Scott Lauber: I agree, Gale. And I think the other key is we have the site selection at the Oak Creek site for a significant part of our assets. And we’ve done a lot of the filings already. So really, things are moving ahead very quickly. But we got a process in place in the orders placed, which is good.
Gale Klappa : Yes. Scott is actually making a very good point about site selection. I mean, we’ve had a power generation campus at Oak Creek literally for the last 70 years. We have buffer property there. We have a property that will easily house, particularly the combustion turbines that Scott talked about earlier. The 1,100 megawatts of combustion turbines that will be an important part of the next addition of assets that we need to have. I hope that responds, Durgesh.
Durgesh Chopra : That is very, very helpful. I appreciate all the color there. Thank you. Maybe can I just quickly follow up on Illinois, the limited rehearing? Is there a potential for settlement there?
Gale Klappa : Sure.
Durgesh Chopra : Can you settle with the parties potentially those Part A and Part B? Does it have to be 0 or 145? Or can it be sort of a spend number, which is in between?
Gale Klappa : No, it can be a spend number anywhere in between. There really is in this limited rehearing process, if you will. There’s really no avenue for settlement. But you’re right, it’s not a binary thing. It’s not 0 or 145. The commissioners can use judgment on any number from 0 to 145 or in between.
Durgesh Chopra : Got it. Thanks so much. Appreciate the time.
Gale Klappa : You take care, Durgesh.
Operator: We will take our next question from Carly Davenport with Goldman Sachs. Your line is open.
Carly Davenport: Hey, good afternoon. Thanks so much for taking the questions.
Gale Klappa : You’re welcome, Carly. Hey, Carly, you’re not old enough to have heard the first of the 75 calls, but we appreciate you calling in on this one.
Carly Davenport: I’m glad that I made it just in time. We appreciate it. Maybe just to start, I wanted to just ask on the electric sales this quarter, you walked through some of the weather impacts, but anything else that you flag driving some of the C&I load for the quarter, particularly for the larger customers there? And then as you just think about some of these economic development opportunities, how you think about really that timing for an inflection in load growth?
Gale Klappa: Well, we’ve already — and we will ask Xia to give you, she’s got a couple of very good important details, particularly about the large industrial activity that we saw in Q1 here. Let me just say two quick things. First of all, as mild as the weather was and is far from normal as it was, I would suggest that you take the actual weather normal sales numbers with a bit of a grain of salt. Some of you heard me say this forever, but our weather normalization techniques that are used in our industry just don’t bear up well when you get 1.5, 2 standard deviations away from norm. So, read our numbers for Q1 on weather normal is more precise than accurate. Secondly, we’ve already shown, as you probably saw, as we’ve gone through some of our plans, we’ve already shown a nice uptick in annual projections of energy sales starting in 2026.
You remember, we basically, for the past decade or so have been growing at 0.5%, 0.7% in terms of annual kilowatt hour sales. We moved that up based on everything we were seeing last November on the ground. We moved that up to 4.5% to 5% starting in 2026. I’m guessing that you’ll see that number grow when the plan gets updated as we normally do in the fall. I mean just from everything else that seems to be occurring here post when we put the plan together, last fall. And then in terms of specifics on Q1 in terms of industrial, Xia?
Xia Liu: Yes. So, on Q1, so to your point, Carly, the weather normal LC&I electric sales was minus 1.8%, which was behind our forecast. But if you — we looked pretty hard on the specifics. So it turned out that the underperformance was concentrated in really a couple of customers, one in primary metal, the other in the paper sector. And one of them actually is in the process of transition into a very — a much bigger expanded presence in the region. So Q1 was kind of a transition period for them. So, that’s really just timing. If you excluded those customers, LC&I sales would have been 0.4% higher compared to Q1 last year. So, we’re not worried about the LC&I sales trend.
Carly Davenport: Got it. Okay, that’s super helpful. Thank you for that detail.
Gale Klappa: Thank you, Carly.
Carly Davenport: Maybe if I could just squeeze one more in. You referenced the new EPA rules in terms of some spend there in the Wisconsin rate cases just filed. I guess, do you expect those new rules to have any impact on the views on gas capacity additions going forward or the capital needs associated with that?
Gale Klappa: No, it’s a good question. And the short answer is no, compared to what we filed. And I will say a real shout out to our generation and environmental planning folks. They’ve done a great job of anticipating the new EPA rules. And Scott, based on everything we’ve seen that’s come out in the last couple of weeks, we’re right on track.
Scott Lauber: No, our plan that we filed and the plan — we have in our five-year plan lines up right in line with the EPA rules that just came out or finalized. So, I’m very happy to see that come together.
Carly Davenport: Great. Thank you so much for that color.
Gale Klappa: Take care Carly.
Operator: And we will take our next question from Anthony Crowdell with Mizuho. Your line is open.
Gale Klappa: Greetings, Anthony, how are you?
Anthony Crowdell: Good congratulations and best of luck and best of luck to Shar in the closet also. So great news all around. I guess, also Neil and Steve’s question, I apologize if you answered it, just I guess you talked about you have an adequate reserve margin in the service territory and if a large data center hyperscale that comes in, and they eat up that entire reserve margin and now the generations need to get back. Just on the allocation of cost for the data center moving in there and maybe eating up that reserve margin, does the rest of this jurisdiction bear the cost of now building back up the reserve margin?
