Good afternoon, and welcome to WEC Energy Group's Conference Call for 4th Quarter and Year End 2020 Results. This call is being recorded for rebroadcast and all participants are in a listen only mode at this time. Before the conference call begins, I remind you that all statements in the presentation other than historical facts are forward looking statements that involve risks and uncertainties that are subject to change at any time. Such statements are based on management's expectations at the time they are made. In addition to the assumptions and other factors referred to in connection with the statements, factors described in WEC Energy Group's latest Form 10 ks and subsequent reports filed with the Securities and Exchange Commission could cause actual results to differ materially from those contemplated.
During the discussions, referenced earnings per share will be based on diluted earnings per share unless otherwise noted. After the presentation, the conference will be open to analysts for questions and answers. In conjunction with this call, a package of detailed financial information is posted at wecenergygroup.com. A replay will be available approximately 2 hours after the conclusion of this call. And now it's my pleasure to introduce Gale Klappa, Executive Chairman of WEC Energy Group.
Good afternoon, everyone. Thank you for joining us today as we review our results for calendar year 2020. First, I'd like to introduce the members of our management team who are here with me today. We have Kevin Fletcher, our President and CEO Scott Lauber, our Chief Operating Officer Xiaolu, our Chief Financial Officer and Beth Straka, Senior Vice President of Corporate Communications and Investor Relations. As you saw from our news release this morning, we reported full year 2020 earnings of $3.79 a share.
Shao will provide you with more detail on our financial metrics in just a few minutes. But first, I'm pleased to report that we delivered a record year on virtually every meaningful measure of performance from customer service to network reliability to earnings per share, despite the challenges posed by the COVID-nineteen pandemic. Our focus on efficiency, on financial discipline and an encouraging rebound in energy demand during the second half of the year resulted in the highest net income from operations and the highest earnings per share in company history. And throughout the difficulties of the pandemic year, we also accelerated our support for the communities we serve. In total, our companies and foundations donated more than $20,000,000 to non profits across our service area, including more than $2,000,000 to direct COVID-nineteen relief efforts.
We also made significant progress on diversity and inclusion. We spent a record $303,000,000 with diverse suppliers during the year and through our board refreshment, 46% of our board members now are women or minorities. In addition, we set new aggressive goals as we continue to improve our environmental footprint. In fact, I'm pleased to report that based on preliminary data for 2020, reduced carbon dioxide emissions by 50% below 2,005 levels. And we have, as you know, a well defined plan to achieve a 55% reduction by the end of 2025.
Over the longer term, we expect to reduce carbon emissions by 70% by 2,030. And as we look out to the year 2,050, the target for our generation fleet is net zero carbon. Our new 5 year capital plan lays out a roadmap for achieving these goals. We call it our ESG progress plan, the largest 5 year plan in our history that calls for investment in efficiency, sustainability and growth. And it drives average annual growth in our asset base of 7% with no need for additional equity.
Highlights of the plan include 1800 megawatts of wind, solar and battery storage that would be added to our regulated asset base in Wisconsin. And we've allocated an additional $1,800,000,000 to our infrastructure segment where we see a robust pipeline of high quality renewable projects, projects that have long term contracts with strong creditworthy customers. All in all, our plan positions us to deliver among the very best risk adjusted returns our industry has to offer. And now let's take a brief look at the regional economy. It was of course an unusual year for everyone, but many of our commercial and industrial customers proved to be quite resilient, providing essential products and services such as food, plastics, paper, packaging and electronic controls.
Latest available data show Wisconsin's unemployment rate at 5.5%. That's more than a full percentage point better than the national average. And as we look to the year ahead, we see positive signs of continued growth. For example, Green Bay Packaging is building a major expansion of its mill in Northeastern Wisconsin. It's a $500,000,000 addition and is expected to be completed later this year.
The Foxconn, Komatsu Mining, Haribo and Milwaukee Tool projects that we've reported to you in the past are all moving forward as well. So we remain optimistic about the strength of the regional economy and our long term sales growth. Finally, I know many of you are interested in our rate case calendar for the year ahead. As you know, under normal circumstances, our Wisconsin utilities would be filing rate reviews later this spring for energy rates that would go into effect on January 1, 2022. Of course, we're in the middle of anything but normal times, and I can tell you that we've begun discussions with the commission staff and we'll be talking with other major stakeholders to determine whether a 1 year delay in a filing would be in everyone's best interest.
