Good morning, everyone, and welcome to the CMS Energy First Quarter 2020 Results. The earnings news release issued earlier today and the presentation used in this webcast are available on CMS Energy's website in the Investor Relations section. This call is being recorded. After the presentation, we will conduct a question and answer session. Instructions will be provided at that time.
Just a reminder, there will be a rebroadcast of this conference call today beginning at 12 pm Eastern Time running through May 6. This presentation is also being webcast and is available on CMS Energy's website in the Investor section. At this time, I would like to turn the call over to Mr. Sri Madhipati, Vice President of Treasury and Investor Relations. Please go ahead, sir.
Thank you, Rocco. Good morning, everyone, and thank you for joining us today. With me are Derek Rochow, President and Chief Executive Officer and Reggie Hayes, Executive Vice President and Chief Financial Officer. This presentation contains forward looking statements, which are subject to risks and uncertainties. Please refer to our SEC filings for more information regarding the risks and other factors that could cause our actual results to differ materially.
This presentation Also includes non GAAP measures. Reconciliations of these measures to the most directly comparable GAAP measures are included in the appendix and posted on our website. Now I'll turn the call over to Gerrick. Thank you, Sri, and thank you everyone for joining us today. We appreciate your interest in CMS Energy.
Over the past 5 months, I've been on the virtual road and have had the opportunity to meet with many of you to share our investment thesis, which delivers for all our stakeholders. This This thesis is grounded in our commitment to the triple bottom line of people, planet and profit and enables the Excellence you have come to expect from CMS Energy. Many of you have asked what will change under my leadership. And I want to reemphasize, we've changed leadership, not the simple, proven investment thesis that delivers year in And year out. Looking forward, we're committed to leading the clean energy transformation with our net zero carbon and methane emissions plans, which by our clean energy investments in our current progressive integrated resource plan.
Furthermore, we are recognized as top tier For ESG performance, earning top ratings amongst our peers. We continue to mature our industry leading lean operating The CE way, eliminating waste and improving our performance. I love this system. Over the past several years, we have used it across the business to drive efficiencies, improve employee engagement And deliver sustainable cost performance. I've seen it, I've worked it, and we have plenty Of gas pedal left.
Today, we are crafting the next horizon, what I call CEway 2.0, Which layers in greater use of automation and analytics and begins to position CMS Energy as a leader in digital. Another key differentiator of CMS Energy is Michigan's top tier regulatory construct that has 10 month Forward looking rate cases and constructive ROEs. This all leads to our adjusted EPS growth of 6% to 8% And combined with our dividend provides a premium total shareholder return of 9% to 11%. At CMS Energy, We wake up every day to get after it, deliver for our customers in all conditions, rain, snow, sleet, wind. We never quit.
And for you, our investors, we never quit. This year is no different. Now let's get into the numbers. In the Q1, we delivered $1.21 On adjusted earnings per share, this is up significantly $0.35 from last year, primarily from an incremental revenue to fund needed customer investments And sustained cost performance. As a reminder, our full year dividend is $1.74 up 7% from last year.
We are reaffirming our 2021 guidance for the year of $2.83 to 2 point earnings per share and our long term earnings and dividend per share growth of 6% to 8% with a bias to the midpoint. At CMS Energy, we're as committed to our promises to our coworkers, the communities we serve and our planet As we are to delivering our financial commitments. During my discussions with many of you, the topic of ESG often comes up. I'm proud of our leadership in this space. We continue to enhance our commitments and our efforts are being recognized With top tier ratings.
We remain a AA rated company by MSCI and have ranked top Quartile for Global Utilities by Sustainalytics since 2013. This is a deep commitment that began well before it was a trend. Our commitments to net 0 methane emissions by 2,030 and net 0 carbon emissions by 2,040 are among the most aggressive in 3, as our industry approaches a cleaner energy future and we retire our legacy generating units, it is critical That we honor the contributions and service of our coworkers as well as address the economic impact on those communities. Now, I began my career on the generation side of our business. I've walked the halls, The men and women who work every day to provide energy for our customers and I am proud of the honorable and equitable way we have cared for both our coworkers And our communities as we retire these units from service.
We've built a playbook for success. It began with the retirement of our 7 coal plants in 2016. That work will continue with retirement of Karn 1 and 2 in 2023. Our leadership and track record in this space is something I'm proud of and will continue as we look to the future. This ensures success for all stakeholders, including our investors.
