Xcel could increase base capital forecast by $2.5 billion

xcel transmission 2 elp

Xcel Energy on Jan. 28 said that it has potential incremental capital investment opportunities that could increase the base capital forecast by $2.5 billion over the 2016-2020 timeframe, resulting in a total capital forecast of $17.7 billion for that timeframe.

The capital expenditure programs of Xcel are subject to continuing review and modification, the company said. Actual utility capital expenditures may vary from the estimates due to changes in electric and natural gas projected load growth, regulatory decisions, legislative initiatives, reserve margin requirements, the availability of purchased power, alternative plans for meeting long-term energy needs, compliance with environmental requirements, renewable portfolio standards and merger, acquisition and divestiture opportunities, the company said.

Xcel had another successful year in 2015, delivering ongoing earnings of $2.09 per share despite some challenging weather, weak sales and some regulatory setbacks, Xcel Chairman, President and CEO Ben Fowke said on Jan. 28 during the company’s 4Q15 earnings call.

“We have now met or exceeded our earnings guidance for 11 consecutive years,” he said. “We also increased the dividend 6.7 percent and raised the dividend growth objective to 5 to 7 percent, and this marks the 12th consecutive annual dividend increase. Finally, we maintained our strong credit ratings and delivered a 3.8 percent total return in 2015, outperforming most other utilities.”

Xcel had a busy and overall successful regulatory calendar, Fowke said.

According to the company’s statement, NSP-Minnesota last November filed a three-year electric rate case with Minnesota state regulators. The rate case is based on a requested return on equity (ROE) of 10 percent, and a 52.5 percent equity ratio. NSP-Minnesota also proposed a five-year alternative plan that would extend the rate plan two additional years.

Last December, the Minnesota Public Utilities Commission accepted the rate case and approved interim rates for 2016, and the commission deferred making a decision on incremental interim rates for 2017, as well as indicated that NSP-Minnesota could bring back its request in 4Q16, Xcel said.

Last May, NSP-Wisconsin filed a request with the Public Service Commission of Wisconsin, seeking an increase in annual electric rates of $27.4 million, or 3.9 percent, and an increase in natural gas rates of $5.9 million, or 5 percent, effective Jan. 1, 2016.

The rate filing was based on a 2016 forecast test year, an ROE of 10.2 percent, an equity ratio of 52.5 percent, and a forecast average rate base of about $1.2 billion for the electric utility, and $111.2 million for the natural gas utility, the company added.

Last December, Wisconsin state regulators approved an electric rate increase of about $7.6 million, or 1.1 percent, and a natural gas rate increase of $4.2 million, or 3.6 percent, based on a 10 percent ROE, and an equity ratio of 52.5 percent. New rates went into effect this month, the company said.

Of the PSCo – Colorado “Our Energy Future” plan, Xcel said that the proposal ties together innovative technology, economic development and customer initiatives to give customers more control over their energy use, prepare for the future energy demands of the state and keep rates competitive. Key components of the plan include investigating up to 1,000 MW of additional renewable resources to be presented later this year for consideration by Colorado state regulators, the company said.

The company also noted that in December 2014, Southwestern Public Service (SPS) filed a retail electric rate case in Texas seeking an overall increase in annual revenue of about $64.8 million, or 6.7 percent. The filing was based on a historic test year ending June 2014, adjusted for known and measurable changes, an ROE of 10.25 percent, an electric rate base of about $1.6 billion and an equity ratio of 53.97 percent.

The company added that last December, Texas state regulators made such decisions as approving an equity ratio of 51.00 percent instead of the actual 53.97 percent, and an ROE of 9.7 percent.

On Jan. 7, SPS filed its motion for rehearing on capital structure, incentive compensation, as well as known and measurable adjustments, including wholesale load reductions and post test-year capital additions. In addition, SPS expects to file a new rate case in 1Q16, which will incorporate provisions of the legislation passed last year, the company added.

Among other things, Xcel noted that SPS last October filed an electric rate case with New Mexico state regulators for a net increase in base rates of about $24.3 million, reflecting an increase in non-fuel base rates of $45.4 million and a decrease in base fuel revenue of about $21.1 million.

The rate filing is based on a June 30, 2015, historic test year adjusted for known and measurable changes, a requested ROE of 10.25 percent, an electric jurisdictional rate base of about $734 million, and an equity ratio of 53.97 percent. A settlement conference is scheduled for Feb. 18-19, the company added.

A decision from the New Mexico Public Regulation Commission and implementation of final rates is anticipated in 2Q16. In response to the original 2015 electric rate case previously dismissed, SPS has appealed that decision to the New Mexico Supreme Court, Xcel added, noting that a date has not been set for oral arguments. SPS anticipates a decision by 1Q17, Xcel added.

Fowke said during the call that Xcel was “encouraged by the legislation that was passed in Minnesota and Texas, which provides us with additional tools to reduce regulatory lag.”

In Minnesota, the company filed a resource plan that will achieve a 60 percent carbon reduction by 2030, he said. The plan advances the addition of renewables on the company’s system, preserves reliability while ensuring customer benefits and affordability, creates ownership opportunities for the company and positions it well to meet the requirements of the U.S. Environmental Protection Agency’s (EPA) Clean Power Plan, he said.

Fowke also noted that in 2015, Xcel continued to demonstrate strong operational performance, particularly in storm restoration.

“For example, in December, SPS experienced a horrific winter storm, with sustained winds between 50 [and] 80 miles per hour, below 0 wind chill, white-out conditions, and inaccessible roads due to six to 10-foot sown drifts,” he said. “Now, even with these challenging conditions, we were able to restore service to 84 percent of our customers within 12 hours, and 98 percent of our customers within 24 hours. This remarkable feat was accomplished as a result of our proactive planning, which began days before the event, and of course, our dedicated employees, who sacrificed time with families during the holidays.”

Fowke also discussed the 200 MW Courtney wind farm in North Dakota, noting that the company expects that project to be in service by year-end, ahead of schedule and on budget.

On natural gas, he noted that PSCo recently filed an application with Colorado state regulators to establish a framework for potential investments in natural gas reserves. The filing proposes a plan to take advantage of historically low natural gas prices, provides a long-term hedge against market fluctuations, and offers predictable natural gas prices for the long-term benefit of customers, Fowke said.

Xcel on Jan. 28 reported 2015 GAAP earnings of $984 million, or $1.94 per share, compared with 2014 GAAP earnings of $1,021 million, or $2.03 per share. 

Ongoing earnings, which exclude adjustments for certain items, were $2.09 per share for 2015 compared with $2.03 per share in 2014, the company said.

Ongoing earnings increased primarily due to rate increases in various jurisdictions, non-fuel riders, a lower earnings test refund in Colorado and a decline in operating and maintenance expenses. The company added that those positive factors were partially offset by the impact of negative weather (7 cents per share) as well as higher depreciation, property taxes, interest charges and lower allowance for fund used for construction.

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