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IDACORP’s (IDA) CEO Darrel Anderson on Q2 2015 Results – Earnings Call Transcript

IDACORP, Inc. (NYSE: IDA ) Q2 2015 Earnings Conference Call July 30, 2015 4:30 pm ET Executives Lawrence Spencer – Director of Investor Relations Darrel Anderson – President and Chief Executive Officer Steve Keen – Senior Vice President, Chief Financial Officer and Treasurer Analysts Paul Ridzon – KeyBanc Ashar Khan – Visium Asset Management Brian Russo – Ladenburg Thalmann Operator Welcome to IDACORP’s Second Quarter 2015 Conference Call. Today’s call is being recorded and webcast live. A complete replay will be available from the end of the day for a period of 12 months on the company’s website at www.idacorpinc.com. [Operator Instructions] At this time, I’d like to turn the call over to IDACORP’s Director of Investor Relations, Mr. Lawrence Spencer. Please go ahead. Lawrence Spencer Thank you, Liz, and good afternoon everyone. As you’ve probably seen, we issued our earnings release and Form 10-Q before the markets opened today. They’re both posted to the IDACORP website. We will be using a few slides to supplement today’s call, and you can also find those on our website. We’ll refer to those slides as we work our way through today’s presentation. On today’s call we have Darrel Anderson, IDACORP’s President and Chief Executive Officer, and Steve Keen, IDACORP’s Senior Vice President, Chief Financial Officer and Treasurer. We also have other individuals available to help answer your questions during the Q&A period. Before turning the presentation over to Steve, I’ll cover our Safe Harbor statement on Slide 3. Our presentation today will include forward-looking statements. While these forward-looking statements represent the current judgment or opinion of what the future holds, these statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made today. So we caution you against placing undue reliance on these forward-looking statements. Some of the factors and events that could cause future results to differ materially from those included in forward-looking statements are listed on Slide 3 and included in our filings with the Securities and Exchange Commission, which we encourage you to review. On Slide 4, we present our quarterly and year-to-date financial results. IDACORP’s second quarter 2015 earnings per diluted share were $1.31, an increase of $0.42 per share from last year’s second quarter. For the first six months of 2015, earnings per diluted share were $1.78, $0.35 greater than the same period in 2014. I’ll now turn it over to Steve to discuss the results in greater detail and review our 2015 key operating metrics. Steve Keen Thanks, Larry, and good afternoon everyone. On Slide 5 we show a reconciliation of earnings from second quarter 2014 to second quarter 2015. As you can see, net income over the period increased $21.6 million. This was largely due to improved retail sales volumes, the impact of the fixed cost adjusted or FCA methodology change and the tax benefit of an income tax deductible make-whole premium from Idaho Power’s recent first mortgage bond redemption. The heat wave in our service territory this June combined with dry spring weather resulted in recorded second quarter energy sales. The hot temperatures increased loads for air conditioning and the dry weather increased irrigation pump usage. As a result, operating income increased by $7.8 million. Changes to the FCA mechanism which were approved by the Idaho Public Utilities Commission in the second quarter were retroactive to January 01, 2015. Idaho Power recorded a $7.4 million benefit in the second quarter for the retroactive application of the FCA mechanism change to the first quarter. The calculations under the revised mechanism use sales associated with actual weather conditions as opposed to normalized weather condition under the prior mechanism. During this year’s second quarter, normal temperatures grow greater sales resulting in a $1.7 million decrease in FCA revenues compared to 2014. To help you understand the operation and potential future impact of the revised FCA mechanism which is now sensitive to weather conditions, we have included a discussion in the MD&A section of the 10-Q that we filed today. Customer growth increased revenues by $2.9 million as our customer account grew by 1.7%, also the $7.2 million decrease in income tax expense benefited this quarter’s earnings. As stated on our first quarter earnings release conference call, this resulted from the flow through tax benefit of the make-whole premium Idaho Power paid for the early redemption of first mortgage bonds originally due in 2018 but redeemed this quarter. The combination of these items resulted in a strong second quarter financial results we believe that positions the company well going into the second half of 2015. Moving now to slide 6, we show IDACORP’s operating cash flows for the first six months of 2015 and the comparable period in 2014 along with the liquidity positions at June 30. Cash flow from operations for this year’s first six months was $171 million, an increase of $8 million over the same period last year. Cash flows increased as a result of an $18 million increase in net income as well as from increased coal sales of Bridger coal company for the first six months of 2015, which resulted in a $6 million increase in distributed cash. Decreases in cash flow of $3 million occurred due to changes in deferred taxes and changes in taxes accrued and receivable and the remaining $10 million reduction in cash flows resulted from changes in working capital items such as unbilled revenues and prepaid expenses. IDACORP and Idaho Power currently have in place credit facilities of $125 million and $300 million respectively to meet short term liquidity and operating requirements. The liquidity available under the credit facilities is shown on the bottom of slide 6. Also, there are 3 million IDACORP common shares available for issuance under IDACORP’s continuous equity program. No shares were issued during the second quarter and we do not expect to issue new equity during the remainder of 2015 except for modest amounts relating to employee compensation plan. Turning now to slide 7, we continue to estimate 2015 O&M between $340 million and $350 million and we do not expect to amortize any additional accumulated deferred investment tax credits this year under the Idaho settlement stipulation. The 2015 capital expenditure range for Idaho Power remains between $300 million and $310 million. With the recent rainfall, we are tightening upward our projected hydro electric generation range from 5 million to 7 million megawatt hours up to a range of 6 million to 7 million megawatt hours. Finally, we are increasing our 2015 IDACORP earnings per share guidance range from $3.65 to $3.80 per diluted share up to the range of $3.75 to $3.90 per diluted share primarily to reflect the earnings drivers I mentioned earlier. The upper end of our guidance range is slightly above the 10% Idaho return on year end equity threshold and reflects the potential that Idaho Power could once again share benefits with Idaho customers under the current Idaho regulatory settlement stipulation, gets that level as it takes. I’ll now turn the presentation over to Darrel. Darrel Anderson Thanks, Steve, and good afternoon. I want to start today by acknowledging the passing of Idaho Public Utilities Commissioner, Mack Redford. As some of you may know, commissioner Redford passed away on June 30 unexpectedly. The Public Utilities Commission and the State of Idaho have lost an outstanding public servant. Commissioner Redford had served on the commission since 2007 and he was a skilled, fair and thoughtful arbiter from the bench. The Governor of Idaho C. L. Butch Otter announced today that Marsha Smith, a long-time Commissioner for the IPUC, will be re-appointed on an interim basis. In his announcement, he noted that her appointment will be effective immediately and will expire on January 15, 2016. At that time, a new commissioner will be appointed to replace her, pending Idaho Senate confirmation. Marsha Smith served as a Commissioner for 24 years before retiring last February. The two sitting commissioners both have a long history with the Idaho Commission and a deep background in utility issues. Commissioner Paul Kjellander has been a Commissioner since 2011 and previously was Commissioner from 1999 until 2007. Commissioner Kristine Raper served seven years as a Deputy Attorney General at the IPUC before her recent appointment. Now I’d like to move on to a discussion of topics related to the quarter. Last month, Idaho Power filed its 2015 Integrated Resource Plan, also known as the IRP. The preferred portfolio continues to include the addition of the 500 kilovolt Boardman to Hemingway or B to H transmission line which is proposed to run from the Hemingway substation near Melba, Idaho to Boardman, Oregon. The IRP provides for completion of B to H by 2025 which is a date based on a number of assumptions we include in the IRP prospects. We continue to advocate for and work towards an earlier in-service date for this critical resource as an earlier date has a number of benefits that might be lessened if the in-service date is delayed to 2025. Those benefits include increased reliability, mitigation of transmission constraint, environmental benefits from the import and export of renewable energy and lower permitting and construction costs and risk. Because of these benefits we are working for an in-service date as early as we can achieve. Additional components of the potential plan for 2025 and beyond are shown on slide eight, and include the possible early retirement of the North Valmy power plant in collaboration with the plant’s co-owner. Demand response programs, ice-based thermal energy storage and a new combined cycle natural gas plant. The IRP also considers the impact of anticipated power purchases from new solar projects. It is also fair to note that the IRP is a long-term planning tool completed every two years and near-term deviations from the assumptions in the plan could result in modifications to our resource needs. As you’ll see on slide nine, June’s very warm weather led us to near record fee customer demand. On June 30, Idaho Power System load reached 3,402 megawatts which is 5 megawatts short of the all-time record of 3,407 megawatts set in July 2013. It is interesting to note that the 2013 record was set at a time when we did not have any active demand response programs. This year, we had two demand response programs that were deployed on the peak demand day for a total of 67 megawatts. Without the programs deployed, we would have exceeded our all-time peak load level. Idaho Power continues to expect strong customer growth in the service area in the near-term and remains supportive of economic development initiatives aimed at sustainable levels of growth. During the first six months of 2015, Idaho Power’s customer count grew by over 4,500 customers and for the 12-month ended June 30, 2015 the customer growth rate was 1.7%. This is shown on slide 10. According to preliminary Idaho Department of Labor data for June 2015, total employment in the service area was more than 474,000 compared with around 460,000 at the end of last year, an increase of over 3% in the last six months. The unemployment rate for our service area was 3.9% compared to the June 2015 U.S. unemployment rate of 5.3% according to U.S. Department of Labor data. Another key economic indicator is expected growth in gross area product. Moody’s Analytics has stated that as of June 2015, the anticipated growth in gross area product for Idaho Power service area for 2015 and 2016 is 4.6% and 5.4% respectively. These are up from this year’s first quarter estimate of 3.2% and 3.8% of 2015 and 2016 respectively, representing an increase of over 40% in the estimated growth rate. Further evidence of our economic development potential is found in a six county region known as the Magic Valley located in the South Central Park of our Idaho service area. This area was selected as a top 12 U.S. manufacturing community under the investing and manufacturing communities partnership initiative sponsored by the U.S. Commerce Department. As a result of this federal designation, a number of significant benefits may be available to Southern Idaho including support from 11 federal agencies and more than $1 billion available in federal economic development assistance. Also this month, Idaho is recognized by Kiplinger as number three on the list of 10 states with the fastest job growth in 2015. We view all of these to be positive economic indicators in our service area that we expect will help drive load growth. Finally, I will touch on our weather outlook heading into fall as reflected on slide 11. For August through October, according to Nova, we are looking at a 33% to 40% chance of above normal precipitation and a 40% to 50% chance of above normal temperatures in much of our service area. And with that, I and others on the call will be happy to take your questions. Question-and-Answer Session Operator Thank you. Ladies and gentlemen, we will begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Paul Ridzon with KeyBanc. Your line is now open. Please go ahead. Paul Ridzon Good afternoon, congratulations on the quarter. Darrel Anderson Thanks, Paul. Steve Keen Thanks, Paul. Darrel Anderson Appreciate that. Paul Ridzon Have you booked any provisions for refunds at this point or do you need to get through the quarter behind you? Steve Keen Paul, at this point, we have not booked any provision for sharing that’s what