I expect the final decision on this around the end of the Q1. And now I'll be happy to turn the call over to Scott for more detail on our sales results and our forecast for 2021, as well as an update on our infrastructure segment and our O and M performance. Scott, all yours.
Thank you, Gail. Turning now to sales, we continue to see customer growth across our system. At the end of 2020, our utilities were serving approximately 11,000 more electric and 27,000 more natural gas customers compared to a year ago. Retail electric and natural gas sales volumes are shown beginning on Page 17 of the earnings packet. Overall, retail deliveries of electricity, excluding the iron ore line, were down 2.1% compared to 2019.
And on a weather normal basis, deliveries were down 2.9%. Natural gas deliveries in Wisconsin decreased 7.9% versus 2019 and by 2.4% on a weather normal basis. This excludes gas used for power generation. On the electric side, you'll note the positive trend that we have seen in residential sales has continued. Importantly, it has counterbalanced the weakness in small commercial and industrial sales caused by the pandemic.
Meanwhile, large commercial industrial sales, excluding the iron ore mine, were down 7.1% for the full year compared to 2019 on a weather normal basis. However, these sales were only down 4.6% for the Q4, a notable positive trend reflecting the recovery of Wisconsin's economy. Now I'd like to briefly touch on our 2021 sales forecast for our Wisconsin segment. We are using 2019 as a base for 2021 retail projections. We're using 2019 because it represents a more typical year.
We are forecasting a decrease of 1.5% in weather normal retail electric deliveries, excluding the iron ore mine compared to 2019. This would represent a 1.4% increase compared to 2020. We expect large commercial and industrial sales to continue to improve and anticipate the same positive offsetting relationship between residential sales and small commercial industrial sales. For our natural gas business, we project weather normalized retail gas deliveries to decrease by 2.4% compared to 2019. This leaves the projected sales outlook compared to 2020 relatively flat.
With this in mind, we remain focused in operating efficiencies and financial discipline across our business. We lowered operations and maintenance costs by more than 3% in 2020. And we continue to adopt new technology and apply best practices. We plan to reduce our operations and maintenance expense by an additional 2% to 3% in 2021. I also have an update on our infrastructure segment.
The Blooming Grove and Tatanka RIN projects are in service now and came in ahead of time and on budget. As a reminder, our Thunderhead wind investment is projected to go in service by the end of the Q3. We expect this segment to contribute an incremental $0.08 to earnings in 2021. And now I'll turn it over to Kevin for his update on utility operations.
Thank you, Scott. Throughout 2020, we kept the energy flowing to our customers safely and reliably. Our largest utility, We Energies, was named the most reliable electric company in the Midwest for the 10th year running and our Peoples Gas subsidiary was named the most trusted brand and a customer champion for the 2nd year in a row by Escalant, a leading behavior and analytics firm. Now I will beautifully stand on current projects in our ESG progress plan. As you heard in our last call, the 2 Creek Solar Farm is now operating.
As we've mentioned, this is a very large project. In fact, just days after achieving commercial operation this past November, our share of this project accounted for more than 20% of the solar output in the entire MISO generation market. Also in Wisconsin, Weenergies is making progress in the approval process for 2 liquefied natural gas facilities, which would provide enhanced savings and reliability during our cold winters. If approved, we expect to be in construction in the fall of this year and to invest approximately $370,000,000,000 in total to bring the facilities in operation in 2023. And as Gail just mentioned, our ESP progress plan includes 1800 megawatts of wind, solar and battery storage.
Billings with the Wisconsin Commission for a number of these projects will begin in the Q1. Turning to Illinois. As you may recall, we are in the midst of a rate review for one of our smaller subsidiaries, North Shore Gas, which serves approximately 160,000 customers in the northern suburbs of Chicago. Rates for North Shore Gas were lab set more than 5 years ago before we acquired the company. Since then, we have consistently invested capital to serve our customers while reducing operating costs.
The Illinois Commerce Commission has set a schedule for concluding the case. Greetings are expected to begin in late April with the final order in September. And with that, I'll turn it back to Gail.
Kevin, thank you very much. We're confident that we can deliver our 2021 earnings guidance in the range of $3.99 a share to $4.03 a share. This represents earnings growth of between 7% 8% of our 20.20 base of $3.73 a share. And you may have seen the announcement that our Board of Directors at its January meeting raised our quarterly cash dividend to $0.6775 a share for the 1st quarter of 2021. That's an increase, folks, of 7.1%.
