Glenn Barba - Vice President, Controller and Chief Accounting Officer John Russell - President and Chief Executive Officer Thomas Webb - Executive Vice President and Chief Financial Officer.

Dan Eggers - Credit Suisse Securities LLC Jonathan Arnold - Deutsche Bank Securities Inc. Ali Agha - SunTrust Robinson Humphrey, Inc. Paul Ridzon - KeyBanc Capital Markets Inc Andy Levi -- Avon Capital Advisor Brian Russo - Ladenburg Thalmann & Co. Paul Patterson - Glenrock Associates LLC Steven Fleishman - Wolfe Research.

Good morning, everyone and welcome to the CMS Energy 2014 First Quarter Results and Outlook Call. This call is being recorded. Just a reminder, there will be a rebroadcast of this conference call today, beginning at noon Eastern Time, running through May 1.

This presentation is also being webcast and is available on CMS Energy's website in the Investor Relations section. At this time, I would like to turn the call over to Mr. Glenn Barba, Vice President, Controller and Chief Accounting Officer. Please go ahead..

Thank you. Good morning and thank you for joining us today. With me are John Russell, President, Chief Executive Officer; and Tom Webb, Executive Vice President and Chief Financial Officer. Our earnings news release issued earlier today and the presentation used in this webcast are available on our website.

Some of the statements made today may be forward-looking statements. Our SEC filings including our 10-K for the fiscal year 2013 identified some of the factors that could cause actual results to differ materially from those projected. Our SEC filings are available on our website.

This presentation also include non-GAAP measures, reconciliations of non-GAAP to GAAP measures are included in the Appendix to the presentation and posted in the Investor Relations section of our website. With that I'll turn the call over to John..

Thanks, Glenn and good morning everyone. Thanks for joining us on our first quarter earnings call. I'll begin the presentation with a few brief comments about the quarter. Before I turn the call over to Tom to discuss the financial results and the outlook for the remainder of 2014, then we will close with Q&A. We are off to a good start in 2014.

For the first quarter adjusted earnings per share was $0.75. This is up $0.22 from last year primarily due to the winter weather and strong cost performance. First quarter results keep us on track to meet our full year guidance of $1.74 to $1.78 per share. Tom will provide the details in a few minutes.

You can see from this graph how this winter compared to those of the last 100 years. It was consistently cold from November through March. The winter put our gas system to the test and I am pleased to report it performed very well. Total gas deliveries were up nearly 25% due to the weather. And there were no major service interruptions.

Here you can see where we are putting our gas investments to work. The $175 million upgrade at the Ray Compressor Station increased reliability to meet peak demand. And the $120 million Southwest Michigan Pipeline currently under construction will increase the transmission system capacity and reliability.

Our gas system is the fourth largest in the United States. During the first quarter, we delivered almost 160 billion cubic feet of natural gas to our 1.7 million customers. About half of the deliveries come from our storage fields.

Consumers have one of the largest storage systems in the country and the highest level of deliverability at 4 billion cubic feet a day. Our storage field help protect customers from volatile price spikes, which many experienced during this past winter specially in March.

Over the last -- over the next 10 years we plan to invest $5 billion in gas transmission, distribution and storage systems. In 2013, strong cost performance and favorable weather allowed us to reinvest back into the business for our customers. This model allows continuing to focus on cost performance and reinvestment within the year.

We have been doing this now for several years which are unique in the industry. We believe this improves performance for our customers and our investors. The result of our model is sustainable growth. Each year our growth builds on the previous year's performance without weather adjustments.

Within the year, we pull-aheads work to accelerate the pace of improvement for our customers. And the yearend results are delivered for investors with predictable and consistent growth. Again this year we plan to take advantage of the cold weather to reinvest for our customers.

In the first quarter, we benefited from favorable weather of $0.20 and strong cost performance of $0.04, allowing us to begin our reinvestment plan earlier than last year. Tom will go through the numbers with you in more detail. But I want to make the point again about sustainable, consistent growth strategy.

