Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

David Meador - Chief Financial Officer, Executive Vice President and Member of Internal Risk Management Committee

Nick Khouri - Vice President, Treasurer and Member of Internal Risk Management Committee

Peter Oleksiak - Chief Accounting Officer, Vice President, Controller and Investor Relations Officer

Analysts

Dan Eggers - Crédit Suisse AG

Erica Piserchia - Wunderlich Securities Inc.

Paul Patterson - Glenrock Associates

Mark Sigal - Canaccord Genuity

Chris Bassett - Decade

Ashar Khan - SAC Capital

Leslie Rich - Columbia Management

Phyllis Gray - Dwight Asset Management.

Steven Fleishman - BofA Merrill Lynch

DTE Energy (DTE) Q2 2011 Earnings Call July 28, 2011 8:30 AM ET

Operator

Good day, and welcome to the DTE Energy Second Quarter 2011 Earnings Release Conference Call. Today's call is being recorded. At this time, I would like to turn the conference over to Mr. David Meador. Please go ahead, sir.

David Meador

Thank you, Connie. Good morning, and welcome to our second quarter conference call. Before we get started, I encourage you to read the Safe Harbor statement on Page 2, including the reference to forward-looking statements.

With me this morning are Peter Oleksiak, Nick Khouri, and Mark Rolling. I also have members of the leadership team in the room and they're available in the Q&A session if needed.

Before we get started, I just wanted to mention that we ended up announcing our earnings call and CMS did at the same time, inadvertently. So when we realized that, we adjusted our call 0.5 hour here to allow as many of you as possible to listen to both us and CMS' call. And going forward, we'll try to avoid that so you can hear both of the Michigan companies as we go through our quarterly earnings.

So with that background, let me start on Slide 5. This is our investment thesis. And for those of you that follow the company, you've seen this investment thesis many times and you know that it's constant and it serves as the North star for us in positioning DTE Energy as an attractive investment for you. In May, we announced a 5% increase in our dividend, which brings the annual dividend to $2.35 per share. And in addition to that solid dividend yield, we plan to deliver 5% to 6% long-term earnings per share growth. And when you combine those 2 together, that provides an attractive total shareholder return of 9% to 10%.

Our utility growth is driven by mandates at the state and the federal level and is supported by a constructive regulatory environment. While capital requirements to meet both the current and proposed environmental rules and renewable mandates are quite significant, we're applying our continuous improvement methodology to drive greater capital efficiency to ensure we manage the impact on our customers.

And as we've talked about many times in the past, it's our continuous improvement capabilities which have enabled us to make significant reductions in O&M expense and drive our utilities turns -- their authorized returns, which they did last year and we're targeted to again this year.

We continue to focus on operational excellence and customer service. And as an example of those, I wanted to mention that we have driven many, many improvement initiatives. One of the things that we focused in on is providing appointment windows for our customers and then delivering on those appointments. So we do that in both the gas and the electric utilities, as an example. And right now, we're at a 96% attainment of the windows when we give our customers appointments.

Another example in that area is our channel management strategy, where we're looking to shift customers from customer offices to the voice response system, to call centers, then to the web and then our new mobile applications that we're developing -- and at the same time, delighting those customers in every channel that we serve them in.

We also remain committed to being a force for growth and renewed prosperity in the communities we serve. We recently announced the plan to boost our annual Michigan-based purchases of products and services by $250 million by 2015. Approximately 60% of our non-fuel purchases will be sourced in Michigan by then, which is up from 44% today.

Another example is, this week we announced, with other Detroit-based companies, an employee program called Live Detroit, which provides incentives for those to move into downtown Detroit or the midtown area just north of us. We've also recently talked about some of the meaningful growth opportunities we have in our Non-Utility businesses, particularly at the Power & Industrial Projects, and also the Gas Midstream business. And I'll give you an update on recent developments on those fronts in just a minute.

