CMS Energy (CMS) Q4 2025 Earnings Call Transcript

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Date

Thursday, Feb. 5, 2026 at 10 a.m. ET

Call participants

• President and Chief Executive Officer — Garrick J. Rochow
• Executive Vice President and Chief Financial Officer — Rejji P. Hayes

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Takeaways

• Adjusted EPS -- $3.61 delivered in 2025, representing over 8% growth from 2024.
• 2026 adjusted EPS guidance -- Raised to $3.83–$3.90 per share, signaling 6%-8% growth compared to 2025 results.
• Dividend policy -- Target payout ratio is approximately 60% in 2026 and 55% over the five-year plan.
• Five-year customer investment plan -- Increased to $24 billion, up $4 billion from the prior plan, supporting distribution, supply reliability, and regulatory-driven investments.
• Electric generation investment -- Raised by approximately $2.5 billion in the updated five-year plan, largely approved through the renewable energy plan.
• Electric reliability roadmap -- Capital allocated rose by approximately $1.2 billion versus previous plan, aligning with Michigan Public Service Commission guidance.
• Gas investments -- Increased by roughly $400 million in response to rising transmission demand and system growth.
• Rate base growth -- Projected compound annual growth rate (CAGR) of 10.5% through 2030, not including any contributions from new data centers.
• Financial compensation mechanism (FCM) -- Expected to provide nearly $50 million in incentives by the end of the decade.
• Energy efficiency program incentives -- Approximately $65 million per year of incentive benefits are enhanced by recent energy law changes.
• NorthStar Clean Energy contributions -- Segment is forecasted to supply $0.25–$0.30 per share of adjusted EPS in 2026 through capacity contract pricing and renewables project completions.
• Equity issuance plans -- Expected $700 million in 2026 and annual average of $750 million across the plan, maintaining 40% equity to new CapEx funding.
• Utility financing -- More than $1.7 billion in aggregate debt expected to be issued at the utility in 2026; parent company issued debt in fiscal 2025 Q4.
• Approved large load tariff -- Established in November, providing a regulatory foundation for new data center load without cost-shifting to existing customers.
• Twenty-year renewable energy plan -- Approved, creating about $14 billion in customer investment opportunity through 2040 for solar and wind assets.
• Storm deferral mechanism -- First-ever in company history, approved in June, supporting earnings stability and investment recovery.
• Pending electric rate case outlook -- Management explicitly expects a "constructive outcome" with a targeted allowed ROE of 9.9% or better.
• Gas decoupling proposal -- Full gas decoupling included in pending rate case to further support investment and earnings stability.
• Customer affordability metrics -- Residential natural gas rate is 28% below the national average, and customer utility bills comprise about 3% of customer expenses, down 150 basis points from ten years prior.
• Operational savings -- The CE Way program generated over $100 million of savings in 2025 and $1.2 billion of cumulative bill reduction for customers from energy waste reduction initiatives.
• Data center opportunity -- Agreements reached on extraordinary facilities and rate agreements for a Q2-announced data center, which could be online as soon as 2028; not reflected in current capital plan.
• Additional data center and manufacturing pipeline -- Management in advanced talks with another public data center and engaged with two large manufacturing prospects considering service area expansion.
• Load growth projections -- Expected 3% weather-normalized load growth in 2026, with 2%-3% run-rate growth over the five-year outlook.
• Capital structure strategy -- Continued use of at-the-market (ATM) equity offerings and junior subordinated notes, with over $1 billion planned late in plan horizon.
• Customer bill control -- Data center load anticipated to reduce average bill growth by approximately two percentage points for residential customers when a gigawatt of incremental load is connected.

Summary

CMS Energy (NYSE:CMS) concluded the call by confirming it outperformed 2025 adjusted EPS guidance and raised its 2026 outlook to reflect continued compound growth. Management emphasized an enlarged $24 billion capital plan, increased investment in renewable and grid reliability, and preserved visibility through long-term regulatory approvals. The large load tariff and successful rate case outcomes underpin a visible growth runway not yet inclusive of sizable data center and industrial customer additions. Strategic direction favors increased equity issuance and prudent funding, with dividend targets adjusted to support higher self-funding amidst a capital-intensive environment. Long-term rate base growth and incentive-driven earnings streams are reinforced by management's stated confidence in regulatory outcomes and customer affordability.

• Management described the Michigan regulatory environment as "constructive" and highlighted the alignment of ongoing and future rate cases with commission guidance.
• CMS Energy achieved S&P affirmation of investment-grade credit ratings following its recent funding strategy combining cash flow, debt, and tax credit monetization.
• Incremental gigawatt-scale economic load additions were stated to require $2.5–$5 billion of new investment per gigawatt, with none of these opportunities yet included in the capital plan.
• Both dividend policy and payout ratios were explicitly linked to the need to self-fund increased capital spend in a "the cost of capital environment."
• Affordability remains a focal point, with management citing a 28% below-national-average residential gas rate, ongoing efficiency program savings, and customer share-of-wallet declines despite significant system investment.
• Pending gas business decoupling was described as achievable and desirable only for the gas segment, with legislative constraints on electric decoupling noted.
• Company executives communicated that regulatory and policy engagement with all gubernatorial and legislative stakeholders is standard practice to further secure stable outcomes during electoral cycles.
• Opportunistic capital markets access is planned for both debt and equity, with average annual utility equity issuance pegged at $750 million and $1.7 billion+ debt in 2026 alone.

Industry glossary

• CE Way: CMS Energy's internal operational excellence and cost-savings initiative focused on efficiency and productivity improvements across functions.
• Financial compensation mechanism (FCM): An incentive framework enabling utilities to earn return on power purchase agreements (PPAs), unique to Michigan regulation.
• At-the-market (ATM) equity issuance program: A mechanism for gradually selling new equity shares into the market at prevailing prices to fund capital plans.
• Extraordinary facilities agreement: A contractual arrangement defining terms for major infrastructure investment and service to large-load customers such as data centers.
• Rate base: The value of property on which a utility is permitted to earn a specified rate of return as set by regulators.
• Decoupling: A regulatory mechanism separating a utility’s revenue from the volume of energy sold, designed to stabilize earnings and encourage efficiency; permitted for gas, but not electric operations under current Michigan law.

Full Conference Call Transcript

Garrick Rochow: Thank you, Jason. And good morning, everyone. Before we get into the financial results, I'm very proud of the team in 2025. As you see from the slide, I want to highlight a few of the big wins the CMS Energy team delivered in 2025. First, I'm very pleased with our large load tariff, which was approved in November. Supplying energy for data centers is a national story, and the rush to serve is on the mind of utility leaders. I'm very proud of the tariff the team worked so hard on this year because it's strategic and thoughtful. It protects our customers and supports growth in the state.

