Good morning, and welcome to CenterPoint Energy's First Quarter 2024 Earnings Conference Call with senior management. I will now turn the call over to Jackie Richert, Senior Vice President of Corporate Planning, Investor Relations and Trustee. Ms. Richert, you may begin.

Good morning, and welcome to CenterPoint Energy's First Quarter 2024 Earnings Conference Call. Jason Wells, our CEO; and Chris Foster, our CFO, will discuss the company's first quarter results. Management will discuss certain topics that will contain projections and other forward-looking information and statements that are based on management's beliefs, assumptions, and information currently available to management. These forward-looking statements are subject to risks or uncertainties. Actual results could differ materially based upon various factors as noted in our Form 10-Q, other SEC filings, and our earnings materials. We undertake no obligation to revise or update publicly any forward-looking statements. We will be discussing certain non-GAAP measures on today's call. When providing guidance, we use the non-GAAP EPS measure of diluted adjusted earnings per share on a consolidated basis referred to as non-GAAP EPS. For information on our guidance methodology and a reconciliation of the non-GAAP measures used in providing guidance, please refer to our news release and presentation on our website. We will use our website to announce material information. This call is being recorded. Information on how to access the replay can be found on our website. Now I'd like to turn the call over to Jason.

Thank you, Jackie, and good morning, everyone. As many of you likely saw from this morning's earnings release, we are off to a strong start in 2024 despite the mild weather and the general trend of a longer interest rate environment our sector has experienced. This quarter is yet another illustration of why we believe we have one of the most tangible long-term growth plans in the industry, which we plan to consistently execute and thoughtfully enhance for the benefit of all of our stakeholders. On this morning's call, I'd like to address three key areas of focus before handing the call over to Chris to discuss our financial results in more detail. First, I'll briefly summarize the strong first quarter financial results I just alluded to. Second, I'll touch on the details of our most recent filing at Houston Electric related to our resiliency investments, including the potential for incremental CapEx. And lastly, I'll provide an update on where we stand with respect to our regulatory calendar including an overview of our pending rate cases and an important update on the settlement of our Texas Gas rate case, where we are hopeful for an eventual constructive outcome for our stakeholders. First, turning to our financial results for the first quarter. This morning, we announced non-GAAP EPS of $0.55 for the first quarter, which represents over one-third of our full year non-GAAP earnings guidance at the midpoint. As a reminder, our full year 2024 non-GAAP EPS guidance range of $1.61 to $1.63 represents 8% growth at the midpoint from our 2023 actual results of $1.50 per share and reflects our continued focus delivering value for our investors each and every year. Beyond 2024, we are reaffirming our guidance where we expect to grow non-GAAP EPS at the mid- to high end of our 6% to 8% range annually through 2030 as well as targeting dividend per share growth, in line with earnings per share growth over that same period of time. Chris will provide additional details regarding our financial results and earnings guidance shortly. Now I'll turn to the recent announcement we made regarding Houston Electric's resiliency plan filing. There's been a tremendous amount of collaboration by the public and private sector to align our focus on great resiliency across the state of Texas. I want to applaud the state for its continued support for providing additional tools to help improve resiliency of the electric grid, all of which serves to support the continued economic growth here in Texas. This legislation is a recognition of investments needed to strengthen the resiliency of the grid for the increasing risk of disruptive, extreme weather-related or security-related events while at the same time accommodating little growth across Texas. Through these filings, we anticipate achieving a faster pace of investments to support higher levels of resiliency for our customers while also utilizing a recovery mechanism that is expected to enable smoother and more efficient recovery of certain distribution-related costs for the benefit of our customers and our investors. Our focus on delivering a more resilient grid that serves approximately 2.8 million metered customers across the Greater Houston area has been underway for some time. The sequence of our work portfolio began with enhancing our electric transmission system and related substations, which comprised the backbone of our electric grid. This work included upgrading our transmission structures to better withstand extreme winds, elevating our substations to mitigate flood risk, and converting our older 69 kV transmission lines to a more robust 138 kV standard. We will continue this work on the backbone of our system and when the first three-year cycle proposed in this filing is complete in 2027, we believe we will have finished the vast majority of work associated with these programs. With that series of measures well underway, we're now complementing these program elements by expanding our targeted investments to improve outcomes closer to the customer. Our work articulated in our resiliency filing has 24 individual resiliency measures that are focused on advancing the overall resiliency of our system. The three-year plan is expected to significantly improve customer outcomes from the most severe system events associated with extreme wind, flood, temperature changes, and wildfires. Additionally, measures are being undertaken to bolster physical and cybersecurity. Examples of some of the solutions deployed include composite poles, trip saver devices, and intelligent grid switching automation technology. All of these are proven to help the system respond more favorably in extreme conditions, resulting in a reduced number of sustained interruptions that our customers experience. In fact, we've steadily deployed similar system automation in recent years, saving our customers over 300 million minutes of interruptions over the last five years. With the investments included in our resiliency plan filing, we could more than triple that figure over the next few years. In aggregate, our filing includes a range of investments of approximately $2.2 billion to $2.7 billion over the three-year period of 2025 to 2027. The high end of our filing, if approved, would increase our total capital expenditures from $44.5 billion to $45 billion over our 10-year plan ended in 2030. Consistent with how we have historically incorporated incremental investment opportunities in our base plan, the $500 million of additional capital will be formally included in our capital investment plan when we believe we can efficiently execute, finance, and recover these investments. We will also align our execution with the feedback and final resolution of the resiliency plan proceeding, which we anticipate will be towards the end of this year. While we have factored the majority of this resiliency investment within our updated CapEx and financing plans discussed last quarter, Chris will describe thoughts on efficiently funding the incremental $500 million of capital investment opportunity including pursuing various state and federal incentives. We are excited to work with the commission and other stakeholders to get feedback on the plan we proposed and, most importantly, executing this work to