Good morning, everyone, and welcome to the CMS Energy 2023 Third Quarter Results. The earnings news release issued earlier today and the presentation used in this webcast are available on CMS Energy's website in the Investor Relations section. This call is being recorded. After the presentation, we will conduct a question-and-answer session; instructions will be provided at that time. Just a reminder, there will be a rebroadcast of this conference call today beginning at 12:00 P.M. Eastern Time running through November 2. This presentation is also being webcast and is available on CMS Energy's website in the Investor Relations section. At this time, I would like to turn the call over to Mr. Sri Maddipati, Treasurer and Vice President of Finance and Investor Relations.

Thank you, Harry. Good morning, everyone, and thank you for joining us today. With me are Garrick Rochow, President and Chief Executive Officer; and Rejji Hayes, Executive Vice President and Chief Financial Officer. This presentation contains forward-looking statements, which are subject to risks and uncertainties. Please refer to our SEC filings for more information regarding the risks and other factors that could cause our actual results to differ materially. This presentation also includes non-GAAP measures. Reconciliations of these measures to the most directly comparable GAAP measure are included in the appendix and posted on our website. Now I'll turn the call over to Garrick.

Thank you, Sri, and thank you everyone for joining us today. What sets us apart in this industry is clear and has been proven for over two decades; our simple, cleaner, and leaner investment thesis. We've talked about this in many calls and many investor meetings, and it works—a long and robust capital runway, a best-in-class ability to take costs out of the business, to create headroom for needed investments, and keep bills affordable for customers. Couple that with a constructive, top-tier regulatory environment and that is our recipe for premium total shareholder return. Today I want to highlight one part of our investment thesis, infrastructure renewal. It starts with our five-year $15.5 billion capital plan, which supports a long runway for important customer investments. This allows us to do what is most important for our customers—deliver safe, reliable, affordable energy and lead the industry in the clean energy transformation. We are one of the first vertically integrated utilities to switch from coal to clean by 2025, leading the industry with net zero carbon by 2040, aligned with customers, policymakers, and our strategic plan, positioning us for the future. In our gas business, we are on pace to net zero methane by 2030 and with a 20% reduction in Scope 3 emissions—one of the few in the industry making the gas system safer and cleaner. And in our electric distribution system, we are hardening the grid to make it more reliable today while preparing for the resiliency that will be required for EVs, connected devices, and to mitigate the impact of climate change. Our electric distribution system is vast, covering much of the lower Peninsula of Michigan, but it's aging. We are seeing more frequent and severe weather, which proves the future will require something different because our customers count on us for reliable service. Last month, we filed our electric reliability roadmap with the Michigan Public Service Commission, which outlined our plan to improve reliability and prepare the system for greater resiliency. Over the last 20 years, we've seen an increase in both the frequency of storms and higher wind speeds, with some of the most extreme winds within the last four years. We're clearly seeing the effects of climate change. Given this and the increasing dependency on the electric distribution system, we have set forward a plan that bolsters the system now and builds for the future. We worked with the leading industry research institute EPRI, benchmarking companies, as well as advancing technology to build a robust and comprehensive plan. This five-year electric reliability roadmap calls for $7 billion of capital investment to harden the system, expand undergrounding, update infrastructure, increase capacity, and advance automation. To give you a small snapshot, our plan includes roughly 1,000 miles of system undergrounding in the near-term and longer term significantly more undergrounding to ensure our system is prepared to withstand severe weather. Originally our design standard was for 40-mile per hour wind. With the wind speeds we are seeing today, our new standard is for 80-mile per hour wind and 0.5 inch of ice loading. This plan also includes further automation in machine modeling, adding technology to more precisely locate and isolate damage, reroute power, and better predict problem areas, keeping more customers online and responding to outages faster. We put our stake in the ground. We've identified the steps to improve reliability—a step change—and build an electric grid that can better withstand extreme weather and serve our customers in the future. With commission support, this plan will reduce the frequency and duration of outages while moving us into the second quartile for reliability; coupled with additional customer investments, the longer-term vision delivers a grid where no outage will affect more than 100,000 customers and no customer will be without power for more than 24 hours. We expect these investments to be part of our upcoming electric rate case filings and will be implemented upon commission approval. And let me be clear, we are already making progress. We've doubled our investment in vegetation management over the last three years, shortening our trim cycles. We've seen greater than a 60% benefit where we've done the work. We've increased the amount of customer investments and upgrades using hardening, installing nearly 15,000 used devices in the last two years—more than we've ever done—reducing the number of customers impacted for interruptions. We've increased our maintenance inspection frequency, mining potential failures before they occur. And just last week, we were notified that of the nearly 300 companies who applied for grants from the Department of Energy, we were one of seven companies who were awarded $100 million for specializing in improving circuits in disadvantaged communities. This is great for our company and our customers. First, it accelerates investment, which was already part of our $7 billion electric reliability roadmap; second, this strikes the important balance of reliability improvement and affordability; and finally, because these are matching grants, that provides greater line of sight and certainty of recovery of these needed customer investments. We take our commitment to serve seriously—what our customers deserve. We wake up every day to deliver. That's why we constructed our electric reliability roadmap. On Slide 5, I want to take a moment to provide an update on our regulatory calendar. In September, we revised our position in our electric rate case to $169 million and maintained our position for a 10.25% ROE and a 51.5% equity ratio. We're requesting approval of a 10-mile undergrounding pilot with plans to underground over 400 miles annually beginning in 2027, which aligns with our electric reliability roadmap—a small but important step in building out a program that can be supported by the Michigan Public Service Commission and will deliver significant improvements for our customers. We also requested a recovery mechanism for investments in our electric distribution system to improve reliability, similar to the mechanism we've utilized in our gas business, which creates greater clarity on the investment end customer benefits while improving certainty of recovery. We expect the final order by March of next year. We also recently received approval from the Michigan Public Service Commission on our gas rate case settlement, providing continued value for our customers and investors. These rates became effective October 1. We plan to follow our next gas rate case in December of this year. This case brings a continued focus on a safe, reliable, affordable, and clean natural gas system that will support needed customer investments. As we've shared in previous calls and in investor meetings, we continue to see the Michigan regulatory jurisdiction as constructive in providing a good balance for all stakeholders, leading up to its ranking as top tier. Moving on to the financials. For the third quarter, we reported adjusted earnings per share of $0.61 and $2.06 per share year-to-date. Rejji will provide additional details, but despite a significant storm in the third quarter, we remain on track to deliver on our full year guidance of $3.06 to $3.12 per share and expect to deliver toward the high end. Given that confidence, we are initiating our full year guidance for 2024 at $3.27 to $3.33 per share, reflecting 6% to 8% growth off the midpoint of this year's range, and we are well positioned just like 2023 to be toward the high end of that range. It is also important to remember that we always rebased guidance off our actuals on the Q4 call, impounding our growth. This brings you a higher quality of earnings and differentiates us from others in the sector. We're also reaffirming our long-term adjusted earnings growth of 6% to 8% per year, with continued confidence towards the high end, and remain committed to dividend per share growth of 6% to 8%. Like we've done in previous years, we'll provide you with an update on our 2024 guidance based off of actuals, as well as a refresh of our five-year capital plan on the Q4 call. We continue to be confident in our ability to deliver the year and in our longer-term outlook, providing exceptional value for all stakeholders. With that, I'll hand it over to Rejji to offer some additional details.