In the first quarter, our cost savings alone allowed us to beat our 5% to 7% growth rate. Our strategy differentiates us from our peers. The Michigan Energy Law is working well. But there is an opportunity to make the law even better in 2015. The governor has developed a set of no regrets principles shown in the green circle.

We support his vision and work closely with his administration and legislators. Near term, the House Energy and Technology Committee held hearings on electric deregulation. There was strong opposition to the bill. And the committee took no action. The administration is looking at options to establish a tariff for energy intensive customers.

And a legislature may take action on that. In the gas business, I expect the House will propose legislation to expand gas mains. We will support this effort because it works -- it will accelerate convergence from propane to natural gas.

Looking into 2015, we see the possibility of an increase in renewable energy portfolio standard, continuation of energy efficiency goals, regulatory improvements and the potential elimination of retail open access. We look forward to working with the governor and the legislators to make Michigan a more attractive state for business.

Next, Tom will take you through the details for the quarter. .

Pull-aheads permitted primarily by favorable weather in 2013 and so far in 2014 as well. The pull-aheads includes actions like incremental tree trimming for reliability, faster pole and pipe maintenance as well as accelerated plant maintenance outage.

Cost reductions cover a variety of items including actions like plan benefit savings, faster installation, smart meters and more productivity. Even after reinvestment, our costs are down about 3% a year. Our cost reduction track record is better than most peers and shown in orange.

At present, we plan future cost reduction at about 2% a year, reducing our O&M from a $1.055 billion last year to $930 million by 2018. This is a net reduction of $125 million which is down 12% and a bit more than 2% a year. This may well be conservative because we do not believe in our count on black boxes.

We plan on cost savings that we know about including actions like gas in place of coal generation, reforming our benefit programs and implementing specific plans for productivity. We are confident in substantial cost savings ahead making headroom for more capital investment. But perhaps there's little more upside. Let's switch to revenue.

Our electric sales have been better than many others as Michigan continues to grow particularly in our service territory. As shown in the top left of this slide, key economic indicators like building permits and GDP growth and population and unemployment in our major service area are meaningfully stronger than Michigan as well as the U.S. overall.

For example, during the latest reported 12 months to February, building permits were up 16% in the U.S., they are 25% in Michigan and 39% in Grand Rapids. For the first quarter weather normalized electric sales were up 1.7%. For the full-year, we anticipate a similar growth rate. Over the next several years, we plan conservatively in a bit over 0.5%.

We prefer upside opportunities not downside risk. Our EPS growth over the next five years is not however dependent on strong load growth. Our growth is based on needed investment and solid productivity. Low growth over and above are conservative estimates could be another catalyst. We've not factor this into our plan and perhaps this is another upside.

We are not however without need to improve. We do have substantial investment ahead to catch up on. This investment allows us to meet environmental requirements, add more renewable, improve reliability and enhance productivity. Our bills are competitive for our residential customers but rates are not competitive for many of our industrial customers.

In many circumstances these rates are higher than rates in other Midwestern states. We're working hard to correct this through our own substantial cost performance and improve rate design. And this could make us more like our Midwest peers.

Also, possible policy changes could eliminate or reduce existing penalties that all our customers pay to subsidize a few customers on retail open access. While we have the lowest overhead in our business and among the very best O&M cost performance and advantages like procuring low cost gas to our huge storage fields.

We still have disadvantages including our geographic location on a peninsula remote from fuel supplies. Our goal is to work with our customers, our regulators and policymakers to provide fully competitive prices and reliability, exactly what our customers should expect from us.

So a great deal of our capital investment focuses on more productivity, the improved reliability, completing environmental projects in a major reduction in carbon output to levels below the president's goal. Our investment in plants using gas and renewable fuels helps to make this possible.

Even as we limit the level of capital investment to keep base rate growth below inflation, this investment catch up provides resources to make necessary improvements. We have opportunities to spend more than $20 billion over the next 10 years and all nice bite-size no bet the planet projects.

We've included $15 billion in our plans and limited only by that passion to keep customer rates and bills down.

