威斯康辛能源 (WEC) 2017 Q1 法說會逐字稿

Good afternoon, and welcome to WEC Energy Group's conference call for first quarter 2017 results. This call is being recorded for rebroadcast. (Operator Instructions)

Before the conference call begins, I remind you 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 discussion, referenced earnings per share will be based on diluted earnings per share, unless otherwise noted.

After the presentation, the conference will be open to analysts for questions and answers. In conjunction with this call, a package of detailed financial information is posted at wecenergygroup.com. A replay will be available approximately 2 hours after the conclusion of this call.

And now it is now my pleasure to introduce Allen Leverett, President and Chief Executive Officer of WEC Energy Group.

Good afternoon, everyone. Thank you for joining us today as we review our results for the first quarter. I want to start by introducing the members of our team who are here with me today: Scott Lauber, our Chief Financial Officer; Jim Schubilske, our Treasurer; Susan Martin, General Counsel; Bill Guc, Controller; and finally, Beth Straka, Senior Vice President of Corporate Communications and Investor Relations.

Now as you saw this morning, we reported first quarter earnings per share of $1.12, which is ahead of our guidance. Effective cost controls, better-than-forecasted electric fuel recoveries and the decoupling mechanisms at our Illinois and Minnesota gas utilities helped to more than offset the very warm weather in the first quarter.

Scott will provide more detail in a moment. We are affirming our guidance for 2017 in the range of $3.06 per share to $3.12 per share. And this is in line with our expected long-term earnings per share growth of 5% to 7%.

Now I would like to update you on several developments on the regulatory front. On April 4, we filed the proposed settlement agreement with the Public Service Commission of Wisconsin. Under the terms of this settlement, the currently approved base rates for all of our Wisconsin utilities would be frozen for 2018 as well as 2019. This will make for a total of 4 years that base rates will be flat. This would essentially give our customers price certainty through 2019 and require us to continue to manage our costs aggressively. Under the proposed agreement, the current earnings sharing mechanisms would be extended through 2019 at Wisconsin Electric and Wisconsin Gas. In addition, a similar mechanism would be put in place in 2018 at Wisconsin Public Service for 2 years. Similar to Wisconsin Electric and Wisconsin Gas, this mechanism would provide for equal sharing between shareholders and customers of the first 50 basis points of earnings above Wisconsin Public Service's allowed return on equity of 10%. All earnings above 10.5% will go back to benefit customers.

We have the support of a broad cross-section of our industrial and commercial customers. Currently, 24 customers, including 3 of our largest customers, have signed the settlement agreement. We've also briefed legislative leaders and they have been supportive. As part of the agreement, we are looking to expand and make permanent some electric pricing options for our large electric customers. These options have helped many of our customers reduce their energy costs, grow their businesses and create more than 2,000 jobs.

These changes will allow us to retain an effective economic development tool and avoid a price increase for customers whose current pricing options would expire under the current terms. The commission formally began consideration of the proposed settlement on April 20. Now settlements are uncommon in Wisconsin but at this point, I expect the process to move expeditiously.

I also want to note that our proposed $230 million investment in natural gas storage for our Wisconsin utilities is progressing through the regulatory process. In March, the Wisconsin Commission agreed to consider the merits of our petition for declaratory ruling on the reasonableness and prudence of this investment. Under the schedule set by the administrative law judge, the matter will be ready for the commission to consider and decide on June 1.

Our acquisition of Bluewater Natural Gas Holding will provide approximately 1/3 of the current storage needs of our Wisconsin natural gas distribution companies. Bluewater will have a long-term service agreement with each of our 3 natural gas distribution companies in Wisconsin.

The earnings from this investment, as well as its risk profile, are expected to be the same as if the storage was owned by our local gas distribution companies. I believe this investment will bring very meaningful benefits to our customers. In Michigan, our proceeding to obtain regulatory approval for the construction of new gas-fired generation in the Upper Peninsula is also progressing well. We are on track to conclude that process within the 270-day statutory deadline, which ends on October 27. No substantive issues or concerns have been raised and we anticipate receiving Michigan Commission approval for the project later this year. In addition, we have received all local approvals needed to accommodate the project if approved by the Michigan Commission.