This tariff provides certainty for our data centers as we bring new load onto the system and ensures existing customers don't pay a single cent for the investments. In some cases, they will see tangible benefits as this new load supports more affordable rates as we grow Michigan. Next, we received approval for our twenty-year renewable energy plan. Another area the team worked hard on to put the right plan together that meets the requirements in our state's energy law. More importantly, this approval highlights the constructive regulatory environment in Michigan and provides visibility and certainty for our long-term investments in solar and wind, providing roughly $14 billion of customer investment opportunity over the next decade.

On this last one, we have a saying around here: Victory loves preparation. I want to talk about our gas business. It's been a cold start to the winter, and as always, we have been prepared to serve our customers. That doesn't happen by luck or accident. That is a deliberate commitment of our team who work every day to buy gas at the lowest price, store it in some of the largest storage fields in the nation, and deliver it safely and reliably to our customers. We're reducing the price of gas when it is needed most by our customers. This is affordability in action.

This reflects our ongoing work to replace this important storage and delivery infrastructure, investing over $1 billion in the year so we are there when our customers expect us. At CMS Energy, we wake up every day committed to serve and deliver value for all our stakeholders. In 2025 marks our twenty-third year of industry-leading performance. As we prepare for these calls, we do a lot of work on slides, and we all have our favorites. This next one is mine. It highlights the team's commitment to excellence and what we are able to achieve. It shows results, proof points of the great regulatory construct in Michigan.

I know you hear from Rejji and me all the time when we're on the road. Our long history of constructive outcomes, multiple years, multiple cases, then add the unique mechanisms like incentives on energy waste reduction, you know, PPAs, all of which is built into the energy law. It's an outstanding construct. More importantly, we have been successful in getting top-tier outcomes to support our long track record of performance. This year was no different. Two rate orders, electric and gas, both approved with constructive outcomes, delivering big wins for our customers, supporting critically important work to improve electric reliability and ensure gas safety across our system.

Our twenty-year renewable energy plan approved over $14 billion of customer investment opportunity to achieve the state's energy law by 2040. Visibility and certainty for the recovery of our investments. We also delivered on the first-ever storm deferral mechanism approved in June. Our large load tariff was approved in November, priming the pump for growth. Like I said, my favorite slide. These important outcomes provide visibility and certainty for customer investments in our electric and gas systems. This track record of constructive outcomes continues to highlight what the CMS Energy team is able to achieve and further reaffirms Michigan's top-tier regulatory environment. I look forward, I have confidence in our ongoing electric rate case.

Given the reactions to our recent proposal for decision, I would remind the investment community that this is simply a step in the process and it is not reflective or consistent with our strong track record of performance. The MPSC staff professionals have spent significant time with the testimony and merits of this case. Staff position is constructive, and I would argue much closer to the expected rate case outcome. I would also note that the commissioner's previous public comments from the bench support the need for an improved electric grid in constructive ROEs.

This case is built on the fundamentals of our reliability roadmap, the MPSC Commission Liberty distribution audit, and the necessary customer investments to support electric reliability while maintaining affordability. I expect a constructive outcome for our customers and investors. I also expect the ROE to be 9.9% or better. In our recently filed gas rate case, I'm confident in the investments to ensure the gas system is safe, reliable, and clean, and the value to customers of our proposed full gas decoupling. As I shared a moment ago, our gas price is on the decline. Our residential natural gas rate is 28% below the national average, striking the right balance between investment in the system and affordability for our customers.

Now onto the financials. For 2025, we exceeded our adjusted earnings per share guidance and delivered $3.61 per share. This is up over 8% from 2024's actual result and delivers that compounding of earnings you have come to expect from CMS Energy. Throughout 2025, we continue to see strong performance at the utility, largely driven by constructive regulatory outcomes and robust performance at NorthStar driving full-year results. This performance allowed us the opportunity to exceed or beat guidance at year-end, deliver better service for our customers, and derisk the business for the coming year. For 2026, we are raising our annual guidance by 3 to $3.83 to $3.90, which represents 6% to 8% growth off of 2025 actual results.

We continue to guide toward the high end. Our practice of rebasing higher off of action is a differentiator in the sector and provides a higher quality of earnings for our investors. We deliver year in and year out. Easy straightforward math, compounding growth, and bringing greater value. How we've done it for years. We're also reaffirming our long-term guidance range of 6% to 8% toward the high end. As part of our total shareholder return, we'll continue to grow the dividend as we have for over twenty years, targeting a dividend payout ratio of approximately 55% over time. Finally, remain confident in our ability to manage the business and execute year in and year out regardless of circumstances.

Twenty-three years now. Consistent industry-leading performance. On slide six, we've highlighted our five-year $24 billion utility customer investment plan, up $4 billion from our prior plan. These investments are necessary to deliver better customer service through improved reliability, both in distribution and supply. I want to take a moment to connect the dots on why I'm excited and confident in our ability to execute on this plan. First, we've increased our electric generation investment by approximately $2.5 billion over the previous plan. Most of this customer investment is already approved in the renewable energy plan, with the visibility and certainty I mentioned earlier.

Another customer investment that I communicated on previous calls is the addition of natural gas generation in battery storage. Our integrated resource plan that we'll file in mid-2026 will detail additional capacity needed to replace retired plants and support existing and future growth. This customer investment opportunity is not contingent on new data centers but growth already or soon to be connected to our system. We know we are well on our way in planning and preparation to deliver capacity in this five-year window. Second, we continue to roll more of our electric reliability roadmap into our five-year plan to strengthen our electric distribution system, which has increased by approximately $1.2 billion over the previous plan.

This work and these investments are well aligned with the Michigan Public Service Commission, the results of the Liberty Distribution Audit. We've also seen constructive support for our investment recovery mechanism in the rate case process. Finally, our gas investments also increased in this plan in the amount of approximately $400 million. This aligns with our ten-year natural gas delivery plan as a result of greater demand across the gas transmission system for power generation and industrial growth. So when I step back and objectively look at our five-year customer investment plan, there is visibility and certainty around the investments. We have an efficient workforce to get the work done.

The work provides significant value to our customers, and I have confidence we can do it affordably. This plan supports 10.5% rate base growth through 2030. In addition to our robust customer investment plan, we have meaningful growth drivers outside traditional rate base, which are unique to Michigan and CMS Energy and are sometimes overlooked. The financial compensation mechanism, which allows us to earn on PPAs, grows over the five-year period, offering nearly $50 million of incentives by the end of the decade. There's approximately $65 million per year of incentives through our energy efficiency programs enhanced by the 2023 energy law.