While many focus on the E of ESG, we have a strong record of delivering across all three. In my 20 years of service, I believe our culture has never been stronger. Every single day, our coworkers show up with a heart of service for our customers, our communities, and ultimately you, our investors. Our culture, anchored by our values, is thriving across our company and it's why we're recognized For top quartile safety performance, industry leading employee engagement, Forbes Best Employer for Women, Best for Vets by Military Times In best places to work for LGBTQ Equality in the Corporate Equality Index. And earlier this month, We were ranked by Forbes as the number one utility in the country as best employers for diversity.
Our leadership, commitment and top tier ESG performance should provide you with the confidence that our long track record will continue to deliver value Customers and investors. Turning to recent updates, I want to highlight Our continued growth in renewables with several exciting announcements. We are pleased to announce the recent commission approval Of our Heartland Wind project in March, which will be online in December of next year. This project adds 201 megawatts of new capacity As a part of our renewable portfolio standard, earning a 10.7% return, I'm also pleased to share that we received Approval for the first launch of our current integrated resource plan, which adds nearly 300 megawatts of new solar through 2 projects that we expect to come online in 2022. We are evaluating the 2nd tranche of our current IRP, another 300 megawatts of solar Expected to come online in 2023.
In the 3rd tranche, 500 megawatts of solar expected to come online in 2024 For a total of 1100 Megawatts, we're on track to file our next integrated resource plan in June. It has been a popular topic in our meetings with many of you. While we're still finalizing the details, The focus of our upcoming IRP will be to accelerate the decarbonization of our fleet, ensure reliability and affordability And add renewables and demand side resources in a way that makes sense for our customers and investors while maintaining a healthy balance sheet. I'm excited for this next IRP. It serves as yet another proof point that we are leading the clean energy transformation.
As part of our clean energy transformation includes the retirement of our remaining coal fleet. On Slide 7, you'll see our plan to be carbonized as both visible and data driven. The meaningful reduction of carbon emissions in our plan We'll drive our ability to achieve net zero carbon emissions by 2,040. Over the past few months, I've been asked quite a bit About the future of our gas business. As I've shared with many of you, our gas business and system is critical Providing affordable and reliable heating here in Michigan.
But that doesn't mean we're sitting on our tails here. In fact, we are actively working to decarbonize our gas Now this aligns very well with the recent announcement from the Biden administration. Our first step is to reduce Fugitive methane emissions, which is well underway as we accelerate the replacement of vintage mains and services, both plans approved by the commission We'll decrease our emissions and achieve our net zero methane goal. Our decarbonization plans also leverage energy efficiency To reduce carbon usage and put renewable natural gas on our system, which will help decarbonize more difficult sectors such as agriculture. By replacing vintage mains and services with plastic piping, we will be positioned to deliver hydrogen or other clean molecules To our customers in the future, as we grow our renewable portfolio and decarbonize our generation fleet In gas delivery system, we remain committed to delivering against the triple bottom line of people, planet and profit.
Before I turn the call over to Reggie, I want to end with this slide that demonstrates our consistent Industry leading performance for nearly 2 decades. As much as things change, one thing stays Year in year out, we have and will continue to deliver. 2020 proved this. 2021 will be no different, marking 19 years of consistent, predictable financial performance. With that, I'll turn the call over to Reggie.
Thank you, Derek, and good morning, everyone. As Derek highlighted, we're pleased to report our Q1 results For 2021, in summary, we delivered adjusted net income of $348,000,000 or $1.21 per share. For comparative purposes, our Q1 adjusted EPS was $0.35 above our Q1 2020 results, Largely driven by rate relief, net of investment related expenses, better weather and sustained cost performance from our 2020 efforts at the utility. Our enterprises, parent and other segments were slightly down as planned due to the absence of a one time cost reduction item in 2020 and higher Funding related costs respectively. This modest negative variance was more than offset by strong origination growth at EnerBank, Which exceeded its Q1 2020 EPS contribution by $0.06 in 2021 as planned and is tracking towards the high end of our guidance for the year of $0.22 per share.
The waterfall chart on Slide 10 provides more detail on the key year to date drivers of our financial performance versus 2020 and highlights our latest estimates for the major year to go drivers to meet our 2021 EPS guidance range. To elaborate on our year to date performance, while weather in the Q1 of 2020 has been below normal to date, which has led to lower volumetric gas sales, It has been better than the historically warm winter weather experienced in the Q1 of 2020. And the As a reminder, our rate relief estimates are stated net of investment related costs such as depreciation and amortization, Property taxes and funding costs. It is also worth noting that our 2021 financials reflect the accelerated amortization of deferred taxes as part of 2020 gas rate order settlement. On the cost side, as noted during our Q4 earnings call, we budgeted substantial increases in Our operating and maintenance expenses in 2021 versus the prior year to fund key initiatives around safety, Reliability, customer experience and decarbonization and in alignment with our recent rate orders.
