The operator introduces the DTE Energy Third Quarter Earnings Call and hands it over to Barbara Tuckfield, Director of Investor Relations. Tuckfield reminds listeners to read the safe harbor statement and explains the use of operating earnings as a non-GAAP financial measure. CEO Jerry Norcia expresses confidence in the company despite facing unprecedented challenges this year. CFO Dave Ruud will provide a financial update before taking questions. Norcia highlights the company's ability to offset most of the earnings headwinds while maintaining service excellence as a testament to their engaged team and commitment to operating excellence.

DTE has strong cash flows and a solid balance sheet that allow for continued investments in building a more advanced grid and driving the clean energy transition. The company has a dedicated team of employees who are committed to customer satisfaction and have received recognition for their engagement. DTE remains confident in its ability to deliver for customers, communities, and investors in the long term. The company's investment plan includes improving grid reliability and transitioning to cleaner sources of energy. The recently filed distribution grid plan and IRP settlement support these investments, and the company is working towards a positive outcome in their electric rate case to further support customer-focused investments.

The company is facing pressure from customers and political leaders to improve reliability during storms, which requires strategic investment and resuming maintenance schedules. Despite not reaching a settlement in an electric rate case, the company is confident in receiving support from the Michigan Public Service Commission. However, the company faced $370 million in headwinds this year, leading to a revision of their full year EPS guidance from $6.25 to $5.75 per share. The company's leadership team is disappointed in this outcome, as they have consistently met or exceeded targets in the past.

The company is still waiting for a final resolution on their electric rate case, so they will delay providing forward-looking disclosures until December. The company has faced challenges due to lower-than-expected rate orders, storms, and unfavorable weather. Despite these challenges, the company has been able to offset some of the headwinds through cost reduction efforts and is on track to meet their full year EPS guidance. However, they have faced additional pressure from storms and cooler than normal weather this quarter. The company has faced 5 catastrophic storms this year, but their team has worked hard to safely restore power during each event.

Despite budgeting for storm costs, the number of catastrophic storms, along with unfavorable weather, has significantly impacted DTE Electric's earnings. The company prepares for unfavorable weather scenarios during the planning process, but the combination of high storm activity and unfavorable weather has exceeded all reasonable planning scenarios. This, along with a low rate case order, has led to the company lowering its operating EPS guidance for 2023. However, DTE is still focused on making customer-focused capital investments across its businesses.

DTE is facing two important factors affecting the grid: climate change and emerging electrification technologies. They are investing in renewable energy and natural gas to shift away from coal generation. Their voluntary renewable program, My Green Power, is growing and has been recognized as the largest in the country. They are also focusing on cost management and reducing greenhouse gas emissions. The IRA supports this transition to renewable energy while maintaining customer affordability and providing opportunities for growth. DTE is confident in their strong operating foundation, experienced team, and solid balance sheet to continue delivering premium total returns while providing clean, reliable, and affordable energy to customers.

In the third quarter, DTE's operating earnings were $298 million, equivalent to $1.44 per share. This was a decrease from the previous year due to cooler weather, higher storm expenses, and other factors. DTE Electric earnings were $268 million, while DTE Gas earnings were $18 million higher. DT Vantage saw a $30 million increase in earnings, and Energy Trading had $31 million in earnings. Corporate and Other had an unfavorable variance of $17 million. Overall, DTE earned $1.44 per share in the third quarter. Revised 2023 guidance by business unit will be discussed on the next slide.

Due to ongoing unfavorable weather and storm activity, the company is decreasing its operating EPS guidance for the year. DTE Electric will be below its original guidance range while DTE Gas, Vantage, and Energy Trading will be above their guidance ranges. This results in a decrease to the company's DTE operating EPS guidance midpoint. The company has faced significant challenges at DTE Electric, but has seen favorability at its other business units due to cost reductions and other factors. Despite facing $370 million in headwinds, the company's team has been able to offset much of the challenge and the company remains focused on improving processes and serving customers. Overall, the company's operating EPS guidance has been revised from a midpoint of $6.25 per share to a midpoint of $5.75 per share.

The speaker reiterates that the current challenges faced by the company are temporary and do not affect their long-term growth. They also mention their strong balance sheet and credit profile, and their commitment to delivering for all stakeholders. The operating EPS guidance for 2023 has been updated to reflect the recent headwinds, but the team remains focused on offsetting them and delivering for customers and communities. The electric rate case is progressing and a constructive order is expected in December. The company's capital plan supports long-term growth and they will share more details after the rate case is finalized. The speaker thanks the listeners and opens the line for questions. The first question is about the tough decisions made this quarter.

Gerardo Norcia, the CEO, responded to a question about the company's outlook for 2024. He stated that the fundamentals of the business remain strong in the long term, with opportunities for investment in clean energy. The company is waiting for a commission order in December before releasing their 2024 guidance, long-term growth rate, and capital investment profile for both utilities and advantage. Norcia also mentioned that the company will go back to their original guidance for 2023 and grow from there when planning for 2024.

Shahriar Pourreza asks Gerardo Norcia about the $270 million offsets and whether they will be replenished in the future. Norcia explains that much of the cost will flow back in, but some will stick and help for next year. They plan to return to their normal planning process and anticipate certain levels of storm activity and weather variation. David Arcaro asks for more information about the settlement discussions in the rate case.

Gerardo Norcia explains that the main challenges that prevented the rate case from being settled were the lack of engagement from some parties and the reluctance to pursue contested rate settlements in Michigan. He also mentions that the specific requests, such as undergrounding and IRM, were not the main sticking points. He suggests that in the future, they may need to explore contested rate settlements when the majority of economic interests are represented at the table. Despite the challenges, the company is still confident in their go-forward earnings power.