The new quarterly dividend is equivalent to an annual rate of $2.71 a share, and this marks the 18th consecutive year that our company will reward shareholders with higher dividends. We continue to target a payout ratio of 65% to 70% of earnings. We're right smack dab in the middle of that range now, so I expect our dividend growth will continue to be in line with the growth in our earnings per share. Next up, Shah will provide you with more detail on our financials and our Q1 guidance. Shah?
Thanks, Gail. Our 2020 earnings of $3.79 per share increased $0.21 per share compared to 2019. Our favorable 2020 results were driven by a number of factors. These included the execution of our capital plan, rate adjustments at our Wisconsin Utilities, ROE Improvement at American Transmission Company, production tax credit in our infrastructure business and continued emphasis on operating efficiency. These factors helped us to overcome the sales impact of COVID-nineteen and mild winter weather, and all of our utilities met their financial goals in 2020.
The earnings packet placed on our website this morning includes a comparison of 2020 results on Page 21. I'll walk through the significant drivers impacting our earnings per share. Starting with our utility operations, we grew our earnings by $0.22 compared to 2019. First, O and M expenses were favorable. This includes $0.08 from lower day to day O and M expenses and $0.09 from lower sharing amounts in 2020 at our Wisconsin utilities.
2nd, despite the impact of COVID-nineteen and reduced wholesale and other margins, rate adjustments at our Wisconsin utilities continued capital investment and fuel drove a net $0.21 increase in earnings. 3rd, we had $0.12 of higher depreciation and amortization expense and an estimated $0.05 decrease in margins related to mild winter weather year over year. These factors partially offset the favorable items we discussed. Overall, we added $0.22 year over year from utility operations. Earnings from our investment in American Transmission Company increased $0.08 per share compared to 2019.
Recall that $0.07 of the $0.08 were driven due to ROE changes from FERC orders issued in November 2019 May $2,020.04 resulted from the November 2019 order and $0.03 from the May 2020 order and a $0.01 came mainly from continued capital investment. Earnings at our Energy Infrastructure segment improved $0.05 in 2020 compared to 2019, primarily from production tax credits related to wind farm acquisitions. These include the Coyote Ridge wind farm placed in service at the end of 2019, additional 10% ownership of the Upstream Wind Energy Center and the Blooming Grove Wind Farm came online in early December. Finally, you'll observe that we recorded a $0.09 charge in corporate and other to account for the make whole premiums we incurred in the Q4 as we refinanced certain holding company debt to take advantage of lower interest rates. The remaining $0.05 decrease is related to some tax and other items partially offset by lower interest expense.
In summary, WEC improved on our 2019 performance by $0.21 per share. Now I'd like to update you on some other financial items. Our effective income tax rate was 15.9% for 2020. Excluding the benefit of unprotected taxes flowing to customers, our rate was 20.2%. Looking to 2021, we expect our effective income tax rate to be between 13% 14%.
Excluding the benefit of unprotected taxes flowing to customers, we project our 2021 effective tax rate to be between 19% 20%. As in past years, we expect to be a modest taxpayer in 2021. Our projections show that we will be able to efficiently utilize our tax position with our current capital plan. Looking now at the cash flow statement on Page 6 of the earnings package. Net cash provided by operating activities decreased $149,500,000 Our increase in cash earnings in 2020 more than offset by higher working capital requirements, primarily related to COVID-nineteen and by higher pension contributions.
Total capital expenditures and asset acquisitions were $2,900,000,000 in 20.20, a $345,000,000 increase from 2019. This reflects our investment focus in our regulated utility and contracted renewable businesses at our Energy Infrastructure segment. In terms of financing activities, in the Q4 of 2020, we opportunistically refinanced over $1,000,000,000 of holding company debt, reducing the average interest rate of these notes from 3.3% to 1.5%. We continue to demonstrate our commitment to strong credit quality. As expected, our FFO to debt ratio was 15.4% in 2020.
Adjusting for the impacts of voluntary pension contributions and customer arrears related to COVID-nineteen, our FFO to debt was 16.9% in 2020. At the end of 2020, our ratio of holding company debt to total debt was 28%, below our 30% target. In addition, as Gail mentioned, we have no need for additional equity over the 5 year forecast period. Finally, let's look at our guidance for the Q1 of 2021. Last year, we earned $1.43 per share in the Q1.