Even after recently pulling ahead $545 million of investment, investment and gas infrastructure, smart energy and electric reliability as well reinvesting almost $390 million in the gas business associated with securitizing coal plants, we have $5 billion of investment opportunity not in our plans perhaps more upside.

Here is just one example of capital investment growth opportunities not in our plan. We likely will need to build or secure over 2500 megawatts of capacity just to replace expiring PPAs and coal plant closures. We already have secured 540 megawatts with the acquisition of the combined cycle gas plant in Jackson.

With conservative load growth estimates and the possibility of customers returning to bundled service, and need for secure capacity may be even larger. And we are confident that we can fill those needs. So here's the map for this additional capacity, it is attractive for both customers and investors.

If for example we build just a thousand megawatts of new capacity is good at $0.05 of EPS growth or about two points of headroom to our long-term guidance. And that's without increasing customer bills. The rate impact of adding a new capacity is likely to be equal to or less than the cost associated with expiring PPAs.

Customers and investors win again. We are not however raising long-term guidance. These capacity additions, need additions are not in our plan yet. This investment opportunity will allow us to redeploy resources in a manner that further strengthen the likelihood of consistent 5% to 7% growth.

Our investment driven model is not so unique but we work it well enough to improve our gross operating cash flow by about by about $100 million each year, and in some years we've exceeded that substantially. We self fund our growth with no need for block equity on the five year horizon.

As a percent of market cap today, our spending levels now exceed peers with strong additional growth ahead. As a risk adverse company, our operating cash flow and liquidity are higher too. And this is a nice place to be. You can see our liquidity here with over $2 billion available in a robust financing plan.

Our liquidity as percent market cap shown at the bottom right exceeds peer levels. Moody's upgraded both CMS and Consumers just two months ago; Fitch upgraded the CMS Energy parent's unsecured rating to BBB- and revised the outlook to stable. And in last month S&P change their outlook from stable to positive. And here is our sensitivity chart.

This will help you assess our prospects. And here's our report card for 2014. Obviously, the Arctic blast -- with that Arctic blast we'd be well ahead of earnings guidance. We will however work to put this surplus to good use with even more reliability improvements for our customers.

You'll note we graded ourselves with an orange check on operating cash flow. Although we anticipate achieving our target, we had not planned on the high price of gas transportation for incremental gas purchase beyond what we had contracted and what we had in our storage fields.

As shown on the earlier sensitivity slide, each increase or decrease in the price of gas by about a $1 impact our cash flow by $100 million in the opposite direction. This is a pass through but some of this may be recovered in 2015 rather than 2014. So we are on course to meet all of our financial targets with substantial upside and earnings.

We are actively redeploying some of the surplus to improve the lot of our customers with no adverse consequences for you our investors. The mindset for customers and investors has worked and we hope you agree. We are in our 12 year of premier earnings and dividend growth, and we plan to continue this performance for some time.

So thank you again for joining us on our call today and we would be pleased to take your questions.

Operator?.

(Operator Instructions). And our first question comes from the line of Dan Eggers, Credit Suisee. Please proceed. .

Hi, good morning guys. Thanks for the update on Slide 16 on the capacity your resource opportunity.

Can you just maybe talk a little about you where you guys sit from a functional reserve margin between what you guys own what you haven't a contract and then how much you having to buy out the market right now on a spot or normalized base over the course of the year?.

Yeah, Dan, we have got enough capacity now for our customer load. That's not an issue for us as far as that. Next few years we'll probably be in the market for a few hundred but very small from that standpoint.

So I think Tom was showing in the chart which is important pieces, we are shutting down coal which were beginning to replace, we'll buy more from the market and as the PPA expire will need to have replacement capacity, will makes us a bit unique here I think very unique is the fact that we do -- we are heavily dependent on PPAs compared to other utilities.

So as those expire allows us to do the development here and raise our capital investment without raising the cost to our customers. .

And I guess, John, there is a couple of contingencies out there obviously what happens with choice in the 780 megawatt and then the survivability I suppose of Palisades as it gets older and the prospects for a PPA beyond your PPA or probably harder to find, how are you guessing about contingency planning for both these issues and if choice does get eliminated early next year, is that -- would that accelerate the need maybe to revisit Thetford?.