The speaker is asking about the growth and trading results for the 2023 Vantage and if they can be considered new baselines for growth. The speaker also mentions some one-time or non-repeatable strength in those businesses and asks if they will revert to the original 2023 midpoint for growth. The speaker also asks about the implications of a year with aggressive storms on the company's future earnings profile and mentions that this year's impact was around $150 million, which is roughly 10% of their normalized earnings power.

In the current rate case, there is $55 million set aside for storms, but the company also budgets for contingencies. There may be opportunities for trackers or deferrals in the future, but they are not included in the current rate case. The company has hired Liberty Consulting Group to investigate the storms and the exchanges have been collaborative.

The speaker discusses the next steps for their company, including conducting field work and expecting a report next summer. They also mention a rate case that may impact the base business after 2024, but state that all opportunities for long-term growth are still available. They are waiting for regulatory support and emphasize that customers and government officials are in favor of their investments. The requested rate relief is not excessive and is below national inflation rates and their peers' bill growth since 2020.

The speaker discusses their confidence in their competitive package for the commission and their belief that they will receive strong support for investments. They also mention their plan to manage increasing interest rates and their hedges for parent debt that will come due in 2024. The speaker also mentions the need to revisit their standard deviation calculations for weather due to the severity of this year.

The company typically looks at 15-year weather patterns and builds a plan based on that. Rates are also based on a 15-year average and 1 standard deviation in weather consumption. They also carry a storm budget based on a 5-7 year average, but are currently revisiting it due to more severe weather patterns. The company will continue to modify their approach as patterns change and roll forward 15-year averages for weather. They also consider storm activity and increase contingencies for it. The company has been successful in delivering using this approach and will continue to do so, while also accounting for pull-forward items and their sustainability.

Gerardo Norcia, CEO of a company, is responding to a question about the company's financial plans for the next few years. He clarifies that some of the current favorable financial conditions will continue, but the company will return to normal levels of maintenance expenses in 2024. He also addresses the impact of weather on residential sales and mentions that the company will continue to monitor and adjust their forecasts accordingly.

The speaker discusses the weather patterns in Michigan, remarking on the unusual combination of cooler-than-normal and warmer-than-normal weather, as well as increased storm activity. They mention that their statisticians have determined it to be a 1 in 50-year probability. The speaker also briefly mentions residential sales, stating that they have remained consistent with their forecast and should not be an issue in the upcoming rate case. The questioner asks about pressure on the balance sheet, referencing a Moody's report that noted a decrease in FFO to debt metric.

David Ruud and Gerardo Norcia discuss the impact of this year's storm activity and mild weather on their company's balance sheet and FFO to debt ratio. They also mention meeting with rating agencies and remaining in a good position relative to downgrade thresholds. Anthony Crowdell asks about the potential for higher ROEs in future rate cases due to the volatility of weather and storm activity in Michigan. Gerardo Norcia suggests that this is a possibility, especially if interest rates continue to rise.

The speaker believes that in the past, Michigan has had successful storm tracking systems to help mitigate the effects of volatile storm activity. They also mention the possibility of implementing a similar system in the future. In response to a question about rate case timing, the speaker explains that if the current infrastructure recovery mechanism is adopted, it will reduce the frequency of rate cases. They also mention that the length of time between rate cases will depend on the gas company's needs. The speaker then addresses a question about supply chains.

Gerardo Norcia, the CEO of a utility company, discusses their recent investments in renewable energy and improving reliability. He mentions the challenges they face with supply chain for grid level equipment, but states that they have expanded their reach internationally to mitigate these challenges. When asked about rate cases, Norcia mentions that their posture has become more conservative due to last year's surprise in sales forecast, but they have support for their investments from commissioners and the governor's office.

The speaker mentions that customers have been demanding for the company to invest in making the grid better and supporting the clean energy transition. However, due to challenges in the regulatory process and experiences this year, they are taking a more conservative approach. They want to make sure they deliver on their promises and need a data point to finalize their plans. The next question asks about potential solutions for the increasing storm activity in Michigan, to which the speaker responds that there may be a need for a more structural solution beyond trackers and riders, such as a surcharge or storm escrow, and that there is potential to learn from other regions where these solutions have been implemented.

The speaker acknowledges the potential impact of volatility on the utility and agrees with the listener's suggestions to reduce it. They also mention that they have considered different scenarios and will reveal their plans once the rate order is received. They do not anticipate any disruption in their ability to invest and feel confident about the need to make investments.

The company has been doing scenario planning to prepare for any potential outcomes, and they will announce guidance and capital investment plans after the rate case. The interveners in the case have been involved in previous rate cases, but some were not interested in settling due to their lack of economic interest. In the third quarter, the company made significant cost cuts, but it is unclear if there were any additional tools that were not used.

The company has been looking for opportunities to cut costs since the end of last year, and they have already implemented $270 million in cost cuts. These cost cuts will continue to have an impact throughout the year. The company is also considering the increasing impact of storms and has built in some contingency measures. They expect to receive back $380 million in under recovery this year, which will greatly impact their cash and FFO. Jerry Norcia concludes the call with closing remarks.

Gerardo Norcia thanks everyone for joining the call and expresses his excitement for future opportunities, such as strengthening the electric grid and preparing for increased demand for electrification. He also mentions their readiness for growth and concludes the call.

This summary was generated with AI and may contain some inaccuracies.