0000072903 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-07-01 2019-09-30
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended Sept. 30, 2019March 31, 2020 or |
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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001-3034Xcel Energy Inc. |
(Exact name of registrant as specified in its charter) |
| | 41-0448030 |
(Commission File Number) | | (I.R.S. Employer Identification No.) |
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Minnesota | | 001-3034 | | 41-0448030 |
(Registrant, State or Other Jurisdiction of Incorporation or Organization, Address of Principal Executive Officers and TelephoneOrganization) | | (Commission File Number)
| | (IRS Employer Identification No.) |
Xcel Energy Inc. |
Minnesota |
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Minneapolis | Minnesota | | | | 55401 |
(Address of Principal Executive Offices)
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612 | 330-5500 |
(Registrant’s Telephone Number, Including Area Code) |
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N/A |
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | | Trading Symbol | | Name of each exchange on which registered |
Common Stock, $2.50 par value | | XEL | | NASDAQNasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☒ | | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | | Smaller reporting company | ☐ | |
| | | Emerging growth company | ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class | | Oct. 17, 2019April 30, 2020 |
Common Stock, $2.50 par value | | 524,388,096525,170,820 shares |
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PART I | FINANCIAL INFORMATION | |
Item 1 — | | |
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Item 2 — | | |
Item 3 — | | |
Item 4 — | | |
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PART II | OTHER INFORMATION | |
Item 1 — | | |
Item 1A — | | |
Item 2 — | | |
Item 6 — | | |
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| Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
This Form 10-Q is filed by Xcel Energy Inc. Additional information is available on various filings with the Securities and Exchange Commission (SEC).
ABBREVIATIONS AND INDUSTRY TERMSDefinitions of Abbreviations
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Xcel Energy Inc.’s Subsidiaries and Affiliates (current and former) |
NSP-Minnesota | Northern States Power Company, a Minnesota corporation |
NSP System | The electric production and transmission system of NSP-Minnesota and NSP-Wisconsin operated on an integrated basis and managed by NSP-Minnesota |
NSP-Wisconsin | Northern States Power Company, a Wisconsin corporation |
PSCo | Public Service Company of Colorado |
SPS | Southwestern Public Service Co. |
Utility subsidiaries | NSP-Minnesota, NSP-Wisconsin, PSCo and SPS |
WGI | West Gas Interstate |
WYCO | WYCO Development, LLC |
Xcel Energy | Xcel Energy Inc. and its subsidiaries |
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Federal and State Regulatory Agencies |
CEC | Colorado Energy Consumers |
CPUC | Colorado Public Utilities Commission |
D.C. Circuit | United States Court of Appeals for the District of Columbia Circuit |
DOC | Department of Commerce |
DOE | Department of Energy |
EPA | United States Environmental Protection Agency |
FEA | Federal Executive Agencies |
FERC | Federal Energy Regulatory Commission |
IRS | Internal Revenue Service |
MPUC | Minnesota Public Utilities Commission |
NMPRC | New Mexico Public Regulation Commission |
NRC | Nuclear Regulatory Commission |
OAG | Minnesota Office of the Attorney General |
OCC | Office of Consumer Counsel |
PSCW | Public Service Commission of Wisconsin |
PUCT | Public Utility Commission of Texas |
SEC | Securities and Exchange Commission |
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Electric, Purchased Gas and Resource Adjustment Clauses |
DSM | Demand side management |
FCA | Fuel clause adjustment |
FPPCAC | Fuel and Purchased Power Cost Adjustment Clause |
GUIC | Gas utility infrastructure cost rider |
RES | Renewable energy standard |
TCR | Transmission cost recovery adjustment |
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Other |
ACE | Affordable Clean Energy |
AFUDC | Allowance for funds used during construction |
ASC | FASB Accounting Standards Codification |
ASUAXM | FASB Accounting Standards UpdateAlliance of Xcel Municipalities |
C&I | Commercial and Industrial |
CAPM | Capital Asset Pricing Model |
CC | Combined cycle |
CCR | Coal combustion residual |
CCR Rule | Final rule (40 CFR 257.50 - 257.107) published by the EPA regulating the management, storage and disposal of CCRs as a nonhazardous waste |
CDD | Cooling degree-days |
CEO | Chief executive officer |
CFO | Chief financial officer |
CIGCOVID-19 | Colorado Interstate Gas Company, LLCNovel coronavirus |
CT | Combustion turbine |
CWIP | Construction work in progress |
DCF | Discounted Cash Flows |
DR | Demand response |
DRC | Development Recovery Company |
DRIP | Dividend Reinvestment and Stock Purchase Program |
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EPS | Earnings per share |
ETR | Effective tax rate |
FASB | Financial Accounting Standards Board |
FTR | Financial transmission right |
GAAP | Generally accepted accounting principles |
GE | General Electric |
HDD | Heating degree-days |
IPP | Independent power producing entity |
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LLC | Limited liability company |
MDL | Multi district litigation |
MEC | Mankato Energy Center |
MGP | Manufactured gas plant |
MISO | Midcontinent Independent System Operator, Inc. |
NAV | Net asset value |
NOI | Notice of inquiry |
NOL | Net operating loss |
O&M | Operating and maintenance |
OATT | Open Access Transmission Tariff |
OPUC | Office of Public Utility Counsel |
PPA | Power purchase agreement |
PTC | Production tax credit |
ROE | Return on equity |
ROFR | Right-of-first refusal |
ROU | Right-of-use |
RTO | Regional Transmission Organization |
SMMPA | Southern Minnesota Municipal Power Agency |
SPP | Southwest Power Pool, Inc. |
TCJATHI | 2017 federal tax reform enacted as Public Law No: 115-97, commonly referred to as the Tax Cuts and Jobs ActTemperature-humidity index |
TIEC | Texas Industrial Energy Consumers |
TOs | Transmission owners |
VIE | Variable interest entity |
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Measurements |
KV | Kilovolts |
MMBtu | Million British thermal Units |
MW | Megawatts |
MWh | Megawatt hours |
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Forward-Looking Statements |
Except for the historical statements contained in this report, the matters discussed herein are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements, including the 20192020 EPS guidance, long-term EPS and dividend growth rate objectives, future sales, future bad debt expense, and future operating performance, as well as assumptions and other statements are intended to be identified in this document by the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should,” “will,” “would” and similar expressions. Actual results may vary materially. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information. The following factors, in addition to those discussed elsewhere in this Quarterly Report on Form 10-Q and in other securities filings (including Xcel Energy’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2018,2019, and subsequent securities filings), could cause actual results to differ materially from management expectations as suggested by such forward-looking information: uncertainty around the impacts and duration of the COVID-19 pandemic; operational safety, including our nuclear generation facilities; successful long-term operational planning; commodity risks associated with energy markets and production; rising energy prices and fuel costs; qualified employee work force and third-party contractor factors; ability to recover costs, changes in environmental lawsregulation and regulations; climate change and other weather, natural disaster and resource depletion, including compliance with any accompanying legislative and regulatory changes;subsidiaries’ ability of subsidiaries to recover costs from customers; reductions in our credit ratings and the cost of maintaining certain contractual relationships; general economic conditions, including inflation rates, monetary fluctuations and their impact on capital expenditures and the ability of Xcel Energy Inc. and its subsidiaries to obtain financing on favorable terms; availability or cost of capital; our customers’ and counterparties’ ability to pay their debts to us; assumptions and costs relating to funding our employee benefit plans and health care benefits; our subsidiaries’ ability to make dividend payments; tax laws; operational safety, including our nuclear generation facilities; successful long-term operational planning; commodity risks associated with energy markets and production; rising energy prices; costs of potential regulatory penalties; effects of geopolitical events, including war and acts of terrorism; cyber security threats and data security breaches; fuel costs;seasonal weather patterns; changes in environmental laws and employee work forceregulations; climate change and third party contractor factors.other weather; natural disaster and resource depletion, including compliance with any accompanying legislative and regulatory changes; and costs of potential regulatory penalties.
PART I — FINANCIAL INFORMATION
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ITEM 1 — FINANCIAL STATEMENTS |
XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (amounts in millions, except per share data)
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| Three Months Ended Sept. 30 | | Nine Months Ended Sept. 30 |
| 2019 | | 2018 | | 2019 | | 2018 |
Operating revenues | | | | | | | |
Electric | $ | 2,771 |
| | $ | 2,802 |
| | $ | 7,345 |
| | $ | 7,419 |
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Natural gas | 222 |
| | 227 |
| | 1,324 |
| | 1,181 |
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Other | 20 |
| | 19 |
| | 62 |
| | 57 |
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Total operating revenues | 3,013 |
| | 3,048 |
| | 8,731 |
| | 8,657 |
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Operating expenses | | | | | | | |
Electric fuel and purchased power | 952 |
| | 1,040 |
| | 2,679 |
| | 2,907 |
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Cost of natural gas sold and transported | 55 |
| | 58 |
| | 646 |
| | 537 |
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Cost of sales — other | 9 |
| | 9 |
| | 28 |
| | 26 |
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Operating and maintenance expenses | 580 |
| | 593 |
| | 1,764 |
| | 1,729 |
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Conservation and demand side management expenses | 75 |
| | 77 |
| | 212 |
| | 216 |
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Depreciation and amortization | 447 |
| | 440 |
| | 1,319 |
| | 1,199 |
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Taxes (other than income taxes) | 137 |
| | 135 |
| | 429 |
| | 417 |
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Total operating expenses | 2,255 |
| | 2,352 |
| | 7,077 |
| | 7,031 |
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Operating income | 758 |
| | 696 |
| | 1,654 |
| | 1,626 |
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Other income (expense) | 8 |
| | (7 | ) | | 14 |
| | (8 | ) |
Equity earnings of unconsolidated subsidiaries | 10 |
| | 9 |
| | 29 |
| | 25 |
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Allowance for funds used during construction — equity | 15 |
| | 30 |
| | 55 |
| | 79 |
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Interest charges and financing costs | | | | | | | |
Interest charges — includes other financing costs of $6, $6, $19 and $18, respectively | 199 |
| | 177 |
| | 578 |
| | 523 |
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Allowance for funds used during construction — debt | (7 | ) | | (13 | ) | | (27 | ) | | (35 | ) |
Total interest charges and financing costs | 192 |
| | 164 |
| | 551 |
| | 488 |
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Income before income taxes | 599 |
| | 564 |
| | 1,201 |
| | 1,234 |
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Income taxes | 72 |
| | 73 |
| | 121 |
| | 187 |
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Net income | $ | 527 |
| | $ | 491 |
| | $ | 1,080 |
| | $ | 1,047 |
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Weighted average common shares outstanding: | | | | | | | |
Basic | $ | 519 |
| | $ | 510 |
| | $ | 517 |
| | $ | 510 |
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Diluted | 521 |
| | 511 |
| | 518 |
| | 510 |
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Earnings per average common share: | | | | | | | |
Basic | $ | 1.02 |
| | $ | 0.96 |
| | $ | 2.09 |
| | $ | 2.05 |
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Diluted | 1.01 |
| | 0.96 |
| | 2.08 |
| | 2.05 |
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See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (amounts in millions)
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| Three Months Ended Sept. 30 | | Nine Months Ended Sept. 30 |
| 2019 | | 2018 | | 2019 | | 2018 |
Net income | $ | 527 |
| | $ | 491 |
| | $ | 1,080 |
| | $ | 1,047 |
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Other comprehensive income | | | | | | | |
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Pension and retiree medical benefits: | | | | | | | |
Net pension and retiree medical gains arising during the period, net of tax of $0, $(1), $1 and $(1), respectively | — |
| | (2 | ) | | 2 |
| | (2 | ) |
Amortization of losses included in net periodic benefit cost, net of tax of $0, $1, $1 and $2, respectively | 1 |
| | 4 |
| | 3 |
| | 6 |
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| 1 |
| | 2 |
| | 5 |
| | 4 |
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Derivative instruments: | | | | | | | |
Net fair value decrease, net of tax of $(3), $0, $(8) and $0, respectively | (9 | ) | | — |
| | (25 | ) | | — |
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Reclassification of losses to net income, net of tax of $0, $0, $1 and $1, respectively | 1 |
| | 1 |
| | 2 |
| | 2 |
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| (8 | ) | | 1 |
| | (23 | ) | | 2 |
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Other comprehensive (loss) income | (7 | ) | | 3 |
| | (18 | ) | | 6 |
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Comprehensive income | $ | 520 |
| | $ | 494 |
| | $ | 1,062 |
| | $ | 1,053 |
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See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (amounts in millions, except per share data)
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| Three Months Ended March 31 |
| 2020 | | 2019 |
Operating revenues | | | |
Electric | $ | 2,203 |
| | $ | 2,325 |
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Natural gas | 583 |
| | 794 |
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Other | 25 |
| | 22 |
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Total operating revenues | 2,811 |
| | 3,141 |
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Operating expenses | | | |
Electric fuel and purchased power | 797 |
| | 914 |
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Cost of natural gas sold and transported | 285 |
| | 479 |
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Cost of sales — other | 9 |
| | 10 |
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Operating and maintenance expenses | 579 |
| | 597 |
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Conservation and demand side management expenses | 74 |
| | 72 |
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Depreciation and amortization | 463 |
| | 433 |
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Taxes (other than income taxes) | 149 |
| | 150 |
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Total operating expenses | 2,356 |
| | 2,655 |
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Operating income | 455 |
| | 486 |
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Other (expense) income, net | (11 | ) | | 4 |
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Equity earnings of unconsolidated subsidiaries | 11 |
| | 9 |
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Allowance for funds used during construction — equity | 23 |
| | 20 |
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Interest charges and financing costs | | | |
Interest charges — includes other financing costs of $7 and $6, respectively | 199 |
| | 189 |
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Allowance for funds used during construction — debt | (10 | ) | | (10 | ) |
Total interest charges and financing costs | 189 |
| | 179 |
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Income before income taxes | 289 |
| | 340 |
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Income tax (benefit) expense | (6 | ) | | 25 |
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Net income | $ | 295 |
| | $ | 315 |
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Weighted average common shares outstanding: | | | |
Basic | 526 |
| | 515 |
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Diluted | 527 |
| | 516 |
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Earnings per average common share: | | | |
Basic | $ | 0.56 |
| | $ | 0.61 |
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Diluted | 0.56 |
| | 0.61 |
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See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (amounts in millions) |
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| Nine Months Ended Sept. 30 |
| 2019 | | 2018 |
Operating activities | | | |
Net income | $ | 1,080 |
| | $ | 1,047 |
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Adjustments to reconcile net income to cash provided by operating activities: | | | |
Depreciation and amortization | 1,332 |
| | 1,213 |
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Nuclear fuel amortization | 89 |
| | 92 |
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Deferred income taxes | 130 |
| | 184 |
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Allowance for equity funds used during construction | (55 | ) | | (79 | ) |
Equity earnings of unconsolidated subsidiaries | (29 | ) | | (25 | ) |
Dividends from unconsolidated subsidiaries | 30 |
| | 27 |
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Share-based compensation expense | 47 |
| | 25 |
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Changes in operating assets and liabilities: | | | |
Accounts receivable | 39 |
| | (48 | ) |
Accrued unbilled revenues | 132 |
| | 114 |
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Inventories | (60 | ) | | 37 |
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Other current assets | 3 |
| | 52 |
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Accounts payable | (56 | ) | | 37 |
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Net regulatory assets and liabilities | (6 | ) | | 164 |
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Other current liabilities | (100 | ) | | (158 | ) |
Pension and other employee benefit obligations | (138 | ) | | (134 | ) |
Other, net | 119 |
| | (55 | ) |
Net cash provided by operating activities | 2,557 |
| | 2,493 |
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Investing activities | | | |
Utility capital/construction expenditures | (3,018 | ) | | (2,681 | ) |
Purchases of investment securities | (472 | ) | | (494 | ) |
Proceeds from the sale of investment securities | 462 |
| | 479 |
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Other, net | (101 | ) | | (10 | ) |
Net cash used in investing activities | (3,129 | ) | | (2,706 | ) |
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Financing activities | | | |
Repayments from short-term borrowings, net | (105 | ) | | (376 | ) |
Proceeds from issuances of long-term debt | 1,937 |
| | 1,381 |
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Repayments of long-term debt, including reacquisition premiums | (399 | ) | | (301 | ) |
Proceeds from issuance of common stock | 457 |
| | 203 |
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Dividends paid | (587 | ) | | (544 | ) |
Other, net | (14 | ) | | (20 | ) |
Net cash provided by financing activities | 1,289 |
| | 343 |
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| | | |
Net change in cash and cash equivalents | 717 |
| | 130 |
|
Cash and cash equivalents at beginning of period | 147 |
| | 83 |
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Cash and cash equivalents at end of period | $ | 864 |
| | $ | 213 |
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Supplemental disclosure of cash flow information: | | | |
Cash paid for interest (net of amounts capitalized) | $ | (544 | ) | | $ | (491 | ) |
Cash received (paid) for income taxes, net | 53 |
| | (4 | ) |
| | | |
Supplemental disclosure of non-cash investing and financing transactions: | | | |
Accrued property, plant and equipment additions | $ | 420 |
| | $ | 340 |
|
Inventory transfers to property, plant and equipment | 64 |
| | 74 |
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Operating lease right-of-use assets | 1,718 |
| | — |
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Allowance for equity funds used during construction | 55 |
| | 79 |
|
Issuance of common stock for equity awards | 46 |
| | 52 |
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See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (amounts in millions)
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| | | | | | | |
| Three Months Ended March 31 |
| 2020 | | 2019 |
Net income | $ | 295 |
| | $ | 315 |
|
Other comprehensive loss | | | |
Pension and retiree medical benefits: | | | |
Net pension and retiree medical gains arising during the period, net of tax of $0 and $1, respectively | — |
| | 2 |
|
Reclassifications of loss to net income, net of tax of $0 | 1 |
| | 1 |
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Derivative instruments: | | | |
Net fair value decrease, net of tax of $(3) and $(2), respectively | (10 | ) | | (7 | ) |
Reclassification of losses to net income, net of tax of $0 | 2 |
| | 1 |
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| | | |
Total other comprehensive loss | (7 | ) | | (3 | ) |
Total comprehensive income | $ | 288 |
| | $ | 312 |
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See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (amounts in millions, except share and per share data)
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| | | | | | | |
| Sept. 30, 2019 | | Dec. 31, 2018 |
Assets | | | |
Current assets | | | |
Cash and cash equivalents | $ | 864 |
| | $ | 147 |
|
Accounts receivable, net | 821 |
| | 860 |
|
Accrued unbilled revenues | 623 |
| | 755 |
|
Inventories | 544 |
| | 548 |
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Regulatory assets | 455 |
| | 464 |
|
Derivative instruments | 61 |
| | 87 |
|
Prepaid taxes | 39 |
| | 79 |
|
Prepayments and other | 193 |
| | 154 |
|
Total current assets | 3,600 |
| | 3,094 |
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| | | |
Property, plant and equipment, net | 38,703 |
| | 36,944 |
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| | | |
Other assets | | | |
Nuclear decommissioning fund and other investments | 2,599 |
| | 2,317 |
|
Regulatory assets | 3,120 |
| | 3,326 |
|
Derivative instruments | 22 |
| | 34 |
|
Operating lease right-of-use assets | 1,718 |
| | — |
|
Other | 478 |
| | 272 |
|
Total other assets | 7,937 |
| | 5,949 |
|
Total assets | $ | 50,240 |
| | $ | 45,987 |
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| | | |
Liabilities and Equity | | | |
Current liabilities | | | |
Current portion of long-term debt | $ | 853 |
| | $ | 406 |
|
Short-term debt | 933 |
| | 1,038 |
|
Accounts payable | 1,258 |
| | 1,237 |
|
Regulatory liabilities | 469 |
| | 436 |
|
Taxes accrued | 443 |
| | 450 |
|
Accrued interest | 166 |
| | 174 |
|
Dividends payable | 212 |
| | 195 |
|
Derivative instruments | 73 |
| | 61 |
|
Other | 614 |
| | 463 |
|
Total current liabilities | 5,021 |
| | 4,460 |
|
| | | |
Deferred credits and other liabilities | | | |
Deferred income taxes | 4,427 |
| | 4,165 |
|
Deferred investment tax credits | 50 |
| | 54 |
|
Regulatory liabilities | 5,082 |
| | 5,187 |
|
Asset retirement obligations | 2,679 |
| | 2,568 |
|
Derivative instruments | 178 |
| | 129 |
|
Customer advances | 203 |
| | 199 |
|
Pension and employee benefit obligations | 856 |
| | 994 |
|
Operating lease liabilities | 1,598 |
| | — |
|
Other | 186 |
| | 206 |
|
Total deferred credits and other liabilities | 15,259 |
| | 13,502 |
|
| | | |
Commitments and contingencies |
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| |
|
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Capitalization | | | |
Long-term debt | 16,819 |
| | 15,803 |
|
Common stock — 1,000,000,000 shares authorized of $2.50 par value; 524,384,030 and 514,036,787 shares outstanding at Sept. 30, 2019 and Dec. 31, 2018, respectively | 1,311 |
| | 1,285 |
|
Additional paid in capital | 6,636 |
| | 6,168 |
|
Retained earnings | 5,336 |
| | 4,893 |
|
Accumulated other comprehensive loss | (142 | ) | | (124 | ) |
Total common stockholders’ equity | 13,141 |
| | 12,222 |
|
Total liabilities and equity | $ | 50,240 |
| | $ | 45,987 |
|
| | | |
See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (amounts in millions) |
| | | | | | | |
| Three Months Ended March 31 |
| 2020 | | 2019 |
Operating activities | | | |
Net income | $ | 295 |
| | $ | 315 |
|
Adjustments to reconcile net income to cash provided by operating activities: | | | |
Depreciation and amortization | 466 |
| | 438 |
|
Nuclear fuel amortization | 33 |
| | 31 |
|
Deferred income taxes | 34 |
| | 26 |