create a more resilient electric grid for our customers. I now want to turn to an update on the broader regulatory calendar. I'll cover these sequentially from the dates filed, starting with a Texas Gas rate case, where we have recently announced an all-party settlement. Although this settlement is still subject to railroad commission approval, we believe the settlement agreement reached with parties is a constructive outcome for our customers and all other stakeholders. In its current form, pending approval, the case will result in an annual revenue requirement increase of approximately $5 million, which results in an average increase of well under one-tenth of one percent for our Houston area residential customers. This very modest customer bill increase is a great illustration of the power of organic growth, coupled with our continued focus on reducing O&M across our businesses. The Texas Gas rate case filing included nearly $500 million of new capital investments and an increase to its authorized cost of capital that I'll briefly touch on in a moment, all while resulting in a very modest increase for our customers. Since the last rate case, we have invested a total of $1.4 billion in CapEx to continue to improve system safety and reliability for our customers. These investments have translated to more than 1,800 miles of pipe replacement and more than 300,000 advanced meter upgrades, all helping to modernize our gas network. As I just mentioned, our $5 million settled revenue requirement proposal includes an increase to our authorized capital structure and return on equity. The proposed settlement includes an authorized equity ratio of approximately 61% and an authorized return on equity of 9.8% across our entire Texas gas jurisdiction. In comparison, we are currently authorized on average for a 55.5% equity layer and a 9.64% return on equity across the four historic divisions. Increasing both our authorized equity ratio and our authorized return on equity is vital to the Texas Gas business as well as our other regulated businesses as we continue to compete for capital to make critical investments for our customers. In addition to the minimal impact to our customer bills, the settlement combines our four historic Texas gas jurisdictions into one jurisdiction for future capital recovery mechanisms, which will benefit all stakeholders through reduced administrative burden and the ability to spread future investments over a broader growing customer base. We appreciate the effort of various parties involved in the rate case to this point and expect railroad commission consideration of the settlement this summer. Moving to the filed Minnesota Gas rate case. As a reminder, we filed our rate case on November 1st of last year, with a requested revenue increase of approximately $85 million and $52 million for 2024 and 2025, respectively. As discussed on the last call, the interim rates for 2024 were approved in mid-December and went into effect on January 1st of this year. The commission will consider interim rates for 2025 toward the end of this year, depending on how far along we are in the case. At this stage, we anticipate hearings to occur in the middle of December this year. Ahead of those hearings, we intend to engage parties to the case in settlement discussions. As you may recall, we have settled our previous three rate cases at our Minnesota Gas jurisdiction. Now turning to the Indiana electric rate case, which we filed in December of last year with a requested revenue requirement of $190 million. As we've discussed previously, much of this revenue requirement increase is associated with our investments in connection with our electric generation transition plan as we move away from coal to more efficient and cost-effective fuel types such as renewables and natural gas. We have slightly delayed the start of the hearings in this case to determine if a settlement is possible with parties. Absent a settlement, we would expect a final decision in this case in the fourth quarter of this year. And finally, I'll touch on our largest jurisdiction, Houston Electric. As many of you saw, we filed our rate case last month with a requested revenue requirement increase of 2.6%, which is approximately $60 million. This revenue requirement increase results in a relatively nominal residential customer charge increase of about $1.25 per month or less than 1%. This revenue requirement increase is premised on the filing seeking an authorized equity ratio of approximately 45% and an authorized return on equity of 10.4%. As a reminder, we've been funding the Houston Electric business with a 45% equity ratio, as we believe this is the minimum amount of equity with which this business should be capitalized even though we are currently authorized at 42.5%. The modest revenue requirement request truly exemplifies the strong advantage we have here at CenterPoint, as it's driven by one, our relentless focus on reducing O&M 1% to 2% per year on average; two, prior securitization charges rolling off the bill in October of this year; and three, the nearly unparalleled growth at Houston Electric and surrounding areas experienced each and every year. To put these combined factors into perspective, since our last rate case in 2019, Houston Electric's rate base has nearly doubled, while the average residential charges were nearly the same amount at the beginning of 2024 as they were all the way back in 2014. As a management team, we are acutely aware of the advantage we have to serve a growing economy like Houston, but we also understand the tremendous responsibility that a company holds. We are tasked with serving and supporting the dynamic growth of Houston's vibrant and diverse population. One recent tangible example of Houston's continued expansion can be seen from the nearly $6 billion in Department of Energy grants awarded a little over a month ago. Nearly one-third of these grants were ordered for projects in the Greater Houston area. If completed, we believe these projects associated with these grants could contribute well over 500 megawatts alone in new load in the Houston Electric service territory. And this is just one of many examples of the explosive load growth potential in this region. We look forward to working with our stakeholders as we continue to support this incredible growth story here in Houston. Before moving on, I want to briefly mention that we have one other rate case that we will be filing in 2024 related to our Ohio gas business. We anticipate filing this rate case in August of this year, and we'll provide more details as we get closer to the filing. We look forward to continuing to work with all of our stakeholders to reach constructive resolutions to all of our rate cases. We believe we are well positioned in all of our filings as we've made prudent investments on behalf of our customers and have made concerted efforts to reduce controllable O&M for the benefit of the communities we serve. Those are all of my updates for now. With a strong start here in 2024, we have laid the foundation to once again meet or exceed expectations for the benefit of all of our stakeholders. I'm proud of the early milestones already achieved in 2024 and look forward to being able to provide progress on our cases and how the resiliency plan filing and other opportunities may influence incremental investments in the future. I am confident in our path forward and our ability to continue as we reaffirm our commitment to our proven strategy into our non-GAAP EPS guidance target range of 8% in 2024 and at the mid- to high end of our 6% to 8% non-GAAP EPS guidance target range annually from 2025 through 2030. And as we've mentioned in recent quarters, we'll be prepared to update a new 10-year plan through an Analyst Day following the conclusion of our rate cases next year.