Thank you, Garrick, and good morning, everyone. As Garrick noted, we had a solid third quarter, delivering adjusted earnings of $0.61 per share, driven by numerous cost reduction initiatives that have largely offset the headwinds that we have faced throughout the year, most recently in the form of a severe storm that hit our electric service territory in August. To put the weather we have experienced in 2023 into perspective, we are approaching a record level of storm activity this year, which further supports the needed investments in our electric system that Garrick highlighted, and we have seen heating and cooling degree days of 11% and 24% below historical levels, respectively, on a year-to-date basis. That said, we do not make excuses and have implemented numerous countermeasures throughout the year to mitigate these risks and are well positioned to deliver on our financial objectives this year for the benefit of customers and investors. As such, we are reaffirming our guidance for the year and on a year-to-date basis, we're on track with adjusted EPS of $2.06 per share, given our progress in the aforementioned countermeasures, which I'll elaborate on shortly. In the waterfall chart on Slide 7, for clarification purposes, all of the variance analysis therein are measured relative to the comparable periods in 2022. The actuals are quantified on a year-to-date basis, and the prospective period reflects the final three months of the year. Starting with actuals with respect to weather. The previously noted unfavorable weather experience in 2023 has driven $0.49 per share of negative impact. Rate relief, net of investment-related expenses has resulted in $0.20 per share of positive variance, driven by last year's constructive electric and gas rate case settlements. From a cost perspective, our financial performance through the third quarter has been significantly impacted by higher operating and maintenance or O&M expenses to the tune of $0.21 per share of negative variance due to higher service restoration expenses attributable to storms. However, it is worth noting that our operational O&M expenses exclusive of service restoration expense are down roughly 10% versus the third quarter of 2022, which highlights the significant cost performance we've realized across the business. To that end, and as previously noted, we implemented numerous cost reduction initiatives early in the year, such as reducing our use of consultants and contractors, limiting hiring, accelerating longer-term IT projects, and eliminating other discretionary spending. We have also supplemented these efforts with a voluntary separation program or VSP that reduced our salaried workforce by roughly 10%. More importantly, as we leverage the CE Way—our lean operating system—we will continue to eliminate waste and increase productivity going forward. Rounding out the first nine months of the year, you'll note that $0.27 per share of positive variance highlighted the catch-all bucket in the middle of the chart. We've seen this bar increase throughout the year as a result of our continued success in realizing cost savings through financing efficiencies, liability management, strong tax planning, and favorable non-weather sales in our electric business during the summer. As we look ahead to the fourth quarter, as always, we plan for normal weather, which we expect will have a neutral impact on our financial performance versus the fourth quarter of 2022. We expect a similar financial impact for rate relief net of investment-related costs, as the benefits of our recent gas rate case settlement and our 2022 electric rate case settlement are largely offset by the absence of tax benefits associated with the prior gas rate case settlement. From a cost perspective, as noted during our Q2 call, we anticipate lower overall O&M expense at the utility, driven by the ongoing benefit of cost reduction initiatives, which equates to $0.17 per share of targeted variance. It is also worth noting that the Q4 2022 comp for this bucket is notably soft, given the higher-than-average O&M expenses incurred during that period. Closing out the glide path for the remainder of the year, you'll note in the penultimate that yellow bar on the right that we're anticipating $0.23 to $0.29 per share of positive variance. As we've discussed previously, the key drivers here are the absence of significant discretionary actions taken in the fourth quarter of 2022 related to last year's electric rate case settlement and the filing of our voluntary refund mechanism, which collectively equate to $0.12 per share. The remaining notable items that we anticipate in this bucket are from North Star—our non-utility business—achieving its full year guidance, and favorable non-weather sales at the utility, which have trended well over the past few quarters. All in, we remain confident in our ability to meet our EPS guidance for the year. And as always, we'll take none of this positive momentum for granted and will approach these last two months of the year with the usual degree of paranoia by maintaining our cost discipline and flexing additional opportunities as needed to deliver the consistent financial results you have come to expect. Moving on to the balance sheet. On Slide 8, we highlight our recently reaffirmed credit ratings from S&P in August. As you know, we continue to target mid-teens FFO to debt on a consolidated basis over our planning period to preserve our solid investment-grade credit ratings. Our financing strategy and strong balance sheet position us well given the market volatility we've seen recently. At the utility, our annual rate case cadence and the use of forward-looking test years allow us to incorporate higher interest rates into our filings and recover the associated costs with minimal lag. At the parent, where funding costs are non-recoverable, we have limited refinancing risk in the near term, with $250 million due in 2024 and 2025 and $300 million coming due in 2026. As noted during our second quarter call, the 2024 maturity has already been prefunded with proceeds from our convertible debt issuance in May. It is also worth noting that 100% of the debt of the parent company is fixed and over 40% is hybrid in nature, thus receiving equity credit from the rating agencies. In addition to strong liability management, we have continued to plan conservatively. And while debt funding costs have increased in the current environment, they remain consistent with the assumptions embedded in our long-term financial plan. As always, we remain focused on maintaining a strong financial position, which, coupled with a supportive regulatory construct and predictable operating cash flow generation, supports our solid investment-grade ratings for the benefit of our customers and investors. Moving on to the financing plan. Slide 9 offers more specificity on the balance of our planned funding needs in 2023. In short, I'm pleased to report that our financing plan for the year is largely completed. In fact, at the utility, we've completed all of our planned first mortgage bond issuances for the year at a weighted average coupon of approximately 4.8%, which is below our planned estimate. The only remaining opco financing is a securitization funding to address the recovery of the undepreciated rate base in our recently retired coal facilities. As for the parent company, given the timing of the aforementioned convertible bond issuance, we've been able to delay the settlement of the equity forwards at a price last year. So the roughly $440 million of forward equity contracts will be settled in the fourth quarter. As I've said before, our approach to our financing plan is similar to how we run the business. We plan conservatively and capitalize on opportunities as they arise. This approach has been tried and true year in and year out and has enabled us to deliver on our operational and financial objectives irrespective of the circumstances, to the benefit of customers and investors. And with that, I'll hand it back to Garrick for his final remarks and for the Q&A session.

