Xcel Energy(XEL) - 2023 Q3 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1 — Financial Statements (unaudited) Presents Xcel Energy Inc.'s unaudited consolidated financial statements and notes for Q3 and YTD September 30, 2023 and 2022 Consolidated Statements of Income Consolidated Statements of Income (Unaudited) | Metric | Three Months Ended Sept. 30, 2023 (Millions) | Three Months Ended Sept. 30, 2022 (Millions) | Nine Months Ended Sept. 30, 2023 (Millions) | Nine Months Ended Sept. 30, 2022 (Millions) | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | :----------------------------------------- | :----------------------------------------- | | Total operating revenues | $3,662 | $4,082 | $10,764 | $11,257 | | Total operating expenses | $2,747 | $3,158 | $8,858 | $9,354 | | Operating income | $915 | $924 | $1,906 | $1,903 | | Income before income taxes | $696 | $693 | $1,261 | $1,277 | | Net income | $656 | $649 | $1,362 | $1,357 | | Diluted Earnings per average common share | $1.19 | $1.18 | $2.47 | $2.48 | Consolidated Statements of Comprehensive Income Consolidated Statements of Comprehensive Income (Unaudited) | Metric | Three Months Ended Sept. 30, 2023 (Millions) | Three Months Ended Sept. 30, 2022 (Millions) | Nine Months Ended Sept. 30, 2023 (Millions) | Nine Months Ended Sept. 30, 2022 (Millions) | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | :----------------------------------------- | :----------------------------------------- | | Net income | $656 | $649 | $1,362 | $1,357 | | Total other comprehensive income | $4 | $12 | $15 | $32 | | Total comprehensive income | $660 | $661 | $1,377 | $1,389 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (Unaudited) | Activity | Nine Months Ended Sept. 30, 2023 (Millions) | Nine Months Ended Sept. 30, 2022 (Millions) | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash provided by operating activities | $4,353 | $3,167 | | Net cash used in investing activities | $(4,292) | $(3,321) | | Net cash provided by financing activities | $422 | $105 | | Net change in cash, cash equivalents and restricted cash | $483 | $(49) | | Cash, cash equivalents and restricted cash at end of period | $594 | $117 | Consolidated Balance Sheets Consolidated Balance Sheets (Unaudited) | Metric | Sept. 30, 2023 (Millions) | Dec. 31, 2022 (Millions) | | :--------------------------------- | :------------------------ | :----------------------- | | Total current assets | $4,402 | $5,144 | | Property, plant and equipment, net | $50,613 | $48,253 | | Total assets | $62,870 | $61,188 | | Total current liabilities | $5,073 | $6,078 | | Total deferred credits and other liabilities | $15,578 | $15,622 | | Long-term debt | $24,910 | $22,813 | | Total common stockholders' equity | $17,309 | $16,675 | | Total liabilities and equity | $62,870 | $61,188 | Consolidated Statements of Common Stockholders' Equity Common Stockholders' Equity Changes (Unaudited) | Metric | Sept. 30, 2023 (Millions) | Dec. 31, 2022 (Millions) | | :--------------------------------- | :------------------------ | :----------------------- | | Balance at beginning of period (Dec. 31, 2022 for 9M 2023) | $16,675 | $15,612 (Dec. 31, 2021) | | Net income | $1,362 | $1,357 | | Other comprehensive income | $15 | $32 | | Dividends declared on common stock | $(859) | $(798) | | Issuances of common stock | $113 | $185 | | Share-based compensation | $3 | $(4) | | Balance at Sept. 30, 2023 | $17,309 | $16,384 (Sept. 30, 2022) | Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies - The significant accounting policies are consistent with those outlined in the 2022 Annual Report on Form 10-K and are incorporated by reference[30] 2. Accounting Pronouncements - No material impact from recent or newly issued accounting pronouncements on Xcel Energy's consolidated financial statements as of September 30, 2023[31] 3. Selected Balance Sheet Data Selected Balance Sheet Data (Millions of Dollars) | Metric | Sept. 30, 2023 | Dec. 31, 2022 | | :--------------------------------- | :------------- | :------------ | | Accounts receivable, net | $1,220 | $1,373 | | Property, plant and equipment, net | $50,613 | $48,253 | | Inventories | $688 | $803 | 4. Borrowings and Other Financing Instruments Short-Term Borrowings (Commercial Paper and Term Loan) | Metric | Three Months Ended Sept. 