Thanks, Jason. Today, I'd like to cover three areas of focus. First, the details of our strong first quarter financial results. Second, I'll touch on our capital deployment progress this quarter and the potential for incremental capital related to Houston Electric system resiliency plan filing. And finally, I'll provide an update on where we stand with respect to our current financing plan and credit metrics. Let's start with the financial results shown on Slide 6. As Jason highlighted earlier, the first quarter of 2024 was yet another strong quarter of financial performance here at CenterPoint. On a GAAP EPS basis, we reported $0.55 for the first quarter of 2024. On a non-GAAP basis, we also reported $0.55 for the first quarter of 2024 compared to $0.50 in the first quarter of 2023. With these first quarter results, we have now earned over one-third of our full year 2024 non-GAAP earnings guidance at the midpoint. Diving into more detail of the earnings drivers for the quarter, growth in rate recovery contributed $0.09, which was primarily driven by the ongoing recovery from various interim mechanisms for which the customer rates were updated last year. In addition to those capital recovery mechanisms, interim rates in our Minnesota gas business went into effect on January 1st of this year. These rates reflect a revenue requirement increase of approximately $69 million, which when combined with our requested 2025 revenue increase, represent an approximately 5% average bill increase over the next 2 years. In addition, we continue to see strong organic growth in the Houston area, extending the long-term trend of 1% to 2% average annual customer growth, which continues to benefit both customers and investors. A great illustration of this continued growth can be found in the impressive job creation we've observed in Houston over the last year. According to the U.S. Department of Labor, the Houston Metro area added the second most jobs in the entire U.S. from February of last year to February 2024. Weather and usage were $0.02 favorable when compared to the same quarter of 2023. And despite the mild weather, the $0.02 favorable variance was largely driven by more favorable weather when compared to an extremely mild Q1 of 2023, partially offsetting the favorable items from rate recovery and usage were increases in O&M and interest expense. O&M was $0.02 unfavorable for the first quarter. This unfavorable variance was driven by additional work pulled forward in the first quarter of this year as well as storm response recovery efforts. However, we remain on track to achieve our target of reducing O&M 1% to 2% per year on average through 2030. Interest expense was $0.04 unfavorable, primarily driven by the new debt issuances since the first quarter of last year at a higher relative cost of debt. However, the impact of this increase was partially offset by the redemption of all outstanding shares of the Series A preferred for $800 million last September, which eliminated the approximately $12 million quarterly dividend. I'll discuss our long-term financing plan and balance sheet in greater detail later. Next, I'll touch on our capital execution thus far in 2024 and the state of our 10-year capital plan target, which you can see here on Slide 7. In short, we are right on plan. The first quarter of 2024 represented yet another quarter of solid capital investment execution as we invested $800 million for the benefit of our customers and communities. This represents a little over 20% of our 2024 capital expenditure target of $3.7 billion. Our approach to incorporating customer-driven capital has resulted in a capital investment plan of $44.5 billion and potentially more, which represents an increase of over 10% since our 2021 Analyst Day. This increased capital plan is expected to drive a nearly 10% rate base CAGR through 2030, which supports strong earnings growth through the remainder of the decade. We continue to estimate our growth in customer delivery charges at Houston Electric to be equal to or less than the historical inflation rate of 2% through 2030 with this capital investment profile. We have confidence in our ability to achieve this, given the size of Houston Electric's customer base and the underlying tremendous organic growth, securitization charges that are rolling off the bill later this year, and our plan to reduce O&M, as I referenced. In addition to enhancing the customer experience through our capital investments, we remain focused on affordability, both from an O&M and ongoing targeted capital perspective. A great illustration as to why we are confident that we can continue to prudently invest while keeping customer charges modest can be found by looking at our utility delivery charge increases over the last 10 years. Since 2014, Houston Electric's average monthly delivery charges have stayed essentially flat. That's a truly remarkable outcome for our customers. And as Jason mentioned, our capital has potential for further incremental revisions driven by our