On Slide 6 is an overview for the quarter. We strive to develop a reputation of putting out our plans and then delivering on those commitments. We are right where we want to be after 6 months, with solid results in the quarter, where we earned $0.65 in operating earnings per share. Detroit Edison's margin was up for the quarter, with self-implementation of new rates beginning in the spring, while the Power & Industrial earnings are down from a record level in 2010. And that's mainly due to a number of non-recurring items last year.

The Gas Midstream business continues to provide good earnings for us and Energy Trading earnings are up significantly from the loss we experienced in the second quarter of 2010. Our reported earnings include a onetime benefit from the change in the state of Michigan tax law. The impact of this change was neutral at the Utilities and was incurred only at the Non-Utility businesses.

On the cash front, we've generated $1.2 billion in cash from operations year-to-date, which is consistent from the strong levels that we achieved last year and our balance sheet metrics are right where we want them to be. On the development side, we entered into a long-term agreement with Southwestern Energy earlier this month to build and operate the Bluestone lateral pipeline and gathering system. The Bluestone lateral will be a wholly owned DTE pipeline running between the Millennium Pipeline and the Tennessee Pipeline. The Bluestone gathering assets will collect natural gas from Southwestern's Marcellus Shale acreage and move it to the lateral pipe. The investment for this lateral pipe and the initial gathering system will be $150 million to $200 million with upside potential over time to expand that gathering system, for a total investment of up to $280 million.

We also announced the first 2 expansions in the Millennium mainline, which will go into service in 2012 and 2013. So for some time, we've talked about the fact that our assets are very, very strategically positioned relative to the Marcellus Shale. And what you're seeing now is us stepping out to make investments which will support the growth of the Midstream business there. At the Power & Industrial business, we're seeing the Reduced Emission Fuels business materializing as a significant growth opportunity. We have 5 REF machines in service and 2 more are being constructed. And we're in advanced discussions with a number of potential partners and expect that we'll build potentially additional facilities this year.

We expect to be able to go into more detail on both of these investments at the Fall EEI Financial Conference.

Now moving to Slide 7. I want to give you a sense of where we are halfway through the year. Our performance for the first 6 months of 2011 continues to support our full year guidance at midpoint. Now being a former car guy, I would describe the first 6 months by saying we're firing on all 8 cylinders. But now that I'm driving a Chevy Volt,I can't use that analogy anymore. But I'd say in the electric world version here, the electric engines are all running and spinning throughout the company here very well. Both our utilities are on track, doing their authorized returns again, which is at 11%. And we're looking forward to a productive order at Detroit Edison as our rate case plays out later this fall.

Year-to-date, operating earnings of both the Non-Utility businesses are in line with our full year projections as well. Power & Industrial will probably see a small lift in the second half of the year due to the REF projects starting to come online. And both Energy Trading and Corporate & Other are on track to hit their guidance for the year.

So overall, we had a very good first half of the year. And with that overview, now let me turn it over to Peter, who will take you through more details on the second quarter.

Peter Oleksiak

Thanks, David. Good morning, everyone. I'd like to start with Slide 9 in the second quarter earnings [indiscernible]. For the quarter, DTE's operating earnings were $0.65. I'd like to remind everyone that a reconciliation to GAAP reported earnings is contained in the Appendix. Detroit Edison contributed $0.59. And MichCon, which typically incurs an operating loss for the second quarter combined came in at a $0.02 loss. The Non-Utility segments combined to earn $0.18. The drivers for the Non-Utility second quarter results were Gas Storage & Pipeline at $0.09, Trading at $0.07, Power & Industrial Projects at $0.03, and Nonconventional Gas Production at a $0.01 loss. Finally, Corporate & Other had a loss of $0.10 in the quarter.

Let's move to Slide 10 and a summary of the quarter-over-quarter performance by segment.

