CMS Energy Corporation (CMS) Q3 2026 Earnings Report, Transcript and Summary

Good morning, everyone, and welcome to the CMS Energy 26 Third Quarter Results. The earnings news release issued earlier today and the presentation used in this webcast are available on CMS Energy's web 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. If at any time during the conference, you need to reach out to an operator, please press the star followed by zero. Just a reminder that there will be a rebroadcast of this conference call today beginning at 12PM eastern time running through November 3rd, This presentation is also being webcast and is available on CMS Energy's website in the investor relations section. At this time, I would like to turn the call over to mister Jason Shore, treasurer and vice president of investor relations.

Thank you, Piercy. Good morning, everyone. And thank you for joining us today. With me are Garrick J. Rochow, President and Chief Executive Officer; and Srikanth Maddipati, 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. And now I will turn the call over to Garrick.

Thank you, Jason, and thank you everyone for joining us today. I always start with our investment thesis, because it is a durable and proven model. That has delivered for more than 20 years a consistent industry leading performance for all stakeholders. For our customers, it enables important investments in safe, reliable, and clean energy across our electric and gas systems while maintaining affordable bills. For our investors, it delivers a premium total shareholder return. Made up of 6% to 8% adjusted EPS growth toward the high end which reflects 7% or better compounded annually and paired with an approximately 3% yield. And as shared on our Q2 earnings call, with the restructuring of NorthStar Clean Energy, our model is further simplified as we exit non-utility renewable development. And deliver approximately 100% regulated utility earnings growth after 2027. Let's start with NorthStar. As of today, we have more than 35% of the assets have signed agreements or closed. There continues to be strong interest across the remaining assets with the majority of these assets in exclusivity with buyers in summary, good progress. We are on track to complete the restructuring by year end. As a reminder, as part of this restructuring, we retain Dearborn Industrial Generation, or DIG, several small gas peakers, and 4 commercial solar projects, all of which generate strong cash flows, and support our long term growth strategy. This restructuring strengthens our balance sheet and allows us to reduce over $500 million of funding within our current 5-year plan for use at the utility. Supporting important and needed customer investments in our systems. Simply put, nearly 100% regulated utility earnings growth after 2027. Reduced parent funding requirements, improved earnings quality. This restructuring strengthens our business model and positions the company to make the long term utility investments our customers need. Speaking of customer focused utility investments, in September, we filed our long term integrated resource plan, or IRP, outlining how we will meet Michigan's clean energy targets while ensuring reliable electric service. Through 2040, the IRP details in all of the above resource strategy that combines natural gas, solar, wind, pump storage, and battery storage to deliver reliable, affordable, and cleaner energy for Michigan customers. We have foreshadowed a portion of these customer investment opportunities in previous earnings calls, But as noted on the slide, the plan includes 15.8 gigawatts of clean energy resources, an increase over our already approved renewable energy plan of 10.8 gigawatts. 4.1 gigawatts of battery, an increase over our previous plan of 850 megawatts. and 1.4 gigawatts of new simple cycle gas generation to replace the aging oil and gas fired peakers at our Karn 3 and 4 plants and to ensure reliability of the electric grid. The plan further reflects energy waste reduction, and virtual power plant options that help customers save money while providing additional earning opportunities. In summary, our IRP provides significant capital investment opportunity of roughly $27 billion in new clean energy resources, battery storage, and gas generation. Another important aspect of the plan is the ability to earn on power purchase agreements. Frankly, it is a differentiator in our sector. The IRP assumes a financial compensation mechanism or FCM of $125 million beginning in 2031, growing to $195 million by 2040. Assuming a 50% ownership split. On the right side of the slide, we have offered visibility into how the value of the FCM has progressed over the last few financial plans. In the path to achieve those earnings. The ability to earn in a capital light way has grown as we have signed more PPAs for renewables, batteries, and clean energy. Of note, the filed IRP includes a recently signed large clean energy PPA of 680 megawatts. This PPA de-risks new renewables development, supports Michigan's clean energy targets, delivers the energy and capacity our customers need, while ensuring the continued strength of our balance sheet. I look forward to sharing more details at the EEI conference in November. I am also pleased to share we continue to deliver on the approximately 900 megawatts of growth that supports the 2% to 3% annual load growth we have highlighted within our 5-year plan period. As noted on the slide, we have added approximately 745 megawatts of new contracts in our service territory, and we have energized more than half of that load or 450 megawatts. Essentially, we are adding the equivalent of a large data center. Through primarily the manufacturing and semiconductor industries, and it comes with more jobs, and other tertiary benefits, such as supply chain, housing starts, and potentially higher margin commercial and residential growth. And keep in mind, this does not include the large load agreement. A large data center signed earlier this year. That project continues to progress through zoning, in multiple locations, and I expect further movement after the elections. I continue to be proud with what the CMS Energy team has delivered and know that the benefit of growth flows to our customers as we spread fixed cost across a larger customer base driving affordability. These opportunities create jobs and strengthen our communities, and our state. As we turn to the regulatory calendar, I will highlight the constructive order from the commission in our gas rate case approving $139 million or approximately 60% of our final ask. A 9.8% ROE, and a 50% equity ratio. The commission order delivers another proof point. Of the constructive regulatory environment in Michigan and supports the important and needed investments in our gas distribution system. In October, we filed our revised and updated electric rate case requesting a $443 million revenue increase, a 10.25% ROE and a 51.75% equity ratio. Staff also filed their position in October recommending a $265 million revenue increase or 60% of our revised ask a 9.85% ROE, and a 50% equity ratio. Additionally, staff support our storm deferral recovery for the 25 storms within the electric rate case and the commission approved the deferral of 26 Q1 storms in August. Furthering our confidence in recovery and evidence of the constructive regulatory environment in Michigan. If I pull up from the details and reflect on the entire electric rate case. Staff's position is constructive, a good starting point, and there are opportunities we will pursue in the rebuttal process to ensure we support the important and needed investments to improve reliability. And that the record further reflects our reasonable sales forecast for both residential and commercial growth. We expect the PFD position in late January in a final order by early April of next year. Now on to the financials. Year to date, we reported adjusted earnings per share of $2.95. We are reaffirming our full year 2026 guidance of $3.83 to $3.90 per share with continued confidence toward the high end. Our financial performance has positioned us to reinvest in the business. Derisking future years and further enhancing service for our customers. We are also reaffirming our 2027 guidance of $4.08 to $4.17 per share incorporates the North Star restructuring. Longer term, we continue to guide toward the high end of our adjusted EPS growth range of 6% to 8%. Finally, as we have done in previous years, we will provide an update on our year end call regarding the roll forward of our 5 year utility capital plan and broader financial plan. With that, I will hand the call over to Srikanth.