resiliency filing in Texas. The system resiliency plan filing could drive incremental customer-driven opportunities of up to $500 million at the high end range of our proposed investment. I want to reiterate that over the past couple of years, we have been increasing our capital investment plan through 2030 as we identify incremental investment opportunities that we believe we can efficiently execute, finance, and recover. Let's spend a moment on the potential for funding the incremental resiliency investment opportunities of approximately $500 million, which Jason mentioned. We are applying for various federal dollars through multiple avenues and have already applied for $100 million of grid applications through the Department of Energy Grid Resilience and Innovation Partnership funding opportunity, and that was submitted a little over a week ago. These funds, if approved, would primarily assist in providing a lower cost of borrowing for our resiliency initiatives around distribution circuit rebuilds and substation resiliency innovations. In addition, we will also seek other efficient funding opportunities through federal and state matching programs such as the DOE loan guarantee program. CenterPoint has three separate loan applications working through the process in various stages for over $2 billion in aggregate. While these are loan dollars, not grant dollars, the relative cost savings versus traditional debt can be substantial, around 100 basis points, representing meaningful savings for customers. As Jason alluded to, we are actively pursuing these avenues of funding as we believe these are incredibly valuable initiatives for customers. To the extent that we are not successful, our consistent growth capital investment rule of thumb holds, which is funding in line with our consolidated capital structure. Finally, to highlight the balance sheet and credit strength. As of the end of the first quarter, our calculated FFO to debt is 14.6%, based on our calculation aligning with Moody's methodology, as shown on Slide 20. On a full year 2024 basis, we still anticipate delivering on the 100 to 150 basis points cushion we continue to emphasize when applying Moody's methodology. As you can see on the slide, we've also included S&P's calculation on the slides this quarter and will continue to do so going forward. As the computations illustrate, we've adjusted our calculations for one-time items, mainly driven by Winter Storm Uri. We have had two years of one-time items related to the over $1 billion of extraordinary gas costs associated with that storm. We don't believe that this debt nor the eventual receipt of the proceeds and associated taxes were indicative of the fundamental credit health of the company and adjusted accordingly. For comparative purposes, you can see on the slide that we put our calculated 14% in the middle of the 18.5% FFO to debt that Moody's derived and the 11.2% calculation that S&P derived. To be clear, we see no need to change our current financing plans we shared with our rating agencies earlier this year to improve the outlook from S&P on our credit metrics. In addition, we've made good progress against the modest $250 million at-the-market or ATM equity program year-to-date. We have completed approximately 75% of our equity sales through today, leaving only around an expected $60 million of equity remaining to be issued this year. As a reminder, we continue to have slightly elevated parent debt to total debt as we are continuing to carry over $400 million of debt at the parent to support what we believe is the proper capitalization of the CEHE operating companies through rate cases. We plan to continue to carry that through the CEHE rate case supporting its approximately 45% equity layer today. On the solid footing of a strong first quarter, we continue to reaffirm our non-GAAP EPS target of 8% this year and the mid- to high end of 6% to 8% annually thereafter through 2030. This growth is supported by differentiating factors that we enjoy, including consistent customer organic growth, which has averaged 2% per year over the last 30 years in the Houston area, Texas' pro-business environment which continues to attract new investment, especially in the Gulf Coast region, and lastly, our relentless focus on O&M discipline. We believe these factors will allow us to sustainably grow for years to come. The last thing I want to mention is that we are making good progress related to the sale of our Louisiana and Mississippi Gas LDCs. We, along with the buyer, have now made all required regulatory filings including filings with the Louisiana and Mississippi Public Service Commission, and we look forward to working constructively with the commission to facilitate the approval proceedings. We still anticipate closing the sale late first quarter 2025 and it is anticipated to result in after-tax cash proceeds of approximately $1 billion, which equates to an earnings multiple of nearly 32x 2023 earnings. This will be a terrific outcome for all stakeholders.