As you may recall, our last several major proceedings in Michigan have resulted in settlements, which the commission approved. We would welcome a similar outcome in this case. Turning now to Illinois. We continue to make progress on the Peoples Gas system modernization program. I expect we will invest approximately $300 million this year in this program, all of which I expect will make our gas distribution system in Chicago safer, more reliable and less expensive to maintain. Although the program continues as planned, the Illinois Commission is still completing its review of the preferred approach to the program. The commission has requested that the record and the proceeding be developed further before making a final decision, and I expect an order in the fourth quarter.

Finally, on the federal regulatory front, you will recall that on September 28, 2016, FERC affirmed a prior ALJ recommendation of a 10.32% base return on equity in response to the first MISO return on equity complaint.

ATC qualifies for a 50 basis point adder for being a member of MISO, thus, increasing its return on equity to 10.82%. We are currently recognizing income at this 10.82% level. However, in the second MISO return on equity complaint case, the ALJ recommended a base return on equity of 9.7%. Again, ATC qualifies for the 50 basis point adder, which will bring its return on equity to 10.2%. When the final order is received, we anticipate transitioning to the 10.2% return on equity. We have factored this lower return into our long-term financial plan.

We are monitoring the appeals of the New England cases for developments that could impact ATC's allowed returns.

Now just a reminder on our dividend, on January 19, our board declared a quarterly cash dividend of $0.52 per share, which is an increase of $0.025 or 5.1% over the previous quarterly dividend level. This represents a compound annual growth rate of 6.6% from the 2015 quarter level. Our annualized dividend level stands at $2.08 per share.

We continue to target a payout ratio of 65% to 70% of earnings. Given that we arrive in this range now, I expect our dividend growth will continue to be in line with our earnings per share growth.

Now with some additional details on our first quarter results and financial outlook, here's Scott Lauber, who's our Chief Financial Officer.

Thank you, Allen. Our 2017 first quarter earnings grew to $1.12 per share from $1.09 per share in the first quarter of 2016. Our earnings were driven by effective cost control that more than offset the warmer-than-normal weather. The weather impact in the quarter is estimated to be approximately $0.04 a share less compared to normal weather. As you recall, our guidance in the first quarter was $1.02 to $1.06 per share. Our guidance already reflected about a $0.02 per share decrease related to the warm January weather.

The continued warm weather in February and normal weather in March was offset by better-than-expected electric fuel recoveries in the quarter due to lower natural gas prices. With the warmer weather, we saw less maintenance in our field operations that allowed us to allocate resources to capital work. In addition, we aggressively managed costs with the continuation of warmer weather. The earnings packet placed on our website this morning includes a comparison of first quarter 2017 and first quarter 2016 results. I'll first focus on operating income by segment and then discuss other income, interest expense and income taxes.

Referring to Page 6 of the earnings packet, our consolidated operating income for the first quarter of 2017 was $617.3 million as compared to $589.3 million in the first quarter of 2016, an increase of $28 million.

Starting with the Wisconsin segment, operating income in the first quarter increased $4.8 million from the first quarter of 2016. On the favorable side, operations and maintenance expense was $28.4 million lower. This was mostly offset by the mild winter temperatures. In the first quarter of 2017, our Illinois segment recognized an operating increase of $18.4 million compared to the first quarter of 2016. The increase was primarily driven by reduced operations and maintenance expense, and to a lesser extent, continued investment in the gas system modernization program.

The mild weather did not have as significant of an impact on our Illinois margins due to decoupling in the jurisdiction. Operating income in our Other States segment improved $1.6 million, due in part to lower operations and maintenance expense resulting from cost control measures and decoupling at our Minnesota operations.

