Good morning. My name is Joanne, and I will be your conference operator today. I would like to welcome everyone to Duke Energy's Second Quarter 2022 Earnings Call. I would now like to introduce Jack Sullivan, Vice President of Investor Relations. You may begin your conference.

Well, thank you, Joanne, and good morning, everyone. Welcome to Duke Energy's second quarter 2022 earnings review and business update. Leading our call today is Lynn Good, Chair, President and CEO along with Steve Young, Executive Vice President and CFO. Today's discussion will include the use of non-GAAP financial measures and forward-looking information within the meaning of securities laws. Actual results may be different than forward-looking statements, and those factors are outlined herein and disclosed in Duke Energy's SEC filings. The appendix of today's presentation includes supplemental information and disclosures, along with a reconciliation of non-GAAP financial measures. So with that, let's turn the call over to Lynn.

Jack, thank you, and good morning, everyone. Today, we announced adjusted earnings per share of $1.14 for the quarter, delivering strong results driven by continued growth in electric volumes and favorable weather. We remain on track to deliver within our original guidance range and are reaffirming our full year guidance range of $5.30 to $5.60 with a midpoint of $5.45. We're also reaffirming our long term earnings growth rate of 5% to 7% through 2026, up a midpoint of our original 2021 guidance range. Turning to Slide 5, I'd like to offer context on our announcement this morning to perform a strategic review of our Commercial Renewables business, which has been an integral part of Duke Energy's renewable energy platform over the past 15 years. Since 2007, we've built a portfolio of approximately 5,000 megawatts of Commercial wind, solar and battery projects across the US and established a robust development pipeline. While it represents less than 5% of Duke Energy's earnings, we're proud of the fact that it's among the top 10 largest US renewable companies. But as we look forward to the remainder of this decade and beyond, we have line of sight to significant renewable, grid, and other investment opportunities within our faster growing regulated operations as we execute the industry's largest clean energy transition. We believe this is the appropriate time to review the ongoing strategic fit of commercial operations as we prepare for an acceleration in capital spending within our regulated businesses. Our strategic review will be thorough yet timely. We expect to conclude the review later this year or early next and we'll update you along the way. Today, our regulated utility operations represent over 95% of Duke Energy's earnings profile, and have long been the growth engine of our company. We operate premier regulated franchises in growing service territories with constructive regulatory jurisdictions and robust customer-focused investment opportunities. Our regulated businesses are strongly positioned to grow within our earnings guidance range of 5% to 7%, providing consistent earnings and cash flow and supporting our attractive dividend. Turning to Slide 6, let me share an overview of the proposed carbon plan we filed with the North Carolina Utilities Commission on May 16th. We've already made significant progress in the Carolinas and this plan continues our transition to lower carbon resources while maintaining affordability and reliability. Our plan contains four portfolios that achieve the interim 70% carbon reduction target and carbon neutrality by 2050. Each portfolio presents a roadmap to lower emissions through an orderly retirement of coal, replacing it with a diverse set of carbon-free and dispatchable resources. The primary difference among the portfolios relates to the pace of deployment and availability of replacement resources. As part of the filing, we've requested the approval of a defined set of near-term activities to replacement resources needed regardless of the path selected. This includes new solar, battery storage, onshore wind and hydrogen-capable natural gas. We also requested to begin early development of long lead time zero carbon resources, which are needed in the early 2030s, including offshore wind, small modular nuclear, and pumped storage. These activities help us preserve option value for a broader set of resources. The results of these development activities will be filed in 2024 with an updated carbon plan, providing the commission with more information as they consider resource selections required to meet carbon reduction targets. We look forward to continued engagement with stakeholders as the NCUC finalizes the carbon plan by year end. Our proposed plan has also been shared with the Public Service Commission of South Carolina, and the final plan will be foundational to the next comprehensive South Carolina IRP in 2023. Moving to Slide 7. We have a robust regulatory and legislative plan that is underway in the vibrant economies we serve. Our thriving jurisdictions were highlighted recently in CNBC's Annual List of America's top states for business, which ranked five of the states we