Good morning, everyone, and welcome to the CMS Energy 2024 Second 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. 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 measures are included in the appendix and posted on our website. At this time, I would like to turn the call over to Mr. Jason Shore, Treasurer and Vice President of 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. And now I'll turn the call over to Garrick.

Thank you, Jason, and thank you, everyone, for joining us today. Our proven investment thesis, which delivers 6% to 8% adjusted earnings growth and affordable bills for our customers has been durable for more than two decades because we focus on what matters. Today, I'm going to highlight two key areas of our thesis. First, Michigan's strong regulatory environment. Built on a solid constructive framework, much of which is codified in Michigan law, 10-month forward-looking rate cases, important financial and fuel recovery mechanisms increased energy waste reduction incentives just to name a few attributes. This robust framework supports Michigan's position as a top-tier regulatory environment and provides supportive incentives for needed investments to make our electric and gas systems safer, more reliable and resilient and cleaner. And second, our continued commitment to affordable bills for our customers. As I've said before, we work both sides of the equation. We make important investments, and we keep customer bills affordable. I consider our use of the CE Way, our lean operating system, one of the best in the industry. This approach limits upward pressure on customer bills. It is critical in the delivery of our investment plan. And we continue to see a long runway of cost-saving opportunities well into the future, delivering industry-leading results for all our stakeholders. From a regulatory perspective, we're off to a strong start for the year. As you can see on Slide 4, our regulatory calendar is mostly complete. We received a constructive order in our electric rate case in March, filed our new electric rate case in May and settled our gas rate case earlier this month, the fourth consecutive settlement in our gas business, four consecutive settlements in gas, yet another proof point highlighting the strong regulatory environment in Michigan. We're very pleased with our recently approved gas settlement, which calls for a $62.5 million of effective rate relief, a 9.9% ROE and a 50% equity ratio. We plan to follow our next gas rate case in December of this year. Outside of rate cases, our upcoming 20-year renewable energy plan or our EP filing in November is the only major remaining filing for the year. Midway through the year, our financial-related regulatory outcomes are known. This is a great place to be. I also want to talk about our formula to deliver customer affordability as we make important investments. Long-term filings, like our renewable energy plan detail the significant planned investments that support safe, reliable, clean and affordable energy for our customers. As we shared previously, we see more investment opportunities as we make the transition to renewables and clean energy. In addition to the $17 billion of needed customer investments in our 5-year capital plan, our electric reliability roadmap and natural gas delivery plans highlight important investments well beyond our financial plan. We take seriously our ability to create capital headroom to make those investments through continued use of the CE Way, which provides over $50 million of annual customer savings. Renegotiating over market PPAs in retiring our coal facilities, which together provide well over $200 million in savings as we transition toward cleaner resources. Capitalizing on economic development opportunities, particularly in manufacturing, which brings jobs and significant mission investments, spreading fixed costs over a larger customer base, benefiting all customers. Lastly, leveraging our best-in-class energy waste reduction programs to help customers reduce bills. This is a formula that works for everyone, continuing to strengthen the system with important investments while keeping customer bills affordable. Now let's look at the results and outlook. For the first half, we reported adjusted earnings per share of $1.63, up $0.18 versus the first half of 2023, largely driven by the constructive outcomes in our electric and gas rate cases. We remain confident in this year's guidance and long-term outlook and are reaffirming all our financial objectives. Our full-year guidance remains at $3.29 to $3.35 per share with continued confidence toward the high end. Longer term, we continue to guide toward the high end of our adjusted EPS growth range of 6% to 8%, which implies and includes 7% up to 8%. With that, I'll hand the call over to Rejji.