you mean as the sharing component and as we looked at it, as I said at the upper end of our range incorporate that possibility but it’s not sure enough that we booked anything. Looking at this quarter, weather certainly helped and with half the year left, we kind of need to see where that goes. Paul Ridzon How is still our weather? Steve Keen July has not been strong like June. I haven’t seen any reports on where it’s stacked up against normal but certainly it’s not a record month like June was. Darrel Anderson Paul, it’s been a bit of a roller coaster. We started out warm, we got cool and now it’s warm again. So cool, cool relatively speaking but we’re – I think we’re headed into triple digits here in the next couple of days, so we’re headed back into warming trend it looks like so — Paul Ridzon And always kind of surprised to see a little bit of a disparity between kind of the impact of the new FCA mechanism. You had a nice pickup from the first quarter but the impact on the second quarter wasn’t that meaningful relative, is it something symmetry or? Darrel Anderson Right. I would say that compulsive [ph] it was a little surprising to me at first. I asked the same question but as you look at it, first quarter there was much more impacts on the residential component of our revenues, second quarter affected residential again although obviously not as much as it did downward in the first quarter but some of our pickup came out of the irrigation side and irrigation is excluded from the FCA. It’s not included as a component and so that the upside there was not – didn’t get offset with any sort of an FCA reversal. Paul Ridzon Okay. That makes sense. Is this FCA mechanism applicable to commercial and industrial as well? Darrel Anderson No. It’s our commercial, it’s our residential on small commercial, so it applies to both. Paul Ridzon Okay. Thank you very much. Darrel Anderson Thanks, Bob. Operator Our next question comes from the line of Ashar Khan with Visium Asset Management. Your line is now open. Ashar Khan Good afternoon and congratulations on good quarter. Darrel Anderson Thanks, Ashar. Steve Keen Hi, Ashar. Ashar Khan Hi, how are you guys doing? Could you see minus as we getting to that part of the year on the dividend policy if you can just remind us what is the rate of change that you have indicated as we enter into that season? Darrel Anderson Sure. Thanks, Ashar. Thanks for that question. This is Darrel. So as we have stated previously, our target payout ratio is 50% to 60% of sustainable earnings. And so we will be taking out up with the board at the September meeting and what we have stated publicly is that we anticipate an increase of at least 5% from where we are at today. And so we will be taking this discussion up with the board in September with the expectation that we will update all of you once we have a decision on that. And I think what’s important there is we continuing to take a look at the 50% to 60% of sustainable earnings, and that we will look at when we review with the board. Obviously we are having a good year this year, we had some one-off items incorporated into this year. This year, I think you know how our mechanisms work with respect to the ADITC. Those numbers are all based on year end equity and so as our equity grows, which it’s growing as earnings grow then that potentially has an impact for future years. So we will take all of that into consideration when we look at what that dividend recommendation will be in September. Ashar Khan Okay. And can I just ask you this dividend, do you look at I’m assuming the way you described it. You will be looking at like ‘16 earnings? Is that right because the dividend increases like three quarters for next year and then the one quarter this year, is that a fair way to look at it? Darrel Anderson We will look at where we are at this year. We will also take a look at looking forward as to what earnings look like going forward combining with what cash flows would like. So all of that will be taken into consideration in coming up with the recommendation to the board. Ashar Khan Okay. Okay. I haven’t seen your Q, so I apologize but any change in CapEx for ’16 or ’17? Steve Keen There is no change at this point. We are in the middle of reviewing future CapEx right now. We don’t have any update provided externally but that’s what we do this time of the year as we roll through ’15. We are taking a hard look at ’16 and beyond. Ashar Khan Okay. Okay. Thank you so much. Darrel Anderson Thanks, Ashar. Steve Keen Thank you. Operator Our next question comes from the line of Brian Russo with Ladenburg Thalmann. Your line is now open. Brian Russo Good morning, I’m sorry, good afternoon. Darrel Anderson Hi, Brian. It’s probably a busy day for you, so it might still be morning. Brian Russo Just wanted to understand the increased guidance versus the original guidance. Obviously weather wasn’t the strong weather in the second quarter, it wasn’t included in the original guidance and I’m assuming that the make-whole redemption impact on tax, that was included in the guidance but was the FCA adjustment included in the original guidance. Darrel Anderson Brian, in the original guidance, it was not. We knew that there was potential for a change, but we didn’t know what that change would be or when it would be have implication. So it was not there. Brian Russo Okay. Darrel Anderson We are aware of things going on with it but it wasn’t final. They didn’t become final until second quarter. Brian Russo Right. And so was that just weather and the FCA combined, it seems like your guidance – you are increasing guidance, it should have been greater than what it was. But then I guess it’s probably because you then run into the sharing bands and then kind of caps the upside, is that the way to look at it? Darrel Anderson Yeah. The upper end, remember, our sharing mechanism this year is operating from the first dollar. 25% of the company retained, 75% goes back to customers. So it’s a pretty steep hill. We have to earn to keep one once you hit that threshold. And on the FCA, I do want to correct this. There was an FCA competition included but it was basically the old methodology. We did know if there would be a new methodology and if there was what it would be at that point of time. Brian Russo Right. Okay. And can you maybe talk about the scenarios or the mechanics of the FCA in the upcoming third quarter. Could it potentially have a meaningful impact? Steve Keen At the very highest level, what’s it going to tend to do is take a quarter where you have much higher usage and it’s going to moderate that a bit, pull you back down because it will look at that weather impact and give some of that back to customers. Quarter like the first quarter, if it’s very mild, you are not going to see all of what we used to see in terms of a negative impact. You will get the moderation back as the FCA fills that back in. What it’s doing is looking and saying, did you really get the amount of sales that were expected in order to get you that increment of fixed cost or the partner recovery that isn’t purely an energy sale then you would have otherwise been entitled to and it moderates. You could also look at it and say you got too much. You got a big quarter, lot of sales that you didn’t anticipate, it will take a little bit out. So it is really a moderating factor the way it’s designed right now. Darrel Anderson And Brian, just as a reminder in the classes that it covers which is residential and small commercial, and so variations in those classes will have an impact versus the industrials and the irrigation customer type. They will not have an impact. But as we go into third quarter obviously depending on the makeup of our sales between those classes also have an impact on what FCA might look like. Steve Keen Right. And just to add to Darrel’s comment, those two – the items that were excluded, the industrial and irrigation, they weren’t included in the old FCA either. It’s never been applied to them. That’s not new. Brian Russo Okay, good. And then just to understand the base case and the RFP, it seems like you can bridge the gap between now and when board men [ph] align, it is commercially available with energy efficiency and demand response. There is no need for new capacity or new generation. Steve Keen That’s right, Brian. I mean that’s the way this last round of the IRP set up is. We are sufficient and we don’t have a need really until 2025. Brian, you have to factor in and Darrel mentioned it in his comments that there are assumptions that go into that including the growth assumption. And if those deviate, then the plan will move away from what the IRP is projecting. One thing I know we’ve talked about with you before is our IRP used to include a large load component and add for potential large load, where current IRP does not. And those kind of factors if those things change, you just have to be ready to be nimble around what the IRP says. It’s designed as a document to lay the foundation and as you move past your point of projection into actual, you have to moderate based on what we really experience. So what happens in our service territory over the next couple of years could change what the next IRP might project. Darrel Anderson And Brian, I’m going to add, there is still also the wildcard of 111D. We don’t know – we think that’s coming out soon. We will have to assess that and how that impacts. What’s in our current IRP and so while we don’t have a lot of near term action plans with respect to what’s in the IRP, we will have a chance as we put a new plan together over the next two years to digest all of those variables and see kind of where we land. But as you know, there is a lot of moving pieces right now especially with 111D might not end up, so that could have an impact also. Brian Russo And just it looked like according to the Q, the tax rate was 15% in the second quarter. What’s the assumption built into your EPS guidance? Steve Keen Brian, if you pull the impact of the redemption, it’s isolated in this quarter. So if you go to note 2 and pull that number out, you will see that the effective rate jumps up back above 20% which is kind of where it was last quarter. It’s actually in and around that, so for the full year it’s going to be a number closer to that range. Brian Russo Okay. And then lastly, are there any other tax studies or triggers for gains or losses for the remainder of the year that we should be aware of? Steve Keen Right now, Brian, I don’t believe we have anything. I’m looking at [indiscernible]. We do have our normal – there is an annual process of filing returns, getting our – and we are very current in how we get reviewed by the IRS. There is typically – once you get your returns done, we will look at that and there could be some impact out of that in the third quarter but there is no change in direction or new type of deduction or loss of deduction that we are anticipating right now. It would just be the fact that what actually happen might be slightly different than what got filed in the return as you get a reconcile with the IRS, but that’s the only thing I am aware of, now typically third quarter. Brian Russo Alright. Thank you very much. Steve Keen Thanks, Brian. Operator [Operator Instructions] That concludes the question-and-answer session for today. Mr. Anderson, I’ll turn the conference back to you. Darrel Anderson We know that you all had a fairly busy day. I think there is a lot of you had stacked up calls, so we appreciate you guys taking the time, participating in our call this afternoon. We appreciate your continued interest in our company and look forward to talk to you guys in the future. Thanks a lot. Operator That concludes today’s conference. Thank you for your participation. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) 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California Water Service Group’s (CWT) CEO Martin Kropelnicki on Q2 2015 Results – Earnings Call Transcript