Operating income at the We Power segment was up $4.1 million when compared to the first quarter of 2016. This increase reflects the additional investment at our Power the Future plant since the first quarter of 2016. The operating loss at our corporate and other segment increased $900,000.

Taking the changes of these segments together, we arrived at $28 million increase in operating income.

During the first quarter of 2017, earnings from our equity investment in American Transmission Company totaled $41.9 million, an increase of $3.4 million compared to the first quarter of last year. Other income net decreased by $17 million quarter-over-quarter. Recall that in the first quarter of 2016, we repurchased approximately $155 million of Integrys' 6.11% junior subordinated notes at a discount, which contributed approximately $0.04 per share.

Interest expense increased $3.8 million quarter-over-quarter. This was primarily due to lower capitalized interest and higher short-term rates.

Our consolidated income tax is relatively flat compared to last year. As a reminder, we expect our effective income tax rate to be between 37% and 38% for 2017. Net cash provided by operating activities increased $18.7 million for the quarter ended March 31, 2017. A reduction in working capital was partially offset by $100 million contribution to the pension plan in January 2017.

Looking at the cash flow statement on Page 5 of the earnings package. Our capital expenditures totaled $329.7 million in the first quarter, a $17.7 million increase compared to the first quarter of 2016 as we continue to invest in our core infrastructure.

Our adjusted debt-to-capital ratio was 50.8% at the end of March, a decrease from the 51.9% adjusted debt-to-capital ratio at the end of last year. Our calculation continues to treat half of the WEC Energy Group 2007 Series A Junior Subordinated Notes as common equity. We are using cash to satisfy any shares required for our 401(k) plans, options and other programs. Going forward, we do not expect to issue any additional shares.

We also paid $164.1 million in common dividends during the first quarter of 2017, an increase of $7.9 million over the first quarter of last year. Higher dividends were driven by the 5.1% increase in the dividend rate compared to the first quarter of 2016.

Moving to sales. We see continued customer growth across our system. At the end of March, our utilities were serving approximately 8,000 more electric and 23,000 more natural gas customers than they did the same time a year ago.

Sales volume quarter-over-quarter are shown on the earnings package on Page 8. Weather-normalized sales are adjusted back to factor out the effects of leap year in 2016. Overall, our normalized results for gas and electric sales in 2017 were slightly above our expectations.

Turning now to our earnings forecasts. We are affirming our 2017 earnings guidance of $3.06 a share to $3.12 a share. This projection assumes normal weather for the remainder of the year. We are off to a strong start, however, it is early in the year and we have a lot of weather ahead of us.

Finally, we'd like to address the second quarter earnings per share guidance. We expect our second quarter 2017 earnings per share to be in the range of $0.56 to $0.60. That assumes normal weather for the rest of the quarter. Again, the second quarter earnings guidance is $0.56 to $0.60 per share.

With that, I'll turn things back to Allen.

Thank you, Scott. So we'll now begin the question-and-answer period. Operator?

(Operator Instructions) Your first question comes from the line of Greg Gordon with Evercore ISI.

A couple of questions. So the quantum of O&M reduction you saw in the quarter, was that a function of ratcheting down O&M in the quarter relative to understanding where your margin was coming in? And should we -- when we look at Q2 versus Q2 O&M, our balance of the year O&M versus balance of the year O&M, how should we think about those numbers going forward? I mean, clearly, there would be a huge assumption to use the current base of O&M as a run rate?

So Greg, I think, as we look at our plan for 2017, our plan was to bring O&M down 3% in 2017 relative to the actual run rate in 2016. And that's still our plan. But given how extraordinarily warm it was in January and February, we used -- what I talked about before, our flex down process to basically flex down spending to preserve our margins in the face of the very, very warm weather. So I think 3% down year-over-year in O&M is still a good assumption, sort of on a weather-normalized basis, so to speak, Greg.

Okay. So if your Q2 through Q4 numbers were to come in and theoretically on the plan, the O&M numbers quarter-over-quarter for the balance of the year would be in that direction and magnitude?

