CMS
#Good morning, everyone
We are happy to have you with us
I know that we saw many of your at our Investor Day on September 25th and we'll see many of you at EEI, so I'll be brief this morning
But we do have a few updates to share, including our results for the quarter, and not to worry, we have another exciting story of the month
<UNK> will walk you through the financial results and our outlook
We're happy to announce that for the first nine months of 2017 we reported $1.66 of adjusted EPS
On a weather normalized basis, this is up 8% from last year
Despite challenging weather and storms through the year, we are well on track to meet our guidance, and we're raising our bottom end of our top ---+ of our full year guidance from $2.14 to $2.15 per share
Our top end remains unchanged at $2.18 per share
We're also introducing 2018 full year guidance of $2.29 to $2.33 per share, which implies another year of 6% to 8% annual growth
Now this is a good opportunity for me to remind you what we mean when we say 6% to 8%
For 14 years in a row, we have delivered 7%, so it would be easy to assume that we when moved from 5% to 7% to 6% to 8% we meant to imply 8%
What we actually signalled is our confidence in 7%, and frankly, we took 5% off the table
Our self funding model and our adaptability under a variety of changing conditions each year puts us in a unique position to deliver sustainable 6% to 8% annual growth
This is why we have confidence in the midpoint of our range
In years where we have particularly strong performance and don't have higher priorities for reinvestment, we could go to the high end
However, our bias is to reinvest in the business and to stack the deck for next year and deliver our growth trajectory for longer
We know it is both our growth rate and the consistency of it that is valued
To that end, we remain unwavering in our commitment to the triple bottom line
Our focus on people, planet and profit underpinned by our performance will deliver the consistent and sustainable results that you have come to expect
When we say people, we are referring to our customers, our co-workers, our communities, and of course, our investors
Driving economic development in Michigan is a great way to enable growth and to serve the people of Michigan
We know that when Michigan wins, our business wins
It's a competitive environment and these large site selection efforts and Michigan is winning
In part, due to the speed of our in-house economic development team which has identified 23 energy ready sites so that when a company wants to locate here we can quickly help them find a site that's available and best suited to their needs
For example, we were pleased that when Lear Corporation, a large auto supplier was looking for a place to locate a new manufacturing facility, we were ready
As a result, Lear recently announced plans to invest in a new plant in Flint, a community we are proud to serve
This is another win for Michigan creating approximately 450 new jobs
Turning to the planet, we're thrilled with the response to our renewable tariff
This program allows us to partner with our large business customers to meet their commitment to renewable energy at a very competitive price
We're already looking for ways to expand this program to keep up with our customers demand and partner with them to protect the planet
Finally, our commitment to people and the planet can't be fulfilled without the critical capital that you have all provided
We know that pensioners, retirees and moms and pops have entrusted you with their life savings to invest in safe and reliable places
We want you to count on us to be just that sort of place
Therefore, we are equally committed to delivering consistent and predictable financial results
We continue to progress on the regulatory agenda and look for ways to support longer-term planning
The 2016 energy law creates a framework for the governor's long-term energy plan and our commission has been systematically implementing the different elements of it
For example, we'll be filing our integrated resource plan required by the new law next year
Combined with the commissions ordered 5-year electric distribution plan, we'll be providing a vivid picture of the future replacements, upgrades and enhancements to our large and aging electric supply and distribution system in partnership with the commission and its staff, yielding more transparency and regulatory certainty going forward
Our rate cases remain on track
Our gas rate case was approved at $29 million and it included and expanded $18 million capital tracking mechanism
We plan to file our upcoming gas case in the next couple of weeks
Our new electric rates were self implemented at $130 million on October 1st
We expect a final order in March of 2018. These rate cases enable the infrastructure improvement that deliver real value to our customers and reflect the cost savings that help reduce the price of that infrastructure
One way we are driving our ongoing cost savings is through the implementation of the Consumers Energy Way, our lean operating system
Most of the coverage about the Consumers Energy Way has been about the benefits of those cost savings
My story for this month however, demonstrates the power of the CE Way to not only reduce cost through waste elimination but also to enable better system performance and areas like electric reliability to the benefit of our customers
You know we've been in business for 130 years, and yet, we still find things we can improve every single day
About a year ago, we realized that our approach to improving reliability was just not working as fast as we wanted, so we stepped back and leveraging our CE Way playbook, we tackled the systemic issue in a whole new way
The result speaks for themselves
In spite of challenging weather and storm activity, we had our best system reliability ever recorded this quarter
Our talented team tackled the problem through the use of data and applied problem solving techniques, and as a result, we improved the prioritization of capital investments on our worst-performing circuits, we actually call those our Dirty Thirty
We had more targeted tree trimming and we realized that we could effectively engineer animal mitigation at our substations
Yes, the CE Way even helps us protect our local critters
This coordinated effort resulted in a 40% improvement in reliability for this quarter versus our last 10 year average
Every dollar we spend is more effective
The waste is eliminated, and our customers have a better experience
I am sure this sounds simplistic, but when we apply the CE Way every day all across our system in big and small ways, we fuel our simple but powerful business model, higher value at lower cost built on our consistent past and yields a sustainable future that you and your clients can count on
Now I'll turn the call over to <UNK>