We also expect incremental earnings from our nonutility business, NorthStar Clean Energy, as we continue to see attractive pricing from capacity and energy sold at Dearborn Industrial Generation, or DIG. Now we make all these investments with a strong focus on customer affordability. We have a proven track record of driving customer savings through the CE Way and digital automation. Episodic cost-saving opportunities, low growth, and energy waste reduction. This creates capital headroom, which maintains affordability as we make important and needed investments in our system. To offer a few examples, in 2025, we had another great year leveraging the CE Way to deliver work more efficiently. Over $100 million in savings.

In 2025, our energy waste reduction program will save our customers approximately $1.2 billion, reducing our customers' bills. Because when you use less, you pay less. Our efforts here are making an impact. Today, our customers' utility bills remain roughly 3% of their total expenses or what is often referred to as share of wallet. This is down 150 basis points from a decade ago. While we've invested significantly in our system to the tune of roughly $24 billion. I'm also pleased to share that our recent electric bill increases are among the lowest in the country. We are committed to keeping our residential bills below the national average.

Midwest average too, and plan to be over the five-year plan period. This is an important commitment. Every penny we spend on our infrastructure investments is done with customer affordability at the center. As I've said before, Michigan is growing, and I continue to be positive and confident about the progress of the data center we announced on the Q2 call. The large load tariff was an important milestone to provide clarity for the data centers and to protect our existing customers. I'm pleased to share that there has been great progress with the data centers that are considering locating in our service area.

Regarding the data center referenced on the Q2 call and depicted on the slide, we've reached commercial terms on the extraordinary facilities agreement, which is similar to an ESA or electric service agreement. We're also at near final terms in our rate agreement. Our agreements have a path to serve their peak demand. We know both the timing and incremental supply resources that are needed to serve this load. We also know the expected ramp timeline. That timeline would have their data center online as early as 2028. Keep in mind, the data center is not yet reflected in our five-year customer investment plan.

In addition, we are in advanced talks with the second data center that has been public about their expansion in Michigan and specifically in our service area. We can't give more details at this point. I can say we are working with them on their needs. We are looking forward to serving this prospective customer. Our pipeline for growth is exciting and robust in Michigan and in our service area. We are well equipped and prepared to serve data centers and manufacturing customers. On that high note, let me hand the call over to Rejji to offer additional details.

Rejji Hayes: Thank you, Garrick. And good morning, everyone. To elaborate on the strength of our financial performance in 2025, on Slide nine, you'll note that we met or exceeded all of our key financial objectives for the year. Most notably, our adjusted earnings per share. To avoid being repetitive, I'll just note that we successfully invested $3.8 billion largely in line with our original guidance to make our electric and gas systems safer, more reliable, and cleaner on behalf of our 3 million customers at the utility. We managed to do this while funding the business in a cost-efficient manner largely through operating cash flow, well-priced bond and equity financings, and tax credit transfers.

This prudent funding strategy enabled us to maintain our solid investment-grade credit metrics and associated ratings as affirmed by each of the rating agencies over the course of the year. Most recently by S&P for our parent company, CMS Energy, in December. Moving on to our 2026 EPS guidance on Slide 10, you'll note the rebasing off the range higher off of our 2025 adjusted EPS actuals as per our historical practice. More specifically, our 2026 adjusted EPS guidance range has increased by $0.03 per share on both ends of the range to $3.83 to $3.90 per share.

Our increased 2026 EPS guidance implies 6% to 8% growth with continued confidence toward the high end of the range as Garrick noted, which is effectively 7% to 8% given our historical performance. As you can see in the segment details, our EPS will primarily be driven by the utility providing $4.28 to 4.33¢ of adjusted earnings. We plan for normal weather, constructive regulatory outcomes, and earned returns at or near authorized levels. At NorthStar, we're assuming an EPS contribution of $0.25 to $0.30, which incorporates normalized operations at DIG, benefiting from an increasingly favorable mix of capacity contracts and the completion of select renewable projects.

Lastly, our financing assumptions remain conservative at the parent segment with expected equity issuances of approximately $700 million to support the increased capital plan at the utility. Our guidance in the parent segment also includes a full year of interest expense from last year's successful convertible debt offering in the fourth quarter and assumes the absence of liability management transactions. To elaborate on the glide path to achieve our 2026 adjusted EPS guidance range, you'll see the usual waterfall chart on Slide 11. For clarification purposes, all of the variance analyses herein are measured on a full-year basis and are relative to 2025.

From left to right, we plan for normal weather, which in this case amounts to $0.22 per share of negative variance given the absence of favorable temperatures experienced in 2025, largely in our electric business. Additionally, we anticipate 37¢ per share of pickup attributable to rate relief driven by the residual benefits of last year's gas and electric rate cases and the expectation of constructive outcomes in our pending electric and gas rate cases. Outside of the general rate cases, we also expect to see earnings contributions from our investments in renewable generation assets in accordance with our recently approved renewable energy plan.

As always, our rate relief figures are stated net of investment-related costs such as depreciation, property taxes, and utility interest expense. As we turn to the cost structure in 2026, you'll note 12¢ per share of positive variance due to the anticipation of continued productivity driven by the CE Way and more normalized storm activity in our service territory. It is also worth noting that our projected operating expenses reflect the benefits of operational pull-aheads executed in 2025, and as always, we will adjust our cost assumptions in accordance with rate case outcomes. Given the financial flexibility inherent in the forward-looking test year.

Lastly, in the penultimate bar on the right-hand side, you'll note a modest variance, which largely consists of growth at NorthStar per my earlier comments. This bucket also includes the roll-off of 2025 liability management transactions and the usual conservative assumptions around parent financing costs and taxes among other items. In aggregate, these assumptions equate to a variance of negative 5¢ to positive $0.02 per share. As always, we'll adapt to changing conditions throughout the year to capitalize on opportunities and mitigate risks. To deliver on our operational and financial objectives to the benefit of customers and investors. On slide 12, we have a summary of our near and long-term financial objectives.

As Garrick noted, from a dividend policy perspective, we're targeting a payout ratio of approximately 60% in 2026. And roughly 55% over the course of our five-year plan. Given the elevated cost of capital environment, and the breadth and depth of customer investment opportunities before us, we continue to believe that it is prudent to retain more earnings to fund growth. From a balance sheet perspective, we continue to target solid investment-grade credit ratings and we'll continue to manage our key credit metrics accordingly as we balance the needs of the business. As such, we intend to continue our at-the-market or ATM equity issuance program in the amount of approximately $700 million in 2026 as mentioned earlier.

Over the course of the five-year plan, our aggregate equity needs will be consistent with our historical ratio of $0.40 of equity for every dollar of incremental CapEx. And equates to an average of approximately $750 million per year given a substantial increase in our five-year customer investment plan. While we do have some capacity remaining with our existing ATM program, you can expect us to file a new prospectus supplement to reflect our updated needs later this year. Lastly, we also expect select large multiyear economic development projects to begin ramping up in 2026, yielding approximately 3% weather-normalized load growth for the year. With run rate assumptions of 2% to 3% in the outer years of our plan.