Thank you, Garrick and good morning, everyone. I am excited to be with you all this morning and to provide an update on our business. Today, my remarks will largely focus on continued execution through 2026, our reinvestment of favorable performance, which will benefit customers, strengthen next year and future long term growth. As well as an update on our financing activities. And how we will continue to leverage the benefits of restructuring NorthStar into our annual planning process. Given the progress Garrick highlighted in our IRP, we see plenty of opportunities between rate base and FCM on PPAs in our supply business. In addition, there is a robust capital backlog. In both our electric and gas distribution businesses. We will provide an update of our capital plan in Q4 for our normal practice. Starting on Slide 9, we have the standard waterfall chart. Which illustrates the key drivers of our financial performance the first 9 months of 2026 and our year to go assumptions for meeting our full year guidance range. Where we plan to deliver toward the high end. Year to date, the company delivered adjusted net income of $915 million or $2.95. per share. Which you will note excludes the restructuring activities at NorthStar, and is $0.29 favorable to last year. We are trending ahead of last year and are well positioned relative to plan. Reflecting strong execution at the utility including constructive regulatory outcomes as well as completion of the Michigan solar projects we are retaining at NorthStar. Favorable weather in the quarter and benefits from the storm deferral give us greater flexibility as we manage the remainder of the year, including weather and storm risk, while continuing to reinvest in the business to benefit customers and strengthen 2027 and beyond. Compared to last year, you can see that weather results in a $0.05 unfavorable variance. However, from a planning perspective, we assume normal weather. So relative to plan, we have benefited $0.08 year to date primarily driven by Q3 cooling degree days. New rates, of investment costs, resulted in a positive variance of $0.34 with the benefits of last year's gas rate order new electric rates, from earlier this year, and continued investments in renewable projects at the utility. We were pleased with the commission's approval of the storm deferral in Q3. Offsetting the full year impact of the ice storm earlier in the year. Year to date, O&M is unfavorable $0.16, primarily due to additional storm activity as well as a portion of the reinvestments we have already made across the business. Including electric reliability, gas operations, customer service, and digital investments that will enhance future productivity. The $0.16 of favorable variance in Parent and Other has been primarily driven by NorthStar performance, with much of that being reinvested back into the business. Which I will touch on in a moment. Looking at the remainder of the year, we are well positioned to meet our financial objectives in 2026, as Garrick noted. Our assumptions already reflect an unfavorable variance of $0.09 for normal weather. With our 2026 regulatory outcomes complete, we are confident in the positive variance of $0.08 in the fourth quarter for rates net of investments. From an O&M perspective, we expect to net $0.10 of favorable variance given our conservative planning assumptions for storm activity. This already accounts for $0.10 of reinvestments to improve safety, reliability, and enhance future productivity as previously noted. As always, we will remain flexible throughout the quarter look to take advantage of additional opportunities to reinvest for customer benefits that will strengthen future years. Closing out the glide path, the remainder of the year in the bar on the right hand side, you will note $0.09 to $0.16 of negative variance. Which incorporates the flexibility we have for the rest of the year for contingency, or to reinvest back into the business. We remain well positioned to deliver toward the high end of our guidance range, while maintaining the flexibility to manage the remainder of the year and continue investing for the long term. Moving to slide 10. You will note that our planned financing for the year is nearly complete given the $900 million utility first mortgage bonds we raised in the third quarter, all within our planning assumptions. From an equities perspective at the peer, we have completed 495 million at attractive prices relative to plan. For the remaining equity, we will continue to match the pricing and issuance relative to our needs given the North Star restructuring. We are to be disappointed if we are not above the $500 million funding benefit Derek noted. We are already optimizing those benefits this year and we incorporate it into our 5-year planning cycle. From a debt maturities perspective, we have approximately $625 million maturing at the parent next year. Keep in mind, with our conservative approach, our conservative approach already incorporates interest rates consistent with where the market is today. So we would look to potentially derisk next year by pulling some of that refinancing forward. Also, I will remind you that nearly all our debt is fixed. Rate. I am confident in the strategy we are executing to deliver on our objectives this year and strengthen the plan going forward. And I look forward to sharing more in the future. Now turn the call back to Garrett.

