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CMS Energy outlines 10-year, $25B capital spending plan

CMS Energy Corp. officials on Oct. 24 unveiled a 10-year, $25 billion capital investment plan, with funds primarily allocated to electric and gas utility operations.

"There's no question that our electric and gas systems need upgrades well beyond normal maintenance, including accelerated electric reliability investments and enhanced infrastructure replacements for gas," Patti Poppe, president and CEO of CMS and its utility subsidiary Consumers Energy Co., said during a call to discuss the company's third-quarter 2019 earnings.

Earlier on Oct. 24, CMS reported adjusted net income of $208 million, or 73 cents per share, in the third quarter of 2019, up from $169 million, or 60 cents per share, in the corresponding quarter of 2018.

CMS also revised its five-year plan, which reflects forecast capital investments from 2019 to 2023, to include the addition of roughly $600 million of solar investments over the period as approved in Consumer Energy's integrated resource plan.

The 10-year plan runs from 2019 through 2028. Most of the spending will be split between electric and gas utility operations, with $11 billion slated for the electric side and $10 billion allocated to the gas side, according to an earnings presentation. Another $4 billion is planned for new utility renewables.

CMS also sees an opportunity to invest another $3 billion to $4 billion over the 10-year time frame, mostly in the electric reliability and gas distribution.

One of the primary constraints on its long-term capital investment plan is customer affordability, CMS CFO Rejji Hayes said, noting this was taken into account in forming the new plan. The company has "substantial" cost reduction opportunities through things like the expiration of high-priced power purchase agreements and the gradual retirement of its coal fleet.

"These efforts will provide a sustainable funding strategy for our five- and 10-year capital plans, which will keep customer bills low on an absolute basis and relative to other household staples in Michigan," Hayes said.

The CFO also pointed out that economic development efforts have produced good results. Over the past three years, CMS has seen increases in new load commitments in its electric service territory, surpassing 100 MW in 2018. The company is targeting another 100 MW for 2019.

Briefly touching on the strike of more than 48,000 General Motors Co. workers, Hayes said CMS is not "overly exposed" to auto manufacturers or their suppliers in its electric service territory. The auto industry represents only around 2% of CMS' customer rate mix.

"However, we are watching closely for any spillover effects that can impact our residential and commercial customers," Hayes added.

The CFO further noted a lack of "notable pullback in key economic indicators." Unemployment in Grand Rapids, Mich., remains well below the national average, while Western Michigan continues to have "robust" new construction activity, he said.

Net-zero methane goal

Poppe also touted a commitment for net-zero methane emissions goal by 2030 for the company's gas distribution system.

To achieve this goal, CMS will continue to accelerate existing replacement programs, protect assets with increased damage prevention and apply new technologies to identify and eliminate fugitive methane emissions, she said. With these efforts, CMS can get an 80% methane reduction and to get to net zero by 2030, she said. CMS Energy is also planning to use renewable natural gas as part of its total gas supply.

Addressing a question about the potential for Michigan policymakers to follow the lead of some communities to move away natural gas infrastructure, Poppe said many of the cities with gas moratoriums do not have the natural gas penetration for home and water heating like Michigan does.

"When we're looking at the cost comparison for electrifying all the home heating needs, the cost to customers would be significant," she said. "And so given that cost impact, we don't think there's going to be a big market push, or demand from customers, to make that switch to electrification."