I've simplified my presentation pages this quarter due to the straightforward nature of the earnings experiences at the utilities. For those separate earnings walks on the utilities, I described the quarter-over-quarter changes with Slide 10. Operating earnings for consolidated DTE Energy are up $45 million for the quarter. Detroit Edison's operating earnings was $100 million, up $13 million from prior year. The favorability is driven by improved margin resulting from self-implemented rates in the second quarter of 2011. Even though our electric utility is decoupled, we closely monitor sales levels and the underlying economy for our region. Overall, temperature-normal electric load in the territory was relatively flat for the quarter. Last year in the second quarter, the auto companies were ramping up production and inventory levels, so it's a strong quarter for industrial sales. This is playing out as we look at the quarter-over-quarter this year.

Moving to MichCon, as noted earlier, the second quarter is typically a loss for the seasonal Gas Utility business. MichCon had an operating loss of $3 million, down $2 million for the prior year. The decrease in earnings was driven by final order rates falling through this quarter versus self-implemented rates last year. We also saw lower storage revenues offset by favorable weather.

Our non-utility segments were up $26 million, primarily driven by higher earnings at Energy Trading, partially offset by lower earnings at Power & Industrial Projects. Power & Industrial Projects are down $17 million resulting from non-repeating earnings last year from the steel industry fuels tax credit and favorable transportation contracts. Energy Trading is up $38 million, following a loss of $26 million in the second quarter of 2010. The improvement is driven by favorable economic performance and favorable accounting timing-related earnings.

We have provided our standard year-to-date economic and accounting earnings walks for the segment in the Appendix, and this quarter we've also included a quarter-over-quarter walk. Lastly, Corporate and Other was up $8 million from last year due to lower interest and taxes in 2011.

That concludes an update on the earnings for the quarter. I'll turn the discussion over to Nick Khouri, who will cover cash flow and capital expenditures.

Nick Khouri

Thanks, Peter, and good morning, everyone. As always, improved cash flow and balance sheet strength remains a key priority for management and the Board of Directors. Through the first 6 months of this year, DTE Energy's cash and balance sheet metrics are on track -- in fact, nearly equal to the historically strong year we saw in 2010.

Page 12 summarizes our balance sheet metrics. We expect to end this year within our targeted leverage and cash flow ranges. In addition, we have made significant progress towards our 2011 funding requirements. We completed our pension plan funding earlier this year than in past years and we do not foresee the need for new equity in 2011. Liquidity remains strong, with no expiring credit facilities until 2012.

Page 13 provides an overview of DTE Energy's cash flow in the first half of this year versus the same period last year. As Dave mentioned, cash from operations at $1.2 billion was on par with the strong internal cash seen last year. As expected, capital was up compared to last year, which I will detail in a minute. All told, net cash reached a positive $300 million in the first half of 2011. As in prior years, net cash is not equal across the 4 quarters of the year. Both working capital requirements and capital spending is backloaded towards the end of the year.

Page 14 details capital spending. As expected, capital spending is up from last year. Capital is higher at Detroit Edison, reflecting an increase in both environmental spending and the acceleration of wind projects in Michigan. As we discussed on our last call, we have accelerated the timing of our wind investment in Michigan. Renewable capital in 2011 is now projected at $350 million for the full year, up from the original guidance of $50 million. Since renewable investments at Detroit Edison are funded with a pre-existing surcharge, the new capital can be supported without an increase in customer rates, while still maintaining our balance sheet targets.

In summary, DTE's cash and balance sheet targets are on track, with year-to-date actuals nearing the historically strong year we saw in 2010, allowing us to accelerate our investment in Renewable portfolio for Detroit Edison.

Now let me turn it back over to Dave to wrap up.

David Meador

Thanks, Nick. Let me wrap up on Slide 16. We're off to a very good start in 2011, and we are confident in our guidance range of $3.40 to $3.70 operating earnings per share and very comfortable with our midpoint guidance. All businesses are on track, as we laid out, to deliver their targets. As Nick just explained, our cash flow and balance sheet metrics are also on track for our 2011 targets.