Good morning, <UNK>
Yes, it actually will provide a lot of visibility to that, <UNK>
We're really excited about having the IRP available to us
It provides a framework and the certainly so as we make those long-term transitions, we are able to have alignment with our commissions and make good decisions together about balancing a variety of factors; fuel diversity, cost for customers, how we want to fulfill the RPS standards, how much energy efficiency and demand response we want, in fact, our IRP, looks like it's going to have 47 different model runs that we're undertaking right now, as we speak
And so it's a complex set of variables and we're excited about what the opportunities will be provided and the transparency and frankly regulatory certainty that will be a result of it
Yes, I would say, the timing is over this 10 year time horizon that we're looking at, making these transitions
We have ---+ at 22% coal we're already one of the lowest in the country
We feel good about that
The fuel diversity of having our sites remaining is an important part of the mix
And so, we'll build that into the plan
And frankly, we look forward to the results of the model because they'll be informing to us about when the best time is to utilize those ---+ or to transition those plants
The reality is, we've done some environmental upgrades at those facilities, so they're best-in-class environmental controls currently
And so to rush any ---+ any additional retirements probably isn't necessary but they do have a natural end-of-life within that cycle
So we'll be thinking through that the ---+ through the IRP, and frankly, with all of our critical stakeholders, internal and outside the company
And Julian, I'll add just a couple more, just to reinforce at there's plenty
We've got ---+ the CE Way is just taking shape and so we're finding operational savings across the board, around the organization
Our technology adoption, so going from our traditional phone calls to our digital channels is a fundamental cost savings and cost reduction, and so part of what you're hearing from <UNK> and I here and for everyone on the phone is that we have the luxury of focus
Our business model is not complex
We don't have big bets, we're not betting on big outcomes
We've got a series of small, focused efforts that allow us to deliver consistently
And the consistency is what we know you've come to expect and we're pretty excited about the breadth and depth of opportunities that are in front of us
I'll start and then as <UNK> wants to add some additional comments
We have this ---+ the commission has requested a five-year distribution plan and we will ---+ we filed an initial version in August, we're receiving comments and having working sessions with the staff at the commission right now
We'll be submitting a final plan in January
And as through that plan ---+ and this is what I think is really a great part of what the commission is leading right now, these longer-term viewpoints of where the right investments in infrastructure exist
And so what will ---+ filling in our IRP in the spring of next year in conjunction with this T&D distribution, in particular, five-year modernization plan, we'll have a really good picture about where the investment opportunities are and have some real alignment with the commission and agreement about what those investments will be
And frankly, because of the age and the size and scope of our system, we have internal competition with trying to decide where best to put the dollars because there's so many parts of the distribution system and the supply system that require investment
And then when you layer in our gas, our large gas system, we've got ---+ our constraint is not ‘Do we have capital we can do?’ The constraint is customer's ability to pay, which is why we put so much emphasis on reducing the cost of that infrastructure in any way possible, so that we can provide more value for every dollar that we invest
And so that's where been working on
And so with the five-year distribution plan and the IRP combined, we'll be able to build out that five-year investment strategy in much more detail and with a lot more certainty
Yes, we do
And again, it's only constrained by customers' ability to pay, so that in the 10-year time horizon, in particular, when we have these PPAs that do peel off and are at the end of their contractual life, that creates some real headroom to make additional investments without raising customers' prices beyond what they can afford
And so that definitely is a key ingredient in our 10-year plan
Good morning, <UNK>
Good morning, <UNK>
Well, okay, so we do have some significant regulatory outcomes in 2018 planned
But as it relates to our guidance, our 6% to 8%, that's ---+ as I mentioned, we work every year under a variety of changing conditions, whether regulatory outcomes, politics et cetera, we always work to make sure that we can adapt to those changing conditions, and that's the strength of this business model
So I think, as you're thinking about our 2018 guidance, I would stay anchored in that point that our strength comes from our simple but powerful business model
It has strong CapEx underpinned by cost savings, ongoing throughout the year
And then a real core competence and adaptability
A lot of people do point to our business model and I love it and it's straightforward and I can see why we would
But one of the core strengths of this company, and <UNK> highlighted it in his remarks, is the fact that no matter what comes we managed to work it out because we don't have big bets, because we're not waiting on one big regulatory outcome because we're not waiting on one big project to get approved, we can adapt to make those changes throughout the year and manage to deliver for all of you
And for 14 years in a row, delivering 7% EPS growth
We feel pretty good about our track record and what we're trying to share is that we have plenty of visibility and to being able to deliver it to again going forward
I think, if anything, the IRP provides more certainty to the performance because we'll have more visibility into longer-term planning and be able to do more cost effective investments and cost effective generation, which is how our model works
The heart of our model is that our system is large and aging and we have significant infrastructure replacement upgrades enhancements required
And so any certainty we can have going forward allows us to most cost effectively do those upgrades and make the changes necessary
We have a large and aging system between the gas and electric
And so really we look forward to certainty that the IRP can provide so that we can do really even better planning than we've been able to do in the past
Thanks, <UNK>
Hey, <UNK>
Thanks, Andy
Well, thanks everyone for joining us and we do look forward to seeing you at EEI, right around the corner