Thank you, Chris. I look forward to continuing not only to execute on what I believe to be one of the most tangible long-term growth plans in the industry, but also enhancing it for the benefit of all of our stakeholders in both the near and long term.

Thank you, Jason. Operator, we're now ready for Q&A.

And the first question will come from Shahriar Pourreza with Guggenheim Partners.

It's Constantine standing in for Shahriar. I appreciate the updates during the call today, especially regarding the resiliency filing, which I noticed was mostly included in the fourth quarter update. As we consider the $500 million upside, how are you approaching it in terms of accretion compared to the 10% rate base growth? Are there any specific thresholds or additional details on the updates related to capital expenditures? Additionally, how do you plan to communicate any financing optimization around this?

Yes. Thanks, Constantine. Pretty comprehensive question there. Let me kind of start at the highest level. And I think there's three main points to this CapEx update. The first is we've got a great base plan, 10% rate base growth through the end of the decade. The second point I'd make is we've been spending significantly on resiliency because it's the right thing to do for our customers and case in point. We've increased our CapEx plans by over 10% since our 2021 Analyst Day, which was largely due to increased resiliency efforts. This is again spending that has already been incorporated in this plan. And importantly, I do think third, we have a significant amount of opportunities in front of us. Those take the form of continued resiliency investment, particularly on the distribution side. One of the things that I'm probably most excited about is the industrial electrification opportunity that we have here, particularly in the greater Houston area. Just as one quick example, there's about 10 gigawatts of hydrogen production in development to come online before 2030. That hydrogen production requires significant increases in electric transmission capacity, substation capacity, also carries with it significant jobs, which will help continue to drive residential loan growth. On the gas side of things, we continue to see significant opportunities for incremental CapEx, particularly around maybe local gas transmission pipeline capacity in the Greater Houston area. We're one of the few gas LDCs in the country that don't have localized gas transmission capacity, and I think it can help our customers mitigate the costs and severe weather events. The short of it is we've got a great base plan. We've been spending on resiliency, and we have significant increases in CapEx still in front of us. In terms of being accretive to the plan, we wouldn't spend it if it wasn't the right thing to do for customers, if it wasn't the right thing to do for shareholders, for all of our stakeholders. I think we've developed a track record of executing upon that. In terms of financing, maybe I'll turn it over to Chris to share some thoughts about funding any incremental CapEx from this point forward.

Sure. Happy to hit it, morning, Constantine. I think if you look at the larger incremental potential CapEx that Jason was just referencing, you should think about it as just the prior approach that we've referenced, which is continuing to incorporate that into our capital plan as we can execute it, finance it, and recover it. The way in which we would do it would largely be to fund it in line with our enterprise capital structure. As you look specifically at the roughly $500 million opportunity we referenced this morning around the resiliency filing, we did reference that we're going to go after some potential both federal and state-based loan and cost matching programs. But to the extent that we're not successful on those, again, the simple way to think about it is we'd be funding in line with the enterprise capital structure.

I appreciate that. And maybe a quick follow-up on that. You kind of highlighted the path on credit metrics and how are you thinking about options of refinancing needs on both floating rate exposure and kind of near-term maturities? And is there any optimization opportunities there with convertibles, hybrids, or any of these kind of federal loan programs to supplement?