We project Q1 2021 earnings to be in the range of $1.45 per share to $1.47 per share. We have taken into account mild weather to date and this forecast assumes normal weather for the rest of the quarter. For full year 2021, we are reaffirming our annual guidance of $3.99 to $4.03 per share. With that, I'll turn it back to Gail.
Sean, thank you so much. Overall, we're on track and focused on delivering value for our customers and our stockholders. Operator, we're ready to open it up for a little trash talking in the Q and A portion of our conference call today.
Thank you very much. Now we will take your questions. The question and answer session will be conducted electronically. Your first question comes from Shahriar Pourreza with Guggenheim. Your line is open.
Hi, Ken, Raul, Shar. How are you today?
Hey, sorry to disappoint. It's actually James for Shar.
That's all right. Better looking and younger.
Yes, exactly. The easier question. So I guess if we could start on the infrastructure side. You've laid out $2,200,000,000 going forward. How should we sort of think about the cadence of that?
And does the extension of tax credits earlier this month kind of change any of your timing or thoughts there? Any changes in the opportunity set?
Happy to answer those questions. First of all, for the 5 year plan, we've laid out $1,800,000,000 of additional capital in that 5 year plan. As I mentioned in our in the prepared remarks, we're going through due diligence on a number of projects right now. We've a robust pipeline that we're looking at. And because we're so far ahead of schedule on our infrastructure segment right now, we can afford to be very selective and really cherry pick only the very best projects that meet or exceed our criteria.
So long story short, the cadence will continue. Wouldn't surprise me if we have 1 or 2 more announcements during the calendar year 2021. And then regarding the change in the tax credits, the extension of tax credits, really all of that all that does I think is give us even more to look at in the pipeline. It certainly does not in any way diminish our opportunity set. And remember that we're really utilizing our tax appetite here as a way to continue to grow earnings, continue to improve our environmental footprint and build optionality for down the road when we're certainly going to need in our retail rate base more carbon free energy.
Just so there's no confusion, it is $2,200,000,000 in
the 5 year plan. Dollars 400,000,000
of that is the Thunderhead project that has been announced already. The additional $1,800,000,000 is just what hasn't been announced yet, just so there's no confusion.
Yes. We have $1,800,000,000 to look at. Thunderhead is on its way, we hope, by the end of Q3.
Perfect. And I guess just kind of following on the clean resources side. Since you and Shar last spoke, we've seen Nextera formally file at the NRC to extend the life of Point Beach. Have you had any conversations with them yet? Are there any general updates there to think about potential recontracting or retirement?
Well, first of all, they're in the very early stages of thinking through what they might want to put together for a life extension at Point Beach. And we have had some very preliminary discussions. But one thing is very clear from our standpoint and NextEra's standpoint, we are going to make the best decision possible from the standpoint of economics for our customers, whether that includes an extension of Point Beach, whether that includes an investment opportunity, but either way, I see us having a robust investment opportunity set as we get into the next decade one way or another.
Got it. Thanks guys and congrats on a strong finish to the tough year.
Thank you for your questions. Appreciate it. Tell Shar to behave, okay?
Will do.
Your next question comes from with Evercore.
Just I'm clear on the quarter. Thanks for the update on 'twenty one. Just on the rate case front, Gail, just have you been here before? So have you done this in Wisconsin before? Can you just remind us?
And what might the options look like? Could you defer the rate increase? Or if I'm thinking about 2022, could you accelerate your cost savings to sort of stay on target with your 5% to 7% EPS growth rate? Just any color around that would be helpful. Thanks, Gail.
Sure. Thank you, Dheganesh. I appreciate the question. I mean, the short answer is yes, we have had stay outs before. In fact, if you think about what occurred after the acquisition of Entegris in 2015, we were out of a rate case for 4 years, again, in constructive discussions with the commission staff and the intervener groups.
So again, as I mentioned to you, we're in early stages of discussion right now with the commission staff. We will be talking with all the stakeholder groups. The concept would be rather than potentially filing a rate case on the normal schedule this year, the concept would be, is it in everyone's best interest to have a 1 year delay in the filings for our Wisconsin utilities. And so we're working on what the outline of that looks like and whether or not again, everyone would agree that it's in the best interest of all parties involved for us to push out given where we're at with the economy, etcetera, for us to push out a rate filing for 1 year. And I do believe those conversations are constructive and we should have a final decision, I would think around the end of the Q1.
Got it. Thanks, Gail. That's all I had. Thank you.
Thank you. Take care.
Your next question comes from Julien Dumoulin Smith with Bank of America. Your line is open.