Thank you, Rejji. You hear us say it every year: we deliver. Our track record spans two decades of consistently delivering industry-leading results in all conditions for all stakeholders. This year will be no different. With that, Harry, please open the lines for Q&A.

Thanks very much, Garrick. Our first question today comes from the line of Jeremy Tonet of JPMorgan. Jeremy, your line is open.

Good morning.

Hey, Jeremy, how are you? Good morning.

Good. Good. Thanks. Just wanted to start with the electric rate case if I could here. Thank you for the color that you provided, but I wonder if we could dig in a little bit more on how recent conversations have been tracking in the case. Could you walk us through the core differences between DAS recommendations and your proposal? What items should we be looking for more specifically? Is that impossible when tracking mechanisms are disputed? And is a fully litigated case preferable in this area so there's no kind of gray areas?

Great question, Jeremy. I feel good about the progress of our electric rate case. And just to give you a little flavor on where we're at with that. In rebuttal, we came back at $169 million, and as I shared in my prepared remarks, a 10.25% ROE and a 51.5% equity ratio. That reflects just the differences in the business from when we built the case to where we're at now in the forward-looking test year. Staff is at $88 million, and so the gap is pretty small between our ask and where the staff is, which again I see as very constructive. And so we're really at a constructive starting point in the conversation. Much of that delta is made up with—it’s just really the cost of capital ROE and equity ratio. That's a big piece of the difference. And there's a few other, what I call, cats and dogs—important cash is the dog nonetheless—but things that are helpful for our customers. So that's the big difference. Now let's talk a little bit about settlement in the context of settlement. I've certainly been in a number of these calls where I'm open to settlement, and if settlement presents itself that’s great, and we're certainly receptive to that. But as you pointed out, there are important mechanisms in there and there's undergrounding. Those are two key things that we need to see come out of this case. Investment recovery mechanisms to have some certainty on our distribution let distribution investments in this underground pilot. This is important to get started, and there's a real benefit for our customers. And so those are harder to get in settlement, just to be fully transparent. Typically, they're a black box when you go through settlement. And so we're prepared to go the full distance. I'll just be honest with the entire call; it's likely we're going to go the full distance and I have confidence that we can get a really constructive outcome going to a full order.