serve in the top 15, including North Carolina, which ranked number one for the first time. I'd like to touch on the progress we're making in each of our jurisdictions to continue providing affordable and reliable energy for our customers. In North Carolina, we expect to file a DEP rate case in the fourth quarter, and likely a DEC rate case early next year. Both cases will introduce the modernized rate making tools approved in HB 951, including multiyear rate plans, performance incentive measures and residential decoupling. The NCUC hosted a T&D Technical Conference in late July. DEP presented to the commission and stakeholders and discussed key transmission and distribution investments that enhanced grid resiliency and flexibility, and expanded the use of renewables and distributed energy resources on our system. In South Carolina, Storm Securitization legislation was signed into law in June. This creates a valuable tool to recover prior and future storm restoration costs while saving customers millions of dollars compared to traditional recovery mechanisms. We expect to file an initial application with the Public Service Commission of South Carolina in August, and expect to issue Store Bonds in late 2023 or early 2024. Earlier this week, we gave notice of an upcoming DEP South Carolina rate case. Our first case to be filed in South Carolina since 2018. We expect to file the case in September and anticipate rates to go into effect in the first half of 2023. In Florida, we have placed three out of four solar projects planned for 2022 online, and we remain on track to install a total of 300 megawatts of solar by the end of this year. Shifting to Indiana, the commission approved our $2 billion TDSIC plan, which includes grid modernization investments and improved reliability and resiliency. We will begin executing in 2023 following the completion of our initial TDSIC plan this year. In May, we received a robust response to our request for proposals for generation resources in Indiana. We're evaluating the proposals now and we'll incorporate the results into our CPCN filings later this year. And turning to Ohio, our electric distribution rate case continues to move forward and the hearing is scheduled to begin in mid-September. In June, we filed an Ohio gas rate case, which is our first detailed review of gas base rates since 2012. Moving to Slide 8, I'd like to touch on the Inflation Reduction Act that was announced this week. Duke Energy has always advocated for policies aligned with our mission to deliver affordable, reliable, and increasingly clean energy to our customers. And the clean energy tax provisions of this draft legislation do just that. If passed, the clean energy tax credits will lower our cost of service, which in turn reduces the cost to customers of our energy transition. Furthermore, the transferability provisions can help direct the intended value of these credits to our customers more efficiently. The bill also recognizes the important role that existing nuclear plays with nuclear PTCs awarded to operators of highly efficient nuclear stations. Duke Energy operates the largest regulated nuclear fleet in the US with some of the highest efficiency measures. As such, we would likely qualify for significant nuclear production tax credits, also to the benefit of our customers in the Carolinas. We're pleased to see the strong support of the clean energy provisions in this draft legislation and we look forward to tracking the bill's progress, and we'll keep you informed along the way. In closing, we have a clear path ahead of us as we execute our energy transition and I'm confident in our ability to continue to deliver value to customers and shareholders. Before I hand the call over to Steve, I'd like to comment on some important organizational changes we announced earlier this week. Effective September 1st, Brian Savoy, currently Executive Vice President and Chief Strategy and Commercial Officer, will become Executive Vice President and Chief Financial Officer, succeeding Steve. Brian's deep financial acumen and broad business experience have prepared him well for this role, allowing for a seamless transition. Steve will become Executive Vice President and Chief Commercial Officer. One of Steve's main priorities will be to oversee the strategic review of our commercial renewables portfolio that we announced this morning. Steve is an exceptional leader and during his 40-year career, has played an instrumental role in transforming Duke Energy into the strong company it is today. He has been an extraordinary partner of mine and a trusted counselor and his commitment to our company, customers, communities, and employees is deeply appreciated and recognized by all of our stakeholders. Brian also shares this commitment and will play a critical role in advancing our strategy while delivering sustainable value to our customers and shareholders. The depth of leadership at this company is impressive; I would say it's second to none. And these changes will further position us for success as we execute the industry's largest clean energy transition. And so with that, thanks to Steve, and let me turn the call over to him.