As you can see, we're $0.02 per share above our spend rate in Q1 of 2020 as planned, and I'm pleased to report that we're seeing sustained cost performance from 2020 as well as increased productivity in 2021, Largely attributable to the CE way. That said, we do expect to see the bulk of the planned O and M increases to materialize later in the year. The balance of our year to date performance is driven by the aforementioned drivers at our non utility segments and non weather sales, We're still slightly down at about 1% below the Q1 2020, continue to exhibit favorable mix with the higher margin residential class up 2% versus Q1 of 2020. And I'll remind you that our total electric sales exclude 1 large low margin customer. As we look ahead to the remaining 9 months of 2021, we are cautiously optimistic about the glide path illustrated on this slide to achieve our full year EPS guidance.
As always, we plan for normal weather, which in this case translates to $0.12 per share of negative variance given the above normal weather Experience in the second and third quarters of 2020. The residual impact of the aforementioned rate relief, which equates to $0.22 per share of pickup and is not subject to any further MPSC actions and the continued execution of our operational and customer related projects, Which we estimate as an incremental $0.18 per share of spend versus the comparable period in 2020. We have also assumed the usual conservatism in our utility non weather sales and our non utility segments. All in, we are pleased with our strong start to the year and are well positioned for the remaining 3 quarters of 2021. And needless to say, we'll be prepared to flex Costs up or down as the fact pattern evolves over the course of the year.
As we look out over the long term, we're in the early stages of Executing our $13,200,000,000 5 year customer investment plan at the utility, which is highlighted on Slide 11 And will provide significant benefits for our customers, the communities we serve and our investors. As a reminder, we have budgeted over $2,500,000,000 in 2021, the vast majority of which is earmarked for safety, reliability and clean energy projects. We are on track thus far and recently filed an electric rate case in March that enumerates our customer investment priorities for the 2022 test year, which are summarized on the right hand side of the page among other key details related to the filing. We expect an order from the commission by the end of the year. Despite the substantial customer investments that we intend to make On our electric and gas system over the next several years, as you know, we take great pride in taking out costs in a sustainable way To maintain affordable bills for our customers and we have the track record to prove it.
The left hand side of Slide 12 summarizes the key components of our cost structure, which we have successfully managed over the past several years while investing Significant capital on behalf of customers. In fact, from 2,007 to 2019, we reduced utility bills As a percentage of customer wallet by 1% while investing roughly $19,000,000,000 of capital in the utility over that timeframe. As we look ahead, We have several highly actionable event driven cost reduction opportunities, which will provide substantial savings in the years to come. The planned expiration of our Palisades power purchase agreement and the recently approved amendment to our MCV PPA will collectively generate roughly $150,000,000 of power supply cost recovery savings. And as you'll note, our initial estimates for the potential savings for the MCB contract amendment of approximately $50,000,000 Proved conservative with the revised estimate of over $60,000,000 of savings per the commission's order in March.
Also, The planned retirements of our 5 remaining coal units should provide another $90,000,000 of savings in aggregate, exclusive of any potential fuel cost savings, which will create meaningful headroom in bills for future customer investments. Lastly, I'd be remiss if I didn't mention our annual O and M productivity delivered through the CE Way, which last year generated roughly $45,000,000 of savings and serves as a critical tool to our long term and intra year financial planning. To that end, many of you have asked about proposed changes in corporate tax policy and its potential impact to our plan. Though at this point, the final details remain unclear, trust that we are evaluating the potential effects and we'll leverage the CEWAY and other cost reduction opportunities, including Potential offsetting tax credits that are also being proposed as part of the legislation to minimize the impact to customers while executing our capital plan. As we've said before, it is our job to do the worrying for you and we are uniquely positioned over the next several years to manage any potential headwinds.
With our unparalleled track record on cost management driven by our highly engaged workforce coupled with a robust customer investment backlog And top tier regulatory construct, we are confident that we can deliver on our ambitious operational customer and financial objectives for the And with that, we'll move to Q and A. Sir Rocco, please open the line.
Thank you. We will now begin the question and answer session. The question and answer session will be conducted electronically. Today's first question comes from Jonathan Arnold with Vertical Research Partners. Please go ahead.
Good morning, guys.
Good morning, Jonathan. Good morning, Jonathan.
