WEC Energy Group Inc

NYSE:WEC

Earnings Call Analysis

Solid Performance Despite Challenges

In the second quarter of 2024, the company reported earnings of $0.67 per share, exceeding guidance of $0.60 to $0.64. Despite a $0.25 decline from the previous year, the company remains on track to achieve its annual earnings guidance of $4.80 to $4.90 per share. The quarter was impacted by higher storm costs, but operational efficiencies resulted in a 2% to 3% rise in O&M for 2024, better than initially expected. Significant investments include $23.7 billion over five years in projects for efficiency and sustainability. For Q3 2024, earnings are expected to be $0.68 to $0.70 per share.

Introduction

This is an exciting time for the WEC Energy Group. Despite some challenges in the second quarter of 2024, the company remains optimistic about its long-term outlook. Here are the highlights and strategic initiatives that are shaping the company's future.

Financial Performance

WEC Energy Group reported earnings of $0.67 per share for the second quarter of 2024. This was a decrease of $0.25 compared to the same period last year, but it still exceeded the company’s own guidance of $0.60 to $0.64 per share. The management remains confident about meeting the full-year earnings guidance of $4.80 to $4.90 per share, assuming normal weather conditions for the remainder of the year.

Operational Challenges and Cost Management

Higher storm costs and an absence of one-time gains from a previous land sale contributed to a decline in utility operations earnings by $0.19 per share compared to the second quarter of 2023. However, the company has been proactive with Operations and Maintenance (O&M) cost savings initiatives, which are expected to result in a 4% improvement in O&M costs by the end of 2024 compared to initial expectations. Overall O&M costs for 2024 are now projected to be 2% to 3% higher than in 2023, down from an earlier forecast of 3% to 5%.

Capital Investments and Economic Growth

WEC Energy Group is investing heavily in its capital plan, the largest in its history, with a projected $23.7 billion investment over the next five years. These investments are aimed at enhancing efficiency, sustainability, and growth. Key projects include the $100 million investment in the West Riverside Energy Center and significant spending on natural gas infrastructure, renewable projects, and energy storage facilities. The local economy, particularly the I-94 corridor between Milwaukee and Chicago, is thriving with projects such as the WestRock facility and Microsoft’s data center complex, which promise to create thousands of jobs.

Regulatory and Legal Updates

The company is engaged in various regulatory reviews and legal proceedings. In Wisconsin, new rate reviews are in progress for 2025 and 2026 to support reliability, economic growth, and the transition from coal to renewable energy. In Illinois, the company is appealing a decision by the Illinois Commerce Commission regarding the restoration of $145 million for the Safety Modernization Program. Despite receiving only $28.5 million from the commission, WEC Energy Group has appealed this decision and remains involved in additional dockets with decisions expected by early 2025.

Future Outlook

Looking ahead, WEC Energy Group is reaffirming its 2024 earnings guidance of $4.80 to $4.90 per share. The company is also planning to invest approximately $500 million annually post-2024 in line with its capital spending. Potential developments, such as the ongoing collaborations with Microsoft and the possible acquisitions and constructions in renewable energy projects, are viewed optimistically. The company aims to support long-term earnings growth rates of 6.5% to 7% annually through these strategic initiatives.

Conclusion

In summary, WEC Energy Group is navigating through a period of transformation and growth. While facing some short-term challenges, the company’s strategic investments, proactive cost management, and strong economic fundamentals in its operating region provide a solid foundation for sustained long-term growth. Investors should watch closely for regulatory outcomes and the execution of WEC's ambitious capital projects.

Earnings Call Transcript 2024-Q2

[Operator]

Good afternoon, and welcome to the WEC Energy Group's Conference Call for Second Quarter 2024 results. This call is being recorded for rebroadcast. [Operator Instructions] In conjunction with this call, a package of detailed financial information is posted on wecenergygroup.com. A replay will be available approximately 2 hours after the conclusion of this call.