Thank you, Garrick, and good morning, everyone. On Slide 7, you'll see our standard waterfall chart, which illustrates the key drivers impacting our financial performance for the first six months of 2024 and our year-ago expectations. For clarification purposes, all of the variance analysis herein are in comparison to 2023, both on a year-to-date and a year-to-go basis. In summary, through the first half of 2024, we delivered adjusted net income of $485 million or $1.63 per share, which compares favorably to the comparable period in 2023, largely due to higher rate relief net of investment costs. And while we have seen some glimpses of favorable weather, particularly in June, overall weather continues to be a headwind through the first half of the year, equating to $0.05 per share of negative variance and that figure includes the warm winter weather experienced in our service territory in the first quarter, which I'll remind you, had the second lowest number of heating degree days in the past 25 years. As mentioned, rate relief, net investment-related expenses, one of the key drivers of our first half performance resulted in $0.13 per share of positive variance due to constructive outcomes achieved in our electric rate order received in March and last year's gas rate case settlement. From a cost perspective, our financial performance in the first half of the year was negatively impacted by heavy storm activity, including a notable weather system that impacted our service territory in late June, resulting in $0.03 per share of negative variance versus the comparable period in 2023. Rounding out the first six months of the year, you'll note the $0.13 per share of positive variance highlighted in the catch-off bucket in the middle of the chart. The primary sources of upside here were related to solid operational performance at NorthStar and higher weather-normalized electric sales. Looking ahead, as always, we plan for normal weather, which equates to $0.20 per share of positive variance for the remaining half of the year, given the mild temperatures experienced in the final six months of 2023. From a regulatory perspective, we'll realize $0.12 per share of positive variance, largely driven by the aforementioned electric rate order received from the commission earlier this year and the constructive outcome achieved in our recently approved gas rate case settlement, which Garrick summarized earlier. Closing out the glide path for the remainder of the year, as noted during our Q1 call, we anticipate lower overall O&M expense at the utility driven by the usual cost performance fueled by the CE Way and the residual benefits from select sustainable cost reduction initiatives implemented in 2023 such as our voluntary separation plan, among others. Collectively, we expect these items to drive $0.09 per share, a positive variance for the remaining six months of the year. Lastly, in the penultimate bar on the right-hand side, you'll note a significant negative variance, which largely consists of the absence of select one-time countermeasures from last year and the usual conservative assumptions around weather-normalized sales and non-utility performance among other items. In summary, despite a challenging first half of the year, we are well-positioned to deliver on our 2024 financial objectives to the benefit of customers and investors. Moving on to our financing plan. Slide 8 offers more specificity on the balance of our planned funding needs in 2024, which at this point are limited to debt issuances at the utility. I'll bring to your attention a relatively modest increase to our 2024 planned financing of the utility. Specifically, we are now planning to issue approximately $675 million in the second half of the year versus the implied estimates in our original guidance of $500 million to rebalance the rate-making capital structure at the utility in accordance with recent rate case outcomes. Although not highlighted in the table on the slide, I'm pleased to report that we have completed all of our planned tax credit sales for the year at levels favorable to our plan and ahead of schedule. I'll also reiterate that we have no planned long-term financings as apparent in 2024 but remain opportunistic should we see a cost-efficient opportunity to pull ahead some of our 2025 financing needs. 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.

Thank you, Rejji. CMS Energy, 21 years of consistent industry-leading financial performance. I have confidence in our strong outlook this year and beyond as we continue to execute on our simple investment thesis, and make the necessary and important investments in our system while maintaining customer affordability. With that, Harry, please open the lines for Q&A.

Our first question today comes from Jeremy Tonet of JPMorgan. Please go ahead, your line is open.

Just wanted to turn towards DIG for a little bit here if we could. And just wanted to get updated thoughts with regards to recontracting overall and just, I guess, the outlook in this environment, given kind of trends in power prices?

I would suggest, Jeremy, it's consistent with what we shared in the past, energy and capacity markets that upward pressure continues to be a ripe opportunity and we continue to strike nice bilateral contracts to secure managing capacity prices well above our plan. And so again, it's a good opportunity to continue to do that. And as we've shared in the past, this just continues to strengthen and lengthen our financial performance.

Got it. Thank you for that. And then it seems like halfway through the year, CMS is in a pretty good position overall. Just wondering any thoughts, you could share with regards to, I guess, how weather is looking in impacts for 3Q as it stands right now and really getting towards, I guess, cost management thoughts and whether there might be in a position to pull forward costs to further derisk the future outlook and how you think about all of that?