|
Allowance for equity funds used during construction | (23 | ) | | (20 | ) |
Equity earnings of unconsolidated subsidiaries | (11 | ) | | (9 | ) |
Dividends from unconsolidated subsidiaries | 11 |
| | 10 |
|
Share-based compensation expense | 26 |
| | 19 |
|
Changes in operating assets and liabilities: | | | |
Accounts receivable | 7 |
| | (114 | ) |
Accrued unbilled revenues | 149 |
| | 92 |
|
Inventories | 33 |
| | 84 |
|
Other current assets | (31 | ) | | (33 | ) |
Accounts payable | (201 | ) | | 4 |
|
Net regulatory assets and liabilities | 101 |
| | 153 |
|
Other current liabilities | (77 | ) | | (36 | ) |
Pension and other employee benefit obligations | (157 | ) | | (145 | ) |
Other, net | 14 |
| | (22 | ) |
Net cash provided by operating activities | 669 |
| | 793 |
|
| | | |
Investing activities | | | |
Capital/construction expenditures | (1,607 | ) | | (844 | ) |
Purchases of investment securities | (835 | ) | | (305 | ) |
Proceeds from the sale of investment securities | 830 |
| | 300 |
|
Other, net | 6 |
| | (3 | ) |
Net cash used in investing activities | (1,606 | ) | | (852 | ) |
| | | |
Financing activities | | | |
Proceeds from short-term borrowings, net | 1,170 |
| | 214 |
|
Proceeds from issuances of long-term debt | — |
| | 392 |
|
Repayments of long-term debt, including reacquisition premiums | — |
| | (400 | ) |
Dividends paid | (204 | ) | | (187 | ) |
Other, net | (33 | ) | | (13 | ) |
Net cash provided by financing activities | 933 |
| | 6 |
|
| | | |
Net change in cash, cash equivalents and restricted cash | (4 | ) | | (53 | ) |
Cash, cash equivalents and restricted cash at beginning of period | 248 |
| | 147 |
|
Cash, cash equivalents and restricted cash at end of period | $ | 244 |
| | $ | 94 |
|
| | | |
Supplemental disclosure of cash flow information: | | | |
Cash paid for interest (net of amounts capitalized) | $ | (207 | ) | | $ | (190 | ) |
Cash received (paid) for income taxes, net | — |
| | — |
|
| | | |
Supplemental disclosure of non-cash investing and financing transactions: | | | |
Accrued property, plant and equipment additions | $ | 284 |
| | $ | 238 |
|
Inventory transfers to property, plant and equipment | 33 |
| | 18 |
|
Operating lease right-of-use assets | — |
| | 1,659 |
|
Allowance for equity funds used during construction | 23 |
| | 20 |
|
Issuance of common stock for equity awards | 18 |
| | 17 |
|
| | | |
See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED) (amounts in millions, shares in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | |
| Common Stock Issued | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholders’ Equity |
| Shares | | Par Value | | Additional Paid In Capital | | | |
Three Months Ended Sept. 30, 2019 and 2018 | | | | | | | | | | | |
Balance at June 30, 2018 | 508,898 |
| | $ | 1,272 |
| | $ | 5,920 |
| | $ | 4,580 |
| | $ | (122 | ) | | $ | 11,650 |
|
Net income |
|
| |
|
| |
|
| | 491 |
| |
|
| | 491 |
|
Other comprehensive income |
|
| |
|
| |
|
| |
|
| | 3 |
| | 3 |
|
Dividends declared on common stock ($0.38 per share) |
|
| |
|
| |
|
| | (195 | ) | |
|
| | (195 | ) |
Issuances of common stock | 4,401 |
| | 11 |
| | 197 |
| |
|
| |
|
| | 208 |
|
Share-based compensation |
|
| |
|
| | 8 |
| | — |
| |
|
| | 8 |
|
Balance at Sept. 30, 2018 | 513,299 |
| | $ | 1,283 |
| | $ | 6,125 |
| | $ | 4,876 |
| | $ | (119 | ) | | $ | 12,165 |
|
| | | | | | | | | | | |
Balance at June 30, 2019 | 514,865 |
| | $ | 1,287 |
| | $ | 6,190 |
| | $ | 5,024 |
| | $ | (135 | ) | | $ | 12,366 |
|
Net income |
|
| |
|
| |
|
| | 527 |
| |
|
| | 527 |
|
Other comprehensive loss |
|
| |
|
| |
|
| |
|
| | (7 | ) | | (7 | ) |
Dividends declared on common stock ($0.405 per share) |
|
| |
|
| |
|
| | (214 | ) | |
|
| | (214 | ) |
Issuances of common stock | 9,519 |
| | 24 |
| | 438 |
| |
|
| |
|
| | 462 |
|
Share-based compensation |
|
| |
|
| | 8 |
| | (1 | ) | |
|
| | 7 |
|
Balance at Sept. 30, 2019 | 524,384 |
| | $ | 1,311 |
| | $ | 6,636 |
| | $ | 5,336 |
| | $ | (142 | ) | | $ | 13,141 |
|
| | | | | | | | | | | |
See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (amounts in millions, except share and per share data)
|
| | | | | | | |
| March 31, 2020 | | Dec. 31, 2019 |
Assets | | | |
Current assets | | | |
Cash and cash equivalents | $ | 244 |
| | $ | 248 |
|
Accounts receivable, net | 839 |
| | 837 |
|
Accrued unbilled revenues | 561 |
| | 713 |
|
Inventories | 488 |
| | 544 |
|
Regulatory assets | 508 |
| | 488 |
|
Derivative instruments | 45 |
| | 55 |
|
Prepaid taxes | 68 |
| | 43 |
|
Prepayments and other | 230 |
| | 185 |
|
Total current assets | 2,983 |
| | 3,113 |
|
| | | |
Property, plant and equipment, net | 40,776 |
| | 39,483 |
|
| | | |
Other assets | | | |
Nuclear decommissioning fund and other investments | 2,429 |
| | 2,731 |
|
Regulatory assets | 3,130 |
| | 2,935 |
|
Derivative instruments | 39 |
| | 22 |
|
Operating lease right-of-use assets | 1,260 |
| | 1,672 |
|
Other | 516 |
| | 492 |
|
Total other assets | 7,374 |
| | 7,852 |
|
Total assets | $ | 51,133 |
| | $ | 50,448 |
|
| | | |
Liabilities and Equity | | | |
Current liabilities | | | |
Current portion of long-term debt | $ | 1,102 |
| | $ | 702 |
|
Short-term debt | 1,765 |
| | 595 |
|
Accounts payable | 996 |
| | 1,294 |
|
Regulatory liabilities | 456 |
| | 407 |
|
Taxes accrued | 553 |
| | 466 |
|
Accrued interest | 167 |
| | 192 |
|
Dividends payable | 226 |
| | 212 |
|
Derivative instruments | 52 |
| | 38 |
|
Operating lease liabilities | 143 |
| | 194 |
|
Other | 379 |
| | 468 |
|
Total current liabilities | 5,839 |
| | 4,568 |
|
| | | |
Deferred credits and other liabilities | | | |
Deferred income taxes | 4,492 |
| | 4,509 |
|
Deferred investment tax credits | 48 |
| | 49 |
|
Regulatory liabilities | 5,342 |
| | 5,077 |
|
Asset retirement obligations | 2,734 |
| | 2,701 |
|
Derivative instruments | 183 |
| | 175 |
|
Customer advances | 202 |
| | 203 |
|
Pension and employee benefit obligations | 622 |
| | 785 |
|
Operating lease liabilities | 1,163 |
| | 1,549 |
|
Other | 196 |
| | 186 |
|
Total deferred credits and other liabilities | 14,982 |
| | 15,234 |
|
| | | |
Commitments and contingencies |
|
| |
|
|
Capitalization | | | |
Long-term debt | 17,010 |
| | 17,407 |
|
Common stock — 1,000,000,000 shares authorized of $2.50 par value; 525,033,594 and 524,539,000 shares outstanding at March 31, 2020 and Dec. 31, 2019, respectively | 1,313 |
| | 1,311 |
|
Additional paid in capital | 6,659 |
| | 6,656 |
|
Retained earnings | 5,478 |
| | 5,413 |
|
Accumulated other comprehensive loss | (148 | ) | | (141 | ) |
Total common stockholders’ equity | 13,302 |
| | 13,239 |
|
Total liabilities and equity | $ | 51,133 |
| | $ | 50,448 |
|
| | | |
See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED) (amounts in millions, shares in thousands)
| XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED) (amounts in millions, shares in thousands)
| XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED) (amounts in millions, shares in thousands)
|
| | Common Stock Issued | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholders’ Equity | Common Stock Issued | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholders’ Equity |
| Shares | | Par Value | | Additional Paid In Capital | | Shares | | Par Value | | Additional Paid In Capital | |
Nine Months Ended Sept. 30, 2019 and 2018 | | | | | | | | | | | | |
Balance at Dec. 31, 2017 | 507,763 |
| | $ | 1,269 |
| | $ | 5,898 |
| | $ | 4,413 |
| | $ | (125 | ) | | $ | 11,455 |
| |
Three Months Ended March 31, 2020 and 2019 | | | | | | | | | | | | |
Balance at Dec. 31, 2018 | | 514,037 |
| | $ | 1,285 |
| | $ | 6,168 |
| | $ | 4,893 |
| | $ | (124 | ) | | $ | 12,222 |
|
Net income | | | | | | | 1,047 |
| | | | 1,047 |
| | | | | | | 315 |
| | | | 315 |
|
Other comprehensive income | | | | | | | | | 6 |
| | 6 |
| |
Dividends declared on common stock ($1.14 per share) | | | | | | | (584 | ) | | | | (584 | ) | |
Other comprehensive loss | | | | | | | | | | (3 | ) | | (3 | ) |
Dividends declared on common stock ($0.41 per share) | | | | | | | | (210 | ) | | | | (210 | ) |
Issuances of common stock | 5,558 |
| | 14 |
| | 221 |
| | | | | | 235 |
| 637 |
| | 2 |
| | 10 |
| | | | | | 12 |
|
Repurchases of common stock | (22 | ) | | — |
| | (1 | ) | | | | | | (1 | ) | (6 | ) | | — |
| | — |
| | | | | | — |
|
Share-based compensation | | | | | 7 |
| | — |
| | | | 7 |
| | | | | (5 | ) | | (2 | ) | | | | (7 | ) |
Balance at Sept. 30, 2018 | 513,299 |
| | $ | 1,283 |
| | $ | 6,125 |
| | $ | 4,876 |
| | $ | (119 | ) | | $ | 12,165 |
| |
Balance at March 31, 2019 | | 514,668 |
| | $ | 1,287 |
| | $ | 6,173 |
| | $ | 4,996 |
| | $ | (127 | ) | | $ | 12,329 |
|
| | | | | | | | | | | | | | | | | | | | | | |
Balance at Dec. 31, 2018 | 514,037 |
| | $ | 1,285 |
| | $ | 6,168 |
| | $ | 4,893 |
| | $ | (124 | ) | | $ | 12,222 |
| |
Balance at Dec. 31, 2019 | | 524,539 |
| | $ | 1,311 |
| | $ | 6,656 |
| | $ | 5,413 |
| | $ | (141 | ) | | $ | 13,239 |
|
Net income | | | | | | | 1,080 |
| | | | 1,080 |
| | | | | | | 295 |
| | | | 295 |
|
Other comprehensive income | | | | | | | | | (18 | ) | | (18 | ) | |
Dividends declared on common stock ($1.215 per share) | | | | | | | (633 | ) | | | | (633 | ) | |
Other comprehensive loss | | | | | | | | | | (7 | ) | | (7 | ) |
Dividends declared on common stock ($0.43 per share) | | | | | | | | (227 | ) | | | | (227 | ) |
Issuances of common stock | 10,353 |
| | 26 |
| | 458 |
| | | | | | 484 |
| 495 |
| | 2 |
| | 10 |
| | | | | | 12 |
|
Repurchases of common stock | (6 | ) | | — |
| | — |
| | | | | | — |
| |
Share-based compensation | | | | | 10 |
| | (4 | ) | | | | 6 |
| | | | | (7 | ) | | (1 | ) | | | | (8 | ) |
Balance at Sept. 30, 2019 | 524,384 |
| | $ | 1,311 |
| | $ | 6,636 |
| | $ | 5,336 |
| | $ | (142 | ) | | $ | 13,141 |
| |
Adoption of ASC Topic 326 | | | | | | | | (2 | ) | | | | (2 | ) |
Balance at March 31, 2020 | | 525,034 |
| | $ | 1,313 |
| | $ | 6,659 |
| | $ | 5,478 |
| | $ | (148 | ) | | $ | 13,302 |
|
| | | | | | | | | | | | | | | | | | | | | | |
See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (UNAUDITED)
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly, in accordance with U.S. GAAP, the financial position of Xcel Energy Inc. and its subsidiaries as of Sept. 30, 2019March 31, 2020 and Dec. 31, 2018;2019; the results of its operations, including the components of net income and comprehensive income, and changes in stockholders’ equity for the three and nine months ended Sept. 30, 2019March 31, 2020 and 2018;2019; and its cash flows for the ninethree months ended Sept. 30, 2019March 31, 2020 and 2018.2019. All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after Sept. 30, 2019March 31, 2020, up to the date of issuance of these consolidated financial statements. These statements contain all necessary adjustments and disclosures resulting from that evaluation. The Dec. 31, 20182019, balance sheet information has been derived from the audited 20182019 consolidated financial statements included in the Xcel Energy Inc. Annual Report on Form 10-K for the year ended Dec. 31, 2018.2019. Notes to the consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP on an annual basis have been condensed or omitted pursuant to such rules and regulations. For further information, refer to the consolidated financial statements and notes thereto, included in the Xcel Energy Inc. Annual Report on Form 10-K for the year ended Dec. 31, 2018,2019, filed with the SEC on Feb. 22, 2019.21, 2020. Due to the seasonality of Xcel Energy’s electric and natural gas sales, interim results are not necessarily an appropriate base from which to project annual results. | |
|
1. | Summary of Significant Accounting Policies
|
The significant accounting policies set forth in Note 1 to the consolidated financial statements in the Xcel Energy Inc. Annual Report on Form 10-K for the year ended Dec. 31, 2018,2019, appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference. | |
|
2. | Accounting Pronouncements
|
Recently Issued
Credit Losses— In 2016, the FASB issued Financial Instruments - Credit Losses, Topic 326 (ASC Topic 326), which changes how entities account for losses on receivables and certain other assets. The guidance requires use of a current expected credit loss model, which may result in earlier recognition of credit losses than under previous accounting standards. ASC Topic 326 is effective for interim and annual periods beginning on or after Dec. 15, 2019, and will be applied on a modified-retrospective approach through a cumulative-effect adjustment to retained earnings as of Jan. 1, 2020. Xcel Energy expects the impact of adoption of the new standard to include first-time recognition of expected credit losses (i.e., bad debt expense) on unbilled revenues, with the initial allowance established at Jan. 1, 2020 charged to retained earnings.
Recently Adopted
LeasesCredit Losses —In 2016, the FASB issued LeasesFinancial Instruments - Credit Losses, Topic 326 (ASC Topic 326), Topic 842(ASC Topic 842), which provides newchanges how entities account for losses on receivables and certain other assets. The guidance requires use of a current expected credit loss model, which may result in earlier recognition of credit losses than under previous accounting and disclosure guidance for leasing activities, most significantly requiring that operating leases be recognized on the balance sheet. standards.
Xcel Energy adoptedimplemented the guidance on Jan. 1, 2019 utilizing the packageusing a modified-retrospective approach, recognizing a cumulative effect charge of transition practical expedients provided by the new standard, including carrying forward prior conclusions on whether agreements existing before the adoption date contain leases and whether existing leases are operating or finance leases; ASC Topic 842 refers$2 million (after tax) to capital leases as finance leases.
Specifically for land easement contracts, Xcel Energy has elected the practical expedient provided by ASU No. 2018-01 Leases: Land Easement Practical Expedient for Transition to Topic 842, and as a result, only those easement contracts entered on or after Jan. 1, 2019 will be evaluated to determine if lease treatment is appropriate.
Xcel Energy also utilized the transition practical expedient offered by ASU No. 2018-11 Leases: Targeted Improvements to implement the standard on a prospective basis. As a result, reporting periods in the consolidated financial statements beginning Jan. 1, 2019 reflect the implementation of ASC Topic 842, while prior periods continue to be reported in accordance with Leases, Topic 840 (ASC Topic 840).retained earnings. Other than first-time recognition of operating leasesan allowance for doubtful accounts on its consolidated balance sheet,accrued unbilled revenues, the implementationJan. 1, 2020, adoption of ASC Topic 842326 did not have a significant impact on Xcel Energy’s consolidated financial statements. Adoption resulted in recognition of approximately $1.7 billion of operating lease ROU assets and current/noncurrent operating lease liabilities. See Note 10 to the consolidated financial statements for leasing disclosures.
|
|
3. Selected Balance Sheet Data |
| | (Millions of Dollars) | | Sept. 30, 2019 | | Dec. 31, 2018 | | March 31, 2020 | | Dec. 31, 2019 |
Accounts receivable, net | | | | | | | | |
Accounts receivable | | $ | 875 |
| | $ | 915 |
| | $ | 897 |
| | $ | 892 |
|
Less allowance for bad debts | | (54 | ) | | (55 | ) | | (58 | ) | | (55 | ) |
Accounts receivable, net | | $ | 821 |
| | $ | 860 |
| | $ | 839 |
| | $ | 837 |
|
|
| | | | | | | | |
(Millions of Dollars) | | March 31, 2020 | | Dec. 31, 2019 |
Inventories | | | | |
Materials and supplies | | $ | 283 |
| | $ | 270 |
|
Fuel | | 170 |
| | 191 |
|
Natural gas | | 35 |
| | 83 |
|
Total inventories | | $ | 488 |
| | $ | 544 |
|
|
| | | | | | | | |
(Millions of Dollars) | | Sept. 30, 2019 | | Dec. 31, 2018 |
Inventories | | | | |
Materials and supplies | | $ | 271 |
| | $ | 271 |
|
Fuel | | 187 |
| | 170 |
|
Natural gas | | 86 |
| | 107 |
|
Total inventories | | $ | 544 |
| | $ | 548 |
|
| | (Millions of Dollars) | | Sept. 30, 2019 | | Dec. 31, 2018 | | March 31, 2020 | | Dec. 31, 2019 |
Property, plant and equipment, net | | | | | | | | |
Electric plant | | $ | 43,301 |
| | $ | 41,472 |
| | $ | 44,544 |
| | $ | 44,355 |
|
Natural gas plant | | 6,414 |
| | 6,210 |
| | 6,653 |
| | 6,560 |
|
Common and other property | | 2,251 |
| | 2,154 |
| | 2,991 |
| | 2,341 |
|
Plant to be retired (a) | | 276 |
| | 322 |
| | 217 |
| | 259 |
|
CWIP | | 2,629 |
| | 2,091 |
| | 2,756 |
| | 2,329 |
|
Total property, plant and equipment | | 54,871 |
| | 52,249 |
| | 57,161 |
| | 55,844 |
|
Less accumulated depreciation | | (16,549 | ) | | (15,659 | ) | | (16,730 | ) | | (16,735 | ) |
Nuclear fuel | | 2,887 |
| | 2,771 |
| | 2,913 |
| | 2,909 |
|
Less accumulated amortization | | (2,506 | ) | | (2,417 | ) | | (2,568 | ) | | (2,535 | ) |
Property, plant and equipment, net | | $ | 38,703 |
| | $ | 36,944 |
| | $ | 40,776 |
| | $ | 39,483 |
|
| |
(a) | In 2018, the CPUC approved early retirement of PSCo’s Comanche Units 1 and 2 in approximately 2022 and 2025, respectively. PSCo also expects Craig Unit 1 to be retired early in 2025. Amounts are presented net of accumulated depreciation. |
|
|
4. Borrowings and Other Financing Instruments |
Short-Term Borrowings
Short-Term Debt — Xcel Energy Inc. and its utility subsidiaries meet their short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under their credit facilities and term loan agreements.
Commercial paper and term loan borrowings outstanding for Xcel Energy were as follows:
| | (Amounts in Millions, Except Interest Rates) | | Three Months Ended Sept. 30, 2019 | | Year Ended Dec. 31, 2018 | | Three Months Ended March 31, 2020 | | Year Ended Dec. 31, 2019 |
Borrowing limit | | $ | 3,600 |
| | $ | 3,250 |
| | $ | 4,300 |
| | $ | 3,600 |
|
Amount outstanding at period end | | 933 |
| | 1,038 |
| | 1,765 |
| | 595 |
|
Average amount outstanding | | 1,303 |
| | 788 |
| | 1,404 |
| | 1,115 |
|
Maximum amount outstanding | | 1,780 |
| | 1,349 |
| | 2,080 |
| | 1,780 |
|
Weighted average interest rate, computed on a daily basis | | 2.62 | % | | 2.34 | % | | 2.05 | % | | 2.72 | % |
Weighted average interest rate at period end | | 2.54 |
| | 2.97 |
| | 1.96 |
| | 2.34 |
|
Letters of Credit — Xcel Energy Inc. and its subsidiaries use letters of credit, generally with terms of one year, to provide financial guarantees for certain operating obligations. At Sept. 30, 2019both March 31, 2020 and Dec. 31, 2018,2019, there were $30$20 million and $49 million, respectively, of letters of credit outstanding under the credit facilities. The contract amounts of these letters of credit approximate their fair value and are subject to fees.
Revolving Credit Facilities — In order to use commercial paper programs to fulfill short-term funding needs, Xcel Energy Inc. and its utility subsidiaries must have revolving credit facilities in place at least equal to the amount of their respective commercial paper borrowing limits and cannot issue commercial paper in an aggregate amount exceeding available capacity under these credit facilities. The lines of credit provide short-term financing in the form of notes payable to banks, letters of credit and back-up support for commercial paper borrowings.
As of March 31, 2020, Xcel Energy Inc., NSP-Minnesota, NSP-Wisconsin, PSCo and SPS entered into amended five-year credit agreements with a syndicate of banks. The total borrowing limit under the amended credit agreements was increased to $3.1 billion, withits utility subsidiaries had the following changes:committed revolving credit facilities available:
Maturity extended from June 2021 to June 2024. |
| | | | | | | | | | | | |
(Millions of Dollars) | | Credit Facility (a) | | Outstanding (b) | | Available |
Xcel Energy Inc. | | $ | 1,250 |
| | $ | 449 |
| | $ | 801 |
|
PSCo | | 700 |
| | 8 |
| | 692 |
|
NSP-Minnesota | | 500 |
| | 10 |
| | 490 |
|
SPS | | 500 |
| | 42 |
| | 458 |
|
NSP-Wisconsin | | 150 |
| | 76 |
| | 74 |
|
Total | | $ | 3,100 |
| | $ | 585 |
| | $ | 2,515 |
|
| |
•(a) | Borrowing limit for Xcel Energy was increased from $1.0 billion to $1.25 billion Expires in June 2024. |
| |
• | Borrowing limit for SPS was increased from $400 million to $500 million(b)
|
| |
• | Added swingline subfacility for Xcel Energy up to $75 million Includes outstanding commercial paper and letters of credit. |
Xcel Energy Inc., NSP-Minnesota, PSCo, and SPS each have the right to request an extension of the revolving credit facility termination date for 2two additional one year periods. NSP-Wisconsin has the right to request an extension of the revolving credit facility termination date for an additional one year period. All extension requests are subject to majority bank group approval.
As of Sept. 30, 2019, Xcel Energy Inc. and its utility subsidiaries had the following committed credit facilities available:
|
| | | | | | | | | | | | |
(Millions of Dollars) | | Credit Facility (a) | | Outstanding (b) | | Available |
Xcel Energy Inc. | | $ | 1,250 |
| | $ | 365 |
| | $ | 885 |
|
PSCo | | 700 |
| | 9 |
| | 691 |
|
NSP-Minnesota | | 500 |
| | 19 |
| | 481 |
|
SPS | | 500 |
| | 2 |
| | 498 |
|
NSP-Wisconsin | | 150 |
| | 68 |
| | 82 |
|
Total | | $ | 3,100 |
| | $ | 463 |
| | $ | 2,637 |
|
| |
(b)
| Includes outstanding commercial paper and letters of credit. |
All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the respective credit facilities. Xcel Energy Inc. and its subsidiaries had 0 direct advances on the credit facilities outstanding as of Sept. 30, 2019March 31, 2020 and Dec. 31, 2018.2019.
Term Loan AgreementAgreements — In December 2018,March 2020, Xcel Energy Inc. renewed its $500entered into a $700 million, 364 Day364-Day Term Loan Agreement. No additional capacity remains as loans borrowed and repaid may not be redrawn. The loan is unsecured and matures Dec. 3, 2019.March 22, 2021. Xcel Energy has an option to request an extension through Dec. 2, 2020.
March 21, 2022. The term loan includes one financial covenant, requiring Xcel Energy’s consolidated funded debt to total capitalization ratio to be less than or equal to 65%.65 percent. Interest is at a rate equal to either (i) the Eurodollar rate, plus 50.060.0 basis points, or (ii) an alternate base rate. Xcel Energy is also required to pay a commitment fee equal to 10 basis points per annum on any unborrowed portion.
As of Sept. 30, 2019,March 31, 2020, Xcel Energy Inc.’s term loan borrowings were as follows:
| | (Millions of Dollars) | | Limit | | Amount Used | | Available | | Limit | | Amount Used | | Available |
Xcel Energy Inc. | | $ | 500 |
| | $ | 500 |
| | $ | — |
| | $ | 1,200 |
| | $ | 1,200 |
| | $ | — |
|
Bilateral Credit Agreement
In March 2019, NSP-Minnesota entered into a one-yearone year uncommitted bilateral credit agreement. The credit agreement is limited in use to support letters of credit. In March 2020, NSP-Minnesota renewed its bilateral credit agreement for an additional one-year term.
As of Sept. 30, 2019,March 31, 2020, NSP-Minnesota’s outstanding letters of credit under the Bilateral Credit Agreement were as follows:
| | (Millions of Dollars) | | Limit | | Amount Outstanding | | Available | | Limit | | Amount Outstanding | | Available |
NSP-Minnesota | | $ | 75 |
| | $ | 20 |
| | $ | 55 |
| | $ | 75 |
| | $ | 26 |
| | $ | 49 |
|
Long-Term Borrowings
During the ninethree months ended Sept. 30, 2019,March 31, 2020, Xcel Energy Inc. and its utility subsidiaries issued the following:
PSCo issued $400 million of 4.05% first mortgage bonds due Sept. 15, 2049.
did not issue any long-term debt. On April 1, 2020, Xcel Energy Inc. issued $130 million of 4.00% senior unsecured bonds due June 15, 2028.
SPS issued $300 million of 3.75% first mortgage green bonds due June 15, 2049.
PSCo issued $550 million of 3.20% first mortgage green bonds due March 1, 2050.
NSP-Minnesota issued $600 million of 2.90% first mortgage green bonds3.40% senior unsecured notes due MarchJune 1, 2050.2030.
Forward Equity Agreements — In November 2018,2019, Xcel Energy Inc. entered into forward sale agreements in connection with a completed $459$743 million public offering of 9.411.8 million shares of Xcel Energy common stock. The initial forward agreement was for 8.110.3 million shares with an additional agreement for 1.21.5 million shares that was exercised at the option of the banking counterparty. On Aug. 29, 2019, Xcel Energy settled
At March 31, 2020, the forward equity agreements by physically delivering 9.4could have been settled with physical delivery of 11.8 million common shares to the banking counterparty in exchange for cash of $734 million. The forward instruments could also have been settled at March 31, 2020, with delivery of approximately $19 million of cash or approximately 0.3 million shares of common equitystock to the counterparty, if Xcel Energy unilaterally elected net cash or net share settlement, respectively.
The forward price used to determine amounts due at settlement is calculated based on the November 2019, public offering price for Xcel Energy’s common stock of $62.69, increased for the overnight bank funding rate, less a spread of 0.75% and less expected dividends on Xcel Energy’s common stock during the period the instruments are outstanding.
Xcel Energy may settle the agreements at any time up to the maturity date of Dec. 31, 2020. Depending on settlement timing, cash proceeds are expected to be approximately $720 million to $735 million.
Forward equity instruments were recognized within stockholders’ equity at fair value at execution of $453 million.the agreements and will not be subsequently adjusted until settlement.
Other Equity — Xcel Energy Inc. issued $28.9$10 million and $38.5 million of equity through the DRIP during both the ninethree months ended Sept. 30, 2019,March 31, 2020 and year ended Dec. 31, 2018, respectively.2019. The program allows shareholders to elect dividend reinvestment in Xcel Energy Inc. common stock through a non-cash transaction.
