Brian Savoy
Executive Vice President and Chief Financial Officer at Duke Energy
Thanks, Lynn, and good morning, everyone.
Turning to Slide 7, 2022 marked a year of solid growth for our utilities. We achieved full year adjusted earnings per share of $5.27, above the midpoint of our updated guidance range. These adjusted results exclude our Commercial Renewables business, which was moved to discontinued operations in the fourth quarter. The classification of these assets as held for sale triggered a valuation adjustment of $1.3 billion, which is reflected in discontinued operations and GAAP reported results. This adjustment relates to the combined utility scale and distributed generation businesses and was within our planning range for the sales processes.
Moving to our adjusted results for the year. In the Electric segment, earnings per share increased by $0.36 in 2022, primarily due to higher volumes, favorable weather and rate increases in North Carolina and Florida. Partially offsetting these were higher interest expense and storm costs. Absent storms, O&M was flat to prior year, which was in line with our guidance. In the Gas segment, earnings per share increased $0.07 and was primarily due to the Piedmont, North Carolina rate case and riders. In the Other segment, unfavorable returns on investments and higher interest expense drove results lower by $0.15.
Turning to Slide 8. We are reaffirming our $5.55 to $5.75 guidance range for 2023 with the midpoint of $5.65. Within Electric, we expect retail volume growth in 2023 of roughly 0.5%. We also entered the year with updated rates for Ohio and Florida already in effect, and we'll see growth from three Carolinas rate cases as we move through the year. Additionally, we will continue to see growth from the grid investment riders in the Midwest and Florida, namely the Indiana TDISC and Florida SPP plans approved in 2022.
Moving to cost mitigation. We've identified $300 million of savings in 2023, which is primarily related to rationalizing our corporate and business support cost structures. Examples include streamlining IT support and reducing our real estate footprint. These cost reductions will be realized ratably over 2023 with approximately 75% of the savings being sustainable into future years. Partially offsetting these favorable drivers are higher financing cost as well as depreciation and property taxes on a growing asset base. Within our Gas segment, growth drivers include the Ohio rate case currently underway, cost mitigation efforts and customer growth, partially offset by higher interest expense. Finally, we expect the Other segment to be unfavorable due to higher interest expense.
Turning to retail electric volumes on Slide 9. In 2022, we saw load growth of 2.5%. These strong results were driven by residential customer growth of 1.8%, higher usage per customer from hybrid and remote work and a continuation of the post-COVID rebound in the commercial class. Our total retail load in 2022 was about 2% higher than 2019 pre-pandemic levels. This is equivalent to an average annual growth rate of around 0.5% when smoothing out the year-to-year fluctuations. In 2023, total retail load growth is projected to be roughly 0.5%. Based on 2022 U.S. Census Bureau data, three states within our regulated footprint were in the top six for net population migration. This illustrates the robust customer growth experienced in our territories, which we expect to continue in 2023. We expect load growth in the commercial class to moderate this year following two years of significant growth. But [Phonetic] the upside in industrial as easing supply chain constraints fuel a continued rebound for certain large manufacturers. Longer term, we expect annual load growth to be about 0.5% through 2027.
Turning to Slide 10. I'd like to provide an overview of our five-year capital plan, which has increased to $65 billion. When compared to prior periods, the capital plan has steadily increased as we move further into the clean energy transition. This increase is net of [Indecipherable] almost $3 billion of commercial renewables capital including the previous five-year plan. This means that we've increased the regulated plan by approximately $5 billion, resulting in a 7.1% earnings-based CAGR through 2027.
While the investment needs of our utilities continue to accelerate, customer affordability remains front and center. Affordability has consistently been a pillar that governs our planning, and we have several tools to help keep rates low and assist customers who are struggling to pay their bills. First, the benefits of our cost mitigation efforts go back to customers over time, easing bill impacts as we recover capital investments. As I mentioned, we expect 75% of our 2023 cost mitigation efforts to be sustainable. Additionally, we are targeting flat O&M from 2024 through 2027. Our long-term O&M trajectory is supported by smart capital investments within our plan, including modernized equipment and technology investments that will help reduce fuel and operating costs. Next, the Inflation Reduction Act provides substantial benefits for carbon-free resources, including nuclear and solar PTCs and other renewable tax credits. We are beginning to incorporate these benefits and updated resources plans and rate adjustments. Over the next decade, we will fully leverage IRA benefits across all of our jurisdictions in order to maintain low cost for customers as we execute our clean energy transition.
Finally, assisting vulnerable customers has always been an area of focus. But since the pandemic, we worked even more closely with our communities and customers in need. For example, in 2021, we created a specialized team that partnered with agencies across our service territories and help connect customers to nearly $300 million in energy assistance funding over two years.
Moving to Slide 11. Our ability to execute our robust capital program is underpinned by a healthy balance sheet, and we remain committed to our current credit ratings. In December 2022, we received $1 billion in cash proceeds upon the closing of the second tranche of the Indiana minority stake sale. We expect to receive proceeds from the Commercial Renewables transactions later this year, which will be used for debt avoidance at the holding company.
Turning to FFO to debt. We ended 2022 below our 14% target, largely due to deferred fuel balances. We have started recovering these amounts through established recovery mechanisms, and we'll continue to file using mechanisms in place for the remaining balances. As we recover deferred fuel costs over the next one to two years, we expect FFO to debt to steadily improve and return to our long-term 14% target, demonstrating our commitment to our current credit ratings. As we look ahead, about 90% of the electric investments in our capital plan are eligible for modern recovery mechanisms, which is critical to maintaining a strong balance sheet, mitigating regulatory lag and smoothing rate impacts. With the steps we've taken to reposition our business and improve our cash flow profile in the years ahead, we are not planning to issue equity through 2027.
Moving to Slide 12. Our robust capital plan, strong customer growth and constructive jurisdictions provide a compelling growth story. And our commitment to the dividend remains unchanged. We understand its importance to our shareholders, and 2023 marks the 97th consecutive year of paying a quarterly cash dividend. We intend to keep growing the dividend balancing our targeted 65% to 75% payout ratio with the need to fund our capital. As we begin 2023, we are well positioned to tackle the challenges ahead and look forward to updating you on our progress throughout the year.
With that, we'll open the line for your questions.