Before we take your questions. Thanks, Sri. At CMS Energy, we deliver. Every year, for 23 years, consistent industry leading performance. Regardless of circumstances. Can count on CMS Energy to deliver for all of its stakeholders. With that, Piercy, please open the lines for Q and A.

Thank you very much, Garrick. Rochown and answer session will be conducted electronically If you would like to ask a question, please do so by pressing the star key followed by the digit 1 on your touch tone telephone. If you are using a speaker function, please make sure you pick up your handset. We will proceed in the order you signal us, and we will take as many questions as time permits. If you do find that your question has been answered, you may remove yourself by pressing the star key followed by the digit 1 on your touch tone telephone. We will pause for just a moment. Your first question comes from Shahriar Pourreza with Wells Fargo. Please go ahead.

Hey. Good morning. This is Marcella on for Shaun. Thanks for taking our question.

Hey, Marcella. Good morning.

Thanks. So MDSC has had some commentary recently on the FCM. Specifically as it relates to contracts you are legally obligated to enter. But just more broadly, how should we be thinking about durability of the FCM and energy policy in Michigan post election?

The short answer is we do not see the FCM going away. But let me talk a little bit more about that. And I am glad you brought up the FCM because we have been very deliberate including in our slide deck. Right? it is on the right hand side of I do not remember the slide number. I think slide 5 there. But I think it is 1 of the things that is most underestimated by investors, that ability to grow FCM over time, and we are showing that in that graph. The ability to grow up to 2031, and beyond to a $125 million, and then even to 2040 to and $95 million. And, Marcel, you will not know this about me. My mom was a math teacher. And she would always say to me, like, show your work. Like, she drilled that into me in junior high. And that is what we are doing right here in the context of this STM. You can see in that slide, in Slide 5, that it is highlighted. Right? It goes from darker blue to light blue. that is to show the progress we have made. In 2031, over 70% of those contracts are already signed or online. And so that creates the visibility and clarity, and for me, confidence of our ability to deliver on that. And so I just wanna highlight that in the context of this because, again, it is a differentiator in our story. I wanna make sure I bring attention to that. In terms of the MPSC, the commission in their words, in their letter to the governor, recognized the value of the FCM. And particularly third party solutions that come at a lower cost. And so this is about the discussion around the entire FCM. This is about refinement. Particularly around PERPA contracts and assets that Frank that are fully depreciated. And so I really view this as refinement of the STM. Not eliminated in the context of affordability. And that is why I came out strongly and said, we do not see the FCM going away in fact, it is. it is 1 thing that we want to highlight during this call, is just the potential upside there.