Quick one. So Garik, I appreciate the comments on the IRP and You mentioned the sort of focus will be on accelerating decarbonization. Are you willing to sort of Talk about how significant an acceleration you might sort of have in mind. Could we be talking about bringing Net 0 sort of took into that 2035 timeframe on electric, for example.
Thanks for your question, Jonathan. We've laid out those objectives and all of those objectives, I would just put them all as equally important. And so decarbonization is 1, but so is reliability and affordability and the rest of them that are listed there within the deck. You'll recall from the settlement we had on our current integrated resource plan in 2019 that we were going to take a look at the Potential for accelerating Campbell 12, which is currently scheduled to retire in 2,031. And so we're doing that as part of this Evaluation.
And I would just put it this way. We are in the final throes of completing exhibits In testimony, we'll be sharing the outcome with our Board of Directors like we do in some of our large filings in early May here. And I don't want to
get too far ahead of our Board
of Directors here. So, our objectives are true. That's what we're targeting. And we look forward to sharing more In the Q2 reports.
Okay, fair enough. Thank you for that. And then just on May I ask on Anabank, obviously, you've mentioned you're now tracking to the high end of the range, but it seemed unusually It's a big number in the Q1. Is there anything other than just strong origination going on there, maybe, Reggie?
Yes. As you know, Reggie
chairs it.
So, Reggie, why don't you go ahead?
Jonathan, thanks for the question. I think you hit one of the bigger drivers, and so It's really a couple of things. You've got strong origination growth and we really saw and we talked about this I'd say in quarters 2 through 4 last year, A nice staycation bid with very good loan origination volumes for swimming pools, HVAC systems, and that has carried on. So you've got strong origination growth and you also, I would say, have a weak comp in Q1 of last year just because as you recall, pandemic really started to impact the global economy in the latter part of March. And so Q1 of last pick some of that up.
We also do have a loan sale as part of that earnings growth. Now this is all on plan. We had anticipated this in our 2021 plan, but that also offers the favorability relative to Q1 of 2020. And we've always talked about the fact that we don't allocate capital to the bank. And They have to fund their own growth, and so loan sales is certainly part of that strategy.
So it's really a combination of strong origination growth coupled with the loan sale.
Okay. Does that I mean, A, can you maybe quantify how much that piece was? And perhaps sort of also talk about Where that leaves the book in terms of size, maybe relative to where it was?
Sure. So they gave about $0.06 To Bob's guide from my prepared remarks relative to Q1 of 2020, roughly half of that was due to the loan sale and about the other half For the origination growth, so it's not about $0.02 for each or $0.02 to $0.03 for each. And I would say the book still looks quite good. For competitive reasons, we don't talk about annual origination volumes, but there's still around $3,000,000,000 of assets all in.
Okay. Thank you for that and I'll leave it at that. Thanks. Thank you.
And our next question today comes from Andrew Weisel with Scotia, please go ahead.
Hi, Andrew.
Thanks. Hi,
good morning, everyone. Just maybe I'll start continuing on the Enerbank conversation there. I think, Randy, you just said that the strong origination growth from last year has continued. What's your latest thinking on when that might return to Sort of a more normal level. In other words, the COVID trade will eventually moderate.
There are only so many swimming pools to be installed. Yes. So it's a good question. And we may not see the feverish volumes we saw in 2020, but We continue to see high applications and again very good origination volume going into the Q2. So I'm not Convinced that that trend will abate anytime soon.
And it's not just swimming pools, they also do HVAC installations. That's a fairly non cyclical Cool product, and they also do resi solar and there's still good organic growth there as well. So there's decent diversification, Andrew, in the loan portfolio and swimming pools certainly are quite strong, but again, we haven't seen any signs that that will abate anytime soon. And if that does happen, let's say in 2020 Well, then at that point, again, there's good HVAC volume, there's good resi solar, and they also do kitchen and windows and doors. So home improvement, From our perspective, it's not going to be the sort of thing that's going to die out anytime soon.
And we've been at this now for over a decade and they've delivered in a very non Away for some time now. Okay. Great. And you mentioned it's trending for the high end for the full year. I mean, that Kind of sounds like an understatement given that they earned $0.11 in the quarter alone.
So what Might be the limiting factor there as far as the let me put it this way. Is the balance sheet of CMS limiting factor or are there other ways that you might slow down the growth rate to elongate the trajectory? Yes. So let me be clear. So even though they delivered $0.11 of EPS contribution for the quarter and that was a Strong B versus Q1 of 2020.