Jeremy, it's Rejji. I appreciate the question. I would say weather outlook looks fairly good for Q3, but obviously, early days. And I will just say, personally, I don't give a lot of credence to 2-month and 3-month outlooks. I'm much more focused on the 10 days ahead, which appear to be a bit more accurate. And so, we always remain cautious about weather. And just based on year-to-date, weather has not been all that kind. And so, we'll continue to execute on cost performance-related initiatives. We've had some good success over the last several years in executing on cost management over the course of the year, and we'll continue to do that through Q3. As I mentioned in the first quarter call, it's still premature to start thinking about pulling ahead for 2025. I'd say historically, even in the best of years, where weather was really helpful in the first couple of quarters, we still didn't think about flexing up or pulling ahead or any of those types of derisking mechanisms until we got deeper into Q3 and had a real good outlook on the fourth quarter. So hopefully, more to talk about from a 2025 derisking perspective next quarter. But at this point, it's too premature to get into that.

And if I could just add to that, Jeremy, part of the call here in my prepared remarks, I talked about the confidence. Confidence comes from the fact that we're executing on the CE Way. We've done that historically. We typically have been at a run rate of greater than $50 million on an annual basis. We see that continuing. There are a number of things that we did in 2023, already shared in my prepared remarks, voluntary separation, contract control, as those continue to yield benefits in the year. And also, we're deploying a lot of digital solutions, everything from work in the field to automate work, all the way into the office, things like work management that continue to provide additional cost savings in the year. So again, confident as I shared in the call here earlier, and delivering guidance for the year.

Got it. Appreciate it. And then if I could just wrap with thoughts on opportunity to service data centers going forward here, and I guess, the interplay with regards to legislation in Michigan, whether that comes to fruition and how that might impact the pace of such type of development.

Jeremy, you know us well enough the Hayes-Rochow team here. We're pretty conservative in our approach to financials. And as I shared in the Q1 call, we want to make sure it's signed on the dotted line, you might say, before we talk about it. So, we don't inflate our sales forecast. I would just say that there's a lot of interest in both manufacturing and data centers in the state as I shared in the Q1 call, seeing a lot of manufacturing growth. That continues into Q2. We saw data centers, we talked about one that we signed in Q1, 230 megawatts. There continues to be strong interest in the state, both the hyperscalers and also, we're seeing some growth in what I call, mid-scalers from a data center perspective, those continue to move forward regardless of legislation in the state. And so, the sales and use tax piece will continue in the conversation in the legislature. But again, it's a bit of icing on top of the cake, you might say.

Our next question today is from the line of Shahriar Pourreza of Guggenheim Partners. Please go ahead. Your line is open.

So, I know you guys noted previously that the FCM mechanism could be incremental sort of in the new generation not in plan. As we're kind of getting closer to the November rep filing, any thoughts on where demand is headed and how maybe CMS would be positioned for upside there. So, any thoughts on incremental CapEx versus the PPA options? Have you started to embed any higher load growth in your assumptions?

Sure. I was really hoping for a rate design question. Let's talk about this. We definitely see as a part of this energy law, additional upside. That shows up in ownership of asset that shows up in the financial compensation mechanism, both those are true. Let me talk about how they'll play out, though. We're going to file our renewable energy plan in November, it's a 10-month process. So, we'll know in 2025, kind of latter half of the year, what that looks like. And so, in our 2026 capital plan, you'll see what that means, our 2026 financials both from an FCM perspective as well as what might the ownership mix looks like. And so, that's where it will play out. In addition to that, that's probably a portion of the story, because in 2026, we'll also file our integrated resource plan, which we'll talk about some of the reliability pieces and some of the work to deliver the capacity component of that. So, between '26, '27, '28, I think that's when you'll see the capital impact as well as the financial compensation mechanism play out in terms of our financials. And I will say this, we've seen some good economic growth in the state. That will show up in our renewable energy plan. We're definitely seeing a greater need than was in our original 2021 IRP.