Slide 13 offers more specificity on the funding needs in 2026 at the utility and the parent. At the utility, we're planning to issue a little over $1.7 billion in aggregate. And at the parent, you'll note that our debt financing needs were pulled ahead in November 2025, which leaves the aforementioned equity issuance needs of roughly $700 million. Needless to say, we'll remain opportunistic throughout the year and we'll continue to monitor the markets for attractive issuance windows. On slide 14, we've refreshed our sensitivity analysis on key variables for your planning assumptions. As you'll note, with reasonable planning assumptions and our track record of risk mitigation, the probability of large variances from our plan is minimized.

Our model has served and will continue to serve all stakeholders well. Our customers receive safe, reliable, and clean energy at affordable prices. Our diverse and battle-tested workforce remains committed to our purpose-driven organization, and our investors benefit from consistent industry-leading financial performance. And with that, I'll hand it back to Garrick for his final remarks before the Q and A session.

Garrick Rochow: Thanks, Rejji. At CMS Energy, we deliver. Twenty-three years now of consistent industry-leading performance regardless of changing circumstances. Year in and year out. You can count on CMS Energy to deliver for all of its stakeholders. With that, Adam, please open the lines for Q and A.

Operator: Thank you very much, Garrick. The question and answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the star key followed by the digit one on your touch-tone telephone. If you're using a speaker function, please make sure you pick up your headset. We'll proceed in the order you signal us, and we'll take as many questions as time permits. If you do find that your question has been answered, you may remove yourself by pressing the star key followed by the digit. We'll pause for just a second. Our first question comes from Julien Dumoulin-Smith from Jefferies. Julien, please go ahead. Your line is open.

Julien Dumoulin-Smith: Hey, good morning, team. Thank you guys very much. As always, appreciate your infectious energy you convey on these calls. I look. If I can kick it off here as it pertains to the data center opportunity you guys alluded to here. Obviously, you're in advanced talks as you characterize it here. Can you give us a little bit more of a sense as to where we stand on data centers in Michigan? Obviously, there's been a lot of discussion in the state more broadly, maybe not necessarily specifically as the second site here. But how are you thinking about that opportunity, and how would you set expectations on the timeline?

Obviously, can't give too many details, but at least from a financial update, and frankly, in terms of a roll forward of your overall plan, you've put a lot of progress in here with 10.5% rate base CAGR. Just want to see how you would marry up any kind of timing on a second data center here against your wider financial plan here ultimately. This is best you can tell right hear from you.

Garrick Rochow: Yeah. Julien. Good morning. Like, I'm very pleased with the progress from a data center. And you look at that entire funnel, and that funnel has actually grown. We've had just in the last month, another two data centers joined the grouping there. Again, they're kind of at the top of the funnel. They haven't worked their way through. Even in broader economic development, there's two large manufacturing customers that are in that funnel too that are relatively new in thing. And so like, Michigan's economic development story looks very, very strong from my perspective. And then they're continuing to move through that funnel, and we pull we've blown a couple of them out in my prepared remarks.

And so like, again, referencing the you know, the one we announced in Q2 with a with a you know, a tentative agreement. That's continued to move forward. The first piece is getting that data center tariff in place. That really paves the way. Right, for these. They know the they know the terms. They know the conditions. And so getting the facilities or extraordinary facilities agreement in place was a big win. And, again, that's comparable to a service agreement or electric service agreement. Other utilities. And then this rate construct or rate contract is at near final. And that's necessary to go through the regulatory process of approving the contract. Right? And so I feel good about that.

That should be a short process because we've done all these preapprovals. Right? And so, again, that's a good glide path. And we continue to work with these customers on finalizing zoning. And so everything is headed in the right direction here. Which gives me a lot of confidence about our ability to secure well, a couple data centers potentially. But, like, certainly, what I'm focused on is the one where we're closest with the with the contract terms and conditions. That helpful? Julien?

Julien Dumoulin-Smith: Yeah. Absolutely. Then maybe secondly, I mean, you guys just gave this big update on the plan here. I just want to nitpick a little bit around it. In as much as it really puts a lot of latitude within the six to eight here. So would love to think about or walk through a little bit what's in and what's out of the plan and how you think about the pieces here. Because you get a 10.5% against the six to eight. Obviously, you guys are talking about, you know, a certain degree of dilution against that. But separately, you talked about a $50 million pretax FCM. I talked about some $65 million of energy incentives.

Or energy efficiency incentives. You talk about North Star, Digby contracting. Like, if you take the rate base plus some of these other items, how are feeling about the six to eight? What's in and what's not? Encompassed in the formal plan today? I'm I'm cognizant much of the data center discussion we just had is not explicitly.

Garrick Rochow: Yeah. Just to just to confirm that, the data center piece not, and that would be incremental, investments. And we again, we know what that timeline looks like and those resources and how to accommodate those to deliver for the customers. But Rejji will walk through a little bit of math here. In the six to 8%.

Rejji Hayes: Yeah, Julien. We thought we'd get that question within the first three or so questions. So you did meet the over under on that. So well done. Yeah. And so, I think you've got the components right. Where you've got 10 and a half percent rate based CAGR over the five-year window. And then if you add NorthStar, opportunities as well as the FCM, both of which have grown versus the prior vintage. That adds about another point on top of that 10 and a half percent. And then there's some other puts and takes that we could certainly spend some time on offline.

And so that gives you I would say, a low double-digit CAGR, with NorthStar, FC FCM plus, rate-based growth. What bridges it down to the guide of six percent eight with the confidence toward the high end, which as I said in my prepared remarks, is call it let's call it seven to 8%, and let's realistically call it 7.5% to 8%. What bridges you down to that is just the funding cost because we are issuing more equity in this plan versus the prior vintage. We've quantified that as about three and a half percent, just given our market cap today and, again, the quantum of equity.

And so you're going from a low double-digit CAGR of growth netted down by that equity that, again, is around three and a half percent. The other, driver of sort of downward pressure on that growth is just the fact that we've got about $1.7 of parent refinancings over the course of this five-year plan. And it's important to remember that, unlike the prior sort of fifteen years or the first fifteen years of this century, money is no longer free. And so, unfortunately, we'll be refinancing those parent bonds at issuance levels higher than initially they were funded at. So there's a little bit of a negative arbitrage. We're not alone in this.

The entire sector will be impacted by that. But needless to say, it's important to remember that the parent company, those financing costs are nonrecoverable. And so it's a combination of the equity needs and just parent refinancings that will drive us back down to that seven and a half to 8%. And the last thing I'll note is just even if you do that math out and you say, okay. Well, there's a little bit cushion. That kinda gets me to about eight and a half percent. Remember, we compound off of actuals every year.