Yes. The 3%, that's right.

Okay, got you. Moving down to the We Power line, you saw a $4.1 million improvement in operating income from a higher capital investment. How should we think about how those numbers are going to trend over the balance of the year? Is that going to be at a sort of a $16 million improved operating income run rate because of higher capital? Or was that for some reason, lumpy in the quarter?

It was a little lumpy as we put those projects in, in the coal storage and fuel blending. So overall, though, that should continue through the year.

Okay. So not at a $4 million run rate but there will be incremental earnings in each subsequent quarter that approach that amount?

Yes, it'll be an increase in each of the future quarters compared to the prior year. Because we just put it in service in January of this year, at the end of last year.

Can you remind me what the total capital investment was because you earned sort of a pretty consistent return on investment?

It's just under $60 million.

$60 million. Okay.

Your next question comes from the line of Shahriar Pourreza of Guggenheim Partners.

Is there an update on the Arizona co-op situation and as well as Alaska? Is there any updates on why those opportunities there right now?

Yes, so I am sure those are, just maybe a context for others on the call, those were areas that American Transmission Company was targeting for development, kind of outside their traditional footprint. In Arizona, they are looking at the feasibility of the number of transmission projects. My expectation is later this year, can't really give you a specific date at this point, but they're actively looking at, I think, 4 different projects and they would be prepared to propose some of those later this year in Arizona. And in Alaska, I don't have any update for you at this point in Alaska.

Okay, got it. And just on the Arizona, is that incremental to what you have as a placeholder? Or would that be supportive of that?

It will be the latter, Shar. So we had $300 million of capital for what we call outside the footprint in the 5-year plan. So whatever they propose there would be supportive of that $300 million.

Okay. Helpful. And then just lastly, I know obviously with your carbon reduction goals, you've talked about additional coal retirements. Can you sort of just -- is there an update on how you're thinking about additional retirements? And what the read through could be for additional O&M savings as well as incremental gas needs?

Well, there's nothing, at least in terms of additional requirements other than the retirement of Presque Isle we've talked about, which was about the 360-megawatt coal unit. We've also talked about the retirement of Pulliam, which is a coal unit in Green Bay, in the WPS service territory. So other than those 2 retirements, I don't have anything additional to announce. I would tell you though, Shar, as you look at kind of our carbon reduction goals and maybe describe it in terms of annual tons of reduction, so what we ultimately would like to see is about a $14 million annual run rate reduction in CO2. And based on the things that we've already announced, so the Pulliam and Presque Isle and the things that we've done at our gas plants, you could get roughly 7 out of that 14. So based on what we've already announced, you can get 7 out of that 14 and those actions, not only would they reduce carbon, they would also be a net savings to customers.

Your next question comes from the line of Caroline Bone with Deutsche Bank.

I was just wondering if you could talk about something you discussed last quarter. On the call, in response to a question, you talked about your capital plans supporting growth in the lower half or towards the low end of the 5% to 7% range. And I was just wondering if you could remind us if there's a time frame associated with this growth target? Or if it's more indefinite?

Yes, so what we've said, and this is something that I've mentioned at least on a couple of calls before this one, didn't go into as much detail on it on this call. But we look at the base of earnings in 2015 of $2.72 per share. And Caroline, basically, that $2.72, it effectively -- it's like a pro forma number for the company as if we had never done the Integrys acquisition, okay? So we set that base of earnings in $2.72 in 2015. And what we've said as a long-term matter is sort of think of an envelope where the bottom end of the envelope is a 5% compound annual growth of $2.72 and then 7% as the upper end of the envelope, what we've said as a long-term matter, we expect our actual earnings, the trajectory to be in that envelope. That's really how we've laid out our goal.

So it's more of an indefinite kind of through 2020 and beyond type of time frame than just through 2019?

I would characterize it as long-term, I'm not sure anything is indefinite, but it's certainly long-term.