Yeah. And the only thing I would note to Garrick's comments were, the depreciated assets largely talking about River Hydros. We did not include that into our projection of the FCM. In fact, we asked to use those proceeds to derisk future safety of those funds. So the FCM that we have here contemplated is within the law and really reflective of the contracts the commission highlighted.

Super helpful. Thanks. And then just because it is pretty topical right now, given the latest gubernatorial debate posturing, and the kind of a high relative number of moratoriums in Michigan, how should we be thinking about data center opportunity window relative to manufacturing? And other opportunities, just how should we be thinking?

The short answer is strong. It still I mean, across both candidates and our current governor. But let me offer-- let me offer some more context around this. Politics, Sri says this, and I love it when he says this. Politics do not equal policy. And some of the spin that you see leading up to election does not equal reality. And what we know, and we showed in that slide, it is the last slide in my prepared remarks, that regardless of CEO, CFO, governor, legislature, MPSC, and we deliver. And it is based on the principle we work with everyone. And that is easy to say, harder to do, but that is what we do. We do it year after year by finding common ground. there is common ground on affordability, and there is common ground on data centers. Right? And we see this with both candidates that are running our supportive of those investments and the jobs that come with it and the property tax value. No 1 said, no data centers. In fact, they have talked about responsible data centers, and we are for that as well. In fact, our electric tariff, for data centers, our large load agreement does just that. it is responsible, and for, again, who pays, and so our residential customers are not burdened with the data center. So we need to do more of that in terms of water and wastewater and noise and land as a state, and that is the important work that is to be done. And I expect the data centers will continue to move forward after the elections here. But, again, just back to my beginning remarks, I see a strong environment for data center growth across Michigan. Appreciate that. Thanks, Garrick.

Thank you, Marcella. Your next question comes from Jeremy Tonet with JPMorgan. Please go ahead.

Hi. Good morning. Good morning, Jeremy.

Look forward to seeing you soon at EEI. Yeah. See you soon. Looking forward to it. I was just wondering if you could provide maybe a little bit more color on the large load expectations there in the cadence you see coming forward. There was the funnel in prior slides, and so just looking to see, you know, how you think about that at this point, you know, how far are different, you know, initiatives are advanced And I will leave it there for now. Well, to be super clear, we heard that feedback morning. We did not include the slide. Look, we like, we could provide the slide. that is not it is a little bit like watching Michigan play football. You know, you can spend a lot of time at the plays, but you gotta get it across the end zone. You gotta get it across the goal line. And so we provide in this deck really along the lines of economic development. We are showing our showing our work. Going back to my mom, show your work. 745 megawatts. it is been signed, 450 is already energized. A lot of that is in the space. You have heard me talk before about the benefits and value of that. So we are showing that. We are showing that important work and what that means for the state, what that means for jobs, what that means for and confirming our sales growth that is in our financial plan of 2 to 3%. Now we can talk data centers, and we are happy to talk data centers. Multiple data centers continue in the state. that is the pipeline. We signed, 1 in Q2. And we shared that on the Q2 earnings call. that is continued to progress. In multiple locations across the state. From a zoning perspective, 1 of the areas where they are where they are located, they just released their draft. Zoning ordinance. And so the companies, in fact, reviewing that right now and providing feedback. So I see that as a again, as a positive step. In another data center, actually, a couple data centers are acquiring more land within the state. So, again, we continue to see positive progress, along those lines. And, again, I see more progress after we get through the elections here shortly.

Got it. that is helpful. Thank you for that. And then pick up, I guess, in the past, you talked about, you know, 1 gigawatt could drive $2 billion to $5 billion in CapEx. And just wondering if we should still think about that relationship and specifically as it relates IRP and the $27 billion of long term CapEx. How you think this could enter the plan over time? Forward thoughts there.

Yeah. Jeremy, I think that is still good way to look at it, 2 billion to $5 billion and that really just bifurcated between just the capacity needed and then the clean energy that is needed over time. As it relates to the IRP, we will incorporate that into our into our annual process. Gotta keep in mind, our current plan does not really contemplate having a data center in it. So our future plans will incorporate the IRP cap which largely is not data center related nor is the SCM. So we will incorporate that in as we as we roll forward.

Got it. Makes sense. I will leave it there. Thank you.

Your next question comes from Richard Sunderland with Truist Securities. Please go ahead.