Thanks, Lynn, and good morning, everyone. I'll start by discussing our quarterly results and highlighting some key differences from the previous year. We reported an adjusted earnings per share of $1.14, compared to $0.96 and $1.15 last year for reported and adjusted earnings per share, respectively. For more details, please refer to our non-GAAP reconciliation in the earnings release materials. In the Electric Utilities & Infrastructure segment, we saw an increase of $0.03 compared to the previous year due to favorable weather, higher retail volumes, and rate increases. However, higher operational and maintenance costs, including timing of outages versus last year, and increased depreciation on our growing investment base partially offset these gains. For Gas Utilities and Infrastructure, results were down $0.02 due to the timing of operational and maintenance costs. Our Commercial business remained flat, as higher wind resources balanced out a decrease in projects placed in service. The Other segment reported a $0.02 decrease, mainly due to lower market returns on benefit trusts. Now, turning to electric volumes and economic trends, we continue to see strong volume growth, with second-quarter results reflecting a year-over-year increase of approximately 1.5%. Over a rolling 12-month period, volumes are up 2.6% and slightly surpass 2019 volumes, the last full year before the pandemic. Although we anticipate a moderation in our rolling 12-month volume growth rate, we now project 2022 load growth to be between 1.5% to 2%, surpassing our original guidance of 1.5%. In terms of customer classes, residential volumes rose by 1.2%, supported by a 1.8% increase in customer growth and ongoing remote and hybrid work arrangements for many office employees. Our Commercial and Industrial classes both recorded a 1.7% increase, benefitting from the return to normal business hours and a rebound in load from existing customers in addition to new customers drawn to our service areas. We are encouraged by this volume recovery, which reflects the strong economies we serve. As for timing considerations in the second half of the year, we expect third-quarter adjusted earnings per share to be slightly lower than in 2021 due to favorable weather last year, higher interest expenses, tax timing issues, and reduced contributions from Commercial Renewables. This will be partially countered by increased revenues from rate cases, riders, and wholesale operations. In the fourth quarter, we anticipate positive impacts from several factors, including normal weather, higher load, reduced operational and maintenance costs, and increased revenue from rate cases and riders. We aim to hold operational and maintenance costs flat for the year, excluding our first-quarter storm costs. I want to mention several initiatives we're implementing to respond to rising interest rates and inflation. To tackle these economic challenges, we are targeting $200 million in cost mitigation across the company starting in 2023. Our focus will be on employee-driven productivity and cost-savings initiatives, digital automation, leveraging our scale to reduce supply chain costs, tax optimization, and minimizing regulatory lag through capital expenditure timing. We believe these initiatives will be sustainable, akin to our efforts in 2020 in response to COVID. In the long run, these efforts will benefit our customers and facilitate our energy transition, as reducing operational and maintenance costs will lessen future rate impacts. For every dollar of operational cost we cut, we can invest about $7 of capital without raising costs for customers. We are making progress on each of these initiatives, and we will share further details as we advance. Before we open the floor for questions, let me conclude by noting that we have made a robust start in the first half of the year and are well-positioned to meet our 2022 adjusted earnings per share guidance range of $5.30 to $5.60, with a midpoint of $5.45. This marks our 96th consecutive year of paying a quarterly cash dividend and the 16th consecutive annual increase. As Lynn mentioned earlier, we are conducting a strategic review of our Commercial Renewables business, and we will provide updates on any decisions and their potential impact on our future financial guidance. Now, let's open the line for your questions.

Your first question comes from the line of Shar Pourreza with Guggenheim Partners.

So Lynn, starting on sort of the Commercial news, there's a lot of renewable assets out there for sale right now. I guess, what prompted the process, why now, did you get unsolicited offers? And maybe just fine-tune any sense on timing as we're thinking about presentation packages being sent out and data rooms being set up?

And you know Shar, what I would say on timing is we have been looking at this for some time. I think you have known us to review our portfolio and make strategic decisions about the future a number of times in our history, and this is no exception to that. As we look at the pipeline of regulated investment that is in front of us, over the next many years, we believe this is the right time to step back and really look at the strategic fit of the Commercial business, because there's going to be competition for capital at Duke. And we think we operate a very strong Commercial business that can grow and grow well in the future, and we want to take the opportunity to evaluate if there's a better strategic owner at this moment. And as I think about other portfolios in the market, I believe there will be a robust market for these assets, given that it's not only operating assets but also a development pipeline, a platform, and a team of very capable developers and operators that I think have the potential to add a great deal of value. If I focus just a moment on the pipeline, we have 1 gig to 1.5 gigs of near-term projects that could be quite valuable in 2024, 2025, in addition to what we had planned for 2023. So when we think about our timing for execution, we commented that we'll be completing the strategic review by the end of '22 into early '23. We will move quickly to get information into the market. There is interest in these types of assets from a broad range of buyers and would hope, Shar, to have more to share as we think about third quarter EEI and then moving into February of next year.