That was on plan. They were about a penny ahead of plan. So we assumed about $0.10 and a pretty front end loaded earnings trajectory In 2021. And so we do still see them kind of being within the range of $0.20 to $0.22 I wouldn't say it's due to us actively potentially slowing them down.
It's just part of There's a
little bit of seasonality in
the business. We'll see how it
trends over time. But like the rest of the business, we'll manage it where we try to avoid sugar eyes and if there are Opportunities to derisk 2022 and beyond by some levers we pull at the bank as well as the other business. We'll look to do that. Okay, great. Then just more broadly, when you think about the CEU way, obviously, you had a really strong year last year with cost savings, Strong start to the quarter this year.
Are you already in a reinvestment mode to benefit customers and position yourselves well for next year and beyond? Or is it just Too early given your typical uncertainty around summer weather.
Well, I'll tell you the CE way is alive and well and we continue to work that system. As I shared in my comments, I do truly love that system and what it means for not only cost management, but what it means for Improved customer service and coworker engagement and employment not employment, empowerment. So we work it all the time because It will provide some nice value for our customers in addition to cost management. So that's well underway. But to get to the heart of your question, we're early in the 1st part of the year here, we feel good about the quarter and we'll continue, as you know, Andrew, when there's opportunities.
Should they show themselves, we'll reinvest for the benefit of our customers and for our shareholders here to really de risk the future years.
All right. Sounds good. Looking forward to the IRP.
Thank you.
And our next question today comes from Jeremy Tonet with JPMorgan. Please go ahead.
Good morning.
Hi, good morning. Thanks. I was wondering if you could comment a bit more on how energy transition could impact the upcoming IRP, Especially with the focus on hydrogen and expanded tax credits such as 45Qs enhancing CCS economics, What type of timeframe do you think this could make sense for CMS? Could it find its way into your plans? Or do you think they can find their way into your plans?
Well, we even talk about it in a bigger way than just energy transition. We call it the energy transformation. And certainly what we're leading here And it shows up on our first and our current and I would say a progressive integrated resource plan, the one that we're building out right now, Just a ton of solar, 1100 megawatts of solar, the retirement of Carbon 1 and 2 And energy efficiency demand response programs that are outstanding offerings for our customers. But With any integrated resource plan, particularly when you get to the end years of that plan, there's about a 10% to 20% gap that you got to close. And that's not unique To CMS, you'll hear our peers talk about that as well.
But I will remind you, we're one of the most aggressive plans out there in decarbonization by 2,040. So there does need to be technology advancements. That comes in carbon capture, that comes in hydrogen, that comes in terms of lithium ion, both from a reliability as well as Affordability perspective. And so all of the above is needed. And so in fact, we're just even tomorrow, I'm going to be with Department of Energy and Office of Management and Budget tomorrow to again, we're advocating for R and D type funding to continue to close that gap, Particularly in the out years.
And so we'll participate as it makes sense within the regulated utility to close some of those gaps. But again, they're out in the 2,035 The 2,040 timeframe. And then, Reggie, you might have something more to add on that as well.
Hey, Jeremy, the only part I would add to Garik's Comments, it's just around the tax incentives. I mean, it's obviously early days, but we've been encouraged with some of the proposals we've seen offered, particularly in the Wyden bill with Potential incentives applied on a tech neutral basis for 0 carbon emitting resource as well as potential flexibility on choosing PTCs versus ITCs And then more refundability, which is really one of the biggest constraints for utilities to execute on some of these renewable projects. So if we see good advancements there, that obviously allows us to do more front of the media solutions on a cost effective basis for customers. So that's encouraging, but obviously early days there.
Got it. That's very helpful. And then just wondering if you could kind of frame your thoughts for us when it comes to the proven versus maybe the less proven Algi's targets as far as how much could be directly owned by CMS versus PPAs, just kind of any framework you could share with us there?
Let me offer this from a proven perspective. One of the things that we are considering within this next IRP is Reliability. And so we look at loss of load expectations. And again, particularly in the backdrop of the unfortunate events in Texas, we're going to make that our system is reliable in every weather condition. We've got a history of that and we'll continue to do that.
And so clearly, we're going to go with Items that are proven, that doesn't mean we're not looking out forward and looking at R and D, but when it comes to putting Equipment on the grid, we want to ensure reliability. But Reggie, I don't you may want to add more to that to the question there, Let me just give you a little bit of context.