Hey. Good morning. Thanks for the time today. Turning back to North Star, the 35% of the assets at signed agreement or closed and kind of that buyer interest for the remainder, Could you speak a little bit to that versus expectations last quarter into this process, maybe just progress overall? And where it is trending versus sort of your internal modeling?

I think Sri and I. Well, Sri and I will tag team 1, but I am very pleased with the progress, from where we stand in the in the 35% of the assets that are either purchase sale agreement or closed and so that is trending well. And then in the context of exclusivity with the buyers, that. that is well underway. So we are not at the beginning of that, and so closing in on purchase and sales agreement. And that is why we are again, offer the commentary that restructure will be complete by year end, and we are on target from that perspective. But Sri, please.

Yeah. The only thing I would add is, as Garrick noted, we are we are on track in the in the use of funding. We noted in the Q2 call at least $500 million, like I said here. I mean, wondering if we are above that. And so trending positively relative to that. All of that will help parent funding needs, which will roll into our Q4 financing plan along with our capital programs. Understood.

Thanks for running through all of that. And turning back to some of the broader policy considerations, elections, pre and post considerations, Could you speak a little bit more to kind of the utility issue side, particularly, you know, regulatory changes and the appetite to address that? Maybe how stakeholder conversations on that front are trending, and if you have any updated thoughts on how that may or may not get picked up after the elections in 2027. Thank you.

Yeah. There, just from an investment community, there appears to be a lot of noise on Michigan and I will tell you right here on the ground. I am confident in our ability to navigate And, frankly, we have built good relationships with all the governor candidates, many of the legislature, and as a result of just doing business here in Michigan for a long time. And as I shared here, we have delivered for 23 years. By finding common ground, by this principle, we work with everyone. When it comes to common ground, particularly around affordability, whether you are Republican, independent, or Democrat, people can align around that. And I have talked about it in a number of these calls and investor meetings, The 2 pager I run around with and talk about affordability and look for common ground. I think there is a lot of ways to do that. 1 is in the context of multiyear rate plans that provide predictability for customers. 1, 2, we have talked about in terms of personal property tax and hundreds of millions of savings, for customers, and that pass through that shows up. We have talked about in state permitting reform. Know we are talking about federal right now, but also state permitting reform, but it helps from a from a cost perspective. Chair Scripps from the commission sent a letter to the governor And if you go through that letter like I have, you can say, yes. Yes. Yes. We should be doing a number of those things, particularly in terms of low to moderate income. that is right now in the state, there is all kinds of policy improvement that can be done in the context of low to moderate income customers. And so what I am laying out, Richard, is, like, here's the place for common ground. How do we work for an affordability? And so, again, we see that as important steps as we go into 2027 and further and beyond that to be able to continue to find, and continue our position as 15th lowest bills, from a nation perspective in terms of electric and just continue to position utility in a. In the right way and make the important investments for all stakeholders. So hopefully that offers some good context for you. No. that is great. Appreciate the flavor for all of that. Thanks, Eric.

Your next question comes from James Ward with Jefferies. Please go ahead.

Hi, guys. I have got another North Star question for you here. So NorthStar has contributed $0.62 through September Guidance for the year was $0.25 to $0.30 back in February. How should we think about the North Star contribution in your current full year guidance? And then how much of the third quarter benefit reverses in the fourth quarter And what sort of tail amount, if any, is left for 2027?

Yeah. Thanks, James, for the question. Couple things. On North Star related to guidance. Obviously, realizing benefits we brought some of those projects to COD. So let's having North Star overperforming our planned guidance for the year. Some of that will reverse. Some of that is just timing on taxes. So when we book of effective tax rates, you kinda do it evenly and some of that will reverse in the fourth quarter. And in terms of kind of rolling into 2027, we have already incorporated the that we are selling some of the assets, so that is already in our 2027 guide. And then the. Some of the taxable equity pieces will roll off into 2017. it is already baked in. We will share kind of segment guidance as we go through the fourth quarter.

Got you. And then on 2027, your reliability storms and productivity bucket is about $0.12 lower for the year than the July plan, but weather's obviously $0.12 better. Is that reinvestment? And is the 2027 range built off the higher 2026 cost base or the July 1? And then, how much of the fourth quarter spend, will be 2027 work pulled forward? Just trying to get a sense as we head into next year. Of, how to level set. As we go much more utility nearly all utility focused.