As Garrick noted in his prepared remarks, we think that's a higher quality of earnings, and you do have to build in some contingency to be able to do that year in and year out like we've done for the past twenty-three years. And then, of course, as we've talked about before, we do not have a full decoupling yet on gas or and certainly not on electric, and we have storm activity. And so you have to build in some cushion as well for weather risk. And so for all those reasons, we feel good about the guide today, and that's how you bridge from that high teens or sorry.

Not high teens, but low double-digit, CAGR down to the six to eight and really it seven and a half to 8%. Is that helpful?

Julien Dumoulin-Smith: Let me look. May I just Oh, that's actually maybe I just add some

Garrick Rochow: Yeah. I wanna add a little more clarity even on the to Rejji's good remarks and just reflect here on 2025. Constructive regulatory outcomes, outperformance on NorthStar, that allowed us to reinvest back in the in the business. Rejji talked about from a pull-ahead perspective. Better customer service. We're able to do that this year. Additional tree trimming, work on the gas, system. We also derisked future years, and there was upside that we're able to pass on to our investors. And then we have the confidence to, again, compound off that. And add 3¢ to our guide. So, like, this should speak to the strength of our plan and our confidence in the plan.

And so again, don't underestimate this compounding piece, six to eight to the high end. In this compounding of growth.

Julien Dumoulin-Smith: That's awesome. Thank you so much, Appreciate the comprehensive nature of that response, and I appreciate I'm on the bingo card today. Alright, guys. All the best.

Operator: The next question comes from Nicholas Campanella from Barclays. Nicholas, please go ahead. Your line is open.

Nicholas Campanella: Hey, good morning, everyone. Thanks for the answers on rate base to earnings walk. That was very helpful. You know, maybe, you know, maybe just a large component of the plan is also just you know, the authorized returns. And, you know, I hear the comments about you know, expecting you know, something closer to a $9.09. Just, you know, the PSD, I would say, is just quite concerning from know, seeing an eight and change ROE significantly below the national average. Not really representative of the cost of capital environment that you guys kinda spoke to in the prepared.

So just maybe kinda talk a little bit about what the feedback from stakeholders has been since this has come out and how you're kind of viewing the decision tree in into March here and just overall confidence for a constructive outcome?

Garrick Rochow: Look. I'm not concerned about the ALJ PFD at all. Just to be super clear, this team, the CMS Energy team has delivered and we've got a track record of performance. And credit goes to the team, and a very constructive regulatory environment. And as I shared, just to be clear, we expect a constructive outcome, and I expect an ROE of 9.9 or better. Not close to 9.9. 9.9 or better in the context of this case. And let's just take that 8.2. Like, it's an outlier. It's not well supported. It doesn't match the environment. Like, it's gonna be discounted in this case. But I will point to this. Take the revenue deficiency. That the ALJ offer. 168,000,000.

Apply a prevailing ROE of $9.09. It's like the number goes to $3.14. Right? That's actually in the ballpark where staff is at. It's actually a lot closer. So that speaks to the merits of the case. Like, there's good justification for the capital investment. There's good justification for what we need to do in o and m and tree trimming and storm restoration and the like. And then turn to staff's position. Alright? Like I said in my prepared remarks, professionals. Amazing public servants who are dedicated to understanding this industry. And there's lot stuff that goes on outside the cases. IRPs and REPs and reliability road maps.

We're building the case like we're building outside the case for the next case, and then you go into the case. And this team, the CMS Energy team, does an amazing job of and have an our testimony in justification in business cases. For these investments. And the revenue deficiency from staff is very constructive as well. Right? It's $3.03 17. I guess an ask of $4.04 23. And so like, there is a clear path to a constructive outcome. In terms of ROEs, we've heard it. From the bench. From the chair, access has been driven out. And I believe supported by testimony, again, clear testimony supports these ROEs.

That this commission sees the importance of attracting and attracting capital to Michigan, and that's important for all stakeholders. Including our customers. So that gives me a great confidence that we'll be able to achieve. A successful outcome in this rate case as well as a ROE of nine or better. Alright.

Nicholas Campanella: Thanks for those thoughts. Really appreciate that.

And then just know, on the IRP, can you maybe kinda talk about how the one to two gigawatts in final stages kinda impacts the capacity need, just or maybe just level set, you know, without this what is kind of the outlook for the capacity need out to the, you know, early 2030s And then, you know, a follow on is just when you when you would wrap in the one to two gigs, do you see it as truly incremental to the 10 and a half CAGR that you outlined today just given the large load tariffs, should protect customers from a rate standpoint, and, you know, this should purely translate to rate additional rate base growth? Thanks.

Garrick Rochow: Just to be clear on this, the data centers are not in the plan. So any growth from the data centers that are in that funnel are not included in the customer investment plan. Just to be clear about that. And so when I think about this integrated resource plan, and I've shared this in some of the calls, we got a we got a renewable energy law. Or clean energy law. And so much of that's already been approved in the renewable energy plan. So you're gonna see that within this IRP. But there's a gap in capacity. You can put all this clean energy in, but you need to fill the gaps.

When the sun's not shining and the wind's not blowing. Just you just have to do that. And you're gonna do that with batteries, and you're gonna do that with you know, natural gas. That's gonna be have to be part of the mix. And so then when we look forward, we also know this. Right? We've got load growth in the state. Again, separate from those that funnel. 450 megawatts of connected load last year. That was on our slide last quarter. Right? Those have already been connected. It's 3% load growth just next year alone, and we forecast two to 3% over the over the five-year plan. And so 've gotta be able to deliver on that. Right?

And then you look forward and you've got some retirements. We got current three and four. It's, you know, oil-fired peakers. They're gonna retire in 2031. Right? That's a roughly a gigawatt of capacity. And so those capacity needs that we're foreshadowing here have to play out in this next IRP and are built into this $24 billion customer investment plan.

Rejji Hayes: Yeah, Nick. This is Rejji. All I would add to Garrick's good comments is that and I think we've shared this sensitivity in the past, but generally, every gigawatt of additional load we bring onto the system will need anywhere from, call it, 2 and a half billion dollars to about $5.05 plus billion dollars, and that is a combination of distribution-related resources needed to interconnect the load opportunity as well as additional supply. And I think this point that Garrick has raised is critical in our differentiation versus perhaps some of our peers.

This CapEx backlog that we're laying out for you today, this five-year plan, the 24 billion not predicated on us landing these large to load opportunities So that creates incremental CapEx and direct to directly ask answer, one of the parts of your question. The rate base CAGR would in fact go up if we landed one of these opportunities and had to build out more capacity to accommodate its needs. So, obviously, a lot of opportunity on the outside looking in and look forward to giving you updates later in the year.

Nicholas Campanella: Hey. Thanks a lot. That's really clear, and appreciate the time. Thank you.

