CMS
#Just think of that as a regular non-utility business.
So, the part that's capitalized is capitalized, and the part that's expensed is expensed in the project.
Just try not to think utility for a minute, and it will look very normal that way.
The bulk of it, candidly, is going to be expense that goes in for this year.
But as you can see we have plenty of room to put it in.
You could do that math that way but I'd caution you not to because, remember, we're taking the good news this year that's happening unrelated to it to fit it in.
So, your base didn't change.
And then next year, yes, we had planned to spend about $10 million, which we won't need to.
But if we've got some head room next year what do you think we'll do.
What.
s your second choice, <UNK>.
No, we will find a way, as you've grown accustomed to, to see us get in that growth of earnings of 5% to 7%, no matter what, if it's easy or hard.
And I may as well take the question on before it comes.
We've got so much work to do on the reliability side in the utility that I would just tell you there will be a time when we won't, and maybe the 5% to 7% will drift up a little bit.
Again, I wouldn't get excited about it because we've got plenty of work to do this year and we know we will have plenty of work to do next year.
So it's not in that timeframe that you would likely see us change from our guidance of 5% to 7%.
We'll be, for the 2017 to 2018 planning year, a little over 500 megawatts available and then a little bit better than that ---+ a little higher than that, in other words, as you go through time.
So, that's all upside opportunity.
Well, no, we're actually making two upgrades.
And the number you will get used to seeing will be 770 megawatts.
So we had already planned, and we were just being quiet about it, putting in some foggers and increasing the capacity at DIG this year.
This new increase, which is news because we've just authorized it inside of our own Company, will add that extra 38 megawatts on top of that.
Net-net we will go from ---+ you've seen 710 in the past ---+ will go to 770 megawatts.
What we're hearing, at least right now, is, I'll call, revenue certainty.
The decoupling seems to be optional for the utilities to choose, which is fine with us, if we choose to do it or don't.
The incentives ---+ they haven't really dug into the incentives yet.
But the argument, I think, is pretty strong that we make electricity, we deliver electricity, we sell electricity, we should be incented to help our customers understand why we're not trying to do that with energy optimization.
So, I have a feeling the incentives ---+ they have worked well for us ---+ and I expect those to continue, but that may be in a regulatory format rather than a legislative format.
I'll tell you what, I think we'll take this in two pieces.
Let me just describe a little bit about what we see in the bilateral market.
From a capacity standpoint, I would tell you this indication we gave you of $4.50 near term is reasonably indicative of where we are.
Obviously folks out there are watching very carefully what happens in the energy law.
The ability to put more capacity in place the accountability for doing that.
Those will all be positive things.
But while the policy is being worked out, people are nervous and trying to figure out are we going to fill that big void that begins next spring when we take a third of our coal plants out and have to somehow fill in behind that.
So, there's a lot of speculation in the markets about where we'll go.
The best indication I can give you on bilateral is around $4.50 for the spring 2016 to spring 2017 planning year.
Now, you asked a different question about the near-term capacity market in MISO.
Maybe <UNK> could add to that.
One of the things we found, <UNK>, pretty revealing, as we've talked about, we expect the capacity prices to rise in zone seven next year when we shut down, at least our Company, shuts down a third of its coal capacity.
This year I think the news out of the capacity auction was that capacity prices were low, as expected, except in zone four which was the one deregulated state, and that was Illinois.
And the capacity prices there are 50 times higher than in the generally regulated states of the rest of MISO.
So, that's an interesting time to see this happen when we haven't seen a lot of the capacity come out of the market.
And you can rest assured we're talking to a lot of people here in Michigan about the risks of the volatility of the deregulated market.
Let me take that one since you don't want to hear <UNK> anymore talk about how we're going to grow at 5% to 7%.
(laughter) One of the things that I think is very important to understand about our capital investment plan is that we invest capital for a couple reasons, and if we don't achieve those reasons we don't invest the capital.
One, we need to make sure that it provides value to our customers.
Two, it ensures that we reduce fuel costs.
Three, it reduces O&M costs.
And, fourth, if there's an environmental commitment that we've made to improve the environment, whether it's driven through EPA, state laws or our own initiatives, we do that, too.
So, the customers, by us investing capital, get a better environment, a better bill, and better reliability.
And that's really what we strive for.
In the five-year plan that we have today, with the capital investment we have, we can still keep customer rates below the rate of inflation ---+ the base rate increase below the rate of inflation.
That's on the electric side.
On the gas side that also holds true, but as I mentioned earlier, with the low gas prices customers are paying bills the same rate that they did in 2001.
So, we have a lot of headroom.
Fuel is in our favor in most cases here.
And where it isn't in our favor because we're making investments on the electric side, we're seeing the results in reliability, the results in customer satisfaction, and the results which I think are unique for us compared to others is the reduction in O&M cost.
And we see that happening.
<UNK> showed you the one chart.
We're down last eight years 10%.
In the next five years we expect to be down 7%.
And that's on an absolute basis.
That includes inflation, it includes the legacy costs that we have.
So, we feel very comfortable that we invest the right amount of capital to do the things that I just mentioned and keeping the bills affordable.
Yes, definitely.
When I was thinking about that, <UNK>, the cost, the base rates are rate of inflation ---+ keep it at the rate of inflation.
But on one of the slides I showed, you can see the increase in investment in the capital in the gas business because of the dramatic decline of the natural gas fuel cost.
We're down about 50% in the fuel cost which provided headroom for us, or does provide headroom for us, to be able to make additional capital investments while still having the customer's overall bill decline.
There's opportunity there.
I think I stated we've got another $1 billion on top of that if we choose to.
But right now that seems like the right level.
The one thing that we're a little pushed against is we hired about 625 people in the gas business over the past three years.
We're growing those people.
I think it's going to be a competitive advantage to us to have people that can install pipe, weld pipe, going forward in the future.
As those people develop we may be able to put a little more capital into it.
But one thing about the gas business is that it's not just plug-and-play, it takes a lot of employees to get that done.
And what you'll find in some areas contractors are getting a little short now because of the influx in capital.
We made a decision a few years ago to move ahead with our own workforce, worked with our union, and we added 625 people to do that, which will position us well in the future.
So, if there was going to increase, think of it incrementally.
Across the board is the best way to think about what's happening there.
And when we.
re thinking ---+ if your question is going to what's going to happen in the rest of the year, because you did see that we were only up 2% industrial and 1.9% in the first quarter.
What we will see in the rest of the year is food.
There's some folks who have a program with us that they're going to need more power, we will see some increases.
Building ---+ and that fits pretty well with the economics that we're seeing, so more cement and the like.
We're seeing a little more on the silicon side, so it's a little more high-tech that's coming in.
And the aluminum side of the industry.
All of these industries have told us they need more, and we'll be providing that.
And we're already beginning to see that tick up just a little bit.
So, our forecast is pushing us to say it's going to be higher than 3% industrial growth, but you know us, we don't want to say that until we see it actually come to do.
Great, thank you.
Thank you for joining us today.
We're off to a good start again this year.
And we look forward to working with you through the rest of the year.
And we will put this first quarter's good weather to good use for our customers and our investors.
Thanks for joining us, I appreciate it.