And then just a quick follow-up, and I obviously dedicate this to Garrick. Just on the rate case filing on the electric side, obviously, it's in the early innings. It's kind of more of a '25 event. The provisions and sort of the mechanisms like the IRM and DR remain unchanged. I guess do you feel there would be sort of an opportunity for settlement after testimony given this is kind of a less complex case. I guess, how are you sort of thinking about settlement path versus the prior litigated path? And is there anything, and I dedicate this to you, any of the rate design stuff in there that can cause some contention?

I set myself up for that one, didn't I? I will always look for settlement opportunities. I'm also very confident in our team. We put a great case together, and we can go the full distance, just as we did this year in our March order. When I think about this electric rate case, there's some things that have to be figured out to really get some context around the opportunity for settlement. One, I think it's really important to understand that electric cases are more complex than gas cases. For example, we had less than 10 intervenors in our gas case. We have a little over 20 in our electric case. That's not abnormal, it's just more complex. There's more interested parties, so we have to navigate through that. I also think it's important to find where staff is and where the Attorney General are at in this case. That will come in September. These are important points to know in the context of settlement opportunity. But I understand that I am very confident in this case. It is focused on electric reliability. That's well aligned with what the customers are asking for, what the commissioners and the staff are asking for and what I've committed to do. This case has great capital investments and undergrounding has important work hardening the system and automated transfer reclosures technology on the system. There's important work in O&M and tree trimming, our number one cause of outage and other important maintenance work across the system. We're going to leverage the infrastructure recovery mechanism, and we'll certainly look for work in that area as well. We feel confident in our ability to get a very constructive outcome, just given how well aligned we are across commission staff as well as our customers. Hopefully, that gives you some context on the case. Now on rate design, let me just talk a little bit about rate design. Specifically, data centers are not at our economic development rate. We had an ex-parte filing that made an adjustment in that which was approved. So, in the meantime, they are under an industrial rate. We thought our GDP rate and what that does is a better balance, both capacity and energy cost, the cost to serve those customers. The commission, as well as the utility, has been looking and exploring the opportunity for a specific data center rate. That said, the GDP is a good proxy for that in our mind.

Our next question today is from the line of Michael Sullivan of Wolfe Research. Please go ahead. Your line is open.

I just wanted to go back to the data center legislation discussion. I think on the last call, you talked about a 230-megawatt data center coming in 2026. Was that contingent on the legislation or your understanding is still moving forward? And are there any other examples of that? Or is everyone else weighty inflation?

It was not contingent. That one is still moving forward, that's the signed piece. And I guess that's my point. What we hear from data centers, it's more important about how fast can you get transmission here, how much cash can you build that conversion from transmission distribution to substation, how fast can you get supply here, and we're able to do that. Many of those mid-scalers and hyperscalers continue to make forward steps regardless of the progress on the sales tax. And just to give you a little context, at the end of the spring session, the legislature was focused on the state budget. In the words of our governor, we've got to fix the roads and we got to fund schools. Those are important things, too. We want smart kids in the state. Those are important things underway. That conversation on data centers and the sales tax will continue into the fall. Now we're in elections. It will be difficult for me to predict how fast that will move, or if it could happen in the future. We'll continue that conversation in the state. It's not stopping things from moving forward.

And is that like a good proxy for how long it takes new load to come on to your system, about two years with that one being 2026?

There's a number of variables there, Mike. So, in the case of that data center, what we talked about is they're bringing on load by 2025, 2026, and where they're located on the system makes a big difference. Depending on where the data center is located from a property perspective, it makes a difference. Just as far as how far do we have to extend lines, is it greenfield? There are all kinds of variables that go into it, but we're in that two to three years cycle. Even if you're at the tail end of that cycle, data centers are moving quickly, and that doesn't seem to be holding them up too much.

Okay great. Separately, regarding legislation, I recall some comments from the PSC chair a few months ago about the timelines for rate cases being somewhat compressed lately. Are you aware of any possibility of legislation that would return to a 12-month cycle? Additionally, could you provide a general sense of rate fatigue in the state in light of those comments?