Got it. You are kinda mixing with 2026 and 2027, so I will see if I can parse that for a second. Some of what you have on the to go is just conservative planning. Right? We plan conservatively for storms to make sure we have enough there for that. But then that number is net of reinvestments that we are gonna be making here over the course of the fourth quarter. So significant flexibility there to kind of reinvest in the business. That all derisks 27. Some of that will be pulled forward, and we will continue to have those options as we go through the year. But we gotta keep in mind, we are not decoupled, so we are also making sure that we have enough contingency as we look forward to the year for sales as well.

Terrific. Thank you very much, and we look forward to kicking off EI with you guys at lunch on Sunday.

Your next question comes from Nicholas Campanella with Barclays. Please go ahead.

Nicholas Campanella: Good morning. Thanks for taking my questions. Hey.

Hey.

I just wanted to be you know, clear and follow-up on the prior question from Jeremy on just the data center opportunity set. Just the 745 megawatts in the in the context of you talking about making more progress after the election here. That something that we can just kind of wrap in? To expect in the full year update that you are going give the fourth quarter? Is that where that is trending? Or just wanted to level set there. Thank you.

Let me offer some context, and Srikanth may wanna also join in some context on this. So what so what we have framed there is 745 megawatts Does not include the large load agreement data center. So that is just I call it singles and doubles. We are just stacking up semiconductor, manufacture, food processing. there is 1 medium sized data center in that mix, but much of that is already online. And so, again, that is that is built into the plan. it is built into our IRP. We are showing again, the 2% to 3% low growth that we have in our current 5-year plan. The capital investments that will come with this new data center are not yet incorporated into our plan. We will see that through from a zoning perspective. And, again, I have optimism as I see that playing out from in multiple jurisdictions. But Sri, please.

Yeah. No. Like, Derek said that the 23% sales growth already baked into our 5-year plan. The fact of adding a data center will push us above that as well as the capital above that. That would get incorporated as we execute on that. So this is already incorporated into our plan. it is us just executing against it, and we continue to see strong momentum in that space as we sign up customers across a number of industries.

Yep. I meant the 745. Sorry about that. So just 1 other follow-up was just the 6% to 8% growth plan towards the high end, which reflects 7% or better compounded annually.

Just I guess, how are you guys kind of framing it? Is it is it closer to 7, or is it kinda closer to 8, understanding that you have kinda historically you know, under promised and over delivered? Thanks.

Let me start with 2026, I think, because everything builds off of 2020. And so just again, framing for everyone here. So as we said on the call, 6% to 8% toward the high end. And, again, that is 7% or better. And we have offered a commentary here that we are reinvesting for the benefit of customers. Particularly in terms of reliability in our gas business and digital. Which improves productivity. And then overall, derisking 2027, which is beneficial for all stakeholders. And so hear me when I say this. I have great deal of confidence in our ability to deliver in our guidance range for 2026 as we have framed up during this call. And I would suggest we are well positioned for 2027 as well. But as we normally do, in Q4, we update our capital plan. We update our financial plan. We update our earnings guidance. that is that is our consistent from a process perspective. And we will do that. But I would remind everybody on this call, and we have shared it in the materials and in our speaking and our prepared remarks, is our long term guidance continues to be 6% to 8%, but toward the high end, which we framed up as 7%. Or better. Appreciate it.

Your next question Thanks. Your next question comes from Michael Sullivan with Wolfe Research. Please go ahead.

Hey. Good morning. Wanted to ask a little more on this new FCM customer that you signed up. Is it all 1 customer, and are you expecting these to be this chunky going forward and just given the progress already? Like, what. How do you think about layering in any potential upside if you start tracking ahead of the $125 million target by 2031.

Yeah, Michael. I will take it. So that is not a customer. Keep in mind, these are suppliers. We are with the FCM, so it is people who are, we are contracting with. And that is 1 individual supplier that we are contracting with. And we are making progress as we bring that into our portfolio starting in 2031. So we feel pretty confident about that. there is, some more work we have to do on the ground to move that forward, but I would expect that we incorporate those as we roll forward the plan, here in the fourth quarter.

Okay. That makes sense. And then just on the regulatory front, I think you are going to go right back in for another gas case and 1 of your peers in the state, I think, was about to do that and kinda changed their mind. So just curious if that had come up at all. And in the electric case, just any thoughts around potentially trying to move the needle on the on the equity ratio? I know that is something that been hoped for a little while now.