Operator: The next question comes from Shahriar Pourreza from Wells Fargo. Shahriar, your line is open. Please go ahead.

Marcella Pedepran: Good morning. This is Marcella Pedepran on for Shahriar. Thank you for taking our question.

Garrick Rochow: Yeah. Good morning. Thanks.

Marcella Pedepran: So you highlight bill growth compared to the national average and to share of wallet. As well as potential savings with a one gigawatt data center addition And we've seen rates be a really big topic in gubernatorial elections, so thank you, Sheryl, and New Jersey, and just this week with Josh Shapiro in Pennsylvania. How are you thinking about affordability going into the election year in Michigan?

Garrick Rochow: Marcella, it is a great question. The good thing is this isn't our first rodeo. We've been doing the affordability and the cost savings for a long, long time. But this issue, as you pointed out, is not a Michigan issue. It's broader national And, frankly, when you got a k-shaped economy, like, this president gonna have some challenges in this midterm election. And so when you look at across the nation and particularly look at energy costs, it's most pronounced in PJM. Reminder, we are not PJM. We're MISO. In PJM, all those costs are flowing through the customer. All those supply and energy and capacity dynamics are flowing right to the customer. 50% of the bill.

And it's happening with deregulated utilities. Right? All that flows through and impacts the residential customer. The good thing about us, again, we're not PJM. We're MISO. And, also, we're a regulated utility. And we own generation. So we're able to hedge that cost. And I showed on my first slide just this year alone in 2025, we saved our customers $250 million by self-generating with our own units that are a good heat rate versus buying from the market. Exposure to the volatility market. 250. And if you go back a year ago, was over 200 million. If you go back three years ago, approaching $200 million.

It's in all if you go back to Q4 calls in the slide deck, you'll see all that information. So, like, that's why I say it's not our first rodeo. We do the same thing in our gas business. We buy gas in the summer. We have the net largest natural gas storage fields in the world. We deliver that low-cost gas in the winter. Keep our gas supply cost low. This affordability is not new to us. I talked about in my prepared remarks, $100 million of savings through the CUA. 450 over the last five years. 1.2 billion of customer measures from energy efficiency perspective. Right? I can go on and on about the things we do.

And here's the here's some data. You can look to the Detroit News on this. Richard Zuba, old, Michigan residents, Michigan voters, and they asked about this question on cost of living. And 80% a huge number in a poll. 80% of Michigan residents said the issue with cost of living was groceries. Groceries. It wasn't energy. Like, it's a different fact pattern here in Michigan. And so we continue to focus on it, and that's why we're able to talk about being below the Midwest average and the national average because we deliver. Now brought up the important piece of this affordability in the election. And just to be clear, we've got 10 people running for governor.

It's a crowded field. Right? And everyone's trying to find their little lane. And, you know, they talk about different extremes, you know, extreme politics, like, dead catting. There's all kinds of ways to describe all this stuff. Again, you gotta look at the polling numbers here. And the other important piece is so who's pulling And so we know that. We work with them. That's an important piece. But, also, remember another piece in this, there's plenty of information that shows that rate freezes in Michigan are legal. Go back to act three of 1939. Go to public act one ninety-one of 1982. Go back to case law of Michigan in Michigan, in the Michigan Supreme Court.

So again, we've got a good fact pattern affordability. We've got good case law and good precedent. But that's that's not all we do. Well, like, we go meet with these candidates, these gubernatorial candidates, and I pull out two pieces of paper, double-sided two pieces of paper, and I present them with 10 policy things. Policy and legislative things that they can do to improve affordability. And I will tell you, r like some of them, and d's like some of them, you know what? That changes the conversation. Now I'm with them. Now I'm a partner. Now we're able to provide solutions to continue to take this great affordability equation we have and make it even better.

Here in our capital in Lansing, Michigan. And so like, here's part of our success. Twenty-three years of consistent financial performance. That doesn't have my luck or accident. Right? It's because I got good energy law. That's a big piece of it. But, also, our job is to be solution providers. To work with everybody on either side of the aisle. And when you can come and be a solution provider, man, that's how you get good outcomes. And that's why this works this investment thesis works and why we're able to do what we do. Great question, Marcella.

Marcella Pedepran: Thanks. That's super helpful. I'll leave it there. Appreciate it.

Operator: Next question comes from David Arcaro from Morgan Stanley. David, please go ahead. Your line is open.

David Arcaro: Hey, thank you. Good morning. A bit of a follow on to that thread and a really hey. Really appreciate the comments, Garrick. I was wondering if you could touch on the data center piece of things on the large load, tariff side. And I guess one effort that we've seen, maybe getting more common, you know, data centers paying their full share of all costs. You know, we saw Microsoft, present that, that initiative on their side. But I was wondering, you know, maybe talk about the large load tariff. And are there ways I mean, there are some costs that are more challenging to allocate, whether it's the full generation cost or whether it's the full transmission cost.

How can you, you know, how do you plan to inflate customers, from large loads? Are there strategies that you'd take beyond the large tariff that you've got there?

Garrick Rochow: It's a great tariff to protect customers. You know, we're out in the public talking about this, and out some of the misinformation that's out there that this is not gonna raise residential rates at all. In fact, there's a benefit associated with these data centers. And so as I talked about, we're in near final terms with the rate construct. It has to be very clear. About how they're gonna pay for those facts, how they're gonna pay for the capacity in the energy, and it's how it's transmission and distribution, how it's all on their nickel. And so it's great when companies like Microsoft come out and say, hey. Gonna protect the residential customer.

It aligns exactly with what this tariff is, you know, aligns greatly with the tariff. And so and we're gonna have to get approval from the Michigan Public Service Commission on these on these contracts. Right? And so it's very clear what the rules of the road are, I'm pleased to say we're making great progress on that. I won't get into specifics of how much supply and when, but, no, like I said, it can be on at the on online as soon as 2028. And, again, as that contracts get finalized, as the zoning is finalized, we'll be sure to share that with the investment community and others.

David Arcaro: Okay. Great. Thanks. That's helpful. And not sure if you specifically mentioned, but has there been support from data centers on the large load tariff just in terms of continued interest in, in coming to Michigan, you know, able to work under the new provisions under that tariff?

Garrick Rochow: Yes. Yes. In fact, like, I shared on some of my earlier responses, that data center pipeline is advanced. And it's even grown in size. And so, again, both positive indicators, support for this data center tariff. In Michigan's growth.

David Arcaro: Great. Okay. Thanks so much.

Operator: The next question comes from Michael Sullivan from Wolfe Research. Michael, please go ahead. Your line is open.

Michael Sullivan: Hey, good morning.

Garrick Rochow: Hi, Michael.