Yes, exactly. You hit it. I mean that the issue we have a great site Thetford, we are ready to move ahead with it, the opportunity presented itself with the plan here in Jackson, it was best for us and for our customers we took advantage of it.

The Thetford site is ready to go, we do have expandability and be changing out some of our simple cycle to combined cycle, it is even plan Thetford can begin at the simple cycle moved to combined cycle, so we are well positioned to be able to move.

I'd say quickly but again building plans nothing is quick, but having the sites and having all that work already behind us really would help us move quickly as retail open access returns, as coal plants are shutdown and as some of these PPAs expire..

And with choice being replaced it with your own generation, would that prospectively be added to the growth rate because presumably the revenues coming back and to pay for that generation, would you mitigate the concerns you guys always have about your bill versus your customer?.

Absolutely, absolutely and the fact that ROA customers would come back also means that the wall was it as far as coal being reduced, the capacity markets increasing to the normal levels, we are more competitive and we will be in a very good position to be able to build with that pretty substantial that you saw there, it is almost 800 megawatts of load if it did return..

And your next question comes from the line of Jonathan Arnold, Deutsche Bank. Please proceed..

Yes, good morning.

Could I ask you just talk a little bit about where you are on days of coal supply of deliverability and if weather being constrained, is got a changing dispatch and then how you expect the summer to play out?.

Yes, we fell below our normal levels this winter and I think it's what the industry is experience with some of the real disruptions primarily due to the cold weather.

We've been able to make up about seven days of inventory over the past few weeks, so we been making up ground and we would be putting some more railcars to work, we do have a couple scheduled outages especially at Campbell 3, our biggest plant which is helped us get back on track so we are little bit below normal levels today, but I do feel good that there's finally most of the ice is gone out of the Great Lakes so we do have the opportunity different than other utilities to bring in coal with barge, through barges and we are also making progress as I said with a seven day increase over the last several weeks..

John, can you just kind of frame -- so how low did you go and where are you now with that seven delta?.

What would I say lowest we ever hit was about 14 days that was the lowest and what we did as a result of that as we began to conserve our western coal which is cheaper for our customers by working for minimum dispatch on weekends and doing some different things like that? So that did help increase it.

And keep in mind we have still have the ability to burn Eastern coal which we have those coal piles too but we chose to use Western because of the environmental and customer benefits. So moving up from 14 we are up to and above 21 days right now.

We like to be in the 25 to 35 days going into summer, and I expect we will be there especially now that lakes have opened up. .

And your next question comes from the line of Ali Agha, SunTrust. Please proceed..

Thank you, good morning. First off on the 2014 guidance by the segments Slide 25 I believe enterprise you are assuming will contribute about $0.11 or so to earnings in 2014 which is significantly higher than what they being running for the last several years.

Can you just remind us what's causing that pickup this year?.

It is about the same and what you are reading there members Enterprises and EnerBank combined, so you need to split that between those two. .

Okay, Tom and so how should we think of that split?.

Okay and EnerBank would be about $0.07 or $0.08 and Enterprises would be about $0.03 or $0.04, it kind of round in there.

So Enterprises is running what we call a little low on its earnings contribution today because this is not a great market for the IPPs but what we see-- we have kept ourselves open for the year after next and into the future for capacity contracts, and energy contracts, and if you remember John's presentation from some while ago, we have the opportunity for plants like DIG to be little bit like a Ferrari in a garage.

And so that guy can come out when we need to for utility if needed to, if it was the best deal or it can be out there with a higher capacity prices we anticipate will occur over the next couple of three years..

Okay and EnerBank is that something going on there to add $0.07 to $0.08 again I maybe I just don't recall it contributing that level historically..

No, nothing special just their consistent growth that they have year-over-year, nice performing little bank. .

Okay.

And John, on retail open access and you're thinking there and the prospect that you think that load may come back, how much of that is driven by your outlook for say commodity prices? Are you assuming high commodity prices is what is bringing those customers back or what is the scenario in your mind that you see that as an incremental load opportunity for you?.