Revenue is classified by the type of goods/services rendered and market/customer type. Xcel Energy’s operating revenues consists of the following:
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended Sept. 30, 2019 |
(Millions of Dollars) | | Electric | | Natural Gas | | All Other | | Total |
Major revenue types | | | | | | | | |
Revenue from contracts with customers: | | | | | | | | |
Residential | | $ | 865 |
| | $ | 124 |
| | $ | 10 |
| | $ | 999 |
|
C&I | | 1,383 |
| | 58 |
| | 6 |
| | 1,447 |
|
Other | | 35 |
| | — |
| | 1 |
| | 36 |
|
Total retail | | 2,283 |
| | 182 |
| | 17 |
| | 2,482 |
|
Wholesale | | 205 |
| | — |
| | — |
| | 205 |
|
Transmission | | 151 |
| | — |
| | — |
| | 151 |
|
Other | | 13 |
| | 24 |
| | — |
| | 37 |
|
Total revenue from contracts with customers | | 2,652 |
| | 206 |
| | 17 |
| | 2,875 |
|
Alternative revenue and other | | 119 |
| | 16 |
| | 3 |
| | 138 |
|
Total revenues | | $ | 2,771 |
| | $ | 222 |
| | $ | 20 |
| | $ | 3,013 |
|
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended Sept. 30, 2018 |
(Millions of Dollars) | | Electric | | Natural Gas | | All Other | | Total |
Major revenue types | | | | | | | | |
Revenue from contracts with customers: | | | | | | | | |
Residential | | $ | 890 |
| | $ | 116 |
| | $ | 10 |
| | $ | 1,016 |
|
C&I | | 1,408 |
| | 58 |
| | 5 |
| | 1,471 |
|
Other | | 35 |
| | — |
| | 1 |
| | 36 |
|
Total retail | | 2,333 |
| | 174 |
| | 16 |
| | 2,523 |
|
Wholesale | | 207 |
| | — |
| | — |
| | 207 |
|
Transmission | | 143 |
| | — |
| | — |
| | 143 |
|
Other | | 17 |
| | 25 |
| | — |
| | 42 |
|
Total revenue from contracts with customers | | 2,700 |
| | 199 |
| | 16 |
| | 2,915 |
|
Alternative revenue and other | | 102 |
| | 28 |
| | 3 |
| | 133 |
|
Total revenues | | $ | 2,802 |
| | $ | 227 |
| | $ | 19 |
| | $ | 3,048 |
|
|
| | | | | | | | | | | | | | | | |
| | Nine Months Ended Sept. 30, 2019 |
(Millions of Dollars) | | Electric | | Natural Gas | | All Other | | Total |
Major revenue types | | | | | | | | |
Revenue from contracts with customers: | | | | | | | | |
Residential | | $ | 2,216 |
| | $ | 801 |
| | $ | 29 |
| | $ | 3,046 |
|
C&I | | 3,724 |
| | 403 |
| | 21 |
| | 4,148 |
|
Other | | 98 |
| | — |
| | 3 |
| | 101 |
|
Total retail | | 6,038 |
| | 1,204 |
| | 53 |
| | 7,295 |
|
Wholesale | | 548 |
| | — |
| | — |
| | 548 |
|
Transmission | | 409 |
| | — |
| | — |
| | 409 |
|
Other | | 42 |
| | 84 |
| | — |
| | 126 |
|
Total revenue from contracts with customers | | 7,037 |
| | 1,288 |
| | 53 |
| | 8,378 |
|
Alternative revenue and other | | 308 |
| | 36 |
| | 9 |
| | 353 |
|
Total revenues | | $ | 7,345 |
| | $ | 1,324 |
| | $ | 62 |
| | $ | 8,731 |
|
| | | | Nine Months Ended Sept. 30, 2018 | | Three Months Ended March 31, 2020 |
(Millions of Dollars) | | Electric | | Natural Gas | | All Other | | Total | | Electric | | Natural Gas | | All Other | | Total |
Major revenue types | | | | | | | | | | | | | | | | |
Revenue from contracts with customers: | | | | | | | | | Revenue from contracts with customers: |
Residential | | $ | 2,255 |
| | $ | 663 |
| | $ | 28 |
| | $ | 2,946 |
| | $ | 676 |
| | $ | 355 |
| | $ | 11 |
| | $ | 1,042 |
|
C&I | | 3,726 |
| | 347 |
| | 17 |
| | 4,090 |
| | 1,066 |
| | 180 |
| | 9 |
| | 1,255 |
|
Other | | 101 |
| | — |
| | 5 |
| | 106 |
| | 29 |
| | — |
| | 1 |
| | 30 |
|
Total retail | | 6,082 |
| | 1,010 |
| | 50 |
| | 7,142 |
| | 1,771 |
| | 535 |
| | 21 |
| | 2,327 |
|
Wholesale | | 589 |
| | — |
| | — |
| | 589 |
| | 166 |
| | — |
| | — |
| | 166 |
|
Transmission | | 398 |
| | — |
| | — |
| | 398 |
| | 132 |
| | — |
| | — |
| | 132 |
|
Other | | 80 |
| | 76 |
| | — |
| | 156 |
| | 17 |
| | 32 |
| | — |
| | 49 |
|
Total revenue from contracts with customers | | 7,149 |
| | 1,086 |
| | 50 |
| | 8,285 |
| | 2,086 |
| | 567 |
| | 21 |
| | 2,674 |
|
Alternative revenue and other | | 270 |
| | 95 |
| | 7 |
| | 372 |
| | 117 |
| | 16 |
| | 4 |
| | 137 |
|
Total revenues | | $ | 7,419 |
| | $ | 1,181 |
| | $ | 57 |
| | $ | 8,657 |
| | $ | 2,203 |
| | $ | 583 |
| | $ | 25 |
| | $ | 2,811 |
|
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, 2019 |
(Millions of Dollars) | | Electric | | Natural Gas | | All Other | | Total |
Major revenue types | | | | | | | | |
Revenue from contracts with customers: |
Residential | | $ | 727 |
| | $ | 495 |
| | $ | 9 |
| | $ | 1,231 |
|
C&I | | 1,140 |
| | 255 |
| | 9 |
| | 1,404 |
|
Other | | 32 |
| | — |
| | 1 |
| | 33 |
|
Total retail | | 1,899 |
| | 750 |
| | 19 |
| | 2,668 |
|
Wholesale | | 189 |
| | — |
| | — |
| | 189 |
|
Transmission | | 131 |
| | — |
| | — |
| | 131 |
|
Other | | 18 |
| | 34 |
| | — |
| | 52 |
|
Total revenue from contracts with customers | | 2,237 |
| | 784 |
| | 19 |
| | 3,040 |
|
Alternative revenue and other | | 88 |
| | 10 |
| | 3 |
| | 101 |
|
Total revenues | | $ | 2,325 |
| | $ | 794 |
| | $ | 22 |
| | $ | 3,141 |
|
Note 7 to the consolidated financial statements included in Xcel Energy’s Annual Report on Form 10-K for the year ended Dec. 31, 20182019, represents, in all material respects, the current status of other income tax matters except to the extent noted below, and are incorporated herein by reference. The following table reconciles the difference between the statutory rate and the ETR:
| | | | Three Months Ended Sept. 30 | | Nine Months Ended Sept. 30 | | Three Months Ended March 31 |
| | 2019 | | 2018 | | 2019 | | 2018 | | 2020 | | 2019 |
Federal statutory rate | | 21.0 | % | | 21.0 | % | | 21.0 | % | | 21.0 | % | | 21.0 | % | | 21.0 | % |
State tax (net of federal tax effect) | | 5.0 |
| | 5.0 |
| | 5.0 |
| | 5.0 |
| | 4.9 |
| | 5.0 |
|
(Decreases) increases: | | | | | | | | | |
Decreases in tax from: | | | | | |
Wind PTCs | | (6.1 | ) | | (2.6 | ) | | (8.1 | ) | | (4.3 | ) | | (17.2 | ) | | (8.6 | ) |
Plant regulatory differences (a) | | (5.6 | ) | | (9.4 | ) | | (5.5 | ) | | (5.2 | ) | | (8.4 | ) | | (5.7 | ) |
Other tax credits and tax credit and NOL allowances (net) | | (1.7 | ) | | (1.9 | ) | | (1.8 | ) | | (1.5 | ) | |
Other tax credits, net NOL & tax credit allowances | | | (0.9 | ) | | (2.7 | ) |
Other (net) | | (0.6 | ) | | 0.8 |
| | (0.5 | ) | | 0.2 |
| | (1.5 | ) | | (1.6 | ) |
Effective income tax rate | | 12.0 | % | | 12.9 | % | | 10.1 | % | | 15.2 | % | | (2.1 | )% | | 7.4 | % |
| |
(a) | Regulatory differences for income tax primarily relate to the credit of excess deferred taxes to customers through the average rate assumption method and the timing of regulatory decisions regarding the return of excess deferred taxes.method. Income tax benefits associated with the credit of excess deferred credits are offset by corresponding revenue reductions and additional prepaid pension asset amortization.reductions. |
Federal Audits — Statute of limitations applicable to Xcel Energy’s consolidated federal income tax returns expire as follows:
|
| | |
Tax Year(s)Years | | Expiration |
2009 - 2013 | | JuneSeptember 2020 |
2014 - 2016 | | September 2020June 2021 |
In 2015, the IRS commenced an examination of tax years 2012 and 2013. In 2017, the IRS concluded the audit of tax years 2012 and 2013 and proposed an adjustment that would impact Xcel Energy’s NOL and ETR. Xcel Energy filed a protest with the IRS. As of Sept. 30, 2019,March 31, 2020, the case has been forwarded to the Office of Appeals and Xcel Energy has recognized its best estimate of income tax expense that will result from a final resolution of this issue; however, the outcome and timing of a resolution is unknown.
In 2018, the IRS began an audit of tax years 2014 - 2016. As of Sept. 30, 2019,March 31, 2020, 0 adjustments have been proposed.
State Audits — Xcel Energy files consolidated state tax returns based on income in its major operating jurisdictions and various other state income-based tax returns.
As of Sept. 30, 2019,March 31, 2020, Xcel Energy’s earliest open tax years (subject to examination by state taxing authorities in its major operating jurisdictions) were as follows:
|
| | |
State | | Year |
Colorado | | 2009 |
Minnesota | | 2009 |
Texas | | 2009 |
Wisconsin | | 2014 |
In 2018, Wisconsin began an audit of tax years 2014 - 2016. As of Sept. 30, 2019,March 31, 2020, 0 material adjustments have been proposed.
No other state income tax audits were in progress as of Sept. 30, 2019.March 31, 2020.
Unrecognized Benefits — Unrecognized tax benefit balance includes permanent tax positions, which if recognized would affect the annual ETR. In addition, the unrecognized tax benefit balance includes temporary tax positions for which ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility. A change in the period of deductibility would not affect the ETR but would accelerate the payment to the taxing authority to an earlier period.
Unrecognized tax benefits — permanent vs. temporary:
| | (Millions of Dollars) | | Sept. 30, 2019 | | Dec. 31, 2018 | | March 31, 2020 | | Dec. 31, 2019 |
Unrecognized tax benefit — Permanent tax positions | | $ | 33 |
| | $ | 28 |
| | $ | 36 |
| | $ | 35 |
|
Unrecognized tax benefit — Temporary tax positions | | 10 |
| | 9 |
| | 10 |
| | 9 |
|
Total unrecognized tax benefit | | $ | 43 |
| | $ | 37 |
| | $ | 46 |
| | $ | 44 |
|
Unrecognized tax benefits were reduced by tax benefits associated with NOL and tax credit carryforwards:
| | (Millions of Dollars) | | Sept. 30, 2019 | | Dec. 31, 2018 | | March 31, 2020 | | Dec. 31, 2019 |
NOL and tax credit carryforwards | | $ | (40 | ) | | $ | (35 | ) | | $ | (42 | ) | | $ | (40 | ) |
Net deferred tax liability associated with the unrecognized tax benefit amounts and related NOLs and tax credits carryforwards were $28$30 million at Sept. 30, 2019March 31, 2020 and $24$29 million at Dec. 31, 2018.2019.
As the IRS Appeals and federal and state audits progresses,progress, it is reasonably possible that the amount of unrecognized tax benefit could decrease up to approximately $28 million in the next 12 months.
Payables for interest related to unrecognized tax benefits were not material and no0 amounts were accrued for penalties related to unrecognized tax benefits as of Sept. 30, 2019March 31, 2020 or Dec. 31, 2018.2019.
Basic EPS was computed by dividing the earnings available to common shareholders by the weighted average number of common shares outstanding. Diluted EPS was computed by dividing the earnings available to common shareholders by the diluted weighted average number of common shares outstanding.
Diluted EPS reflects the potential dilution that could occur if securities or other agreements to issue common stock (i.e., common stock equivalents) were settled. The weighted average number of potentially dilutive shares outstanding used to calculate diluted EPS is calculated using the treasury stock method.
Common Stock Equivalents — Xcel Energy Inc. has common stock equivalents related to forward equity agreements (settled in August 2019) and time-based equity compensation awards.
Stock equivalent units granted to Xcel Energy Inc.’s Board of Directors are included in common shares outstanding upon grant date as there is no further service, performance or market condition associated with these awards. Restricted stock issued to employees is included in common shares outstanding when granted.
Share-based compensation arrangements for which there is currently no dilutive impact to EPS include the following:
Equity awards subject to a performance condition; included in common shares outstanding when all necessary conditions for settlement have been satisfied by the end of the reporting period; and
Liability awards subject to a performance condition; any portions settled in shares are included in common shares outstanding upon settlement.
Diluted common shares outstanding included common stock equivalents of 1.80.8 million and 1.61.2 million for the three and nine months ended Sept. 30,March 31, 2020 and 2019, respectively (0.4 million for both the three and nine months ended Sept. 30, 2018).respectively.
| |
|
8. | Fair Value of Financial Assets and Liabilities
|
Fair Value Measurements
Accounting guidance for fair value measurements and disclosures provides a single definition of fair value a hierarchical framework for measuring assets and liabilities and requires disclosuredisclosures about assets and liabilities measured at fair value.
Level 1 — Quoted prices are available in active markets A hierarchical framework for identical assets or liabilities asdisclosing the observability of the reporting date. The types ofinputs utilized in measuring assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices.at fair value is established by this guidance.
Level 2 — Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reporting date. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs. | |
• | Level 1 — Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices; |
| |
• | Level 2 — Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reporting date. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs; and |
| |
• | Level 3 — Significant inputs to pricing have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 are those valued with models requiring significant management judgment or estimation. |
Specific valuation methods include the following:include:
Cash equivalents — The fair values of cash equivalents are generally based on cost plus accrued interest; money market funds are measured using quoted NAV.
Investments in equity securities and other funds — Equity securities are valued using quoted prices in active markets. The fair values for commingled funds are measured using NAVs. The investments in commingled funds may be redeemed for NAV with proper notice. Private equity commingled fund investments require approval of the fund for any unscheduled redemption, and such redemptions may be approved or denied by the fund at its sole discretion. Unscheduled distributions from real estate commingled funds investments may be redeemed with proper notice;notice, however, withdrawals may be delayed or discounted as a result of fund illiquidity.
Investments in debt securities — Fair values for debt securities are determined by a third party pricing service using recent trades and observable spreads from benchmark interest rates for similar securities.
Interest rate derivatives — Fair values of interest rate derivatives are based on broker quotes that utilize current market interest rate forecasts.
Commodity derivatives — Methods used to measure the fair value of commodity derivative forwards and options generally utilize observable forward prices and volatilities, as well as observable pricing adjustments for specific delivery locations and are generally assigned a Level 2 classification. When contractual settlements relate to inactive delivery locations for which pricing is relatively unobservable, or extend to periods beyond those readily observable on active exchanges or quoted by brokers, the significance of the use of less observable inputsforecasts of forward prices and volatilities on a valuation is evaluated and may result in Level 3 classification.
Electric commodity derivatives held by NSP-Minnesota and SPS include transmission congestion instruments, generally referred to as FTRs. FTRs purchased from a RTO are financial instruments that entitle or obligate the holder to monthly revenues or charges based on transmission congestion across a given transmission path.
The value of an FTR is derived from, and designed to offset, the cost of transmission congestion. In addition to overall transmission load, congestion is also influenced by the operating schedules of power plants and the consumption of electricity pertinent to a given transmission path. Unplanned plant outages, scheduled plant maintenance, changes in the relative costs of fuels used in generation, weather and overall changes in demand for electricity can each impact the operating schedules of the power plants on the transmission grid and the value of an FTR.
If forecasted costs of electric transmission congestion increase or decrease for a given FTR path, the value of that particular FTR instrument will likewise increase or decrease. Given the limited observability of importantcertain inputs to the value of FTRs between auction processes, including expected plant operating schedules and retail and wholesale demand, fair value measurements for FTRs have been assigned a Level 3.
Non-trading monthly FTR settlements are included in fuel and purchased energy cost recovery mechanisms as applicable in each jurisdiction and therefore changes in the fair value of the yet to be settled portions of most FTRs are deferred as a regulatory asset or liability. Given this regulatory treatment and the limited magnitude of FTRs relative to the electric utility operations of NSP-Minnesota and SPS, the numerous unobservable quantitative inputs pertinent to the value of FTRs are insignificant to the consolidated financial statements of Xcel Energy.statements.
Non-Derivative Fair Value Measurements
The NRC requires NSP-Minnesota to maintain a portfolio of investments to fund the costs of decommissioning its nuclear generating plants. Assets of the nuclear decommissioning fund are legally restricted for the purpose of decommissioning these facilities. The fund contains cash equivalents, debt securities, equity securities and other investments. NSP-Minnesota uses the MPUC approved asset allocation for the escrow and investment targets by asset class for both the escrow and qualified trust.
NSP-Minnesota recognizes the costs of funding the decommissioning over the lives of the nuclear plants, assuming rate recovery of all costs. Realized and unrealized gains on fund investments over the life of the fund are deferred as an offset of NSP-Minnesota’s regulatory asset for nuclear decommissioning costs. Consequently, any realized and unrealized gains and losses on securities in the nuclear decommissioning fund are deferred as a component of the regulatory asset.
Unrealized gains for the nuclear decommissioning fund were $619 million and $450 million as of Sept. 30, 2019 and Dec. 31, 2018, respectively, and unrealized losses were $22 million and $45 million as of Sept. 30, 2019 and Dec. 31, 2018, respectively.
Unrealized gains for the nuclear decommissioning fund were $454 million and $706 million as of March 31, 2020 and Dec. 31, 2019, respectively, and unrealized losses were $88 million and $6 million as of March 31, 2020 and Dec. 31, 2019, respectively.
Non-derivative instruments with recurring fair value measurements in the nuclear decommissioning fund:
| | | | Sept. 30, 2019 | | March 31, 2020 |
| | | | Fair Value | | | | Fair Value |
(Millions of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | NAV | | Total | | Cost | | Level 1 | | Level 2 | | Level 3 | | NAV | | Total |
Nuclear decommissioning fund (a) | | | | | | | | | | | | | | | | | | | | | | | | |
Cash equivalents | | $ | 23 |
| | $ | 23 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 23 |
| | $ | 71 |
| | $ | 71 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 71 |
|
Commingled funds | | 815 |
| | — |
| | — |
| | — |
| | 997 |
| | 997 |
| | 756 |
| | — |
| | — |
| | — |
| | 843 |
| | 843 |
|
Debt securities | | 489 |
| | — |
| | 484 |
| | 12 |
| | — |
| | 496 |
| | 514 |
| | — |
| | 488 |
| | 13 |
| | — |
| | 501 |
|
Equity securities | | 393 |
| | 800 |
| | 1 |
| | — |
| | — |
| | 801 |
| | 435 |
| | 726 |
| | 1 |
| | — |
| | — |
| | 727 |
|
Total | | $ | 1,720 |
| | $ | 823 |
| | $ | 485 |
| | $ | 12 |
| | $ | 997 |
| | $ | 2,317 |
| | $ | 1,776 |
| | $ | 797 |
| | $ | 489 |
| | $ | 13 |
| | $ | 843 |
| | $ | 2,142 |
|
| |
(a) | Reported in nuclear decommissioning fund and other investments on the consolidated balance sheet, which also includes $151$158 million of equity investments in unconsolidated subsidiaries and $132$129 million of rabbi trust assets and miscellaneous investments. |
| | | | Dec. 31, 2018 | | Dec. 31, 2019 |
| | | | Fair Value | | | | Fair Value |
(Millions of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | NAV | | Total | | Cost | | Level 1 | | Level 2 | | Level 3 | | NAV | | Total |
Nuclear decommissioning fund (a) | | | | | | | | | | | | | | | | | | | | | | | | |
Cash equivalents | | $ | 24 |
| | $ | 24 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 24 |
| | $ | 33 |
| | $ | 33 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 33 |
|
Commingled funds | | 758 |
| | 79 |
| | — |
| | — |
| | 819 |
| | 898 |
| | 733 |
| | — |
| | — |
| | — |
| | 935 |
| | 935 |
|
Debt securities | | 466 |
| | — |
| | 436 |
| | — |
| | — |
| | 436 |
| | 489 |
| | — |
| | 495 |
| | 13 |
| | — |
| | 508 |
|
Equity securities | | 401 |
| | 697 |
| | — |
| | — |
| | — |
| | 697 |
| | 485 |
| | 962 |
| | 2 |
| | — |
| | — |
| | 964 |
|
Total | | $ | 1,649 |
| | $ | 800 |
| | $ | 436 |
| | $ | — |
| | $ | 819 |
| | $ | 2,055 |
| | $ | 1,740 |
| | $ | 995 |
| | $ | 497 |
| | $ | 13 |
| | $ | 935 |
| | $ | 2,440 |
|
| |
(a) | Reported in nuclear decommissioning fund and other investments on the consolidated balance sheet, which also includes $141$155 million of equity investments in unconsolidated subsidiaries and $121$136 million of rabbi trust assets and miscellaneous investments. |
For the three and nine months ended Sept. 30,March 31, 2020 and 2019, and 2018, there were 0 transfersimmaterial Level 3 nuclear decommissioning fund investments or transfer of amounts between levels.
Contractual maturity dates of debt securities in the nuclear decommissioning fund as of Sept. 30, 2019:March 31, 2020:
| | | | Final Contractual Maturity | | Final Contractual Maturity |
(Millions of Dollars) | | Due in 1 Year or Less | | Due in 1 to 5 Years | | Due in 5 to 10 Years | | Due after 10 Years | | Total | | Due in 1 Year or Less | | Due in 1 to 5 Years | | Due in 5 to 10 Years | | Due after 10 Years | | Total |
Debt securities | | $ | 1 |
| | $ | 126 |
| | $ | 226 |
| | $ | 143 |
| | $ | 496 |
| | $ | 11 |
| | $ | 81 |
| | $ | 205 |
| | $ | 204 |
| | $ | 501 |
|
Rabbi Trusts
Xcel Energy has established rabbi trusts to provide partial funding for future distributions of its supplemental executive retirement plan and deferred compensation plan.
Cost and fair value of assets held in rabbi trusts:
|
| | | | | | | | | | | | | | | | | | | | |
| | Sept. 30, 2019 |
| | | | Fair Value |
(Millions of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | Total |
Rabbi Trusts (a) | | | | | | | | | | |
Cash equivalents | | $ | 17 |
| | $ | 17 |
| | $ | — |
| | $ | — |
| | $ | 17 |
|
Mutual funds | | 55 |
| | 61 |
| | — |
| | — |
| | 61 |
|
Total | | $ | 72 |
| | $ | 78 |
| | $ | — |
| | $ | — |
| | $ | 78 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | March 31, 2020 |
| | | | Fair Value |
(Millions of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | Total |
Rabbi Trusts (a) | | | | | | | | | | |
Cash equivalents | | $ | 17 |
| | $ | 17 |
| | $ | — |
| | $ | — |
| | $ | 17 |
|
Mutual funds | | 57 |
| | 56 |
| | — |
| | — |
| | 56 |
|
Total | | $ | 74 |
| | $ | 73 |
| | $ | — |
| | $ | — |
| | $ | 73 |
|
| | | | Dec. 31, 2018 | | Dec. 31, 2019 |
| | | | Fair Value | | | | Fair Value |
(Millions of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | Total | | Cost | | Level 1 | | Level 2 | | Level 3 | | Total |
Rabbi Trusts (a) | | | | | | | | | | | | | | | | | | | | |
Cash equivalents | | $ | 16 |
| | $ | 16 |
| | $ | — |
| | $ | — |
| | $ | 16 |
| | $ | 17 |
| | $ | 17 |
| | $ | — |
| | $ | — |
| | $ | 17 |
|
Mutual funds | | 52 |
| | 51 |
| | — |
| | — |
| | 51 |
| | 57 |
| | 65 |
| | — |
| | — |
| | 65 |
|
Total | | $ | 68 |
| | $ | 67 |
| | $ | — |
| | $ | — |
| | $ | 67 |
| | $ | 74 |
| | $ | 82 |
| | $ | — |
| | $ | — |
| | $ | 82 |
|
(a) Reported in nuclear decommissioning fund and other investments on the consolidated balance sheet.
Derivative Instruments Fair Value Measurements
Xcel Energy enters into derivative instruments, including forward contracts, futures, swaps and options, for trading purposes and to manage risk in connection with changes in interest rates, utility commodity prices and vehicle fuel prices.
Interest Rate Derivatives — Xcel Energy enters into various instruments that effectively fix the interest payments on certain floating rate debt obligations or effectively fix the yield or price on a specified benchmark interest rate for an anticipated debt issuance for a specific period. These derivative instruments are generally designated as cash flow hedges for accounting purposes.
As of Sept. 30, 2019,March 31, 2020, Xcel Energy had $13 million of settlement payables related to interest rate swaps, which were paid in April 2020. These interest rate derivatives were designated as hedges and changes in fair value were recorded as other comprehensive income.
As of March 31, 2020, accumulated other comprehensive loss related to interest rate derivatives included $5 million of net losses expected to be reclassified into earnings during the next 12 months as the hedged transactions impact earnings.
As of Sept. 30, 2019, Xcel Energy had unsettled interest rate swaps outstanding with a notional amount of $300 million. These interest rate derivatives were designated as cash flow hedges, and as such, changes in fair value are recorded to other comprehensive income.
Wholesale and Commodity Trading Risk — Xcel Energy Inc.’s utility subsidiaries conduct various wholesale and commodity trading activities, including the purchase and sale of electric capacity, energy, energy-related instruments and natural gas-related instruments, including derivatives. Xcel Energy is allowed to conduct these activities within guidelines and limitations as approved by its risk management committee, comprised of management personnel not directly involved in activities governed by this policy.
Commodity Derivatives — Xcel Energy enters into derivative instruments to manage variability of future cash flows from changes in commodity prices in its electric and natural gas operations, as well as for trading purposes. This could include the purchase or sale of energy or energy-related products, natural gas to generate electric energy, natural gas for resale, FTRs, vehicle fuel and weather derivatives.
Xcel Energy may enter into derivative instruments that mitigate commodity price risk on behalf of electric and natural gas customers, but may not be designated as qualifying hedging transactions. Changes in the fair value of non-trading commodity derivative instruments are recorded as other comprehensive income or deferred as a regulatory asset or liability. The classification as a regulatory asset or liability is based on approved regulatory recovery mechanisms.
As of Sept. 30, 2019,March 31, 2020, Xcel Energy had 0 commodity contracts designated as cash flow hedges.
Xcel Energy also enters into commodity derivative instruments for trading purposes not directly related to commodity price risks associated with serving its electric and natural gas customers. Changes in the fair value of these commodity derivatives are recorded in electric operating revenues, net of amounts credited to customers under margin-sharing mechanisms.
Gross notional amounts of commodity forwards, options and FTRs:
| | (Amounts in Millions) (a)(b) | | Sept. 30, 2019 | | Dec. 31, 2018 | | March 31, 2020 | | Dec. 31, 2019 |
MWh of electricity | | 121 |
| | 87 |
| | 79 |
| | 95 |
|
MMBtu of natural gas | | 130 |
| | 92 |
| | 149 |
| | 110 |
|
| |
(a) | Not reflective of net positions in the underlying commodities. |
| |
(b) | Notional amounts for options included on a gross basis but are weighted for the probability of exercise. |
Consideration of Credit Risk and Concentrations — Xcel Energy continuously monitors the creditworthiness of counterparties to its interest rate derivatives and commodity derivative contracts prior to settlement, and assesses each counterparty’s ability to perform on the transactions set forth in the contracts. Impact of credit risk was immaterial to the fair value of unsettled commodity derivatives presented in the consolidated balance sheets.
Xcel Energy’s utility subsidiaries’ most significant concentrations of credit risk with particular entities or industries are contracts with counterparties to their wholesale, trading and non-trading commodity activities.
As of Sept. 30, 2019,March 31, 2020, 6 of Xcel Energy’s 10 most significant counterparties for these activities, comprising $156$154 million, or 53%56%, of this credit exposure, had investment grade credit ratings from S&P Global Ratings, Moody’s Investor Services or Fitch Ratings. NaN of the 10 most significant counterparties, comprising $24$35 million, or 8%13%, of this credit exposure, were not rated by these external agencies, but based on Xcel Energy’s internal analysis, had credit quality consistent with investment grade. NaN of these significant counterparties, comprising $8$12 million or 3%4% of this credit exposure, had credit quality less than investment grade, based on externalinternal analysis. NaN of these significant counterparties are municipal or cooperative electric entities, RTOs or other utilities.
