Xcel Energy(US:XEL)2023-02-23 19:54PART I Item 1 — Business Xcel Energy is a major U.S. regulated electric and natural gas utility serving approximately 3.8 million electric and 2.1 million natural gas customers across eight states, focusing on clean energy transition and customer experience Overview and Strategy Xcel Energy operates as a regulated utility, prioritizing clean energy transition, customer experience, and affordability, with ambitious carbon reduction goals and a strong dividend growth record - Xcel Energy's core strategy revolves around three priorities: Lead the Clean Energy Transition, Enhance the Customer Experience, and Keep Bills Low18 Key Company Statistics | Metric | Value | | :--- | :--- | | Electric Customers | 3.8 million | | Natural Gas Customers | 2.1 million | | Total Assets | $61.1 billion | | Electric Generating Capacity | 20,897 MW | | Electric Transmission Lines | 110,000 miles | | Natural Gas Distribution Lines | 37,000 miles | - The company has a goal to reduce carbon emissions by 80% by 2030 from 2005 levels and achieve 100% carbon-free electricity by 2050, having achieved an estimated 53% reduction as of 20222425 - Xcel Energy plans to be coal-free by year-end 2030, pending approval to accelerate the Tolk coal plant retirement to 202826 - The Inflation Reduction Act (IRA) is expected to significantly reduce the cost of future renewable projects, with wind projects potentially decreasing by 50-60% and solar by 25-40% on a levelized cost of energy basis43 Utility Subsidiaries The company's operations are conducted through four primary utility subsidiaries: NSP-Minnesota, NSP-Wisconsin, PSCo, and SPS, each serving distinct customer bases in various states Utility Subsidiary Overview (2022) | Subsidiary | Electric Customers (million) | Natural Gas Customers (million) | Total Assets ($B) | Rate Base ($B, est.) | ROE (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | NSP-Minnesota | 1.5 | 0.5 | $23.7 | $15.1 | 8.76% | | NSP-Wisconsin | 0.3 | 0.1 | $3.4 | $2.1 | 10.57% | | PSCo | 1.6 | 1.5 | $23.6 | $14.9 | 8.23% | | SPS | 0.4 | N/A | $9.7 | $6.7 | 9.36% | Operations Overview In 2022, electric operations generated $12.1 billion in revenue, with a generation mix increasingly shifting to carbon-free sources, while natural gas operations served 2.1 million customers, and significant investments are planned for grid modernization 2022 Electric Energy Generation Sources | Energy Source | Percentage of Total | | :--- | :--- | | Carbon-Free | 53% | | Wind | 29% | | Nuclear | 11% | | Hydro/Other | 13% | | Fossil Fuel | 47% | | Natural Gas | 24% | | Coal | 23% | Approved Early Coal Plant Retirements/Conversions | Year | Subsidiary | Plant Unit | Capacity (MW) | Action | | :--- | :--- | :--- | :--- | :--- | | 2023 | NSP-Minnesota | Sherco 2 | 682 | Retire | | 2024 | SPS | Harrington | 1,018 | Convert to Gas | | 2025 | PSCo | Comanche 2 | 335 | Retire | | 2025 | PSCo | Pawnee | 505 | Convert to Gas | | 2026 | NSP-Minnesota | Sherco 1 | 680 | Retire | | 2028 | NSP-Minnesota | A.S. King | 511 | Retire | | 2030 | NSP-Minnesota | Sherco 3 | 517 | Retire | | 2030 | PSCo | Comanche 3 | 500 | Retire | - The company is investing approximately $1.7 billion in digitizing the distribution grid, including smart meters and advanced software, to improve reliability and enable integration of distributed energy resources87 - Competition arises from customers' ability to self-generate power (e.g., rooftop solar), FERC policies promoting competitive wholesale markets, and the potential for municipalization of services9798100103 Governmental Regulations Xcel Energy's operations are extensively regulated by federal and state agencies concerning environmental compliance, with emerging regulations potentially incurring significant annual costs, and environmental costs totaling approximately $365 million in 2022 - The EPA's proposed "Good Neighbor" regulations under the Clean Air Act are expected to impact facilities in Minnesota, Texas, and Wisconsin, with anticipated annual costs of approximately $60 million, which are expected to be recoverable through regulatory mechanisms110 Environmental Costs | Type | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Operating Expenses | $365M | $365M | $400M | | Capital Expenditures | $20M | $60M | $30M | Item 1A — Risk Factors Xcel Energy faces diverse risks including operational hazards, long-term planning uncertainties, commodity price volatility, financial recovery challenges, credit rating impacts, macroeconomic conditions, cyber threats, and climate-related policy and physical risks - Operational Risks: Inherent hazards in natural gas and electric operations (leaks, explosions, fires), risks in long-term resource planning due to technological and policy shifts, and dependence on suppliers for key components132138141 - Financial Risks: Profitability depends on the ability to recover costs through regulated rates; reductions in credit ratings could increase financing costs; the company is also subject to capital market, interest rate, and counterparty credit risks159166168170 - Macroeconomic Risks: Operations are