I think that let's start now. The load projections really don't do it although I will tell you I think we are going to see more normal capacity prices after some of the EPA rules kick into effect for the Midwest.

So that's one area, I really think the driver behind it, Ali, will be legislative changes, I mean really today our customers, we have got about 400 customers on retail open access and our -- the rest of our customers the 98.98% of our customers pay $140 million more per year to take care of those 400 customers, that's not fair.

And what we are trying to do as I mentioned earlier is work on some industrial, they are call industrial or heavy energy intense customers to provide them some savings and some discounts which reflect true cost to savings with the type of across the service with the type of plants, the type of customers that they are.

So I think say that's going to be the driver. I mean we are out of step in Michigan with having a hybrid market and we are the only one maybe one other state in the country that has this.

And the trend is pretty clear, people are moving away from deregulation despite what you saw in Ohio that started before Michigan deregulated, and it was kind of interesting to see the governor talk about what he thinks about that as he's moving forward with it.

And while I'm on this little soapbox I think it's pretty important to look around this country and see what happened in March of this year with gas prices, electric prices for those customers that are deregulated and don't have the protection of the utility..

Right. Got it. Last question. Just to again to frame up that 1,000 megawatt capacity potential that you have for owning.

Again could you just remind us what timeframe -- if I heard you right that was beyond the next five years, but it wasn't clear? When do you see that opportunity?.

If you look at Slide 16, you can see on we have opportunity to put in another 400 or so megawatts today if the Palisades PPA contract did not renew, it expires in 2022 who knows something can happen earlier there but we are not projecting that. And then the MCV PPA expires in 2025. .

And your next question comes from the line of Paul Ridzon with KeyBanc. Please proceed..

Good morning.

Can we just talk about what happened on the industrial side? Weather-normalized sales were up pretty sharply?.

Yes, what we're seeing and that's why we gave you the slide and showing this sort of the hookups in the building permits and all that sort of thing, we're seeing a turned back up on the industrial site, if you could think back some of you are able to do this to a year ago, we also softening across the country and we were kind of scratching our heads, everybody had ideas for what was causing it.

We are seeing a reverse of that in the first quarter of this year. We are seeing things firm up in our particular area there's a couple of customers that are doing particularly well and driving that growth in the first quarter.

But we are also seeing a lot of others doing things with their building and preparing for additions, so that's why we're pretty confident with the projections that we have through the rest of the year and we are calling it about the same level of growth.

So from an industrial standpoint inside of that 1.7% first quarter growth, it was about 5.8% and we are forecasting and probably continue just a little bit better than 5% for the rest of the year..

And just back to Thetford with that current shortfall will you plan currently just to lean on the markets or could we see tight recovery in a couple of years?.

Yes, I think we could Paul.

Right now I think the markets are the best way to go for us to fill that shortfall which is small, I mean let's put in perspective, in our peak load is over 8000 megawatt and we are talking about capacity only not really energy for less than 400 megawatts, so it is not a big deal to go the market for 400 megawatts but when we start seeing that increase to near thousand I think in that ramp up we will be looking at Thetford because I think that's kind of a critical stage and we see that and it could change relatively quickly based on the change in retail open access or as Tom said some of the contracts that in the future will move off.

So I mean we are very well positioned, the sites ready, the sites ready to go as we said before we've got gas, we've got electric transmission, we've got some older units on site, it's in a remote relatively remote area but it's on the east side of the state near Flint, Michigan and they would really like us to build their plant.

So it's a pretty good set up for us. .

So I would just add the purchase we did of the plant in Jackson was at a price that's lower than anything I have seen across the country, and so it was a great thing to do for our customers. The John's point here is that we are going to have to add new capacity for the state as well as our service territory at some point..

You bet..

Are there other plants out there like the Jackson plant that you could buy?.

There are but there's still, I think three significant IPPs out there, one is ours and so yes there are still opportunities that way too..

But either way it's a rate based opportunity?.

Yes, it is. .

Absolutely.

Your next question comes from the line of Andy Levi, Avon Capital Advisor. Please proceed.