Impact of derivative activity:
| | | | Pre-Tax Fair Value Gains (Losses) Recognized During the Period in: | | Pre-Tax Fair Value Gains (Losses) Recognized During the Period in: |
(Millions of Dollars) | | Accumulated Other Comprehensive Loss | | Regulatory (Assets) and Liabilities | | Accumulated Other Comprehensive Loss | | Regulatory (Assets) and Liabilities |
Three Months Ended Sept. 30, 2019 | | | | | |
Three Months Ended March 31, 2020 | | | | | |
Derivatives designated as cash flow hedges | | | | | | | | |
Interest rate | | $ | (12 | ) | | $ | — |
| | $ | (13 | ) | | $ | — |
|
Total | | $ | (12 | ) | | $ | — |
| | (13 | ) | | — |
|
Other derivative instruments | | | | | |
Natural gas commodity | | $ | — |
| | $ | (3 | ) | |
Total | | $ | — |
| | $ | (3 | ) | |
| | | | | | | | |
Nine Months Ended Sept. 30, 2019 | | | | | |
Three Months Ended March 31, 2019 | | | | | |
Derivatives designated as cash flow hedges | | | | | | | | |
Interest rate | | $ | (33 | ) | | $ | — |
| | (9 | ) | | — |
|
Total | | $ | (33 | ) | | $ | — |
| | (9 | ) | | — |
|
Other derivative instruments | | | | | | | | |
Electric commodity | | $ | — |
| | $ | 4 |
| | — |
| | 12 |
|
Natural gas commodity | | — |
| | (5 | ) | | — |
| | 4 |
|
Total | | $ | — |
| | $ | (1 | ) | | $ | — |
| | $ | 16 |
|
| | | | | |
Three Months Ended Sept. 30, 2018 | | | | | |
Other derivative instruments | | | | | |
Electric commodity | | $ | — |
| | $ | (2 | ) | |
Natural gas commodity | | — |
| | (2 | ) | |
Total | | $ | — |
| | $ | (4 | ) | |
| | | | | |
Nine Months Ended Sept. 30, 2018 | | | | | |
Other derivative instruments | | | | | |
Electric commodity | | $ | — |
| | $ | 6 |
| |
Natural gas commodity | | — |
| | (1 | ) | |
Total | | $ | — |
| | $ | 5 |
| |
| | | Pre-Tax (Gains) Losses Reclassified into Income During the Period from: | | Pre-Tax Gains (Losses) Recognized During the Period in Income | | Pre-Tax (Gains) Losses Reclassified into Income During the Period from: | | Pre-Tax Gains (Losses) Recognized During the Period in Income | |
(Millions of Dollars) | Accumulated Other Comprehensive Loss | | Regulatory Assets and (Liabilities) | | | Accumulated Other Comprehensive Loss | | Regulatory Assets and (Liabilities) | | |
Three Months Ended Sept. 30, 2019 | | | | | | | |
Three Months Ended March 31, 2020 | | | | | | | |
Derivatives designated as cash flow hedges | | | | | | | | | | | | |
Interest rate | $ | 1 |
| (a) | $ | — |
| | $ | — |
| | $ | 2 |
| (a) | $ | — |
| | $ | — |
| |
Total | $ | 1 |
| | $ | — |
| | $ | — |
| | 2 |
| | — |
| | — |
| |
Other derivative instruments | | | | | | | | | | | | |
Commodity trading | $ | — |
| | $ | — |
| | $ | 1 |
| (b) | — |
| | — |
| | 1 |
| (b) |
Electric commodity | — |
| | (1 | ) | (c) | — |
| | — |
| | (4 | ) | (c) | — |
| |
Natural gas commodity | | — |
| | 5 |
| (d) | (6 | ) | (d) |
Total | $ | — |
| | $ | (1 | ) | | $ | 1 |
| | — |
| | 1 |
| | (5 | ) | |
| | | | | | | | | | | | |
Nine Months Ended Sept. 30, 2019 | | | | | | | |
Three Months Ended March 31, 2019 | | | | | | | |
Derivatives designated as cash flow hedges | | | | | | | | | | | | |
Interest rate | $ | 3 |
| (a) | $ | — |
| | $ | — |
| | 1 |
| (a) | — |
| | — |
| |
Total | $ | 3 |
| | $ | — |
| | $ | — |
| | 1 |
| | — |
| | — |
| |
Other derivative instruments | | | | | | | | | | | | |
Commodity trading | $ | — |
| | $ | — |
| | $ | 5 |
| (b) | — |
| | — |
| | 1 |
| (b) |
Electric commodity | | — |
| | 1 |
| (c) | — |
| |
Natural gas commodity | — |
| | (1 | ) | (d) | (4 | ) | (d) | — |
| | (1 | ) | (d) | (3 | ) | (d) |
Total | $ | — |
| | $ | (1 | ) | | $ | 1 |
| | $ | — |
| | $ | — |
| | $ | (2 | ) | |
| | | | | | | |
Three Months Ended Sept. 30, 2018 | | | | | | | |
Derivatives designated as cash flow hedges | | | | | | | |
Interest rate | $ | 1 |
| (a) | $ | — |
| | $ | — |
| | |
Total | $ | 1 |
| | $ | — |
| | $ | — |
| | |
Other derivative instruments | | | | | | | |
Commodity trading | $ | — |
| | $ | — |
| | $ | 5 |
| (b) | |
Total | $ | — |
| | $ | — |
| | $ | 5 |
| | |
| | | | | | | |
Nine Months Ended Sept. 30, 2018 | | | | | | | |
Derivatives designated as cash flow hedges | | | | | | | |
Interest rate | $ | 3 |
| (a) | $ | — |
| | $ | — |
| | |
Total | $ | 3 |
| | $ | — |
| | $ | — |
| | |
Other derivative instruments | | | | | | | |
Commodity trading | $ | — |
| | $ | — |
| | $ | 14 |
| (b) | |
Natural gas commodity | — |
| | 2 |
| (d) | (2 | ) | (d) | |
Total | $ | — |
| | $ | 2 |
| | $ | 12 |
| | |
| |
(a) | Recorded to interest charges. |
| |
(b) | Recorded to electric operating revenues. Portions of these gains and losses are subject to sharing with electric customers through margin-sharing mechanisms and deducted from gross revenue, as appropriate. |
| |
(c) | Recorded to electric fuel and purchased power. These derivative settlement gains and losses are shared with electric customers through fuel and purchased energy cost-recovery mechanisms, and reclassified out of income as regulatory assets or liabilities, as appropriate. |
| |
(d) | Amounts for both the three and nine months ended Sept. 30,March 31, 2020 and 2019 included 0 settlement gains or losses on derivatives entered to mitigate natural gas price risk for electric generation recorded to electric fuel and purchased power, subject to cost-recovery mechanisms and reclassified to a regulatory asset, as appropriate. Amounts for the three and nine months ended Sept. 30, 2018 included 0 such settlement gains or losses and $1 million of such settlement losses, respectively. Remaining settlement losses for the three and nine months ended Sept. 30,March 31, 2020 and 2019 and 2018 related to natural gas operations and were recorded to cost of natural gas sold and transported. These gains and losses are subject to cost-recovery mechanisms and reclassified out of income to a regulatory asset or liability, as appropriate. |
Xcel Energy had 0 derivative instruments designated as fair value hedges during the three and nine months ended Sept. 30, 2019March 31, 2020 and 2018.2019.
Credit Related Contingent Features — Contract provisions for derivative instruments that the utility subsidiaries enter, including those accounted for as normal purchase-normal sale contracts and therefore not reflected on the consolidated balance sheets, may require the posting of collateral or settlement of the contracts for various reasons, including if the applicable utility subsidiary’s credit ratings are downgraded below its investment grade credit rating by any of the major credit rating agencies, or for cross default contractual provisions if there was a failure under other financing arrangements related to payment terms or other covenants. As of Sept. 30, 2019March 31, 2020 and Dec. 31, 2018,2019, there were 0$11 million and $7 million derivative instruments in a liability position with such underlying contract provisions, with 0 offsetting positions or posted collateral.
respectively. Certain derivative instruments are also subject to contract provisions that contain adequate assurance clauses. Provisions allow counterparties to seek performance assurance, including cash collateral, in the event that a given utility subsidiary’s ability to fulfill its contractual obligations is reasonably expected to be impaired. Xcel Energy had 0 collateral posted related to adequate assurance clauses in derivative contracts as of Sept. 30, 2019March 31, 2020 and Dec. 31, 20182019.
Recurring Fair Value Measurements — Derivative assets and liabilities measured at fair value on a recurring basis:
| | | | Sept. 30, 2019 | | Dec. 31, 2018 | | March 31, 2020 | | Dec. 31, 2019 |
| | Fair Value | | Fair Value Total | | Netting (a) | | Total | | Fair Value | | Fair Value Total | | Netting (a) | | Total | | Fair Value | | Fair Value Total | | Netting (a) | | Total | | Fair Value | | Fair Value Total | | Netting (a) | | Total |
(Millions of Dollars) | | Level 1 | | Level 2 | | Level 3 | | Level 1 | | Level 2 | | Level 3 | | | Level 1 | | Level 2 | | Level 3 | | Level 1 | | Level 2 | | Level 3 | |
Current derivative assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other derivative instruments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commodity trading | | $ | 3 |
| | $ | 42 |
| | $ | 13 |
| | $ | 58 |
| | $ | (34 | ) | | $ | 24 |
| | $ | 4 |
| | $ | 92 |
| | $ | 2 |
| | $ | 98 |
| | $ | (44 | ) | | $ | 54 |
| | $ | 8 |
| | $ | 63 |
| | $ | 16 |
| | $ | 87 |
| | $ | (63 | ) | | $ | 24 |
| | $ | 3 |
| | $ | 51 |
| | $ | 24 |
| | $ | 78 |
| | $ | (52 | ) | | $ | 26 |
|
Electric commodity | | — |
| | — |
| | 28 |
| | 28 |
| | (1 | ) | | 27 |
| | — |
| | — |
| | 25 |
| | 25 |
| | — |
| | 25 |
| | — |
| | — |
| | 18 |
| | 18 |
| | — |
| | 18 |
| | — |
| | — |
| | 21 |
| | 21 |
| | (1 | ) | | 20 |
|
Natural gas commodity | | — |
| | 7 |
| | — |
| | 7 |
| | — |
| | 7 |
| | — |
| | 4 |
| | — |
| | 4 |
| | — |
| | 4 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 6 |
| | — |
| | 6 |
| | — |
| | 6 |
|
Total current derivative assets | | $ | 3 |
| | $ | 49 |
| | $ | 41 |
| | $ | 93 |
| | $ | (35 | ) | | 58 |
| | $ | 4 |
| | $ | 96 |
| | $ | 27 |
| | $ | 127 |
| | $ | (44 | ) | | 83 |
| | $ | 8 |
| | $ | 63 |
| | $ | 34 |
| | $ | 105 |
| | $ | (63 | ) | | 42 |
| | $ | 3 |
| | $ | 57 |
| | $ | 45 |
| | $ | 105 |
| | $ | (53 | ) | | 52 |
|
PPAs (b) | | | | | | | | | | | | 3 |
| | | | | | | | | | | | 4 |
| | | | | | | | | | | | 3 |
| | | | | | | | | | | | 3 |
|
Current derivative instruments | | | | | | | | | | | | $ | 61 |
| | | | | | | | | | | | $ | 87 |
| | | | | | | | | | | | $ | 45 |
| | | | | | | | | | | | $ | 55 |
|
Noncurrent derivative assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other derivative instruments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commodity trading | | $ | 5 |
| | $ | 39 |
| | $ | 5 |
| | $ | 49 |
| | $ | (41 | ) | | $ | 8 |
| | $ | — |
| | $ | 27 |
| | $ | 5 |
| | $ | 32 |
| | $ | (14 | ) | | $ | 18 |
| | $ | 10 |
| | $ | 38 |
| | $ | 22 |
| | $ | 70 |
| | $ | (45 | ) | | $ | 25 |
| | $ | 9 |
| | $ | 38 |
| | $ | 7 |
| | $ | 54 |
| | $ | (45 | ) | | $ | 9 |
|
Electric commodity | | | — |
| | — |
| | 2 |
| | 2 |
| | — |
| | 2 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Total noncurrent derivative assets | | $ | 5 |
| | $ | 39 |
| | $ | 5 |
| | $ | 49 |
| | $ | (41 | ) | | 8 |
| | $ | — |
| | $ | 27 |
| | $ | 5 |
| | $ | 32 |
| | $ | (14 | ) | | 18 |
| | $ | 10 |
| | $ | 38 |
| | $ | 24 |
| | $ | 72 |
| | $ | (45 | ) | | 27 |
| | $ | 9 |
| | $ | 38 |
| | $ | 7 |
| | $ | 54 |
| | $ | (45 | ) | | 9 |
|
PPAs (b) | | | | | | | | | | | | 14 |
| | | | | | | | | | | | 16 |
| | | | | | | | | | | | 12 |
| | | | | | | | | | | | 13 |
|
Noncurrent derivative instruments | | | | | | | | | | | | $ | 22 |
| | | | | | | | | | | | $ | 34 |
| | | | | | | | | | | | $ | 39 |
| | | | | | | | | | | | $ | 22 |
|
| | | | Sept. 30, 2019 | | Dec. 31, 2018 | | March 31, 2020 | | Dec. 31, 2019 |
| | Fair Value | | Fair Value Total | | Netting (a) | | Total | | Fair Value | | Fair Value Total | | Netting (a) | | Total | | Fair Value | | Fair Value Total | | Netting (a) | | Total | | Fair Value | | Fair Value Total | | Netting (a) | | Total |
(Millions of Dollars) | | Level 1 | | Level 2 | | Level 3 | | Level 1 | | Level 2 | | Level 3 | | | Level 1 | | Level 2 | | Level 3 | | Level 1 | | Level 2 | | Level 3 | |
Current derivative liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Derivatives designated as cash flow hedges: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Interest rate | | $ | — |
| | $ | 40 |
| | $ | — |
| | $ | 40 |
| | $ | — |
| | $ | 40 |
| | $ | — |
| | $ | 7 |
| | $ | — |
| | $ | 7 |
| | $ | — |
| | $ | 7 |
| | $ | — |
| | $ | 13 |
| | $ | — |
| | $ | 13 |
| | $ | — |
| | $ | 13 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Other derivative instruments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commodity trading | | 3 |
| | 42 |
| | 11 |
| | 56 |
| | (46 | ) | | 10 |
| | 4 |
| | 88 |
| | 2 |
| | 94 |
| | (60 | ) | | 34 |
| | $ | 8 |
| | $ | 62 |
| | $ | 14 |
| | $ | 84 |
| | $ | (63 | ) | | $ | 21 |
| | $ | 4 |
| | $ | 59 |
| | $ | 15 |
| | $ | 78 |
| | $ | (63 | ) | | $ | 15 |
|
Electric commodity | | — |
| | — |
| | 1 |
| | 1 |
| | (1 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1 |
| | 1 |
| | (1 | ) | | — |
|
Natural gas commodity | | — |
| | 6 |
| | — |
| | 6 |
| | — |
| | 6 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 5 |
| | — |
| | 5 |
| | — |
| | 5 |
|
Total current derivative liabilities | | $ | 3 |
| | $ | 88 |
| | $ | 12 |
| | $ | 103 |
| | $ | (47 | ) | | 56 |
| | $ | 4 |
| | $ | 95 |
| | $ | 2 |
| | $ | 101 |
| | $ | (60 | ) | | 41 |
| | $ | 8 |
| | $ | 75 |
| | $ | 14 |
| | $ | 97 |
| | $ | (63 | ) | | 34 |
| | $ | 4 |
| | $ | 64 |
| | $ | 16 |
| | $ | 84 |
| | $ | (64 | ) | | 20 |
|
PPAs (b) | | | | | | | | | | | | 17 |
| | | | | | | | | | | | 20 |
| | | | | | | | | | | | 18 |
| | | | | | | | | | | | 18 |
|
Current derivative instruments | | | | | | | | | | | | $ | 73 |
| | | | | | | | | | | | $ | 61 |
| | | | | | | | | | | | $ | 52 |
| | | | | | | | | | | | $ | 38 |
|
Noncurrent derivative liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Other derivative instruments: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Commodity trading | | $ | 2 |
| | $ | 88 |
| | $ | 19 |
| | $ | 109 |
| | $ | (10 | ) | | $ | 99 |
| | $ | — |
| | $ | 18 |
| | $ | 1 |
| | $ | 19 |
| | $ | 17 |
| | $ | 36 |
| | $ | 3 |
| | $ | 89 |
| | $ | 39 |
| | $ | 131 |
| | $ | (19 | ) | | $ | 112 |
| | $ | 2 |
| | $ | 79 |
| | $ | 32 |
| | $ | 113 |
| | $ | (13 | ) | | $ | 100 |
|
Total noncurrent derivative liabilities | | $ | 2 |
| | $ | 88 |
| | $ | 19 |
| | $ | 109 |
| | $ | (10 | ) | | 99 |
| | $ | — |
| | $ | 18 |
| | $ | 1 |
| | $ | 19 |
| | $ | 17 |
| | 36 |
| | $ | 3 |
| | $ | 89 |
| | $ | 39 |
| | $ | 131 |
| | $ | (19 | ) | | 112 |
| | $ | 2 |
| | $ | 79 |
| | $ | 32 |
| | $ | 113 |
| | $ | (13 | ) | | 100 |
|
PPAs (b) | | | | | | | | | | | | 79 |
| | | | | | | | | | | | 93 |
| | | | | | | | | | | | 71 |
| | | | | | | | | | | | 75 |
|
Noncurrent derivative instruments | | | | | | | | | | | | $ | 178 |
| | | | | | | | | | | | $ | 129 |
| | | | | | | | | | | | $ | 183 |
| | | | | | | | | | | | $ | 175 |
|
| |
(a) | Xcel Energy nets derivative instruments and related collateral in its consolidated balance sheet when supported by a legally enforceable master netting agreement, and all derivative instruments and related collateral amounts were subject to master netting agreements at Sept. 30, 2019March 31, 2020 and Dec. 31, 2018.2019. At both Sept. 30, 2019March 31, 2020 and Dec. 31, 2018,2019, derivative assets and liabilities include $32 million of obligations to return cash collateral. At Sept. 30, 2019collateral and Dec. 31, 2018, derivative assets and liabilities include rights to reclaim cash collateral of $12$6 million and $15$11 million, respectively. Counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements. |
| |
(b) | During 2006, Xcel Energy qualified these contracts under the normal purchase exception. Based on this qualification, contracts are no longer adjusted to fair value and the previous carrying value of these contracts is being amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities. |
Changes in Level 3 commodity derivatives:
| | | | Three Months Ended Sept. 30 | |
(Millions of Dollars) | | 2019 | | 2018 | |
Balance at July 1 | | $ | 28 |
| | $ | 64 |
| |
Purchases | | 5 |
| | 3 |
| |
Settlements | | (21 | ) | | (19 | ) | |
Net transactions recorded during the period: | | | | |
| |
Gains recognized in earnings (a) | | 1 |
| | — |
| |
Net gains recognized as regulatory assets and liabilities | | 2 |
| | — |
| |
Balance at Sept. 30 | | $ | 15 |
| | $ | 48 |
| |
| | | | | | | | | |
| | Nine Months Ended Sept. 30 | | Three Months Ended March 31 |
(Millions of Dollars) | | 2019 | | 2018 | | 2020 | | 2019 |
Balance at Jan. 1 | | $ | 29 |
| | $ | 35 |
| | $ | 4 |
| | $ | 29 |
|
Purchases | | 42 |
| | 49 |
| | 12 |
| | 4 |
|
Settlements | | (48 | ) | | (51 | ) | | (18 | ) | | (11 | ) |
Net transactions recorded during the period: | | | | | | | | |
Losses recognized in earnings (a) | | (9 | ) | | — |
| |
Net gains recognized as regulatory assets and liabilities | | 1 |
| | 15 |
| |
Balance at Sept. 30 | | $ | 15 |
| | $ | 48 |
| |
Gains (losses) recognized in earnings (a) | | | 6 |
| | (18 | ) |
Net gains (losses) recognized as regulatory assets and liabilities | | | 1 |
| | (11 | ) |
Balance at March 31 | | | $ | 5 |
| | $ | (7 | ) |
| |
(a) | These amountsAmounts relate to commodity derivatives held at the end of the period. |
Xcel Energy recognizes transfers between fair value hierarchy levels as of the beginning of each period. There were 0 transfers of amounts between levels for derivative instruments for the three and nine months ended Sept. 30, 2019March 31, 2020 and 2018.2019.
Fair Value of Long-Term Debt
Other financial instruments for which the carrying amount did not equal fair value:
| | | | Sept. 30, 2019 | | Dec. 31, 2018 | | March 31, 2020 | | Dec. 31, 2019 |
(Millions of Dollars) | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
Long-term debt, including current portion | | $ | 17,672 |
| | $ | 20,064 |
| | $ | 16,209 |
| | $ | 16,755 |
| | $ | 18,112 |
| | $ | 19,864 |
| | $ | 18,109 |
| | $ | 20,227 |
|
Fair value of Xcel Energy’s long-term debt is estimated based on recent trades and observable spreads from benchmark interest rates for similar securities. Fair value estimates are based on information available to management as of Sept. 30, 2019March 31, 2020 and Dec. 31, 2018,2019, and given the observability of the inputs, fair values presented for long-term debt were assigned as Level 2.
|
|
9. Benefit Plans and Other Postretirement Benefits |
Components of Net Periodic Benefit Cost (Credit)
| | | | Three Months Ended Sept. 30 | | Three Months Ended March 31 |
| | 2019 | | 2018 | | 2019 | | 2018 | | 2020 | | 2019 | | 2020 | | 2019 |
(Millions of Dollars) | | Pension Benefits | | Postretirement Health Care Benefits | | Pension Benefits | | Postretirement Health Care Benefits |
Service cost | | $ | 22 |
| | $ | 24 |
| | $ | — |
| | $ | 1 |
| | $ | 24 |
| | $ | 22 |
| | $ | — |
| | $ | — |
|
Interest cost (a) | | 36 |
| | 33 |
| | 6 |
| | 5 |
| | 31 |
| | 36 |
| | 5 |
| | 6 |
|
Expected return on plan assets (a) | | (51 | ) | | (52 | ) | | (5 | ) | | (6 | ) | | (52 | ) | | (51 | ) | | (5 | ) | | (5 | ) |
Amortization of prior service credit (a) | | (1 | ) | | (1 | ) | | (3 | ) | | (3 | ) | | (1 | ) | | (1 | ) | | (2 | ) | | (3 | ) |
Amortization of net loss (a) | | 22 |
| | 27 |
| | 1 |
| | 2 |
| | 25 |
| | 22 |
| | 1 |
| | 1 |
|
Settlement charge (b) | | — |
| | 59 |
| | — |
| | — |
| |
Net periodic benefit cost (credit) | | 28 |
| | 90 |
| | (1 | ) | | (1 | ) | | 27 |
| | 28 |
| | (1 | ) | | (1 | ) |
Credits (costs) not recognized due to the effects of regulation | | — |
| | (50 | ) | | — |
| | 1 |
| |
Credits not recognized due to effects of regulation | | | 2 |
| | 1 |
| | 1 |
| | — |
|
Net benefit cost (credit) recognized for financial reporting | | $ | 28 |
| | $ | 40 |
| | $ | (1 | ) | | $ | — |
| | $ | 29 |
| | $ | 29 |
| | $ | — |
| | $ | (1 | ) |
|
| | | | | | | | | | | | | | | | |
| | Nine Months Ended Sept. 30 |
| | 2019 | | 2018 | | 2019 | | 2018 |
(Millions of Dollars) | | Pension Benefits | | Postretirement Health Care Benefits |
Service cost | | $ | 64 |
| | $ | 71 |
| | $ | 1 |
| | $ | 1 |
|
Interest cost (a) | | 108 |
| | 100 |
| | 17 |
| | 16 |
|
Expected return on plan assets (a) | | (152 | ) | | (157 | ) | | (16 | ) | | (19 | ) |
Amortization of prior service credit (a) | | (3 | ) | | (3 | ) | | (8 | ) | | (8 | ) |
Amortization of net loss (a) | | 66 |
| | 83 |
| | 4 |
| | 6 |
|
Settlement charge (b) | | — |
| | 59 |
| | — |
| | — |
|
Net periodic benefit cost (credit) | | 83 |
| | 153 |
| | (2 | ) | | (4 | ) |
Credits (costs) not recognized due to the effects of regulation | | 2 |
| | (51 | ) | | 1 |
| | 1 |
|
Net benefit cost (credit) recognized for financial reporting | | $ | 85 |
| | $ | 102 |
| | $ | (1 | ) | | $ | (3 | ) |
| |
(a) | Components of net periodic cost other than the service cost component are included in the line item “other expense,(expense) income, net” in the consolidated statement of income or capitalized on the consolidated balance sheet as a regulatory asset. |
(b) A settlement charge is required when the amount of all lump-sum distributions during the year is greater than the sum of the service and interest cost components of the annual net periodic pension cost. In the third quarter of 2018 as a result of lump-sum distributions during the 2018 plan year, Xcel Energy recorded a total pension settlement charge of $59 million, the majority of which was not recognized due to the effects of regulation. A total of $6 million of that amount was recorded in other expense in the third quarter of 2018.
In January 2019,2020, contributions of $150 million were made across 4 of Xcel Energy’s pension plans. In July 2019, Xcel Energy made a $4 million contribution to the Xcel Energy Inc. Non-Bargaining Pension Plan (South). Xcel Energy does not expect additional pension contributions during 2019.2020.
|
|
10. Commitments and Contingencies |
The following include commitments, contingencies and unresolved contingencies that are material to Xcel Energy’s financial position.
Legal
Xcel Energy is involved in various litigation matters in the ordinary course of business. The assessment of whether a loss is probable or is a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. Management maintains accruals for losses probable of being incurred and subject to reasonable estimation. Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories.
In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss. For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, would have a material effect on Xcel Energy’s financial statements. Unless otherwise required by GAAP, legal fees are expensed as incurred.
Gas Trading Litigation — e prime is a wholly owned subsidiary of Xcel Energy. e prime was in the business of natural gas trading and marketing but has not engaged in natural gas trading or marketing activities since 2003. Multiple lawsuits seeking monetary damages were commenced against e prime and its affiliates, including Xcel Energy, between 2003 and 2009 alleging fraud and anticompetitive activities in conspiring to restrain the trade of natural gas and manipulate natural gas prices. Cases were all consolidated in the U.S. District Court in Nevada.
NaN cases remain active which include an MDL matter consisting of a Colorado purported class (Breckenridge) and a Wisconsin purported class (Arandell Corp.).
Breckenridge/Colorado — In February 2019, the MDL panel remanded Breckenridge back to the U.S. District Court in Colorado.
Arandell Corp. — In February 2019, the case was remanded back to the U.S. District Court in Wisconsin. Plaintiffs are seeking class certification. It is uncertain when the court will rule on this issue.
Xcel Energy has concluded that a loss is remote for both remaining lawsuits.
Line Extension Disputes — In December 2015, the DRC filed a lawsuit seeking monetary damages in the Denver District Court, stating PSCo failed to award proper allowances and refunds for line extensions to new developments pursuant to the terms of electric and gas service agreements. The dispute involves claims by over 50 developers. In February 2018, the Colorado Supreme Court denied DRC’s petition to appeal the Denver District Court’s dismissal of the lawsuit, effectively terminating this litigation. However, in January 2018, DRC filed a new lawsuit in Boulder County District Court, asserting a single claim that PSCo was required to file its line extension agreements with the CPUC but failed to do so.
This claim is similar to the arguments previously raised by DRC. PSCo filed a motion to dismiss this claim, which was granted in May 2018. DRC subsequently filed an appeal to the Colorado Court of Appeals. It is uncertain when a decision will be rendered.
PSCo has concluded that a loss is remote with respect to both of these matters as the service agreements were developed to implement CPUC approved tariffs and PSCo has complied with the tariff provisions. If a loss were sustained, PSCo believes it would be allowed to recover costs through traditional regulatory mechanisms. Amount or range in dispute is presently unknown and 0 accrual has been recorded for this matter.
Rate Matters
MEC Transactions — In November 2018, NSP-Minnesota reached an agreement with Southern Power Company (a subsidiary of Southern Company) to purchase MEC, a 760 MW natural gas combined cycle facility, for approximately $650 million. In September 2019, the MPUC denied NSP-Minnesota's request to purchase MEC as a rate base asset. In January 2020, the MPUC approved Xcel Energy’s plan to acquire MEC as a non-regulated investment and step into the existing PPAs with NSP-Minnesota. A newly formed non-regulated subsidiary of Xcel Energy completed the transaction to purchase MEC in January 2020.
In April 2020, Xcel Energy reached agreement to sell MEC to Southwest Generation for $680 million, subject to working capital adjustments. Proceeds from the sale will primarily be used to reduce Xcel Energy’s overall financing needs. The transaction is not anticipated to have a material impact on long-term earnings per share and is expected to close in the third quarter of 2020.
The sale will result in a gain, which Xcel Energy plans to use to fund its corporate giving efforts, including support related to COVID-19 recovery.
NSP-Minnesota — Sherco — In NSP-Minnesota’s 2013 fuel reconciliation filing, the MPUC made recovery of replacement power costs associated with athe 2011 turbine malfunctionincident at its Sherco Unit 3 plant provisional and subject to further review following conclusion of litigation commenced by NSP-Minnesota, SMMPA (Co-owner of Sherco Unit 3) and insurance companies against GE.
In 2018, NSP-Minnesota and SMMPA reached a settlement with GE. NSP-Minnesota has notified the MPUC of its proposal to refund the GE settlement proceeds back to customers through the FCA.
The insurance providers continued their litigation against GE and the case went to trial.
In 2018, GE prevailed in the lawsuit with the insurance companies, however, the jury found comparable fault, finding that GE was 52% and NSP-Minnesota was 48% at fault. At that point in the litigation, NSP-Minnesota was no longer involved in the case and was not present to make arguments about its role in the event. The specific issue leading to the fault apportionment was also not before the jury and not relevant to the outcome of the trial.
