Xcel Energy Inc. — 2023 Q4

I like the phrase doing the math. I think I might have heard that before. Look, we're really excited about our investment profile over the next 5 years, across our 8 states, multiple asset categories, clean generation, transmission, advanced grid, electric vehicles, everything in support of our customers. Obviously, the EPS growth rate follows the rate base growth with some amount of dilution for financing costs at the parent level. The new updated capital plan is accretive. We expect during this 5-year period to be at or above the top end of our 5% to 7% range. But we think 5% to 7% is still a good long-term growth rate for the company, and that's our guidance right now.

Yes. And Julien, I'd just add that we do expect -- that's a conservative growth rate. And as I noted in my remarks, going forward, we will rebase off of actual earnings. So important things to note in our script. And overall, as Bob said, we're really excited about it. We're excited about our opportunities and our steel for fuel and the clean energy transition. And I think we're one of the fastest transitioning utilities in the country. And our electric bills are 28% below the national average. So I think we're in a great place for our investors and our customers.

Yes. Julien, yes, no change and our guidance assumptions for this year is still $3.50 to $3.60. Now there is an increase in CapEx if you look kind of plan over plan this year. But that was really back-end loaded as we work through some of the regulatory approval processes. From an equity perspective, look, we have -- we've said we've been -- we've talked about doing at least $500 million annually through our ATM and expect that ratable over the 5 years. And then we do have some drip. The amount above the $1.5 billion above that, we'll be opportunistic, and we'll look at it. But I think it kind of follows with how our incremental CapEx follows.

Yes. No, we've got a long-standing relationship. The new commissioner comes out of the department, and we've been working with him very proactively over years. So we expect a continued strong relationship with the Minnesota Commission.

It's actually Rich Sunderland on for Jeremy. Can you hear me?

Yes, we can.

Great. Just picking at the last point on equity. I appreciate opportunistic in terms of timing. Can you speak a little bit more in terms of format of how you might address that I guess, the gap from the ATM to the total needs. Anything on the table at this point or any guardrails to that?

No, the way we'll -- a pretty plain vanilla way we finance our company. So kind of the base case to be is a block issue. And something you can obviously look at doing a forwards or something. We look at mandatory converts, but our base case is just doing blocks above the level that we feel comfortable with on the ATM.

Understood. Very helpful. And then looking at a high level in terms of the O&M outlook and then parsing that relative to the workforce reduction announcements. Could you speak a little bit more to the savings there over the near to medium term? How that factors into your overall O&M trajectory and how you're thinking about that O&M outlook, I guess, over the long term as well relative to the work you've accomplished over the past few years.

Yes. Let me hit the workforce reduction question first, and I'll transition to the longer-term O&M outlook for us.

Yes. Absolutely. So as we look at it, given our significant growth in our base plan, we just added $5 billion of capital to it and that -- the fact that we're guiding to the top end or above our conservative 5% to 7% EPS growth, we thought it was prudent and the right decision to lower our dividend growth, still within our dividend growth guidance of 5% to 7%.

Durgesh, I think we'll assess it every time if we have a significant chunk of capital, update our plans as we do regularly, we obviously evaluate all parts of our total shareholder return.

It's Bob. Thanks for the support as always. With the fire, I think the next sort of milestone I'd say is we have a sort of a trial planning period of meeting first week of February. Given the change in cases and plaintiffs that schedule got moved back a little bit to give new claimants more time. We'll get a better trial calendar.

Yes, Steve, the updated $39 billion plan. Yes.

Yes. Certainly, Steve, and for the folks that haven't been close to that proceeding. We really have 2 PIMs, which the commission asked to propose a couple of PIMs. So we have a cost to construct and think of that just as a capital, what's our budget for the project has been. And we've operated under those types of things for a long time, whether in Minnesota, Texas, New Mexico, we've had those in Colorado. So we propose a PIM. The commission modified it a little bit, so it's a plus or minus 5% deadband and then customers sharing -- savings and sharing was a penalty or incentive above the 5%.

Steve, it's Bob. The last one seems like a lot of fun to talk about, but I'll probably pass on that fastball. On Washington, in particular, the hydrogen production tax credit, we were very active, we've been very stalwart in our position that we believe that clean fuels and clean molecules are going to be needed as part of a broader, cleaner energy economy. We felt that hydrogen was probably the most attractive molecule that we could produce in a clean and green way.

Yes, I can just chime in on nuclear. So we expect guidance here in Q2 is our current thinking. Obviously, the guidance we're looking for is how do you calculate the gross receipts, meaning how do you calculate the value. We've got advocated for the use of LMPs, obviously, given that we're in an RTO.

Well, I mean, at or above the high end implies that we're above 6% growth right now. But I take it your question, what would cause us to go to 6% to 8%, if I can interpret it. Like we evaluate it we feel 5% to 7% is the right long-term growth rate. It's conservative and rebasing off of actuals and signaling that we're going to be at the top end or above is the right place to be long term.