Hi, good morning. Just two quick questions. Just on the verbiage on the upsize as far as the growth rate so that's what we're talking about, right, upsize to the growth rate? Longer term 5% to 7% right. .

Yes, so when you're -- we're talking about the earnings per share growth rate but when we do that you notice we have been cautious each time whether it was upside because we may be conservative on revenue or upside because we maybe a little conservative on our cost or all these different things.

That upside we talk about gives us the opportunity and then put more capital investment in place. And then be able to do more work for our customers. So we anticipate certainly in a short-term that this is what kind of gives us chance to give you a very sustainable, very predictable growth at 5% to 7% pace.

What we're not trying to signal here is that you are going to see some new sustainable level at a pace higher than that and maybe a year or two when something happens but just our plan is to continue to deliver that 5% to 7% and our point is we probably have some upsides to make that even easier. .

Okay, okay.

I thought you were talking about upside to the 5% to 7% and again it could be lumpy or there's a year that you surpass the 5% to 7% but when you talked about upside we should just continue to upside to inflexibility I guess?.

That well said, thank you. .

Okay. And then at the same time some of us are thinking that maybe you may need to file for or may choose to file for a rate case on the electric side that rates would take effect, I don't know mid 2015.

So I guess some of this upside could help alleviate or eliminate that potential for 2015 or not at this point?.

Well, here is the way I would think about that to put in perspective. For 2014, we didn't need to have a rate case for gas or electric either of those businesses and that's because we found ways to reduce our cost by $150 million that funded if you will the investment.

We do plan to do rate cases as we get toward the middle and the end of the year particularly on the electric side. The magnitude of that case will depend upon the size and scale of our O&M cost productions and of course our revenue growth. So we will watch that carefully, we do not anticipate being able to avoid a rate case for an additional year.

But it may be able to allow us to tamper the size of the case that we asked for..

Great. And then one last question.

Any commentary or information you can give us on the -- I don't know if you want to call it strategy but this thinking as far as we approach the PJM auction what you are thinking there?.

Yes, we are not prepared today to announce what we're going to do but you know our opportunity to participate varies to our IPP that we call DIG, Dearborn Industrial Generation. We did participate in the market a year ago for the three year dance period.

We are looking at that again but you know PJM is doing I think a good job trying to ensure that the people that participate have hard assets and they plan to be there each and every year.

We've got to play that off against what we see the needs are in MISO and make a decision that's the most economic for you as investors, but also the most practical in terms of serving customers in the State of Michigan.

So we haven't made that decision yet and I know there are a lot of people out there sharpening their pencils trying to figure out what they will do to be an interesting option..

Your next question comes from the line of Brian Russo, - Ladenburg Thalmann. Please proceed.

Hi, good morning. Most of my questions have been asked and answered but just curious on the opportunities to reinvest the surplus margins reported in the first quarter.

Does that all get reinvested in the second quarter or do you kind of spread it out for the remaining three quarters and how important is summer weather to that reinvestment?.

Well, let me start on that and I think both John and I might have some thoughts we would like to share with you to be helpful.

We've already started, so I don't want you to think that we have an impact to get a chance to see that on John's Slide 7 which shows the reinvestment curve and he noted that the weather was favorable $0.20 and that we had cost savings that were higher than we expected by another $0.04. So we really had good news of $0.24 in the quarter.

You'll note there that we also showed $0.06 of reinvestment and some things that are associated with the cold weather. We always tell you when it's really good news or really bad news, there are things that come with it on the other side.

So being very cold, our UAs may creep up a little bit more, our lost gas might be little bit more, so there are some natural offsets. But we've already started the reinvestment in the first quarter, and although we give you a curve that little dotted line, I would caution you not to make that too predictive.

We will take on the things that need advanced notice like forestry, tree trimming, we have to plan those things ahead to line up our crews and treat people fairly, and make sure we're doing that in a very safe way, so the earlier we start that the more that we can get done for our customers.

We look at outage pull-aheads, those you can't just say I want to do it tomorrow or I want to do it two months from now.