Got it. That's very helpful there. And maybe pivoting a bit, could you walk us through your longer-term expectations for DIG, particularly as it relates to recontracting here? Could you speak to the longer-term potential for this business and for non-regulated renewables growth in the future as well given the changing landscape?

Yes. Our non-utility growth continues to be small in the bigger scheme of things. Our primary business continues to be the utility space. So it's about a 95-5 mix. And as shared in the prepared remarks, we expect them to be within guidance range, and so that's a good piece. It continues to be contracted renewables, and again Rejji uses these words singles and doubles. We're not swinging for the fences here, so just thoughtful contracted renewables. They have a utility-like return, long-term contracts assuming no terminal value, again really conservative, almost utility-like. And then there's the Dearborn Industrial Generation or DIG. We continue to see upward pressure on energy and capacity prices, so we're fully contracted out to 2025 with energy and capacity. We plan conservatively, but those bilaterals and the contracts that we are inking are certainly better than expectations. Now, don't read into that a sugar high; you've heard me say no sugar highs in the past. You can anticipate 6% to 8% growth on this again, expectation toward the high side of that growth. So hopefully, that's helpful as we see North Star.

Got it. Understood. No sugar highs, but certainly helpful towards the upper end of the range there. So thank you for the color. We'll leave it there. Thanks.

Our next question today is from the line of Julien Dumoulin-Smith of Bank of America Merrill Lynch. Julien, your line is open.

Hey, good morning, team. How are you guys doing?

Hey, Julien.

Good morning, Julien. Congratulations on the announcement there and good work on your team.

I appreciate it. Look just following up on the distribution plan—the $7 billion that you guys talked about there. Can you elaborate just if you think that that's really kind of incremental versus your prior plan? It seems like that's probably kind of a net $1 billion increase over five years. Can you talk about—is that incremental, or as you talk about sugar highs, is that going to like offset capital elsewhere, if you will, to smooth things out? Just curious on how you think about that fitting into the grander plan as you update that more holistically?

I'm really excited about this plan. We've talked about—we've seen the storms this year and certainly we have an opportunity to improve reliability, in the here and now and then prepare for the aging system; a system that's seen higher wind and more severe weather and preparing for the future. The team has really done a nice job of putting a good plan together. Now when I look at the five years, it's more than an incremental $1 billion. It's an incremental $3 billion, right? What's right in the plan right now is $4 billion in our five-year plan. Now I want to be really careful and really clear about this. And so when we get to the Q4 call, you're going to expect we're going to grow our capital. You can expect with these needs on the distribution system that it's going to be biased or it's going to be more growth on the electric distribution system. So that $4 billion number should grow. That's what I would anticipate and expect. However, I wouldn't just do the simple math of taking $15.5 and adding $3 billion to it. That would get you the wrong answer to the wrong number. It's important that we get commission support, and as we go through the steps, we'll get that in the rate case filing and we'll weave that into that capital plan over time. But it should give you a picture of the strength of our five-year plan. It is robust. There's plenty of opportunities out there, and that extends even beyond 10 years into a really nice long capital runway. It's helpful, Julien.

Absolutely. Thank you for giving all the context there. In fact, speaking of context, capacity markets writ large have attracted a decent amount of tension of late, and certainly some of the inflationary dynamics around them. Can you speak a little bit to the status of DIG, both your contracting status through the long term and, more importantly, how you think about your commercial strategy here with pricing as elevated as it seems to be getting in some of these markets? So just curious, on what you guys are seeing and what the opportunity is and how that fits into the plan.

Yes. And similar to my previous answer here on this, Dearborn Industrial Generation, we take a very conservative utility-like approach. And as you know, over time we've just stacked in contracts for energy and capacity—bilateral contracts to make sure that we are avoiding risk and market volatility. But we certainly see some upward pressure on both energy and capacity prices, as you noted. Much of the energy and capacity has already—contracts are already in place through 2025, but we're filling in the gaps for 2026, 2027 and out years. We plan conservatively and those contracts are, I would say, exceeding our expectations or exceeding our plan, which is great. We'll continue to operate just as we have historically in a really conservative mode and a conservative plan, but you can see we're layering in the future right now and feel good about the opportunities for growth at DIG.

Excellent. And then just quickly, if you don't mind, the status of the solar projects, just where that stands and the schedule for bringing those into rates. Sorry, just to clarify that. I just wanted to hit that as a last quick one.