And just Lynn, from a numbers perspective, I know you've highlighted that there could be a time in the future where you could need some equity to fund the incremental regulated capital growth opportunities that are out there for you. Could this potential sale, I guess, provide enough balance sheet capacity and threshold improvements where future equity needs are off the table even as capital growth opportunities accelerate? And just remind us what the basis and tax leakage is on the assets.

And as we look at our potential to accelerate and what we believe the potential from this transaction represents, we do think it would postpone equity into the future. But I think we're getting a little bit ahead because I don't want to comment on value. We've given you an indication that we think the right bias right now is to use the proceeds to avoid debt. It's a high-interest rate environment, inflation, and a variety of other uncertainties around the economy. But I do think it strengthens the balance sheet in a moment when we see accelerated capital, and that would lead to a period in which we can delay any further equity issuances. On tax leakage, let me turn to Steve just to make a comment on that.

A couple of comments here. The book value of this body of assets is approximately $4 billion, and that would include about $1 billion of tax attributes. We don't see any significant tax leakage if a transaction were to occur.

And then just one last one for me, and I'll jump back in the queue. Steve, there's a viewpoint that you may need to rebase. I mean is that a scenario or do you feel that just given the robust nature of the process and the demand for renewables that you could more than sort of offset that lost earnings and maintain the current trajectory?

Shar, I don't want to comment on 2023 guidance at this point. I feel like the process is early. We're going to be testing the market on value. We have given you a sense of how we're thinking about use of proceeds at this point. But what I would point you to is if we are successful in executing a robust transaction, which we have every confidence we will, then Duke Energy lessens volatility; we increase transparency. We draw focus and attention to this regulated business, which I would say is one of the strongest franchises in the US with 5% to 7% growth and an ability to earn at the top half of that range as we deploy capital and move through the regulatory modernization that sits in front of us. I think that's the real takeaway. We'll keep you informed on this process every step of the way and bring guidance at the right time. But I think there's just a strong pipeline of investment and strong confidence in our ability to grow 5% to 7% on the regulated business.

Your next question comes from the line of Julien Dumoulin-Smith with Bank of America.

Just to keep going on this thought process. I mean, obviously, this has seemingly been in some thought for a little time. How do you think about the accretion dilution and the commitment of pursuing this through? And then related to that, just again, given some of the use of proceeds considerations, is there a potential that this ends up taking some time all out to align with some of your CapEx needs through the course of the decade? Just think about some of the parameters here.

And Julien, I'm not going to comment on value. I think we're too early in the process. We're testing the market. But we do believe we have a very strong set of operating assets, development pipeline, etc. We've given you an indication of use of proceeds, so I'd like to leave the comments there. As for the second part of your question, I lost the train…

No, I was just thinking about use of proceeds and then perhaps elongating it to align with your CapEx, again, more of a pushing you on the parameters that you alluded to a moment ago.

So use of proceeds, as I said in my comments to Shar, our bias right now would be to use the proceeds to avoid debt. But Julien, as the review progresses, we get a better sense of the market, we're sometime in '23 likely, we will finalize that decision and keep you informed every step of the way. As I think about the way this will work, when we reach a decision, we will likely move the business to discontinued operations. So the Commercial business would come out. We would give you very clear guidance on the regulated business, and we'll give you a sense of use of proceeds so we can put all of those various pieces together. We will do that when we have progressed far enough in the strategic process to have a sense of how to guide you into 2023. But I would point again too, this gives us an opportunity to really draw a great focus and attention on the Regulated business, which is poised to continue to grow at a very healthy pace.

And to keep going on some of the core operations here. Just with respect to some of the other moving parameters at present, any initial thoughts on the AMC impacts from IRA, again, I guess that's a moving target itself. And then related, obviously, continued success on cost mitigation, and kudos Steve. Just with respect to that, again, we feel fairly good about the outlook from '23 onwards and some of the earlier comments that you've made. Again, I get that the gross level of inflation has potentially accelerated against what you guys had previously thought in establishing your EPS CAGR?

Julien, we feel very confident in our ability to execute on cost mitigation. If you track back, COVID and even prior to that, dating back to '15 and '16, we have consistently managed our O&M trajectory in a way that's not only been helpful to investors but helpful to our customers. It's been part of keeping our prices low in all of our jurisdictions. We are looking at the Inflation Reduction Act, and we see meaningful benefits to customers from the renewable tax credits, the recognition of nuclear, the incentives around critical infrastructure. We will be impacted by the corporate minimum tax, but we will also benefit from the credits, which we will pass through to our customers. We're in the early phase of analysis of this as I know so many others and we'll be tracking it closely.

