Gerardo Norcia: Well, certainly, the contingency that we walk into the year with is exactly for these purposes, whether it’s deviations in weather or — we do carry a storm budget as part of our base plan. And then, of course, if storm costs exceed plan, and that’s what contingency may be used for, or it maybe used for weather variations. So I would say that we have adequate contingency at this point in time based on what we’ve seen so far in the year. And as we consume contingency, as I mentioned before, we go into deeper lean actions to try and restore contingency, especially as we head into the summer season, which is really our biggest opportunity to create value for our shareholders. That’s when we really want to make sure that most of our contingency is intact.
Operator: Your next question is from the line of Julien Dumoulin-Smith with Bank of America.
Unidentified Analyst: This is for Julien. And congrats on today’s results. Just the first question, kind of coming back to the 2023 O&M cuts. You mentioned historic success in executing on these cuts with COVID in the last recession. Do you perceive any risk, I guess, at this time around, once again executing on O&M costs, given, A, the inflationary cost backdrop we’ve seen; and then B, a bit higher scrutiny from Michigan regulator across Michigan utilities on vegetation management efforts, particularly with the 2022 storm docket?
Gerardo Norcia: Yes. So let me start with vegetation management first. We’ve got our largest vegetation management program that we’ve ever had historically in our company. Back in 2013, we were investing about $65 million a year in vegetation management. And several years ago, we came up with a creative solution with the commission to basically more than triple the investment in vegetation management. This year, for example, we will invest over $200 million in vegetation management. And we actually agreed to amortize those costs over time in order to smooth out the impact to our customers, but still give the customers — our customers the benefit of reliability improvements. And as I mentioned in my comments, I think the commission would agree that we’ve had significant impact on reliability where we have taken on a very aggressive tree trimming as well as hardening of the system by replacing poles and wires and transformers.
So very significant investments in the grid. And while we’ve completed that work, we’ve had significant improvements in the liability. So we feel good about the work that we’re doing. We were always looking for opportunities to do even better. And we believe that, that’s what the process that the commission has initiated is really about, is really finding joint opportunities to accelerate and improve processes to make our investments even more effective than they have been. So I’m excited about that. In terms of cost reductions, your first question, we are undertaking many of these onetime actions in order to accommodate the challenge that we received late last year. And we feel pretty confident in executing those. We know they are onetime, they’re not sustainable.
Things like not hiring people or suspending tiring. We do need to replace critical positions in our company over time. And not to say that there’s not potential efficiency opportunities that we will pursue. Some of this could stick. I mean, that’s the opportunity that we’re faced with. But a lot of these actions are onetime and not sustainable in nature and also deferring maintenance work. We can do that for short periods of time, but certainly cannot do that for a long period of time. Hopefully, that helps.
David Ruud: Yes. And as we built these plans, we were very careful to ensure that we weren’t going to impact — first of all, never impact safety. Nothing that would impact reliability or our ability to deliver for our customers. And so these plans are built with that in mind. So it should fit well even though they’re unsustainable in the future should fit well with what we’re trying to continue to do for our customers.