Before the conference call begins, please note that all statements in the presentation, other than historical facts, are forward-looking statements that involve risks and uncertainties that are subject to change at any time. Such statements are based on management's expectations at the time they are made. In addition to the assumptions and other factors referred to in connection with the statements, factors described in WEC Energy Group's latest Form 10-K, and subsequent reports filed with the Securities and Exchange Commission could cause actual results to differ materially from those contemplated. During the discussions, referenced earnings per share will be based on diluted earnings per share, unless otherwise noted. And it's now my pleasure to introduce Scott Lauber, President and Chief Executive Officer of WEC Energy Group.

[Scott Lauber, executive]

Good afternoon, everyone, and thank you for joining us today as we review our results for the second quarter of 2024. Here with me today are Xia Liu, our Chief Financial Officer; and Beth Straka, Senior Vice President of Corporate Communications and Investor Relations. As you saw from our news release this morning, we reported second quarter 2024 earnings of $0.67 per share.

We're firmly on track to meet the full year 2024 guidance of $4.80 to $4.90 a share. This, of course, assumes normal weather for the balance of the year. We continue to see strong foundational growth in our regional economy. The unemployment rate in Wisconsin stands at 2.9%, continuing a long-running trend below the national average. The pipeline of economic activity is particularly strong in what we call the I-94 corridor between Milwaukee and Chicago.

For example, just last month, WestRock broke ground on a new facility at the former site of our retired power plants. WestRock is a leading company in paper and packaging solutions with 50,000 employees and 300 plants worldwide. The company called the cutting-edge facility, a super plant, stating it will be one of their largest and most advanced plants. And Microsoft is making good progress on the construction of a large data center complex in Southeast Wisconsin.

In May, Microsoft announced a broad investment package to strengthen our region as a hub for AI economic activity, innovation, and job creation. These investments include a planned $3.3 billion to be spent in cloud computing and AI infrastructure between now and the end of 2026. Microsoft has stated that it expects to bring 2,300 construction jobs to the area by 2025 and 2,000 permanent jobs over time.

These developments highlight the strength and the potential of our local economy and underscores the need for the investments in our capital plan. During the second quarter, we continued to move forward on major projects in our capital plan. It's the largest 5-year investment plan in our history totaling $23.7 billion for efficiency, sustainability and growth.

As we've discussed, the plan is based on projects that are low-risk and highly executable. At the end of May, we closed on our second option at West Riverside Energy Center for $100 million. This adds 100 megawatts of efficient combined cycle natural gas generation to our portfolio. You'll recall that last year, we discussed several filings or last quarter, we discussed several filings for major projects to support economic growth and reliability in Wisconsin.

This includes approximately 1,200 megawatts of efficient natural gas generation at our Paris and Oak Creek sites as well as 2 billion cubic foot liquified natural gas storage facility, and a 33-mile gas lateral to serve the Oak Creek site. In total, these projects combined represent $2.1 billion of investment. Our proposals were submitted to the Wisconsin Commission in April, and we expect the decision in approximately a year. Also under review, we filed an application in February to purchase a 90% ownership interest in high-noon solar energy center in Southern Wisconsin.

With an expected investment of approximately $580 million, the facility is expected to provide 300 megawatts of solar generation. We have asked the commission to make a decision before the end of the year. As a reminder, we expect these investments to earn AFUDC during the construction period after commission approval. And in our WEC Infrastructure segment, the Delilah I Solar is now expected to go into service at the end of the year, delayed from June due to a weather event.

We plan to invest approximately $460 million for a 90% ownership interest in this project in Northeast Texas, and we still expect our Maple Flats Solar Project to be in service by the end of the year. As you recall, we're investing an additional $560 million this year in our Infrastructure segment. We reallocated away from our operations in Illinois, a total of $800 million in our 5-year capital plan.