Julien, how are you doing?
Great. Thanks for the time guys. Afternoon. So I listen, incredible cost reductions, right? And so here's what I want to know.
How are you guys continuing to reduce costs as you think about this 2% to 3% after a year where so many of your peers already brought down costs and the question is the sustainability of those cost reductions. So you can elaborate on that. And then separately, just to follow-up on the last one, I'll throw it in there. You've already articulated some benefits on O and M, you've talked about your refinancing activities here that certainly have some tailwinds. What other pieces in this what other ingredients are there in terms of a stay out here that are relevant in these conversations if you mind?
Okay. Great questions as always, Julien. Well, first of all, related to the sustainability of O and M reductions, Let me be very clear. We have continued runway and I believe strong sustainability for continued O and M reductions. And let me give you three reasons why.
The first is we're pretty damn good at it, number 1. Number 2, we continue to benefit from putting in common systems across our footprint. Remember, we had the acquisition of Entegris at the end of 2015. Since then, we have done an enormous amount of work to basically put everybody on the same platforms. We put in a new general ledger for every one of the companies just Kevin, just 10 days ago, 12 days ago.
We completed a major conversion to a brand new customer information and billing system where all 7 of our customer facing utilities are now on that system. That is going to drive optimization of our call centers, significant cost reduction. So number 1, we are very, very good at financial discipline. Our operating folks are just terrific. Every single area of the company has a cost initiative for 2021 and beyond.
And it really it's more than a cost initiative. It's an efficiency initiative. So I feel very good about basically our DNA in terms of continuing to drive efficiency and best practice across the enterprise, number 1. Number 2, just the continued ability to optimize the organization, we still have a runway to go there post the acquisition of Entegris. And the example I gave you of a common customer information and billing system, I think is a very good example of that.
And then thirdly, we've announced, as you know, the retirement of a number of older less efficient coal fired power plants. There are significant O and M savings that will derive with the retirement of those plants, particularly over 2023, 2024 and 2025. The retirements are really going to come in that timeframe. But there are 1,000,000 of dollars of cost savings as we retire those plants going forward and replace that capacity with much more efficient with much more efficient technology. So that's a long answer to your question, but I hope it gives you some color on, first of all, our success at continuing to drive efficiency, but also our the reason why we feel that that's sustainable and ongoing.
Right. And then in terms of the rate case itself, I mean, it sounds like you've got the key ingredients to justify not going in for a rate increase, I suppose.
Well, Julian, if we didn't, we'd be talking a whole different story here. We feel good about depending upon everyone's view of whether or not it's in the best interest of the state to us for us to stay out for another year, we feel very good about our ability to do that again for both our customers and our shareholders.
Yes, absolutely. Excellent. And that comment on 23% to 25% that relates to Columbia here, just to make the tick and tie thing?
Oh, gosh, it relates to the 4 older units at our Oak Creek site. It relates to Columbia. That was our player to be named later in our investor deck. So that's because our Wisconsin Public Service subsidiary is a minority owner at Columbia and it relates to a unit as well at Wisconsin Public Service.
So it's across the fleet.
Excellent. All right. We'll leave it there. Thanks, guys.
Take care, Julien.
Your next question comes from Jeremy Tonet with JPMorgan. Your line is open.
Great, Jeremy. How are you today?
Good. Good afternoon. Thanks for having me.
It's been nice being had.
Just wanted to kind of start off with a high level question, if I could. The Biden administration has some new emission reductions goals out there. And I was just wondering if you had any thoughts on them and if this becomes law, how this might impact WACC?
Are you thinking, Jeremy, specifically about the aspirational goal of a carbon free grid by 2,035? Is that your thought process?
Yes.
Okay. All right. Well, first of all, I think if you asked anyone in our industry, you never say never, but that is 1 tall order. I would kind of analogize it to a moonshot actually. When you think about what it would take, and again, the pace of technology development can change all of this.
When you think about what it would practically take to get to a full carbon free grid by 2,035, you would frankly have to have enormous technological change. You think about what levers could you pull to get there and they're probably 4. 1 might be huge advancement in modular nuclear, One might be continuing advancement in the cost effectiveness of carbon capture. One might be a breakthrough in long duration battery storage, and the other would be hydrogen. Again, when you look at where hydrogen is at in terms of its stage of development, hard to think that that could be widely available as a tool in 2,035.