In January 2019, the DOC recommended that NSP-Minnesota refund $20 million of previously recovered purchased power costs to its customers, based on the jury’s apportionment of fault. The OAG recommended the MPUC withhold any decision until the underlying litigation by the insurance providers (currently under appeal) is concluded. The DOC subsequently filed comments agreeing with the OAG’s recommendation to withhold a decision pending the outcome of any appeals. NSP-Minnesota filed reply comments arguing that the DOC recommendations are without merit and that it acted prudently in operating the plant and its settlement with GE was reasonable.
In March 2019, the MPUC approved NSP-Minnesota’s proposal to refund the GE settlement proceeds back to customers through the FCA. It also decided to withhold any decision as to NSP-Minnesota’s prudence in connection with the incident at Sherco Unit 3 until after conclusion of the pending litigation between GE and NSP-Minnesota’s insurers. The lower court’s decision was affirmed on appeal. In March 2020, NSP-Minnesota’s insurers filed a petition seeking additional review by the Minnesota Supreme Court, which remains pending.
MISO ROE Complaints — In November 2013 and February 2015, customers filed complaints against MISO TOs including NSP-Minnesota and NSP-Wisconsin. The first complaint argued for a reduction in the base ROE in MISO
transmission formula rates from 12.38% to 9.15%, and removal of ROE adders (including those for RTO membership). The second complaint sought to reduce base ROE from 12.38% to 8.67%.
In September 2016, the FERC issued an order granting a 10.32% base ROE (10.82% with the RTO adder) effective for the first complaint period of Nov. 12, 2013 to Feb. 11, 2015 and subsequent to the date of the order. The D.C. Circuit subsequently vacated and remanded FERC Opinion No. 531, which had established the ROE methodology on which the September 2016 FERC order was based.
On March 21, 2019, FERC announced a NOI seeking public comments on whether, and if so how, to revise ROE policies in light of the D.C. Circuit Court decision. FERC also initiated a NOI on whether to revise its policies on incentives for electric transmission investments, including the RTO membership incentive.
In October 2018,November 2019, the FERC issued an ROE order that addressed the D.C. Circuit’s actions. Under a new proposed 2 step ROE approach, the FERC indicated an intention to dismiss an ROE complaint if the existing ROE falls within the range of just and reasonable ROEs based on equal weighting of the DCF, CAPM, and Expected Earnings models. The FERC proposed that if necessary, it would then setadopting a new ROE by averagingmethodology and settling the results of these models plus a Risk Premium model.
MISO base ROE at 9.88% (10.38% with the RTO adder), effective Sept. 28, 2016 and for the Nov. 12, 2013 to Feb. 11, 2015 refund period. The FERC subsequently made preliminary determinations inalso dismissed the second complaint. In December 2019, MISO TOs filed a November 2018 orderrequest for rehearing. Customers also filed requests for rehearing claiming, among other points, that the MISO TO’s base ROEFERC erred by dismissing the second complaint without refunds.
FERC accepted the requests for rehearing in effect forJanuary 2020, however, it is uncertain when the first complaint period (12.38%) was outsideFERC will act on the range of reasonableness, and should be reduced. The FERC indicated its preliminary analysis using the new ROE approach resulted in a base ROE of 10.28% for the first complaint period, comparedrequests or any other pending matters related to the previously ordered base ROE of 10.32%2019 NOIs.
NSP-Minnesota has recognized a current refund liability consistent withfor its best estimate of final refunds to customers.
In March 2020, the FERC issued a Notice of Proposed Rulemaking regarding changes to its policies for transmission incentives, including a proposal to increase the RTO participation adder from 50 to 100 basis points and to make the adder available regardless of whether a utility’s ongoing participation in the RTO is voluntary or required by legislation or a regulator. It is uncertain if or when this change will be adopted and implemented as a final ROE, pending further FERC action as early as the fourth quarter of 2019.order.
SPP OATT Upgrade Costs — Under the SPP OATT, costs of transmission upgrades may be recovered from other SPP customers whose transmission service depends on capacity enabled by the upgrade. SPP had not been charging its customers for these upgrades, even though the SPP OATT had allowed SPP to do so since 2008. In 2016, the FERC granted SPP’s request to recover these previously unbilled charges and SPP subsequently billed SPS approximately $13 million.
In July 2018, SPS’ appeal to the D.C. Circuit over the FERC rulings granting SPP the right to recover these previously unbilled charges was remanded to the FERC. In February 2019, the FERC reversed its 2016 decision and ordered SPP to refund the charges retroactively collected from its transmission customers, including SPS, related to periods before September 2015. In April 2019, several parties, including SPP, filed requests for a rehearing. In February 2020, FERC issued an order rejecting all rehearing requests and providing certain clarifications. In March 2020, SPP and Oklahoma Gas & Electric separately filed petitions for review of FERC’s orders at the D.C. Circuit. SPS has intervened in both appeals in support of FERC. The timing of a FERC response to the rehearing requestsan appeals decision is uncertain. Any refunds received by SPS are expected to be given back to SPS customers through future rates.
In October 2017, SPS filed a separate complaint against SPP asserting that SPP has assessed upgrade charges to SPS in violation of the SPP OATT. The FERC granted a rehearing for further consideration in May 2018. The timing of FERC action on the SPS rehearing is uncertain. If SPS’ complaint results in additional charges or refunds, SPS will seek to recover or refund the amounts through future SPS customer rates.
Environmental
MGP, Landfill and Disposal Sites
Ashland MGP Site — NSP-Wisconsin was named a responsible party for contamination at the Ashland/Northern States Power Lakefront Superfund Site (the Site) in Ashland, Wisconsin. Remediation was completed in 2019 and restoration activities are anticipated to be completed in 2019 and groundwater2020. Groundwater treatment activities will continue for many years.
The current cost estimate for remediation and restoration of the entire site is approximately $194$199 million. At Sept. 30, 2019March 31, 2020 and Dec. 31, 2018, NSP-Wisconsin2019, NSP‑Wisconsin had a total liability of $22 million and $27$23 million, respectively, for the entire site.
NSP-Wisconsin has deferred the unrecovered portion of the estimated Site remediation and restoration costs as a regulatory asset. The PSCW has authorized NSP-Wisconsin rate recovery for all remediation and restoration costs incurred at the Site. In 2012,its final December 2019 order approving 2020 and 2021 natural gas base rates, the PSCW agreed to allow NSP-Wisconsin to pre-collect certainauthorized continued amortization of costs to amortize costs over 10 years and to applyapplication of a 3% carrying costcharge to the unamortized regulatory asset.
Rice Yards (Denver ) MGP Landfill or Disposal SitesSite — — PSCo is cooperating with the City of Denver on an environmental investigation of the Rice Yards Site in Denver, Colorado, which had various historic industrial uses by multiple parties, including railroad, maintenance shop, scrap metal yard and MGP operations.
The area is being redeveloped into residential and commercial mixed uses, and PSCo is in discussions with the current property owner regarding legal claims related to the Rice Yards Site.
In addition to the Rice Yards and Ashland Sites, Xcel Energy is currently investigating, remediating or remediating 12performing post-closure actions at 11 other MGP, landfill or other disposal sites across its service territories.
Xcel Energy has recognized its best estimate of costs/liabilities that will result from final resolution of these issues, however, the outcome and timing is unknown. In addition, there may be insurance recovery and/or recovery from other potentially responsible parties, offsetting a portion of the costs incurred.
Environmental Requirements — Water and Waste
Coal Ash Regulation — Xcel Energy’s operations are subject to federal and state lawsregulations that impose requirements for handling, storage, treatment and disposal of solid waste.
Under the CCR Rule, utilities are required to complete groundwater sampling around their CCR landfills and surface impoundments. By the end of 2019, onlyCurrently, Xcel Energy has 9 of Xcel Energy’s regulated ash units are expected to be in operation.
Xcel Energy is conducting groundwater sampling and, where appropriate, initiating theimplementing assessment of corrective measures at certain CCR landfills and surface impoundments. In 2019, groundwater monitoring consistent with the CCR Rule was conducted. In NSP-Minnesota, 0 results above the groundwater protection standards in the rule were identified. In PSCo, statistically significant increases above background concentrations were detected at 4 locations. Subsequently, assessment monitoring samples were collected, and PSCo is evaluating whetheroptions for corrective action is required at any CCR landfills or surface impoundments.
2 locations. Until Xcel EnergyPSCo completes its assessment, it is uncertain what impact, if any, there will be on the operations, financial condition or cash flows.
In August 2018, the D.C. Circuit ruled that the EPA cannot allow utilities to continue to use unlined impoundments (including clay lined impoundments) for the storage or disposal of coal ash. In November 2019, the EPA proposed rules in response to this decision. If finalized in their current form, these rules would require NSP-Minnesota to expedite closure plans for 1 impoundment at an estimated cost of $4 million and the construction of a new impoundment at the cost of $8 million. In 2019, NSP-Minnesota initiated the construction of this new impoundment, an ash pond, expected to be in service in 2020. Upon placing the new ash pond in service, the existing ash pond will be taken out of service, and closure activities as prescribed by the CCR Rule and the facility’s National Pollutant Discharge Elimination System permit will be initiated.
In addition, the rules proposed by the EPA under the D.C. Circuit ruling may require PSCo to expedite the closure of 1 coal ash impoundment that was not previously required to close. PSCo is pursuing options through comment on the proposed rules or some other means to allow continued operation of this impoundment until the generating units are retired in 2025, at which time the impoundment would be closed.
Closure costs for existing impoundments are included in the calculation of the asset retirement obligation liability.
Leases
Xcel Energy evaluates contracts that may contain leases, including PPAs and arrangements for the use of office space and other facilities, vehicles and equipment. Under ASC Topic 842, adopted by Xcel Energy on Jan. 1, 2019, a contract contains a lease if it conveys the exclusive right to control the use of a specific asset. A contract determined to contain a lease is evaluated further to determine if the arrangement is a finance lease.
ROU assets represent Xcel Energy's rights to use leased assets. Starting in 2019, the present value of future operating lease payments are recognized in other current liabilities and noncurrent operating lease liabilities. These amounts, adjusted for any prepayments or incentives, are recognized as operating lease ROU assets.
Most of Xcel Energy’s leases do not contain a readily determinable discount rate. Therefore, the present value of future lease payments is calculated using the applicable Xcel Energy subsidiary’s estimated incremental borrowing rate (weighted-average of 4.1%). Xcel Energy has elected the practical expedient under which non-lease components, such as asset maintenance costs included in payments, are not deducted from minimum lease payments for the purposes of lease accounting and disclosure.
Leases with an initial term of 12 months or less are classified as short-term leases and are not recognized on the consolidated balance sheet.
Operating lease ROU assets:
|
| | | | |
(Millions of Dollars) | | Sept. 30, 2019 |
PPAs | | $ | 1,642 |
|
Other | | 201 |
|
Gross operating lease ROU assets | | 1,843 |
|
Accumulated amortization | | (125 | ) |
Net operating lease ROU assets | | $ | 1,718 |
|
In 2019, ROU assets for finance leases are included in other noncurrent assets, and the present value of future finance lease payments is included in other current liabilities and other noncurrent liabilities. Prior to 2019, finance leases were included in property, plant and equipment, the current portion of long-term debt and long-term debt.
Xcel Energy’s most significant finance lease activities are related to WYCO, a joint venture with CIG, to develop and lease natural gas pipeline, storage and compression facilities. Xcel Energy Inc. has a 50% ownership interest in WYCO. WYCO leases its facilities to CIG, and CIG operates the facilities, providing natural gas storage and transportation services to PSCo under separate service agreements.
PSCo accounts for its Totem natural gas storage service and Front Range pipeline arrangements with CIG and WYCO, respectively, as finance leases. Xcel Energy Inc. eliminates 50% of the finance lease obligation related to WYCO in the consolidated balance sheet along with an equal amount of Xcel Energy Inc.’s equity investment in WYCO.
Finance lease ROU assets:
|
| | | | |
(Millions of Dollars) | | Sept. 30, 2019 |
Gas storage facilities | | $ | 201 |
|
Gas pipeline | | 21 |
|
Gross finance lease ROU assets | | 222 |
|
Accumulated amortization | | (81 | ) |
Net finance lease ROU assets | | $ | 141 |
|
Components of lease expense:
|
| | | | | | | | |
(Millions of Dollars) | | Three Months Ended Sept. 30, 2019 | | Nine Months Ended Sept. 30, 2019 |
Operating leases | | | | |
PPA capacity payments | | $ | 58 |
| | $ | 163 |
|
Other operating leases (a) | | 9 |
| | 26 |
|
Total operating lease expense (b) | | $ | 67 |
| | $ | 189 |
|
| | | | |
Finance leases | | | | |
Amortization of ROU assets | | $ | 1 |
| | $ | 5 |
|
Interest expense on lease liability | | 5 |
| | 14 |
|
Total finance lease expense | | $ | 6 |
| | $ | 19 |
|
| |
(a)
| Includes short-term lease expense of $1 million for the three months ended Sept. 30, 2019 and $4 million for the nine months ended Sept. 30, 2019. |
| |
(b)
| PPA capacity payments are included in electric fuel and purchased power on the consolidated statements of income. Expense for other operating leases is included in O&M expense and electric fuel and purchased power. |
Xcel Energy has requested regulatory approval to purchase the MEC in the fourth quarter of 2019. Xcel Energy currently receives energy and capacity from MEC under PPAs expiring in 2026 and 2039. Pending the purchase by Xcel Energy, operating lease liabilities at Sept. 30,Dec. 31, 2019 currently include a present value of $415remaining lease payments of approximately $400 million for the MEC PPA capacity payments.
Future commitments underPPAs. At March 31, 2020, NSP-Minnesota operating lease liabilities and finance leases asrelated ROU assets are eliminated from Xcel Energy’s consolidated balance sheet following the completed January 2020 purchase of Sept. 30, 2019:MEC by Xcel Energy.
|
| | | | | | | | | | | | | | | | |
(Millions of Dollars) | | PPA (a) (b) Operating Leases | | Other Operating Leases | | Total Operating Leases | | Finance Leases (c) |
2019 | | $ | 59 |
| | $ | 6 |
| | $ | 65 |
| | $ | 3 |
|
2020 | | 236 |
| | 26 |
| | 262 |
| | 14 |
|
2021 | | 238 |
| | 29 |
| | 267 |
| | 14 |
|
2022 | | 225 |
| | 28 |
| | 253 |
| | 12 |
|
2023 | | 214 |
| | 25 |
| | 239 |
| | 12 |
|
Thereafter | | 959 |
| | 136 |
| | 1,095 |
| | 219 |
|
Total minimum obligation | | 1,931 |
| | 250 |
| | 2,181 |
| | 274 |
|
Interest component of obligation | | (337 | ) | | (54 | ) | | (391 | ) | | (192 | ) |
Present value of minimum obligation | | $ | 1,594 |
| | $ | 196 |
| | 1,790 |
| | 82 |
|
Less current portion | | | | | | (192 | ) | | (4 | ) |
Noncurrent operating and finance lease liabilities | | | | | | $ | 1,598 |
| | $ | 78 |
|
| | | | | | | | |
Weighted-average remaining lease term in years | | | | | | 9.5 |
| | 37.2 |
|
| |
(a)
| Amounts do not include PPAs accounted for as executory contracts and/or contingent payments, such as energy payments on renewable PPAs. |
| |
(b)
| PPA operating leases contractually expire at various dates through 2033. |
| |
(c)
| Excludes certain amounts related to Xcel Energy’s 50% ownership interest in WYCO. |
Future commitments under operating and finance leases as of Dec. 31, 2018:
|
| | | | | | | | | | | | | | | | |
(Millions of Dollars) | | PPA (a) (b) Operating Leases | | Other Operating Leases | | Total Operating Leases | | Finance Leases (c) |
2019 | | $ | 207 |
| | $ | 32 |
| | $ | 239 |
| | $ | 14 |
|
2020 | | 208 |
| | 26 |
| | 234 |
| | 14 |
|
2021 | | 210 |
| | 25 |
| | 235 |
| | 14 |
|
2022 | | 197 |
| | 24 |
| | 221 |
| | 12 |
|
2023 | | 186 |
| | 22 |
| | 208 |
| | 12 |
|
Thereafter | | 883 |
| | 154 |
| | 1,037 |
| | 220 |
|
Total minimum obligation | |
|
| |
|
| |
|
| | 286 |
|
Interest component of obligation | | | | | | | | (201 | ) |
Present value of minimum obligation | | | | | | $ | 85 |
|
| |
(a)
| Amounts do not include PPAs accounted for as executory contracts and/or contingent payments, such as energy payments on renewable PPAs. |
| |
(b)
| PPA operating leases contractually expire at various dates through 2033. |
| |
(c)
| Excludes certain amounts related to Xcel Energy’s 50% ownership interest in WYCO. |
Variable Interest EntitiesVIEs
Under certain PPAs, NSP-Minnesota, PSCo and SPS purchase power from IPPs andfor which the utility subsidiaries are required to reimburse the IPPs for natural gas or fuel costs, or to participate in tolling arrangements under which the utility subsidiaries procure the natural gas required to produce the energy that they purchase. These specific PPAs create a variable interest in the associated IPP.
Xcel EnergyThe utility subsidiaries had approximately 3,9863,266 MW and 3,7703,986 MW of capacity under long-termlong‑term PPAs as of Sept. 30, 2019at March 31, 2020 and Dec. 31, 2018,2019, respectively, with entities that have been determined to be variable interest entities.VIEs. Xcel Energy has concluded that these entities are not required to be consolidated in its consolidated financial statements because it does not have the power to direct the activities that most significantly impact the entities’ economic performance. These agreementsAgreements have various expiration dates through 2041.
Other
Guarantees and Bond Indemnifications — Xcel Energy Inc. and its subsidiaries provide guarantees and bond indemnities, which guarantee payment or performance. Xcel Energy Inc.’s exposure is based upon the net liability under the specified agreements or transactions. Most of the guarantees and bond indemnities issued by Xcel Energy Inc. and its subsidiaries have a stated maximum amount. As of Sept. 30, 2019March 31, 2020 and Dec. 31, 2018,2019, Xcel Energy Inc. and its subsidiaries had 0 assets held as collateral related to their guarantees, bond indemnities and indemnification agreements.
Guarantees and bond indemnities issued and outstanding for Xcel Energy were $60 million and $62 million and $69 million at Sept. 30, 2019March 31, 2020 and Dec. 31, 2018,2019, respectively.
Other Indemnification Agreements — Xcel Energy Inc. and its subsidiaries provide indemnifications through various contracts. These are primarily indemnifications against adverse litigation outcomes in connection with underwriting agreements, as well as breaches of representations and warranties, including corporate existence, transaction authorization and income tax matters with respect to assets sold. Xcel Energy Inc.’s and its subsidiaries’ obligations under these agreements may be limited in terms of duration and amount. Maximum future payments under these indemnifications cannot be reasonably estimated as the dollar amounts are often not explicitly stated.
|
|
11. Other Comprehensive Loss |
Changes in accumulated other comprehensive loss, net of tax, for the three and nine months ended Sept. 30, 2019March 31, 2020 and 2018:2019:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended Sept. 30, 2019 | | Three Months Ended Sept. 30, 2018 |
(Millions of Dollars) | | Gains and Losses on Cash Flow Hedges | | Defined Benefit Pension and Postretirement Items | | Total | | Gains and Losses on Cash Flow Hedges | | Defined Benefit Pension and Postretirement Items | | Total |
Accumulated other comprehensive loss at July 1 | | $ | (75 | ) | | $ | (60 | ) | | $ | (135 | ) | | $ | (57 | ) | | $ | (65 | ) | | $ | (122 | ) |
Other comprehensive (loss) before reclassifications (net of taxes of $(3), $0, $0 and $(1), respectively) | | (9 | ) | | — |
| | (9 | ) | | — |
| | (2 | ) | | (2 | ) |
Losses reclassified from net accumulated other comprehensive loss: | | | | | | | |
|
| |
|
| |
|
|
Interest rate derivatives (net of taxes of $0) (a) | | 1 |
| | — |
| | 1 |
| | 1 |
| | — |
| | 1 |
|
Amortization of net actuarial loss (net of taxes of $0, $0, $0 and $1, respectively) (b) | | — |
| | 1 |
| | 1 |
| | — |
| | 4 |
| | 4 |
|
Net current period other comprehensive income | | (8 | ) | | 1 |
| | (7 | ) | | 1 |
| | 2 |
| | 3 |
|
Accumulated other comprehensive loss at Sept. 30 | | $ | (83 | ) | | $ | (59 | ) | | $ | (142 | ) | | $ | (56 | ) | | $ | (63 | ) | | $ | (119 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Nine Months Ended Sept. 30, 2019 | | Nine Months Ended Sept. 30, 2018 |
(Millions of Dollars) | | Gains and Losses on Cash Flow Hedges | | Defined Benefit Pension and Postretirement Items | | Total | | Gains and Losses on Cash Flow Hedges | | Defined Benefit Pension and Postretirement Items | | Total |
Accumulated other comprehensive loss at Jan. 1 | | $ | (60 | ) | | $ | (64 | ) | | $ | (124 | ) | | $ | (58 | ) | | $ | (67 | ) | | $ | (125 | ) |
Other comprehensive (loss) gain before reclassifications (net of taxes of $(9), $1, $0 and $(1), respectively) | | (25 | ) | | 2 |
| | (23 | ) | | — |
| | (2 | ) | | (2 | ) |
Losses reclassified from net accumulated other comprehensive loss: | | | | | | | |
|
| |
|
| |
|
|
Interest rate derivatives (net of taxes of $1, $0, $1 and $0, respectively) (a) | | 2 |
| | — |
| | 2 |
| | 2 |
| | — |
| | 2 |
|
Amortization of net actuarial loss (net of taxes of $0, $1, $0 and $2, respectively) (b) | | — |
| | 3 |
| | 3 |
| | — |
| | 6 |
| | 6 |
|
Net current period other comprehensive income | | (23 | ) | | 5 |
| | (18 | ) | | 2 |
| | 4 |
| | 6 |
|
Accumulated other comprehensive loss at Sept. 30 | | $ | (83 | ) | | $ | (59 | ) | | $ | (142 | ) | | $ | (56 | ) | | $ | (63 | ) | | $ | (119 | ) |
|
| | | | | | | | | | | | |
| | Three Months Ended March 31, 2020 |
(Millions of Dollars) | | Gains and Losses on Cash Flow Hedges | | Defined Benefit Pension and Postretirement Items | | Total |
Accumulated other comprehensive loss at Jan. 1 | | $ | (80 | ) | | $ | (61 | ) | | $ | (141 | ) |
Other comprehensive loss before reclassifications (net of taxes of $(3) and $0, respectively) | | (10 | ) | | — |
| | (10 | ) |
Losses reclassified from net accumulated other comprehensive loss: | | | | | | |
Interest rate derivatives (net of taxes of $0) (a) | | 2 |
| | — |
| | 2 |
|
Amortization of net actuarial loss (net of taxes of $0) (b) | | — |
| | 1 |
| | 1 |
|
Net current period other comprehensive (loss) income | | (8 | ) | | 1 |
| | (7 | ) |
Accumulated other comprehensive loss at March 31 | | $ | (88 | ) | | $ | (60 | ) | | $ | (148 | ) |
| |
(a) | Included in interest charges. |
| |
(b) | Included in the computation of net periodic pension and postretirement benefit costs. |
|
| | | | | | | | | | | | |
| | Three Months Ended March 31, 2019 |
(Millions of Dollars) | | Gains and Losses on Cash Flow Hedges | | Defined Benefit Pension and Postretirement Items | | Total |
Accumulated other comprehensive loss at Jan. 1 | | $ | (60 | ) | | $ | (64 | ) | | $ | (124 | ) |
Other comprehensive (loss) gain before reclassifications (net of taxes of $(2) and $1, respectively) | | (7 | ) | | 2 |
| | (5 | ) |
Losses reclassified from net accumulated other comprehensive loss: | | | | | | |
Interest rate derivatives (net of taxes of $0) (a) | | 1 |
| | — |
| | 1 |
|
Amortization of net actuarial loss (net of taxes of $0) (b) | | — |
| | 1 |
| | 1 |
|
Net current period other comprehensive (loss) income | | (6 | ) | | 3 |
| | (3 | ) |
Accumulated other comprehensive loss at March 31 | | $ | (66 | ) | | $ | (61 | ) | | $ | (127 | ) |
| |
(a) | Included in interest charges. |
| |
(b) | Included in the computation of net periodic pension and postretirement benefit costs. |
Regulated electric utility operating results of NSP-Minnesota, NSP-Wisconsin, PSCo and SPS, as well as the regulated natural gas utility operating results of NSP-Minnesota, NSP-Wisconsin and PSCo are each separately and regularly reviewed by Xcel Energy’s chief operating decision maker. Xcel Energy evaluates performance by each utility subsidiary based on profit or loss generated from the product or service provided.provided, including the regulated
electric utility operating results of NSP-Minnesota, NSP-Wisconsin, PSCo and
SPS, as well as the regulated natural gas utility operating results of NSP‑Minnesota, NSP-Wisconsin and PSCo. These segments are managed separately because the revenue streams are dependent upon regulated rate recovery, which is separately determined for each segment.
Xcel Energy has the following reportable segments:
| |
• | Regulated Electric -— The regulated electric utility segment generates, transmits and distributes electricity in Minnesota, Wisconsin, Michigan, North Dakota, South Dakota, Colorado, Texas and New Mexico. In addition, this segment includes sales for resale and provides wholesale transmission service to various entities in the United States. The regulated electric utility segment also includes wholesale commodity and trading operations.operations; and |
| |
• | Regulated Natural Gas -— The regulated natural gas utility segment transports, stores and distributes natural gas primarily in portions of Minnesota, Wisconsin, North Dakota, Michigan and Colorado. |
Xcel Energy presents Other, which includes operating segments, with revenues below the necessary quantitative thresholds. Those operating segments primarily include steam revenue, appliance repair services, non‑utility real estate activities, revenues associated with processing solid waste into refuse-derived fuel and investments in rental housing projects that qualify for low-income housing tax credits.
| |
• | All Other - Operating segments with revenues below the necessary quantitative thresholds are included in this category. Those segments primarily include steam revenue, appliance repair services, non-utility real estate activities, revenues associated with processing solid waste into refuse-derived fuel and investments in rental housing projects that qualify for low-income housing tax credits.
|
Xcel Energy had equity investments in unconsolidated subsidiaries of $151$158 million and $141$155 million as of Sept. 30, 2019March 31, 2020 and Dec. 31, 2018,2019, respectively, included in the natural gas utility and all other segments.
Asset and capital expenditure information is not provided for Xcel Energy’s reportable segments. As an integrated electric and natural gas utility, Xcel Energy operates significant assets that are not dedicated to a specific business segment. Reporting assets and capital expenditures by business segment would require arbitrary and potentially misleading allocations which may not necessarily reflect the assets that would be required for the operation of the business segments on a stand-alone basis.
Certain costs, such as common depreciation, common O&M expenses and interest expense are allocated based on cost causation allocators across each segment. In addition, a general allocator is used for certain general and administrative expenses, including office supplies, rent, property insurance and general advertising.