Okay. And then just kind of on another note, I was just wondering if you could comment on to what extent earnings sharing mechanisms impacted the Q1 result.

Scott, you want to address that?

It did not affect the Q1 results at all.

You said it did not?

It did not.

Your next question comes from the line of Michael Lapides with Goldman Sachs.

So when we think about the rest of the year for O&M, because you were down far more than 3% in the first quarter, should we assume a lower decline rate for the rest of the year? Or simply that the remaining quarters, you kind of stay near that 3% range so you may actually kind of beat your expectations on O&M management just to do a really good start to the year?

Yes, my expectation at this point, Michael, and of course, I can't sit here today and say what weather it's going to be for the rest of the year but if you have sort of a normal weather for the rest of the year, I still think for the year, we would be down 3% on O&M. We would stick pretty close to that plan, if we had normal weather. If, for some reason, it's warmer or cooler than normal, well, I expect we'd adjust.

Okay. Can I ask just a very basic question? When weather impacts O&M, what are the things that change? Like when you're sitting around and it's February and we're not having winter, what is it that actually changes versus what you were thinking you are going to do on December 31, heading into the year, versus what you actually do?

Yes, so when you think about the weather, there's a couple of things. When you have consecutive warm weather, like January was one of the warmest and February was the warmest, we're actually able to just reduce some O&M expenses because the actual number of leaks and callouts and where the frost line is really -- naturally reduces some O&M. And then when we see that warm weather, everyone in the company, like Allen talked about, we have our flex list and we react to that and make sure that we can control our costs to offset the weather decline.

Okay. CapEx in the quarter. So if I think about your full year guidance for CapEx of just over $2.1 billion and yet CapEx in the quarter was south of $350 million and you normally wouldn't do a ton on the electric side in the middle of summer, should we assume this is very back-end-loaded this year? Or is there something where CapEx could be lower this year and bigger in future years?

Well, it's the first quarter so we still have the winter season, so it's not the largest construction for us unless we're finishing up a prior year project. So the first quarter isn't the biggest construction. And remember, some of the construction we have and when we talk about including the storage field that we're looking at purchasing, that's in the back half of the year so it's a little bit back-end loaded.

Got it. Okay. And then finally, I know you've got the settlement outstanding and I just want to make sure I understand, what is the commission's process for reviewing and potentially approving the settlement? And what are the roles that the interveners who did not sign the settlement, what do they play in this process?

Okay, well let me -- maybe just as a background for everybody, settlements, Michael, are quite uncommon in Wisconsin Commission history. So as a result, there is no prescribed settlement process in Wisconsin. In some other states, you have some statutorily prescribed process for a settlement, we really don't have that here. So each settlement can be approached may be in a somewhat different fashion. Sitting here today, I talked about the fact that the PSCW gave official notice of the proposed settlement on April 20. They indicated that they would soon set a date for a prehearing conference and then if things work the way they usually work, Michael, they'd solicit comments after they do that prehearing conference. And then they'll have to decide what process they want to use after that. But I would just reiterate, I mean, there's very broad customer support for the settlement, so the 24 industrial customers that I talked about including the 3 largest customers that we have. Now in terms of the role that other intervenors would have, at this point, hard for me to say. I mean, I would assume they'd be like any other party in a contested proceeding so they wouldn't be any different than how they typically would be in a contested proceeding. That would be my expectation at least.

Yes, I was just thinking through it because 2 of the large groups that are normally part of the process weren't signatory's to your stipulations so just trying to think through how they factor in all of this.

Right. Well, one of those, and I think you're referring to the 2 permanent intervener groups. One of those permanent intervener groups is what I think of as a trade association. Many of whose members actually individually supported the settlement. And then you've got another permanent intervener group called CUB which is not really a trade association but I think their [remit] is to represent residential customers, largely.

Your next question comes from the line of Paul Ridzon with KeyBanc.

Any update on the legislation around Power the Future? Where does that stand?