30, 2023 (Millions) | Year Ended Dec. 31, 2022 (Millions) | | :--------------------------------- | :------------------------------------------ | :---------------------------------- | | Borrowing limit | $3,550 | $3,550 | | Amount outstanding at period end | $0 | $813 | | Weighted average interest rate, computed on a daily basis | 5.35% | 1.47% | Committed Revolving Credit Facilities Available (Millions of Dollars) | Entity | Credit Facility | Drawn | Available | | :----------------- | :-------------- | :---- | :-------- | | Xcel Energy Inc. | $1,500 | $0 | $1,500 | | PSCo | $700 | $29 | $671 | | NSP-Minnesota | $700 | $15 | $685 | | SPS | $500 | $2 | $498 | | NSP-Wisconsin | $150 | $0 | $150 | | Total | $3,550 | $46 | $3,504 | - Xcel Energy Inc issued $800 million of 5.45% Senior Notes due August 15, 2033, while subsidiaries issued significant first mortgage bonds with maturities in 2053 and coupons from 5.10% to 6.00%[43] - Equity issuances through the ATM program totaled 0.9 million shares for approximately $62 million in net proceeds during the nine months ended Sept 30, 2023, with $88 million remaining available[40][44] - Equity issued through the DRIP and benefits programs amounted to $78 million for the nine months ended Sept 30, 2023, up from $59 million in the prior year[41] 5. Revenues Total Operating Revenues by Segment (Millions of Dollars) | Segment | Three Months Ended Sept. 30, 2023 | Three Months Ended Sept. 30, 2022 | Nine Months Ended Sept. 30, 2023 | Nine Months Ended Sept. 30, 2022 | | :--------------------------------- | :---------------------------------- | :---------------------------------- | :--------------------------------- | :--------------------------------- | | Electric | $3,387 | $3,699 | $8,751 | $9,255 | | Natural gas | $245 | $357 | $1,926 | $1,923 | | Other | $30 | $26 | $87 | $79 | | Total operating revenues | $3,662 | $4,082 | $10,764 | $11,257 | 6. Income Taxes Effective Income Tax Rate (ETR) | Metric | Three Months Ended Sept. 30, 2023 | Three Months Ended Sept. 30, 2022 | Nine Months Ended Sept. 30, 2023 | Nine Months Ended Sept. 30, 2022 | | :--------------------------------- | :---------------------------------- | :---------------------------------- | :--------------------------------- | :--------------------------------- | | Federal statutory rate | 21.0% | 21.0% | 21.0% | 21.0% | | State tax (net of federal tax effect) | 5.0% | 4.9% | 4.9% | 4.9% | | Wind PTCs | (13.8)% | (12.3)% | (27.3)% | (25.2)% | | Plant regulatory differences | (5.3)% | (5.8)% | (5.5)% | (5.5)% | | Effective income tax rate | 5.7% | 6.3% | (8.0)% | (6.3)% | - The negative effective tax rate for the nine months ended Sept 30, 2023, is primarily due to Wind Production Tax Credits (PTCs) and plant regulatory differences, which are largely credited to customers and do not materially impact net income[46] 7. Earnings Per Share Common Shares Outstanding for EPS Calculation (Millions) | Metric | Three Months Ended Sept. 30, 2023 | Three Months Ended Sept. 30, 2022 | Nine Months Ended Sept. 30, 2023 | Nine Months Ended Sept. 30, 2022 | | :--------------------------------- | :---------------------------------- | :---------------------------------- | :--------------------------------- | :--------------------------------- | | Basic | 552 | 548 | 551 | 546 | | Diluted | 552 | 548 | 552 | 546 | - Diluted common shares outstanding included common stock equivalents of 0.3 million for the three months ended Sept 30, 2023 and 2022, and 0.2 million and 0.3 million for the nine months ended Sept 30, 2023 and 2022, respectively[50] 8. Fair Value of Financial Assets and Liabilities - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (significant unobservable inputs)[54] Nuclear Decommissioning Fund Fair Value (Millions of Dollars) | Asset Type | Sept. 30, 2023 (Total Fair Value) | Dec. 31, 2022 (Total Fair Value) | | :--------------------------------- | :---------------------------------- | :--------------------------------- | | Cash equivalents | $27 | $29 | | Commingled funds | $1,059 | $1,178 | | Debt securities | $726 | $675 | | Equity securities | $1,202 | $1,000 | | Total | $3,014 | $2,882 | - Xcel Energy uses derivative instruments (forwards, futures, swaps, options) for trading and to manage interest rate and commodity price risks, with FTRs classified as Level 3 