CMS Energy Corporation — 2024 Q1

Shahriar, you want me to get into rate design. You guys are all going to fall asleep on this call if I go into rate design. Let me start out with the fundamentals of this electric case. I think this is really important. You've heard me time and time again, whether it's investor meetings or in our calls and the importance of improving reliability. We've seen higher wind speeds, more frequent storm activity. And just this is our focus as a company, how we improve reliability and the longer-term resiliency of our electric system.

It's still early days on some of those modeling. So we'll file our REP, Renewable Energy Plan, on November 15. And as I've shared historically here or previous here, there's a broad spectrum of ownership versus PPAs. PPAs obviously have the opportunity for the financial compensation mechanism or if you're going to build everything and own everything, obviously, you have the opportunity to earn your ROE.

Thanks for the question. All I would add to Garrick's comments is that in our current 5-year plan, what we've incorporated is just a modest amount of PPAs with the financial compensation mechanism, and that's solely because of the fact that any PPA put in place after June of this year would be subject to the new FCM, which is around 9% versus the prior of about 5.5%. And so we have a portion of that, albeit a small portion incorporated in this 5-year plan.

Nick, this is Rejji. I appreciate the question. Yes, as we talked about on our fourth quarter call, we still have about 30% to 35% open margin in the outer years of our plan, really starting in sort of 2026 or second half of 2016 going through 2028. We certainly are seeing attractive reverse inquiry for that open margin on the capacity side. We're sold through on the energy side through 2028 or through the duration of this 5-year plan, but there still are opportunities in the capacity side. And we'll be thoughtful.

I'd go back Nick to the fundamentals of that case, aiming for a safe natural gas system, you continue to reduce methane across that and deliver affordable natural gas to our customers. And so again, the imbalance -- that equation of making the investments in the natural gas system, also just like we're doing in the electric business, aiming for an improved affordability across the gas system through unit costs, through cost out using the CE Way and the likes.

Ye's. Jeremy, this is Rejji. I appreciate the question. So yes, we were pleased with the first quarter performance of non-weather sales. We provide good color on that in our earnings digest, which you probably saw. But going through the customer classes, we saw residential up just under 1.5% versus Q1 of 2023. And so on the surface that looks quite good, but it's important to note that the leap day in the quarter because it's a leap year, drove about 2/3 of that. But still even absent leap day, I mentioned in my prepared remarks, still up about 0.5%.

Yes. I would say, Jeremy, early days. Obviously, we're delighted that 2024 is not 2023 in that we don't have a big storm as well as mild weather to start off the year, which we obviously saw last year. But to be clear, we still saw negative variance in terms of weather, top line-related weather. And so there's still some work to do. And so we are countermeasuring and again, very confident in the outlook. But it's a little early before we start thinking about derisking 2025 and beyond.

Thanks for your question, David. A couple of things on this. I typically don't like to talk about the pipeline just because it's pretty speculative on that. And many of these data center companies are testing the waters in a variety of different utilities. And so we typically talk in terms of contracts. And when we talk about economic development, whether it's manufacturing or data centers, it's secured contracts, which we, again, feel really good about. Let me reflect a little bit on this project, and then I'll talk -- I will highlight the pipeline. I will get to your answer.

We've got a -- we have -- between the manufacturing load this contract and the data center load that's contracted. As Rejji said, it's a nice piece of load growth that we factored in the later years of this 5-year plan, but future 5-year plans. And we're excited about what that means. And there's a strong pipeline, both from a manufacturing perspective and to a degree, the data center perspective as well. I'd be disappointed if some of those projects in the pipeline didn't materialize.

That's progressed in a constructive way. We had close to 10 or a dozen metrics that were originally proposed. It's narrowed to 4 metrics that are benchmarkable and there's good standards. And so again, a constructive process plays out. There's more work to do from our perspective when we filed comments in the February, March time frame.

Similar to Rejji's comments, from an energy perspective, energy tools and a capacity of the bilateral contracts, much of DIG has been spoken for at attractive -- really attractive position that either meets our expectations or is above our expectations. And so there's really unless you're beyond 2028, and maybe in the 2030s decade, DIG's really not available because it's already been secured and with, again, attractive energy tools and bilateral contracts for capacity.

It is -- we got primaries in August, and that means early [indiscernible] balance start in June. And so its political season already in Michigan. And so I would anticipate that. Look, the Attorney General participates in all our cases, that's been a historical practice. Sometimes those are more public than other times. We stand, as I shared earlier, by the merits of the case, both in our gas case that's underway right now and this electric rate case.

Yes. The short answer is yes. But again, important work from a capital investment perspective and reliability, and we've done a lot to offset some of the O&M costs components of this to strike that right balance. And that's what I mean by the important fundamentals or merits of the case.

No. The team seems excited about the opportunity to get to the table. Now that we have staff position now that we know where intervenors are at, to talk settlement. And as I shared, we've been able to navigate that with success in the past with all interveners, all stakeholders. And so we'll look to do that, but also hear my confidence in the merits of the case that if we need to go to full distance, we will. And I know that will get a good outcome for our customers and for stakeholders.

Thanks, Drew. I'd like to thank you for joining us today. I look forward to seeing you on the road soon. Take care and stay safe.