Modular nuclear is a long way away of being widely available. So that kind of leaves you with carbon capture. That also leaves you with can there be some more significant advancement in battery technology for longer duration storage. I think those are the elements that we would continue to look at. If I were a betting man, I would say carbon capture is probably further along.
But long story short, it's a tall order. And in the meantime, I think the good news is our industry has done so much already. Our company has done so much already in emission reduction that we're our goals are mirror the goals in the Paris Climate Accord. So regardless of whether we're totally there in 2,035, I think we can continue on the path of reducing emissions. We don't need any change of technology to hit our 2,030 goal of a 70% reduction.
So I'm still optimistic about the path of emission reductions and we'll see about 2,035. But I guess my bottom line message is never say never, but it would take very significant technology evolution.
That's very helpful economic context. I appreciate that. Thank you.
You're welcome.
And just one last one, if I could. Just to clarify here, I might have missed it here, but could you confirm if the guide, the 7% to 8% guide is based off the 3.73%, if that's how we should be thinking about the CAGR here?
Yes, it's based off
the midpoint of our 2020 original guidance, which is 3.73.
That's great. Thanks so much.
You're welcome. Good questions, Jeremy.
Your next question comes from Michael Weinstein with Credit Suisse. Your line is open.
Hello, Michael. How are you doing today?
All right. I'm doing good.
Well, your technology may not be doing so good, Michael. Operator, unfortunately, I think Michael cut off there.
Okay. Thank you. Your next question comes from Michael Lapides with Goldman Sachs. Your line is open.
Hi, Mike.
Hi, Mike. Thanks for taking my question. I have 2 for you. One is well, one may be for others on the team, one for you. Just curious for you, there are lots of states that are talking about or putting out restrictions on gas distribution customer demand growth or that would impact gas distribution volumetric growth.
I guess my question to you is, A, what's your view on that in general? It's clearly had
an impact on kind of
the pure play gas utilities out in the market, but also just how investors and how policymakers are thinking about gas distribution businesses? And are you seeing any of that type of activity in the states you serve?
Short answer and it's a good question, Michael. Short answer is no. In fact, I believe in one of the states we serve, there's someone who's drafting legislation to make sure there is never a ban on the use of natural gas, particularly for home heating. Couple of thoughts along those lines, and I'm happy to have Kevin Shaw, Scott give you their view or add to anything that I might say. First of all, the region we serve, our 4 state area with natural gas, Well, let me give an example.
It's going to get according to the weather forecast, 32 below in International Falls, Minnesota this Sunday. There's not a heat pump in the world or one under development that could keep you warm at 32 Below. So the market share for natural gas heating in each of the 4 states where we provide natural gas is huge. And on average in Michigan, Wisconsin, Minnesota and Illinois, on average, it's almost a 70% market share. So natural gas for home heating has about a 70% market share.
There's a reason for that. It's cost effective, it's convenient, it's clean. And in these kind of climates, natural gas is really the best alternative. Now looking way down the road, and some have said, well, maybe hydrogen will take the place of natural gas. Well, you still have to get the hydrogen from you still have to get the hydrogen to the customers.
And as difficult as it would be, as difficult as permitting it is, as difficult as it is to build infrastructure in this country today, I can't imagine it's practical to develop an entirely new distribution network. And technologically, we believe with some slight changes, natural gas distribution network could carry hydrogen fuel. So my sense is that the fear about the future of natural gas is a bit overblown, maybe way overblown. But in a climate like ours, in the upper Midwest, natural gas is going to be an important product, I believe for many years to come. And Scott, we're still seeing very strong customer growth on the natural gas delivery side of the business.
Yes, that's correct, Gail. In fact, we are still seeing, especially in Wisconsin, Michigan and Minnesota, about 1% new customer growth. And we saw a large customer even switch over in the fall from using coal their industrial process over to natural gas. So we're still seeing a really good growth on the customer side
in natural gas. John, I'd also say that we're seeing conversions from propane still as well. So in our geographic area, gas will be a part of our future
for the
near future.
That's a very good point. If you look at market share, I mentioned about a 70% market share for natural gas. Propane is in our 4 states, the next most used fuel source. So yes, and people are moving off of propane over to our gas distribution network. Michael, I hope that responds.
No, that's super helpful. Just one quick follow-up. Whether organically, meaning via growing the rate base faster than your current plan or inorganically, would you be willing to tilt the mix of the earnings power of the company even more towards being more towards gas versus electric?