derivatives due to limited observability[60][68][75] Derivative Assets and Liabilities (Netting Adjusted, Millions of Dollars) | Category | Sept. 30, 2023 (Total) | Dec. 31, 2022 (Total) | | :--------------------------------- | :--------------------- | :-------------------- | | Current derivative assets | $146 | $279 | | Noncurrent derivative assets | $72 | $93 | | Current derivative liabilities | $59 | $76 | | Noncurrent derivative liabilities | $83 | $113 | Fair Value of Long-Term Debt (Millions of Dollars) | Metric | Sept. 30, 2023 (Carrying Amount) | Sept. 30, 2023 (Fair Value) | Dec. 31, 2022 (Carrying Amount) | Dec. 31, 2022 (Fair Value) | | :--------------------------------- | :------------------------------- | :-------------------------- | :------------------------------ | :------------------------- | | Long-term debt, including current portion | $25,961 | $21,484 | $23,964 | $20,897 | 9. Benefit Plans and Other Postretirement Benefits Net Periodic Benefit Cost (Credit) (Millions of Dollars) | Metric | Three Months Ended Sept. 30, 2023 (Pension) | Three Months Ended Sept. 30, 2022 (Pension) | Nine Months Ended Sept. 30, 2023 (Pension) | Nine Months Ended Sept. 30, 2022 (Pension) | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | :----------------------------------------- | :----------------------------------------- | | Net periodic benefit cost (credit) | $11 | $74 | $33 | $109 | | Net benefit cost (credit) recognized for financial reporting | $22 | $37 | $58 | $79 | - In January 2023, contributions totaling $50 million were made across Xcel Energy's pension plans, with no additional contributions expected for 2023[95] 10. Commitments and Contingencies - Xcel Energy is involved in various legal proceedings, including gas trading litigation (Arandell Corp), Comanche Unit 3 litigation, and Marshall Wildfire litigation, with management accruing for probable and estimable losses[96][98][100][101] - In the Comanche Unit 3 litigation, PSCo recognized a $34 million loss in Q3 2023 following a jury verdict awarding CORE lost power damages, which PSCo intends to appeal[108] - Regarding the Marshall Fire, PSCo disputes its power lines caused the second ignition, and while potential damages could exceed $500 million in insurance coverage, the amount or range of possible losses is currently inestimable[103][111] - Environmental commitments include managing coal ash, complying with the Federal Clean Water Act (estimated $50 million capital expenditures), and mitigating tritium release, with costs generally expected to be recoverable through regulatory mechanisms[125][126][127][128][129] Total Operating Lease Expense (Millions of Dollars) | Metric | Three Months Ended Sept. 30, 2023 | Three Months Ended Sept. 30, 2022 | Nine Months Ended Sept. 30, 2023 | Nine Months Ended Sept. 30, 2022 | | :--------------------------------- | :---------------------------------- | :---------------------------------- | :--------------------------------- | :--------------------------------- | | PPA capacity payments | $61 | $59 | $182 | $182 | | Other operating leases | $11 | $8 | $35 | $28 | | Total operating lease expense | $72 | $67 | $217 | $210 | - Xcel Energy's utility subsidiaries had approximately 4,053 MW of capacity under long-term PPAs with variable interest entities as of Sept 30, 2023, with expiration dates through 2041[137] 11. Other Comprehensive Loss Changes in Accumulated Other Comprehensive Loss (Net of Tax, Millions of Dollars) | Metric | Sept. 30, 2023 (Total) | Sept. 30, 2022 (Total) | | :--------------------------------- | :--------------------- | :--------------------- | | Accumulated other comprehensive loss at Jan. 1 | $(93) | $(123) | | Other comprehensive gain before reclassifications | $11 | $26 | | Losses reclassified from net accumulated other comprehensive loss | $4 | $6 | | Accumulated other comprehensive loss at Sept. 30 | $(78) | $(91) | 12. Segment Information - Xcel Energy operates through Regulated Electric, Regulated Natural Gas, and All Other segments, with performance evaluated based on profit or loss from regulated rate recovery[143][144][156][147] Segment Net Income (Loss) (Millions of Dollars) | Segment | Three Months Ended Sept. 30, 2023 | Three Months Ended Sept. 30, 2022 | Nine Months Ended Sept. 30, 2023 | Nine Months Ended Sept. 30, 2022 | | :--------------------------------- | :---------------------------------- | :---------------------------------- | :--------------------------------- | :--------------------------------- | | Regulated Electric (Net income) | $706 | $697 | $1,352 | $1,312 | | Regulated Natural Gas (Net loss/income) | $(21) | $(7) | $116 | $148 | | All Other (Net loss) | $(29) | $(41) | $(106) | $(103) | | Consolidated Total (Net income) | $656 | $649 | $1,362 | $1,357 | Item 2 — Management's Discussion and Analysis of Financial Condition and Results of Operations Management's analysis of Xcel Energy's financial performance, cash flows, regulatory matters, and future outlook Non-GAAP Financial Measures - Xcel Energy uses non-GAAP measures like 'ongoing earnings' and 'ongoing diluted EPS' to evaluate core earnings and underlying performance, adjusting GAAP earnings for non-recurring items[155][161] Reconciliation of GAAP Net Income to Ongoing Earnings (Millions of Dollars) | Metric | Three Months Ended Sept. 30, 2023 | Three Months Ended Sept. 30, 2022 | Nine Months Ended Sept. 30, 2023 | Nine Months Ended Sept. 30, 2022 | | :--------------------------------- | :---------------------------------- | :---------------------------------- | :--------------------------------- | :--------------------------------- | | GAAP net income | $656 | $649 | $1,362 | $1,357 | | Loss on Comanche Unit 3 litigation | $34 | $0 | $34 | $0 | | Less: tax effect of adjustment | $(8) | $0 | $(8) | $0 | | Ongoing earnings | $682 | $649 | $1,388 | $1,357 | Results of Operations Summary of Earnings Summarized Diluted EPS for Xcel Energy | Subsidiary/Segment | Three Months Ended Sept. 30, 2023 | Three Months Ended Sept. 30, 2022 | Nine Months Ended Sept. 30, 2023 | Nine Months Ended Sept. 30, 2022 | | :--------------------------------- | :---------------------------------- | :---------------------------------- | :--------------------------------- | :--------------------------------- | | PSCo | $0.41 | $0.45 | $0.97 | $1.02 | | NSP-Minnesota | $0.47 | $0.49 | $0.95 | $0.94 | | SPS | $0.30 | $0.25 | $0.55 | $0.52 | | NSP-Wisconsin | $0.06 | $0.07 | $0.18 | $0.19 | | Regulated utility total | $1.25 | $1.28 | $2.68 | $2.69 | | Xcel Energy Inc. and Other | $(0.06) | $(0.09) | $(0.22) | $(0.21) | | GAAP diluted EPS | $1.19 | $1.18 | $2.47 | $2.48 | | Loss on Comanche Unit 3 litigation | $0.05 | $0.00 | $0.05 | $0.00 | | Ongoing diluted EPS | $1.23 | $1.18 | $2.52 | $2.48 | - Xcel Energy's Q3 2023 ongoing diluted EPS increased to $1.23 from $1.18 YoY, driven by infrastructure investment recovery, higher sales, demand, and lower O&M, partially offset by increased interest charges and depreciation[165] Changes in GAAP and Ongoing Diluted EPS Components Contributing to Changes in 2023 EPS vs. 2022 (Diluted Earnings Per Share) | Component of Change | Three Months Ended Sept. 30 | Nine Months Ended Sept. 30 | | :--------------------------------- | :-------------------------- | :------------------------- | | GAAP and ongoing diluted EPS — 2022 | $1.18 | $2.48 | | Lower (higher) natural gas revenues, net of cost of natural gas sold and transported | $(0.01) | $0.07 | | Lower conservation and demand side management expenses | $0.02 | $0.06 | | Higher other income (expense) | $0.02 | $0.05 | | Lower taxes (other than income taxes) | $0.01 | $0.05 | | Lower effective tax rate (ETR) | $0.01 | $0.03 | | Higher depreciation and amortization | $(0.02) | $0.00 | | Higher interest charges | $(0.03) | $(0.11) | | Higher (lower) electric revenues, net of electric fuel and purchased power | $0.01 | $(0.08) | | Lower (higher) O&M expenses | $0.03 | $(0.05) | | Loss on Comanche Unit 3 litigation | $(0.05) | $(0.05) | | Other, net | $0.02 | $0.02 | | GAAP diluted EPS — 2023 | $1.19 | $2.47 | | Loss on Comanche Unit 3 litigation | $0.05 | $0.05 | | Ongoing diluted EPS — 2023 | $1.23 | $2.52 | Statement of Income Analysis Estimated Impact of Temperature Changes on Regulated Earnings Estimated Impact of Temperature Variations on EPS vs. Normal Weather (Dollars) | Metric | Three Months Ended Sept. 30, 2023 vs. Normal | Three Months Ended Sept. 30, 2022 vs. Normal | Nine Months Ended Sept. 30, 2023 vs. Normal | Nine Months Ended Sept. 30, 2022 vs. Normal | | :--------------------------------- | :------------------------------------------- | :------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Retail