California Water Service Group (NYSE: CWT ) Q2 2015 Earnings Conference Call July 30, 2015 07:30 ET Executives Thomas Smegal – VP & CFO Martin Kropelnicki – President & CEO Paul Townsley – VP, Regulatory Matters Analysts Spencer Joyce – Hilliard Lyons Jonathan Reeder – Wells Fargo Operator Welcome to the California Water Service Group Second Quarter 2015 Earnings Results Teleconference. Today call is being recorded. I would now like to turn the meeting over to Mr. Thomas Smegal, Vice President and Chief Financial Officer. Please go ahead, sir. Thomas Smegal Thank you, Kim. Welcome everyone to the second quarter earnings call for California Water Service Group. With me today is Martin Kropelnicki, our President and CEO and Paul Townsley, our Vice President of Regulatory Matters. A replay of today’s proceedings will be available beginning today July 30, 2015 through September 30, 2015, at 1-888-203-1112 or at 1-719-457-0820, with a replay passcode of 1770876. Before looking at this quarter’s results, we would like to take a few moments to cover forward-looking statements. During the course of the call, the company may make certain forward-looking statements. Because these statements deal with future events, they are subject to various risks and uncertainties, and actual results could differ materially from the company’s current expectations. Because of this, the company strongly advices all current shareholders, as well as interested parties to carefully read and understand the company’s disclosures on risks and uncertainties found in our Form 10-K, Form 10-Q and other reports filed from time-to-time with the Securities and Exchange Commission. Now, let’s look at the quarterly results. I’m going to go through the income statement and then turn it over to Paul for an update on our regulatory activity for the quarter. So for the second quarter our financial results, our revenue was a 144.4 million that’s down 8.8% or 14 million and that’s two things going on there, the MCBA, the modified cost balancing account which tracks our production cost that’s reflected an entry of 6.7 million and then unbuilt revenue adjustment which we will talk about in a little bit more detail later reduced revenue by 10 million and those both result really from decreased consumption in the quarter and at the end of the quarter. Our production cost for the quarter 53.0 million that’s down 14.4%, 8.9 million and again that water production volume is down 21% for the quarter. So we see that conservation is having effect on our production cost. Our production mix, well production within the quarter was 52% of total water production, while purchased water represented 45% and surface water accounted for the remaining 3%. In 2014 in the same quarter, 51% of water production was from wells, 46% from purchase sources and 3% was surface water. Our administrative and general expenses for the quarter were up 11.9% or 2.8 million and that’s really driven by pension expenses which were higher by 2.6 million. For our other operations expense, that was 17.5 million for the quarter up 9.4% or 1.5 million. Conservation expense increased to 0.5 million and expenses recorded to the drought memorandum account for future recovery was 0.9 million during the quarter and just as a reminder in our past calls we are confirming that the company still expects to spend $4 million to $6 million on drought response this year and Marty will talk more about our drought response. And maintenance, we got 5.3 million for the quarter up 6.8% or 0.3 million driven by maintenance in services maintenance within the quarter. Depreciation and amortization was 15.4 million, a decrease of 4.6% that’s driven as it was last quarter by lower depreciation rates that were adopted with the DRC [ph] decision late in 2014. Our net other income was a loss for the quarter of $15,000 that’s down about 800,000 from the second quarter of 2014 and the biggest driver there is a change in the value of the company’s non-qualified benefit plans which are mark to market each quarter. For income taxes during the quarter they decreased 2.1 million to 5.1 million and that’s due primarily to a decrease in pretax income and partially offset by changes in tax benefits. During the second quarter of 2014 the company has realized tax benefit of 2.5 million associated with implementation of the tangible property regulations. No similar benefit was achieved in the second quarter of 2015. Consequently the effective tax rate for 2015 is estimated to be 38%. So our net income for the quarter was 9.8 million, compared to net income of 17.2 million in the same period last year for a decrease of 7.3 million and talk about two main factors there of course is the unbuilt revenue and the tax benefit that we had received in the prior year. Earnings per share $0.21 and earnings per share on a fully diluted basis for the quarter is compared to earnings per share of $0.36 in the second quarter of 2014. Please go through the year-to-date results, revenue 266.4 million for the year down 1% or 2.5 m. Production costs are down 8.5% or 9.1 million over the first six months and that is reflecting of course decrease in volume. Our production mix was 51% for the first six months was well production as compared to 49% in the first six months of 2014 and purchased water decreased from 48% to 46%. This reflects a scarcity of surface water during the drought and more pumping from our groundwater wells. Our administrative and general expenses for the first six months of the year were up 11% or 5.4 million again that’s pension expense which was 5 million of 5.4 million. Other operations, 33.4 million for the year up 3% for 1 million and that’s to be driven primarily by wages. Maintenance expense is 9.8 million for the year to-date down 2.1% or 200,000. So there is a decrease in well and pumping equipment maintenance for the year-to-date. So net income for the first six months of the year 11.4 million, that’s down 2.3% or 300,000. The earnings per share is $0.24 on a fully diluted basis for 2015 and that’s the same $0.24 as we achieved in the first six months of 2014. So now I would like to turn it over Paul for an update on regulatory activity during the quarter. Paul Townsley Thank you, Tom. Good morning everybody. I would like to provide you with an update on our regulatory activity in both California and our subsidiaries. Let me start with Hawaii, our subsidiary Hawaii Water Service Company received three decisions from the Hawaii Public Utilities Commission during the second quarter of this year. These three decisions will provide the company with an additional revenue of $2 million annually. The three decisions conclude general rate cases for our Waikoloa Water Company, the Waikoloa Sewer Company and the [indiscernible] water Service Company, all of which are located on the Big Island of Hawaii. In addition to revenue increases to offset changes in operating expenses and to provide a return on our invested capital, these decisions also authorize the company to establish power cost pass through mechanisms so that energy cost are shown directly on customer’s bills and cost saves are pass through rather than eroding range [ph]. These three decisions conclude a series of Hawaii Water Service Company rate cases that is being working their way through the regulatory process since 2011 and 2012. Our net rate cases in Hawaii are for our Maui based, [indiscernible] service areas which we plan to file early next year. In California we filed our 2015 general rate case application in early July of this year. The application was covered of three year forward looking period request California Public Utility commission approval to increase revenue by $94.8 million in 2017, $23 million in 2018 and $22.6 million in 2019. The application also requests commission approval for Cal Water to invest $693 million in capital over the three year period of 2016 through 2018. The main driver for the requested revenue increase in this rate case application is investment and infrastructure. About 80% of the requested revenue increase in the rate case is attributable to capital investment and of the $693 million in requested capital investment over 40% or about $280 million of it is because of our stepping up of our pipeline replacement program. By stepping up our pipeline replacement program we can ensure that we’re replacing older pipeline in a systematic and timely manner which will reduce failure and leakage rates over the long term and the balance of the capital request that we have made to the commission is for other types of normal utility investments wells, pumps, tanks, treatment plants and water meters and service lines and technology, the usual bread and butter of our water utility investments. The rate case filing also reflects Cal Water’s aggressive cost control measures which include reduced benefit costs and increasing employee head count for all positions except for those that are required and make water supply improvements. We also want to point out some other important elements of the rate case application. In this case we’re proposing to consolidate a number of our service areas, our application details proposals to combine for rate making purposes 16 of our service areas in the five regions. We believe that proposed consolidation will help with a customer affordability concerns and also improve administrative efficiency. We have also requested that the commission continued the company’s sales reconciliation mechanism also known as SRM that was approved in our last rate case and to further enhance it to make it better reflect annual changes in customer sales. And finally we’re proposing to improve construction work and progress also known as [indiscernible] in rate base rather than including capitalized interest in our project announced. This last change will make Cal Water’s approach to construction accounting more consistent with other California Public Utility commission regulated water companies. The commission has not yet established a schedule for our rate case. However in accordance with the commissions established rate case plan new rates should go into effect on January 1, 2017. That’s my update, Tom. I will give it back to you. Thomas Smegal Thanks, Paul. Now I would like to cover some highlights on the balance sheet. So our plant balance at the end of the period net utility plant grew to 1.64 billion as of June 30 of 2015. The work in progress as Paul was talking about, construction work in progress increased to a 135 million. Our capital investments from both company funded and developer funded activities were 75.8 million on a year-to-date basis, it’s a 32% increase from the same time in 2014. This increase is primarily driven by increased activity on projects approved in the 2012 California General rate case application which went into effect last year. And as we have mentioned earlier the company expects to spend between a 125 million and a 145 million on company funded improvements in 2015, so we’re well on our way to meeting our target goals there. Cash on hand was 24.5 million. We did have a 126.6 million outstanding on our revolving credit facilities as of June 30th. I wanted to talk a little bit about our accrued unbilled accounts receivable what we call unbilled revenue and because that was the main driver of the change in earnings for the period. Unbilled revenue accrual represents water which has been used but not built for at the end of the period. The unbilled revenue is not reflected in the RAM decoupling mechanism which is recorded on a cash basis. Once built of course the revenue is recorded in the RAM and it flows through the normal decoupling process. The accrual we do this every quarter and it is very seasonally and very with REIT changes typically as in 2014 the accrual is higher at the end of the second quarter as compared to the end of first quarter. This year we asked our customers to conserve 25% to 30% state wide and they really came through as Marty will talk about in the discussion of the drought, our customers in June conserve 30% based upon their usage in 2013. With that consumption our unbilled revenue accrual is down as compared to 2014 and that’s what’s really driving the change in earnings this year. This has the seasonal effect, this is a transitory effect. We’re going to be doing this accrual every quarter and it’s just a natural part of us doing it. And of course the company cannot predict the future effects on net income due unbilled revenue accruals but we will see how it goes throughout the rest of the year. And just a final update from me on the balance sheet net RAM and MCBA balance actually decreased 0.3 million during the quarter to 47.9 million from 48.2 million at the end of the first quarter. The balance is up 2.7 million for the year from 45.2 million at the year-end. So now I’m going to turn it over to Marty for some comments on the drought and the quarter’s results. Martin Kropelnicki Thanks, Tom. Good morning everyone. If we sound like we’re a little off because Tom and I are in Boston after our board meeting yesterday we flew out east and we will be meeting with investors in Boston today to talk about the rate case we just filed. So it’s really early in the morning our time and we struggled to find Tom coffee this morning and me a cold diet coke but we got the first shot. I think we’re warming up here. So I want to cover really five things, one talk a little bit about the operating results for the quarter. Two, spend most of my time giving you kind of detailed drought update and what’s being going over the last really 60 days in the State of California. Three, give some thoughts on the GRC and highlight some of the things in what we’re doing that Paul talked about. Four, talk about the [indiscernible] workplace which we won for the fourth year in a row and then lastly talk about our plans as we move into the second half of the year what are our priorities as we move into the last part of the year and one of our goals for the company. So first and foremost, as Tom mentioned we saw significant decline in demand, our consumption laid in the quarter. So if you remember, Jerry Brown, Governor of California signed the executive order by extending the Emergency Drought Declaration in April that was ultimately put into place about May end of the first week in May and then we had to ramp up to be in compliance with that role start in June 1st. So it’s interesting that we did see the consumption prior that declaration being extended if you recall the medium wasn’t very good and in most places the consumption was down anywhere from 0% to 7% and that was really driven by the fact we had a very long dry winter. So people continue to use water. Once we did the public participation meetings, we communicated the drought plans. We sort of implemented our customer first approach. It shouldn’t be a surprise to anyone that we saw a significant decrease in consumption that really hit in the month of June and Tom kind of hit the bad news with that and it does affect the revenue accrual which is outside the regulatory accounting mechanism. That’s a good news in that and that most of our districts hitting or exceeding the conservation targets, what are the major step from where they were 60 days ago. So while that’s create a little bit of short term volatility the fact that