But not ready to quantify given the moving pieces, etc., on debt and cash flow. Okay. Excellent. All the best.

Your next question comes from the line of Nicholas Campanella with Credit Suisse.

Congratulations to Steve and Brian on their new roles. I wanted to revisit CEB briefly and think about its overall contribution. What is the EBITDA for that business? Last quarter, you mentioned that CEB in 2023 would be relatively flat compared to 2022. We've seen some relief from AVCBD there. I'm trying to understand what the ultimate loss earnings for those assets will be in 2023 and how we should approach that.

Our target for 2022 is around $150 million of net income, which we kind of stepped down the contribution at the end of last year as we saw some of the challenges in supply chain and panel availability, etc. We also, in the last call, said we see a trending more in line with that for '23, because despite the favorable executive action, the delay and uncertainty that was created during that period of time really pushed the execution of projects from '23 into '24. I'll leave it there. I don't know, Steve, if you would add anything to that.

No, I think that's correct. We had stepped down the contribution for those years in light of the supply chain issues. And we had kind of capped the earnings throughout our plan prior to that in the $200 million type range per year and stepped it down for the recent supply chain issues. So that's about how I think about it.

So just run with the $150 million. And then do you have EBITDA for that business that you're willing to disclose or…

I'll leave it at that, the $150 million. Jack and the IR team are available for any further follow-up on specifics.

Your next question comes from the line of Jeremy Tonet with JP Morgan Chase.

Just wanted to look forward to the ESG Day on October 4th. Are there any kind of updated metrics or any other kind of messages we should be looking for at that point in time?

Jeremy, we're really looking forward to ESG Day, because we've had, over the course of this year, a chance to give you some visibility into new targets. So we added Scope 2 and Scope 3 emissions. You can expect to hear more from that. We've also filed our carbon plan. We've also continued to progress our integrated resource plan in Indiana and have continued to build solar in Florida. We will give you an update on what all of that could mean. You can expect ranges of capital to be discussed as we kind of take all of these plans into a more financial perspective at ESG Day. And of course, we'll comment on some of the social issues around environmental justice, just transition, affordability, which is increasingly important, and then, of course, governance. You can expect to have a member of our Board join the conversation. I think it will be a great day to really hone in on the clean energy transition story that we have here at Duke. We're not only making good progress, but we have good plans and targets in place in all of our jurisdictions to continue that work.

And I just want to pick up with the carbon plan a little bit more, if I could. If you could just give us a little bit more flavor on stakeholder conversations. We hear some stakeholders might have different concerns about the proposal. Just wondering if there's any sticking points or alternative pathways around that to get a sense on how that's all going?

Jeremy, it's been a robust stakeholder process. As we have been engaged in so many meetings and discussions, there are a wide range of topics being discussed, but it's nothing that we would say is surprising. One of the reasons that we put together multiple pathways is really to get all of the topics on the table, so that we could have the kind of discussion the commission can have the kind of information they need to make decisions. If I were to just comment briefly on the types of things that are under discussion, there's a lot of agreement on retirement of coal, there's a lot of agreement on near-term actions, particularly solar, storage, and wind, a lot of agreement on energy efficiency, and demand response being a part of the conversation, and a lot of agreement on the need to accelerate integration of renewables, because it's not just a matter of naming megawatts; it's a matter of getting them interconnected. A few areas of differing points of view include opinions about how quickly solar comes in, some are more optimistic about the pricing of storage and pricing of offshore wind. Some believe we could do more onshore wind than what we consider. A lot of discussion also surrounds the attributes of natural gas, the assumptions on price, and the role that natural gas should play. Price is a top of mind consideration for our industrial customers as well as customers in general. This provides a fruitful menu of items and discussions that will result in a thoughtful plan. We've asked for authority to move on the no-regrets elements of the plan, not to lock into any specific one, allowing things to continue to mature as prices on certain technologies continue to decline. I think there will be just a really good discussion. Hearings are scheduled for mid-September. We will be filing testimony in late August. There will be more data points along the way that we can share with you as this process continues.