Right. Well I think, where it stands, it was referred to an assembly committee which, of course, is the lower house of the legislature. Then it was also referred to a Senate committee. At this point, there've been no hearings that had been scheduled at a committee level, so that's where it stands, Paul.

When does the legislative session end?

Paul, I believe they're in session until at least the end of May. Of course, this is a budget year so I'm not sure they can go home until they have a budget. But I think it's the end of May, Paul, but we can get you a more precise answer offline.

Is the budget discussion contentious?

I'm not sure I would call it any more or less contentious than Wisconsin budgets have been. Unlike other states, they consistently have a budget.

(Operator Instructions) Your next question comes from the line of Dan Jenkins with State of Wisconsin Investment Board.

I guess my first question kind of relates to the energy sales shown on Pages 8 and the bottom of Page 7. It looks like the 2017 normalized versus 2016 normalized, you had a nice pickup in the small commercial, industrial area...

Yes, that's correct.

Particularly in Wisconsin and then on the gas side. So I'm just wondering, is that something that we should anticipate is going to continue? Can you give us a little more color on what's going on there?

Sure. Yes, the small class in our electric sales on a weather-normalized basis, we calculated to be up 1.4%. Now, like we talked about the quarter, it was extremely warm this quarter so normalization in this sector, in all sectors, is pretty tricky, especially when you're talking commercial, there's a variety of commercial operations there. So the class has always been a little stronger for us. In our long-term forecasts, we have about 0.5% here for next year, for this coming year. So it was a good quarter but once again it was only 1 quarter. I'd still look at overall being about 0.5% in that small C&I class.

Okay. Then you also mentioned you had $100 million pension contribution in the first quarter. I'm just wondering if you could just update us on so where kind of you are on pension funding and should that like satisfy your needs for the next few years. Or how should we think about that payment?

Yes. So we evaluate the pension, as you know, every year, and monitor it intensely during the year. It gives us -- to be about fully funded, about 100% on a GAAP basis. So we don't see any contributions in the near term but, of course, we'll continue to evaluate.

Okay. And then I just wonder if you can update us on the debt financing plans in terms of timing.

Sure, we have a couple debt financing plans this year. First, we are looking at putting debt versus intercompany debt found at our Minnesota and Michigan subs. So we're looking at debt financing. So that is one item that we'll be doing. Another financing, and that will probably each be around $100 million each. So those financings we'll be working on this year. We will also be looking at continued some debt at our gas utility, Peoples Gas, with the continued construction program so that will be happening this year also. Of course, when we look at -- with the purchase of Bluewater, there's potential financing with that also. And then we continue to monitor all of the large electric utilities, Wisconsin Electric, Wisconsin Pub Service, potentially we'll have to monitor that as we go through the year.

Your next question comes from the line of Steve Fleishman with Wolfe Research.

So just on the rate settlement filing, so you mentioned the commission is going to be setting a prehearing, they have still not set the date on that, yet?

Steve, to my knowledge, at this point, they have not set a date for the prehearing conference.

Okay. And how long can this process go before you need to kind of make your normal rate filing?

Well, in my view right now, Steve, would be that I'm going to wait for the commission to take some definitive action. Either a definitive action that they approve the settlement or a definitive action that they reject the settlement. And I think, financially, we're just fine waiting for that definitive answer. So we'll wait. As I was saying in the prepared comments, I do think they'll act expeditiously but there's just no prescribed process.

Okay. And then just, I know -- just in terms of like -- someone asked about other parties, just I assume you probably talk to other parties, just do you expect some of them to oppose the settlement? Or you've just got to wait and see what happens?

I think we really have to wait and see what happens. At this point, the interventions, they've raised their hand and intervened but without even having had the prehearing conference, it's hard to know what their positions are at this point.

Okay. That makes sense. And then, I guess, just any update, you may have given this and I missed it, just on the Illinois gas infrastructure investment program.