Sure. Happy to touch on it. And I have to say, we're pleased with where we are today, reported 14.6% in terms of FFO to debt based on the Moody's calculation. We're consistently seeing good trajectory, both on the Moody's and S&P calculation. As we think about the different financing alternatives, it is certainly the case that we are already pursuing some DOE loan program dollars to the tune of just over $2 billion already. So those have already been filed. Really, that's just a cheaper alternative for better financing costs for customers. As we look at the financing plan throughout the year, certainly, we've got a few maturities coming up. We've hedged against a portion of the current offering that's probably closer here in front of us at the parent level. As you look at hybrid alternatives, I think you referenced there, that's certainly something that we're evaluating. You should assume, we like the profile there, but we are looking really at a couple of alternatives, both for some tax alternatives this year and some hybrid opportunities if they make sense. It's just my way of saying, Constantine, that we're always going to be pursuing the most efficient financing we can as we go forward.

Okay. So everything is on the table. And just a quick one on Jason's comments around demand growth that you mentioned and cost shift which has kind of become more of a prominent issue with the inflection in load that we are seeing. Do you see any issues in Texas or even Indiana, where you would need to adjust kind of cost allocation? And would those be addressed in the current rate case process or any kind of separate proceedings?

Constantine, I think it's a great question. Probably less of an issue directly in the service territories that we serve largely because the growth that we're seeing, both the potential for it up in Southwest Indiana as well as here in the Greater Houston area, is really driven by industrial load growth that comes with significant jobs. Much of the discussion over the last couple of quarters has been around data centers and AI growth; that's some of the toughest electric load growth to serve, right? Low margin doesn't necessarily come with the jobs and so it does put, to your point, sort of pressure more largely on cost allocation. I think here, again, we're a clear differentiator for CenterPoint. We serve load that is not only growing from a residential standpoint and an industrial standpoint, but it keeps that cost allocation issue less impactful than maybe some of the peers that have data center growth really driving their electric sales.

The next question will come from James Thalacker with BMO Capital Markets.

I just wanted to follow up on Constantine's question on the system resiliency filing. The plan is $2.2 billion to $2.7 billion, which I think is roughly almost double the $1.3 billion we've been spending over the last couple of years. But if I heard you correctly, the $500 million of incremental capital is kind of in line with the higher end of the filing. So if we kind of run this forward, if the PUCT ultimately decides to approve spending that's, say, near the bottom of this or even below the range, could you talk a little bit about where you see other investment opportunities and how would this change your financing plan, if at all?

Yes. Maybe a couple of quick points on that, Jim. So the 2.2%, the low end of the range, is consistent with $44.5 billion. The upper end of the resiliency filing and the incremental $500 million would put us to $45 billion overall through 2030. I think that there is pretty strong alignment across the state here in Texas around investments to keep the great resilience that can help the economic growth that we're experiencing in Texas. I also think it's an important part of this filing, and what may be different than some of the historical resiliency spend is as part of the filing, we have to prove the benefits of the incremental resiliency mitigation measures exceed the cost. So part of this filing really demonstrates that on a net basis, it is still in the customer's best interest for us to make these investments. I feel like there's going to be strong support for our filing and the other filings of the transmission and distribution utilities. That being said, to your point, if there is concern around the proposed mitigation measures that we have in our filing, as a quick reminder, this is about 15% of our total CapEx plan. And as I alluded to in my answer to Constantine, I think we have plenty of incremental CapEx opportunities outside of this, whether they be on the gas side of the business — I talked about local transmission pipeline there — potential to accelerate our next-generation smart meter deployment and then on the electric side. I just cannot reiterate enough the opportunity with this exponential load growth driven by industrial electrification and electrification of commercial fleets. So I think that there are an abundant set of opportunities for incremental CapEx.

Sure, just to build on that, again, as we look at the base plan at the low end of the resiliency filing, that would just support the $44.5 billion with the ongoing very modest ATM program that we've got through 2030. And again, as we look beyond that for some of these incremental opportunities, it really would be funded in line with the existing capital structure.

The next question will come from Steven Fleishman with Wolfe Research.

Just on the Indiana update that you mentioned on the settlement or delayed the hearing. Just maybe a little more color on how long it's delayed and just the likelihood of an agreement?