Overall, our plan fully supports our long-term earnings growth rate which we project to be in the 6.5% to 7% range on a compound average annual basis. We're also on schedule with the development of our next 5-year plan. And as usual, we expect to share the details with you in the fall. Now I have a few updates on the regulatory front. In Wisconsin, we filed new rate reviews for test year 2025 and 2026 on April 12.

Our request focused on addressing 3 major areas of need: first, improving reliability and reducing outages from increased storm activity; second, supporting Wisconsin's economic growth and job creation through investments in new generation and distribution projects; and lastly, continue the transition from coal generation to renewables and natural gas.

Commission staff and intervener testimony is scheduled for August 21, we expect the decision by the end of the year with new rates effective January 1, 2025. We have smaller rate reviews and progress at Michigan Gas Utilities and Upper Michigan Energy Resources. We also expect decisions on these reviews by the end of the year. And in Illinois, we've been engaged in 3 dockets. The Illinois Commerce Commission issued its decision on the first of these, a limited rehearing of the commission's rate order for Peoples Gas at the end of May.

The commission had agreed to reconsider our request to restore $145 million for Safety Modernization program in 2024. This is mostly related to emergency work, unfinished projects, and work driven by public entities like the city of Chicago. The commission granted $28.5 billion (sic) [ $28.5 million ] concentrating on what they deemed emergency work. We have appealed this decision to the Illinois Appellate Court along with other items in the rate order, including the commission's previous disallowance of investments in new service centers.

We are also actively involved in 2 remaining dockets. One is the review of the Safety Modernization program, staff and intervener rebuttal testimony are expected by August 21, but the commission's decision expected in the first quarter of 2025. The other docket is the evaluation of the future of natural gas in Illinois, which is expected to conclude in about a year.

Of course, we'll keep you updated on any further developments. Across our business, we continue to make good progress towards our goals of reducing greenhouse gas emissions. In May, we retired units 5 and 6 at our Oak Creek power plant. Together, those made up over 500 megawatts of coal-fired generation. Including these units since 2018, we've retired nearly 2,500 megawatts of older fossil fuel generation.

Finally, a quick reminder about the dividend. We continue to target a payout ratio of 65% to 70% of earnings. We're tracking in that range now, and expect the dividend growth will continue to be in line with the growth of our earnings per share. Now I'll turn it to Xia to provide you more details on our financial results and our guidance for the third quarter.

[Liu Xia, executive]

Thank you, Scott. We earned $0.67 a share for the second quarter. While this was a decrease of $0.25 quarter-over-quarter, we exceeded our Q4 guidance -- Q2 guidance range of $0.60 to $0.64 a share driven by favorable O&M and financing compared to guidance. As Scott indicated, we are on track to meet our 2024 earnings guidance. As I reminded you on the last couple of calls with the redesign changes at Peoples Gas, base revenues are now more concentrated in the first and fourth quarters when natural gas usage is the highest.

This earnings shift has impacted our second quarter and will impact our Q3 guidance, which I will discuss in a few minutes. Now let's look at our quarter-over-quarter variances. Our earnings package includes a comparison of second quarter results on Page 15. I'll walk through the significant drivers. Starting with our utility operations, earnings were $0.19 lower compared to the second quarter of 2023 as a result of higher O&M, fuel, depreciation and amortization, interest and other expenses.

A couple of drivers for the day-to-day O&M variants are worth noting. One, we experienced higher storm costs in the current quarter compared to Q2 last year. And two, we benefited in Q2 last year from a land sale at a retired plant site in Wisconsin. Looking ahead, I now expect overall day-to-day O&M in 2024 to be 2% to 3% higher compared to 2023. This is a 4% improvement compared to our initial expectation due to our continued O&M savings initiatives that we expect to realize late this year.

The impact of weather was flat for the quarter. Compared to normal conditions, we estimate that weather had a $0.02 negative impact for the second quarter in both 2023 and 2024. Our weather-normal electric sales in Wisconsin are relatively flat quarter-over-quarter and are overall in line with our forecast.