Yeah. I cannot speak to what DTE's approach is. I will leave that for DTE and their call. But, again, 1 of the benefits we see is an annual rate case filer is bringing back the savings to our customers, whether that shows up in the CUA and Digital where we see savings, we bring that back. Whether that is in our appliance service plan, and other tax benefits, we bring that savings back. Whether that is in the context of low growth, and we see that both in our gas and electric business, we bring back those. That savings opportunity for customers. And sharing some of those fixed costs across the system. And so by annual rate cases, we are bringing that back, which creates the important headroom to make the needed investments in the system. Right? When customers have an outage, there is a real cost to that. We need to be able to make those investments in electric system. We wanna ensure a safe natural gas system. Without events. We wanna make sure we are on the path to clean air and compliance. And so those are not at odds with 1 another. In fact, commissions have been very supportive. And throughout these annual rate case processes, we have been able achieve constructive outcomes. We have been pleased with the outcomes. And we continue to work hard to make sure that is gonna happen. But, again, so, again, the current system works for us. And we continue to get the outcomes we need for all stakeholders. Now I have been on the record since early in 2026 to talk about the potential for multiyear rate plans, which offer predictability for customers. I think there is a right way to do that, assuming we can do that in the right way. And building into law, I think, provides a much more durable means of, providing some benefit for customers and other stakeholders. And so rather than just a stay out provision, which to me does not provide the durability for the long term.

The only thing I am just gonna add is. Good example that Garrett gave in there was just ASP. Was about a $90 million benefit. We could have just passed that on in 1 year. We did not. We actually smoothed that in over 3 years. So just gives a more consistency experience both to the customers as well as we execute our plan.

Great. Thanks very much.

Your next question comes from Anthony Crowdell with Mizuho. Please go ahead.

Hey. Good morning, Garrick. Good morning, Sri. Always my favorite meeting at EEI right there.

Thanks. But you are having lunch with Jameson. Thanks. Just quickly, you guys small minor detail.

it is a very thorough call. Just the OpCo where consumers, the utility Moody's has it at negative outlook. You are stable at the parent. Just does that add any additional pressure maybe to your financing or change anything with the financing at the parent company or thoughts on maybe moving that to stable?

Kind of as you noted, Anthony, the Outlook is actually at the utility, and so a lot of that just gonna be dependent on actions at the utility. We have noted in our kinda cases, and the first time the commission's really gonna have an opportunity to look at that when it is on the direct record is in the electric case. We are looking for a 51.75% equity ratio. So I would expect that Moody's will look at that as they kind of both on a qualitative and quantitative perspective, but the quantitative aspect being rate recovery and specifically equity ratio.

Great. that is all I had. I appreciate the details. See you guys in Phoenix.

Your next question comes from Andrew Weisel with Scotiabank. Please go ahead.

Morning, Andrew.

Hey. Good morning, everyone. Hi.

First question, and you sort of alluded to this a little bit, but the IRP load forecast in the data center, but your capital plan does not.

Me just understand that disparity. Why do you treat those differently? And I know your CapEx update is coming in February. How should we think about you know, whether you will or will not match those 2 things up, or will there always be some disparities between those?

Well, first of all, it is let me just answer the short answer, and then I will hand it over to Srikanth here as it is required. When we sign a contract, it is required to include it in the integrated resource plan. And so and, again, we model a variety of different scenarios. And, again, there is real as we have shown throughout this call, real load growth in terms of manufacturing industrial, midsized data centers as part of the mix. And then we layer in the signed contracts as well. And so that is just you know, within the policy, within the work of the integrator resource plan, we need to include that.

But Sri talked a little bit more about the capital. Yeah. Just keep in mind, Andrew, when we rolled the 5-year plan out, we had not actually had a contract signed with a. Or an agreement signed with that large center. So nowadays, it is in the IRP as we roll it forward, we, you know, we. We are gonna make sure we can clear all the conditions precedent, which includes citing. Right? So making sure those are in before we include that capital. I will just remind you those, that customer does not come on, Ryan, really, and energize into the back half of the plan to begin with. So it is a slow ramp even if it was included. Out into that early 30 time frame. So we will take a look at that if we make more progress between now and the end of the year to incorporate some of that in, but I in terms of actually incorporating in the IRP, it is required. So we roll things into our plan. We are a little bit more conservative than that.

Makes sense. Thank you. And then I know you certainly would not build speculatively, but should you be successful with maybe more than just 1 data center, maybe it is a couple, at what point would it justify the need for a CCGT? I know they are very expensive, but at what point in terms of the demand side and in terms of timing based on your conversations with customers in the funnel that is not in the slides anymore, how should we think about the need for potential base load capacity?