Steve, thanks for the question. We pushed the start of the hearing by a day as we continue to explore the potential here for settlement. It's hard to handicap kind of expectations. I think we're working hard with stakeholders to find what we believe would be a constructive path forward. As a quick reminder in this case, a lot of the CapEx that's included in the Indiana electric filing has been in front of the IURC and our stakeholders in previous forums, whether that's the cost of the coal transition or the transmission and distribution investments that we are making to improve reliability and resiliency in that area. And so a lot of the issues of the case have kind of been seen by stakeholders in a number of different forms. We continue to try to work constructively towards the settlement, and we'll update you as we have more information.

Great. And then just on the kind of S&P negative outlook, I just want to clarify. Just — is your — I mean, I think these things usually take like a year or so to go through. But just are you — your intention is just these metrics will get better as the Uri impact goes away and that should be sufficient — to meet the targets there? Is that how to think about it?

Steve, that's accurate. Really, what S&P was looking at was the past. As they evaluated and arrived at that outcome, our general assumption is that roughly year-long period. As we look at the plan going forward, you're going to see naturally that Uri impact roll off, and we'll see ourselves really as we see just in 2024, looking at the year, you're going to see us at Moody's, continuing to target that 100 to 150 basis points cushion, that won't change. And additionally, you're going to see us grow into a greater cushion at S&P as we walk into the subsequent year. So we're comfortable with the base financial plan and what it informed for the years ahead.

I think — Steve, if I could add to that. Obviously, as Chris said, we're comfortable. But I think it's important just to highlight the core difference in methodology here because it is transitory in nature. The way that issue I'd add is we've received securitization proceeds from significant cash inflow. We have to pay taxes on that, cash outflow. S&P's methodology excludes that significant inflow but includes the associated cash outflow, right? That's sort of a transitory effect. As Chris said, as we look forward, we feel comfortable about the trajectory that we're on. And so just a very sort of idiosyncratic impact from their calculation.

Okay. And then last question, just on Texas, and I know you kind of answered this, and the hydrogen hub sounds exciting. That just feels like that just takes time, but there's just so many other dynamic economic things, whether it's data centers or other industrial. Just could you just give maybe a little more flavor on CenterPoint's ability to get to opportunity set related to the growth in Texas?

Yes. Thanks, Steve. What I would say is, I don't think you can find a more dynamic setting anywhere in the country, particularly on electric sales growth, and you can't hear. Residential load growth continues to be best-in-class. We continue to see the industrial load growth that I mentioned, transportation, electric load growth. I think that's really reflective in our sales numbers for the first quarter. On a quarter-over-quarter basis, when we adjust for weather, sales are up 8% over the first quarter last year, driven by strong residential, commercial, and large industrial growth. There's electrification at one of our nation's largest ports here in Houston. We continue to see incremental growth in the petrochemical complex, which is becoming one of the dominant areas in the country for life sciences. What I would say is basically the growth that you see in any one sector, including data centers around the country, we see it in all the sectors here in the Greater Houston area. And so I see it showing up in the numbers this quarter, and I see it driving continued growth at least through the remainder of the decade, if not well beyond.

The next question comes from Nick Campanella with Barclays.

A lot of things have been answered. But I guess, just on your comments about pursuing state and federal incentives for this plan, it sounds like some of this is grant, but some of it's also DOE loans. But can you just kind of talk — I think it's very helpful from a financing benefit and from a customer affordability benefit. But how do we kind of think about the contribution from EPS if you were to pursue state programs rather than kind of traditional financing?

I think about it, is just to be clear, very small. We're really talking about a component here, where we're looking at the federal program from the loan standpoint, as you mentioned, as well as the specificity that we provided around the GRIP program that's there, which has already been filed. We've also got some Texas Department of Energy, emergency management funds that we've also asked for on the state level. Those would be in the form of grants — again, just a situation where we can get better outcomes in total for customers.

Yes. Thanks, Chris. What we've consistently said, Nick, is that we'll come back after these rate cases next year and provide a new 10-year plan well into the mid-2030s to reflect in our continued confidence on long-term growth. What I want to highlight, though, are there have been a handful of things that we've been able to accomplish since we rolled out that guidance, the long-term EPS guidance, which is again, 8% growth here in 2024 and then the mid- to high end of the 6% to 8% range through 2030. What I would say is we certainly have more tailwinds than we have headwinds. From a tailwind standpoint, we had some success in the legislative session helping reduce some regulatory lag in key jurisdictions. As I mentioned previously, we've increased CapEx since we've issued that guidance by more than 10%. The third thing that I'd point to is last quarter when we announced the sale of Louisiana, Mississippi and the recycling of that capital that's moving what is nearly $800 million of rate base and $1 billion of CapEx into jurisdictions that earn a higher return. I'd be remiss to say that obviously, interest rates are a little higher, and we've announced a modest equity program. But suffice it to say, the tailwinds here exceed the headwinds. And as we get to the other side of these rate cases, we'll be in a better position to give a kind of a long-term comprehensive update to the earnings guidance for the company.