Looking at ATC, continued capital investments contributed an incremental $0.01 to Q2 earnings compared to 2023. And in our Energy Infrastructure segment, earnings improved $0.02 in the second quarter of 24% compared to the second quarter of '23, driven partially by higher production tax credit at WEC infrastructure. Finally, you'll see that earnings at our Corporate and Other segment decreased $0.09 as a result of the impact of tax timing and higher interest expense.

Now turning to guidance. For the third quarter, we are expecting a range of $0.68 to $0.70 per share. This accounts for July weather and assumes normal weather for the rest of the quarter. As I mentioned earlier, it also accounts for the shift in Illinois revenue recognition pattern. Our third quarter 2023 earnings were $1 a share. Once again, we are reaffirming our 2024 earnings guidance of $4.80 to $4.90 per share, assuming normal weather for the rest of the year.

Before I turn back to Scott, let me quickly remind you that we continue to utilize dividend reinvestment and employee benefit plans to issue common equity. Also, as we said before, we plan to set up an ATM program. Overall, we still project that our common equity issuance will be up to $200 million for 2024.

Post 2024, our equity issuances will be tied to our capital spending ratably with approximately $500 million expected per year in the current plan. We look forward to updating you in the fall as we refresh our capital and financing plan. With that, I'll turn it back to Scott.

[Scott Lauber, executive]

Thank you, Xia. Overall, we're on track and focused on providing value for our customers and our stockholders. Operator, we're ready now for the question-and-answer portion of the call.

[Operator]

[Operator Instructions] Our first question comes from Shahr Pourreza with Guggenheim Partners.

[Shahriar Pourreza, analyst]

Just starting off just on the sort of the perennial Microsoft opportunity that always seems to be asked. It's obviously becoming even more kind of topical now. Just remind us on what portion of Microsoft land acquisition and Build has kind of layered in your current plan? And the reason why I ask is that it's obviously now kind of public that they bought a bit more land. And I guess, when do you see this hit your plan more materially?

[Scott Lauber, executive]

Sure. So just as everyone update everyone, they announced spending $3.3 billion through 2024 through 2026, which is on that first about 315 acres that they purchased. And then last fall, they purchased another 1,030 acres. And of course, we pulled our capital plans together before that 1,000 acres were purchased.

And then just this morning, there's been a couple of announcements in the paper where they purchased another 173 acres in Southeastern Wisconsin. So we are currently in the process of working with Microsoft and developing our plans for our next 5-year plan that will roll out this fall in the development. But Currently, we really only have the energy and the capacity needs for that first 315 acres.

[Shahriar Pourreza, analyst]

Got it. Okay. That's perfect. So more to come there. And then just lastly, on the Delilah I solar project delay, it's roughly 6 months. I guess, can you just maybe a question for Xia is how to think about the offsets around the potential headwind there versus your kind of prior assumption?

[Liu Xia, executive]

Yes. We took that into consideration as we reaffirmed the annual guidance of $4.80 to $4.90. So as I mentioned, we continue to focus on O&M management and financing costs and tax and others. So we're confident that we can offset the downside from the delay.

[Shahriar Pourreza, analyst]

Appreciate it. And hopefully, Gale is somewhere tropical listening to this earnings call. Appreciate it.

[Scott Lauber, executive]

He probably is.

[Operator]

Our next question comes from the line of Julien Dumoulin-Smith with Jefferies.

[Julien Dumoulin-Smith, analyst]

Can you guys hear me okay?

[Scott Lauber, executive]

Yes, we can hear you fine. Welcome back, Julien.

[Julien Dumoulin-Smith, analyst]

Awesome. I appreciate the time, guys. It's a pleasure to chat here. So perhaps just to kick things off here, look, nicely done all around. In fact, I wanted to just focus on the Infrastructure segment. Obviously, you guys are planning well against those targets. I'm curious, as you think about the totality of the data center opportunities, what does that mean as you think about the opportunities that you're seeing on that side of the business?

