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CMS says C&I power sales down 20% to 25%, residential demand up 5% on stay-at-home mandate

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Houston — CMS Energy said Monday that since Michigan issued its stay-at-home mandate in mid-March it has seen a 20-25% decline in commercial and industrial power sales, while residential sales have increased roughly 5%, thanks in large part to people working from home.

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The Jackson, Michigan-based electric and natural gas utility posted a net profit of $243 million in the first quarter of 2020, compared with $213 million in the same period in 2019.

"As the ultimate impacts of the pandemic on Michigan's economy and our business remain uncertain, at this time, CMS Energy is not changing guidance for 2020 adjusted earnings of $2.64 - $2.68* per share, as announced on January 30," Patti Poppe, CEO of CMS Energy and Consumers Energy said.

Poppe said two primary drivers of CMS Energy's quarterly financial performance were "timely recovery of customer investments and cost management, partially offset by mild winter weather."

Looking forward, however, the utility holding company is grappling not only with lower sales, but also increased uncollectible accounts and sequestration and quarantine-related costs.

Poppe said the fundamentals of CMS' business had not changed, but the number of unknown factors "is unprecedented." Among the unknowns is how long sheltering-in-place and social distancing will last, how large the utility's "uncollectibles" will ultimately prove to be and how fast the business will "bounce back," he added

The company was at pains to describe its overall "2020 earnings per share sensitivities," by using "conservative estimates."

It said that the impact on its EPS during "extensive social distancing" would be a decline of between 3 cents and 4 cents per month.

SOME EMPLOYEES SEQUESTERED

CMS has seen 11 of its co-workers test positive for the novel coronavirus, but no fatalities, according to a company spokeswoman. Six of those co-workers have been able to return to work.

"Out of our 8,000 employees and contractors, over 60% of those coworkers are logging in from home," the spokeswoman, Katelyn Carey, said.

The company has sequestered employees at its Campbell and Karn coal-fired power plants, at its Jackson and Zeeland natural gas-fired plants, at its Ludington Pumped Storage facility and at gas compression sites.

NO CUTS IN CAPITAL EXPENDITURES

CMS said it foresees no cuts in its capital expenditure. On March 26, the company issued $575 million of 3.5% first mortgage bonds due 2051.

The company on Monday said the impact of the coronavirus pandemic is being mitigated by "higher margin residential usage, regulatory deferral mechanisms, operational flexibility and waste elimination, and fiscal stimulus customer support."

During a conference call, Poppe was asked about the impact the pandemic is having or will have on ongoing rate cases. She said the company made its most recent filing in its electricity rate case with the Michigan Public Service Commission in February.

Poppe said that given the impact of the pandemic, and the substantial number of unknowns still associated with it, "it is going to be hard to capture the degradation of sales at a certain moment in time" that it will have to provide to the PSC.

Poppe noted, however, that the PSC has passed an order that will allow CMS and other utilities in the state time to "figure out these unknowables."

In an April 15 order, the PSC said it was "aware that utility response to the COVID-19 pandemic may cause them to incur extraordinary costs," and that it is "open to utility tracking of certain costs in order to be able to review the prudency of expenditures in response to future requests for recovery."

It also said it is "exploring" the use of video-conferencing capability for prehearings and cross examination in contested cases, with several rate case hearings on the horizon in late April and early May.

"Administrative law judges will work directly with parties on scheduling and logistical matters, and parties are encouraged to reach out to the ALJ for questions as necessary," the order said.