Michael, you never say never. But when I think about capital allocation and when the 4 of us, when Sean, Scott and Kevin and I look at our opportunities with our team, we see so many significant investment opportunities on the electric side that I don't practically, I think our set of investment opportunities is even greater as electrification continues and as the push toward renewables continues. So again, you never say never, but our investment opportunity set, I think, is even more significant on the electric side. That's where our capital allocation will continue to grow.
Got it. And then last one, if you'll pardon me. Camille ever disclosed or would you disclose what you think your excess balance sheet capacity is? Meaning, how much incremental more investment, whether on the infrastructure segment or at the core utilities in Wisconsin or Illinois or elsewhere? How much incremental investment could you make with your current balance sheet and expected balance sheet before it would require you to seek other external financing that's not just debt financing.
So how much more can we do if we were to issue more equity or not issue more equity?
Yes, I guess not issue equity. Like do you have excess balance sheet capacity? Do you have the ability to raise your capital plan without actually having the issue?
Well, I'm going to ask Shao to give her a view on this as well. I'll give you my overall kind of high level opinion. And that is that we try to marry our capital plan against 3 very important criteria. The first is what is the need? I mean, we're in a most of our assets are regulated assets.
You have to prove the need to make those investments. So number 1, what is the need? Number 2, how do you finance it and maintain the solid credit metrics that we strive to maintain and have maintained. As you know, we have one of the stronger balance sheets in the industry and we intend to keep it that way. And then number 3, if there were an opportunity, would it require more equity?
But long story short, we really try we really try to balance the need and the financing to maintain the kind of credit quality. Sean?
Yes, I totally agree. I think I would just add 2 more thoughts. One is WEC, you heard me say all the utilities met the financial goals in 2020. Actually that has been a track record. So in terms of putting money to work and we deploy $3,000,000,000 a year, We earn our allowed ROEs at the utilities and you generate very healthy internal cash as a result.
So that's number 1. Number 2, you heard us say that for the WEC, the WEC infrastructure investment, We very much focused on using our own tax appetite. We focused on the time horizon when we could get the cash back. And we just try to take advantage not only the investment opportunity, but also the cash flows. So I think overall, the combination of strong utility performance and the ability to recover the cash from the Wacky infrastructure investment, I think really allows us to continue to be on the trajectory that we have been on.
Your next question comes from Steve Fleishman with Wolfe Research. Your line is open.
How are you doing, Steve?
Yes. Hi, Gail and everyone. Good afternoon. So just a question in Wisconsin related to the coal shutdowns and regulatory treatment. Could you just remind us what you've done so far with that?
And would something related to that potentially be in your stay out agreement? And how you're kind of thinking about that overall?
Yes, good question, Steve. First of all, if we were to come to a stay out agreement, it would not involve any discussion or any delineation of a retirement of coal plants because it's outside of the rate case window right now. So again, we're talking about 2023, 2024 for, the majority of the retirements that we're talking about, including the one of Colombia that was just announced by Alliant. So there would be no need to address the coal plant retirements in any kind of a stay out arrangement, if I'm making any sense to you. Secondly, if you think about what we have done, so we've retired a fair amount of capacity already.
We've retired, I think, 65% of our coal fired capacity since about 2015. And in essence, the unrecovered book balance of those plants has been fully recovered with the exception of $100,000,000 of unrecovered book balance at Pleasant Prairie, which is a large coal fired power plant in Southeastern Wisconsin. That was our most recent retirement. That $100,000,000 is being securitized. In fact, expect to be to have a securitization offering this year.
Got it. Okay. Great. And just one other question is on, we're going to have a new FERC ultimately Democrat majority. And I'm just curious if you have any thoughts on whether there could be another change in transmission policy or ROEs or you think it will stay relatively stable?
Steve, I'm guessing relatively stable, if not up. And the reason for that is when you talk to as we have, when you talk to people early now in the Biden administration, there is enormous focus on incentivizing renewable development, as you know, an enormous focus. And I think the appointees that we will see that the Federal Energy Regulatory Commission, I'm guessing will fully understand that you're not going to reach the administration's goals for renewable development without further incentivizing transmission development. Those 2 go hand in hand, chicken and egg, I mean, it's got to be done. So it would be almost counter to a huge tailwind of public policy to try to do anything from here that would not continue the return incentives for needed transmission.
So my guess is that the overriding public policy will keep things stable or at least stable if not positive at FERC.
Great. Thank you very much.
You're welcome, Steve. Appreciate your call.
You bet.
Your next question comes from Neil Colton with Wells Fargo. Your line is open.