And how do you think about the scope of that business in turn. You guys are obviously focused on contracted opportunities. By contrast, a lot of these potential customers would be in a similar manner focused on these kinds of counterparties. Curious if you think about that opportunity set on that front first?

[Scott Lauber, executive]

Sure. And we've been working with Microsoft on the needs for the area. And Wisconsin has got a lot of development opportunities, and we want to make sure we hit the capacity requirements we need for the area to support the growth, not just Microsoft, but all the other growth that we're seeing in the region. So that's why we've added the -- and you'll see more filings shortly on renewable projects in the next month or so that we're proposing to help beat the capacity and the energy needs in the region. So we think there's a lot of opportunity not only from generation of renewables, some capacity needs, some distribution needs also, but also American Transmission Company and investment in the transmission in the region. So we're factoring all of that in as we pull together our 5-year plan here.

[Liu Xia, executive]

And Julien, all those filings will be in the regulated area, as you know, in Wisconsin.

[Julien Dumoulin-Smith, analyst]

Yes, absolutely. Indeed, I know you're pursuing this on multiple fronts, absolutely. And then, [ team ], just maybe to tackle on the regulatory front, a couple of questions here. How do you think about this -- the PSC's denial in the AFUDC? Is there anything to read into that here on the preconstruction costs? And just -- I know it's a little bit nitpicky, but I'm just curious if there's anything to tease out of that in terms of direction strategically or financial?

[Scott Lauber, executive]

No, I don't think there's anything to read into that. We, of course, thought if we'd get approval on that. We'll wait and see what the final written order is, but when you look at the value we're providing our customers getting these orders in early, both from a cost savings standpoint and a time of delivery standpoint, there's really a lot of value for our customers.

So we're going to most likely ask for reconsideration, and refile that information with the additional information they are looking for. So stay tuned on that, but we think there's a lot of value. And I know the cost of the projects as the longer you wait, would continue to go up as everyone across the country is looking at adding generation.

[Julien Dumoulin-Smith, analyst]

Yes, that seems pretty transparent, as you say. And lastly, I'll just offer this. I traded in the dog, the Equity, traded them in and they got a little boy now. So I appreciate you guys looking forward all along.

[Scott Lauber, executive]

Congratulations. It's excellent to hear.

[Julien Dumoulin-Smith, analyst]

Absolutely. I'll see you soon, appreciate it.

[Scott Lauber, executive]

Sounds good.

[Operator]

Our next question comes from the line of Michael Sullivan with Wolfe Research.

[Michael Sullivan, analyst]

Just as we look forward to your kind of usual plan refresh with Q3 and CapEx has usually been biased higher. How should we think about incremental equity needs associated with that? Should it just be any incremental CapEx is financed consistent with your utility capital structures or any different way to think about it?

[Scott Lauber, executive]

No, I think you got it right in line. I mean, of course, we'll put everything together and look at it, refresh it again. But similar to what Xia has been talking about, we'll just look at the equity needs in line with the capital spend to be very excited about the long-term growth that we have available in the capital and the insights we have looking forward on additional capital.

[Michael Sullivan, analyst]

Okay. That makes sense. And then shifting over to Illinois. I just maybe hoping you could frame some bookings for potential outcomes of the still pending docket, namely the [ pipe ] program review. What's the range of outcomes there? And then also really, is there anything -- any loose ends still tied to the QIP Rider Reconciliations from prior years that could move numbers around at all?

[Scott Lauber, executive]

Sure. So let's look at both of them. So the QIP Riders from other years, right now, 2016, Rider has been queued up, I think, for a decision, hopefully, I would expect by the end of the year, decision we made in that. As you know, it's 2016 Rider so it's been a while. And then, of course, we have those other years under the QIP still to look at.

So remember, the requirements there is prudency. And we think we've been very prudent specifically after the Integrys acquisition, where we really took a look at the program and factored in a lot of information that we received from the audits of the Liberty audit and staff recommendations from that audit.