We feel good about our renewable build. In this electric rate case, we pulled out some of the renewable build. But I'll be honest with you; 25 years in this business and been in engineering operations much of my career—there's projects and contracts that move between years. That's not a big deal. Much of our build this year is in wind. We're going to be COD here at the end of the year at our Heartland wind farm. We're building another 201 megawatts of wind. So there's a lot of renewable build that's underway in these years. Those projects that were referenced in the electric rate case were some of the ones that early got caught up in some of the ops and solar complaint-related issues. We've talked about that; that's been hashed through in this industry. I felt good about the projects we have in mid-development right now. We have line of sight into panels; we got good siting pieces. That will play out as part of our IRP build. The other thing is these projects don't go away. Remember that these are part of the IRP. They'll get constructed here; it's just a matter of timing, and that timing is being refined here. I think at least one of them is going to go this year anyway, so we're going to see some construction there. Because they're approved in the IRP, they get AFUDC along the way. So there's no earnings impact. Make sense?

Good luck, guys. Thank you so much.

Yeah. Thanks, Julien.

Our next question is from the line of Shahriar Pourreza of Guggenheim. Shahriar, your line is now open.

Hey, guys. Good morning. As we reflect on your kind of prior guidance for $350 million of equity starting in 2025, does this kind of increased CapEx plan move your equity needs proportionately higher?

Shar, this is Rejji. Yeah, so we're still in the relatively early stage of building out—sorry, Shar? Shar, this is Rejji if you can hear me. So we're in the early stages of rolling out our five-year plan. We're still calibrating what the financing needs will be. As I've said before, the estimate that we have in our current five-year plan—where we said up to $350 million a year of equity starting in 2025—I don't see that number materially changing. Now, as the CapEx plan increases again, we always recalibrate; you may see a slight shift upward, but we have to take a look at all of the puts and takes—the capital investments, the cash flow generation. At the end of the day, you're not going to see us with any sort of need to do block equity. I still think, even without seeing the numbers, we'll be able to double out the equity in those outer years. Again, still early days on those calculations.

Okay. Perfect. And then just from a stakeholder perspective, where is the MPSC going with sort of the investigations into storms at this point? And I guess, what's the range of outcomes you guys anticipate? We've seen some comments filed, but there seems to be a negatively skewed mechanism for penalties versus rewards.

So there's two pieces. And I wouldn't put a negative take on it. All the conversations we have with staff and commissioners continue to be constructive, and frankly we're both aligned in the same thing: we want to improve reliability. We have a longer-term view of resiliency. When we're aligned, it makes for constructive conversations. There's one—there's the audit that's underway. That was started in September. Liberty Consulting Group is the one doing the work. They've participated with other utilities, a very skilled organization. Right now, they're in the data collection phase; that's well underway. We expect an interim report about the end of the year and then a full report likely in the September-ish timeframe. It's not about a year report then. But I would just be fully transparent with you and honest—I want reliability to improve in the state. I want resiliency and improvement in the state for our customers. If they have findings on how we can do our work better, my gosh, I'm just going to agree to them. We should build that into the next electric grid case. We should do that because we want to do better for our customers. It doesn't bother me at all; I think this is good that we have an outside party looking at how we can improve. It's only going to add to our reliability roadmap. The other thing is on this performance-based rates or PBR—the work group is underway. It was initiated in the first/second quarter time frame, April-ish time frame I believe. That conversation is underway, a proposal was put out. We have put comments through that process. We're continuing to participate in work groups. At the end of the day, I think you're going to have a nice balance of incentives and disincentives from an electric reliability perspective. The important piece for us is making sure there's a nice line of sight into capital recovery, and there's certainty. That's why we're so focused on this investment recovery mechanism. We also think the same thing is required for storm expenses and some of the O&M expense that occurs in the year. As long as we can navigate all that, I feel good. This will lead to good outcomes for our customers.

Got it. Perfect. Thanks, Garrick. Appreciate it. Thanks, Rejji.

Our next question today is from the line of Andrew Weisel of Scotiabank. Andrew, your line is open.

Hey, good morning, everybody.

Hi, Andrew.

My first question is about supply chain. I know solar has been in focus. I think you just alluded to that a moment ago, but how about the availability of grid-level equipment like transformers or switch gears? If you do see shortages, is there a risk that might slow down your planned pace of spending?

First of all, I appreciate your analysis. You did a nice write-up on that. It was about a week ago, two weeks ago. Some good work on what's going on in the industry. We're highly focused on the supply chain. I'll give it over here to Rejji in a minute; he has responsibility for that area. They've done a lot of good work to be able to secure that line of sight. When I think about the projects we have underway, particularly those that are in mid-development, the team has done a much better job to make sure we have panels, transformers, and the like so we can do that build. Now, there's longer lead times, most definitely, and so you've got to be prepared and you've got to plan for that, but the team has just done a phenomenal job. Rejji, your team is doing great work; maybe add to it.

Yes. Thanks, Garrick. I appreciate the question, Andrew. Garrick is exactly right. We have really been attacking challenges in the supply chain for the last 18 months or so. What we've done to really make sure that we've got sufficient supply—not just on the solar side but really across the business—is we've been very focused on diversifying our vendor sources, and that has been a very concerted effort, again over the last 12 to 18 months. We've also done what we would describe as value engineering and looked at other alternatives, particularly in the context of transformers that could be compatible with our electric grid. So we historically used a standard of grain-oriented steel; we're now using amorphous core and introducing that into our system. We've also been very successful in refurbishing damaged transformers and using a variety of third parties to help us with that. All of those countermeasures have led to us getting to a sufficient level of supply across our most highly used transformers. Now, there are still issues in the supply chain across a variety of materials, and we're spending a lot of time on hypercare. For those highest velocity materials, we feel like we're in really good shape at this point, so I really appreciate the question.

