Q1 2024 Earnings Summary
- Significant capacity addition of 1,400 megawatts to meet strong economic growth in the region, driven by investments from companies like Microsoft and Eli Lilly.
- Projected substantial increase in annual energy sales from 0.5%-0.7% to 4.5%-5% starting in 2026, reflecting growing demand due to economic development.
- Capital plan aligns with new EPA rules, with no negative impact on gas capacity additions or capital needs, ensuring regulatory compliance and stability.
- Potential Underperformance in Large Commercial and Industrial Sales: Weather-normalized large commercial and industrial (LC&I) electric sales declined by 1.8% in the first quarter compared to the previous year, underperforming forecasts. This decline was concentrated in a couple of customers in the primary metals and paper sectors, indicating possible weakness or timing issues in these industries.
- Uncertainty Regarding Future Equity Financing Needs: In response to questions about adding incremental equity to align utility equity layers with higher requested ratios in rate cases, management indicated that there is no change now but did not rule out the possibility of needing additional equity if higher equity ratios are approved. This uncertainty could lead to dilution or financial adjustments in the future. ,
- Risks Associated with Large Capital Expenditures for New Projects: The company plans significant capital investments, including adding 1,400 megawatts of dispatchable capacity to serve new large customers like Microsoft. These substantial investments carry risks if the anticipated load growth does not materialize as expected, potentially straining financial resources or impacting returns. ,
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Microsoft Data Center Expansion
Q: How will Microsoft's expansion impact WEC's plans?
A: WEC will supply all the energy Microsoft needs at their site in the Wisconsin Technology Park. Initially, Microsoft acquired 315 acres, but now controls 1,345 acres, indicating significant expansion. WEC's current 5-year capital plan includes 1,400 megawatts of new dispatchable capacity to serve this growth. Weekly discussions with Microsoft are ongoing to ensure their needs are met. -
Additional Generation Capacity
Q: Will more generation be needed beyond the 1,400 MW planned?
A: If economic development accelerates, WEC will need to build more generation capacity beyond the 1,400 megawatts planned. The current plan meets required reserve margins based on existing forecasts, but additional load from projects like Microsoft's expansion may necessitate further investment. -
Wisconsin Equity Ratio Increase
Q: Will WEC adjust equity plans with the requested 53.5% equity ratio?
A: WEC filed for a 53.5% equity ratio in Wisconsin rate cases and hopes to receive it. However, they have not changed the equity plan and do not expect to add incremental equity even if the higher ratio is approved. -
Illinois Regulatory Outlook
Q: What's the outlook for the Illinois rehearing decision?
A: WEC expects a decision on the Illinois rehearing by the end of May or early June. The staff and intervenors support continuing some capital work for safety and reliability. Labor has a strong voice and is passionate about the safety modernization program. -
Load Growth Projections
Q: How is WEC's load growth outlook changing?
A: Starting in 2026, WEC projects annual kilowatt-hour sales growth of 4.5% to 5%, up from the historical 0.5% to 0.7%. This increase reflects economic development underway, including projects like Microsoft's expansion. -
Impact of EPA Rules
Q: Will new EPA rules affect gas capacity additions?
A: No, WEC's 5-year plan aligns with the new EPA rules. Their generation and environmental planning anticipated the regulations, and no changes to gas capacity additions are expected. -
Cost Allocation for Data Centers
Q: Will data centers burden other customers with costs?
A: No, Microsoft will pay their fair share for generation capacity and distribution investments. They will be charged specific components in their rate, similar to other large industrial customers. Increased kilowatt-hour sales from such growth help spread costs over a broader base. -
Grid Enhancement Technologies
Q: How is WEC approaching grid enhancement technologies?
A: WEC is deploying automation and exploring technologies like dynamic line ratings to improve reliability. They believe technology will continue to evolve, benefiting transmission and distribution systems.