Well, we do not build speculatively, just to be super clear about that. But 1 of the things the FCM does and allows us a greater flexibility, because we can leverage developers. We can leverage existing assets to bring energy and capacity. And so in the context yeah, we can build ourselves too. So, again, that offers a lot of ability to be able to. As we secure additional data centers to be able to adapt to their needs. And, again, they have a ramp up schedule, which we have talked about in the context we match We work to match as well.

The only thing I would add, is we have in the IRP. There is a combined cycle plan out in 2040. What that would. You know, if we continue to add load there, Andrew, we would likely have to bring that forward and pulling it in closer than 2040.

Okay. Sounds good. 1 last 1, if I may, the regulatory side. You alluded to the PSC letter to the outgoing governor for this summer. How do you think about some of. There are a lot of issues in there. Where do you see opportunities that you are maybe optimistic about? Where do you see some potential areas of concern? Garrett, you talked about policy improvement around the low and moderate income customers and affordability. What were some other ideas that maybe caught your interest?

it is just as important what is not in the letter. I mean, you see some states that are going after ROE and equity thickness. that is not in the letter. Right? And they acknowledge where we are from a bill perspective, 15th lowest bills in the nation. Right? They acknowledge that we have stayed below the rate of inflation. And so I think in the context of that letter, people wanna point to the you know, potential negative of it. I saw it as a lot of positive. Just those 4 things alone. But if you kinda walk through that letter, like, or that letter, what is the number 1 thing on there? Multiyear rate plans and the predictability. Again, done in the right way, I mean, I think that is the important piece. You talk about, the balance of that and, and both sides of it, Andrew. It is it is doing the right way. And so that, all stakeholders benefit from that. And so we are working on that. Right? And we will see how that plays out here and 2027. there is a lot of great things in there in the low to moderate income space. Like, it is difficult for a customer that struggles to be able to get assistance in the state. Have to go from organization to organization. You have to fill out a lot of paper multiple times versus 1 way, 1 means, 1 source of data, that is shared to be able to streamline that process. We make it very difficult for those in need within the state of Michigan to get service. We all should fix that. there is in that letter, like, the bottom half of that letter is just that. The low to moderate income space. Like, we should say yes to all those. Right? And figure out those from a policy perspective. And so, again, there is always pluses and minuses to every. To everything, but from my perspective, there is a lot of great things in that letter. That we can do from an affordability perspective. It gets back to common ground. And I think you can find common ground and affordability. And that is how we are approaching things through this election period. Up until the election and after the election, and which gives me confidence right, regardless of who is governor, who is in the legislature that we will be successful. Makes a lot of sense. Thank you. I will follow-up offline to find out where you and James are having lunch. I am gonna crash that lunch. I will see you guys soon. Thank you.

Alright. Thanks, Andrew.

Your next question comes from Sophie Karp with KeyBanc. Please go ahead.

Hi. Good morning. Sophie. Thank you for taking my question. Yeah. So I just wanted to ask you, are you still. I need to write in a 10.5% rate base CAGR long term, or is that number kind of, like, under review? At this point? Because I do not see it in the card and deck.

You cut off, but I think you said 10.5. I think you said 5, and our rate base carrier is 10 and a half. that is still supported by our capital plan. So yeah.

Yeah. 10 and a half percent.

Yeah. Exactly right. So that is still supported by capital plan, and we are gonna update our capital plan here in the fourth quarter. And as Garrick noted, we have got a lot of opportunity from that. What that does include, Sophie, just keep in mind is any of the growth that we get out of the FCM. So that is added to that.

Mhmm. Mhmm. So I am just curious. What drove the decision to kinda trim the disclosure in this deck? You have removed some references to rate base. They will not watch what customer kind of progression Is it simply a change how you are presenting, or should we read something more into it?

I would not read much into it, Sophie, other than you got the third quarter, and we got a brief call. So we will we will continue to update our plans, but I would not read anything into it, on that on that basis.

Let me just reiterate that. There should be nothing you should read it. You. There should nothing you should read into this is just being efficient with the number of slides and when we get to EEI, we have that rich, full many page deck, we will certainly include you know, the funnel and some other components that people are used to seeing. it is just about it being efficient for the for the quarter call.

Okay. Thank you so much. We look forward to that EEI deck. Thank you.

We have reached the end of the Q&A session. I will now turn the call back to Mr. Garrick Rochow for closing remarks.

Thanks, Piercy. I would like to thank you for joining us today, and we look forward to seeing many of at the EEI Conference. Take care, and stay safe.

This concludes today's conference. We thank everyone for your You may now disconnect.