is it’s step in the right direction for the company being able to hit it’s required targets as prescribed by that emergency declaration by the governor. Tom, you might want to take a quick minute if you can just to go through kind of the surcharge accounting and now that we’re into the penalty phase where people are charged a surcharged regarding their allocation how their accounting is going to work for that, because they will start showing us really in the Q3 numbers. Thomas Smegal Sure, Marty. The commission adopted our what’s called schedule 14.1 which is our drought plan and our drought water budget plan. In it there is two types of monetary penalties, one is a surcharge on excessive use over the budget that the customer has, each of our customers is given a specific budget that’s based upon their past usage in 2013 in the similar period. That surcharge money that comes is going to be put in the RAM of decoupling account, so that goes offset the deficit that might occur in the RAM with reduced sales. So that’s something that are going to be looking at very carefully to see where that goes. There are also penalties that would be associated with customers that misuse water or use water against the rules that have been established by ourselves, by the state and by local ordinances such as washing their car at an inappropriate time or watering at an inappropriate time or wasting water down the side walk. Those penalties, those fines really will be put into the drought memorandum account. That drought memorandum account I mentioned has we recorded 900,000 for the quarter and as we go forward that will be collected on a future basis so that’s drought memorandum account, it’s not something that we will recover immediately it will be something we recover probably in 2017. Martin Kropelnicki Right, so the end build revenue versus the ramp kind of creates a timing difference and the ramp balances for the quarter really went down actually slightly from where they were at the beginning of the year, so now you will start, we believe we believe you will start to see as the RAM balances start to grow as we move into the summer month and it’s kind of the change in consumption is being recorded now in June. It will start moving through the regulatory accounts going forward. As Tom we spent about a $1 million incrementally on our drought response and we’re still stand at the 4 million to 6 million is about the right amount. About 40 people dedicated full time in our drought centers working in each of our regions and through a dedicated call center to assist our customers and help high volume users in each of our districts. In addition on the numbers for the quarter, the 75.8 million and the capital program that the company has recorded that’s really good news. So we’re actually ahead of plan on a year-to-date basis, our goal is a 125 million to 145 million the significance in why I’m pushing this number and I want to highlight this number a little bit is because of the rate case numbers that Paul mentioned. We [indiscernible] $700 million of new capital and that is a significant increase what we asked for in the last rate case, the largest components of that being made and then pumps treatment, water supply, water [indiscernible] items. So this is kind of a transition here in terms of our ability to execute a $200 million year capital program. So we have been very focused internally looking at our capital processes and making sure we have the ability to implement a significantly larger capital program in the coming years and as we said before we don’t see the capital slowing down as Tom and I have mentioned before, you know our mains are getting older. We need to start changing out those mains. Obviously water supply and scarcity is playing in the California so we have a lot of projects to bring new water supply on board and also make sure as the water level has dropped in California while the quality issues become more difficult to deal with. So we’re dealing — we’re spending more money on purification for our programs. By the way we know that it’s very complicated on the RAM accounting and all everything gets involved in it. So when we look to our 10Q there will be a lot of disclosure around this and we try to highlight the changes in the MD&A so people can really follow in our 10Q that we plan to file shortly. Now moving on to the drought, so bad news is out of the way, the decline in consumption now let’s stick to the good news and that’s really the customers and our footprint within the State of California has done an outstanding job at the first month of required mandatory conservation. To give you an idea how our districts faired, we had six districts that achieved greater than a 40% reduction, and the water consumption we had 15 districts that achieved greater than 30% reduction and 19 out of our 24 districts were in compliance that means 80% of our districts were in compliance. The ones that were out of compliance most of them was the exception of one district which I will come back were a stone throw away from hitting the targets. So that’s first month of reporting that’s required and the penalties are rolling in, I’ve been very, very happy with the drought response and our customers’ ability to hit their conservation target. Call center volumes have leveled off from a higher 45,000 calls per week down to approximately 20,000 calls per week and in total we have received approximately 4000 customer applications for appeals are requesting changes to their water budget. If you put that into perspective of how many meters we have in the State of California that’s less than 1% of their customers are coming back saying they need a little bit more out of their water budget. So we have an approved approximately 1600 applications and adjusted water budget and those are remodeled or we just had twins or my in-laws has just moved in with me and so we go and we verify all that and we will adjust their water budgets based on the supporting documentation that’s put in. But nonetheless, it’s less than 1% of the customers coming and asking for a change in the water budget and to me it speaks the fact that the message of the drought in what we need to do is really clearly being understood by our customers. In addition towards the end of the quarter we did a few customer focused groups, and the feedback has been mainly positive. What we try to do is get customers in a room and ask them what’s working, what’s not working, what is it going to take them to help conserve and overall it’s been a very supportive environment with the customers and the communities that we serve. In addition to the focus groups about 82% of the media coverage in our service areas has been neutral to positive versus 18% which is negative and again we believe that’s reinforces, that’s the message is getting out and it fits nicely with decline that we have seen in consumption at our customers understand that we need to hit these targets. [Indiscernible] supply standpoint our water supply conditions have been steady and we’re in the process of launching five new conservation programs that will bring us upto 12 conservation programs that have been launched over the last 60 days, the new programs will drive our outreach and continued success, and allow us to continue to target high end users, high volume users and the water that they use. In addition, we started rolling out a new report. This new report was traded with an application called BEACON. We have partnered Badger Meter to design and build an application to produce easy to read graphical reports for customers to help them track and understand their water usage compared to people in their neighborhood so it doesn’t identify who your neighbors are but it’s basically a graphical report that we produced and give to the customers, that shows their trends and how they are trending compared to people in their neighborhood. And so that was a good project that we partnered with Badger Meter and we’re in the process that we’re rolling it out. We’re rolling it out to the high volume districts first and then we will roll out to the districts that aren’t as hard hit with the drought, what the idea that is being fully rolled out here during the third quarter. So overall I’m very pleased with the progress that we have made on the drought, I think we’re off to an outstanding start, it has been a lot of work for the team but all this indications are heading in the right way. Customer usage is down, customer understanding is up, media coverage has been good and we’re hitting our targets and I think that’s the most important story here. In addition as Paul mentioned you know the rate case, the rate case we’re moving into the next stage so it’s being filed. We start our tours with the regulators here in next month and we start notifying our customers. I believe this week with build notifications of the rate case process. We get what’s called an exception report from the — we file a prelim rate case and then give us a deficiency report and then we have to correct those deficiencies before make the final filing. Our deficiencies in this rate case were down about 65% from where they were with the last rate case, I think that speaks to the companies extra care and timing is put into preparing this rate case, in particular the capital work and the capital program across the state. So as we move into the rate case space here and continue to deal with the drought those are our two priorities as we go into the end of the year. Droughts number one, rate cases number two. Lastly I want to take a couple of minutes to talk about the award we announced a couple of weeks ago, the Bay Area Top 100 Workplace so this effects our employees in the Bay Area which is about — it’s about 25% to 35% of the company. For the fourth year in a row we have been named a Top 100 Workplace in the Bay Area and once again we’re the only utility to win this award and we take great pride in being an 89 year old water utility located in the heart of Silicon Valley competing with 1000 of tech companies that are around us. It’s nice to be a winner and I believe that the award shows the type of company that we’re, the type of employees that we have and I sincerely believe that happy employees help create good customer service and that good customer service also helps [indiscernible] response. So we’re very happy to have won that award for the fourth year in a row. We did take a small moment to have lunch with the employees to celebrate their success and it was back to our come back to dealing with the drought. So in closing while the drought is creating a little bit of volatility on the unbuild of revenue side which is outside the regulatory mechanism, the fact is there is a lot of great things are happening in Cal Water. We’re off to a great start with the drought and we’re hitting our targets and really because we’re in the emergency declaration, it’s about doing the right thing right now and dealing with the short term volatility and so I’m very pleased to where we ended the quarter in terms of the products with drought and think we’re off to a great start. So, Tom with that I will turn it back to you. Thomas Smegal Okay, great Marty and Kim that is the end of our presentation and we’re happy to take questions. Question-and-Answer Session Operator [Operator Instructions]. Our first question is from Spencer Joyce from Hilliard Lyons. Spencer Joyce Couple of quick ones for me here, first I think you briefly touched on, did you say the CapEx spend so far this year has been about 75 million? Thomas Smegal Yes 75.8 million so almost 76 million. Spencer Joyce Okay, so we’re over half way to kind of the full year goal here. Thomas Smegal Spencer that does include a little bit of developer contributions so that’s not all what we call company funded CapEx and when we’re targeting we’re targeting the company funded CapEx. So we’re right about half way there little bit better than half of our goal right now. Spencer Joyce In any case tracking well may be at least if we think about last year where we kind of undershot a little bit. Thomas Smegal I think Spencer, one think to look at is the company funded over the last 12 rolling last 12 months, half of last year we really accelerated and then this has continued that trend. So I think that shows a good track record of what we can spend in the future. Spencer Joyce Separately with the drought kind of dominating the conversations here over the last year or two, I want to ask about acquisition potential. Has the drought or any other external factors perhaps brought any potential targets kind of to the forefront or have any opportunities maybe percolated on that front? Martin Kropelnicki What’s the drought done, I think is really highlighted kind of some of the weakness in the State of California around the long term planning for water supply and Spencer you’re right, NAWC Financial forum I shared with the people of the financial forum what the population growth curve was for California versus kind of the water supply and the demand curve and the supply curve are growing apart right now, they are not going together which is highlighting a lot of need for a lot of capital infrastructure both for new water supply but also upgrading existing water supply and that’s start with the state and goes all the way through to companies like us. So [indiscernible] covers a lot of stones and when that babbling brook [ph] goes down you start to see the rocks that usually lie under the water. So we’ve seen some of the rocks, just some of the weakness in the system right now. Having said that, our water supply has been fine that we have a few cities