electric | $0.032 | $0.074 | $0.035 | $0.123 | | Decoupling and sales true-up | $0.007 | $(0.032) | $(0.015) | $(0.055) | | Electric total | $0.039 | $0.042 | $0.020 | $0.068 | | Firm natural gas | $(0.002) | $0.000 | $0.024 | $0.019 | | Decoupling | $0.001 | $0.000 | $0.001 | $0.000 | | Gas total | $(0.001) | $0.000 | $0.025 | $0.019 | | Total | $0.038 | $0.042 | $0.045 | $0.087 | - Weather deviations can affect financial performance, but decoupling mechanisms in Colorado (expired Sept 2023) and sales true-up in Minnesota largely mitigate these impacts for electric utilities[174] Sales Weather-Normalized Retail Electric Sales Growth (Decline) - Year-to-Date 2023 vs. 2022 | Entity | Residential | C&I | Total Retail Electric Sales | | :----------------- | :---------- | :---- | :-------------------------- | | PSCo | 1.4% | (0.2)% | 0.3% | | NSP Minnesota | 0.6% | (0.9)% | (0.4)% | | SPS | 0.9% | 5.7% | 4.7% | | NSP-Wisconsin | (0.5)% | (0.2)% | (0.3)% | | Xcel Energy | 0.8% | 1.2% | 1.1% | Weather-Normalized Firm Natural Gas Sales Growth (Decline) - Year-to-Date 2023 vs. 2022 | Entity | Firm Natural Gas Sales | | :----------------- | :--------------------- | | PSCo | 1.6% | | NSP Minnesota | (1.4)% | | SPS | N/A | | NSP-Wisconsin | (1.9)% | | Xcel Energy | 0.4% | - Natural gas sales reflect lower use per residential customer across all jurisdictions, partially offset by increased C&I use per customer in PSCo, alongside residential and C&I customer growth of 1.2% and 0.7%, respectively[181] Electric Margin Electric Margin (Millions of Dollars) | Metric | Three Months Ended Sept. 30, 2023 | Three Months Ended Sept. 30, 2022 | Nine Months Ended Sept. 30, 2023 | Nine Months Ended Sept. 30, 2022 | | :--------------------------------- | :---------------------------------- | :---------------------------------- | :--------------------------------- | :--------------------------------- | | Electric revenues | $3,387 | $3,699 | $8,751 | $9,255 | | Electric fuel and purchased power | $(1,181) | $(1,497) | $(3,328) | $(3,772) | | Electric margin | $2,206 | $2,202 | $5,423 | $5,483 | - Electric margin increased by $4 million for the three months ended Sept 30, 2023, but decreased by $60 million for the nine months ended Sept 30, 2023, primarily due to the Texas rate case surcharge recognition in 2022 and lower PTCs flowed back to customers, partially offset by non-fuel riders and sales/demand growth[183] Natural Gas Margin Natural Gas Margin (Millions of Dollars) | Metric | Three Months Ended Sept. 30, 2023 | Three Months Ended Sept. 30, 2022 | Nine Months Ended Sept. 30, 2023 | Nine Months Ended Sept. 30, 2022 | | :--------------------------------- | :---------------------------------- | :---------------------------------- | :--------------------------------- | :--------------------------------- | | Natural gas revenues | $245 | $357 | $1,926 | $1,923 | | Cost of natural gas sold and transported | $(70) | $(173) | $(1,084) | $(1,134) | | Natural gas margin | $175 | $184 | $842 | $789 | - Natural gas margin decreased by $9 million for the three months ended Sept 30, 2023, but increased by $53 million for the nine months ended Sept 30, 2023, primarily due to regulatory rate outcomes in Colorado and Wisconsin[185] Non-Fuel Operating Expenses and Other Items - O&M expenses decreased by $25 million in Q3 2023 but increased by $37 million year-to-date, mainly due to higher bad debt, inflationary pressures, and unplanned maintenance, partially offset by deferred costs from Texas Electric Rate Cases[188] - Depreciation and amortization increased by $11 million in Q3 2023 but remained flat year-to-date, reflecting system expansion offset by deferred depreciation from the Texas Electric Rate Case and life extensions from the Minnesota Electric Rate Case[189] - Taxes (other than income taxes) decreased by $5 million in Q3 2023 and $34 million year-to-date, primarily due to Minnesota Electric Rate Case deferrals and Texas Electric Rate Case deferred cost recognition, partially offset by increased Colorado property tax[190] - Other income (expense) increased by $18 million in Q3 2023 and $39 million year-to-date, largely from interest on cash balances and rabbi trust performance[191] - Interest charges increased by $25 million in Q3 2023 and $85 million