Operator: Our next question today is from the line of Andrew Weisel of Scotiabank. Andrew, your line is open.
Andrew Weisel: Hey, good morning, everybody.
Garrick Rochow: Hi, Andrew.
Andrew Weisel: My first question is about supply chain. I know solar has been in focus. I think you just alluded to that a moment ago but how about the availability of grid level equipment like transformers or switch gears? And if you do see shortages is there a risk that might slow down your planned pace of spending?
Garrick Rochow: Well, first of all, I appreciate your analysis. You did a nice write-up on that. It was about a week ago, two weeks ago. So some good work of what’s going on in the industry. And so we’re highly focused on the supply chain. I’ll give it over here to Rejji a minute. He has responsibility for that area. They’ve done a lot of good work to be able to secure that line of sight. And so when I think about the projects we have underway, particularly those that are in mid-development. The team has done a much better job to make sure we have panels, transformers and the like so we can do that build. Now, there’s longer lead times, most definitely. And so you’ve got to be prepared and you’ve got to be planned in that but the team has just done a phenomenal job. But Rejji, your team is doing great work, maybe add to it.
Rejji Hayes: Yes. Thanks, Garrick. And I appreciate the question Andrew. So Garrick is exactly right. We have really been attacking challenges in supply chain for the last 18 months or so. And what we’ve done to really make sure that we’ve got sufficient supply, not just on the solar side but really across the business is we’ve been very focused on diversifying our vendor sources. And so that has been a very concerted effort again over the last 12 to 18 months. We’ve also done what we would describe as value engineering and looking at other alternatives, particularly in the context of transformers that could be compatible with our electric grid. So we historically used a standard of grain-oriented steel. We’re now using amorphous core and introducing that into our system.
We’ve also been very successful in refurbishing damage transformers and using a variety of third parties to help us with that. And so all of those countermeasures, have really led to us getting to a sufficient level of supply across our most highly used transformers. Now, there’s still issues in the supply chain across a variety of materials and we’re spending a lot of time on hypercare. But for those highest velocity materials, we feel like we’re in really good shape at this point. So I really appreciate the question.
Garrick Rochow: I just got to know something. Just a Rejji’s dexterity great CFO, and when you can talk about amorphous core, that’s really awesome to see.
Andrew Weisel: One other question for the team here. Can you give us any updates on the legislative environment in Michigan, talking about the fact that Democrats have full control? So is there any talk of potential updates either a big change to the 2016 law or maybe more likely incremental marginal support for clean energy. Are you hearing any potential around that?
Garrick Rochow: So I’ll start with the big picture and the Governor’s first term, she came out with her healthy climate plan. And that was a nice plan, supportive of the plan very pragmatic and balances clean energy, reliability of supply and affordability. And the Governor came out in August and said — now in her second term and came out and said, hey, I want to make a portion of this into law. And that’s been in the Senate right now. It started out in committee. And so there are a number of bills that were put together on that as you imagine in Committee there’s a discussion and we’re actively engaged in that discussion. And so that’s moved on now to the full Senate for consideration still has not made it to the House. And so there’s important work going on to define what that looks like.
But I’ll just, again, stand back and look at the bigger picture of this, much like 2008, much like 2016, this legislative body as well as the Public Service Commission continues to provide a constructive approach to the future. And we see a constructive out of these bills, if they even move forward and if they even get agreement we see a path of constructive regulation going forward and a constructive policy going forward. And so — but that’s currently where it stands, Andrew.
Andrew Weisel: Okay. We’ll stay tune. Thank you very much.
Garrick Rochow: Yes. Thank you.
Operator: Our next question today is from the line of Durgesh Chopra of Evercore ISI. Durgesh, please go ahead.
Garrick Rochow: Good morning, Durgesh.
Durgesh Chopra: Hey, team. Thanks. Good morning, Garrick. Thanks for taking my question. I had a few questions. You’ve already answered them. Just — maybe just on the O&M savings. Obviously, you’ve done a great job here offsetting weather and storms, it’s a big number like $0.60 $0.70 year-to-date combined impact from weather and storms. What — like is there a way for you to quantify for us what these O&M savings that you’re using? You’re offsetting weather and storms with this year. How much of that can be carried forward to 2024 and beyond? I’m just looking for what level of these savings are sustainable, or are these truly one-time in nature?
Rejji Hayes: Yes. Durgesh, this is Rejji. I appreciate the question. And I appreciate also the compliments. We are really proud of the work done for the first three quarters of the year offsetting the headwinds we’ve seen on the weather side both in terms of mild weather as well as the storm activity and the organization has really rallied around the cause. Obviously, when it comes to cost savings, we never discriminate when it comes to operational versus non-operational and we’ve been quite expansive in our approach. To get to the spirit of your question, I think it’s difficult to quantify to what degree the savings will be sustainable. And I do think a decent portion will be because when you think about the separation plan that I mentioned we reduced our salaried workforce by roughly 10% and we do not assume that we will go and re-staff that over the next year or two or even next several years.
And so, we’ll see sustainable savings from that and that will be a significant portion. Some of the other bigger opportunities. So in Q2 the tender financing obviously that is a one-timer and so we wouldn’t count on that being sustained. But there are other opportunities we’ve executed on. We’ve been really disciplined and rationalizing our contractor base and some of the consultants we’re working with again, we’d like to think we can sustain that. And as I mentioned in my prepared remarks, we accelerated some longer-term IT projects and we think we’ll see productivity from those actions for some time now. So I’d say it’s tough to really ascribe a specific percentage, but I’d say decent portion should be sustained going into next year and will provide some tailwinds when you think about not just our guidance next year but also affordability because we always look forward to passing on those savings on the customers.
And the last thing I’ll note is on the financing side, we’ve seen quite a few efficiencies with the convert where we pulled ahead some costs that we were going to have or some financing needs we had in 2024. That’s going to have a sustained level of savings and the operating company financings we’ve done those in a really efficient fashion at a weighted average coupon of 4.8% below plan. And so we’ll see sustained savings from that. So I’d say on the operational and non-operational side you’ve got some one-timers and then some of that will be sustained but I can’t give you a specific percentage at this point.
