Q1 2024 Earnings Summary
- CMS Energy is expecting significant load growth from secured contracts with data centers and manufacturing projects, including a 230 MW data center expansion online by 2025, with a strong pipeline that could lead to upside in long-term load growth expectations.
- The company is focusing on improving reliability and long-term resiliency of their electric system through capital investments and best practices, while also emphasizing affordability by driving down unit costs, which is expected to benefit customers and deliver positive outcomes in their upcoming electric rate case.
- There are positive trends in weather-normalized sales, particularly in higher-margin residential and commercial customer classes, contributing to strong financial performance and supporting confidence in their growth outlook.
- CMS Energy plans to request a larger revenue increase in its upcoming electric rate case due to increased capital and O&M spending, which may lead to higher customer bills and potential regulatory pushback. ,
- The company anticipates potential opposition from the Attorney General during rate case proceedings, especially during the political season, which could complicate or delay rate approvals.
- There is uncertainty regarding future earnings beyond 2025, as the company is not yet considering derisking future years, indicating possible challenges in sustaining growth targets.
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Data Center Demand
Q: Any updates on data center demand and potential load growth?
A: CMS Energy is experiencing strong interest in data center projects, highlighted by a 230 MW data center expansion expected to be online by 2025, with the majority of load in place by 2026. Michigan's attractive features, such as a temperate climate and robust infrastructure, make it appealing for data center development. There's potential upside to long-term load growth expectations due to a strong pipeline of both manufacturing and data center projects. -
Electric Rate Case Increase
Q: Should we expect a larger revenue increase request in the upcoming electric rate case?
A: Yes, CMS Energy anticipates a larger revenue increase request due to important capital investments aimed at improving reliability. The company has made efforts to offset some O&M costs to balance customer impact. -
Sales Outlook
Q: How did sales perform across customer classes, and what's driving the outlook?
A: Sales were better than expected in Q1. Residential sales increased nearly 1.5%, with about two-thirds of that due to leap day effects. Commercial sales rose about 3.5%, driven by sectors like agriculture and entertainment. Return-to-office trends and a hybrid workforce are contributing factors. Industrial sales were flat, but there's optimism due to a robust pipeline of industrial opportunities. -
Gas Rate Case and Settlement
Q: What's the status and outlook for settling the gas rate case?
A: The staff's position is considered constructive, and CMS Energy is looking for opportunities to reach a settlement. The company is confident in the merits of the case, which focuses on a safe natural gas system and affordability for customers. -
Performance-Based Rates
Q: Any updates on the performance-based rates process?
A: The process is progressing constructively, with metrics narrowed from about a dozen to four benchmarkable metrics. A staff report is expected in May, and implementation may be a couple of rate cases away. -
DIG Recontracting Opportunity
Q: What's the update on DIG recontracting opportunities?
A: CMS Energy has 30%–35% open margin in the outer years starting in 2026. There is attractive inquiry for capacity, and the energy side is sold through 2028. The company plans to provide updates in the next five-year plan and will continue selling down the open margin thoughtfully. -
Attorney General's Participation
Q: Should we expect a response from the Attorney General to the rate case filing?
A: CMS Energy anticipates participation from the Attorney General due to the political season in Michigan but remains confident in the merits of the case, emphasizing reliability and affordability.