that were trucking water to help get them through the summer months because they have just run-out of supply. I also mentioned at the conference that none of the investor-owned utilities have run out of water, it’s been more a small kind of undercapitalized city or meeting systems have been the ones that have been strained and run out of water. So it hasn’t popped into any type of M&A market, in California it’s hard to buy a muni system because it requires a vote of the local taxpayers to approve it but clearly you’re seeing the stress on the smaller systems and the inability to meet water quality standards or add adequate supply for their customers. So I think the jury is still out on that. I think part of it’s going to depend on what happens over the next 12 to 18 months, it’s drought, if it continues. I will say it’s fascinating to me that we are focused on California but Oregon declared a drought here in the month of June, Washington declared a drought in I believe it was late April, early May and I was recently talking to somebody who is from Vancouver, British Columbia who was telling me how horrible the drought conditions are in Vancouver. In fact their water restrictions are worse than ours. So the drought is really a whole west coast item right now and I think it’s going to be changing some behaviors and changing how capital is directed within the state and whether that leads more M&A I think the jury is still out on that. Spencer Joyce So it sounds like maybe nothing eminent but at least you guys are kind of keeping your ear to the ground there. One final, one from here. I know if we think back to last year Q3 was a pretty strong quarter, Q3 ’14 that is as we recouped a little bit of benefit via the rate case or the generate rate case that may have been otherwise earned during the first half of 2014. Correct me if I’m wrong there first off and then second if you could, what is roughly the kind of net revenue benefit that might come out of Q3 this year in order to maybe get a more fair comp looking at Q3. Thomas Smegal I would have to go back to our communications in Q3 of last year and unfortunately don’t have that open in front of me. We did recognize the benefit of the rate case and the interim rates associated with the rate case in the third quarter but I think that was fully disclosed in the press release so that number is pretty quantifiable. As far as on a go forward basis I think you would look to that adjustment to get to your comp. As far as the rate changes and the way to think about our the profitability of the company from last year to this year we have identified that we had step, what’s called the escalation step increases of about 5 million, a little less than 5 million. We did at the beginning of July, get approval from the CPUC on $5 million revenue requirement worth of these [indiscernible] letter capital projects that they have been approved in the prior rate cases, this all on an annual revenue basis and of course what’s going on in Hawaii we will start to see in August the revenue coming in from those rate changes that we got at the end of June. And so those are just some of the things that are going on and obviously the drought response is another factor that we have identified it could be a change as we go forward. Operator [Operator Instructions]. We will move on to Jonathan Reeder from Wells Fargo. Jonathan Reeder Couple of questions, first on the revenue, since this will essentially get captured by the RAM in Q3 it’s about $0.30 headwind for Q2, should we view that as something that’s just going to reverse and add $0.13 of incremental earnings in Q3? Thomas Smegal Jonathan, I think that this is the line on the balance sheet, you can go back and then anybody can pick this up out of the Qs and the Ks. We see a variability in the accrued revenue, from anywhere from 15 million to 30 million at the end of every quarter. Right now we are at — I think it’s 26 million, at the end of the year last year we were 23 million so this is a very small increment. If you follow that, it’s really — it’s kind of a sea level change or it’s the tide going in and out. If it happens that in the third quarter we get that popped in and what we mean by that not that it’s going to up higher but that is not going to fall like it fell in the third quarter in the prior year. So always going to vary, it varies a lot less the second quarter because of the conservation whether it comes back to a normal level at the end of year. I think it’s dependent upon a couple of factors both the customer conservation, the effect of the surcharges that will be calculated in the end bill and also the effect of the rate design that we have seen over the last couple of quarters where more service charge revenue less quantity charge revenue. So it will come back it’s a question of timing really, will it come back in the third quarter, fourth quarter when the droughts over-rise I can’t say at this point. Martin Kropelnicki Yes I think it was interesting to know Jonathan that typically in the second quarter we see a really big step in that number and in this quarter we see that down because of the consumption, that consumption really had in June and that’s what it relates on that calculation as the 21 day average of what people consumer. So it — when you flipping in the context of what the swing was that we typically see this time the year, it’s a pretty big swing. Jonathan Reeder And then on the mark to market life insurance in Q2, what was the absolute like benefit or loss, I mean you said it was 800,000 quarter to quarter. Thomas Smegal So the loss in that area was about 200,000 so that’s made the rest of that category includes benefits from other unregulated activities. Jonathan Reeder So anything else that we should be thinking about in terms of ongoing earnings number for you all in Q2? Thomas Smegal No just the things that we mention the drivers on the rate changes that are going to hit in Q3 from Hawaii and from the rate base offsets. Martin Kropelnicki Yes. And again when the Q comes out you will see in the rate section we have that identifying what those increases were both the escalation in steps and the Hawaii changes and for this quarter John it really comes down to those three items, the changes and the end build revenue, the non-recurring tax credit and now I’m blank on the third item because it’s early but it’s really the [indiscernible] that we talked about, those are called out in the press release and also in the Q that will be filed. Operator [Operator Instructions]. And it appears there are no further questions today. Gentlemen I will turn the conference back over to you. Thomas Smegal Great. Well I want to thank all of you for your continued interest in California water service group and we look forward to talking with you again after the third quarter. Thanks. Operator And that does conclude our conference today. Thank you all for your participation.

DTE Energy’s (DTE) Management on Q2 2015 Results – Earnings Call Transcript

DTE Energy Company. (NYSE: DTE ) Q2 2015 Results Earnings Conference Call July 24, 2015, 06:30 PM ET Executives Anastasia Minor – Investor Relations Peter Oleksiak – Senior Vice President and CFO Jeff Jewell – VP and Controller Mark Rolling – VP and Treasurer Analysts Julien DuMoulin-Smith – UBS Dan Eggers – Credit Suisse Shahriar Pourreza – Guggenheim Partners Greg Gordon – Evercore ISI Matt Tucker – KeyBanc Andrew Weisel – Macquarie Capital Steve Fleishman – Wolfe Research Paul Patterson – Glenrock Associates Operator Good day everyone and welcome to the DTE Energy Second Quarter 2015 Earnings Release Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Anastasia Minor. Please go ahead. Anastasia Minor Thank you Heather, and good morning, everyone. Welcome to our second quarter 2015 earnings call. Before we get started, I would like to remind you to read the Safe Harbor statement on page two, including the reference to forward-looking statements. Our presentation also includes reference to operating earnings, which is the non-GAAP financial measure. Please refer to the reconciliation of GAAP net income to operating earnings provided in the appendix of today’s presentation. With us this morning is Peter Oleksiak, our Senior Vice President and CFO; Jeff Jewell, our Vice President and Controller, and Mark Rolling, our Vice President and Treasurer. We also have members of our management team with us to call on during the Q&A session. I would like to turn it over to Peter to start our call this morning. Peter Oleksiak Thanks Anastasia, good morning everyone and thank you for joining us today. As usual I like to start the call by giving a quick update on Detroit Tigers. Good news, the Tigers have won 47 games. Bad news is that they have lost 48. Despite the first half July weather here in Detroit area has been colder than normal; the Tigers have cooled off as well this month. We are hoping that the summer heats up, so do the Tiger bats and I’m still holding out some hope for a play-off berth. Unlike the Tigers here at DTE, we certainly have had a successful first half of the year, and I believe we are well positioned to continue the success in the balance of 2015. As all of you saw in our earnings release we are raising our 2015 EPS guidance on strong year-to-date results. Jeff and Mark will be going through the second quarter results in more detail, but before we move onto that, I’d like to do a quick overview of our business strategy as well as some highlights what’s happening at DTE and Michigan. Slide five provides an overview of our business strategy, and investment thesis. Our growth plans for the next 10 years at both utilities are highly visible. Our electric utility growth is driven by environmental spend in the near-term and renewal of our generation fleet and upgrading the distribution system in the longer term. Our gas utility growth is driven by infrastructure investments and the main line pipe replacement. Our two utilities are deploying capital in very — in a constructive regulatory environment and we’re working hard to earn this constructive environment every day. I’ll be updating you on some of the regulatory proceedings our utilities are currently working through. Complementing our utility growth, our meaningful growth opportunities and our non-utility businesses which provides diversity in earnings and geography. Our highly engaged workforce continues to be the key to our success. Last quarter I told you about the third consecutive Gallup Great Workplace Award and just recently DTE Energy received the Development by Design Award from the Gallup organization. The award recognized DTEs focus on creating personnel team and organizational success through employee training programs. So we definitely continue to make strides in our employee engagement efforts. We have a strong focus on continuous improvement and feel we are distinctive in the industry on our approach and outcomes. The combination of these two employee engagement and continuous improvement enables us to deliver both sustainable cost, savings track record and to consistently earn authorised returns at both of our utilities. We are also very focussed on operational excellence and customer satisfaction that we believe also are distinctive in our industry. We have certainly seen positive results on this front, as currently DTE gas is ranked highest by J.D. Power among our peers for residential and business customer satisfaction. And earlier this month, we found out that DTE Electric was ranked second in overall customer satisfaction with electric utility residential customers in J.D. Power’s 2015 study. Our dividend continues to grow as we grow earnings and the goal is to maintain a strong BBB credit rating. This strategy provides about consistent 5% to 6% annual EPS growth. Slide six provides some highlights of progress in 2015. First in our list is the announcement they will be increasing our operating EPS guidance for this year. We are increasing from an EPS midpoint of 460 to a midpoint of 472; this is driven by a strong performance in our gas storage and pipeline business as well as their energy trading operations. I’ll provide a more detailed overview of guidance in a few minutes. Keeping in line with our commitment to grow our dividend with earnings we have recently increased our dividend. Our annual dividend per share was increased from $2.76 to $2.92 which is a 5.8% increase. Regarding Michigan’s Energy policy, I feel there is positive momentum for the constructive legislation by the end of the year. This continues to be a priority of the Governor when he called up publicly the need to get legislation done this year. Back in March, representative Aric Nesbitt introduced legislation and recently the Senate lead, Mike Nofs introduced legislation but the process is definitely moving along. I’ll touch more on the Energy Policy in a few minutes. I also want to give a quick update on the various rate proceedings for our two utilities. Our electric utilities self up [Indiscernible] rates on July 1 for the ongoing general rate proceeding. We expect to receive a final order by the end of the year. We also implemented our new cost of service rates which resulted in a rate reductions for many of our business customers. For DTE Gas, we expect to receive an order this year for our expanded infrastructure recovery mechanism that, if approved will allow us to double our annual miles of our main line replacement program. We continue to make significant progress in our non-utility businesses. In our gas stores and pipeline business, Millennium had a successful open season and we are working through final contracts now. We expect