So those are still more to come on there. And then under the current S&P remember, the S&P in our last rate case, no one requested a pause in the program at all during the rate case. And now in looking at the testimony for the first set of testimony that came through, there is no one also recommending a pause in the case.

The range that our people are talking about that was in the testimony is from including the emergency work to working with the city of Chicago and emergency work. There, the city of Chicago, I think, said he should lift the pause for at least 2 years with a cap of about $245 million all the way to the other extreme, where I think staff recommending that you accelerate the program and actually get it done faster by 2030.

So there's quite a range in the middle there. But once again, none of the intervenors in the initial testimony they all said they should lift the pause and get some work done specifically related to the emergency work and working with the city of Chicago as they do their capital work.

[Michael Sullivan, analyst]

Okay. Yes. Just on that, I mean, I think as we've seen with some of the recent orders there, the ICC has come out worse than every single other intervener. So how do we just think about that risk in these dockets that you could get more of the same when it actually comes down in the final order?

[Scott Lauber, executive]

Yes. And we're going to have to wait and see what they say. I think when you look at it, from every intervenor group though, they are saying we need to work with the city of Chicago, including the city of Chicago to help them with their capital programs at everyone, even on the rehearing talked about the emergency work.

So on that low end, you're talking between $60 million and $100 million a year. So I don't think anyone is disputing that. And I understand what the commission is, but they're taking some time. And I think when you look at that last S&P case or the rehearing we asked for, they are concentrating on purely emergency and want us to wait for this order to look at the entire program.

So I wish I knew the answer, but that's why we're going through the case.

[Michael Sullivan, analyst]

No, that is super helpful context.

[Operator]

Our next question comes from the line of Durgesh Chopra with Evercore ISI.

[Durgesh Chopra, analyst]

Just on the Safety Modernization program review in Illinois, so obviously, you got a decision on the $145 million, you got $28 million. Can you just remind us what is baked into the plan, '25 and forward on that -- on the safety program?

[Scott Lauber, executive]

Sure. And I'll let Xia go through the details. But in general, we took about $800 million out. And as we look at our plan, we'll reevaluate it based on the testimony we're seeing here as we look at the next 5-year plan. But Xia, can you tell us what's in the current?

[Liu Xia, executive]

Yes, it's between $100 million to $120 million a year, Durgesh. And as Scott mentioned, we are in the process of refreshing the capital plan. So we're working with the team in Illinois to reflect the latest development from the commission's decision on the approval of the $28.5 million. So likely, that number could potentially come down over the next 5 years, but we're still working through the details right now.

[Durgesh Chopra, analyst]

Got it. That's very helpful. And just to be clear, first quarter of next year, we're going to get a decision on the spending relative to what you have in the plan, right? And I'm assuming you've asked for anywhere between $100 million to $120 million and then the commission is going to come back with a recommendation. Is that fair?

[Scott Lauber, executive]

Yes. We expect to hear a recommendation in the first quarter of 2025 from the commission.

[Durgesh Chopra, analyst]

Okay. And then just can I quickly follow up on the Delilah I. Any color you can share, I know you mentioned weather event. I'm just wondering if it's -- it could be more than 6 months. What caused it? Was it just equipment or something else? Any color you can share there?

[Scott Lauber, executive]

Sure. There was -- and remember, we haven't purchased it yet. We have a commitment to, but it was during construction and there was a hail event there. So there was some hail damage. We want to work with the developer as they are repairing it to make sure the field in full shape before we purchase it. We anticipate, based on all the latest discussions that it will be in by the end of the year. And we get weekly updates on the progress going there. And right now, that is still the plan to be in by the end of the year, assuming no other events happen.

[Durgesh Chopra, analyst]

I appreciate it.

[Operator]

Our next question comes from the line of Carly Davenport with Goldman Sachs.