That's great. And I guess just kind of a follow-up on high grading the plan here. You mentioned in your prepared remarks the higher for longer interest rate environment. And expectations, I think, across the market have certainly changed from January to today on the trajectory of rates. Can you just kind of remind us on — not necessarily what you're assuming, if you don't want to comment, but just how the plan is kind of provisioned into the back half of this year and then going forward, if we do kind of continue to be higher for longer here?

Sure thing, Nick. I'll just say, as we were building the plan heading into 2023, I don't know that any of us really could have appropriately predicted the impact there, but I think you saw the company execute well and overcome that pressure. As we look into 2024 walking into the year, we definitely plan conservatively there. It's hard for me to be too specific, but just know that if you look across our plant, I hope that you've seen we're consistently bringing forward conservatism so that there are no surprises in the end. I think it's the same thing on our capital programs, right? As we folded in CapEx over time, we're making sure we're doing so conservatively as we see the opportunity to execute it, to finance it, and recover it. So it really holds on the same side in terms of higher for longer. We did walk into this year, assuming this was going to be the case.

The next question comes from Jeremy Tonet with JP Morgan Securities.

Just wondering, going back to the SRP here, if you could frame overall wildfire mitigation needs relative to the $140 million in the SRP filing. And looking more broadly, how might SRP capital competition evolve over time from this first application? And what does the SRP investment runway look like at this point?

Yes. Thanks for the comprehensive question. Look, from a wildfire standpoint, as you highlighted, $140 million is a significant driver of the overall $2.2 billion to $2.7 billion plan. I think it's important to understand why 60% of our system is currently underground. As I know you know, we have high relative humidity here. So all things being equal, we have significantly lower cloud risk than our peers. That being said, obviously, we haven't sat on our hands. We've been addressing this risk with changes in operations, shutting of automatic or closers, enhanced inspections during periods of higher wildfire risks. But this plan basically addresses about 1% of overhead miles that are in higher fire risk areas. And so this is probably under the current set of conditions sufficient to mitigate our wildfire risk. Now obviously, we're going to continue to look at weather patterns, trap patterns to see how that evolves over time. But I don't really see the wildfire mitigation being a significant long-term driver of CapEx; where I do see further opportunity beyond this plan is really on the distribution side. As I said in my prepared remarks, we have been really focused on hardening the backbone of our system, the electric transmission and the substation flood control efforts. We will largely be through those programs by the end of this first cycle. The real opportunities, as I mentioned, are on the distribution side going forward and really creating a more resilient, reliable overhead electric system for our customers. So more to come on that front. We're happy to make this first filing and I see the opportunity for continued CapEx growth as we make subsequent filings in the future.

Got it. Makes sense. If there's one thing we know, it's that Houston is humid, I'll leave it there.

Operator, I think we have time for one more question, please.

And the last question will come from Durgesh Chopra with Evercore.

I appreciate it. I'll ask two very quick questions, and I'll ask them together. Just first, can you help us sort of pan out a timeline for the resiliency plan approval, what to look for there? And then second, Jason, in your comments, you mentioned regulatory lag as a tailwind opportunity. Can you just quickly remind us what your earned regulated ROEs are as of the end of the first quarter?

Yes. Thanks, Durgesh, for the questions. On the first side, the timeline for approval of the resiliency plan, I think the legislation calls for about a six-month approval period. What I will say is this is the first of its kind legislation. So we'll have to kind of get in the middle, but I'm sure there will be a number of parties sort of intervening, but I would look towards the tail end of this year, calendar year, to get a final decision on the resiliency plan that we file. On the question on regulatory lag, we've historically seen particularly here in the Texas business, about 150 basis points on average regulatory lag. What I would say is we sort of meaningfully reduce that amount, but it's an odd time to really be calculating kind of what regulatory lag is at the end of the first quarter just because we're in the middle of our rate case filing. As a result, we don't have access to the full complement of capital recovery mechanisms that we will have sort of on the other side of this rate case. Just know that we've taken steps to begin to reduce that historical regulatory lag, and I think we'll be in place that gives a more normalized view of that on the other side of the rate case.

Okay. Operator, with that, that concludes our call for the quarter. Thanks, everyone, for joining.

This concludes CenterPoint Energy First Quarter 2024 Earnings Conference Call. Thank you for your participation. Have a great day.