Michael Sullivan: Hey, Garrick. Wanted to pick up on the last couple of questions just around data centers coming to your territory. Particularly on the on the zoning front. You know, there's a lot of articles out there locally and even nationally too. Just how much of an impediment has that been, if at all, And how much should we think about that as just like a gating factor to get these things over the finish line.

Garrick Rochow: I don't see this impediment at all. And just to be clear, I know the Wall Street Journal had Wall Street Journal had an article on this and referenced how Michigan Howell is not in our service territory, but your question is still very important and very valid. Look. We've been doing business in the state for a hundred and forty years. It goes back to the Foote brothers. And we know those communities that are more pro investment, and we know the ones that are harder. And we know it's because we're building out solar. We're building out wind, we're know, we do pipeline work.

And so in part, we help steer these data centers in into those areas where it's it's more accommodating to growth. But, also, the Wall Street Journal article, I think where they had it wrong was the more a more moratorium does not mean stopped. In fact, it's a short process. Like, these are thirty, sixty, ninety. Some are a hundred and eighty day moratoriums. But there's still progress being made. And I would suggest it's good due process, these township officials, these community officials are collecting information from their constituents They're doing research, and we just saw this in Mason, Michigan. Right, in our service territory. Had a moratorium in place. It was a ninety day.

They actually came out sooner than the ninety day period. And came out with a new zoning ordinance that allowed for data centers. And so again, I say finalizing zoning, we work through those things alongside with the hyperscalers with the developers, achieve success. And, again, I see that as a hold up or an impediment in Michigan.

Michael Sullivan: K. That's really helpful. Appreciate the color. And then just shifting back to kind of the pending rate case and regulatory strategy. What are your thoughts on just being able to get back to more frequent settlements to maybe just take volatility out of the process associated with ALJs, like the one we just got. And then also, like, potential to space out cases a little bit more just given, I think, there's been commentary from the commission in the past and now whether or not rate freeze is legal, illegal, materializes, but anything that can, like, alleviate pressure on frequency and then also yeah, just parties putting things forth. And being able to settle more preemptively.

Garrick Rochow: As I've shared before, I continue to be open towards settlement and settlement discussions, and we'll continue to explore those. But, again, the merits of the case and just the fact pattern in Michigan, we wouldn't go the full distance as we did last year in 2025 with our case and get very constructive outcomes. And so I'm I'm happy to go that route. And I don't think it's reflective at all about the environment in Michigan. Again, because at the end of the day, we're getting successful and constructive outcomes from commission. In terms of spacing out, I think a really important data point that I referenced on the call and we have this information.

I think, actually, Wolf's presenting this in a different format too, is that Michigan and particularly CMS and the other large utility, like, our rate increases are some of the lowest in the country. Right? And so can we space them out? Sure. But, like, let's do the math and, like, what's going on in these other states, frankly? And so we've got a really good story. And when we go on an annual rate cases, we're able to pass savings back to our customers We're able to make sure that those increases are more in line with inflation or better than inflation. And so smaller little bites at the at the apple is really a great approach.

Now I'm always open. With the right construct if there's a way to expand those out and go longer. But we have to have the right construct in Michigan to be able to do that. There's some talks, early talks in that direction, but nothing that it's you know, serious at this point. Michael.

Michael Sullivan: Appreciate it. Thank you, Garrick.

Operator: The next question comes from Jeremy Tonet from JPMorgan. Jeremy, please go ahead. Your line is open.

Jeremy Tonet: Hi, good morning.

Garrick Rochow: Hey. Good morning, Jeremy. Morning.

Jeremy Tonet: Thanks for all the, good color today. Just was curious, you know, with the upcoming state of the state here, we've seen in other states utilities kind of featured in some of the commentary here. And wondering if you had any expectations or any thoughts to share here, you know, given we've seen in other states?

Garrick Rochow: Let me offer this. Again, I'll start with a big headline. Twenty-three years of consistent financial performance. We have that one slide on there. And regardless of the weather, regardless of the CEO, regardless of the governor, again, r's or d's, regardless of the legislature, regardless of the commission, like, we deliver. And I gotta overuse this term probably, but not by luck or accident. Right? It's energy law. Right? And a lot of that is already set. And it's typically bipartisan when it's done. But that sets a lot of the parameters. And, again, when it comes to the commissioners are on staggered terms, the six-year terms, you can only have two from one party.

So that sets a lot of the parameters in Michigan. That's the great thing about Michigan. But remember, as one of the largest investors in the state, the gubernatorial candidates know that. As one of the largest property taxpayers in the state, the gubernatorial candidates know that. As one of the largest job providers, and union job providers, gubernatorial candidates know that. Right? And so we have a way of working with these candidates to find solutions. And it goes back to my earlier comment. When I come in and I can bring a gubernatorial candidate, a two pages front and back of good policy solutions what happens in that discussion? Right? Also, I'm in their boat. Right?

All my I'm in there helping them be successful. And now when they're out with constituents, they can point to say, here's the three things. Here's the six things. Here's the 10 things we can do in Michigan. To help make bills even more affordable. And remember, we're starting from a really a really good starting spot. And so I mean, that's the that's the dynamic that plays out, and that's how it allows us to be successful. You know, time and time again. So, hopefully, that scratches you the itch of your question there, Jeremy.

Jeremy Tonet: Got it. That's helpful. I'll leave it there. Thanks.

Operator: The next question comes from Andrew Weisel from Scotiabank. Andrew, please go ahead. Your line is open.

Andrew Weisel: Hey. Good morning, everybody. Morning.

Garrick Rochow: Morning, Andrew.

Andrew Weisel: You covered a lot of the main topics. So I've just got two sort of more nuanced ones. First, on equity. Obviously, as you kind of previewed, tick up from $500 million last year to $700 million this year to an average $750 million in the long-term plan. How should we think about that going forward? Should it be consistent? Should it be ramping up to match the CapEx profile? Or would it be more front-end loaded given the lag of cash recovery per generation relative to distribution? And does that assume additional use of hybrids or JSNs, or would hybrids potentially reduce the equity needs?

Rejji Hayes: Andrew, it's Rejji. Appreciate the question. I'm getting to a point age-wise where I when I get multipart questions, I may I have to circle back. So if I miss something, just let me know. But with respect to equity, I think you're you've the premise of your question is right. I mean, they tend to live increase with CapEx needs. And so this plan is 4 billion higher with 24 billion CapEx to the utility than the prior vintage of 20 billion.

And so we've said with that historical sort of ratio of $0.40 of for every dollar of incremental CapEx, this plan has about a billion and a half or so of greater equity needs than the prior vintage, specifically prior vintage was $2.2 billion in aggregate. This one's about three and three-quarters. So again, that historical relationship, still highs, and that allows us to maintain that kind of mid-teens credit metric levels on a consolidated basis, which is where we like to be. With respect to junior subordinated notes, we do have a little bit of those in the plan, over a five-year period. I'd say just over 1 billion. It's a market that we've just seen, quite pleasantly.