We have a very constructive regulatory environment in the state and we're looking forward to a reasonable outcome in the Detroit Edison rate case later this fall. We're making significant investments that we've laid out for you at both our Utility and our Non-Utility businesses, which will fuel our 5% to 6% long-term earnings per share growth. And on the growth front, we are excited about the opportunities that we see at both the Reduced Emission Fuels and the Gas Midstream business and we will keep you updated on that, including a deeper dive at the Fall EEI Conference. So we're pleased with our performance through the second quarter and we believe that positions us very well to achieve our goals for this year and beyond.

Thank you for joining us and, Connie, we will now open it up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] And we'll take our first question from Ashar Khan from Visium Asset Management.

Ashar Khan - SAC Capital

Dave, can I just ask you, I guess, you guys have mentioned regarding some monetization of certain properties towards the second half of the year. Is that still on plan or no?

David Meador

What we have laid out was that, over time, we are going to prove up our properties, our remaining properties in the Barnett. There might be some small monetizations this year, with larger monetizations next year. And I still think as we play out this year, there could be some small sales that we do on the Barnett Shale as we continue to prove up those properties. We have some properties there that are more mature than others. So we are looking at the possibility of some small sales this year but most of that would be in 2012 and beyond.

Ashar Khan - SAC Capital

Okay. Even the ones this year are more towards later end of the year, I guess?

David Meador

Yes.

Operator

And we'll take our next question from Paul Patterson from Glenrock Associates.

Paul Patterson - Glenrock Associates

I just wanted to touch base on a couple items. First of all, the tax benefit that you got, I know that's a onetime item but is there any impact on the future? Or is there any benefit or what-have-you going forward from this law change?

David Meador

No. No. When you change a law like this they restructure -- one of the several things the governor has done in his first 6 months is, they changed the business tax law in Michigan to make it more favorable for businesses and you have to revalue your deferred tax assets and liabilities. And that's just the net of that basically flows through your income statement as a onetime benefit at the parent. There's no cash immediately related to that, so it's just an accounting adjustment that is a onetime adjustment.

Paul Patterson - Glenrock Associates

Okay. But this effort to improve the business climate, that doesn't help you guys at all in terms of anything directly on the income statement or going forward?

David Meador

Going forward, actually, the way it plays out for us is a slight tax increase. It's small, kind of $15 million, but that...

Paul Patterson - Glenrock Associates

Okay. The second thing is that there was a ruling, I guess, in Appeals Court regarding low income assistance that the commission had granted. I generally think of that as being something that's sort of passed through to ratepayers anyway. Is there any implications either associated with that or any other wider implications that came out because of that?

David Meador

No, that item's immaterial. The one thing that we continue to watch is LIEE heat dollars at the Federal level and concerns that LIEE heat could be reduced over time and the impact on our customers. But that's something that we continue to advocate, to look to get our customers that can't afford our product, to get them as much assistance as possible and work with them.

Operator

And we'll take our next question from Daniel Eggers from Crédit Suisse.

Dan Eggers - Crédit Suisse AG

Can you give a little more color on what you're seeing, kind of economic recovery- and power demand-wise for the electric utility? I think that kind of numbers were maybe a little bit wider than we would have expected, given some of the trends we've heard elsewhere. Can you just shed some light on what you're seeing?

David Meador

I'll let Peter talk to that, but we are seeing economic recovery in Michigan as things -- we had always said there was going to be a tail on this. Unemployment took a sharp step down and now it's just slightly up, but it's what we expected. And you're seeing a lot of the factories in Michigan come back to life here slowly but, Peter, why don't you give a little bit more commentary on that?

Peter Oleksiak

The best way to look at this is on a year-to-date basis. I know there is some quarterly noise that we're seeing, so year-to-date we're up about 1%. And if you look at our total year forecast, we think that overall it's going to be 1%, maybe 1% to 2%. We are seeing some good recovery in the residential and the commercial segments. I did mention the industrial in my speaking notes. They had a very strong first half of the year. Actually the second quarter last year, they were up close to 30% on a quarter-over-quarter basis, so we did see some of that taper off this first half but we are actually on that segment looking at around flat earnings year-over-year. So overall 1%. Industrial will probably be flat but recovery in the residential, commercial segments.