Hey, Neil. How are you doing?
I'm doing great.
St. Louis is lovely this time of the year. So
Well, you're invited to International Falls this weekend.
All right. So anyway, just I'm just curious,
EVs have been a pretty hot topic recently, right, all in the news. And I'm wondering how you guys are thinking about your investment opportunity around EVs? How soon you need to start planning for the system? Is this 8 to 10 years out? Are there going to be quicker needs?
Just any kind of insight into how you're thinking about
it? Hey, great question, Neil. Well, first of all, the current governor and the current gubernatorial administration here in Wisconsin has a very keen understanding that in order for the state to continue to make progress on CO2 reductions, there has to be a much stronger pickup in terms of electric vehicle penetration. I've heard that. I mean, I've had probably 3 discussions with the governor about this and he really, really believes that's the case, so do I.
So long story short, we have there are 2 things going on. First of all, we have filed a modest proposal for EV infrastructure that's pending before the Wisconsin Commission right now. And in addition to that, the Wisconsin Commission has opened up or is opening up a generic proceeding on what is it they should be broadly looking at to try to advance the governor's objective of an accelerated pickup in electric vehicle market share. So very early right now, but we do have a pilot that we've suggested that's getting regulatory review right now. And Scott, you want to give a couple just a couple of details on that filing?
Yes. So we've got a pilot out there. It's about $50,000,000 We provide a couple of alternatives on how to also support some of the lower income areas of the state that may be able to help put some of that infrastructure or support that, whether it's through buses or some other ideas there. So it's in the really early stages, but it'd be somewhat of a rebate program that would help actually put some chargers in individual houses.
So early days, Kevin. Some of our larger customers who
are looking at EVs and looking at what they want to do in their fleet longer term. So we've got a close relationship with them and we'll continue doing that in today's event.
Kevin makes a good point. We've actually seen a pickup and we're advising a number of our larger commercial customers who are either thinking about switching over to an all electric fleet or who have other needs as EV penetration begins to pick up. So again, very early days. I don't think you'd see any major impact on our earnings in terms of EV penetration in our region probably until very late in 2020s.
Well, I'll add a statistic that I looked at here recently, present day electric CO2 emissions at 34%, transportation, which we're just talking about is 37%. So just a little bit more already today.
Yes. Kevin is making a good point. Both in our region and nationally, the utilities have done so much that essentially transportation is now the largest contributor to CO2. It has surpassed or we've cut more and so transportation is now the largest contributor, not the utility industry. I'm sorry, Neil, go ahead.
No, no, that was perfect. That was it for me.
Terrific. All right. Thank you, Neil.
And your final question comes from Michael Weinstein with Credit Suisse. Your line is open.
Welcome back, Michael. Can you hear
me this time? Sorry about that. We can't.
That's all right. Great.
Hey, quick question about the extension of the ITC and the PTC that just got passed in December and looks like it there's a decent chance you might have it in further extensions going forward. Could the I guess the increased economic benefits from tax credit extensions, could that change your view on the targeted business mix between infrastructure and utilities? Could you increase your desire for more projects?
It's a great question, Michael. I will tell you this, we have really tailored up to now, we've really tailored our appetite, no pun intended, for growing the infrastructure business. We've tailored that to 2 things. The availability of very high quality projects with strong credit quality off takers, but also our own tax appetite. So to the extent that our tax appetite is what we projected it to be, then the pace of that business growth will be exactly what we've talked about.
On the other hand, we were just talking about this the other day actually. If we see an increase in the corporate income tax, which some have proposed as you know as part of the Biden plan, then we might have a stronger tax appetite. And if you couple that meaning a stronger tax appetite with the extension of these ITCs and PTCs, there may be a greater opportunity there. But long story short, all of that would have to fall in place. Right now, we're working on the plan we laid out.
That makes total sense. One other question too. If you do get a 1 year delay for the big filing, would that could we expect to see like an increased target for O and M savings this year beyond what Scott laid out earlier in the call?
No. Because remember that is all about 2022.
Got you. That's right. Okay. Okay. Thank you very much.
All right.
Hang in there, Michael. Thank you.
All right.
Well, I believe that's our final question for the day. We really appreciate you taking part in our conference call. Thank you again for participating. And if you have any more questions, feel free to contact Beth Straka. The direct line, which she gives out to only a few of you, her direct line, 414-221-4639.
Thanks, everybody. Take care. Bye bye.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.