The short answer is no. As you know, what makes Michigan great is much of the regulatory environment is set in law. So, 10-month forward-looking rate cases are in the law, financial compensation mechanism, and energy efficiency incentives are in the law. We just went through that law. We just opened it, and it was just signed here last November, and we're hearing nothing in terms of holding that law back up or looking at different traditions. We continue to always have a constructive dialogue with the commission and the staff. I do think there are opportunities right, in terms. I’ll give you one example, just one example of probably many you could think about. We have a great process for an integrated resource plan and a renewable energy plan that lay out an energy supply portfolio. So, we get it pre-approved and then it flows into rate cases. It really streamlines rate cases. What if we could do the same thing on the distribution system? Wouldn’t that be great? Let's build a 5-year reliability roadmap. We've already done that. Let's do that. Let's approve that and then have that flow into rate cases. That could really streamline the process. Done in the right way, you can potentially see a path where you could stay out for a period of time, again, done in the right way. The nature of Michigan's constructive regulatory environment, let's explore that. Let's see if there's opportunities there to further bolster Michigan’s constructive nature.

Our next question today is from the line of Andrew Weisel of Scotiabank. Please go ahead. Your line is open.

Just two quick ones. First, C&I weather-adjusted volumes were down in the quarter, it's a bit of a reversal from the first quarter. I know the first quarter was extremely mild weather. So those numbers are probably a little bit goofy. But any commentary on the underlying trends and the near-term outlook for the rest of this year, maybe early thoughts on 2025?

Sure, Andrew. This is Rejji. I'll take it, and I appreciate the question as always. Yes, we did see a little bit of a pullback in Q2 versus Q2 of last year for weather-normalized sales for electric. I will always caveat and I think you alluded to it that it's a very imperfect science, and the team does a really good job trying to pull these numbers together with real accuracy. But again, it's very difficult to get real precision here. Just so everybody is grounded: residential for the quarter versus Q2 of 2023 was slightly up about 0.1%. Commercial down about 1 point, industrial down about 2 points, excluding low-margin customers, and an overall blended was down about 1 point, which is unfavorable from the trends we were seeing in the first quarter. On a year-to-date basis, the trend remains quite good, and we continue to be surprised for the upside really across all customer classes because our assumptions were incredibly conservative as they always are for the year. We are outperforming across every customer class, what our initial expectations were embedded in our original guidance. And so, we are still seeing non-weather sales upside. I'll also note, as I've said before, that we had energy waste reduction incorporated into all of those numbers that you're seeing. So, you should always add 2% to each of those customer classes because we're delivering the 2% reduction across every customer class year-over-year, and we've been doing that now really since the '08 law or thereabouts. So, another way to think about those numbers I just quoted is to gross them up by 2% across each of the classes if you want to get the underlying economic conditions. We think conditions in Michigan remain quite good really across all customer classes.

Yes. Good reminder on the efficiency. And yes, we all know that you're conservative. Next, an operational question. You noted there was some heavy storm activity in the quarter, what kind of score or grade would you give yourself in terms of restoration efforts? Reliability is obviously a big focus for you. You talked about that in your comments. What would you say went well? What could have gone better? And how does this fold into your efforts as part of the electric rate case and the audit?

So, we're seeing a number of great improvements as a result of the investments we have made to date. More needs to be done along those lines. In fairness, I'd give ourselves a B in the context, because there are more needs to be done for our customers. That's evident in the rate case filing that we're doing. Where we've worked a lot this year is in reducing the size of the outage. We've put in a lot of fusing. By that, I mean you have less customers impacted when a tree comes down the line, that's important work. We've more than doubled our tree-trimming work over the last three years. That's also provided a benefit when we trim trees; we see a greater than 60% reduction in the number of outages. You may ask why not 100%? Because we still see trees outside the right-of-way that impacts our performance. But I would also put it into context; Rejji talked about the last week of June, and there was a larger event in June, but there were a lot more smaller events than we would anticipate. We're trying to shrink the size, which makes restoration easier, but a lot of pockets throughout the state. We brought in a number of resources. We leveraged many of our existing union resources to respond to that, and we have good response from that perspective. We measure in terms of restoring our customers within a 24-hour window. We want to have all customers restored within a 24-hour window. Last year, in 2023, we were at 90% within a 24-hour window. This year, we're upwards of 95%. That shows the directional improvement. Now the year is not done. We've got a lot of work to do. and we'll continue to make some important investments throughout this year. Again, this electric rate case shows the path for more. So hopefully, that gives us some context.