Dan Eggers - Crédit Suisse AG

Okay and then I guess, Dave, can you talk a little bit more about the kind of the Trading contribution in the quarter. I think last quarter, you guys thought it was going to be not until year end that you saw some of the reversal of positions, but pretty sharp recovery this quarter. Can you just kind of talk about what changed from last quarter to this quarter and maybe what the underlying economic or new business contribution was for the quarter?

David Meador

I'll let Peter speak to that.

Peter Oleksiak

The last quarter, we mentioned that we thought the next 2 quarters would be relatively flat. Fourth quarter we had some positive accounting timing. Two things happened: first is that we did see some positive economic contribution in the quarter from Energy Trading. Actually, if you look at the reconciliation page, it's around $2 million of economic net income. So that actually was a little bit more than we thought and anticipated, and that allowed for the little -- and we did see some of the shift, where we thought we were going to get positive timing in the fourth quarter, some of it came in this quarter as well. But overall, we believe Energy Trading is on track and we're comfortable with the guidance for that segment.

Dan Eggers - Crédit Suisse AG

Do we think that it's going to be more ratable over the rest of the year, so that if you try to get to your target, in the third and the fourth quarter would see a pickup? Or is it still going to be more fourth quarter-weighted?

Peter Oleksiak

We're still seeing more fourth quarter. So a lot of this is tied to releasing reserves related to either power or gas delivery, which will happen and start happening in the fourth quarter.

Dan Eggers - Crédit Suisse AG

Okay. And then I guess on the Reduced Emissions Fuel, David, you made comments about the idea that there could be more projects above and beyond what you have and what are under construction. What is going to be -- or how do you guys think about approaching the decision to build more of these facilities? Do you need to have an offtake agreement in place to start construction of another one? And do you need to get through the backlog of what you already have built before you decide to build more?

David Meador

There's a slide in the appendix, which is the slide we've been using for a while, but we had -- just to back up a little bit. This is an additive, it's a pre-combustion process that reduces 20% of NOx and 40% of mercury. And we have 5 machines right now and we have 2 under construction, and it's possible that we could have additional machines. And we would only build additional machines beyond the 7 to the extent that we have a host site and contracts. We're not going to speculate and build machines which -- any additional machine has to be in service by the end of the year. We would only do that if we basically had contracts lined up to be able to do that. And we're working that right now, so it's possible that there could be an additional couple machines beyond the 7 that we're talking about right now.

Dan Eggers - Crédit Suisse AG

And just to refresh me, how much does one of the machines costs, capital-wise?

David Meador

It's $15 million to $20 million. Some of these might have a working capital component that comes with it. And then the 5 original machines, again, that's just -- to back up, as a reminder, those 5 had to be in-service by the end of 2009 and that tax credit runs for 10 years. And now any additional machine that we put in service this year would have a 10-year life on it also. So we're looking right now to get potentially additional machines in place. And by the end of the year, we'll know how many machines we have. And then the next question that you should have is how many tons would you be pushing through these machines. And we will be in a much better position to give you some insight into that, especially when we start talking about our early outlook for 2012. But overall, when we got into this, we gave you a wide range and you can see on Slide 20 in terms of the forward year net income, everything we're doing right now is giving us a real sense of comfort around that base-case line, which up to now, we were tentative. We had to wait and see. It's possible we could go beyond that base case over time. But that would play out over time, predominantly from the relocation of some of the original 5 machines.

Dan Eggers - Crédit Suisse AG

So Dave, just the mix of the baseline is based on the idea that the 7 units that are either in-service or under construction go into service and should we assume you're kind of like a midpoint of between the 1 and 10? So you're seeing like a 5 million-ton run rate through each machine on a utilized basis? Is that the right way to think about where you get to the kind of base case?