Gale Klappa: No. And I’m glad you asked the question actually because we should be very, very clear about that. First of all, Microsoft has said time and time and again that they want to and will pay their fair share. And we’re working on a specific rate for them that will have several components. It will have essentially a component for generation capacity basically, they’ll have to pay for their fair share of the generation that’s needed. They will have to pay a small amount. There will be a little bit of distribution, but they will pay for the distribution investment that serves them. Energy will be a pass-through as it is for many, many of our large industrial customers that we have on what we call real-time pricing. And so essentially, we’re working on very specific components of a rate. It’s not hugely — Scott, it’s not hugely dissimilar from what we’re doing for other large industrial customers.
Scott Lauber: Now, it’s — we’re laying out a plan for that, like Gale said, they want to pay their fair share. I wouldn’t characterize it as them eating into reserve margins. Some of this builders support that. So we always look at our plan and make sure we have the appropriate reserve margin and we look at this economic development. Once again, that’s what drove some of the generation here. So I don’t think they ate into anything. It’s just all additive for everybody here.
Gale Klappa: And then, Anthony, as you know well because you’ve been around a long time, when you have substantial kilowatt hour sales growth, that actually is helpful to your customer base because it spreads those additional costs over a much broader base of kilowatt hour sales. So there’s also as we work our way through this, remember that 4.5% to 5% increase that we’re projecting in annual kilowatt hour sales starting in 2026. That’s also going to be helpful as well to our overall customer base.
Anthony Crowdell: Got it. And then if I could just one follow-up. Steve’s question earlier about maybe some of the pushback in Illinois from the labor group. I’m just wondering, do you believe labor still has maybe the same I don’t know political leverage is the right term, but the same maybe sway that they’ve had in years past. Do you think it’s more or just kind of the same? And I’ll leave it there.
Gale Klappa: Anthony, it’s very hard to tell. I mean, incrementally one way or the other. But I will say this, labor has and will continue to have, I believe, a strong voice in Illinois, and they are passionate about the need for us to continue the safety modernization program.
Anthony Crowdell: Great. Thanks again. And again, congratulations.
Gale Klappa: All right. Thank you. Appreciate it very much, Anthony. You take care.
Operator: And we will take our next question from Paul Patterson with Glenrock Associates. Your line is open.
Gale Klappa: Hi, Paul.
Paul Patterson: How you doing? Congratulations.
Gale Klappa: Thank you.
Paul Patterson: So I guess my question is the future of gas. You brought it up. And I know it’s kind of early procedurally, but any sense as to when that might be wrapped up in Illinois?
Gale Klappa: A long time. What is going on right now and started a couple of months ago is really what they would call a scoping phase. So they’re having almost weekly meetings to identify and get broad input on all the different sub subjects or sub subject matters that should have broad discussion from all the stakeholders going forward. So the scoping itself, I think, is going to take until mid-summer. Our guess is probably when do you think, Scott? At least a year.
Scott Lauber: Yeah. It’s supposed to — the scoping is going to go to about the end of August, and then it will be another year after that, that they built through the investigation and the policy that may have to come out of it. But one of the things the ICC is really doing though is making sure they hear everybody’s voice in this. So they’re getting a lot of people involved, which is good to get all the different issues and circumstances on the table. So they’re trying to be a real robust process here.
Gale Klappa: I did notice, Paul yesterday or day before that one of the environmental groups and again, multiple stakeholders taking place in the scoping process. But one of the environmental groups on the record did say that they believe there would have to be a very long transition and that natural gas would play a significant role for a long period of time, which I thought was both practical, accurate and encouraging.
Paul Patterson: Yeah. And I guess, also considering that so much of your CapEx is safety-oriented. I would assume that it doesn’t really — the idea that this is going on doesn’t really probably impact your current investment in the business? If you follow…
Gale Klappa: I think that’s reasonably — yeah, that’s reasonably accurate, Paul. Yes.
Paul Patterson: Okay. And then just one of the things that we’ve been seeing a lot of officials talking about recently for commissioner about, a lot about this enhanced grid enhancement technologies. And I was just wondering how you guys as an industry leader are thinking about the deployment of this and how it might impact the industry as you guys are thinking about just longer term, what do you guys see this as being — how it might be playing a role or not in your business?
Gale Klappa: Well, early days, Paul, but my sense, and we’ll get Scott for you as well, my sense is probably the first application maybe in transmission. What do you think, Scott?
Scott Lauber: Yeah. We’re going to have a lot of technology on the system. So it’s hard to decide what exactly new technology will be coming, but we have a lot of automation that we put on the system that you can really see are very effective when there is a storm that rolls through. So I think the technology will continue to improve and I think transmission and whether you do dynamic line ratings and stuff, you’re going to continue to see the benefits of technology. And I think just like anything else, it continues to evolve here and we get better and better at it.
Gale Klappa: In near-term, as Scott has mentioned the dynamic line ratings, I think, pay attention to that because I think that could be very helpful. But there’s a lot — as you know, there’s a lot of R&D underway to try to enhance both reliability and stability. So I hope that gives you at least a broad answer to the question, Paul.
Paul Patterson : Absolutely. I appreciate it. Once again, congratulations, and good luck.
Gale Klappa : Thank you, Paul. You take care. All right. Well, folks, that concludes our conference call for today. Thank you so much for taking part. If you have more questions, feel free to contact Beth Straka. She can be reached at 414-221-4639. So long, everybody.
Operator: And ladies and gentlemen, that concludes today’s call. We thank you for your participation. You may now disconnect.
