CMS Energy Corporation (CMS)
Barclays CEO Energy/Power Conference Call
September 5, 2012 9:05 am ET
Thomas J. Webb – Executive Vice President and Chief Financial Officer
Daniel Ford – Barclays Capital Inc.
Daniel Ford – Barclays Capital Inc.
Okay, I think we're ready for our next presenter. From CMS Energy Corp, we have Tom Webb, who is Executive Vice President and CFO. Tom?
Thomas J. Webb
Previous Statements by CMS
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I need to ask you first to take a minute, maybe you don't want to, but just read through that for care and remember that you want to check our Ks, check our Qs, look at our risk statements, check the definition on non-GAAP, go to our website. So you can see, when I describe something of what the differentials are. And I'm proud to say the differentials in GAAP and non-GAAP aren’t anything like to use to be when I was talking to you five years ago, they took me a while to figure out. But, so this will make it easy for you.
I do also want to introduce someone that's here with me today, because everyone here, I can barely see everyone here through the lights, but most of you remember Laura Mountcastle who has retired. Glenn Barba has picked up those responsibilities for Investor Relations, and he's also the Vice President and Controller for the Company. So he has got all the really juicy stuff, if you want to catch him later. But he knows, he's learned catch you any of that. After having read that Dan, I'd like to just take you to this model, the triangle may seem a little old to you.
But please remember we've had it for a long time, because it really has worked for us through our recovery and the sustainability that we're in now moving forward with the company. So the model, it's a pretty good one that we’re proud of, its all based on investments and the utility with the creation of jobs and creating more customer value, improving the environment, the air is cleaner in Michigan that ever has been, we have more work to do, and reducing our O&M, because we don't view reducing O&M as a way to make money for you. We view that as a way to reduce our cost to our customers, and I'm the first to admit, in the short term when you do that you had little benefit and that's part of the earnings growth. But over the long haul, we put it right in our annual rate cases, so we give that back. It’s our effort to be more competitive.
And that brings us to the little base or near the bottom of the triangle about base rates. We work very hard to keep our base rate increases at or below the level of inflation. You’ll see a little slide that will show you that over the next five years, we expect to be about up 1% on electric, little less than 1% on gas. So there is little space with inflation more in the ballpark of 2%, but we are also working to get our pass through cost down as well.
All that generates a nice growth in earnings and operating cash flow of about 5% to 7% pretty predictable, and then we are fortunate about how we got them, but we are fortunate to have NOLs that eliminate the need for block equity this year, next year, for the next few years, and therefore eliminates the dilution that’s associated with that.
Now on this slide you see just a simple version of the model that we've described, because we talk here about enablers. And you might say, well, what the heck does that mean, and why does it make you any different from other companies. And I don't like to brag like we are substantially different. We're very utility, like but we work very hard to give ourselves a little bit of an edge for you and for our customers.
So when we talk about enablers, that means the Energy Law that was a comprehensive law that came into place at the end of 2008 big deal for our company, it has many features that you’re familiar with, I won't go through now, and there are ways to make those features work even better, but that's a great enabler to us. We have supported regulation, and I'll tell you right now, before I even get to the slides, that if we were to gather a year ago, I would have described the situation like this, if this is – some time ago, not Dan, but my hand over here, and some time ago, you would have said that – you're not even average, you really don't have a good relationship with your regulators, is this okay?
But when the Energy Law came along, it created a platform for a much better constructive relationship, which raised that relationship a lot, in part because the commissioners, our Public Service Commission actually were very involved in creation of the Energy Law. So they love some aspects, they love some less than other aspects, but they were part of it all. So the implementation of that brought us to any higher level.