Gale Klappa: Anthony
Anthony Crowdell: Absolutely. I saw some photos of you with Aaron Rodgers in a basketball game recently in one of the local papers.
Gale Klappa: Yes. I was apparently seated next to him and some other folks. It was — for some reason or another, when you’re sitting next to Aaron, there are a lot of pictures being taken.
Anthony Crowdell: It was all of you, Aaron was very fortunate. I own one share, so I hope he wasn’t out that late. I hate keeping my employees out late there. Just more housekeeping questions, I guess one on Illinois. I think you spoke earlier on the rate case. And maybe I think if I characterize it correctly, it’s good maybe to go through an entire case and the commission, and I think parties will see how much the company has invested. I’m just curious when you see the timing of the QIP rider, expires, then also on the electric side, which I know you guys are not there, but on the electric side, the formula rate plan expired. So the commission right now has 6 or 7 pretty sizable rate cases. Does that make settlements maybe more likely to happen given the workload there?
Gale Klappa: It’s very difficult to say one way or another. But certainly, the commission will have a solid amount of work to get through. I believe every natural gas distribution company of any size has filed their rate case in Illinois and of course, as you say, the formula rate plans and the changes under the legislation on the electric side. So there will be a lot cooking in Illinois this particular year. Whether that leads to more settlements, I think it’s way too early to tell. But clearly, the Illinois has had a track record of settlements. We actually, I believe, had a very positive settlement with our North Shore case just a year or so ago. So, it’s certainly not out of the realm of possibility, Anthony, at all.
Anthony Crowdell: Got it. And if I stay with the gas business, at least Henry Hub gas prices have really declined from the start of the winter until now, and we’re still have a couple more weeks of winter left. I mean, is the company able to maybe capture that in customer bills through contracts? I’m just wondering, as maybe the company’s buying, more hedging process kicked up with these lower prices to mitigate customer bill impact.
Gale Klappa: Well, we’re clearly going to see — I mean, gosh, I look today, and I think we’re around 2.60 per million BTU is amazing compared to where we were just about two, three months ago. But if you look at — particularly for our natural gas heating customers, we have a set commission-approved strategy where we basically — in advance of the winter season, we basically do a third, a third, and a third; roughly a third of gas and storage, a third of financial hedging and a third on the spot market. So, the extent that third that’s being purchased off the spot market is materially better, it’s going to be helpful to customer bills.
Scott Lauber: And we also have that process as we start thinking about next year as we put injection. So, we may be hedging a little bit right now, just following a very strict pattern to lock in some of those prices for next year.
Gale Klappa: Exactly. And one thing that I would add to all of that is that when we filed our case for Peoples Gas in Illinois, and Scott mentioned this in his prepared remarks, just looking at the futures market for natural gas, we should be able to completely — even with the rate increase in base rates, we should be able to completely offset that with lower commodity costs and keep customer bills flat in 2024 in Illinois.
Anthony Crowdell: Great. And then, if I just — last question, I’d say with costs. I’m just curious, it seems — obviously, WEC large corporation in our space. You’ve been able to navigate a lot of the challenges of maybe higher rates, inflation headwinds. And is it the scale and size? I mean, how big of a factor is that navigating where some of the smaller utilities or smaller companies are really stumbling on navigating? I mean, is it that — do you need that scale and size to handle these challenges?
Gale Klappa: Anthony, it’s a great question and my view would be we are in a scale business. I don’t think there’s any question about that. And I’m going to ask Xia to give you one statistic that I think underscores the benefits of scale. If you look back to the — as a starting point, to 2016, which would be the first full year after our acquisition of Integrys, so from 2016 to the end of €˜22, Xia will give you a statistic that will blow your mind.
Xia Liu: I think Gale mentioned — is thinking about the day-to-day O&M performance. You know we brought down over $300 million since the acquisition. The CAGR from 2016 all the way to the projected 2023, I think is about 2.5% reduction a year projected. So at the same time, if you think about the asset base growth over the same period, it’s been north of 7% a year. So, the growing rate base asset base, at the same time bringing down O&M. So, that’s a pretty solid track record.
Gale Klappa: It just gives you an example, Anthony, of the benefits of scale.