Andrew, all I would add to Garrick's good comments on the operational side is really applying a financial lens. And I would give us about a B+ on the financial side because through utilization of the CE Way, we've done a really good job reducing unit costs in our actual service restoration. We're seeing at this point over $40 million of avoided costs. Now needless to say, I talked about negative variance attributable to overall service restoration costs versus last year. However, the cost would have been decidedly higher as a result of the problem-solving we've done throughout the year. We're contracting third parties more efficiently. We're using more automation to reduce manual inspections and definitely leveraging the tools of the CE Way to really execute on storm restoration much more efficiently than we have in the past. In addition to all the operational feats that Garrick highlighted, will also apply a really thoughtful financial lens to ensure that we're bringing customers back online as quickly as possible.

Our next question today is from the line of Julian Dimelo Smith of Jefferies. Please go ahead. Your line is open.

Garrick, what are you putting yourself in the ring here for VP given all the political conversation here, right? Now you want to fix them growth.

And here's Rochow. I don't know. I don't know if it has a ring to it. Look, I'll give it a try.

You all have made great progress and are in a strong position. You've effectively reduced operating and maintenance costs and have expressed confidence in achieving both your short-term and long-term goals. You issued more debt, totaling $675 million instead of the anticipated $500 million, to adjust your equity ratio. What is contributing to this level of success? I would like to better understand the implications of the debt and your overall remarks, especially in light of the operating and maintenance aspects you mentioned.

Julian, it's Rejji. I appreciate the question and welcome back. Really good to hear your voice. Let me start with a few of the just premises or working assumptions you offered up in the question. The debt at the utility, just for factual purposes, we are planning to issue about $675 million in the second half of the year at the utility as part of our financing plan. It was initially $0.5 billion and we've slightly increased, and that's really just because of our rate case outcomes, which had modestly lower equity levels, and so we'll have more debt at the operating company. I just want to make sure that was clear. The outperformance has been, obviously, we always try to deliver on the cost performance side. But as I mentioned in my prepared remarks, rate relief net of investments has been helpful getting constructive orders from the electric rate order in early March, the gas rate case last year, and we're still seeing the residual benefits from that. That's really what's helped us in the first half of the year. Also, embedded in that catch-all bucket is NorthStar's really outperformed. They had a very soft comp in the first half of 2023, just because last year's plan was a bit more back-end loaded. There were also some outage-related issues at DIG, given a transformer issue. This year, they've really gotten out of the gate pretty strong. DIG is up about $0.05 year-over-year, and we're seeing the residual benefits from some solar projects that came in late last year. I would say it's a combination of rate relief net of investments, outperformance at NorthStar, as well as some cost performance, offset by mild weather conditions, which have hurt the top line, as well as storms, as we talked about in the prior question. I'd say it's a combination of all of that, which gives us just good confidence going into the second half of the year.

Rejji, just to follow up on that quickly. Much of the situation with NorthStar is accurate. When discussing outages year-over-year, some of that should have been anticipated, particularly regarding the solar service. I'm interested in the outperformance here. Is this more of a correction? Or is there an accumulation effect in the following years? How do you view the leading indicators in this context?

Yes, good question. NorthStar on plan. We anticipated a front-end-loaded year for all of the reasons you noted. A good portion of NorthStar's performance was on plan. But I will say DIG did surprise a little bit to the upside in the first quarter because operationally, not only are they executing very well, but they're also executing on a lower unit cost basis, which drives a little bit of additional margin there as well as opportunities for off-peak margin that the team has capitalized on. It's a combination of being on plan because it was a front-end-loaded plan at NorthStar, but also some operational efficiency, which we’ve seen.