I'd be happy to. So as Garrick mentioned, Jeremy, in his Prepared remarks, we did recently get approval from the commission on our first tranche of new solar attributable to The current integrated resource plan and we were, I'd say, pleased with the average cost we So over the life of the projects when we looked at the owned opportunity versus the contracted. And so on a levelized cost of energy basis, we saw Kind of high $50 per megawatt hour for the owned solution and kind of low $50 per megawatt hour for the contracted solution. So that excludes kind of residual value and others of operational benefits and savings that the owned portion could offer over And so we do think that longer term there could be good opportunities as we think through the new solar build out Potentially own more. But again, it's early days in the context of the IRB.
I mean, we're thinking about 6 gigawatts over the next several couple of So more to come on that, but the first tranche looked pretty encouraging. Got it. So is
it fair to say there could be CapEx upside In the IRP here based on what you're talking about there?
Jeremy, we got $25,000,000,000 in the 10 years and $3,000,000,000 to 4,000,000,000 Opportunity out there and a long, long, long track record of organic needed customer investments in the state, renewables, electric and gas to decarbonize. And so Again, you know our history here. There's just lots of opportunities here at CMS Energy.
Got it. Just one last one if I could. With COVID and reopening, just wondering if you could comment a bit on low trends in service territory and degree of residential stickiness that you Have seen and could expect
to see over the balance of the year?
I'm going to turn it
over to Reggie first and then I'll come back to some larger COVID and state type topics. Reg, why don't you start?
Sure. Jeremy, pretty good trends over the course of the Q1 and I'm sure you saw some of the materials we Rolled out this morning. As I mentioned in my prepared remarks, residential up 2% versus Q1 of 2020. And so there still continues to be a little bit
of stickiness in residential, which is higher margin as we've
talked about in the past. Commercial down Which is higher margin as we've talked about in the past. Commercial down 4%, still not quite at the pre pandemic levels, but I think that has a bit to do with the resurgence that we've seen in terms of case counts in Michigan. And we do expect over the course of the year, both commercial and industrial, which was down about 2% will be at pre pandemic levels around mid year. We're also encouraged of what we've seen for most of April in our SmartMedia data, particularly for the residential Segment, which is about 4% ahead of plan.
And so again, the trends look quite good. And we're also seeing just good economic Trend in general, and I'll defer to Derek on some
of these details, but I think we've seen
the residential class up about 1% Versus the same period in 2020, we've seen commercial down excuse me, a little less than 0.5%. We're seeing good count volumes and I'll have Derek talk about the interconnection volumes we've seen, but it's been robust to say the least. So, Derek, I'll give it back to you.
Yes. Broadly from a Michigan perspective and I was with the governor this week on this, we've seen the COVID and this B117 variant, the number of Hospitalizations declined, a number of positive cases declined, vaccinations continue to increase. So I'd be surprised if there was an announcement here in the next couple of days That opens up more of Michigan as we move forward, which will help from a commercial perspective. But just look at unemployment. We're better than the U.
S. Right now across Michigan. And if you go into the heart of our electric service territory, Grand Rapids is even better. And we're seeing it too, not just in unemployment numbers, but new service connects. The number of requested well, first of all, 2020 was a record year for new service connects In the midst of a pandemic, in the first, Q1 is up 27% over last year over the same time period.
That's not just an initiation. That's actually initiation and constructed. So initiated and built, Up 27%. And so again, we see a number of positive indicators. I can go on and on about this.
Life sciences are up. Food processing is up. There's A great opportunity of growth we're seeing and I believe it's going to continue to pick up as we open up more and more of the state.
That's super helpful. That's it for me. Thanks.
And our next question today comes from Michael Weinstein with Credit Suisse. Please go ahead.
Good morning, Michael.
Hey, good morning, guys. In terms of a potential for
a higher corporate tax rate, could you talk about the potential impact that would have on you and your and the NOLs that you have through 2024, I think on the slides, And then also on the same line, if you have a higher tax rate, does that incur And let's say tax credit extension for renewables, does that was one offset the other? Does this encourage you and regulators to build To accelerate the build out of renewables in order to keep taxes down?
Let me offer a few comments on this and then I'll turn it over to Reggie as well. So you're getting really to the affordability and the headroom question. And as Reggie mentioned earlier, with the Wyden proposal, there's a few others out there that we're Following closely and we're advocating frankly with EEI in Washington. There's going to be a real tailwind here. I mean we already have a very aggressive solar build out In our current IRP and these renewable credits and Reggie went through some of the benefits and specifics of the Wyden proposal, but they can provide a nice Tailwind, a nice savings opportunity for our customers.
