree Equity Partnership. This ambitious program aims to build Detroit's tree canopy by planting tens of thousands of trees over the next five years, cooling urban areas while providing beauty and air quality improvements. The program will also hire and train workers to plant and maintain the trees in the city, bringing jobs to our community. We are also partnering to drive economic development in the State of Michigan. Our Next Energy recently announced that they will be bringing 2,000 jobs to Michigan with a $1.6 billion investment in new battery operations. We are helping the state transition to a new automotive future with electric vehicles. Given all of this positive momentum, we also feel great about our financial position as we head into the final months of 2022 and are on track to achieve our 2022 operating EPS guidance. Let's turn to Slide 6. With the opportunities we have in front of us, DTE is on track to make significant customer-focused capital investments across our businesses. These investments are transforming the way we produce power as we shift towards renewables and natural gas and away from coal generation. Two important factors affecting our grid are climate change and emerging electrification technologies. We need to build the grid of the future to ensure we can continue to provide clean, safe, reliable and affordable energy. Additionally, at our gas utility, we continue our important main renewal work, which further reduces greenhouse gas emissions. I'm happy to say we are on target to complete another 200 miles this year. Finally, at DTE Vantage, to continue to add new RNG projects and other energy solution projects for our customers, which enables growth with a focus on decarbonization. We execute on all this investment with a sharp focus on customer affordability and ensuring that we continue to manage our business to achieve that. Our distinctive continuous improvement culture drives cost management. The shift from coal to natural gas and renewables also helps to further reduce operating costs. Our diverse energy mix helps reduce fuel costs as well, and it allows us to maintain flexibility to adapt to future technology advancements. The IRA supports this transition to renewable energy while achieving customer affordability goals and further enhances opportunities for growth at DTE Vantage. With that, let me turn it over to Dave.

Operator:

[Operator Instructions] Our first question comes from Nick Campanella from Credit Suisse. Please go ahead. Your line is open.

Jerry Norcia:

Dave, do you want to take that?

Nicholas Campanella:

Got it, thanks. And then I guess as it just relates to the electric rate order - or not order, but you got an ALJ rec. I think you filed some exceptions as well. Just when do you see that kind of coming to fruition? And do you still kind of feel comfortable in kind of giving this outlook if - my understanding is that proceeding comes after when you'd give the outlook? Thanks.

Nicholas Campanella:

All EEI, thanks so much.

Dave Ruud:

Thanks.

Shar Pourreza:

Hi guys good morning.

Dave Ruud:

Good morning, Shar.

Jerry Norcia:

Great question. So the IRA had a very positive impact on IRP from two perspectives. One, certainly lowered the cost of all of our investments in renewables as well as long-term, it improved the outlook for carbon capture and storage in our IRP so very positive benefit to affordability, which allowed us to accelerate our transition. And so, I think you'll see that when we roll that out next week so very positive impact from the IRA. And of course, you know what the tax credits are, $26 per megawatt hour on solar and wind and PTCs on nuclear. All of those are going to have a beneficial impact to our plan. In terms of tax equity, with the IRA and the provisions in that IRA, making tax credits transferable, we no longer need tax equity structure, which significantly simplifies our plan, but also removes an investment partner. So we have now the opportunity to invest greater amounts in our renewables build-out so very positive impact overall.

Jerry Norcia:

The way we're looking at Vantage right now, Shar, is that it will be - our nonutility business will be 10% of our portfolio. But the IRA, the investment tax credit for RNG of 30% just made the projects we were looking at even more economic, significantly lifted the IRRs of many of the projects that we are looking at. And then the cogen investment tax credit of 30%, that also helps projects that we've got in the pipeline become much more economic. So we're excited about that. So that 10% that we're looking to create and continue to create advantage has just become much more economic. The last one is carbon capture and storage, which we've started to explore and have some interesting small opportunities in that arena as well, which not only will be beneficial to Vantage, but it will also be beneficial to our electric utility as we think about carbon capture and storage as it relates to our generation assets. So we're really starting to understand that business in a deeper way. So overall, I would say the impact on Vantage from the IRA, again, was quite positive. This IRA has had significant impact in our thinking as it relates to our electric utility as well as Vantage in terms of creating more opportunity in both business segments.

Jerry Norcia:

Well thank you.

Operator:

Our next question comes from Jeremy Tonet from JPMorgan. Please go ahead. Your line is open.

Jerry Norcia:

Good morning Jeremy.

Jeremy Tonet:

Good morning, just wanted to start off on the RNG landscape, if I could, given the [Antero] sales here and what looks on the surface to be quite a robust valuation paid there. Just wondering, any thoughts from your side on that transaction and whether that impacts your go-forward RNG strategy?

Jeremy Tonet:

Got it. So even with this level, I guess, of interest in the space and strong valuations, you still see new projects clearing your hurdle rate. There's not too much competition out there to drive down expected rates of return on these projects?

Jerry Norcia:

Yes look at - our business development pipeline, as we look out a few years, is well stocked with high-return projects in the RNG space. And we've also got a few industrial projects, cogen projects that we're pursuing that will bring value - long-term value to the Vantage business unit. So feels like the pipeline to us is very strong in terms of growth with high-quality investments.

Operator:

Our next question comes from David Arcaro from Morgan Stanley. Please go ahead. Your line is open.

Jerry Norcia:

Good morning.

Jerry Norcia:

Sure, so as we look at the Commission order, our discussions with the Commission continue to be really collaborative. And I would say the relationship is in a good place. Ultimately, I think the result of this order is that it will create even stronger alignment as it relates to our investment agenda. Just to give you a feel for it, our system, on average, operates at about 99.9% availability. Best-in-class is 99.97% availability of the grid. So you can see that this is a highly reliable industry when it comes to providing power to our customers. And all of our investment plans are really pointed at how do we get to that 99.97% availability for our grid. So I feel that this process with the Commission will create stronger alignment. And there's a lot of value for our customers to go even from 99.9% to 99.97%, and we'll start to lay all that out, and it will be - I believe it will be a good process, and it will come to a good conclusion.

Jerry Norcia:

Well, when I look at our circuitry, we've got systems that need to be replaced and modernized and automated. And as we rebuilt new circuits, and upgrade those circuits and modernize them, it's going to require a significant amount of capital investment. And I think you'll see that in our planning as we roll out our new plan at EEI. We continue to accelerate this strategic capital that we're investing in a grid in addition to our maintenance capital. But it will be primarily a capital-driven process.

Dave Ruud:

Yes. We have had a strong year in 2022. And as we look at our portfolio over the few years, we do try to balance what we can do in '22 and '23 across all our businesses. So we have been able to find some opportunity to help 2023 as we go through this year, too, because as you've seen, '22 has been a nice strong year for us.

Operator:

Our next question comes from Insoo Kim from Goldman Sachs. Please go ahead. Your line is open.