affected by general economic conditions, health epidemics, and geopolitical events; a major risk is a cyber incident or security breach, as the utility industry is a frequent target of sophisticated attacks181183189191 - Policy & Environmental Risks: Legislative and regulatory responses to climate change could be costly; the company is subject to extensive environmental laws and physical risks from climate change, including severe weather, wildfires (particularly in Colorado), and drought206212219224 Item 2 — Properties This section details Xcel Energy's physical assets, including power generation stations by fuel type and capacity, and quantifies electric transmission/distribution lines and natural gas mains for each subsidiary, largely subject to first mortgage bond indentures Owned Generating Capacity by Subsidiary (MW, Dec 31, 2022) | Subsidiary | Steam (Coal/Nuclear/Gas/Other) | Combustion Turbine (Gas/Oil) | Hydro | Wind | Total (MW) | | :--- | :--- | :--- | :--- | :--- | :--- | | NSP-Minnesota | 3,402 | 2,097 | - | 2,352 | 8,949 | | NSP-Wisconsin | 57 | 356 | 135 | - | 548 | | PSCo | 1,968 | 2,644 | 233 | 1,059 | 6,151 | | SPS | 3,237 | 602 | - | 984 | 5,249 | Electric & Gas Infrastructure (Miles, Dec 31, 2022) | Subsidiary | Electric Transmission | Electric Distribution | Gas Transmission | Gas Distribution | | :--- | :--- | :--- | :--- | :--- | | NSP-Minnesota | 32,594 | 82,024 | 78 | 10,902 | | NSP-Wisconsin | 11,652 | 27,817 | 3 | 2,570 | | PSCo | 24,501 | 79,331 | 2,067 | 23,542 | | SPS | 40,879 | 23,538 | 20 | - | Item 3 — Legal Proceedings Xcel Energy is involved in various litigation matters in the ordinary course of business, with management accruing for probable losses and not anticipating material effects on consolidated financial statements from current proceedings - The company is involved in various litigation, but for proceedings not specifically detailed, management does not expect the outcomes to have a material effect on its financial statements235237 PART II Item 5 — Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Xcel Energy Inc.'s common stock is listed on the Nasdaq under the symbol XEL, with 47,359 stockholders of record as of February 16, 2023, and no equity repurchases during Q4 2022, while its five-year total shareholder return is benchmarked against industry and broader market indices - Xcel Energy's common stock trades on the Nasdaq under the symbol XEL239 - A performance graph compares the company's five-year cumulative total shareholder return (TSR) against the EEI Investor-Owned Electrics Index and the S&P 500240241 - No registered equity securities were purchased by or on behalf of Xcel Energy during the fourth quarter of 2022243 Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of Xcel Energy's financial performance, including increased EPS driven by regulatory outcomes, detailed segment performance, operating expense analysis, extensive regulatory proceedings, liquidity, capital expenditure plans, financing strategies, and critical accounting policies Results of Operations For 2022, Xcel Energy's GAAP and ongoing diluted EPS increased to $3.17, primarily due to favorable regulatory outcomes and positive contributions from all utility subsidiaries, with electric and natural gas margins significantly increasing year-over-year Diluted EPS by Segment (GAAP and Ongoing) | Segment | 2022 | 2021 | | :--- | :--- | :--- | | PSCo | $1.33 | $1.22 | | NSP-Minnesota | $1.23 | $1.12 | | SPS | $0.64 | $0.59 | | NSP-Wisconsin | $0.23 | $0.20 | | Regulated utility (subtotal) | $3.47 | $3.18 | | Xcel Energy Inc. and Other | ($0.29) | ($0.22) | | Total | $3.17 | $2.96 | Change in Electric Margin (2022 vs. 2021) | Driver | Impact (Millions) | | :--- | :--- | | Regulatory rate outcomes | $506 | | Texas rate case surcharge | $85 | | Sales and demand | $80 | | Non-fuel riders | $64 | | PTCs flowed back to customers | ($150) | | Total Increase | $646 | - O&M expenses increased by $170 million in 2022 due to inflation, supply chain constraints, operational activities like vegetation management, and costs for technology and customer programs274 - Depreciation and amortization increased by $292 million, primarily due to capital investment, recognition of deferred costs from the Texas Electric Rate Case, and new wind farms entering service277 Public Utility Regulation Xcel Energy's subsidiaries are regulated by FERC and state commissions, with ongoing rate cases in Minnesota, Colorado, New Mexico, and Texas, and approved resource plans accelerating coal plant retirements and adding renewable capacity - NSP-Minnesota: Filed a three-year electric rate case seeking a revised total of $498 million, with a final MPUC decision expected by June 30, 2023; a natural gas rate case settlement for a $21 million increase is pending MPUC approval288291 - PSCo (Colorado): The CPUC approved a $64 million net increase in natural gas rates in October 2022; a new electric rate case was filed in November 2022 seeking a net increase of $262 million; the CPUC approved an updated resource plan to accelerate coal retirements and add significant renewable and storage