an expansion of greater than 0.2 BCF. In addition, we are constructing a new eight mile lateral off Millennium to serve a proposed 650 megawatts combined cycle plant with approximately a 0.1/b day of natural gas. These projects are expected to be in service in the fourth quarter of 2017. This is another major milestone that helps firm our future year growth. The next is pipeline project. It is always moving forward nicely towards its fourth quarter 2017 in service date. The first FERC scoping meetings are complete and were relatively routine. We recently signed a number of Tampa Interconnection agreements that could provide potential aggregate load across northern Ohio upto 1.3 BCF per day. This demonstrates strong market support for the project and also strengthens the longer term earnings potential for the play. We filed our resource reports in June with a focussed schedule, and our next major milestone will be to file the FERC application in the fourth quarter of this year. We are also now very focussed on optimizing our reduced emissions fuel business. Currently we have REF facilities operating at eight sites and are in a process of relocating underutilized facilities to a ninth site, which should be operational in the fourth quarter. In addition, in this quarter we are operating a third party REF facility. This operating agreement runs — will run through 2020. We continue to work towards further optimization of this business line as this has been a great return business for us which has generated significant cash flows to help fund our non utility growth projects. So you can see, we’ve had a successful first half of the year giving us confidence to reach our earnings goal in 2015. Let me now move to updates in the Michigan improvements and the economy. Turning to slide seven, we are highlighting the progress the Michigan and the City of Detroit are making. I know many of you are interested in how the local economy is doing and we continue to see economic momentum in the state. Michigan’s unemployment rate in June is 5.5% and this rate has been around 5.5% the last three months roughly in line with the national average. Michigan’s unemployment rate hasn’t been at this level since 2001. Michigan is identified by the Site Selection magazine that been the seventh most competitive state for job creation as well as the number one state for new manufacturing jobs since 2009. We continue to see and the other economic indicators including increases in residential customer and business customer accounts and our forecast shows this trend continuing. I do want to highlight the city of Detroit’s economic progress. One indicator that we show on this slide is the Detroit’s Metro area, its’ ranking number eight in the U.S. for a number of new or expansion projects. The City has come a long way since the bankruptcy and with a strong leadership we have in place I’m confident that the city will continue to move forward. DTE as well as other city partners are working with them to help continue this momentum. You will see on slide eight that the additional changes in state have taken place as the Michigan Public Service Commission has welcomed Norm Saari as the new commissioner replacing outgoing Commissioner Greg White whose term has ended. Commissioner Saari has a deep background in public policy and governmental and community affairs, both in state government and direct utility experience. This is Governor’s Synder third appointment and the Governor has been great at talent selection. The Commission has held Michigan regulatory environment Q1 the most constructive in the country. We believe, that Commissioner Saari will continue this supportive environment. Moving onto slide nine, I’m now going to turn to an update on the energy policy. We have mentioned earlier, Governor Snyder has made it clear that energy policy is an important legislative priority for him this year. He called off the need for legislation in his state address and provided more detailed goals in his energy message in March, highlighting this significant transformation and the generation sources that our state will undertake over the next 10 to 15 years. And over the last few months, both the House and the Senate and Energy leaderships had introduced proposed legislation to address needed changes in the state. Representative, Aric Nesbitt, who chairs the House Energy Policy Committee introduced legislation in March that’s consistent with the Governor’s goals of reliability and adaptability. He also recommended the elimination of the retail access program we have here in Michigan which we support. Senator, Mike Nofs, who chairs the Senate Energy and Technology Committee, introduced legislation in June which is also similar to the Governor’s goals. He is recommending to maintain a 10% gap on a retail open access, but with a onetime election to enter into long term capacity commitment with an alternative supplier or to return to the utility. A customer could choose the return of the utility with three year notice and as the one time permanent election to return to the utility. We expect legislation to be completed this year and we are confident that Michigan has strong leaders in place that understand energy and utility dynamics and will provide constructive legislation for Michigan’s future. All of the proposals on that legislative joint board represent a positive move forward. In a moment, I’ll turn the call over to Jeff to review the quarter’s results, but before that I want to highlight, provide some highlights of our outlook and guidance increase. On slide 10, this slide shows our EPS history with our target of 5% to 6% growth. As I mentioned before, we expect to grow our dividend with earnings evidenced by our recent increase. The chart shows a revised 2015 guidance midpoint of $4.72 as well as our EPS guidance midpoint of $4.66 for growth segments. The 5% to 6% future growth that I mentioned is of a new guidance growth segment — point of $4.66 per share. And our commitment is to grow both earnings and our dividends and we are just doing that. Let me get into a little more detail on page 11. We are increasing our 2015 EPS guidance range to $4.54 to $4.90 for DTE Energy. This is a $0.12 increase in the midpoint from our prior range of $4.48 to $4.72. Our EPS guidance range for growth segments is now $4.54 to $4.78. Our guidance increase is driven by strong start of the year in our gas stores and pipeline segment with increased pipeline and gathering earnings. 2015 operating earnings guidance for this segment has increased from a range of $80 million to $88 million to a range of $90 million to $98 million. The majority of this increase is due to strong underlying performance in the business and therefore we expect the majority of this favourability to flow into 2016. For Energy trading business, we’ve raised our guidance, earnings guidance to a range of 0 to $20 million for 2015. Energy Trading is now part of our growth segments and our original guidance is set at zero as we do not rely on this business to achieve our earnings target. As this year is progressing we are recognizing the strong economic performance and have adjusted our 2015 guidance accordingly. Trading does have seasonality tied to the physical part of its business and those contracts may mostly make money in the first and fourth quarter. And with that, I’d like to turn the call over to Jeff Jewell, our Vice President and Controller to provide more details on the second quarter earnings results. Jeff Jewell Thanks, Peter and good morning, everyone. I will be discussing quarter to quarter earnings results on page 13 and on page 14; I will review our electric sales in order to provide more insight into what we are experiencing. Now turning to page 13. For the quarter, DTE Energy’s operating earnings were $137 million or $0.76 per share and for reference our reported earnings were $0.61 per share. You can find a reconciliation of the second quarter reported operating earnings on slide 26. For the quarter-over-quarter results, our growth segments second quarter operating earnings in 2015 were lower by $4million or $0.03 per share. The electric segment was lower by $18 million. This was primarily due to increased costs associated with rate base growth cost and unfavourable weather partially offset by lower O&M. The gas segment was lower by $3 million, driven by unfavourable weather in the second quarter of 2015. Gas Storage & Pipelines earnings were $7 million above the prior year. This increase was primarily due the volume growth in the Bluestone Pipeline and Gathering Assets. Our power and industrial project segment was up $5 million versus 2014. Quarter-over-quarter favourability was primarily driven by strong performance across the business line. Our corporate and other segment came in favorable by $5 million versus last year. This variance is mainly due tax related timing differences. The overall growth segment results for the quarter were $134 million or $0.75 per share. At energy trading, operating results for the quarter came in at a positive $3 million with economic net income of $19 million, both the power and the gas business lines contributed to these results. Please refer to page 24 of the appendix to review the energy trading standard reconciliation page, which shows both economic and accounting performance. Now let’s turn to page 14 to discuss our electric sales results. For the first half of the year, temperature normalized electric sales were down 0.7%. We are very encouraged by the drivers of this change year-to-date and for the future. This net change reflects both the underlying economic growth in all sectors and that energy efficiency is making positive impacts to reduce customer average usage. The economic increases are being driven by population growth, occupancy rate strength, income growth and manufacturing at auto production levels that have surpassed pre recession levels. Energy efficiency which is producing positive results for our customers is a key component of our overall operational and financial plans and a key priority for the Governor. This efficiency translates into reductions in the average energy bill for our residential customers, which is one of the key components of our long term strategy to create affordability headroom as we embark on a very intensive capital investment program. Therefore we are changing our sales forecast as we anticipate our load growth over the next few years to be close to flat as underlying economic growth and energy efficiency play off. That concludes the update on our earnings and sales for the quarter. I’d like to now turn the discussion over to Mark, who will cover cash flow and balance sheet metrics. Mark Rolling Thanks, Jeff and good morning to everyone on the call. In addition to the solid earnings results that Jeff just described, we delivered solid cash flow and capital investments for the first half of the year as well. And all of that is underpinned by the strength of our balance sheet Slide 16 lays out our cash flows and CapEx through the first half of the year. Cash from operations is $1.2 billion which is up slightly over last year and in line with our plan. We saw a strong cash flow performance throughout all the business units and are reaffirming our full year cash from operations guidance of $1.7 billion. We invested $1.1 billion of CapEx in the first half of the year, and on the right side of the page you can see the breakout by business unit. DTE Electric is higher due primarily to the acquisition of the gas peaker back in the first quarter, partially offset by the timing of wind investments between years. And there are some year-over-year timing differences at our nine utility businesses as well. The total year-to-date CapEx is on check with our plan and consistent with our full year guidance of $2.5 billion to $2.6 billion. Finally, to fund this CapEx program and to pay down commercial paper balances, we issued $800 million in loan from debt financing in the first half of the year. Now I’ll move to slide 17 with a look at our balance sheet metrics. In short, our balance sheet remains strong and we project ending the year within our targeted range for both leverage and FFO to debt. We issued $200 million of equity back in the first quarter which fulfilled our equity needs for the year. And there is no change in our plans to issue $800 million to $900 million of new equity through 2017. We continue to take advantage of the low interest rates by issuing $300 million of 7-year debt to parent company which is where we fund most investments at our nine utilities. Earlier in the quarter, we met with the rating agencies and they all re-affirmed our current ratings and outlook which demonstrates our commitment to maintaining a strong BBB credit rating. And lastly, after renewing our credit facility back in April we ended the second quarter with a comfortable $2.2 billion of available liquidity. And now, I’ll hand the discussion back over to Peter to wrap up. Peter Oleksiak Thanks Mark. Let me finish the presentation with a quick summary on slide 19 and then we can open the line for questions. We had a very good quarter as well in the first half of the year and we are confident that this year’s performance will allow us to achieve a increased 2015 EPS guidance, increase our annual dividend 5.8% to $2.90 per share keeping our dividend growth in line with earnings. We anticipate successful outcomes this year for both our utility regulatory filings as well as Michigan Energy’s policy reform. Our balance sheet and cash flow metrics remain strong, and our investments in our utility and non-utility businesses support our target 5% to 