David John Lesar
President and Chief Executive Officer at CenterPoint Energy
Thank you, Phil. Good morning, and thank you for joining our second quarter 2021 earnings call. This call marks my one-year anniversary as CEO of CenterPoint, and I am excited to update everyone on our results this morning. We are now hitting the fast-paced organizational stride I want us to have, and the length of today's prepared remarks will be more in line with the template I want to follow going forward. Now while we are always keen to discuss our great future, we are planning to discuss our exciting longer-term strategy updates at our Analyst Day, which will take place on September 23 here in Houston. Though this is our second Analyst Day in less than 12 months, we feel that it is warranted as we are now well into our strategic transition and we want to use that forum to update our investors on our longer-term business plan, earnings capacity, financial metrics and the net zero emissions target that we will be sharing with you.
We are also excited for the opportunity to spend more time with you in our hometown here in Houston and to see you in person. Let me quickly remind you of just how far we have come in the last year. A year ago, CenterPoint was going through a strategic review at the direction of our Business Review and Evaluation Committee or BREC. The goal of the review was to optimize shareholder value and address specific shareholder concerns. Initially, in my role as Chairman of the BREC, and then later when I became CEO, it was crystal clear to me that while the company had a great asset base and talented employees, we have not unlocked all of our potential, and certainly had not taken full advantage of all of our inherent opportunities. Before the BREC process, CenterPoint was targeting modest EPS growth and had reduced capital spending in our regulated businesses. We had work to do to strengthen our regulatory relationships.
The company had previously announced a strategic review of Enable, but had not found an executable opportunity to actually reduce exposure to its midstream investments. This frustrated investors. Our O&M expenses were historically growing, and we needed a stronger balance sheet. We had minimal renewables opportunities on our radar screen, and we were in search of a permanent CFO. So yes, the list of challenges was long. I mentioned these not to revisit the adversities our investors and company we're experiencing, but to highlight for you the aggressive speed and approach used by our new team to attack and resolve the challenges and headwinds we faced. Let me quickly recap our progress. I substantially refreshed and diversified our Executive Committee, and we now have what I believe is a best-in-class management team. We announced an updated five-year strategy that prioritizes investment in our regulated businesses and boosted our planned capital spending by about 25% to $16 billion.
We instituted a 10% utility rate base CAGR, well above our peer group average of 8%. That rate base growth then supported an increased long-term utility EPS target growth rate of 6% to 8%, which is also above the consensus peer average of 6%. To efficiently fund our growth, while repairing our balance sheet, we announced the sale of our Arkansas and Oklahoma gas LDCs at a landmark earnings multiple of 2.5 times rate base. We were instrumental in the Enable and Energy Transfer merger which, once closed, will provide us a pathway to eliminate our exposure to midstream. And we announced a commitment to a 1% to 2% annual reduction in O&M over the five years to keep our customer rate growth manageable. We recently announced changes to our Board leadership to bring our governance structure in line with best practices and shareholder expectations, and we will be announcing a commitment to an industry-leading net zero carbon commitment at our Analyst Day. So in my view, we certainly have walked the talk, and through timely and aggressive actions overcome many of the headwinds we faced.
Now it's time for CenterPoint to switch gears. We are going to use the same aggressive approach and organizational speed to take advantage of the tailwinds we have today. Our strong execution, coupled with a privilege to serve some of the fastest-growing regions in our country, have created the foundation for CenterPoint to trade as one of the premium utilities in the U.S. Believe me, we are just getting started. Our six-month financial performance in 2021 has been strong. Today, we are raising our 2021 Utility EPS guidance range to $1.25 to $1.27. This 8% growth projection in '21 puts us at the high end of our 6% to 8% Utility EPS annual growth target. And as a reminder, this increase in guidance is after the dilution impact of the 18% increase in our share count that we experienced in 2020. When we compare our Utility EPS growth to analysts' long-term consensus growth for our peers, we are now in the top decile. And as you would expect, we are also reaffirming both our long-term 6% to 8% Utility EPS annual growth target and 10% rate base compound annual growth rate target.
This 10% rate base growth also exceeds the average 8% rate base growth of our peer group. For the second quarter of 2021, we reported strong results, including $0.28 of Utility EPS compared to $0.18 for the second quarter of 2020. The comparison to Q2 2020 is a bit noisy, and I believe essentially irrelevant as both quarters included a number of one-off items. Q2 2020 results also reflected the impact of COVID on our business. The bottom line for me is to focus on the reality that our Utility EPS is expected to grow 8% this year over last year, and then target 6% to 8% growth from there. Jason will go into more detail on the quarterly results a little later in this call. Our O&M continuous improvement programs have strengthened our results for the first six months of 2021. We are already on track to save over $40 million in total O&M costs this year alone, while maintaining our focus on safety. This is almost 3% of our annual O&M cost. However, when compared to last year's second quarter, our O&M costs are actually up a bit.