Yes. Anthony, it's Bob. Good to hear you this morning, and thanks for the questions. We're operating under an existing wildfire mitigation program in Colorado right now. And I'd say that, that plan includes asset hardening and replacement. It's got pilots for various technology solutions and risk modeling embedded within that.

Yes. It goes through a regular way of proceeding with intervenor testimony and our testimony [indiscernible] approval by the PUC.

Yes, absolutely, Carly. Related to Colorado, we'll begin -- so the marker will begin to file CPCNs for all of our projects in transmission starting in likely late February. And then you'll just see them kind of filter in probably over Q2. And then those will be regular way CPCNs, I think probably 8- to 9-month type approval processes on each of those filings. So those are the next markers at least on the projects coming out of the Colorado Resource Plan that was just approved.

Carly, it's Bob. I just add on to what Brian said is probably remiss if we didn't comment on the Minnesota and the Wisconsin RFPs that are in the SPS RP that's in flight right now, which represents 2,000 megawatts of new clean energy in the Upper Midwest and in the Southwest. We expect resolution of those, as I said in my prepared remarks, this year, and they're included in our incremental capital opportunities in our investor deck.

And just one more thing to add. We'll be filing a resource plan in Minnesota on February 1, which is a continuation of the transition of our generation fleet as we shut down our coal plants in Minnesota by 2030. And pretty excited about just all the opportunities across our service territories.

Yes. Sophie, thanks for the question. Certainly, in Colorado, we've had a pretty significant gap between our authorized versus earned ROE. As we think of all the capital that we're deploying on the clean energy transition that will flow through timely recovery from a rider perspective. Also all the transmission that we need to invest to be able to deliver that clean energy to our customers will flow through the TCA. So the incremental capital should get more timely recovery. I mean it's important as we think about longer term to ensure that we have a financially healthy utility because it allows us to have a competitive cost of capital, which in the long term is that -- most beneficial to our customers as it delivers the lowest cost of customers -- lowest cost to our customers.

Yes. And as we mentioned, yes, it is the regulatory lag, the capital lag. We had a historic test year in Colorado gas. And as we mentioned in my opening remarks, we'll be filing a Colorado Natural Gas Case here in the next week or so. And so we'll be working through that.

So as we think about it, yes, our guidance here is 2% to 3% in 2024. The biggest driver continues to be in SPS and the electrification and growth we're hearing from our customers, obviously, we work very closely with our large industrial customers down there, so I have a good sense of what their low growth forecasts are in 2024 and even beyond. We're starting to see some large C&I growth in Colorado with the data center coming online and a couple of other large customers coming online. So really driven by C&I load growth in 2024. We do continue to have customer -- residential customer growth of roughly 1%, so that contribute some. But overall, it's driven by our C&I growth, particularly in SPS.

David, so we incorporate the transferability into the cash from operations. But for us, transferability isn't really cash flow driver when we look plan over plans. We've incorporated all the transfer tax credits in the previous plan, the transfer tax credits in this new plan.

Tavis, it's Bob. Thanks for the question. We really want to own and operate the infrastructure that serves our customers. I think this is a core skill set of the company. We think we're competitive. We think we can do a price competitively for our customers. I think we've proven that over the last 5 or 6 years and delivering value to our customers from our clean energy investments. I think -- it wasn't in our original pro forma estimates, but I think our total over the last 5 years is close to $5 billion worth of tax credits and avoided fuel costs from installing wind into our system for the benefit of our customers, which was never included in our forecast when we put those wind farms in.

Yes. And Travis just to add that -- Bob's absolutely right, we have to demonstrate that we're competitive with our commissions and we have been, and we expect to continue to be so going forward. And so we can continue to deliver low-cost electricity to our customers.

No. No. That was the last one outstanding. So we're pretty excited about it assuming we get PUCT approval of the settlement. That's the last one.

No.

Ryan, look, it's still very early in the process. But as we've said from the beginning, we strongly disagree with the conclusion of the sheriff's report, and we intend to viciously defend ourselves sitting here today.

Yes. First, I guess I'd disagree with the balance sheet challenges. I think we have one of the stronger balance sheets in the industry. So I don't necessarily agree with that characterization. But now from an M&A standpoint, now we're comfortable with where we sit in the assets we own. Obviously, we're aware of everything that is going on in the industry.

Paul, it's Bob. Thanks for the question. No, no update. I mean the insurance commissioner said that the property damage was in excess of $2 billion. But as far as the total amount of suits, they haven't claimed any liability in the suits or from the plaintiffs.

Paul, you were breaking up a little bit, but let me see if I understand the question. Given the recent PIMs in Colorado, how do you feel broadly about performance-based ratemaking and things like that.

Yes, Paul, in the written orders, certainly there's a discussion. We'll work with the staff as we work on the Just Transition plan in terms of looking at well-designed PIMs. And there's also a PIM around potential kind of the emissions achievement. So we look forward to working with staff on that as we move through time.

Well, thank you all for participating in our earnings call this morning. Please contact our Investor Relations team with any follow-up questions. Have a great day.