Yes, and I did touch on it just briefly. But maybe just as kind of a review and summary, my expectations sitting here today is that we'll deploy about $300 million worth of capital for the entire year over the course of the entire year on the S&P program. The Illinois Commission has asked for, going back to the workshop proceedings, remember that they had last year, they've asked for some additional information. I believe our deadline for filing is the middle part of May for that additional information and additional briefs. And they've indicated that they would decide this year. So that's where we are with that process. But in the interim, we're continuing with the program as we laid out in our 3-year plan to them.

Your next question comes from the line of Leslie with JPMorgan.

You said, for the quarter, that one of the things that had you come in above your guidance was better-than-expected fuel recoveries. Could you just walk through how that happened?

Right, on the electric side. Scott, you want to talk Leslie through that?

Sure. So going into the quarter, we were anticipating that gas prices were a little bit higher. They actually were a little bit higher and then with the continued -- so we thought with the recoveries would be a little bit less, about $0.02 worth. And then as the warm weather continued, our natural gas prices went down, and in fact, our fuel recovery at both of the utilities came in slightly better than we anticipated just because of the price of electricity on the market and running our plants with the natural gas.

So does that get trued up over the course of the year?

We have a fuel band at both of the utilities. So that's the plus or minus 2%. So our outlook at this point, Leslie, would be that, given normal weather, we would expect to be about fully recovered at each of the utilities, again, for electric fuel.

But not ahead of plan?

No, at this point, I wouldn't project to be ahead of plan -- or ahead of fully recovered.

Right, right, right. And then just on the C&I side, frac sand, fracking is starting to pick up again. Have you seen -- you'd done some gas infrastructure in Western Wisconsin in 2014, '15? I'm just wondering if you're sort of seeing any uptick in activity in that regard.

Yes, we're starting in the first quarter. When you look at first quarter 2017 versus 2016, we are seeing a slight uptick in that frac sanding sector. So it's nice growth, but remember, frac sanding is, I think when you look at our sales of the gas side in Wisconsin, excluding residential, it's between 1.5% and 2% of sales. So it's a nice grouping and we did see a little nice uptick there.

So just more broadly than on C&I on the electric side, your mines, the mining activity was down pretty heavily, was that the iron ore mines?

Yes. That is correct. So those are the iron ore mines. That's why we looked at it, with or without those.

Right, okay. And just broadly speaking, the rest of the C&I business on the electric side across your jurisdictions is roughly flat on a weather-normal basis?

Yes. The large C&I, that has been relatively flat. Just, once again, the economy is moving a little bit but those sales are very -- have been very flat the last several months, quarters.

Your next question is a follow-up from the line of Paul Ridzon with KeyBanc.

The iron ore mines, are these the mines that are going to eventually close and they're just kind of ramping down here? Which mines are these?

Yes, so these are the 2 large mines in the UP of Michigan, so these are the Cliffs Resources mines. So Paul, and I only mix up the names but one of the mines is roughly 1/3 of the usage up there. And that's the one that you're remembering is going down into shutdown. The other mine, which is about 2/3, which is the Tilden mine, that's the larger of the 2. And that's the one at least that Cliffs has indicated are going to run for the long term.

And is it the impact we're seeing now is the one that's permanently closing?

Correct. I think that actually was closing last fall. It was the early shutdown, I think it's actually closed now.

And did Tilden ever scale back operations? Are they going to ramp them back up, now that steel's recovered? What's the dynamic there?

Well, I think, I didn't listen to their call, their earnings call. My understanding at least is if they see an uptick in demand, because they sell to steel mills, obviously, is if they've see an uptick up there, they would be poised to increase production. But otherwise, I think they're going to be pretty flat, would be my expectation.

We have no additional questions at this time. I'd like to turn the call back over to Allen Leverett for closing remarks.

Thank you, operator. Well, thank you all for joining us today. If you have any more questions, please contact Beth Straka. Her direct number is area code (414) 221-4639. Thank you.

Thank you. This concludes today's conference call. You may now disconnect.