Again, this is just more noise that I don't worry about as last year's second quarter O&M costs were artificially depressed by the impact of COVID and disconnect moratoriums. We are still absolutely committed to our continuous improvement cost management efforts in our target of 1% to 2% annual reductions in O&M. In fact, as a result of our excellent 2021 results to date, we were in the fortunate place to be able to already make a management decision and begin pulling recurring O&M work forward from 2022 into the last six months of this year and still be able to hit the 8% Utility EPS growth for this year. This allows us the luxury of reducing near-term run rate O&M costs today, and immediately reinvesting them for the future long-term benefit of our customers and investors. We continue to see industry-leading organic customer growth rates. Despite COVID, our Houston service territory continues its 30-plus years of consistent growth.
Overall, we saw about 2% customer growth for electric and 1% for natural gas for the first six months of the year when compared to the prior year. The growth is supported by the highest level of new home starts in Houston since 2005. This continued and consistent growth reinforces the value of the fast-growing markets that we serve. This organic growth plays a key role in keeping our service costs reasonable for our customers. Moving to capital investments. We have invested approximately $1.5 billion for the first six months of this year and are still on track to invest approximately $3.4 billion for the full year 2021. More importantly, we now have better line of sight to additional capital investment opportunities beyond the five-year $16 billion investment plan we outlined on our Analyst Day. New Texas legislation provides more tools to transmission and distribution utilities to improve the resiliency of the electric grid and helps minimize the risk of prolonged outages and allows us to put all of this into rate base.
Some of these laws include the ability to lease and put into rate base, backup battery storage capacity for resiliency and to assist with restoring power. Next, the ability to lease and put into rate base emergency generation, which may include mobile generation capabilities. The ability to immediately procure, store and put into rate base long lead time items related to restoring power, and the allowing of economic versus resiliency justifications for new transmission projects. Based on initial analysis, these legislative changes provide support to increase our five-year capital investment plan by at least $500 million. Now this is on top of the $1 billion in reserve capital investment opportunities we previously identified during our last Analyst Day, but were not incorporated into that plan. Just as important, we will have the ability to efficiently fund $1.1 billion of these incremental opportunities. This is primarily due to the incremental proceeds expected from the sale of our gas LDCs and the execution of tax mitigation strategies, which Jason will discuss shortly as well as additional debt, assuming a roughly 50-50 cap structure.
Even better, all of this is before the additional proceeds we anticipate from the sale of Energy Transfer units given the significant appreciation in value since the Enable and Energy Transfer merger was announced. We are in the midst of quantifying what the whole new slate of organic opportunities will look like, and we'll be in a position to provide more detail at our Analyst Day in September. However, just as a teaser, we are confident that we will be in a position to announce an increase to our previous five-year investment plan, fund that increase with no incremental equity and execute on projects that will continue to improve the resiliency and safety of our systems for the benefit of our customers, a very nice trifecta. Now I will briefly touch on strategic initiatives, which we have announced over the recent months, including our gas LDC sale and our planned exit of our midstream investment. We know that investors are highly focused on the ultimate completion of these initiatives, and we believe we will achieve our timing expectations.
We continue to make progress on the gas LDC sale and still anticipate closing by the end of the year. We are working closely each day with Summit to secure regulatory approvals for the sale and to successfully transition that business. Turning to the Enable transaction. We still anticipate the transaction between Enable and Energy Transfer to close in the second half of the year. We remain absolutely focused on reducing and then eliminating our midstream exposure through a disciplined approach. Now to be clear, it would be very unlikely for either of these transactions to close prior to our September Analyst Day. And finally, to reiterate what we said when we announced the news of these two transactions in our last quarterly call, completing these transactions will not change our industry-leading 6% to 8% Utility EPS growth target or 10% rate base compound annual growth rate target.
Finally, I want to highlight the Natural Gas Innovation Act that recently passed in Minnesota. This is a landmark law that establishes a new state regulatory policy that creates additional opportunities for a natural gas utility to invest in innovative, clean energy resources and technologies, including renewable natural gas, green hydrogen and carbon capture and further demonstrates the forward-thinking mindset of the jurisdictions that we serve. This is a successful outcome for all stakeholders as we work to collectively achieve lower greenhouse gas emission reduction goals. With the approval from the Minnesota Public Utility Commission, a utility can invest up to 1.75% of our gross operating revenue in the state annually. This opportunity increases up to 4% of gross operating revenues by 2033. Under the new law, we expect to submit our first innovation plan to the PUC next year.
This law aligns with our steadfast commitment to environmental stewardship and more specifically, our carbon reduction goals. Our customers are asking for ways in which we can deliver not only safe and reliable, but cleaner electricity and gas, and we are working to achieve that. Across jurisdictions, we are collaborating to find ways to introduce more renewable fuels into our systems as we firm up our goal to achieve a net zero target. We look forward to unveiling this in September during our Analyst Day. For now, I'll just remind everyone how thrilled I am to be able to deliver these messages. As I've said, this marks one year for me as CEO, and a lot has changed. I look forward to the calls every quarter, so I can proudly share our team's accomplishments with you. I strongly believe the strategy we have laid out and the progress we have made so far more than demonstrates what a unique value proposition CenterPoint offers. With that, let me turn the call over to Jason.