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Outgoing CMS Energy CEO calls on Michigan to enact proposed energy law

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Outgoing CMS Energy CEO calls on Michigan to enact proposed energy law

Inhis last earnings call before retiring as CMS Energy Corp.'s president and CEO, John Russell urgedthe Michigan Legislature to work with the company in the process of developingnew energy policy that equitably shares the burden of maintaining the grid withall users.

Speakingto investors during the first-quarter 2016 earnings call April 28, Russell saidthe state's current energy policy is working well. The law has provided opportunitiesfor CMS to execute its business plan while still making needed infrastructureinvestments and providing energy savings programs to customers. But Russell hasconcerns about the allocation of costs for under the policy, arguing the lawrequires "99.98% of customers" to subsidize about 300 largecustomers.

"Thisis simply not fair," the outgoing CEO said. "We believe that updatesto the law would be beneficial to our customers by securing reliable capacityand reducing rates. This is an opportunity for our legislators."

Existinglaw has allowed some customers — often large energy customers — to seekelectricity from alternative suppliers on the open market, which CMS Energyargues pushes its fixed costs onto its remaining consumers. Proposed legislationwould add new requirements on alternative electric suppliers and theircustomers, reducing those impacts.

StateSens. Mike Nofs and John Proos on April 26 introduced updated legislation thatseeks to revamp the state's energy policy as the Michigan Comprehensive EnergyPlan. A state Senate committee was on April 28 expected to debate the two-billpackage, which has been in the works for more than two years. S.B. 437 includesa new resource adequacy provision to ensure electric reliability and an enhancedintegrated resource planning process. S.B. 438 promotes clean energy programsand energy waste reduction measures, among other goals.

Russelloffered to work with Michigan lawmakers to make constructive updates, but said "whetheror not the legislators decide to act, we will continue our plan with thecurrent law in place and move to 6% to 8% earnings growth for 2017 and beyond"based on projected increases in capital investment.

Earlieron April 29, CMS reportedfirst-quarter earnings $164 million, or 59 cents per share, down from $202million, or 73 cents per share, a year ago, with weather being the primaryfactor. Michigan experienced a mild winter that stretched from October throughMarch resulting in the second warmest winter on record, which meant CMSexperienced decreased gas deliveries and electric sales. On a weathernormalized basis, Russell said earnings were up 12 cents or 20% compared tolast year.

Theweather impacts, however, were fully offset as operations performed well,Executive Vice President and CFO Tom Webb said.

CMSreaffirmed its guidance for 2016 adjusted earnings of $1.99 per share to $2.02per share, consistent with the company's plan for the year for 5% to 7% annualadjusted earnings per share growth.

CMSclosed out the quarter by shuttering seven coal-fired power plants totaling 950MW, which brings the company's capacity mix to less than 25% coal. Russell saidthese closures mean CMS has retired the most coal capacity of any other investor-ownedutility, and new wind farms and the gas-fired Jackson generating facility have made thecompany's overall capacity more sustainable.

"Thisstrategy puts us in a good position to meet future carbon reductionrequirements, and as I always enjoy saying, the air is cleaner today inMichigan than it's ever been in my life time," Russell said.

IncomingPresident and CEO Patricia Kessler Poppe thanked Russell for his contributionsas CEO, and said the company has become "deftly better" since he tookthe helm. Russell will officially stepaside July 1 but will take on the role of chairman of the CMSboard.

Poppeexpects that trend to continue, as the company plans to invest $17 billion overthe next 10 years, a 60% increase over prior years.