capacity323325326327 - SPS: Filed a new electric rate case in New Mexico in November 2022 seeking a $78 million increase; filed a new electric rate case in Texas in February 2023 seeking a $149 million increase; both filings propose accelerating the depreciation of the Tolk coal plant to 2028347348 Liquidity and Capital Resources Xcel Energy's operating cash flow significantly increased to $3.9 billion in 2022, supporting a $29.5 billion capital expenditure plan for 2023-2027, primarily funded by cash from operations and new debt, while maintaining strong liquidity and long-term EPS growth objectives Cash Flow Summary (in Millions) | Cash Flow | 2022 | 2021 | | :--- | :--- | :--- | | From Operating Activities | $3,932 | $2,189 | | Used in Investing Activities | ($4,653) | ($4,287) | | From Financing Activities | $666 | $2,135 | Base Capital Expenditure Forecast (2023-2027, in Billions) | By Regulated Utility | Forecast | | :--- | :--- | | PSCo | $11.3 | | NSP-Minnesota | $11.7 | | SPS | $3.9 | | NSP-Wisconsin | $2.6 | | Total | $29.5 | - The 2023-2027 financing plan includes $20.5 billion from cash from operations and $8.2 billion in new debt to fund capital expenditures442 - Xcel Energy's 2023 GAAP and ongoing earnings guidance is a range of $3.30 to $3.40 per share456 - The company expects to deliver long-term annual EPS growth of 5% to 7% and annual dividend increases of 5% to 7%456459 Critical Accounting Policies and Estimates Management identifies critical accounting policies requiring significant judgment, including regulatory accounting for cost recovery, income tax accruals, employee benefits based on actuarial assumptions, and nuclear decommissioning estimates involving long-term cost and timing projections - Regulatory Accounting: The company defers costs as regulatory assets ($3.9 billion at YE 2022) and credits as regulatory liabilities ($6.0 billion at YE 2022) based on the probability of future rate recovery or refunds, a process involving significant judgment373376 - Employee Benefits: Pension and postretirement benefit costs are based on key actuarial assumptions; for 2022, the discount rate was set at 5.80% and the expected rate of return on pension assets was 6.93%; changes in these assumptions can materially impact obligations and expenses383384386 - Nuclear Decommissioning: The company records Asset Retirement Obligations (AROs) for its nuclear plants, totaling $2.2 billion in 2022; this estimate relies on assumptions about retirement dates, technology, cost escalation rates (3.2%), and discount rates395398400404 Item 8 — Financial Statements and Supplementary Data This section presents Xcel Energy's consolidated financial statements for 2022, including the Management Report on Internal Control Over Financial Reporting, the Independent Registered Public Accounting Firm's Report, and core financial statements with detailed notes - Management concluded that as of Dec. 31, 2022, the company's internal control over financial reporting was effective464 - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion, stating the financial statements are presented fairly and that the company maintained effective internal control over financial reporting468 Consolidated Income Statement Highlights (in Millions) | Line Item | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total Operating Revenues | $15,310 | $13,431 | $11,526 | | Operating Income | $2,428 | $2,203 | $2,116 | | Net Income | $1,736 | $1,597 | $1,473 | Consolidated Balance Sheet Highlights (in Millions) | Line Item | Dec. 31, 2022 | Dec. 31, 2021 | | :--- | :--- | :--- | | Total Assets | $61,188 | $57,851 | | Long-Term Debt | $22,813 | $21,779 | | Total Common Stockholders' Equity | $16,675 | $15,612 | | Total Liabilities and Equity | $61,188 | $57,851 | Item 9A — Controls and Procedures As of December 31, 2022, Xcel Energy's management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the fourth quarter of 2022 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2022757 - No material changes occurred in the company's internal control over financial reporting during the most recent fiscal quarter758 PART III Items 10, 11, 12, 13, and 14 Information for these items, covering Directors, Executive Compensation, Security Ownership, Related Transactions, and Principal Accountant Fees, is incorporated by reference from Xcel Energy Inc.'s definitive Proxy Statement for its 2023 Annual Meeting of Shareholders - Information regarding directors, executive compensation, security ownership, related transactions, and accountant fees is incorporated by reference from the company's 2023 Proxy Statement761762763764765 PART IV Item 15 — Exhibit and Financial Statement Schedules This section provides an index of all financial statements, schedules, and exhibits included in or incorporated by reference into the Form 10-K filing, encompassing consolidated financial statements, condensed registrant information, and various corporate and legal documents - This item provides an index of all financial statements, schedules, and exhibits included in or incorporated by reference into the Form 10-K filing766767768