David Meador

I think that's fair. I'm not sure I would assume any tonnage right now because as we get the machines in place, there's a wide range of how many tons would go through each machine. And again, I think by the time I get to EEI, I'll know, first of all how many machines I will have, and I'll have a sense of all the host sites and what the range of potential tons are. And we will be in a position then, I think, to give you a little bit more insight into the range of tonnage that will run through these machines for the next 8 to 10 years.

Dan Eggers - Crédit Suisse AG

Not to belabor this, just to understand timing, how long does it take you guys to get from a agreement or an order to get something in service, right? So you decide you want -- you have somebody say, "We'll take one of these for a new project." in order to get it in service by the end of the year to qualify for credits, how much time do you guys need?

David Meador

It's about 3 to 4 months.

Dan Eggers - Crédit Suisse AG

3 to 4 months. So we'll know by -- next month or 2, we'll know what the total number's going to be, effectively?

David Meador

EEI, I think it's going to be -- it's the next time that I think we'll be in a public position where I can talk to you about how many machines there are going to be in total because by then, they're all contracted and in construction. And some of them will actually start to be -- starting to ramp up. And then we can talk to -- the second wave of activity for this business will be activity that will play out next year, which will be focused on potential relocations of some of the original 5 as we really try to optimize this by getting things sited where we can get the most tons through them.

Operator

And we'll take our next question from Erika Piserchia from Wunderlich Securities.

Erica Piserchia - Wunderlich Securities Inc.

Most of my questions have actually been asked and answered. Just any update on the appointment of the new Commissioner at the MPSC, or what's kind of the latest with that?

David Meador

They're working on it. The one time comment I would have is that the governor, the new governor in state of Michigan has been focused on other things. As we indicated, they completely restructured business taxes here. They were also working on a budget process that kept them pretty busy through June. And at the same time, one of the things that we've observed of this administration is their knack for selecting talent. So they really, really have been focused on getting the right people in the right jobs. So I think they're working on this right now and we would expect an appointment, hopefully, in August. And I'm not concerned about this at all. We have nothing imminent right now. The Edison rate case doesn't really play out until later in the fall and we look forward to the appointment and the new commissioner and doing what we have always done, which is building a constructive relationship, not only with the new commissioner but continuing that with the current staff and commissioners.

Erica Piserchia - Wunderlich Securities Inc.

So in the interim, the existing commissioner will just continue to serve in that role until a new appointment is made?

David Meador

Right. Commissioner Martinez has been extended until the appointment takes place.

Operator

[Operator Instructions] And we'll go next to Leslie Rich from J.P. Morgan.

Leslie Rich - Columbia Management

Could you remind me how big the self-implementation was in May?

Peter Oleksiak

[indiscernible] $107 million.

Leslie Rich - Columbia Management

$107 million?

Peter Oleksiak

Yes.

Leslie Rich - Columbia Management

And you did talk about the industrial sales and the year-over-year comparison, but I just wondered if you could also talk about Choice -- how the Choice volumes went up and sort of any trends that you're seeing there.

Peter Oleksiak

Well, Choice, we have a 10% cap so we're at the cap. There was a little bit of increase in Choice just from some organic sales growth from those Choice customers. But essentially, year-over-year we're the same.

Operator

And we'll take our next question from Steve Fleishman from BoA.

Steven Fleishman - BofA Merrill Lynch

Two questions. First, does the REF process allow for any reduction in SOx, as well as NOx and mercury?

David Meador

No. No. I mean, there might be some marginals, but it's really it's NOx and mercury.

Steven Fleishman - BofA Merrill Lynch

Okay. And then just on the rate case, could you just update us on kind of key data points from here until October in the process?

David Meador

The PFT data's August 12 and then the MPSC order has to happen by the end of October, the 28th. And what we've seen in the past is the pattern where it's -- usually the rate cases are being finalized several weeks before that, which gives us time to work through the tariffs and also do the programming for billing. So even though the order date has to be the end of October, we're expecting something, hopefully, in mid-October and we'll have to wait and see how that plays out. My other comment I just wanted to make, we've seen this in the last couple of cases where we have several moving pieces. An example would be decoupling and whether the decoupling mechanism changes, how customer Choice and the tracker around that is handled, and other trackers. So when this case comes out, it's very possible on day one, the press release from the MPSC and the economics are slightly different than how it might really play out through our income statement. So as soon as that order comes out, we will get out to you all as soon as possible, to kind of take you through the various pieces because it's a little bit more complex than just a straightforward rate case.