Our next question today is from the line of Durgesh Chopra of Evercore. Please go ahead. Your line is open.

Good morning. Thank you for taking my question. All my other questions have been answered. I would like to know if there is an update on the performance-based ratemaking from the legislation last year. Where do we stand on that? Can you provide us with an update, please?

Sure. That's been a very constructive dialogue. As I've shared in the past, it started really wide in the number of metrics. Through good dialogue, it was narrowed down to four benchmarkable metrics. It has grown a little bit to accommodate some storm provisions. However, there's still a constructive dialogue underway here in July and August, there's filings to navigate that. There are a few things we still want to work through and get – dot the I’s and cross the T’s on, you might say. I expect that this is going to play out over several rate cases, so it's not going to be implemented here immediately. I think it just speaks to the constructive dialogue we have in Michigan here.

Got it. So just kind of the framework of this would be a potential earnings uplift. And then on the downside, a potential penalty on certain metrics. When did you say this could go into effect? This is a '25 item, '26? Just any thoughts there?

I would put it several rate cases away, so over maybe a year or two years out from an implementation perspective. Again, that's my view, just what I see of the world. The intent is for it to be symmetric. So, there's upside opportunity and downside opportunity. The downside opportunity is marked about $10 million at this context, which is manageable in the context of the year. That means the upside opportunity is roughly that same amount, and at least that is proposed currently.

Our next question is from Travis Miller of Morningstar. Please go ahead. Your line is open.

Very high level on electric demand. I wonder if you could elaborate on how it's trending versus your 2021 IRP and how, as you had mentioned earlier in the call, how that would affect potentially the renewable energy plan filing here. Are trends higher or lower, and how does that impact the REP?

Yes. It's definitely trending higher based on all the economic development activity that is, again, not speculating on that, signed or underway while we're out building substations, and there’s transmission being built to serve these customers. In our renewable energy plan filing, you should anticipate that there's additional sales referenced there above and beyond our 2021 IRP.

And is it fair to make the leap then that you would need more renewable energy on that same percentage basis as what's in the lot?

Yes, generally speaking.

Okay. And then also, obviously, a lot to talk about in the media about Palisades. From your perspective, is it accurate that you're seeing development moving forward on that plant? And then if so, would you be interested in either implementing that in your plan in terms of the capacity and energy and/or signing a PPA?

Palisades is making forward progress in the state. From a state budget perspective, another $150 million was allocated toward the forward direction of the facility. We're having public meetings that are going on right now on site. Forward steps are being made on that plant. I remind you that a PPA has already been struck for the offtake from the Palisades facility that goes to a co-op in Michigan and a co-op in Indiana. So, it's already spoken for. It's good for Michigan that Palisades is returning. We, at CMS Energy, do not see any adverse impact as a result of Palisades coming back.

Our next question today is from the line of Nick Campanella of Barclays. Please go ahead. Your line is open.

Just one for me today. So, I know Rejji, you said you would be opportunistic in your prepared remarks around financing and potentially pulling things forward from '25. I'm just cognizant that you do have kind of you start to issue equity in 2025. And maybe you can just kind of give us some more color? Are you just kind of talking about pulling forward hybrid or debt or is everything on the table, how do you think about that?

Yes, I appreciate the question, Nick. I would say in short, I wouldn't say everything is on the table. So, you won't see us issuing equity in 2024. We have done it in the past, though, as we have executed opportally to take some of the price risk off the table. I would say where the equity is today, I don't think that seems like the most likely trade. But I was speaking more towards parent debt financing needs. We're mindful that we have modest new money needs on top of that. If we start to see favorable pricing in the market, particularly if the speculation around potential dovish policy from the Fed comes to fruition, but I have stopped wagering on that. So, we'll see what happens. If we start to see a correction in the yield curve that's favorable and creates opportunities for holdco debt financings, we’ll look to do that.

With no further questions in the queue at this time, I would like to hand the call back to Mr. Garrick Rochow for any closing remarks.

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

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