Xcel Energy’s segment information for the three and nine months ended Sept. 30:March 31:
|
| | | | | | | | |
| | Three Months Ended Sept. 30 |
(Millions of Dollars) | | 2019 | | 2018 |
Regulated Electric | | | | |
Operating revenues from external customers | | $ | 2,771 |
| | $ | 2,802 |
|
Net income | | 550 |
| | 514 |
|
Regulated Natural Gas | | | | |
Operating revenues from external customers | | $ | 222 |
| | $ | 227 |
|
Net (loss) income | | (1 | ) | | 9 |
|
All Other | | | | |
Total operating revenue | | $ | 20 |
| | $ | 19 |
|
Net loss | | (22 | ) | | (32 | ) |
| | | | |
Consolidated Total | | | | |
Total revenue | | $ | 3,013 |
| | $ | 3,048 |
|
Net income | | 527 |
| | 491 |
|
| | | | Nine Months Ended Sept. 30 | | | | | |
(Millions of Dollars) | | 2019 | | 2018 | | 2020 | | 2019 |
Regulated Electric | | | | | | | | |
Operating revenues from external customers | | $ | 7,345 |
| | $ | 7,419 |
| | $ | 2,203 |
| | $ | 2,325 |
|
Intersegment revenue | | 1 |
| | 1 |
| |
Total revenues | | $ | 7,346 |
| | $ | 7,420 |
| |
Net income | | 1,032 |
| | 997 |
| | 227 |
| | 234 |
|
Regulated Natural Gas | | | | | | | | |
Operating revenues from external customers | | $ | 1,324 |
| | $ | 1,181 |
| | $ | 583 |
| | $ | 794 |
|
Intersegment revenue | | 1 |
| | 1 |
| | — |
| | 1 |
|
Total revenues | | $ | 1,325 |
| | $ | 1,182 |
| | $ | 583 |
| | $ | 795 |
|
Net income | | 127 |
| | 130 |
| | 91 |
| | 105 |
|
All Other | | | | | | | | |
Total operating revenue | | $ | 62 |
| | $ | 57 |
| | $ | 25 |
| | $ | 22 |
|
Net loss | | (79 | ) | | (80 | ) | | (23 | ) | | (24 | ) |
| | | | | | | | |
Consolidated Total | | | | | | | | |
Total revenue | | $ | 8,733 |
| | $ | 8,659 |
| | $ | 2,811 |
| | $ | 3,142 |
|
Reconciling eliminations | | (2 | ) | | (2 | ) | | — |
| | (1 | ) |
Consolidated total revenue | | $ | 8,731 |
| | $ | 8,657 |
| | $ | 2,811 |
| | $ | 3,141 |
|
Net income | | 1,080 |
| | 1,047 |
| | 295 |
| | 315 |
|
|
| | | | |
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis by management focuses on those factors that had a material effect on Xcel Energy’s financial condition, results of operations and cash flows during the periods presented, or are expected to have a material impact in the future. It should be read in conjunction with the accompanying unaudited consolidated financial statements and the related notes to consolidated financial statements.
Due to the seasonality of Xcel Energy’s operating results, quarterly financial results are not an appropriate base from which to project annual results. The demand for electric power and natural gas is affected by seasonal differences in the weather. In general, peak sales of electricity occur in the summer months, and peak sales of natural gas occur in the winter months. As a result, the overall operating results may fluctuate substantially on a seasonal basis. Additionally, Xcel Energy’s operations have historically generated less revenues and income when weather conditions are milder in the winter and cooler in the summer.
Non-GAAP Financial Measures
The following discussion includes financial information prepared in accordance with GAAP, as well as certain non-GAAP financial measures such as electric margin, natural gas margin, ongoing earnings and ongoing diluted EPS. Generally, a non-GAAP financial measure is a measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are adjusted from measures calculated and presented in accordance with GAAP. Xcel Energy’s management uses non-GAAP measures for financial planning and analysis, for reporting of results to the Board of Directors, in determining performance-based compensation, and communicating its earnings outlook to analysts and investors. Non-GAAP financial measures are intended to supplement investors’ understanding of our performance and should not be considered alternatives for financial measures presented in accordance with GAAP. These measures are discussed in more detail below and may not be comparable to other companies’ similarly titled non-GAAP financial measures.
Electric and Natural Gas Margins
Electric margin is presented as electric revenues less electric fuel and purchased power expenses. Natural gas margin is presented as natural gas revenues less the cost of natural gas sold and transported. Expenses incurred for electric fuel and purchased power and the cost of natural gas are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are generally offset in operating revenues.
Management believes electric and natural gas margins provide the most meaningful basis for evaluating our operations because they exclude the revenue impact of fluctuations in these expenses. These margins can be reconciled to operating income, a GAAP measure, by including other operating revenues, cost of sales — other, O&M expenses, conservation and DSM expenses, depreciation and amortization and taxes (other than income taxes).
Earnings Adjusted for Certain Items (Ongoing Earnings and Ongoing Diluted EPS)
GAAP diluted EPS reflects the potential dilution that could occur if securities or other agreements to issue common stock (i.e., common stock equivalents) were settled. The weighted average number of potentially dilutive shares outstanding used to calculate Xcel Energy Inc.’s diluted EPS is calculated using the treasury stock method. Ongoing earnings reflect adjustments to GAAP earnings (net income) for certain items.
Ongoing diluted EPS is calculated by dividing the net income or loss of each subsidiary, adjusted for certain items, by the weighted average fully diluted Xcel Energy Inc. common shares outstanding for the period. Ongoing diluted EPS for each subsidiary is calculated by dividing the net income or loss of such subsidiary, adjusted for certain items, by the weighted average fully diluted Xcel Energy Inc. common shares outstanding for the period.
We use these non-GAAP financial measures to evaluate and provide details of Xcel Energy’s core earnings and underlying performance. We believe these measurements are useful to investors to evaluate the actual and projected financial performance and contribution of our subsidiaries.
For the three and nine months ended Sept. 30,March 31, 2020 and 2019, and 2018, there were no such adjustments to GAAP earnings and therefore GAAP earnings equal ongoing earnings for these periods.
The only common equity securities that are publicly traded are common shares of Xcel Energy Inc. Diluted earnings and EPS of each subsidiary discussed below do not represent a direct legal interest in the assets and liabilities allocated to such subsidiary but rather represent a direct interest in our assets and liabilities as a whole.
GAAP and ongoing diluted EPS for Xcel Energy:
| | | | Three Months Ended Sept. 30 | | Nine Months Ended Sept. 30 | | Three Months Ended March 31 |
Diluted Earnings (Loss) Per Share | | 2019 | | 2018 | | 2019 | | 2018 | | 2020 | | 2019 |
PSCo | | $ | 0.39 |
| | $ | 0.41 |
| | $ | 0.86 |
| | $ | 0.91 |
| | $ | 0.24 |
| | $ | 0.27 |
|
NSP-Minnesota | | 0.40 |
| | 0.39 |
| | 0.81 |
| | 0.79 |
| | 0.20 |
| | 0.22 |
|
SPS | | 0.20 |
| | 0.16 |
| | 0.42 |
| | 0.34 |
| | 0.08 |
| | 0.10 |
|
NSP-Wisconsin | | 0.06 |
| | 0.06 |
| | 0.12 |
| | 0.15 |
| | 0.06 |
| | 0.05 |
|
Equity earnings of unconsolidated subsidiaries | | 0.01 |
| | 0.01 |
| | 0.04 |
| | 0.03 |
| | 0.01 |
| | 0.01 |
|
Regulated utility (a) | | 1.06 |
| | 1.03 |
| | 2.24 |
| | 2.22 |
| | 0.60 |
| | 0.65 |
|
Xcel Energy Inc. and Other | | (0.05 | ) | | (0.07 | ) | | (0.16 | ) | | (0.17 | ) | | (0.04 | ) | | (0.04 | ) |
Total (a) | | $ | 1.01 |
| | $ | 0.96 |
| | $ | 2.08 |
| | $ | 2.05 |
| | $ | 0.56 |
| | $ | 0.61 |
|
| |
(a) | Amounts may not add due to rounding. |
Summary of Earnings
Xcel Energy — Xcel Energy’s earnings increaseddecreased $0.05 per share for the thirdfirst quarter of 2019 and2020. Earnings reflect the negative impact of weather. The impact of COVID-19 did not significantly impact first quarter 2020 results, but could have a material impact on our financial results going forward. See COVID-19 section below for further discussion.
PSCo — Earnings decreased $0.03 per share year-to-date. Earnings reflect higher electricfor the first quarter of 2020, reflecting lower natural gas margins primarily due to non-fuel ridersunfavorable weather, higher depreciation and regulatory rate outcomes and lower O&M, expenses, partially offset by lower AFUDC, increased depreciationhigher electric margin and interest expenses.AFUDC.
PSCoNSP-Minnesota — Earnings decreased $0.02 per share for the thirdfirst quarter of 20192020, driven by reduced natural gas margins primarily due to unfavorable weather as well as lower electric margin, which reflects the unfavorable weather experienced in North and $0.05South Dakota. NSP-Minnesota also recognized increased interest and higher depreciation, partially offset by lower O&M and income taxes.
SPS — Earnings decreased $0.02 per share year-to-date. The decrease in year-to-date earnings was driven by higher depreciation, O&M, interest expense andfor the first quarter of 2020, reflecting lower allowance for funds used during construction (AFUDC), which offsets higher natural gas and electric margin. Changes inmargin primarily due to a 2019 NMPRC revised order eliminating a $10 million retroactive refund of tax reform benefits. SPS also recognized additional depreciation and less AFUDC, are primarily drivenpartially offset by the Rush Creek wind project that was placed in service in 2018.lower income taxes.
NSP-MinnesotaNSP-Wisconsin — Earnings increased $0.01 per share for the thirdfirst quarter of 20192020, driven by reduced O&M and $0.02 per share year-to-date. Year-to-date results reflect higher electric margin, driven by regulatory rate outcomes, partially offset by the negative impact of weather, unfavorable sales and increased depreciation.
SPS — Earnings increased $0.04 for the third quarter of 2019 and $0.08 per share year-to-date. Year-to-date results reflect higher electric margin attributable to regulatory rate outcomes and sales growth despite unfavorable weather. Higher electric margin and AFUDC associated with the Hale wind project were partially offset by increased depreciation, O&M and interest expenses.
NSP-Wisconsin — Earnings were flat for the third quarter of 2019 and decreased $0.03 per share year-to-date. Year-to-date results reflect unfavorable weather, higheradditional depreciation and lower AFUDC.natural gas margin.
Xcel Energy Inc. and Other — Xcel Energy Inc. and Other primarilyPrimarily includes financing costs at the holding company.
Changes in GAAP and Ongoing Diluted EPS
Components significantly contributing to changes in 20192020 EPS compared with the same period in 2018:2019:
|
| | | | | | | | |
Diluted Earnings (Loss) Per Share | | Three Months Ended Sept. 30 | | Nine Months Ended Sept. 30 |
GAAP and ongoing diluted EPS — 2018 | | $ | 0.96 |
| | $ | 2.05 |
|
| | | | |
Components of change — 2019 vs. 2018 | | | | |
Higher electric margins | | 0.08 |
| | 0.22 |
|
Lower ETR (a) | | 0.03 |
| | 0.12 |
|
Higher natural gas margin | | — |
| | 0.05 |
|
Higher depreciation and amortization | | (0.01 | ) | | (0.17 | ) |
Higher interest charges | | (0.03 | ) | | (0.08 | ) |
Lower AFUDC | | (0.04 | ) | | (0.06 | ) |
Changes in O&M | | 0.02 |
| | (0.05 | ) |
GAAP and ongoing diluted EPS — 2019 | | $ | 1.01 |
| | $ | 2.08 |
|
|
| | | | |
Diluted Earnings (Loss) Per Share | | Three Months Ended March 31 |
GAAP and ongoing diluted EPS — 2019 | | $ | 0.61 |
|
| | |
Components of change — 2020 vs. 2019 | | |
Higher depreciation and amortization | | (0.04 | ) |
Lower electric and natural gas margins | | (0.03 | ) |
Higher interest | | (0.01 | ) |
Lower ETR (a) | | 0.03 |
|
Lower O&M | | 0.03 |
|
Lower other (expense) income, net (b) | | (0.02 | ) |
Other (net) | | (0.01 | ) |
GAAP and ongoing diluted EPS — 2020 | | $ | 0.56 |
|
| |
(a) | Includes PTCs and timing of tax reform regulatory decisions, which are primarily offset in electric margin. |
| |
(b) | Decrease is primarily due to the performance of rabbi trust investments associated with deferred compensation, which is offset in O&M. |
Statement of Income Analysis
The following summarizes the items that affected the individual revenue and expense items reported in the consolidated statements of income.
Estimated Impact of Temperature Changes on Regulated Earnings — Unusually—Unusually hot summers or cold winters increase electric and natural gas sales, while mild weather reduces electric and natural gas sales. The estimated impact of weather on earnings is based on the number of customers, temperature variances, and the amount of natural gas or electricity historically used per degree of temperature. Weathertemperature and excludes any incremental related operating expenses that could result due to storm activity or vegetation management requirements. As a result, weather deviations from normal levels can affect Xcel Energy’s financial performance.
Degree-day or Temperature-Humidity Index (THI)THI data is used to estimate amounts of energy required to maintain comfortable indoor temperature levels based on each day’s average temperature and humidity. Heating degree-days (HDD)HDD is the measure of the variation in the weather based on the extent to which the average daily temperature falls below 65° Fahrenheit. Cooling degree-days (CDD)CDD is the measure of the variation in the weather based on the extent to which the average daily temperature rises above 65° Fahrenheit. Each degree of temperature above 65° Fahrenheit is counted as one CDD, and each degree of temperature below 65° Fahrenheit is counted as one HDD. In Xcel Energy’s more humid service territories, a THI is used in place of CDD, which adds a humidity factor to CDD. HDD, CDD and THI are most likely to impact the usage of Xcel Energy’s residential and commercial customers. Industrial customers are less sensitive to weather.
Normal weather conditions are defined as either the 20-year10, 20 or 30-year average of actual historical weather conditions. The historical period of time used in the calculation of normal weather differs by jurisdiction, based on regulatory practice. To calculate the impact of weather on demand, a demand factor is applied to the weather impact on sales. Extreme weather variations, windchill and cloud cover may not be reflected in weather-normalized estimates.
There was no impact on sales for the first quarter of 2020 due to THI or CDD. Percentage increase (decrease)change in normal and actual HDD, CDD and THI:HDD:
|
| | | | | | | | | | | | | | | | | |
| Three Months Ended Sept. 30 | | Nine Months Ended Sept. 30 |
| 2019 vs. Normal | | 2018 vs. Normal | | 2019 vs. 2018 | | 2019 vs. Normal | | 2018 vs. Normal | | 2019 vs. 2018 |
HDD | (64.0 | )% | | (18.2 | )% | | (57.0 | )% | | 10.7 | % | | (0.3 | )% | | 9.4 | % |
CDD | 27.4 |
| | 14.8 |
| | 20.9 |
| | 6.4 |
| | 27.1 |
| | (14.9 | ) |
THI | (2.6 | ) | | 18.2 |
| | (17.0 | ) | | (8.2 | ) | | 38.4 |
| | (33.2 | ) |
|
| | | | | | | | |
| Three Months Ended March 31 |
| 2020 vs. Normal | | 2019 vs. Normal | | 2020 vs. 2019 |
HDD | (5.5 | )% | | 10.5 | % | | (14.1 | )% |
Weather — Estimated impact of temperature variations on EPS compared with normal weather conditions:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended Sept. 30 | | Nine Months Ended Sept. 30 |
| 2019 vs. Normal | | 2018 vs. Normal | | 2019 vs. 2018 | | 2019 vs. Normal | | 2018 vs. Normal | | 2019 vs. 2018 |
Retail electric | $ | 0.040 |
| | $ | 0.043 |
| | $ | (0.003 | ) | | $ | 0.035 |
| | $ | 0.110 |
| | $ | (0.075 | ) |
Firm natural gas | (0.001 | ) | | — |
| | (0.001 | ) | | 0.021 |
| | 0.003 |
| | 0.018 |
|
Total (excluding decoupling) | $ | 0.039 |
| | $ | 0.043 |
| | $ | (0.004 | ) | | $ | 0.056 |
| | $ | 0.113 |
| | $ | (0.057 | ) |
Decoupling — Minnesota | — |
| | (0.018 | ) | | 0.018 |
| | 0.001 |
| | (0.050 | ) | | 0.051 |
|
Total (adjusted for decoupling) | $ | 0.039 |
| | $ | 0.025 |
| | $ | 0.014 |
| | $ | 0.057 |
| | $ | 0.063 |
| | $ | (0.006 | ) |
|
| | | | | | | | | | | |
| Three Months Ended March 31 |
| 2020 vs. Normal | | 2019 vs. Normal | | 2020 vs. 2019 |
Retail electric | $ | (0.011 | ) | | $ | 0.018 |
| | $ | (0.029 | ) |
MN decoupling and sales true-up | 0.006 |
| | (0.005 | ) | | 0.011 |
|
Electric total | $ | (0.005 | ) | | $ | 0.013 |
| | $ | (0.018 | ) |
Firm natural gas | (0.007 | ) | | 0.017 |
| | (0.024 | ) |
Total | $ | (0.012 | ) | | $ | 0.030 |
| | $ | (0.042 | ) |
Sales Growth (Decline) — Sales growth (decline) for actual and weather-normalized sales in 20192020 compared to the same period in 2018:2019:
| | | | Three Months Ended Sept. 30 | | Three Months Ended March 31 |
| | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy | | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Actual | | | | | | | | | | | | | | | | | | | | |
Electric residential | | 1.7 | % | | (6.2 | )% | | 5.9 | % | | (1.8 | )% | | (1.2 | )% | | (0.9 | )% | | (4.8 | )% | | (1.4 | )% | | (6.3 | )% | | (3.0 | )% |
Electric C&I | | (1.6 | ) | | (6.1 | ) | | 4.6 |
| | (3.6 | ) | | (1.9 | ) | | 0.2 |
| | (3.9 | ) | | 3.3 |
| | (0.4 | ) | | (0.6 | ) |
Total retail electric sales | | (0.5 | ) | | (6.1 | ) | | 4.7 |
| | (3.1 | ) | | (1.7 | ) | | (0.2 | ) | | (4.2 | ) | | 2.3 |
| | (2.2 | ) | | (1.3 | ) |
Firm natural gas sales | | 4.2 |
| | 1.7 |
| | N/A |
| | (10.6 | ) | | 2.5 |
| | (6.6 | ) | | (13.4 | ) | | N/A |
| | (14.4 | ) | | (9.3 | ) |
|
| | | | | | | | | | | | | | | |
| | Three Months Ended March 31 |
| | PSCo (a) | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Weather-normalized | | | | | | | | | | |
Electric residential | | 1.0 | % | | 0.2 | % | | 0.6 | % | | 1.6 | % | | 0.7 | % |
Electric C&I | | 0.6 |
| | (3.2 | ) | | 3.4 |
| | 0.4 |
| | (0.1 | ) |
Total retail electric sales | | 0.7 |
| | (2.2 | ) | | 2.8 |
| | 0.8 |
| | 0.1 |
|
Firm natural gas sales | | 0.8 |
| | 2.6 |
| | N/A |
| | 3.3 |
| | 1.5 |
|
|
| | | | | | | | | | | | | | | |
| | Three Months Ended Sept. 30 |
| | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Weather-normalized | | | | | | | | | | |
Electric residential | | (1.1 | )% | | (1.0 | )% | | (1.4 | )% | | 1.5 | % | | (0.9 | )% |
Electric C&I | | (2.8 | ) | | (4.4 | ) | | 3.6 |
| | (2.8 | ) | | (1.8 | ) |
Total retail electric sales | | (2.2 | ) | | (3.4 | ) | | 2.4 |
| | (1.7 | ) | | (1.6 | ) |
Firm natural gas sales | | 6.8 |
| | 4.0 |
| | N/A |
| | (7.9 | ) | | 5.1 |
|
|
| | | | | | | | | | | | | | | |
| | Three Months Ended March 31 (Leap Year Adjusted) |
| | PSCo (a) | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Weather-normalized | | | | | | | | | | |
Electric residential | | (0.1 | )% | | (0.9 | )% | | (0.5 | )% | | 0.5 | % | | (0.4 | )% |
Electric C&I | | (0.5 | ) | | (4.3 | ) | | 2.3 |
| | (0.7 | ) | | (1.2 | ) |
Total retail electric sales | | (0.4 | ) | | (3.3 | ) | | 1.7 |
| | (0.3 | ) | | (1.0 | ) |
Firm natural gas sales | | (0.4 | ) | | 1.4 |
| | N/A |
| | 2.1 |
| | 0.4 |
|
| |
(a) | CPUC approved a historical 10-year weather normalization approach for retail electric, effective March 1, 2020, which did not materially impact the weather-normalized calculation. |
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended Sept. 30 |
| | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Actual | | | | | | | | | | |
Electric residential | | (0.4 | )% | | (4.8 | )% | | (0.4 | )% | | (2.4 | )% | | (2.4 | )% |
Electric C&I | | (0.9 | ) | | (4.6 | ) | | 3.9 |
| | (2.8 | ) | | (1.2 | ) |
Total retail electric sales | | (0.7 | ) | | (4.6 | ) | | 2.9 |
| | (2.7 | ) | | (1.6 | ) |
Firm natural gas sales | | 15.6 |
| | 5.3 |
| | N/A |
| | (1.7 | ) | | 10.9 |
|
|
| | | | | | | | | | | | | | | |
| | Nine Months Ended Sept. 30 |
| | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Weather-normalized | | | | | | | | | | |
Electric residential | | (0.2 | )% | | — | % | | 1.2 | % | | 1.1 | % | | 0.2 | % |
Electric C&I | | (0.8 | ) | | (3.2 | ) | | 4.2 |
| | (2.0 | ) | | (0.5 | ) |
Total retail electric sales | | (0.5 | ) | | (2.3 | ) | | 3.5 |
| | (1.2 | ) | | (0.3 | ) |
Firm natural gas sales | | 4.9 |
| | 1.3 |
| | N/A |
| | (4.1 | ) | | 3.2 |
|
Year-to-date weather-normalizedWeather-normalized and Leap-Year Adjusted Electric Sales Growth (Decline)
All companies were negatively impacted by COVID-19 in March 2020. In addition, the following items impacted sales in each of the companies:
PSCo — Residential sales were lowerdeclined slightly due to a decrease inlower use per customer, usage, partially offset by customer additions. Commercial and industrial (C&I)an increase in customers. The decline in C&I was mainly due to lower usage inuse per customer, primarily led by the food products and service industries, partially offset by growth in metal fabrication and mining industries.the energy industry.
NSP-Minnesota — DeclineResidential sales declined reflecting lower use per customer, partially offset by customer additions. The decline in C&I sales was due to expected discretea result of lower use by certain customers in the energy, manufacturing customer declines due to newly installed co-generation, which wasand services sectors, partially offset by an increase in customers.customer growth.
SPS — Residential sales growth wasdecreased slightly primarily due to customer additions, partially offset by lower use per customer. Higher C&I sales was primarily driven by increasegrew based on higher sales to large customers in the oil and natural gas industry in the Permian Basin.
NSP-Wisconsin — Residential sales growth was primarily attributable to customer additions, and increased usage. Declinepartially offset by less use per customer. The decline in C&I sales was largely due to lower use per customer, partially offset by customer additions and decreased sales to the mining, manufacturing sector, which was partially offset by an increase in the energy sector.
Weather-normalized and food industries.
Year-to-date weather-normalizedLeap-Year Adjusted Natural Gas Sales Growth (Decline)
Natural gas sales reflect an increase in the number of customers combined with higherlower customer use.use and the negative impacts of COVID-19 in March 2020.
Electric Margin
Electric revenues and fuel and purchased power expenses are impacted by fluctuations in the price of natural gas, coal and uranium used in the generation of electricity. However, these price fluctuations have minimal impact on electric margin due to fuel recovery mechanisms that recover fuel expenses.
In addition, electric customers receive a credit for PTCs generated in a particular period.
Electric revenues and margin:
|
| | | | | | | | |
| | Three Months Ended March 31 |
(Millions of Dollars) | | 2020 | | 2019 |
Electric revenues | | $ | 2,203 |
| | $ | 2,325 |
|
Electric fuel and purchased power | | (797 | ) | | (914 | ) |
Electric margin | | $ | 1,406 |
| | $ | 1,411 |
|
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended Sept. 30 | | Nine Months Ended Sept. 30 |
(Millions of Dollars) | | 2019 | | 2018 | | 2019 | | 2018 |
Electric revenues | | $ | 2,771 |
| | $ | 2,802 |
| | $ | 7,345 |
| | $ | 7,419 |
|
Electric fuel and purchased power | | (952 | ) | | (1,040 | ) | | (2,679 | ) | | (2,907 | ) |
Electric margin | | $ | 1,819 |
| | $ | 1,762 |
| | $ | 4,666 |
| | $ | 4,512 |
|
Changes in electric margin:
|
| | | | | | | | |
(Millions of Dollars) | | Three Months Ended Sept. 30, 2019 vs. 2018 | | Nine Months Ended Sept. 30, 2019 vs. 2018 |
Non-fuel riders (a) | | $ | 25 |
| | $ | 81 |
|
Regulatory rate outcomes (Minnesota, New Mexico, North and South Dakota) | | 32 |
| | 79 |
|
Wholesale transmission revenue (net) | | 11 |
| | 22 |
|
Purchased capacity costs | | 6 |
| | 21 |
|
Implementation of lease accounting standard (offset in interest expense and amortization) | | 5 |
| | 16 |
|
Demand revenue | | (1 | ) | | 12 |
|
Estimated impact of weather (net of Minnesota decoupling) | | 6 |
| | (26 | ) |
Timing of tax reform regulatory decisions (offset in income tax and amortization) | | (3 | ) | | (22 | ) |
Sales declines (excluding weather impact and net of sales true-up) | | (16 | ) | | (17 | ) |
Firm wholesale generation | | (9 | ) | | (14 | ) |
Other (net) | | 1 |
| | 2 |
|
Total increase in electric margin | | $ | 57 |
| | $ | 154 |
|
|
| | | | |
(Millions of Dollars) | | Three Months Ended March 31, 2020 vs. 2019 |
PTCs flowed back to customers (offset by a lower ETR) | | $ | (23 | ) |
Estimated impact of weather (net of decoupling/sales true-up) | | (13 | ) |
New Mexico tax reform related regulatory settlement (2019) | | (10 | ) |
Regulatory rate outcomes (Colorado and Wisconsin) | | 13 |
|
Non-fuel riders | | 13 |
|
Wholesale transmission revenue (net) | | 5 |
|
Sales growth (excluding weather impact, net of decoupling/sales true-up | | 4 |
|
Other (net) | | 6 |
|
Total decrease in electric margin | | $ | (5 | ) |
| |
(a)
| Includes approximately $17 million and $50 million, respectively, of additional PTC benefit (grossed-up for tax) as compared to the same periods in 2018, which are credited to customers through various regulatory mechanisms. |
Natural Gas Margin
Natural gas expense varies with changing sales and the cost of natural gas. However, fluctuations in the cost of natural gas has minimal impact on natural gas margin due to cost recovery mechanisms.