[Carly Davenport, analyst]

Just wanted to ask a quick one on transmission and ATC. We've obviously seen the sizing of MISO tranche 2 moving higher here. So just curious how you're thinking about the opportunities around transmission there, both from a size and a timing perspective.

[Scott Lauber, executive]

Sure. I think, Tranche 2, from everything I've seen and heard is going to be larger than Tranche 1, and you've talked about that. And I think it will be probably about proportionately larger for ATC so a lot of good opportunities there, but that spending probably won't actually occur to like [ 2030-plus ], right? Because they're still working through Tranche 1.

I think the other big driver for American Transmission Company is going to be the economic development in the region. And putting in renewables in the system. So last year, Tranche 1 had an effect on our capital plan, but the biggest drivers were economic development and continuing renewables in Wisconsin. So I consider both of those to be additional drivers.

And remember, that Tranche 1 was in 2022 dollars. So as they go through and reprice all of that, when you think about inflation in the last several years, it's going to be -- it's going to most likely be bigger than the original amount.

[Operator]

Our next caller comes from the line of Andrew Weisel with Scotiabank.

[Andrew Weisel, analyst]

First question on Illinois. Just a question of timing. So you mentioned the uncertainty will last for about a year. At what point might you start to consider reallocating capital into the state? Could we see some CapEx go back into Illinois with the update in 3 months or would it be unlikely to show up until the update in the fall of 2025 when all of those dockets are wrapped up?

[Scott Lauber, executive]

Well, and we'll look at it. When you think about Illinois, we'll know more on the S&P program in the first quarter of next year. There's also -- there's the future of natural gas that's being looked at. And there's also an IRP process where we get stakeholders involved and our first filing will be in 2025.

So as you know, as we pull our capital plans together in the fall of this year, we're going to be pretty conservative as we'll look at that until we have a little more clarity. And when we think about it, there's just a lot of opportunities outside of Illinois for the additional capital and growth.

[Andrew Weisel, analyst]

That makes sense. Next question for Xia. If I heard you right on the O&M, you're not projecting it to be up 2% to 3%. Last quarter, you said up 3% to 5%. Originally, it was up 6% to 7%. So this is really good progress. Can you just give us a little bit of detail on those moving parts? How is it that the outlook is getting better and better? What are some examples?

[Liu Xia, executive]

Andrew, every manager in the business unit understands that we had a very mild first quarter. So we made it very clear that we need to be highly focused on O&M to offset the weather headwind in the first quarter. Benefits are lower, expected to be lower. We're also looking at all the angles about using contractors versus internal labor and it's across the board, I would say. So.

[Andrew Weisel, analyst]

Okay. Relative to the original budget, would you call most of these savings onetime thing or some of it going to be sustainable?

[Liu Xia, executive]

I think it's a combination of onetime initiatives but also continue to focus on driving efficiency across the board, which is also sustainable. It's a combination of both.

[Scott Lauber, executive]

And also, when you think about it having a warm first quarter, you don't have like the number of leaks as you would in the gas system. So some things are naturally less. So we've got a little bit less O&M on the gas system and we had some significant storms. So between the storms and the warmer weather, we've asked everyone across the business units to really control cost, and really kind of do some onetime things here.

On the other hand, we are making sure we are actively responding to storms because the storms have had bigger and actually continuing to work on our forestry program because of some of the damage some of the storms have had to the system. So we want to really balance customer reliability along with our savings.

[Andrew Weisel, analyst]

Got it. Then just one very picky one. Corporate and other, minus $0.06 for taxes this quarter. I think it was plus $0.09 in the first quarter. Will you just remind us what's the expectation for the full year, should that net out to 0 or something else?

[Liu Xia, executive]

It would be slightly positive. If you think about the reason why we had a large timing -- tax timing in the first quarter and the opposite in the second quarter. Part of that is driven by the earnings pattern shift in Illinois. So tax dollars follow the earnings pattern and two, we had a deferral -- I'm sorry, the delay of the Delilah. So part of that is reflected in the second quarter. But as we put Delilah online end of the year, we expect the tax dollars to follow.