6% EPS growth going forward. I’d like to thank you all for joining our call this morning. And I invite you to join us for our Investor meeting in Detroit on September 28. We have a great line up of speakers for our meeting, and plan to give you insight and to continue the evolution of the Michigan Detroit development and the economic growth that supports our long term plan. Formal invitations will be delivered in the coming weeks and our business update will be available at the webcast from our investor’s site. Now I’d like to open it up for any questions that you have, so Heather, you can open up the line for questions. Question-and-Answer Session Operator Certainly. [Operator Instructions] And we’ll take our first question from Michael Weinstein with UBS. Julien DuMoulin-Smith Hi, good morning it’s Julien. Peter Oleksiak Good morning, Julien. Julien DuMoulin-Smith So first, a quick question here on the sale side. Just curious what is the nature of the idling you have alluded to here on the Industrial side just perhaps if you could expand upon what your expectations are there? And then perhaps related to that on the — in terms of future rate case filings, how are your expectations for lower sales and efficiency driving expectations there as any changes? Peter Oleksiak So on the – for the idling that occurs mainly in our automotive related segments. There are model turnover, so they are creating brand new vehicles and new models and you’ll see that from time to time. That is really what that’s related — that is really one time in nature and some as if — that the level of new models that are — which is great news for our auto companies that are being produced here. For the energy efficiency, I guess, first I just want to talk about that a little bit. We’re really pleased with the level of energy efficiency in our service territory. And we’ve been really working hard at this over the last five years and I believe we are on the leading edge of some our some [Indiscernible] energy efficiency is special in delivering tools to our customers to save energy. You recall if you actually saw the March energy addresses the Governor gave, he actually held up his Smartphone and have the DTE inside app there. So we’ve actually kind of correct the code of our AMI technology and how do we deliver that real time to our customers to use yourself. Even though energy efficiency increases, maybe over time the electric rate overtime but it does lower customer bills, which provides headroom for rate increases needed to cover new capital investments. So, I know your question Julien was what does that do from our rate case strategy? Our rate case timing really tied to the capital investment we have over and above depreciation, so that’s really going to be tied. It really doesn’t impact the timing of that. And what we are seeing actually when — that it will provide headroom for us from a total customer ball perspective to give recovery of that new capital investment. Julien DuMoulin-Smith Excellent. And just turning to the midstream side quickly. Can you talk about an update on your existing partnerships, specifically on the exit side? And then separately just broadly speaking, strategy as it relates to gathering versus perhaps pipes, etcetera, you have other partnerships and there as well. I would be curious how that is evolving and the nature of the business? Peter Oleksiak Yes on the ownership side and I know the private question is around on the Enbridge and the ownership of pipe. So Enbridge is still considering ownership, but they have been very public and very supportive of the pipe. You know our current disclosure assumes the one third ownership, so they don’t participate in whatever larger ownership of a great project. So they are still in the process of considering ownership in the project. On the gathering side and is evidenced by this year-to-date results and our guidance increase and we’re seeing great results on our gathering business. This is a business that we started in 2012 with a partnership with Southwest energy, so as we’ve been going down our learning curve and cost curve it’s really helped us with that relationship and that’s a business that we liked as well because as we get into new projects like Nexus the idea there is to do a very similar blueprint of what we’re seeing in Millennium now that if you work with producers, get gathering and laterals, that will beat international. So we’ve continued to look at those opportunities and then I do believe in the future they will be there for us related to NEXUS. Julien DuMoulin-Smith Excellent. And sorry, just a clarification. In terms of Enbridge’s timeline for a decision, do you have any sense? Peter Oleksiak Yes. I really don’t – I know they’ve been public about it. They are mainly an oil based company, an oil pipe, but they are trying to grow their gas piece of the business and they’ve been public around that. But I would imagine they’re going through that process right now and they probably want to maybe making a decision at some point. Julien DuMoulin-Smith All right. Well, thank you very much. Congrats again. Peter Oleksiak Thank you. Operator We’ll take our next question from Dan Eggers with Credit Suisse. Dan Eggers Hey, good morning, guys. Peter Oleksiak Good morning, Dan. Dan Eggers On the guidance bump for the quarter and kind of resetting the baseline going forward, what structure are you seeing is giving you more confidence to lift the starting point for growth from here? Peter Oleksiak Yes. On the midstream we are seeing and mainly within the gathering segment and the drilling related to Southwestern. So what we saw in the first half is that there is some upside. Some of this was acceleration of drilling which is positive as well, because Southwestern is allocating our capital and drilling to this region even with the relatively low gas price environment, most of the increase is tied to the higher well performance. That oil performance in volumes will continue to flow. So that is a permanent increase for us. And the great thing about this and this is where we talk about our strategies of having these interconnect assets that it really amplifies income. So we’re seeing those volume increases then occur on Bluestone then occurs on the Millennium Pipeline as well. So we’re feeling really comfortable with those volume increases that are tied to the well performance there. Dan Eggers So that step-up is what is giving you confidence in the sustainability, it is not an assumption of sustained higher trading value? Peter Oleksiak No, no. That’s tied to our midstream segment. Dan Eggers Okay. Got it. And then how should we think about what you guys are going to do to be able to earn your ROEs at electric given this lower demand growth or the flat demand growth outlook between rate case periods? Peter Oleksiak We will be planning that, so some of that is that we have a forecast that test year here. So we are forecasting and we’ll continue forecast energy efficiency. One of the things we’re looking at right now from a load perspective is that we are anticipating a flat load at this point in time. At one point in time we were anticipating probably 0.5% type of increase, but once again we’re pleased with the results as we’ve been really focus on energy efficiency, so we have upped our energy efficiency. And if you look at the legislation, that is proposed in the governors — his areas of priority, energy efficiency is going to be a key component as we think to our generation planning and our integrated resource planning process. So we’ll continue to forecast, so we really is getting the right dominator. Dan Eggers Just one more, sorry Peter, go ahead. Peter Oleksiak I guess the supplement that we have proven track record around cost management as well, but something it will continue to [Indiscernible] between rate proceedings as well. Dan Eggers Okay. And then I guess just one more on the NEXUS side. Can you walk through what you are seeing, quantifying the gathering opportunities, how much capital can go into that? And what is the level of interest for incremental projects you are hearing from customers at this point? Peter Oleksiak Yes. It’s far too early to say what the capital plans will be, but we do see they are out there. There was a recent report that came out that the Utica region reserve forecast has gone up again. So every forecast that’s come out on the Utica Shale it goes higher and higher, so we know that there will be there. And as we’re proving out our gathering business plan in Southwestern that’s really helping us as we’re talking to producers in the region as well. But its too early to say, but I would say that there is a lot of opportunity there and will help as you think through the midstream segment not only in this five-year projection we provided there, but beyond that five-year period gathering will be a piece of that. Dan Eggers Got it. Thank you, guys. Operator We’ll take our next question from Shahriar Pourreza of Guggenheim Partners. Shahriar Pourreza Just on the Enbridge ownership stake in NEXUS, is there a point when DTE makes a strategic decision to take on the additional ownership? So like the Enbridge ownership has been open for some time, is there sort of a deadline that you have internally within the Company? Peter Oleksiak We don’t really have a firm deadline with them and as I mentioned we like them when they are in, if they are in the project and if they’re not. So, its something that we don’t — we’re not really pushing at this point in time from a – if they’re not in the project we have a larger percent ownership of a great pipe. If they are in the project, it does from a strategic perspective they have ownership interest in Vector and they have demand that’s off takes on the backend with their LDC, it helps from a long-term strategic perspective, but there is no firm deadline at this point in time for them. Shahriar Pourreza Got it. And then as you approach year end with the Open Access Policy, any idea how it’s going to shake out with obviously three different competing proposals? Peter Oleksiak Actually I would characterize the proposals as complementary and they are all focusing on the same thing. So, all the proposals on the table are really aimed at eliminating – there are two major flaws we have right now with the retail access program in Michigan, one of them is free option to move back and forth on utility to retail open access backed utilities, so all of the proposals address that. There is either one-time election to the utility if you’re going out on to the market you need some type of capacity. The range right now is 3 to 5 years in the proposals. The capacity does address the second flaw we have which is there is a heavy subsidization that’s happening right now with our bundled customers to retail open access. So really does have put in more level fair playing field around that as well. So the economics with the customers on retail access will change and because of they really get into more of the true cost are being on the program. And this permanent, more permanent type of election as well will impact the decision. So it’s really too early to know how much of the 900 megawatts will come back. And if there’s election too come back you know the timing of that return will be tied to individual contracts with those customers. Shahriar Pourreza Got it, got it. And just one last question on the guidance in Energy Trading, it looks like the top end of the guidance assumes an additional $5 million in earnings. Could we — is it fair to assume that is sort of a fourth quarter recognition just given the way the segment recognizes earnings historically? Peter Oleksiak Yes. I would say that, you actually — from time to time you may experience even a slight loss in the third quarter, because lot of contracts and earnings are tied not to physical fields with gas and power delivery in the first and fourth quartet. Shahriar Pourreza Excellent. Congrats. Thanks Operator We’ll take our next question from Greg Gordon of Evercore ISI. Greg Gordon Thanks. I have a question with regard to gas service area sales. If you look at the Q2, 2015 numbers versus Q2, 2014 numbers, you had a really big negative swing in residential, commercial, industrial, but then a very positive comp on end user transportation. Is the former just weather driven and what’s the latter being driven by? Peter Oleksiak Jeff, do you want to handle that one. Jeff Jewell Yes. That’s exactly what we’re seeing. It’s just a combination of — from the weather, obviously the weather is what driving the quarter over quarter, year-over-year and in the end trend [ph] forward to seeing more volume on that front just from additional load in those things. Greg Gordon Okay. That was my only question. Thank you. Peter Oleksiak Thanks, Greg. Operator We’ll take our next question from Matt Tucker with KeyBanc. Matt Tucker Hey, guys. Good morning. Just noticed with the revised guidance that you widened the range a little bit, can you just talk about the key sensitivities you had in the second half and what kind of gets you to the high or low end of the range? Peter Oleksiak Yes. The widening of range, a lot of that is tied with the energy trading segment, now that we do have a range for that, so that’s really what that you tie there. The key sensitivities, for us just continued strong performance. On the utilities, a lot of that will be tied to what’s happening on the weather fronts and then the weather would be load as well as storm related activities. The gas utility as well, there is fourth quarter heating load, some variability that will occur there as well, so the utilities, a lot of it at