Operator

And we'll take our next question from Chris Bassett from Decade Capital.

Chris Bassett - Decade

I wonder if you could just comment on the 60% increase in oil production in the Barnett year-over-year and whether that changes your view of valuation in the shale assets?

David Meador

So we talked before, first of all, in our properties, that we are getting wetter gas than other areas. So we get a lot of natural gas liquids. We are also pursuing basically what is known as the oil play there and we are actually drilling predominantly to focus on wet gas and oil. And we believe, with very high oil prices, that's going to help us in terms of our exit point. But I wouldn't comment or speculate on valuation right now, other than to say this is going to be very helpful to us, as we try to monetize this over time in an environment where you have low gas prices. But right now, what you see basically from producing wells is we get about a $2 in MCF lift out of a combination of NGLs and oil.

Chris Bassett - Decade

And then just one follow-up. We had Suncor go IPO [ph] here in July and it's trading at a valuation of approximately $400 a ton for their coking facilities. Is there a new plan on your end to look at monetization of your facilities given that implies a value per share of those facilities of about $5?

David Meador

No. We don't have any plans. I'm aware of what they're doing and it's interesting to watch this play out in terms of implied value, but we have no plans right now to exit that business.

Operator

[Operator Instructions] And we'll go next to Phyllis Gray from Dwight Asset Management.

Phyllis Gray - Dwight Asset Management.

Would you please let me know what the status is of efforts to increase the Customer Choice cap?

David Meador

Right now, what we've seen is there is not a lot of appetite to look at this in the current administration or in the legislature. The view is that we're early into the new law right now. Even the Michigan business chambers come out to say we're only a couple years into this and there's really not a lot of energy in terms of exploring this. So we're aware that there are out of state marketers that come in Michigan and propose that the cap should be lifted, but there's not much energy around this issue at all. The Governor and his administration and the legislature are focused on much more important issues as a they try to drive Michigan's economy here back to a healthy state.

Operator

And we'll take our next question from Mark Sigal from Canaccord Genuity.

Mark Sigal - Canaccord Genuity

Can you provide an update on the Smart Meter project? And what's the appetite for extending this technology to the remainder of the territory and when might you look to have visibility on that decision timing?

David Meador

As you know, we have a pilot program going on right now and the pilot was expanded because of the DOE grant. So we're doing between 600,000 and 800,000 meters. And when we are done with that DOE grant, we're going to stop and take a pause. We're seeing very positive benefits from this in terms of reductions in O&M. But at the end of the day, we need to evaluate just to say if it's the right thing for customers. So sometime next year, we'll take a pause and we'll evaluate the program and announce at a future date whether we would expand beyond the current deployment that we're doing right now.

Mark Sigal - Canaccord Genuity

Okay. And that pause or evaluation timeframe, I would assume, might bring you into the 2013 timeframe when you might revisit the project again?

David Meador

No, sometime in 2012, I think, we'll make a decision as to what we're going to do over the next several years.

Operator

And with no further questions in the queue, I'd like to turn the conference back to your speakers for any additional or closing remarks.

David Meador

I just wanted to thank everybody again for joining us and we appreciate your questions. We look forward to seeing you all at the fall events. Our next public event that we'll be out speaking will be the Barclays Conference in the second week of September. And then. As we've indicated. At the fall EEI is where we'll be giving you some insights into 2012 and then the 2 projects that we talked about, the REF projects and the Bluestone project. Thank you.

Operator

And this concludes today's conference. We 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.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: DTE Energy Management Discusses Q2 2011 Results - Earnings Call Transcript
This Transcript
All Transcripts