[Operator]

Our next question comes from the line of Neil Kalton with Wells Fargo Securities.

[Neil Kalton, analyst]

Just on the Microsoft opportunity. A lot of acreage here. As we think about the CapEx refreshes going forward, at what point in time do you think you'll have clarity to start flowing some of that potential spend related to incremental opportunities into the plan? Is that like potentially '24, we could see some, or is this more like '25 or '26?

[Scott Lauber, executive]

Sure. And actually -- thanks, Neil. Thanks for the question. So we're actually -- between us and American Transmission Company, we're actually spending some money now on some of the substations and we have those orders in for some of the generation and it's to support the economic development across the board.

So it's going to be '24, '25 and then even more in '26 as we get those orders released at the commission and approval for that generation. We're also, in the next month or so, you'll see some filing on addition renewables that support the generation needs as we continue to add renewables to our portfolio. So that spending will be probably in that '26, '27 time frame.

[Neil Kalton, analyst]

Okay. So it's kind of like broadly overall, it's not just tied to the Microsoft thing, sort of overall, you have this need and kind of anticipate things happening so we start to kind of slow it in over time, and as a bit more clarity, more comes in. Is that right?

[Scott Lauber, executive]

Exactly. And remember, the growth that they provided us is really only through their capital plans through '26. I imagine once they get it in, they'll continue to ramp up. But we'll continue to work through it. And I think our plan is extremely long as we start adding 2029 to our 5-year plan.

[Operator]

Our next question comes from the line of Jeremy Tonet with JPMorgan.

[Jeremy Tonet, analyst]

I just want to come back to Wisconsin, if I could, with the recent commission vote here. Just wondering with the split vote, what you take from that, I guess, any thoughts on the direction of the commission at this point?

[Scott Lauber, executive]

No. I think it's kind of early to tell. I think they were just looking for some additional information, and I don't think they had the full information on, and he mentioned on the economics and the benefits of this, so this is maybe a communication between our staff and their staff, and we just got to understand it. So we'll get the order, we'll review it.

We'll pull the information together and ask for reconsideration I'm not overly concerned on this. And in the end, when you listen to their comments, if they didn't have all the information, they have to make the right decision for what they think is right, too.

So I appreciate them really evaluating each case. So I won't over read into this over too much.

[Jeremy Tonet, analyst]

Got it. That's helpful.

[Operator]

[Operator Instructions] Our next question comes from the line of Shahr Pourreza with Guggenheim Partners.

[Shahriar Pourreza, analyst]

Scott, I know we're getting closer to the back half of the year. Just on Point Beach PPA I know you've talked about sort of this coming potentially too ahead as we're getting to the year end. I guess how are sort of conversations going with NextEra and a new PPA or sort of another path forward there? Any updates?

[Scott Lauber, executive]

It's really -- we've had really good productive conversations with NextEra, but really nothing to report at this time. So still in discussions, but stay tuned to this, and we're working on it.

[Operator]

Our last question comes from the line of Paul Patterson with Glenrock Associates.

[Paul Patterson, analyst]

So just one question at this point. And that is the Illinois gas appeal at the Appellate Court in Illinois. Just any frame of timing when you think you might get a resolution to that?

[Scott Lauber, executive]

I apologize. It didn't come too clear on the future of gas?

[Paul Patterson, analyst]

No, no. So you guys appealed the orders in Illinois Appeal Court. And I was just wondering when you think a decision from that might be happening?

[Scott Lauber, executive]

I anticipate it's going to take a year or 2.

[Paul Patterson, analyst]

Okay. Long time. Yes, that's it for me.

[Scott Lauber, executive]

Thank you. Well, that' concludes our conference call for today. Thank you for participating. If you have any questions, feel free as always to call Beth Straka at [phone]. Thank you.