I just got to know something. Just Rejji's dexterity—great CFO, and when you can talk about the amorphous core, that's really awesome to see.

One other question for the team here. Can you give us any updates on the legislative environment in Michigan? Talking about the fact that Democrats have full control, so is there any talk of potential updates, either a big change to the 2016 law or maybe more likely incremental marginal support for clean energy? Are you hearing any potential around that?

I'll start with the big picture. In the Governor's first term, she came out with her healthy climate plan. That was a nice plan—supportive of the plan—very pragmatic, and balances clean energy, reliability of supply, and affordability. The Governor came out in August and said—in her second term—came out and said, ‘Hey, I want to make a portion of this into law.’ That's been in the Senate right now. It started out in committee, and so there are a number of bills that were put together on that. As you can imagine, in committee there's a discussion, and we're actively engaged in that discussion. So that's moved on now to the full Senate for consideration but still hasn't made it to the House. There's important work going on to define what that looks like. I stand back and look at the bigger picture of this, much like 2008, much like 2016, this legislative body—as well as the Public Service Commission—continues to provide a constructive approach to the future. We see a constructive outcome of these bills, if they even move forward, and if they even get agreement, we see a path of constructive regulation and policy going forward. That's currently where it stands, Andrew.

Okay. We’ll stay tuned. Thank you very much.

Yes. Thank you.

Our next question is from the line of Durgesh Chopra of Evercore ISI. Durgesh, please go ahead.

Hey, team. Thanks. Good morning, Garrick. Thanks for taking my question. I had a few questions. You've already answered them. Just—maybe just on the O&M savings. Obviously, you've done a great job here offsetting weather and storms; it's a big number, like $0.60 or $0.70 year-to-date combined impact from weather and storms. What—like is there a way for you to quantify for us what these O&M savings that you're using? You're offsetting weather and storms with this year. How much of that can be carried forward to 2024 and beyond? I'm just looking for what level of these savings are sustainable, or are these truly one-time in nature?

Yes. Durgesh, this is Rejji. I appreciate the question. I appreciate also the compliments. We are really proud of the work done for the first three quarters of the year, offsetting the headwinds we've seen from the weather side—both in terms of mild weather as well as the storm activity—and the organization has really rallied around the cause. Obviously, when it comes to cost savings, we never discriminate when it comes to operational versus non-operational, and we've been quite expansive in our approach. To get to the spirit of your question, I think it's difficult to quantify to what degree the savings will be sustainable. I do think a decent portion will be because when you think about the separation plan that I mentioned, we reduced our salaried workforce by roughly 10%, and we do not assume that we will go and re-staff that over the next year or two or even next several years. So we'll see sustainable savings from that, and that will be a significant portion. Some of the other bigger opportunities—so in Q2, the tender financing, obviously, that is a one-timer and so we wouldn't count on that being sustained. But there are other opportunities we've executed on. We've been really disciplined in rationalizing our contractor base and some of the consultants we're working with. Again, we'd like to think we can sustain that. As I mentioned in my prepared remarks, we accelerated some longer-term IT projects and we think we'll see productivity from those actions for some time now. I'd say it's tough to ascribe a specific percentage, but I'd say a decent portion should be sustained going into next year and will provide some tailwinds when you think about not just our guidance next year but also affordability because we always look forward to passing on those savings to the customers. The last thing I'll note is on the financing side, we've seen quite a few efficiencies with the convert, where we pulled ahead some costs or some financing needs we had in 2024. That's going to have a sustained level of savings, and the operating company financings we've done those in a really efficient fashion at a weighted average coupon of 4.8%, below plan. We'll see sustained savings from that. So I'd say on the operational and non-operational side you've got some one-timers, and then some of that will be sustained, but I can't give you a specific percentage at this point.

That’s very helpful color, Rejji. I appreciate it. And then maybe one just quick clarification on the financing point, I'm not trying to jump that down here, but you mentioned you're going to update us on the Q4 call. But for 2024 next year, still no equity? That's still accurate, correct?

That's exactly right.

Thank you.

Thank you.

And our next question today is from the line of David Arcaro of Morgan Stanley. David, please go ahead.

Hi, David.

Good morning. Thanks so much for taking my question. You alluded to this on the last question, but maybe just directly on as you look into 2024, what's your comfort level? You've pulled a lot of cost levers for this year. To the extent there are any incremental challenges into 2024, do you still feel like you're setting up with the same quantum of flexibility around the cost structure and the overall expense structure as you look toward hitting your guidance next year?