year-to-date, driven by higher interest rates and increased long-term debt, partially offset by deferred costs from the Texas Electric Rate Case[192] Public Utility Regulation and Other NSP-Minnesota - The MPUC approved a three-year electric rate increase of approximately $316 million for 2022-2024, based on a ROE of 9.25% and an equity ratio of 52.5%, with NSP-Minnesota planning to appeal certain aspects[196] - NSP-Minnesota plans to file an annual natural gas rate case in November 2023[197] - NSP-Minnesota withdrew its $320 million electric vehicle capital investment request, which the MPUC approved in August 2023[198] NSP-Wisconsin - NSP-Wisconsin filed a rate case seeking an electric increase of $40 million (4.8%) and a natural gas increase of $9 million (5.3%), while PSCW Staff recommended a $3 million electric base rate decrease and a $5 million natural gas rate increase[200][203] - NSP-Wisconsin revised its requested rate increase to $25 million for electric and $7 million for natural gas, with a PSCW decision anticipated in late Q4 2023[204][205] NSP System - NSP-Minnesota and NSP-Wisconsin are acquiring resources to meet IRP needs, including MPUC approval for 250 MW self-build solar and a 100 MW solar PPA, and initiating processes for 800 MW firm dispatchable resources and 1,200 MW wind development assets[206][212] PSCo - The CPUC approved a settlement for PSCo's Colorado electric rate case, resulting in a retail revenue increase of $95 million (2.96%), a 9.3% ROE, and termination of the revenue decoupling pilot[208][213] - PSCo's Preferred Plan for the Colorado Resource Plan aims for coal exit by end of 2030, doubling wind and solar, and over 80% greenhouse gas emission reduction from 2005 levels, with expected investments of $7.9 billion in generation and $2.9 billion in transmission[209][210] - Colorado Senate Bill 23-291 passed, requiring new rules for natural gas and electric fuel incentive mechanisms, natural gas planning, and non-recovery of certain expenses, with CPUC rulemaking expected by Jan 1, 2025[215] SPS - The NMPRC approved a settlement for SPS's New Mexico electric rate case, including a $33 million base rate revenue increase, a 9.5% ROE, and acceleration of Tolk coal plant depreciation to 2028[216][217][226] - SPS reached a settlement in principle for its Texas electric rate case, seeking a $158 million base rate revenue increase, with a PUCT decision expected in Q1 2024[218][219] - SPS filed its IRP with the NMPRC, projecting a total resource need of 5,300 MW to 10,200 MW by 2030, and expects to issue an RFP for new generation in mid-2024[221] Other Supply Chain - Supply chain disruptions, exacerbated by inflation and labor shortages, are impacting electric meter and transformer availability, potentially delaying deployment schedules into 2025 and new customer connections[222][223][224] - The U.S Department of Commerce's anti-circumvention investigation concluded that CSPV solar panels from certain countries will be subject to incremental tariffs (50%-250%), though an interim stay is in effect until June 2024[225][226] New Technology and Government Grants - Xcel Energy is part of the Heartland Hydrogen Hub, selected by the DOE for up to $925 million in award negotiations, with Xcel Energy proposing up to $2 billion investment over a decade for clean hydrogen projects[229] - The DOE awarded Xcel Energy a $70 million grant for two 10 MW, 100-hour battery pilots with Form Energy at retiring coal plant sites, aiming to reduce project costs for customers[230] - Xcel Energy received a $100 million DOE grant, matched by $140 million investment, for wildfire mitigation and grid resiliency projects, including fire-resistant coatings, equipment safety features, undergrounding circuits, and enhanced vegetation management[231] - Xcel Energy and other utilities received a $464 million DOE grant for five JTIQ projects to construct high-voltage transmission lines, improving reliability and resolving transmission system constraints[232] Critical Accounting Policies and Estimates - The outcome of legal proceedings and claims related to the Marshall Fire is uncertain, and the amount or range of possible losses cannot be reasonably estimated at this time[233] Environmental - The EPA proposed new rules for power plant greenhouse gas emissions (Clean Air Act Section 