this point in time is tied to weather and weather-related type of income. In our non-utilities just continued strong performance. For our midstream segment we have upped guidance for that segment, so we’re comfortable now with that range for our Power and Industrial segment that you look at it from a year to-date perspective. They are roughly $50 million with the top end of guidance at 100, so they continue the performance. We’ve seen in the first half, they potentially could be near the upper end of guidance for that segment. Matt Tucker Got it, thanks. And just a follow up to that. I guess we’re about three weeks into July. How has the weather been I guess so far this quarter? And were you able to factor that into the guidance? Jeff Jewell Yes. We factor that into the guidance. And so far the first half like Peter mentioned in his opening comments, the first part of July was a little cooler, but then so far here in the last week or so its been above and so we’ll just see how that plays out, but yes, all that’s been contemplated in our guidance. Matt Tucker Thanks. And then just on the lower load growth expectations going forward, you’ve kind of addressed this, but just big picture, how does that affect your long-term expectations? And does it affect your earnings guidance for DTE Electric, the long-term earnings guidance you’ve provided and are there kind of offsets that we should be considering? Peter Oleksiak Now there’s no impact at all to the earnings guidance for the utility. The utility business at this point and where the money and earnings are tied to with the new capital investment. Power generation replacement strategy we talked about that was on the coal retirement, but also our distribution company. We’re going through a big replacement in upgrading plan. We’re going to sharing some that at our Analyst Day here in September as well. So the flat load for us and we are relatively modest even to begin with prior to this new change of 0.5% and one thing we’re looking at right now is, and the metric we’re really going to moving towards the total bill. What’s happening with your total bill? The way it works for customers is — this is power supply cost that is a past-through that goes away when the usage is down, right. We have a base rate increase tied to the distribution investment and charges. The customers are experience decreases in the total bills even when rates are increasing, if their usage is down. Matt Tucker And if I could just ask one more. How confident are you that there will be energy policy legislation this year? And are there any kind of key dates we should be thinking about? Peter Oleksiak That combination can be with a political process, but I know the governor has been pretty strong around signaling. He wanted to be done by the end of the year, even recently Senator Nofs has been out there publicly saying he wants it done by the end of the year. They are – so all the signals and momentum is for this to get done at this year. Matt Tucker Thanks a lot. That’s all from me. Peter Oleksiak Thanks, Matt. Operator We’ll take our next question from Andrew Weisel with Macquarie Capital. Andrew Weisel Hey, good morning everyone. Peter Oleksiak Good morning, Andrew. Andrew Weisel First question on retail open access. You touched on this, but I want to ask in a slightly different way. If we take the Nofs proposal at face value, I am sure things will change. But if it were exactly as written, how much of the load do you think would come back and how quickly? Peter Oleksiak It’s really too early to determine from the details of that. I would imagine for him, he did have – you need to – if you’re going to stay on the program, first of all there’s an election. If you take the election back to utility its one time, so that is this free option going away, we’ll probably have some of the retail open access customers take a pause and wanted to – whether they return or not. And if they do stay in the program, they’re going to have to get capacity and Nofs proposal I believe was that from a three-year perspective. So each customer has individual economics and the changes through economics. That and coupled with market prices and our sense is that market prices will be increasing as supply, demand and supply tightens as well. So that’s really I guess round about, Andrew, it’s really too early to say. I can say I would imagine some of the 500 [ph] megawatts, but probably would be coming back given the changes, the structural changes that will be occurring with all the proposals that are out there. And the timing of that, it could be relatively quick, but lot of that will be tied to the individual contracts with these retail open access customers. Andrew Weisel And how long do those contracts typically run? Peter Oleksiak We don’t really have insight into that. Andrew Weisel Okay. Fair enough. Next question is on energy efficiency. The new expectations you have for load growth, is that based on the — again the Nofs proposal, or is that some other DTE view of what energy efficiency programs will look like going forward? Peter Oleksiak It is the DTE Energy forecast. Some of that is — we’ve been working hard at this for five years as I mentioned. In many ways I think, in many cases I said, we’re leading edge. So it is realizing the adoption of these energy efficiency programs. They are occurring even faster which is great for us and our customers. So it really tied to what we’re seeing there and the projecting of that going forward. Now both, the Nofs and the Nesbitt [ph] proposals versus having a mandate kind of working that and integrating that part of the integrated resource planning process. And the governors that’s really public around energy efficiency. That’s going to be part of our generation planning, will be what level will be covered off and energy efficiency. And as you know even the clean power plan, the EPA requirements gives you credit for energy efficiency. Andrew Weisel Okay, great. Then lastly, I know decoupling is something — electric decoupling is something being floated in these proposal legislations. What are your views on that? And in light of what we just talked about with the load growth forecast, would your preference be for full decoupling or something only for energy efficiency? Peter Oleksiak We will work through those details, but I can say broadly that we are supportive of energy decoupling. Andrew Weisel Fully or partially? Peter Oleksiak We’re still working through that. I’d say that this first I think we’re having some it is as we’re thinking through there’s probably merits to both either one of those different proposals. Andrew Weisel Okay. Thank you very much. Operator [Operator Instructions] We’ll take our next question from Steve Fleishman with Wolfe Research. Steve Fleishman Yes. Hi, good morning. Just one other question on the Gas Storage and Pipelines upside. So, you guys typically give kind of like a five-year look on these businesses, and I know you mentioned you expect this to continue into 2016. All else equals, is this something that you see as kind of benefiting the five-year look? Peter Oleksiak Yes. It definitely helps. I would say firm up that five-year projection. Steve Fleishman Okay. When you say firm up, it was still that little bit of — I guess it was the white part or whatever in the bar chart. Is that what you mean by that? Peter Oleksiak We are still going – we’re in the midst right now where our longer term planning process, we’ll be providing an update at our Analyst Meeting. Steve Fleishman Okay. And then I know going to the P&I business, I think in some meetings we’ve had, you have talked about co-generation being maybe a potential growth area. Any updates on opportunities there? Peter Oleksiak No, it really is –we do see if you think through the opportunities set there — this cogeneration is one, so we continue to work through those opportunities. There are some projects we have in place right now and are getting into service. They’re probably not a lot of updates since the last meeting but we continue to be optimistic on this side and getting the projects for this segment to grow as we indicate in terms of this five-year growth prospects. Steve Fleishman Okay. Thank you. Peter Oleksiak Thanks, Steve. Operator We’ll take our next question from Paul Patterson with Glenrock Associates. Paul Patterson Good morning. Peter Oleksiak Good morning, Paul. Paul Patterson Just a few quick ones following up on the energy efficiency. With the flat growth, how much of this is based on sort of your efforts at energy efficiency? In other words, if we were to take out your efforts of energy efficiency, what would you guys estimate the impact of sales growth to be? Peter Oleksiak Yes. Without the energy efficiency, it is roughly about — Jeff, you’d said, about a 0.5% Jeff Jewell Yes. Peter Oleksiak We look through and what we’re doing right now. We are in the new era right now with this energy efficiency, because historically you look at your load growth tied directly to economic activity. So we still look at that, but now with the energy efficiency that’s after that. So our customer counts are increasing, so that’s one thing we look at and the overall level activities within the businesses is really the usage that defining [ph]. Paul Patterson Do you see any difference between an IRP versus the mandate in driving energy efficiency going forward? Those have been two differences in legislations. Peter Oleksiak I would say no, because the IRP really that’s going to be like one-stop shop for us. Right now, really the movement is potentially away from these mandates where we have a mandate for RPS or mandate for energy efficiency which is all tied to generation-related spend to have it in one place. So in that IRP process they will discussions and agreements on energy efficiency as well as renewable spend. So I would say it doesn’t, it’s really just change the location of where the discussions and the process for the discussions will be occurring. Paul Patterson Is there any — of all the proposals and the legislation that you guys outlined very nicely in the presentation, is there any one that we should think of as being a significant difference in terms of what your earnings outlook would be or would change the — where you would be in the range if you [Indiscernible]? Peter Oleksiak I think they are all are relatively close. Paul Patterson Okay. Peter Oleksiak Aric Nesbitt has the elimination of retail open access program. We support that the most. But all the proposals are addressing. And probably the one area that I think we’re focus on as you are as well as the retail open access but all the proposals address the unfairness of the current program. Paul Patterson Okay. And then with NEXUS there have been some suits associated with access for surveying purposes and what have you. Is there — are those significant events? Or I mean, they seem to be happening in local courts. Are these sort of run of the mill stuff or is there…? Peter Oleksiak It is. I think the FERC community meetings and that process is really going well, and so we feel pretty good — really good about that process and it was relatively routine. A lot of that is really determining the final path of the pipe, so those meetings are necessary and as we finalize that path, it definitely help us as we drive towards our fourth quarter application filing. Paul Patterson Okay. And then just on the Gas Storage and Pipelines, it sounds like you guys were having a very good 2015 but that it may be a little bit of a slowdown in 2016. I don’t know if I heard that correctly. Could you just elaborate that? That was in your prepared remarks. I just wanted to understand what the outlook is going forward with Gas Storage and Pipelines? Peter Oleksiak It is and what I have indicated is that we’re seeing the first half of the year increase in our gathering and pipeline business that a majority of that will flow through. Some of that is acceleration of drilling which is also positive to the Southwest and is really resourcing and allocating drilling resources here in the region. But we have our new growth segment, our EPS midpoint we are now saying we’re going to grow 5% to 6% off of that, so we… Paul Patterson Okay. Okay, so although — so in other words, generally speaking obviously you guys feel very confident in raising your guidance and also your growth rate. And we shouldn’t think about anything I guess materially sort of dragging — in other words it doesn’t seem like — you are not pulling anything from 2016 into 2015 that is going to affect your long-term growth rate, is that the way to think about it? Peter Oleksiak Yes. The growth rate is off our new growth segment guidance midpoint. So as we took a look at that 2016 and what we’re seeing here in the midstream segment as overall what was happening in the businesses and we were feeling comfortable and confident of not only raising the midpoint of guidance this year, but saying their 5% to 6% will be on that new growth segment. Paul Patterson Okay, great. I appreciate it. Thanks a lot. Operator And it appears there are no further questions at this time. I’ll turn it back over to our speakers for any additional for closing remarks. Peter Oleksiak Once again, I’d like to thank everybody for joining us on the call today. And if you all could say – and I’m trying to root on my Tigers a little bit, I would appreciate that. And also want to once again remind you on September 28 we have our event here in Detroit. So if you can kind of save that date, and look forward to seeing you there. Have a good day. Operator That does conclude today’s conference. Thank you for your participation.