So some of those sorts of decisions we can make in this timeframe but than is a lot of other things that can be decided later as we get into the summer and towards the end of the summer and you know hold back on those decisions until we see what mother nature has in store for us over the summer months and if she is favorable again then we have more opportunity, but if she is not and we can't predict that.

We only plan on normal weather. We will adjust accordingly so we phase in the reinvestments over time. I don't know John if you want to add anything..

No, I think it is great response.

So, Brian, one thing too, if I understood your question correctly, the reinvestment we started in the first quarter but that's just beginning and as Tom said there is a lot of work to be done to be able to spend the money to get the resources in place to be able to make it effective, so you expect that spend to occur throughout the rest of the year..

And your next question comes from the line of Paul Patterson, Glenrock Associates. Please proceed. .

Hi, how are you? Just wanted to follow up on a few things.

I apologize if I misheard them but just on the RPS standards I think you suggested that they might get --that there may be changes to them to make them more aggressive, is that right?.

Well, I just think there will be changes, 2015 as a natural sunset for the law, I don't expect any changes around 2014 but in 2015 I do when I think yes I wouldn't surprised if the targets that we have today which is 10% by 2015 which we will achieve wouldn't be raised or put in context with the energy policy of some sort, so yes I would expect that to happen.

And then driver just for you-- the driver is a lot of interest in renewable energy, we like to build renewable energy, the ones that we done, we completed one wind park, we are building another, it is going very well and the costs are coming down, I mean that's the nice thing compared to several years ago when the law was first put into place that wind power was not that competitive, today it's pretty competitive, I mean it is just natural gas is the only one that really beats it in our mind.

So the wind regime here is good in Michigan I think we can do some more and would like to build it..

Okay.

Going back to this issue of the competitive, the shopping and closing that sort of loophole up, I understand the logic behind, I think I understand the logic that you were just discussing with Ali, but what is the political dynamic that might cause that? Because I mean assume that these guys have been getting the subsidy for some time, they probably won't want to see it go away if you follow me so I'm just wondering what leaves the legislature to sort of plug that hole..

Good question, couple of things.

One is the customers these 400 customers -- the main reason to fix it is that it doesn't make sense to have 400 customers subsidized by 1.8 million particularly knowing that some of these 400 customers are not big energy users the way the law work they just happened to get in line earlier back in 2008 and some of them are commercial accounts that prepare fast food, and those really are not driven by energy rates, they are driven more for the success of their business on location, so that's something that really, it's benefiting some customers that quite frankly today probably shouldn't be benefited $440 million a year.

The second issue that I think is important here is that there are some people that believe that competition is the right thing to do. I mean regardless of the industry, it is the right thing to do. The message we continue to tell them as they we are pretty unique industry. We are the second highest capital intensive industry in the world.

We make electricity, it moves at the speed of light, therefore it's the -- and you can't store it which means it's the most volatile commodity in the world.

And I think this winter really proved to a lot of customers that have ventured out in either on the gas side of deregulation or the electric side of deregulation, how volatile that commodity can be, and you seen the lawsuit, you seen claims that people are gouging others and so forth. That's not what this is all about.

Our large customers particularly want to have competitive rates and they want predictability and they want certainty.

They don't want volatility and bringing them back would allow us to have savings that we could allocate as Tom showed on his slide, may be to that class of customers that uses more energy and ought to have a true cost to service of that approach.

So that's that kind of the whole message that's going on today, and I think in the future those customers are probably paying less than buying their electricity from us today. I think in the future -- we have talked about earlier today when you see some of these coal plants retire I'd expect you are going to see that gap narrow quite a bit. .

Okay and then just on the --.

I just go to add one little comment there.

It is clear this team, this management team is driven to be competitive whether it's reliability or the prices, rates, bills for our customers, and so the more we succeed on that the less reason there is to have a choice program, so we will be pushing hard for the success of our customers that's the bottom line..

When do you think that this legislation might be introduced?.

2015, I expect sometime 2015, as I mentioned that we are hearing that the house about the regulation expanding it beyond 10% so allowing more customers to go to retail open access and the opposition was very strong, is not even getting out of committee, I mean there was no interest in that so it's really I would say 2015 would be the time to look at all of these things, renewable energy, energy efficiency standards, retail open access, maybe some regulatory changes all in about 2015.