We've just seen an increase in breadth and depth of liquidity in that market, and we've seen really strong execution, most notably over the last thirty-six months or so. So we have baked in a little bit of that in the plan, not in this year, but later on, say, more 2728. So we do have again, a little over a billion and a half of junior subs in the plan. Given the strong execution we've seen historically. And then with respect to the shaping of the needs, I would say it's, again, fairly commensurate with the capital needs, and the capital needs are somewhat front-end loaded.

If you look at the details on the CapEx plan we have in the appendix, in the deck for today. And so we anticipate issuing a good portion of that in the first three years of the plan and then at levels out. It really kind of, really drops off in the latter two years. Now we will be opportunistic as always, and if we see our stock trading at levels that are, not offensive, and I would submit they are offensive where they are today, you know, we'll be opportunistic. But the plan for this year is to dribble out that $700 million.

And over time, again, if we see the stock trading at levels that we think are more reasonable, we may be a little bit more aggressive than So let me pause there and see if that's helpful.

Andrew Weisel: It is. Thank you. And your memory is still intact. You got all of those. Next one, you previously talked about a $20 billion CapEx plan $25 billion of incremental opportunities. Now you're guiding to $24 billion. Should we think of that as pulling for from the opportunities bucket into the formal plan? Or is this more like an incremental 4 billion that you've identified and you still have a similar opportunities bucket beyond the new Outlook?

Rejji Hayes: Yeah. So great question. And I would say in terms of that $25 billion of backlog we've been talking about that's outside of the prior plan looking in, yes, we certainly dipped into that with the $4 billion incremental. But I would say it's it's not a perfectly symmetric equation because the reality is we have additional CapEx needs as we're preparing this new integrated resource plan that will likely drive additional CapEx needs. As Garrick and I noted earlier, our plan does not presuppose us realizing some of these large data center opportunities from a customer investment perspective. And so that would add to that backlog as well.

And then I would also just note in this plan, obviously, with the growth of financial compensation mechanism related earnings, we are taking some of that CapEx opportunity and converting it into PPAs. And so we have dipped into that well, but I would say from where we sit, the well is quite infinite when it comes CapEx backlog at the utility, and it just grows every year because there's a lot to do on both the distribution side and the supply side. And electric and gas has quite a bit to do as well.

Andrew Weisel: Infinite. Wow. That's a good word to use. Okay. Thank you so much. Appreciate it.

Operator: The next question comes from Anthony Crowdell from Mizuho. Anthony, please go ahead. Your line is open.

Anthony Crowdell: Hey, good morning team. Rejji, really happy that CMS is still serving caffeinated coffee in the employee kitchen. Just one end, you're currently asking for a decoupling in your gas case. Just curious if you plan on I know I'm thinking forward, you're currently in your an electric case now. Thinking in your next electric case, do you ask for decoupling or given the load that you're showing a big increase in industrial load? In 2025 if you're less inclined to SI given the strong load growth?

Rejji Hayes: Anthony, appreciate the question. And as always, we show up for these calls well caffeinated. So, glad you noticed. Yeah. Our intent is to just focus on revenue decoupling, in the gas business. We have looked historically at the trends in terms of sales for our business and just don't see the need, to look to do that for the electric business. So the intent right now is the gas, just for the gas business That's what's embedded in this pending case that we filed in mid-December. And really, no appetite at the moment to look at that from an electric perspective.

Anthony Crowdell: Great. That's all I had. Thanks so much.

Rejji Hayes: Okay. Yeah. Ahead, Rejji. Anthony, the only other thing I would note is that it is actually not permitted. To utilize decoupling in an electric business. That is actually a part of the legislation that's been passed.

Anthony Crowdell: Okay. Thank you.

Operator: Final question today comes from Bill Apicelli from UBS. Please go ahead. Your line is open.

Bill Apicelli: Hey, good morning.

Garrick Rochow: Good morning, Bill.

Bill Apicelli: Had a question around the 3% residential bill inflation, maybe you could just unpack a bit when we think about 10.5% rate base growth So how much are you managing with the CE Way? And then do you have any else on the affordability side that can help? Right? So I think in the past, you've talked about some higher priced PURPA contracts that roll off. Maybe you could just speak to other tools that are there to manage the affordability.

Rejji Hayes: Yeah. Bill, thanks for the question. And I think you've hit some of the key items that drive that downward pressure on bills and rates every year. So we've been at this, as Garrick noted earlier, for multiple decades now where we really try to self-fund a lot of that rate-based growth. And for, I'd say, two decades, it's been episodic cost reductions, good decisions, and we certainly are assuming that the we do have high-priced PPAs that will be rolling off over time at some point. We'll be out of coal, and so that will drive cost savings as well.

And those are a bit more episodic, but the CE Way just continues, to offer more and more savings each year. And I'll remind everyone that we only about a decade ago, so we think we're just scratching the surface. And I remember going back to 2018, 2019, we delivered probably just under $10 million of operating expense reduction from the CUA. And we were fiving because we were in year two, one or two of, in CEUA. And as Garrick noted, just this past year, we did another year of a $100 million of savings.

So a lot of opportunity there, but we're really excited about again, to in terms of levers or opportunities to just self-fund our growth is just converting on this attractive economic development backlog. That to me is really the third leg of the affordability stool. We know that we're very strong in delivering on the cost performance side. But we can also convert, not even all, but just a portion this economic development backlog, you can see that it just drives great downward pressure on bills and rates and funds a lot of these needed customer investments that we have across our electric business. And that's where we provided that sensitivity.

In one of the slides Garrick spoke to, we basically have shown that with a gigawatt of conversion on this economic development, backlog associated with the large load tariff, that drives about two points of reduction in that bill CAGR. So again, a lot of a lot of errors in our quiver, and we look forward to continue to executing on all of those to create that downward pressure to fund the CapEx plan.

Bill Apicelli: Great. No, that's very helpful. Thank you. And I guess one housekeeping item. It looks like the DNA in 'twenty-eight, 'twenty-nine is about $100 million lower than the prior guide you had given there anything driving that or despite the fact that the CapEx is higher? So any color there.

Rejji Hayes: Yeah. Yeah. My sense is it's mix. That usually what it is because you do have different depreciation rates depending on the assets, the distribution assets tend to be longer-lived than the generation assets, and so it's got to be mixed. But the IR team will certainly follow-up with you after the call to unpack that some more, Bill.

Bill Apicelli: Great. Thank you very much.

Operator: Thank you. This concludes today's Q and A session. So I'll hand the call back to Mr. Garrick Rochow for any closing comments.

Garrick Rochow: Thanks, Adam. I'd like to thank you for joining us today. I look forward to seeing you on the conference circuit. Take care. And stay safe.

Operator: This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.

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