Natural gas revenues and margin:
| | | | Three Months Ended Sept. 30 | | Nine Months Ended Sept. 30 | | Three Months Ended March 31 |
(Millions of Dollars) | | 2019 | | 2018 | | 2019 | | 2018 | | 2020 | | 2019 |
Natural gas revenues | | $ | 222 |
| | $ | 227 |
| | $ | 1,324 |
| | $ | 1,181 |
| | $ | 583 |
| | $ | 794 |
|
Cost of natural gas sold and transported | | (55 | ) | | (58 | ) | | (646 | ) | | (537 | ) | | (285 | ) | | (479 | ) |
Natural gas margin | | $ | 167 |
| | $ | 169 |
| | $ | 678 |
| | $ | 644 |
| | $ | 298 |
| | $ | 315 |
|
Changes in natural gas margin:
| | (Millions of Dollars) | | Three Months Ended Sept. 30, 2019 vs. 2018 | | Nine Months Ended Sept. 30, 2019 vs. 2018 | | Three Months Ended March 31, 2020 vs. 2019 |
Estimated impact of weather | | $ | — |
| | $ | 12 |
| | $ | (17 | ) |
Transport sales | | | (2 | ) |
Regulatory rate outcomes (Wisconsin) | | | (1 | ) |
Retail sales growth | | | 2 |
|
Infrastructure and integrity riders | | 4 |
| | 11 |
| | 1 |
|
Retail sales growth | | 1 |
| | 5 |
| |
Retail rate increase (Colorado, partially offset in amortization) | | (8 | ) | | 4 |
| |
Transport sales | | 1 |
| | 4 |
| |
Conservation revenue (offset in expenses) | | — |
| | (3 | ) | | 1 |
|
Other (net) | | — |
| | 1 |
| | (1 | ) |
Total (decrease) increase in natural gas margin | | $ | (2 | ) | | $ | 34 |
| |
Total decrease in natural gas margin | | | $ | (17 | ) |
Non-Fuel Operating Expenses and Other Items
O&M Expenses — O&M expenses decreased $13$18 million, or 2.2%3.0%, for the thirdfirst quarter of 2019 and increased $35 million, or 2.0%, year-to-date.2020. Significant changes are summarized below:as follows:
|
| | | | |
(Millions of Dollars) | | Three Months Ended March 31, 2020 vs. 2019 |
Employee benefits | | $ | (15 | ) |
Distribution | | (10 | ) |
Generation | | (2 | ) |
Strategic initiatives | | 7 |
|
Other (net) | | 2 |
|
Total decrease in O&M expenses | | $ | (18 | ) |
|
| | | | | | | | |
(Millions of Dollars) | | Three Months Ended Sept. 30, 2019 vs. 2018 | | Nine Months Ended Sept. 30, 2019 vs. 2018 |
Distribution | | $ | — |
| | $ | 23 |
|
Business systems | | (6 | ) | | 5 |
|
Plant generation | | — |
| | 3 |
|
Natural gas operations | | (3 | ) | | 1 |
|
Nuclear plant operations and amortization | | (4 | ) | | (4 | ) |
Other (net) | | — |
| | 7 |
|
Total (decrease) increase in O&M expenses | | $ | (13 | ) | | $ | 35 |
|
Employee benefits were lower primarily due to change in deferred compensation related liability, offset in Other (Expense) Income;
Distribution expenses for the nine month comparisondeclined due to storms, labor and overtime;
Generation expenses were lower from timing of maintenance and overhauls at power plants, partially offset by an increase in wind related amounts; and
Strategic initiatives expenses were higher due to storms and labor charges incurred during the first half of the year;
Business Systems costs were higher for the nine month comparison, primarily due to increased spending on customer experience transformation program expenses;
Natural gas operation expenses for the nine month comparison increased due to pipeline maintenance; and
Nuclear plant operations and amortization are lower largely reflecting savings initiatives and reduced refueling outage costs.advanced grid infrastructure.
Depreciation and Amortization — Depreciation and amortization increased $7$30 million, or 1.6%6.9%, for the thirdfirst quarter of 2019 and $120 million, or 10.0%, year-to-date.2020. Increase was primarily driven by the Rush CreekHale, Lake Benton, and HaleFoxtail wind farmsfacilities going into service, as well as other capital investments, which was partially offsetnormal system expansion. In addition, depreciation rates were increased in February 2020 as part of the Colorado electric rate case.
Other (Expense) Income — Other (Expense) Income decreased by accelerated amortization of PSCo’s prepaid pension asset in the third quarter of 2018.
Taxes (Other than Income Taxes) — Taxes (other than income taxes) increased $2$15 million or 1.5%, for the third quarter of 2019 and $12 million, or 2.9%, year-to-date. Increase was primarily due to higher property taxesthe performance of rabbi trust investments, which is offset in Colorado and Minnesota (net of deferred amounts).O&M expense.
AFUDC, Equity and Debt — AFUDC decreased $21increased $3 million for the thirdfirst quarter of 2019 and $32 million year-to-date. Decrease2020. Increase was primarily due to the Rush Creekan increase in AFUDC recorded on various wind project being placed in-service in 2018, partially offset by the Hale wind project, which went into service in June 2019, and other capital investments.projects currently under construction.
Interest Charges — Interest charges increased $22$10 million, or 12.4%5.3%, for the thirdfirst quarter of 2019 and $55 million, or 10.5%, year-to-date.2020. Increase was primarily due to higher debt levels to fund capital investments, changes inpartially offset by lower long-term and short-term interest rates and implementation of lease accounting standard (offset in electric margin).rates.
Income Taxes — Income taxes decreased $1$31 million for the third quarter of 2019. Higher pre-tax earnings were offsetthree months ended March 31, 2020. The decrease was primarily driven by an increase in wind PTCs, lower pretax earnings in 2020 and tax benefit adjustments attributable to the tax return filed for 2018.an increase in plant regulatory differences. Wind PTCs are credited to customers (recorded as a reduction to revenue) and do not have a material impact on net income. These were partially offset by a decrease in other tax credits. The ETR was 12.0%(2.1%) for the thirdfirst quarter of 20192020 compared with 12.9%7.4% for the same period in 2018, largely due to the adjustments above.2019.
Income taxes decreased $66 million for the first nine months of 2019, primarily driven by additional wind PTCs and lower pre-tax earnings. Wind PTCs are credited to customers (recorded as a reduction to revenue) and do not have a material impact on net income. The ETR was 10.1% for the first nine months of 2019 compared with 15.2% for the same period in 2018, largely due to the adjustments above.
FERC and State Regulation— |
|
Public Utility Regulation |
The FERC and various state and local regulatory commissions regulate Xcel Energy Inc.’s utility subsidiaries and WGI. The electric and natural gas rates charged to customers of Xcel Energy Inc.’s utility subsidiaries and WGI are approved by the FERC or the regulatory commissions in the states in which they operate.
The rates are designed to recover plant investment, operating costs and an allowed return on investment. Xcel Energy Inc.’s utility subsidiaries request changes in rates for utility services through filings with governing commissions.
Changes in operating costs can affect Xcel Energy’s financial results, depending on the timing of rate case filings and implementation of final rates. Other factors affecting rate filings are new investments, sales, conservation and DSM efforts, and the cost of capital. In addition, the regulatory commissions authorize the ROE, capital structure and depreciation rates in rate proceedings. Decisions by these regulators can significantly impact Xcel Energy’s results of operations.
Recently Filed Regulatory Proceedings
NSP-Wisconsin —Rate Case Settlement —In May 2019, NSP-Wisconsin filed an application with the PSCW seeking approval of a rate case settlement with various intervenors for 2020-2021.
For NSP-Wisconsin’s electric utility, the settlement agreement results in no change to base electric rates through Dec. 31, 2021. For the natural gas utility, there would be a $3 million (4.6%) decrease to base rates, effective Jan. 1, 2020, and no additional changes to base rates through Dec. 31, 2021.
Key elements of the settlement include:
Electric:
Allowed ROE of 10.0%;
Allowed equity ratio of 52.5%;
Retain expected fuel cost savings from new wind farms for the NSP System;
Allow deferral of pension settlement costs, if any, for 2019-2021;
Utilize a portion of tax reform benefits to offset revenue deficiency;
Allow deferral of certain large customer non-fuel cost of service impacts and bad debt expense in 2019-2021; and
Apply an earnings sharing mechanism for 2020 and 2021. The mechanism would return to customers 50% of earnings between 10.25% and 10.75% ROE and 100% of earnings equal to or in excess of 10.75% ROE.
Natural Gas:
Utilize tax reform benefits of $22 million to offset a portion of the regulatory asset for remediation of the MGP site in Ashland, WI.
In September 2019, the PSCW issued an interim order approving the settlement agreement as filed with one minor modification, to remove the deferral of pension settlement accounting costs for 2021.
PSCo — Colorado 2019 Electric Rate Case — In May 2019, PSCo filed a request with the CPUC seeking a net rate increase of approximately $158 million, or 5.7%. The filing also requests the transfer of $249 million of rider revenue to base rates, which will not impact overall customer bills as the revenue is currently being recovered through various riders. The request is based on a ROE of 10.35%, an equity ratio of 56.46%, a rate base of approximately $8.2 billion, a historic test year ended Dec. 31, 2018 (adjusted for 2019 capital investment) and incorporates the full impact of tax reform.
In October 2019, PSCo filed rebuttal testimony and revised its request seeking a net increase to retail electric base rate revenue of $108 million, reflecting a $353 million increase offset by $245 million of previously authorized costs (currently recovered through various rider mechanisms). The rebuttal includes certain forecasted plant additions through June 2019 based on a 13-month average rate base convention, a ROE of 10.20%, an equity ratio of 55.61% (based on a 13-month average equity ending Aug. 31, 2019) and inclusion of short-term debt in the capital structure and CWIP in rate base.
The procedural schedule is as follows:
Settlement deadline — Oct. 30, 2019
Evidentiary hearing — Nov. 4-13, 2019
A CPUC decision is anticipated in December 2019 with implementation of final rates on Jan. 1, 2020.
In September 2019, the CPUC Staff, FEA, OCC and CEC filed comprehensive answer testimony. Several other parties filed additional testimony.
Recommendations and the estimated impact on PSCo’s filed electric rate request as calculated by the filing parties, but with our estimate of the impact of their recommendations on riders are as follows:
|
| | | | | | | | | | | | |
(Millions of Dollars) | | Filed base revenue request | | Less: Previously authorized costs (existing riders) (b) | | Filed net change to revenue (c) |
PSCo | | $ | 408 |
| | $ | 249 |
| | $ | 158 |
|
CPUC Staff (a) | | 235 |
| | 227 |
| | 8 |
|
FEA | | 246 |
| | 239 |
| | 7 |
|
OCC (a) | | 207 |
| | 216 |
| | (9 | ) |
CEC (a) | | 187 |
| | 213 |
| | (26 | ) |
| |
(a)
| Staff, OCC and CEC have incorporated corrections to the filed case of ($4) million identified by PSCo. |
| |
(b)
| Amounts derived from intervenors’ positions attributable to previously authorized costs (existing riders), impacted by proposed differences in weighted average cost of capital. |
| |
(c)
| Amounts may not add due to rounding. |
Recommended positions on PSCo’s filed electric rate request are as follows:
|
| | | | | | | | | | | | | |
Position | | Staff | | FEA | | OCC | | CEC | |
ROE | | 9.00 | % | | 9.20 | % | | 8.80 | % | | 8.90 | % | |
Equity | | 55.57 | % | | 56.11 | % | | 54.60 | % | | 54.27 | % | |
Test Year | | 2019 Current |
| (a) | 2018 Historic |
| (b) | 2018 Historic |
| (c) | 2018 Historic |
| (d) |
| |
(a)
| Incorporated 13-month average of proposed forecasted plant additions and rejected adjustments for wildfire mitigation improvements. |
| |
(b)
| Incorporated year-end rate base and rejected proposed forecasted plant additions. Except for the transmission portion, the FEA supported portions of wildfire mitigation improvements and included 2019 distribution capital and O&M in its cost of service amount. |
| |
(c)
| Incorporated proposed 13-month average rate base while rejecting the proposed forecasted plant additions including amounts requested for AGIS and wildfire mitigation improvements. |
| |
(d)
| Rejected proposed forecasted plant additions and the majority of the adjustment for wildfire mitigation improvements. |
SPS — Texas 2019 Electric Rate Case— In August 2019, SPS filed an electric rate case with the PUCT seeking an increase in retail electric base rates of approximately $141 million. The filing requests an ROE of 10.35%, a 54.65% equity ratio, a rate base of approximately $2.6 billion and is built on a 12 month period that ended June 30, 2019. In September 2019, SPS filed an update to the electric rate case and revised its requested increase to approximately $136 million.
The following table summarizes SPS’ base rate increase request:
|
| | | | |
Revenue Request (Millions of Dollars) | | |
Hale Wind Farm | | $ | 62 |
|
Capital investments | | 47 |
|
Depreciation rate change (including Tolk) | | 34 |
|
Cost of capital | | 10 |
|
Expiring purchased power contracts | | (28 | ) |
Other, net | | 11 |
|
New revenue request | | $ | 136 |
|
The procedural schedule is as follows:
Intervenor testimony — Feb. 10, 2020
Staff testimony — Feb. 18, 2020
Rebuttal testimony — March 11, 2020
Public hearing begins — March 30, 2020
Final order deadline — Sept. 7, 2020
The final rates established at the end of the rate case are expected to be made effective relating back to Sept. 12, 2019. SPS expects a decision from the PUCT in the second quarter of 2020.
SPS — New Mexico 2019 Electric Rate Case — In July 2019, SPS filed an electric rate case with the NMPRC seeking an increase in retail electric base rates of approximately $51 million. The rate request is based on a ROE of 10.35%, a 54.77% equity ratio, a rate base of approximately $1.3 billion and a historic test year with rate base additions through Aug. 31, 2019. SPS anticipates final rates will go into effect in the second or third quarter of 2020.
SPS' proposed increase in base rates would be partially mitigated by savings to New Mexico customers achieved through fuel cost reductions and PTCs attributable to wind energy provided by the Hale Wind Farm. SPS’ $51 million requested increase in base rates would be offset by approximately $25 million of savings resulting in a net revenue increase of approximately $26 million, or 5.7%.
The following table summarizes SPS’ base rate increase request:
|
| | | | |
Revenue Request (Millions of Dollars) | | |
Hale Wind Farm | | $ | 28 |
|
Other plant investment | | 22 |
|
Wholesale sales reduction | | 17 |
|
Allocator changes due to load growth | | 15 |
|
Depreciation rate change (including Tolk) | | 15 |
|
Base rate sales growth | | (41 | ) |
Other, net | | (5 | ) |
New revenue request | | $ | 51 |
|
The procedural schedule is as follows:
Filing of stipulation, if any — Nov. 15, 2019
Staff and intervenor testimony or testimony in support of a stipulation — Nov. 22, 2019
Testimony in opposition to a stipulation, if any — Dec. 6, 2019
Rebuttal testimony — Dec. 20, 2019
Public hearing begins — Jan. 7, 2020
End of 9-month suspension — April 30, 2020
Other Pending and Recently Concluded Regulatory Proceedings
|
| | | | | | | | | | |
Mechanism | | Utility Service | | Amount Requested (in millions) | | Filing
Date
| | Approval | | Additional Information |
NSP-Minnesota (MPUC) |
TCR | | Electric | | $98 | | November
2017
| | Pending | | In May 2019, the MPUC issued a verbal order setting an ROE of 9.06% and recovery of 2017-2018 expenses related to advanced grid investments. A final order is expected in the fourth quarter of 2019. |
2018 GUIC | | Natural Gas | | $23 | | November 2017 | | Received | | In May 2019, the MPUC issued a verbal order setting an ROE of 9.04%. A final order was received in August 2019. |
2019 GUIC | | Natural Gas | | $29 | | November 2018 | | Pending | | Proposed ROE of 10.25%. Timing of the MPUC decision is uncertain. |
RES | | Electric | | $23 | | November 2017 | | Pending | | In May 2019, the MPUC issued a verbal order setting an ROE of 9.06%. A final order is expected in the fourth quarter of 2019. |
PSCo (CPUC) |
Rate Case | | Steam | | $7 | | May
2019
| | Received | | In May 2019, PSCo filed an unopposed Settlement Agreement with CPUC Staff and the City of Denver. The settlement reflects a ROE of 9.67% for AFUDC purposes, an equity ratio of 56.04% and utilization of tax reform benefits. The CPUC approved the Settlement Agreement without modification on Sept. 5, 2019. The first stepped increase went into effect Oct. 1, 2019, with full rates effective Oct. 1, 2020. |
Rate Case Appeal | | Natural Gas | | N/A | | April
2019
| | Pending | | In April 2019, PSCo filed an appeal seeking judicial review of the CPUC’s prior ruling regarding PSCo’s last natural gas rate case (approved in December 2018). Appeal requests review of the following: denial of a return on the prepaid pension and retiree medical assets; the use of a capital structure that is not based on the actual historical test year level; and the use of an average rate base methodology rather than a year-end rate base methodology. The District Court of Denver County has adopted a briefing schedule that will conclude in October 2019. Timeline on a final ruling is unknown. |
NSP-Minnesota — MEC Acquisition — In November 2018, NSP-Minnesota reached an agreement with Southern Power Company (a subsidiary of Southern Company) to purchase MEC, a 760 MW natural gas combined cycle facility for approximately $650 million.
On Sept. 27, 2019, the Minnesota Public Utilities Commission (MPUC) voted to deny NSP-Minnesota's request to purchase MEC. The MPUC determined there was too much uncertainty regarding estimated customer benefits associated with the transaction without being able to fully review NSP-Minnesota's Resource Plan (filed July 2019).
Xcel Energy plans to acquire MEC as a non-regulated investment and step into the terms of the existing PPAs with NSP-Minnesota. Xcel Energy provided Southern Power Company formal contractual notice of transferring the purchase agreement to a newly formed non-regulated subsidiary and submitted acquisition and affiliated interest filings to the Federal Energy Regulatory Commission (FERC) and MPUC, respectively. Approval is anticipated by the end of 2019.
NSP-Minnesota — Minnesota Resource Plan —In July 2019, NSP-Minnesota filed its Minnesota resource plan, which runs through 2034. The plan would result in an 80% carbon reduction by 2030 and puts NSP on a path to achieving its vision of being 100% carbon-free by 2050. The preferred plan includes the following:
Extends the life of the Monticello nuclear plant from 2030 to 2040;
Continues to run the Prairie Island nuclear plant through current end of life (2033 and 2034);
Includes the MEC acquisition and construction of the Sherco CC natural gas plant;
Includes the early retirement of the King coal plant (511 MW) in 2028 and the Sherco 3 coal plant (517 MW) in 2030;
Adds approximately 1,700 MW of firm peaking (CT, pumped hydro, battery storage, DR, etc.);
Adds approximately 1,200 MW of wind replacement; and
Adds approximately 4,000 MW of solar.
Intervening parties will provide recommendations and comments on the resource plan. Following the MPUC’s denial of its request to purchase MEC, NSP-Minnesota will provide updates to remove its ownership of MEC from the preferred plan. The MPUC is anticipated to make a final decision on the resource plan in late 2020 or the first half of 2021.
NSP-Minnesota —Jeffers Wind and CommunityWind North Repowering Acquisition— In December 2018, NSP-Minnesota filed a request with the MPUC seeking approval to acquire the Jeffers and Community Wind North wind facilities in western Minnesota from Longroad Energy. The wind farms, currently contracted under PPAs with NSP-Minnesota, will have approximately 70 MW of capacity after being repowered. The repowering and acquisition are expected to be complete by December 2020 and qualify for the 100% PTC benefit. The $135 million asset acquisition is projected to provide customer savings of approximately $7 million over the life of the facilities, compared to the amended PPAs. The FERC approved the acquisition in July 2019.
The DOC filed initial comments in support of NSP-Minnesota continuing to contract for the assets under the amended PPAs, but not the acquisition. In reply comments, NSP-Minnesota indicated it would be willing to acquire the wind facilities as a non-regulated investment and step into the terms of the PPAs, similar to MEC. In October, Xcel Energy filed with FERC requesting contingent approval for a non-regulated subsidiary to acquire the facilities, depending on the MPUC decision. The MPUC decision is expected in the fourth quarter of 2019.
NSP-Minnesota — Mower Wind Facility —On Aug. 30, 2019, NSP-Minnesota filed a petition with the MPUC to acquire the Mower wind facility from affiliates of NextEra Energy, Inc. for an undisclosed amount. The Mower facility is located in southeastern Minnesota and is currently contracted under a PPA with NSP-Minnesota through 2026. Mower will be repowered and continue to have approximately 99 MW of capacity. The acquisition would occur after repowering which is expected to be complete in 2020 and qualify for 100% of the PTC. NSP-Minnesota will need approval from both the MPUC and FERC to complete the transaction. Timing of approval is uncertain.
NSP-Minnesota — Crowned Ridge Wind Project —In 2017, the MPUC approved the NSP-Minnesota proposed wind portfolio that included 1,150 MW of wind ownership and 400 MW of PPAs. Included in that proposal were two Crowned Ridge projects: a 300 MW build-owner transfer (BOT) wind farm and a 300 MW PPA, both with affiliates of NextEra. In August 2019, NextEra withdrew their MISO queue position for a portion of the projects that were still awaiting transmission access due to increased estimates of MISO transmission upgrade and interconnection costs. As a result, NextEra has reduced both the BOT and PPA Crown Ridge projects from 300 MW to 200 MW. The projects are targeting a commercial operation date in the fourth quarter of 2020.
Public Utility Regulation
Except to the extent noted below, and in Regulation above, the circumstances set forth in Public Utility Regulation included in Item 17 of Xcel Energy’s Annual Report on Form 10-K for the year ended Dec. 31, 2018 and in Item 2 of Xcel Energy Inc.’s Quarterly Report on Form 10-Q for the quarterly periods ending March 31, 2019 and June 30, 2019 appropriately represent, in all material respects, the current status of public utility regulation and are incorporated by reference.
NSP-Minnesota
Pending and Recently Concluded Regulatory Proceedings
|
| | | | | | | | | | |
Mechanism | | Utility Service | | Amount Requested (in millions) | | Filing Date | | Approval | | Additional Information |
MPUC |
2020 TCR | | Electric | | $82 | | November 2019 | | Pending | | In November 2019, NSP-Minnesota filed the 2020 TCR Rider. The filing included an ROE of 9.06%. Timing of an MPUC ruling is uncertain. |
2019 GUIC | | Natural Gas | | $29 | | November 2018 | | Received | | In November 2018, NSP-Minnesota filed the 2019 GUIC Rider with the MPUC. The filing included an ROE of 10.25%. In January 2020, the MPUC approved an order setting an ROE of 9.04%. |
2020 GUIC | | Natural Gas | | $21 | | November 2019 | | Pending | | In November 2019, NSP-Minnesota filed the 2020 GUIC Rider with the MPUC. The filing included an ROE of 9.04%. Timing of an MPUC ruling is uncertain. |
2020 RES | | Electric | | $102 | | November 2019 | | Pending | | In November 2019, NSP-Minnesota filed the 2020 RES Rider with the MPUC. The requested amount includes a true-up for the 2019 rider of $38 million and the 2020 requested amount of $64 million. The filing included an ROE of 9.06%. Timing of an MPUC ruling is uncertain. |
2020 Rate Case Stay Out Petition | | Electric | | N/A | | November 2019 | | Received | | In November 2019, NSP-Minnesota filed a three-year electric rate case with the MPUC, which included a stay-out petition. In December 2019, the MPUC verbally approved the stay-out petition including extension of the sales, capital and property tax true-up mechanisms and the delay of any increase to the Nuclear Decommissioning Trust annual accrual until Jan. 1, 2021. A written order of approval was received in March 2020. |
NSP-Minnesota — Minnesota Resource Plan —In July 2019, NSP-Minnesota filed its Minnesota resource plan, which runs through 2034. The plan would result in an 80% carbon reduction by 2030 (from 2005) and puts NSP-Minnesota on a path to achieving its vision of being 100% carbon-free by 2050.
The preferred plan includes the following:
Extends the life of the Monticello nuclear plant from 2030 to 2040;
Continues to run the Prairie Island nuclear plant through current end of life (2033 and 2034);
Includes the MEC acquisition and construction of the Sherco CC natural gas plant;
Includes the early retirement of the King coal plant (511 MW) in 2028 and the Sherco 3 coal plant (517 MW) in 2030;
Adds approximately 1,700 MW of firm peaking (CT, pumped hydro, battery storage, DR, etc.);
Adds approximately 1,200 MW of wind replacement; and
Adds approximately 4,000 MW of solar.
Intervening parties will provide recommendations and comments on the resource plan. NSP-Minnesota will provide updates to remove its ownership of MEC from the preferred plan. The MPUC required NSP-Minnesota to update its filing to address issues related to its decision on MEC, including certain new modeling scenarios. An updated filing will be made on June 30, 2020. The MPUC is anticipated to make a final decision on the resource plan in the first half of 2021.
NSP-Minnesota — Mower Wind Facility —In August 2019, NSP-Minnesota filed a petition with the MPUC to acquire the Mower wind facility from affiliates of NextEra Energy, Inc. for an undisclosed amount. The Mower facility is located in southeastern Minnesota and is currently contracted under a PPA with NSP-Minnesota through 2026. Mower is expected to continue to have approximately 99 MW of capacity following a planned repowering. The acquisition would occur after repowering, which is expected to be completed in 2020 and qualify for the full PTC. NSP-Minnesota will need approval from both the MPUC and FERC to complete the transaction. NSP-Minnesota filed reply comments addressing the DOC’s concerns with the transaction in February 2020. The DOC filed supplemental comments in April 2020. Timing of MPUC and FERC decisions are uncertain.
Minnesota State ROFR Statute Complaint — In September 2017, LSP Transmission filed a complaint in the Minnesota District Court against the Minnesota Attorney General, MPUC and DOC. The complaint was in response to MISO assigning NSP-Minnesota and ITC Midwest, LLC joint ownership ofto jointly own a new Mankato-Winnebago 345 KV transmission line (estimatedfrom Mankato to Winnebago, Minnesota. The project was estimated to cost $108 million and projected to be in-service by the end of $108 million),2021. It was assigned to NSP-Minnesota and ITC Midwest as the incumbent utilities, consistent with a Minnesota state ROFR statute.
The complaint challenged the constitutionality of the state ROFR statute and is seeking declaratory judgment that the statute violates the Commerce Clause of the U.S. Constitution and should not be enforced.
The Minnesota state agencies and NSP-Minnesota filed motions to dismiss. In June 2018, the Minnesota District Court granted the defendants’ motions to dismiss with prejudice. LSP Transmission filed an appeal in July 2018. In September 2019, the estimate was updated to approximately $140 million, due to various changes in build plans. In October 2019, oral arguments were held with the Eighth Circuit Court of Appeals. In February 2020, the Eighth Circuit of Appeals upheld the Minnesota District Court decision to dismiss. It is uncertain when a decision will be rendered.unknown whether LSP Transmission intends to appeal this decision.
Nuclear Power Operations
NSP-Minnesota owns two nuclear generating plants: the Monticello plant and the Prairie Island plant. See Note 12 to the consolidated financial statements of Xcel Energy’s Annual Report on Form 10-K for the year ended Dec. 31, 2018,2019, for further information. The circumstances set forth in Nuclear Power Operations and Waste Disposal included in Item 1 of Xcel Energy’s Annual Report on Form 10-K for the year ended Dec. 31, 2018,2019, appropriately represent, in all material respects, the current status of nuclear power operations, and are incorporated by reference. NSP-Wisconsin
20182019 Electric Fuel Cost Recovery — NSP-Wisconsin’s electric fuel costs for 20182019 were lower than authorized in rates and outside the 2% annual tolerance band, primarily due to increased sales to other utilities compared to the forecast used to set authorized rates. Under the fuel cost recovery rules, NSP-Wisconsin may retain approximately $4$3.4 million of fuel costs and defer the amount of over-recovery in excess of the 2% annual tolerance band for future refund to customers. In March 2019,2020, NSP-Wisconsin filed with the PSCW to provide a refundindicating an over-refund of approximately $4 million to customers$9.7 million. The PSCW will determine how the liability will be addressed with an order expected later in 2020.