Yeah, David. Appreciate the question. This is Rejji. So as you think about the glide path to deliver on the guidance we initiated today, we're guiding $3.06 to $3.12 in 2023 and then $3.27 to $3.33 in 2024. That implies somewhere around $0.20 of pickup year-over-year to get to midpoint to midpoint or thereabouts. So as I think about it, obviously, the weather we had this year—we're looking at roughly $0.30 of weather, and that's just the mild weather experience over the first three quarters of the year, and we anticipate basically being flat in the fourth quarter. You have to imagine that because we plan for normal weather, we shouldn't anticipate that $0.30 of weather impacting us next year. The reality is there have been some one-timers, as I've mentioned in my prior remarks on the tender financing side, and so we'd have to assume that those don't recur as well. When you net the two of those out, you get about $0.10 of pickup. If you think about the pending rate case we have, we had a very constructive gas rate case settlement in the third quarter of this year that was approved by the commission. We've got a pending electric rate case, and then we'll file another gas rate case in December this year. With the anticipation of constructive outcomes on those proceedings, that offers about—per-preliminary estimates—maybe somewhere between $0.10 to $0.15 net of investment-related costs of pickup. Again, a lot of the cost savings I enumerated earlier, we expect a decent portion of those to be sustained, and so we'll get additional pickup there. You can get to a glide path of that $0.20 per share again for that year-over-year growth relatively easily when you look at those pieces. Now there are always puts and takes, and again there are some things that will roll off going into 2024. What's highly debatable is will we see the same quantum of service restoration expense going into next year, because clearly we've had a record level of storm activity, as I noted in our prepared remarks. As we think about the glide path, it's going to be a combination of rate relief, net of investment-related costs with our pending proceedings, we’ll see the weather roll off, we'll see some of the one-timers roll off, and then we expect some of the savings from a lot of the cost reduction initiatives to provide a tailwind on a net basis next year as well. That's what gives us confidence that we can deliver on the 2024 guide. Is that helpful?

Yeah, very helpful. I appreciate all the color. All good points. Also, I just wanted to check on could you just give the latest update in terms of what you're seeing with the voluntary green pricing program potential upside from that program and just expectations for how customer additions could trend from here?

Yeah, it continues to be very positive. Remember, we're in what I'd call a tranche of 1,000 megawatts that is being contracted out. There's significant demand from our customers for those products. We're well over 400 megawatts of contracted load that continues to grow. That's driving to more build from a renewable perspective. We've announced, even within the quarter, the intent to build a solar facility in the current coal facility that will help meet some of that—a portion of that need. So again, very robust continued strong interest from our commercial and industrial customers.

Okay, great. Thanks so much.

And our next question today is from the line of Nicholas Campanella of Barclays. Nicholas, please go ahead.

Hey, thanks for taking my question, everyone. Just one for me. A lot of them have been answered. But I guess just looking at the resiliency plan, you kind of start to show the SADI scores improving in '25, '26, but I was just trying to dig in more on how you're thinking about operational risk reduction for '24. Just given lessons learned from last year's storm cycle, and I assume you're probably actively deploying some of this technology now. So just how should we kind of think about storm risk for '24 versus this year? Thanks.

Great question. I'm glad you're digging into it. That's a fun plan to look at. Right now—and that's why I shared in some of my prepared remarks—we're not waiting. The commission has been supportive of additional tree removal or vegetation management. That's more than doubled our spend over the last three years. So that's active work that's underway. There are close to 300 crews that are on our system—contracted crews that are out doing that work today and have been over the course of the year. In those areas where we do the work, we see greater than a 60% improvement well underway. In addition to that, fusing 15,000 fuses over the last two years and a plan to do more next year as well. That takes—when there's an interruption on the system, like a fuse box in your home. Rather than the whole home going out, you might lose the bathroom or the kitchen—same type of thing on the electric. We're fusing that. When there's an interruption, less customers are impacted. We're seeing SADI performance improvement already from the deployment of those fuses. We've never done this level of fusing across our history. We continue to add automation. I saw a great one the other day; being able to—one of the things on our high-voltage distribution system we've got what's called a Victor insulator. Now, Victor insulators are prone to failure. That's a known problem. Once you put them on the grid, back in the '70s, we didn't have the best kind of control on where those went. To be able to identify them, you got to be able to see the small little 'D' on top of the Victor insulator. Before, we had to stick a bucket truck up there to see that. That's very inefficient. Now with drones, with the ability to automatically pull from a picture to see that little 'D', we're able to find those Victor insulators and be very strategic about replacing them. I'm excited about the technology we're bringing to bear as well. Those are just a few examples. There are hundreds of examples; we are not satisfied with our reliability performance. We are going to make it better. We've seen improvement over 2022. We continue to be on good pace this year, even with the storms. So we're going to keep the—sorry, with the analogy; we're keeping the foot down on the floor on the accelerator on this.

All right. I appreciate it. Thank you.

Our next question today is from the line of Travis Miller of Morningstar. Travis, please go ahead.

Good morning, everyone. Thank you. On the distribution plan, I wondering if you could talk a little bit about what you expect the timing of the regulatory review on that to be?

It's going to be—those will get woven into electric rate case filings. That plan by itself will get some comment, but that's not a contested filing. What will happen is that will be—it's truly a roadmap; it's really a vision of where we're headed and the important pieces that have to come together for that. Those get brought into electric rate case filings, and then with commission support, they can be approved. I would just highlight one thing—one announcement we've had here in the last couple of weeks, the Department of Energy grant of $100 million. That really jump-starts some of this important work. Again, to the previous question, we're not waiting around. We see some opportunities to put this to work immediately, but again, the regulatory process is through the rate cases.