Just the last one, if I could. Just want to touch on nuclear a bit here, and your understanding of the nuclear PPCs and as supply to regulated nuclear and the level of benefits you see there. And just also if you could update us on Duke's involvement in SMRs and any thoughts on that technology going forward.

You know Jeremy, we're digesting what we know about the Inflation Reduction Act at this point. We believe regulated plans are included in that consideration. Frankly, we're really pleased to see nuclear being recognized as a critical part of the clean energy transition. We're a believer of that at Duke. When we look at the credits, we believe there's value for those who are low-cost producers, and Duke certainly is. We'll learn more as this law progresses and have an opportunity to share more with you as we know more. The bill has to pass before we can provide any true specifics. On the SMRs and advanced nuclear, we are working on both technologies, in an advisory capacity and to understand more to lend our operating expertise. We do not have an intention of being version one of anything, first of a kind. We would like to see a broader adoption of the technologies, a broader understanding of not only operating characteristics, but the commercial attributes of price, and the ability to construct them within a timeframe that we're comfortable with. We see this decade of the 2020s as an important one to continue that work. If it progresses as we all hope it does, we could be in a position to potentially invest in one to come into service in the early 2030s. More to come on that. This will be a fruitful area of discussion in front of the commission. We operate in the Carolinas for which 50% of the power today comes from nuclear, so it's an important part of the equation in the Carolinas. If there's a way to add to it in an economic way that is affordable to our customers and fits with the expectations of our regulators, we would welcome that opportunity.

Your next question comes from the line of Durgesh Chopra with Evercore.

Steve, congrats and thank you for your very patient CFO. Thank you for answering all of our very detailed annoying questions over the years. I appreciate it. Maybe just really quickly, is there any debt on the renewable assets that we are pursuing a strategic review on?

Yes, there is. There's about $1.6 billion of project debt on the Commercial Renewables assets.

And that's included in the $4 billion number that you gave us, the value I wasn't sure that was the equity value or the enterprise value.

Yes, that's correct.

And then Lynn, just wanted to get your thoughts on the concept of transferability. Obviously, this version of the plan doesn't have direct pay, but it has transferability. How would you compare and contrast this versus tax equity? And as a concept, what's the market for these credits? Just any color you could share there would be appreciated.

Durgesh, we have been spending some time thinking about this. What we like about transferability is we do believe there could be some efficiency in the market to move cash, which would be valuable to our customers. It has been a concept that has been used for certain state tax attributes. The market, I think, will be quite different if we introduce credits of this level. I'm not sure who shows up as a counterparty for transferability, as this is something we are spending time on. We do like the introduction of a technique that moves cash more efficiently with the hope and expectation that a liquid market develops that would monetize these credits for our customers.

Your next question comes from the line of Michael Lapides with Goldman Sachs.

Steve, congrats on the new role and same for your successor as well. Regulated capital spend that you laid out in your fourth quarter deck, relative to what we know today, just on the regulated side. Can you talk to us about the puts and takes about what maybe has moved around, maybe has some upside to it, maybe has some downside to it, when we think about that capital spend directional guidance?

Michael, what I would say to you on regulated spend, I'm going to focus on the Carolinas just for a moment. We used one of the 2020 IRP scenarios to develop that capital plan, recognizing that we were going to put a carbon plan in front of the Commission, it needed to be reviewed. There will be a fine-tuning of Carolina capital coming out of the carbon plan. We were on the technical conference on the multiyear rate plan and put forward a recommended range of transmission and distribution that will be filed in connection with the cases that are upcoming. There could be some fine-tuning there. I think we see an acceleration of capital in the back half of the year as we get deeper into the multiyear rate plan, deeper into coal retirements and deeper into replacement generation. We do see that capital trending up and we'll have an opportunity to give you some perspective on that at ESG Day.

And that capital trending up, is that more of a post-2025 and maybe the '23 to '25 doesn't move a lot?

Yes, I would think about it as post-2025 because honestly, Michael, 2025 is tomorrow for us when you think about large infrastructure build. There will also be some fine-tuning of capital in Indiana as a result of the Integrated Resource Plan, the CPCN process that we plan to file later this year. So that's another update that you can expect from us. It will be more in the back half of the decade as we move more deeply into our clean energy transition in Indiana.

And then one final one, Lynn. Just curious on coal generation retirements, both in the Carolinas and Indiana. Given supply chain issues for battery and a little bit for solar panels, as well as high commodity prices, does that have you rethinking the timeline for coal power plant retirements?