As I said earlier Paul, I think we have a good opportunity to improve what we have today which think we got a pretty good law here in Michigan today with good regulation. I think there is an opportunity to even it gets better..

Okay. I hear you all that. Let me ask you just on the rate design regulatory on that Slide 14, that's also one of the elements that you want to achieve to get your industrial, rates more in step so to speak.

How much money are we talking about there? Or how should we think about that? How does that work? Is that just residential or commercial to pay that or how do we think about that?.

Well, look at that slide; I think it is written the three pieces that we show. One is just our cost reductions to the extent that we can keep our cost out of the pace faster than our peers then we can keep our bills and keeps our rates down relatively.

The second one is rate design and the whole effort there, there is a workgroup going on led by gentlemen appointed by the governor and he is working with the regulators, the legislature, with our customers, with everybody and what they are seeking to do is simply get rate design, it is a little more like the rest of the Midwest and not so skewed one direction or the other.

That will help a lot of these industrial customers and then lastly it is the whole discussion that John just had about the retail open access so I won't repeat that.

If those three things were to happen in the scale that we expect they could happen then our industrial customers would be very competitive compared to the rest of the Midwest and remember our residential customers already have competitive bills compared to all the utilities across the nation and which not our goal to push this money around and have somebody paying a lot more and somebody pay a lot less.

We just try to get the rate design and structure that we don't have artificial subsidies for some customers over others. So all those things together may -- they are certainly get discussed, they may get acted on in this way through now into 2015, but we can't predict that maybe it will be part of this, may be it will be more than this.

But we will see it and we will certainly be an active party in it..

Okay, understood, but just on that second point, the rate design one, is that a generic proceeding or is that going to be part of a rate case?.

Well, that's not decided exactly how it will go yet, the study group will make a recommend -- and remembers that study groups got customers and everybody involved in right. They will make a recommendation to the governor. And the governor will share that with the legislature and the legislature may decide to take some action or they may not.

This will be completely their choice. If they choose not to on the rate design piece then I think will be a recommendation to the commission to look at this rate design and put something in place and perhaps it could yet be this summer.

So that for future rate cases when we file our rate or another utility files rate case, we would be obligated to use that design so putting the rate design and place it first doesn't change your rates until you have a rate case.

And then those rate cases will follow that but customers will like that because again John mentioned they don't like volatility, they do like predictability, and if they do know they got something that's coming that's better and it is clear that's very helpful for their own planning..

And your next question comes from the line of Steven Fleishman, Wolfe Research. Please proceed. .

Yes, good morning.

Just curious if any of the Michigan law issues have come up in the governor election process so far or has it been pretty quiet?.

Very quite, haven't been raised at all..

Okay.

Also wanted to ask to the degree that bonus depreciation is extended by Congress how would that impact your financing plan or growth rate if at all?.

No real impact to us, I know most utilities would probably answer that question with no, no, no like Amy Winehouse but in our case we are happy to have it because what it does as you are laughing at Amy Winehouse, you don't even know, she is passed away, sure I am (inaudible) I guess, what will happen is that will be good shelter as you know Steve for the utility and that will help us to be more productive and that's good news.

But then when we won't have the opportunity to use it as our NOLs up at the parent so they will actually get pushed out further and that's why we are happy. We will take the good news at 95% of our business for our utility customers and have those NOLs shelter us even longer because we won't need to use those near term.

And you also know there is the downside. It is off the point that we can push down our parent that quicker though. That's a negative side of all that good news..

At this time, we have no further questions. I will now turn the call over to Mr. Russell for closing remarks. .

All right, thank you. Let me wrap up today's call by saying we are off to strong start in 2014 and working to deliver the 12th year of consistent financial performance. We appreciate everybody's interest in CMS Energy and look forward to seeing many of you at upcoming events. We appreciate your time today and thanks for joining us. .

This concludes today's conference. We thank you for your participation. You may now disconnect. And have a great day..