And so I get excited about that. And I mean, the glass is half full for me, but I think there's some real opportunities there. And to the degree I'll just keep this in mind, to the degree there are any headwinds or tax implications for our customers, remember this, If there's one company that I'm going to bet on, it's going to be CMS Energy. I mean, we've this is proven track record of delivering Year after year from a cost management perspective, and so through the CE way and the like. And then as Rejji indicated, these event Driven cost reductions, MCV, Palisades, coal plant retirements, I remain optimistic on our ability to manage it.
It's still early. There are still proposals on the table. I'm confident in our ability to manage it on behalf of our customers and keep bills affordable. Reggie, you might have more to add.
Yes. Michael, what I would just add to all of your Eric's comments is I too am encouraged, as I mentioned before, and what we're seeing in incentives. Now to get directly to your question around NOLs, so like we saw when tax reform was enacted in 2017, there was a remeasurement of NOLs and that led To a non cash loss and a pretty significant one just with the tax rate going from 35% down to 21%. So if you see it come back, let's say, to 28%, you'd have Favorable remeasurement. Clearly, we would carve that out like we did, but that could be beneficial because it creates a greater tax yield.
We'd also see some benefit At our parent and other segment, which as you likely know is primarily interest expense. And so you'd see just a greater value in that tax shield as well. Now To your question about whether there is a push for more renewable build given the incentives to offset the rate Prisis, we'll hold off on our speculation around that three-dimensional chest. But certainly, with the comments we offered earlier, we do think there Certainly potential attractive incentives and that should offset some of the rate increase implications, the total Tax rate increased above 21%.
Right. Right. Okay. You can see what I'm getting at, I mean, if you have a higher if federal government's giving away tax credits at the same time they're It would seem that state regulators would want you to build more, just a standard reason, I guess. Anyway, that's all I have.
Thanks. Thank you. Thanks, Mike.
Our next question today comes from Julien Dumoulin Smith with Bank of America. Please go ahead.
Good morning, Jim. Hey, good morning, team. Thanks for the time and the opportunity. So if I can keep riffing off perhaps Couple of the other questions here in brief, then we're getting late. With respect to the widened plan or what have you in terms of infrastructure, How do you think, 1, about the different scenarios that you come out with on the IRP?
And 2, probably more critically, is there any risk of delay in Timeline based on the timeline of credits. I'm just curious as to how you're thinking about the different scenarios and impacts here, given well, I'll leave it open then for you guys.
There's a lot of proposals, tax proposals on the table and we don't see them getting being settled here in the next Several months. We're on track to file our IRP in June and we'll meet those objectives or really we're aimed at those objectives They laid out there in the presentation. And so, yes, it'll be a plan That's good for Michigan and good for our plan and matches our triple bottom line.
All right. Fair enough. But it doesn't seem as if you're going Taylor, any of the specific folks around any of the proposed infrastructure efforts that could shift the planning through the RFP cycle or process, right?
It's just too early. We're going to I mean, we've done all the modeling. We're Finalizing the details, we've got a good plan. We'll take it to the Board of Directors as we normally do. But these proposals are going to move.
They're probably going to move a lot this summer As well. And so they're a bit unpredictable. I mean, there's a lot of positives we see, but they're a bit unpredictable on where they land. And Reggie, you may have some other thoughts too.
Julien, the only thing I would add to Gary's comments is that it's important to remember that the legislation and how it's structured and the nature of the IRP process is pretty multi It takes into account the dynamism of the world. And so we look at a business usual business as usual case. We look at a descent in the emerging technologies. We Environmental policy changes and then we have various variables that low price, Low growth, gas prices, etcetera. And so there are hundreds of permutations as we structure the IRP and we do take into account a number of different scenarios and then we do try What's best from a triple bottom line perspective when you put it all through that vegematic.
And so I'd say there's a lot of dynamism. What's taking place now, I do think is to some extent accounted for, but we know that we'll file another one in a few years if the world changes. And so that's the other benefit of this process is that it's very iterative as
If you just boil this down, Julian, I think to the degree of this is renewable tax. And again, we like The technology neutral, what it does is it makes it cheaper, right? And so that is the tailwind. That's the opportunity. And so we'll file a great IRP.
I know this and it's just going to make it cheaper and less expensive for our customers, which is a good thing.
Great. Well, best of luck. We'll speak to you after.
All right. Cheers.
Thanks, Julian.
And our next question today comes from Travis Miller, Morningstar.
Please go ahead. Good morning, Trent.
Good morning, everyone. Thank you.