111) and legacy coal combustion residuals (CCR Rule), with uncertain financial impacts but expected cost recovery through rates[234][235][237] - The EPA proposed designating certain PFAS as 'hazardous substances' under CERCLA and establishing drinking water standards, which could lead to new investigation and cleanup obligations, with uncertain costs[239][240][241] - The EPA proposed more stringent Effluent Limitations Guidelines and Standards for steam generating coal plants under the Clean Water Act, with uncertain impacts until final rules are published[242] Derivatives, Risk Management and Market Risk - Xcel Energy manages commodity price risk through physical purchase/sales contracts and financial derivatives, with risk management policies approved by its committee[244][245][249] Fair Value of Net Commodity Trading Contracts (Millions of Dollars) | Metric | Sept. 30, 2023 | Sept. 30, 2022 | | :--------------------------------- | :------------- | :------------- | | Fair value of commodity trading net contracts outstanding at Jan. 1 | $(33) | $(33) | | Contracts realized or settled during the period | $1 | $(11) | | Commodity trading contract additions and changes during the period | $33 | $31 | | Fair value of commodity trading net contracts outstanding at Sept. 30 | $1 | $(13) | - A 10% increase in commodity prices would increase credit exposure by $32 million at Sept 30, 2023, while a 10% decrease would decrease it by $28 million[257] - NSP-Minnesota has contracted for nuclear material requirements through 2025 and has entered into additional contracts to cover potential supply interruptions from Russia through 2030[251] Liquidity and Capital Resources Cash Flows Cash Flow Summary (Nine Months Ended Sept. 30, Millions of Dollars) | Activity | 2023 | 2022 | | :--------------------------------- | :----- | :----- | | Cash provided by operating activities | $4,353 | $3,167 | | Cash used in investing activities | $(4,292) | $(3,321) | | Cash provided by financing activities | $422 | $105 | - Operating cash flows increased by $1,186 million, primarily due to continued collections of deferred net natural gas, fuel, and purchased energy costs, and decreased natural gas prices[259] - Investing cash flows increased by $971 million, mainly due to increased capital expenditures for system expansion[260] - Financing cash flows increased by $317 million, largely related to the amount and timing of debt issuances and repayments[261] Capital Requirements - Xcel Energy expects to meet future financing requirements by issuing short-term debt, long-term debt, common stock, hybrid, and other securities to maintain desired capitalization ratios[263] Capital Sources Committed Credit Facilities Available (Millions of Dollars) as of Oct. 23, 2023 | Entity | Credit Facility | Drawn | Available | Cash | Liquidity | | :----------------- | :-------------- | :---- | :-------- | :--- | :-------- | | Xcel Energy Inc. | $1,500 | $0 | $1,500 | $19 | $1,519 | | PSCo | $700 | $239 | $461 | $3 | $464 | | NSP Minnesota | $700 | $15 | $685 | $8 | $693 | | SPS | $500 | $0 | $500 | $18 | $518 | | NSP-Wisconsin | $150 | $0 | $150 | $8 | $158 | | Total | $3,550 | $254 | $3,296 | $56 | $3,352 | - Xcel Energy's utility subsidiaries participate in a FERC-approved money pool arrangement for short-term investments and borrowings[267][268] Capital Expenditures Base Capital Forecast by Regulated Utility (Millions of Dollars) 2024-2028 | Regulated Utility | 2024 | 2025 | 2026 | 2027 | 2028 | Total | | :--------------------------------- | :--- | :--- | :--- | :--- | :--- | :---- | | PSCo | $2,580 | $2,940 | $3,030 | $3,070 | $2,640 | $14,260 | | NSP Minnesota | $2,660 | $2,970 | $2,380 | $2,500 | $2,180 | $12,690 | | SPS | $910 | $780 | $660 | $870 | $830 | $4,050 | | NSP-Wisconsin | $570 | $600 | $570 | $600 | $650 | $2,990 | | Other | $(20) | $0 | $10 | $10 | $10 | $10 | | Total base capital expenditures | $6,700 | $7,290 | $6,650 | $7,050 | $6,310 | $34,000 | Base Capital Forecast by Function (Millions of Dollars) 2024-2028 | Function | 2024 | 2025 | 2026 | 2027 | 2028 | Total | | :--------------------------------- | :--- | :--- | :--- | :--- | :--- | :---- | | Electric transmission | $1,880 | $2,150 | $2,500 | $2,840 | $2,080 | $11,450 | | Electric distribution | $1,720 | $1,840 | $2,030 | $2,200 | $2,410 | $10,200 | | Electric generation | $930 | $1,160 | $780 | $740 | $600 | $4,210 | | Natural gas | $740 | $680 | $630 | $620 | $570 | $3,240 | | Renewables | $670 | $740 | $40 | $20 | $20 | $1,490 | | Other | $760 | $720 | $670 | $630 | $630 | $3,410 | | Total base capital expenditures | $6,700 | $7,290 | $6,650 | $7,050 | $6,310 | $34,000 | - The base plan excludes potential renewable generation assets (Colorado Preferred Plan, NSP System, SPS) which could add approximately $10 billion in capital expenditures, expected to be funded with 40% equity and 60% debt[269] Financing for Capital Expenditures through 2028 Estimated Financing Plans for Capital Expenditures 2024-2028 (Millions of Dollars) | Source | Amount | | :--------------------------------- | :----- | | Cash from operations | $20,520 | | New debt | $10,980 | | Equity through DRIP and benefit program | $500 | | Other equity | $2,000 | | Total Base Capital Expenditures | $34,000 | - Xcel Energy plans to issue approximately $85 million of equity through DRIP and benefit programs and $62 million under the ATM program in 2023, with several long-term debt issuances completed in 2023 by Xcel Energy and its utility subsidiaries[273] Off-Balance-Sheet Arrangements - Xcel Energy has no material off-balance-sheet arrangements other than those already disclosed[274] Earnings Guidance and Long-Term EPS and Dividend Growth Rate Objectives - Xcel Energy's 2023 ongoing earnings guidance is narrowed to $3.32 to $3.37 per share, with key assumptions including constructive regulatory outcomes, normal weather, 1-2% retail electric sales growth, and 1% retail natural gas sales growth[275] - The 2024 ongoing earnings guidance is $3.50 to $3.60 per share, with projected 2-3% retail electric sales growth and 1% retail natural gas sales growth[275] - Long-term objectives include 5% to 7% annual EPS growth (from a 2023 base of $3.35), 5% to 7% annual dividend increases, a dividend payout ratio of 60% to 70%, and maintaining senior secured debt credit ratings in the A range[287] Item 3 — Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures since the 2022 Annual Report on Form 10-K - No material changes to market risk disclosures since the 2022 Annual Report on Form 10-K[277] Item 4 — Controls and Procedures Confirms effective disclosure controls and no material changes in internal control over financial reporting - Xcel Energy's disclosure controls and procedures were effective as of September 30, 2023[279] - No material changes occurred in internal control over financial reporting during the most recent fiscal quarter[280] PART II OTHER INFORMATION Item 1 — Legal Proceedings Details Xcel Energy's legal proceedings, accrual for estimable losses, and inability to estimate certain potential losses - Management accrues for probable and estimable losses from legal proceedings, but cannot always estimate the amount or range of possible loss due to early stages, indeterminate damages, or novel legal theories[281][282] - No material effect on consolidated financial statements is anticipated for current proceedings not specifically reported[283] Item 1A Risk Factors No material changes to risk factors since the 2022 Annual Report on Form 10-K - No material changes to risk factors since the 2022 Annual Report on Form 10-K[284] Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds Confirms no registered equity securities were purchased by Xcel Energy or affiliates during Q3 2023 - No registered equity securities were purchased by the issuer or affiliated purchasers during Q3 2023[285] Item 5 — Other Information Reports no Rule 10b5-1 trading changes and a $9 million restricted stock unit award to the CEO - No Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers during Q3 2023[286] - A $9,000,000 restricted stock unit award (152,336 units) was granted to CEO Robert C Frenzel, vesting 33% on Feb 28, 2027, and 67% on Feb 29, 2028, contingent on continued employment[287] Item 6 — Exhibits Lists exhibits filed with Form 10-Q, including organizational documents, debt indentures, and SOX certifications - Exhibits include Amended and Restated Articles of Incorporation, Bylaws, Supplemental Indentures for Senior Notes and First Mortgage Bonds, and various certifications (e.g., 18 U.S.C Section 1350, Section 302, Section 906 Sarbanes-Oxley Act)[288] SIGNATURES