Okay. So that suggests you probably continue that annual type run rate of electric rate cases, and even potentially gas rate cases, but especially the electric. Is that roughly correct?

Yes, you should expect an annual rate case type filing. I would just offer, too, particularly with the interest rates the way they are, ten-month rate cases and forward-looking test years really eliminates some of that drag that you get with higher interest rates. There are a lot of benefits of that approach.

Okay. Very good. That’s all I had. Thanks.

Thank you, Travis.

Our next question today is from the line of Sophie Karp with KeyBanc. Sophie, please go ahead.

Hi, good morning. Thank you for taking my questions. A lot of questions have been answered, but I wanted to ask you about the cost of capital and like the ROEs, right? So a bit of a push-pull in Michigan as in many other states right now. I'm just kind of curious how the conversations about the need for higher ROE lending with the stakeholders at the commission. I'm not sure a few people are catching on to how fast the rates have risen and that really needs to—you're going to have some adjustment to how they are as viewed, I guess, in the last few years. So any color on that would be helpful.

Yes, Sophie, it's Rejji. I appreciate the question. Let me just start by saying we're certainly making the case and have made the case really for the last few years around the need to have higher ROEs just given the changing cost of capital environment. I think treasuries are probably a couple of hundred basis points higher than where they were when we first had 9.9% established as the prevailing ROE across our electric and gas businesses and DTs and parity as well. We're certainly making the case, and I think the case becomes stronger and stronger every day as we see continued hawkish monetary policy. To give you any confidence, I think it's—we feel very good about the fact that there's a good floor at the 9.9% prevailing ROE, but we're going to continue to make the case that it should be higher. As Garrick noted, we're seeking 10.25% in our pending electric case, and again, I think the data supports that point of view. We try to make the case in addition to all the different ways in which you can calculate the cost of equity. The fact is that we compete for capital against other utilities in other jurisdictions. Given the quantum of capital that we have—not just in our current five-year plan, but in what we anticipate being our next and subsequent five-year plans—we do think we need to be as competitive as possible on all fronts because you can take your dollars elsewhere as investors. We've been making the case loudly and clearly, I think DTE as well, and hopefully, we can start to see a change in the wind here with respect to ROEs.

Got it. Thank you. And then maybe if I can squeeze one more in. You've been doing your undergrounding pilots. I'm just curious what have you learned so far from this pilot project, maybe in terms of cost or approach that needs to be taken. Curious if you can provide any color on how that is going.

Well, just a point of clarification: what's introduced in the electric case is a pilot—a pilot of 10 miles. As I shared, it's small but important so that the Public Service Commission has the opportunity to evaluate. We do undergrounding already; we do it in the context of subdivisions and the like, and we have done a couple of trial runs. What we've seen is it's very cost-effective because of our gas business; directional drilling underground is one of our specialties. We certainly have the equipment and the expertise to do that, so we're able to be very competitive from an underground perspective. Our plan stays out of congested areas and stays out of three-phase construction. We're talking single-phase, more rural construction where you have the right floor conditions, and we do over much of Michigan, which helps from a cost perspective. We've shared historically—more current, I guess—it’s in the $350,000 per mile range, which we think is very achievable.

All right. Thank you so much.

Thank you.

And our next question is from the line of Anthony Crowdell of Mizuho. Anthony, your line is open.

Hey, all of my questions have been answered. Thanks so much. I am good.

Good to hear from you, Anthony.

Our next question is from the line of Ross Fowler of UBS. Ross, your line is now open.

Hi, Garrick, hi, Rejji, how are you?

Good morning, Ross.

Hey, Ross. How are you?

Good morning. Let's take it to the full hour, why not? And Garrick, there are as many auto analogies as you'd like in the answer to this question. But I just wanted to get an update on the estimated bills meter installation issue given the commission filed that show costs a couple of days ago. I know Rejji kind of talked about this back when I saw in August, but just an update there. And then the second part of the question is, do you think that has any sort of lateral impacts on the rate case proceeding, or from your perspective, is the commission really looking at these as two separate filings and issues?

I don't know if I have any auto analogies for this one. We talked about this in great detail, and I provide probably a long answer—maybe too long an answer—on the Q2 call. I'll try to be brief but this is just the next step in that. Recall that we had some 3G meters that were no longer supported. Our vendor could not meet some of the supply chain needs—again, considered a carryover from the pandemic—and did not meet some of the read requirements out in the field. That creates some billing issues for our customers. That's a problem, and the Public Service Commission clearly identified that. We shared in our Q2 call that that issue is behind us. We filed a report in August, and this is the next step to reach resolution. I don't see any spillover impact into the electric rate case or in any other filings.

All right. Thank you very much.

Thank you, Ross.

And we have no further questions in the queue today, so I'd like to hand back to Mr. Garrick Rochow for any final remarks.

Thanks, Harry, and I'd like to thank you for joining us today. We'll see you at EEI. Please take care and stay safe.

This concludes today's conference. We thank everyone for your participation.