I was wondering, we've seen
a couple of states here just recently suggest potentially Securitization options for coal plant retirements and accelerating that, what's your thought around that? Have you had discussions with Michigan politicians or regulators around that? Just one of your thoughts.
This is I mean, we have We have worked securitization here for a long time in Michigan. In fact, as part of the law here in Michigan, it requires a 90 day it's a 90 day process. We just completed 1 in December for Karn. 1 and 2, many states, many jurisdictions do not have this. We've got a good process underway that exists.
Now, it does just in full transparency, there's One of the challenges with coal plants out there is they have a remaining book value. And so if you continue to securitize those, they can have an impact on credit metrics. And so as I shared in our IRP objectives, that's one of the things that we are watching and needs and we need to be thoughtful about As we pursue decarbonization and our clean energy goals.
Sure. No, I appreciate that. That's all I had. You answered my other questions. Appreciate the time.
Yes. Thank you, Travis.
And our next question today comes from Anthony Chordot with Mizuho.
I have a quick question. Most of them have
been answered and it's Follow-up on
an earlier question on decarbonization and you kind of touched briefly on maybe the events in Texas, but have you noticed any pause in the policyholders Or any of the parties that you're involved with during an IRP process of maybe slowing down the decarbonization due to reliability. I know
you touched
liability earlier, but have you noticed any change following the Texas storms and maybe there's more of interest in keeping Fossil generation around a little longer.
As I shared earlier, our integrated Resource plan, I'm getting way into the engineering weeds with you here, has a loss of load expectation. And so that's one of the criteria that we're going to That we're going to make sure that we deliver on. And so that reliability can come in a variety of different ways. And so we but we saw for reliability. And so again, we want to make sure what we present to The commission, to the staff up there, to all our interveners that it has to when I talk about With our coworkers, when I talk about in the community, when I talk about in Lansing, it has to be affordable, it has to be reliable, and it has to be clean.
And so we have to do all three. That's the challenge. And so again, we've got a great plan and you'll hear more about it in Q2.
Great. Thanks for taking my question.
Yes. Thank you.
And our next question today comes from Stephen Byrd with Morgan Stanley. Please go ahead.
Good morning, Steven.
Hi, good morning. This is Laura calling from First Even. On the energy transformation front, And I'm sorry if this is repetitive, but I think the question is a little bit different. Beyond potentially accelerating the retirements of the capital units, How much more can you do without compromising the reliability of the grid? I'm wondering if there are gas plans that you could retire early without compromising the reliability of the grid and without assuming new technologies pick up, basically how much is affordability versus reliability?
Hi, Laura. How are you? Good to have you on the call. Thanks. That's what that loss of load expectations that it looks at.
Again, We're going to model out energy and energy supply for 20 years. We're going to make sure that we look at what the reliability looks like across the system to make sure it's the most Affordable plan for our customers to make sure it's clean. And then from an investor standpoint, we're going to make sure that, one, there's a nice Opportunity for growth, own growth within the state of the needed customer investments As well as want to make sure a healthy balance sheet. So that's the entire balance. And so that's what the model solves for.
So the question you're asking is what That's exactly what the model is solving for. What is that right balance point where everything comes together? And so we'll share more of what that And all that mix here in Q2.
Understood. And lastly, if I may, Could you comment a little bit on your current efforts on R and D? And if there are any voluntary Programs offered or that will be offered in your gas utility?
So there is a small amount of RNG on our system as we speak. To obtain net 0 methane by 2,030, we'll have to put a bit more of RNG on our system. When I say a bit, let me quantify that. We move about 300,000,000,000 cubic feet of natural gas on our system on an annual basis. We'll have to put about 0.3 yes, I said 0.3000000000 cubic feet.
So that will help us get to net 0 along with some thoughtful and deliberate investments in replacing old names and services.
So there'll be
more added as we move forward. Now as we again continue to think about our carbon footprint, there's the potential to add more renewable natural gas across Our system will do that in a thoughtful and deliberate way that's affordable for our customers and is considered off the planet. Now to your specific question on a program, We do not have a specific renewable natural gas program for our customers. We intend to add 1 over the course of this year and so we'll be making a filing In 2021, that offers a program for our customers in this space.
Understood. Thank you so much.
And ladies and gentlemen, this concludes today's question and answer session. I'd like to turn the conference back over to Gary Grochow for any final remarks.
Thank you, Rocco. And I'd like to thank you all again for joining us today. I'm looking forward to when we can meet face to face, Hopefully soon, we can do that safely before the year is over. Take care and be safe.
Thank you, sir. This concludes today's conference.