Michael, it's a good question because there are puts and takes on that question from every direction. You've highlighted supply chain issues on the replacement side, you also highlighted fuel prices for natural gas generation. But frankly, coal, the supply of coal, the logistics of getting coal from point A to point B are also a challenge. We cannot assume that there is some steady-state perfect situation here. We must manage all of this. Finding the right balance between timing of coal retirement and replacement generation is a focus for us, along with ensuring we have a reliable supply as long as the coal assets are with us. There have been labor shortages in the railroads, labor shortages in the mining community; the global market has impacted coal and pricing. I would just raise that as another dimension to your question.

Your next question comes from the line of Anthony Crowdell with Mizuho.

Congrats on the new position, Brian and Steve, wish you the best of luck. Just two quick questions. Lynn, I understand the size of the Renewal business relative to Duke. But do you think the sale of the Renewable business will have any impact on ESG ratings that Duke Energy has such as, hey, maybe they're not as focused on ESG as previously?

Anthony, I appreciate you asking that question because I want to unequivocally say, no. Because when we talk about our carbon reduction targets, and what we're trying to accomplish by 2030 and 2050, it's all within our regulated business. We have not taken credit for any Commercial Renewables in our clean energy targets that we have shared with you. It will mean that we'll have fewer megawatts of renewables until that regulated renewable growth accelerates in the back part of the decade because we'll sell some of them. Our commitment around carbon reduction and the clean energy transition is unchanged. All of our targets are on track, and this will give us an opportunity at ESG Day to really zero in on that even more and make it very clear.

And just lastly, on load trends, it looks like you're coming in maybe above your original 2022 guidance of 1.5%. I'm curious, what do you see long term? It seems that maybe the electrification of the economy is accelerating than maybe we previously thought. A couple of years ago, we were talking about flat as the new up. Do you think going forward, 1% or 2% may be the new norm as we see hybrid work and all these other things come to benefit the electric utility?

Anthony, we look at that very closely. Back in February, we projected that after '22, it was pretty flat. Our growth through the rest of our five-year plan, electricity sales, weather-normalized, was pretty flat. We're keeping an eye on energy efficiency products that are getting rolled out in addition to electrification. These are variables that we do look at as we project our load. We'll be updating that as we move forward. But right now, we're going to stick with pretty flat load growth throughout our planning horizon and hope for that upside on that.

What I would add to that is we believe that discipline around cost management is really grounded in the fact we're not putting in overly optimistic assumptions on loads. We manage our cost structure consistent with sort of a flat expectation on load growth. But when I look at some of the trends around in-migration in the Southeast, I look at these economic development numbers and the business ratings of our states; we do have some tailwinds on growth, that I think we will enjoy for a period of time. But we continue to believe this flat to 0.5% is the best way to manage the business and always hope to be surprised to the upside.

My last question will be, Steve, you brought up about energy efficiency as maybe a headwind to demand growth. Do you think as we had big energy efficiency gains in appliances, and home construction over the years, we've just reached maybe the peak of the energy efficiency gains? Right now, we're just seeing all small gains that you're going to get with upgrading a refrigerator or a new appliance, and that will be the pivot in demand?

We'll continue to monitor that. We do see a desire to increase energy efficiency as part of carbon reduction plans. You'll see that as an increasing area, for example, in our North Carolina plan. One of the things that's helpful to us as we move forward is we're also going to have residential unbundling as part of our multiyear rate plan. That takes away that volatility for that large customer class on usage, whether it's weather or just growth. I think we have protection there if we saw economic issues or energy efficiency coming along to affect the top line demand.

The only other thing I would point to is energy efficiency hasn't been uniformly adopted across all of our customer classes. We do have an opportunity, particularly with low-income and vulnerable customers, to continue to drive energy efficiency. I believe that home energy management technology, time-of-use rates, and other things that give us the ability to help a customer move their usage around and minimize is an opportunity that will lower prices for customers over time, giving us headroom for these clean energy investments.

There are no further questions at this time. We'll now turn it over to Lynn Good to conclude the call.

Great. Thank you, and thanks to everyone who has joined us today. A strong quarter, a lot of promise ahead. We're available this afternoon for questions as we always are. Congratulations to Steve and Brian on their new roles. Thanks again for your investment in Duke Energy.

This concludes today's conference call. You may now disconnect.