PSCo
Pending and proposed for it to be issued in September 2019. In August 2019, the Commission issued their order to refund the $4 million.Recently Concluded Regulatory Proceedings
|
| | | | | | | | | | |
Mechanism | | Utility Service | | Amount Requested (in millions) | | Filing Date | | Approval | | Additional Information |
CPUC |
Rate Case | | Natural Gas | | $127 | | February 2020 | | Pending | | In February 2020, PSCo filed a rate case with the CPUC seeking a net increase to retail gas rates of $126.8 million, reflecting a $144.5 million increase in base rate revenue, partially offset by $17.7 million of costs previously authorized through the Pipeline Integrity rider. The request is based on a 9.95% ROE, an equity ratio of 55.81% and a historic test year as of Sept. 30, 2019, adjusted for known and measurable differences for the 12-month period ended Sept. 30, 2020. The procedural schedule is as follows: • Answer testimony - May 13, 2020;• Rebuttal testimony - June 8, 2020;• Evidentiary hearing - July 7-17, 2020;• Statement of position - July 31, 2020; and• CPUC decision is expected in the second half of 2020 and rates are anticipated to be effective in November 2020.
|
Rate Case | | Electric | | $158 | | May 2019 | | Pending | | In 2019, PSCo filed a request with the CPUC seeking a net rate increase of $108.4 million, based on a requested ROE of 10.2% and an equity ratio of 55.6%. In February 2020, the CPUC issued a written decision, resulting in an estimated $34.9 million net base rate revenue increase. The CPUC decision included a 9.3% ROE, an equity ratio of 55.61%, based on a current test year ended Aug. 31, 2019 and the implementation of decoupling in 2020 and other items. Final rates were implemented on Feb. 25, 2020. PSCo filed an application for rehearing/reconsideration, which is expected to be heard by the CPUC in the second quarter of 2020.
|
Rate Case Appeal | | Natural Gas | | N/A | | April 2019 | | Pending | | In April 2019, PSCo filed an appeal seeking judicial review of the CPUC’s prior ruling regarding PSCo’s last natural gas rate case (approved in December 2018). The appeal requested review of the following: denial of a return on the prepaid pension and retiree medical assets; the use of a capital structure not based on the actual historical test year; and use of an average rate base methodology rather than a year-end rate base methodology. In March 2020, The District Court of Denver County ruled in favor of allowing the prepaid pension assets to be included in rate base; but it upheld the CPUC treatment of the retiree medical assets and capital structure methodology. The CPUC did not appeal the decision allowing inclusion of the prepaid pension assets in rate base. |
SPS
Pending and Recently Concluded Regulatory Proceedings
|
| | | | | | | | | | |
Mechanism | | Utility Service | | Amount Requested (in millions) | | Filing Date | | Approval | | Additional Information |
NMPRC |
Rate Case | | Electric | | $51 | | July 2019 | | Pending | | In July 2019, SPS filed an electric rate case with the NMPRC seeking an increase in retail electric base rates of approximately $51 million. The rate request is based on an ROE of 10.35%, an equity ratio of 54.77%, a rate base of approximately $1.3 billion and a historic test year with rate base additions through Aug. 31, 2019. In December 2019, SPS revised its base rate increase request to approximately $47 million, based on an ROE of 10.10% and updated information. The request also included an increase of $14.6 million for accelerated depreciation including the early retirement of the Tolk coal plant in 2032. In January 2020, SPS and various parties filed an uncontested comprehensive stipulation. The stipulation includes a base rate revenue increase of $31 million, an ROE of 9.45% and an equity ratio of 54.77%. The stipulation also includes an acceleration of depreciation on the Tolk coal plant to reflect early retirement in 2037, which results in a total increase in depreciation expense of $8 million. The parties to the stipulation agreed not to oppose the full application of depreciation rates associated with the 2032 retirement date in SPS’ next base rate case. A NMPRC decision is expected later in the year. SPS anticipates final rates will go into effect in the second or third quarter of 2020. |
Wind DevelopmentTexas 2019 Electric Rate Case — In 2018,August 2019, SPS filed an electric rate case with the NMPRCPUCT seeking an increase in retail electric base rates of approximately $141 million. The filing requests an ROE of 10.35%, a 54.65% equity ratio, a rate base of approximately $2.6 billion and is built on a 12 month period that ended June 30, 2019. In September 2019, SPS filed an update to the electric rate case and revised its requested increase to approximately $137 million.
On Feb. 10, 2020, the AXM, TIEC, OPUC and DOE filed testimony along with several other parties. On Feb. 18, 2020, the PUCT approvedStaff filed testimony that included certain adjustments and various ring-fencing measures.
Proposed modifications to SPS’ proposalrequest:
|
| | | | | | | | | | | | | | | | | | | | |
(Millions of Dollars) | | Staff | | AXM | | OPUC | | TIEC | | DOE |
SPS Direct Testimony | | $ | 137 |
| | $ | 137 |
| | $ | 137 |
| | $ | 137 |
| | $ | 137 |
|
| | | | | | | | | | |
Recommended base rate adjustments: | | | | | | | | |
ROE | | (22 | ) | | (24 | ) | | (15 | ) | | (21 | ) | | (24 | ) |
Capital structure | | (7 | ) | | (10 | ) | | — |
| | (7 | ) | | (3 | ) |
Tolk/Harrington O&M disallowance | | — |
| | (7 | ) | | — |
| | — |
| | — |
|
Distribution and Transmission Capital Disallowances (a) | | (7 | ) | | — |
| | — |
| | — |
| | — |
|
Depreciation expense | | (8 | ) | | (15 | ) | | (8 | ) | | (20 | ) | | — |
|
Excess ADIT unprotected plant | | — |
| | — |
| | (7 | ) | | — |
| | — |
|
Income Tax Expense Differences | | (12 | ) | | — |
| | — |
| | — |
| | — |
|
Other, net | | (6 | ) | | (6 | ) | | (1 | ) | | (1 | ) | | — |
|
Total Adjustments | | (62 | ) | | (62 | ) | | (31 | ) | | (49 | ) | | (27 | ) |
Total proposed revenue change | | $ | 75 |
| | $ | 75 |
| | $ | 106 |
| | $ | 88 |
| | $ | 110 |
|
|
| | | | | | | | | | | | | | | |
Recommended Position | | Staff | | AXM | | OPUC (b) | | TIEC | | DOE |
ROE | | 9.1 | % | | 9.0 | % | | — | % | | 9.2 | % | | 9.0 | % |
Equity Ratio | | 51.00 | % | | 50.00 | % | | — | % | | 51.00 | % | | 53.00 | % |
| |
(a) | Staff recommends exclusion of approximately $134 million in transmission, distribution, and general plant in service in this rate case resulting in an approximate $7 million decrease to the revenue requirement. |
| |
(b) | OPUC did not provide a recommendation for an ROE or equity ratio. For illustrative purposes an ROE of 9.5% was used. |
In March 2020, SPS filed an update to add 1,230 MWthe electric rate case and revised its requested increase to approximately $130 million, based on a requested ROE of new wind generation, including construction10.1%, a 54.65% equity ratio, rate base of approximately $2.6 billion and ownership ofhistoric test year ended June 30, 2019.
|
| | | | |
Revenue Request (Millions of Dollars) | | |
Hale Wind Farm | | $ | 61 |
|
Capital investments | | 47 |
|
Depreciation rate change (including Tolk) | | 34 |
|
Cost of capital | | 8 |
|
Expiring purchased power contracts | | (28 | ) |
Other, net | | 8 |
|
New revenue request | | $ | 130 |
|
In May 2020, SPS and the 478 MW Haleintervening parties announced they have reached a constructive, unopposed settlement agreement in principle. We are working with intervening parties to document and 522 MW Sagamore wind farms. The Hale wind farm was placed into commercial operationfile the settlement, which we expect to occur in June 2019. Sagamore isthe second quarter.
Final rates are expected to go into servicebe retroactively applied as of Sept. 12, 2019. A decision from the PUCT is anticipated in 2020 and cost approximately $900 million.the third quarter of 2020.
Texas State (ROFR)ROFR Litigation — In May 2019, the Governor signed into law Senate Bill 1938, which grants incumbent utilities a ROFR to build transmission infrastructure when it directly interconnects to the utility’s existing facility. In June 2019, a complaint was filed in the United States District Court for the Western District of Texas claiming the new ROFR law to be unconstitutional. The Texas Attorney General has made a motion to dismiss the federal court complaint. In February 2020, the federal court complaint was dismissed. In March 2020, the ruling was appealed.
Texas Fuel Reconciliation Refund— Fuel and purchased power costs are recoverable in Texas through a fixed fuel factor, which is part of SPS’ rates. The PUCT rule requires refunding or surcharging of under and over-recovered amounts, including interest, when they exceed 4% of the utility’s annual fuel costs on a rolling 12-month basis, as allowed by the PUCT, if this condition is expected to continue.
Under the fuel cost recovery rules, SPS’ 2019 total fuel and purchased power costs were over-collected by approximately $39 million, including interest. In December 2018,February 2020, SPS filed an application with the PUCT for reconciliationrequesting to provide a net refund of fuel costs for the period Jan. 1, 2016, through June 30, 2018,$39 million to determine whether all fuel costs incurredcustomers to be issued beginning May 2020. In April 2020, interim rates were eligible for recovery. On Oct. 17, 2019, the assigned Administrative Law Judges (ALJs) issuedgranted by a Proposal for Decision recommending the PUCT disallow approximately $3 million of costs related to the reconciliation period, based on the ALJs’ determination that entering into two specific solar PPAs was imprudent. The related solar facilities are located in New MexicoTexas administrative law judge. This case is pending final review and were previously approvedapproval by the NMPRC as reasonable, necessary and economic. SPS plans to file exceptions regarding the proposed disallowance and assert, among other points, that the ALJs erred in failing to account for the capacity value of the solar projects.
New Mexico Fuel Continuation —In October 2019, SPS filed an application to the NMPRC to approve SPS’s continued use of its FPPCAC and for reconciliation of fuel costs for the period Sept. 1, 2015, through June 30, 2019, which will determine whether all fuel costs incurred are eligible for recovery. No procedural schedule has yet been established for this matter.PUCT.
Environmental MattersRegulation
In JuneJuly 2019, the EPA issuedadopted the final ACEAffordable Clean Energy rule, which requires states to replacedevelop plans for greenhouse gas reductions from coal-fired power plants. The state plans, due to the Obama-era Clean Power Plan. The final ACE rule mayEPA in July 2022, will evaluate and potentially require implementation of heat rate improvement projectsimprovements at some of ourexisting coal-fired power plants. It is not yet known what the costs associated with the final rule might be untilhow these state plans are developed to implement the final regulation.will affect our existing coal plants, but they could require substantial additional investment, even in plants slated for retirement. Xcel Energy believes, the costs would be recoverable through rates based on prior state commission practice.practice, the cost of these initiatives or replacement generation would be recoverable through rates.
Derivatives, Risk Management and Market RiskXcel Energy Inc. and its subsidiaries |
|
Derivatives, Risk Management and Market Risk |
We are exposed to a variety of market risks in the normal course of business. Market risk is the potential loss that may occur as a result of adverse changes in the market or fair value of a particular instrument or commodity. All financial and commodity-related instruments, including derivatives, are subject to market risk.
See Note 8 to the consolidated financial statements for further discussion of market risks associated with derivatives.
Xcel Energy is exposed to the impact of adverse changes in price for energy and energy-related products, which is partially mitigated by the use of commodity derivatives. In addition to ongoing monitoring and maintaining credit policies intended to minimize overall credit risk, when necessary, management takes steps to mitigate changes in credit and concentration risks associated with its derivatives and other contracts, including parental guarantees and requests of collateral.
While Xcel Energy expectswe expect that the counterparties will perform under the contracts underlying its derivatives, the contracts expose Xcel Energyus to some credit and non-performance risk.
Though no material non-performance risk currently exists with the counterparties to Xcel Energy’s commodity derivative contracts, distress in the financial markets may in the future impact that risk to the extent it impacts those counterparties. Distress in the financial markets may also impact counterparty risk, the fair value of the securities in the nuclear decommissioning fund and master pension trust, as well asfund and Xcel Energy’s ability to earn a return on short-term investments of excess cash.investments.
Commodity Price Risk — Xcel Energy Inc.’s utility subsidiariesWe are exposed to commodity price risk in theirour electric and natural gas operations. Commodity price risk is managed by entering into long- and short-term physical purchase and sales contracts for electric capacity, energy and energy-related products and for various fuels used in generation and distribution activities. Commodity price risk is also managed through the use of financial derivative instruments. Xcel Energy’sOur risk management policy allows it to manage commodity price risk within each rate-regulated operation to the extent such exposure exists.per commission approved hedge plans.
Wholesale and Commodity Trading Risk — Xcel Energy Inc.’s utility subsidiaries conductconducts various wholesale and commodity trading activities, including the purchase and sale of electric capacity, energy, energy-related instruments and natural gas-related instruments, including derivatives. Xcel Energy’sOur risk management policy allows management to conduct these activities within guidelines and limitations as approved by its risk management committee, which is made upcommittee.
At Sept. 30, 2019, the fair values by source for
Fair value of net commodity trading contract assets werecontracts as follows:of March 31, 2020:
| | | | Futures / Forwards | Futures / Forwards Maturity |
(Millions of Dollars) | | Source of Fair Value | | Maturity Less Than 1 Year | | Maturity 1 to 3 Years | | Maturity 4 to 5 Years | | Maturity Greater Than 5 Years | | Total Futures/ Forwards Fair Value | | Less Than 1 Year | | 1 to 3 Years | | 4 to 5 Years | | Greater Than 5 Years | | Total Fair Value |
NSP-Minnesota(a) | | 1 |
| | $ | (1 | ) | | $ | 1 |
| | $ | 1 |
| | $ | 1 |
| | $ | 2 |
| | $ | (1 | ) | | $ | 1 |
| | $ | 3 |
| | $ | 4 |
| | $ | 7 |
|
NSP-Minnesota(b) | | 2 |
| | 5 |
| | (4 | ) | | 1 |
| | (7 | ) | | (5 | ) | | 4 |
| | (2 | ) | | (3 | ) | | (10 | ) | | (11 | ) |
PSCo(a) | | 2 |
| | (5 | ) | | (21 | ) | | (29 | ) | | (4 | ) | | (59 | ) | | 1 |
| | — |
| | — |
| | — |
| | 1 |
|
PSCo (b) | | | (5 | ) | | (25 | ) | | (28 | ) | | — |
| | (58 | ) |
| | | | $ | (1 | ) | | $ | (24 | ) | | $ | (27 | ) | | $ | (10 | ) | | $ | (62 | ) | | $ | (1 | ) | | $ | (26 | ) | | $ | (28 | ) | | $ | (6 | ) | | $ | (61 | ) |
| | | | Options | Options Maturity |
(Millions of Dollars) | | Source of Fair Value | | Maturity Less Than 1 Year | | Maturity 1 to 3 Years | | Maturity 4 to 5 Years | | Maturity Greater Than 5 Years | | Total Futures/ Forwards Fair Value | | Less Than 1 Year | | 1 to 3 Years | | 4 to 5 Years | | Greater Than 5 Years | | Total Fair Value |
NSP-Minnesota(b) | | 2 |
| | $ | 3 |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | 5 |
| | $ | 3 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 3 |
|
| | | | $ | 3 |
| | $ | 2 |
| | $ | — |
| | $ | — |
| | $ | 5 |
| | $ | 3 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 3 |
|
1 — (a) Prices actively quoted or based on actively quoted prices.
2 —(b) Prices based on models and other valuation methods.
Changes in the fair value of commodity trading contracts before the impacts of margin-sharing mechanisms for the ninethree months ended Sept. 30, were as follows:March 31:
|
| | | | | | | | |
(Millions of Dollars) | | 2019 | | 2018 |
Fair value of commodity trading net contract assets outstanding at Jan. 1 | | $ | 17 |
| | $ | 16 |
|
Contracts realized or settled during the period | | (13 | ) | | (8 | ) |
Commodity trading contract additions and changes during the period | | (61 | ) | | 10 |
|
Fair value of commodity trading net contract assets outstanding at Sept. 30 | | $ | (57 | ) | | $ | 18 |
|
|
| | | | | | | | |
(Millions of Dollars) | | 2020 | | 2019 |
Fair value of commodity trading net contract (liabilities) assets outstanding at Jan. 1 | | $ | (59 | ) | | $ | 17 |
|
Contracts realized or settled during the period | | — |
| | (4 | ) |
Commodity trading contract additions and changes during the period | | 1 |
| | 1 |
|
Fair value of commodity trading net contract (liabilities) assets outstanding at March 31 | | $ | (58 | ) | | $ | 14 |
|
At March 31, 2020, a 10% increase in market prices for commodity trading contracts would increase pre-tax income from continuing operations by approximately $9 million, whereas a 10% decrease would decrease pre-tax income from continuing operations by approximately $9 million. At March 31, 2019, a 10% increase in market prices for commodity trading contracts would increase pre-tax income from continuing operations by approximately $8 million, whereas a 10% decrease would decrease pre-tax income from continuing operations by approximately $8 million.
Xcel Energy Inc.’sThe utility subsidiaries’ commodity trading operations which exclude any transactions designated as normal purchases and normal sales, measure the outstanding risk exposure to price changes on contracts and obligations that have been entered into, but not closed, using an industry standard methodology known as Value at Risk (VaR). VaR expresses the potential change in fair value on the outstanding contracts and obligations over a particular period of time under normal market conditions.
The VaRs for the NSP-Minnesota and PSCo commodity trading operations, excluding both non-derivative transactions and derivative transactions designated as normal purchase, normal sales, calculated on a consolidated basis using a Monte Carlo simulation with a 95% confidence level and a one-day holding period, were as follows:
| | (Millions of Dollars) | | Three Months Ended Sept. 30 | | VaR Limit | | Average | | High | | Low | | Three Months Ended March 31 | | VaR Limit | | Average | | High | | Low |
2020 | | | $ | 0.8 |
| | $ | 3.0 |
| | $ | 0.5 |
| | $ | 1.0 |
| | $ | 0.3 |
|
2019 | | $ | 0.52 |
| | $ | 3.00 |
| | $ | 0.97 |
| | $ | 1.30 |
| | $ | 0.52 |
| | 1.1 |
| | 3.0 |
| | 1.9 |
| | 4.4 |
| | 1.0 |
|
2018 | | 0.19 |
| | 3.00 |
| | 0.20 |
| | 0.50 |
| | 0.08 |
| |
In November 2018, management temporarily increased the VaR limit to accommodate a 10-year transaction. NSP-Minnesota has been systematically hedging the transaction and the consolidated VaR returned below $3 million in early January 2019.
At Sept. 30, 2019, a 10% increase or decrease in market prices for commodity trading contracts would increase or decrease pre-tax income from continuing operations by an immaterial amount. At Sept. 30, 2018, a 10% increase in market prices for commodity trading contracts would increase pre-tax income from continuing operations by approximately $1 million, whereas a 10% decrease would decrease pre-tax income from continuing operations by approximately $1 million.
Nuclear Fuel Supply — NSP-Minnesota has received all enriched nuclear material for 2019 and has contracted for approximately 50%51% of its 2020 enriched nuclear material requirements from sources that could be impacted by sanctions against entities doing business with Iran. Those sanctions may impact the supply of enriched nuclear material supplied from Russia. Long-term, through 2024,2030, NSP-Minnesota is scheduled to take delivery of approximately 34%30% of its average enriched nuclear material requirements from these sources. Alternate potential sources provide the flexibility to manage NSP-Minnesota’s nuclear fuel supply. NSP-Minnesota periodically assesses if further actions are required to assure a secure supply of enriched nuclear material.
Disruptions in third party nuclear fuel supply contracts due to bankruptcies or change of contract assignments have not materially impacted NSP‑Minnesota’s operational or financial performance.
Interest Rate Risk — Xcel Energy is subject to the risk of fluctuating interest rates in the normal course of business. Xcel Energy’srate risk. Our risk management policy allows interest rate risk to be managed through the use of fixed rate debt, floating rate debt and interest rate derivatives such as swaps, caps, collars and put or call options.
At Sept. 30,March 31, 2020 and 2019, and 2018, a 100-basis-point change in the benchmark rate on Xcel Energy’s variable rate debt would impact pre-tax interest expense annually by approximately $9$21 million and $5$13 million, respectively.
See Note 8 to the consolidated financial statements for a discussion of Xcel Energy Inc. and its subsidiaries’ interest rate derivatives.
NSP-Minnesota also maintains a nuclear decommissioning fund, as required by the NRC. The nuclear decommissioning fund is subject to interest rate risk and equity price risk. At Sept. 30, 2019, theThe fund wasis invested in a diversified portfolio of cash equivalents, debt securities, equity securities, and other investments.
These investments may be used only for activities related topurpose of decommissioning NSP‑Minnesota’s nuclear decommissioning. Given the purpose and legal restrictions on the use of nuclear decommissioning fund assets, any realizedgenerating plants.
Realized and unrealized gains and losses on securities in the nuclear decommissioning fund including any other-than-temporary impairments,investments are deferred as a componentan offset of theNSP-Minnesota’s regulatory asset for nuclear decommissioning. Since the accounting for nuclear decommissioning recognizes that costs are recovered through rates, fluctuationscosts. Fluctuations in equity prices or interest rates affecting the nuclear decommissioning fund do not have a direct impact on earnings.earnings due to the application of regulatory accounting.
Changes in discount rates and expected return on plan assets impact the value of pension and postretirement plan assets and/or benefit costs.
Credit Risk — Xcel Energy Inc. and its subsidiaries areis also exposed to credit risk. Credit risk relates to the risk of loss resulting from counterparties’ nonperformance on their contractual obligations. Xcel Energy Inc. and its subsidiaries maintainThe Company maintains credit policies intended to minimize overall credit risk and actively monitor these policies to reflect changes and scope of operations.
At Sept. 30,March 31, 2020, a 10% increase in commodity prices would have resulted in an increase in credit exposure of $21 million, while a decrease in prices of 10% would have resulted in an immaterial decrease in credit exposure. At March 31, 2019, a 10% increase in commodity prices would have resulted in an increase in credit exposure of $30$29 million, while a decrease in prices of 10% would have resulted in an increase in credit exposure of $12 million. At Sept. 30, 2018, a 10% increase in commodity prices would have resulted in an increase in credit exposure of $33 million, while a decrease in prices of 10% would have resulted in a decrease in credit exposure of $8$7 million.
Xcel Energy Inc. and its subsidiaries conduct standardconducts credit reviews for all counterparties. Xcel Energycounterparties and employs additional credit risk control, mechanisms when appropriate, such as letters of credit, parental guarantees, standardized master netting agreements and termination provisions that allow for offsetting of positive and negative exposures.provisions. Credit exposure is monitored and when necessary, the activity with a specific counterparty is limited until credit enhancement is provided. Distress in the financial markets could increase Xcel Energy’sour credit risk.
Xcel Energy follows accountinguses derivative contracts such as futures, forwards, interest rate swaps, options and disclosure guidance onFTRs to manage commodity price and interest rate risk. Derivative contracts, with the exception of those designated as normal purchase-normal sale contracts, are reported at fair value.
The Company’s investments held in the nuclear decommissioning fund, rabbi trusts, pension and other postretirement funds are also subject to fair value measurements that contains a hierarchy for inputs used in measuring fair value and requires disclosure of the observability of the inputs used in these measurements. accounting.
See Note 8 to the consolidated financial statements for further discussion of the fair value hierarchy and the amounts of assets and liabilities measured at fair value that have been assigned to Level 3.
Commodity Derivatives — Xcel Energy continuously monitors the creditworthiness of the counterparties to its commodity derivative contracts and assesses each counterparty’s ability to perform on the transactions set forth in the contracts. Given this assessment and the typically short duration of these contracts, thetransactions. The impact of discounting commodity derivative assets for counterparty credit risk was not material to the fair value of commodity derivative assets at Sept. 30, 2019. March 31, 2020.
Adjustments to fair value for credit risk of commodity trading instruments are recorded in electric revenues. Credit risk adjustments for other commodity derivative instruments are deferred as other comprehensive income or deferred as regulatory assets and liabilities. Classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms. Xcel Energy also assesses the impact of its own credit risk when determining the fair value of commodity derivative liabilities. The impact of discounting commodity derivative liabilities for credit risk was immaterial to the fair value of commodity derivative liabilities at Sept. 30, 2019.March 31, 2020.
Liquidity and Capital Resources |
|
LIQUIDITY AND CAPITAL RESOURCES |
| | | | Nine Months Ended Sept. 30 | | Three Months Ended March 31 |
(Millions of Dollars) | | 2019 | | 2018 | | 2020 | | 2019 |
Cash provided by operating activities | | $ | 2,557 |
| | $ | 2,493 |
| | $ | 669 |
| | $ | 793 |
|
Net cash provided by operating activities increased $64decreased $124 million for the ninethree months ended Sept. 30, 2019March 31, 2020 compared with the prior year. IncreaseDecrease was primarily due to additionallower net income partially offset by increased refunds associated with TCJA.(excluding amounts related to non-cash operating activities (e.g., depreciation and amortization and deferred tax expenses)) and lower accounts payable due to a decrease in the cost of fuel.
| | | | Nine Months Ended Sept. 30 | | Three Months Ended March 31 |
(Millions of Dollars) | | 2019 | | 2018 | | 2020 | | 2019 |
Cash used in investing activities | | $ | (3,129 | ) | | $ | (2,706 | ) | | $ | (1,606 | ) | | $ | (852 | ) |
Net cash used in investing activities increased $423$754 million for the ninethree months ended Sept. 30, 2019March 31, 2020 compared with the prior year. Increase was primarily attributable todriven by capital expansion (primarily for wind projects), partially offset by Rush Creek being placed as well as the purchase of MEC in service in 2018.January 2020.
| | | | Nine Months Ended Sept. 30 | | Three Months Ended March 31 |
(Millions of Dollars) | | 2019 | | 2018 | | 2020 | | 2019 |
Cash provided by financing activities | | $ | 1,289 |
| | $ | 343 |
| | $ | 933 |
| | $ | 6 |
|
Net cash provided by financing activities increased $946$927 million for the ninethree months ended Sept. 30, 2019March 31, 2020 compared with the prior year. Increase was primarily attributable to higher proceeds from issuances of long-term debt, common stock issuances (primarily due to the forward equity agreement settling in August 2019) and short-term borrowings, partially offset by higher repayments of long-term debt and dividends paid.borrowings.
Capital Requirements
Xcel Energy expects to meet future financing requirements by periodically issuing short-term debt, long-term debt, common stock, hybrid and other securities to maintain desired capitalization ratios.
Pension Fund — Xcel Energy’s pension assets are invested in a diversified portfolio of domestic and international equity securities, short-term to long-duration fixed income securities, and alternative investments, including private equity, real estate and hedge funds.
In July 2019, Xcel Energy made a $4 million contribution to the Xcel Energy Inc. Non-Bargaining Pension Plan (South).
In January 2019,2020, contributions of $150 million were made across four of Xcel Energy’s pension plans.
In 2018,2019, contributions of $150$154 million were made across four of Xcel Energy’s pension plans.
For future years, contributions will be made as deemed appropriate based on evaluation of various factors including the funded status of the plans, minimum funding requirements, interest rates and expected investment returns.
Capital Sources
Short-Term Funding Sources — Xcel Energy uses a number of sources to fulfill short-term funding needs, including operating cash flow, notes payable, commercial paper and bank lines of credit. The amount and timing of short-term funding needs depend on financing needs for construction expenditures, working capital and dividend payments.
Short-Term Investments — Xcel Energy Inc., NSP-Minnesota, NSP-Wisconsin, PSCo and SPS maintain cash operating and short-term investment accounts.
Revolving Credit Facilities — Xcel Energy Inc., NSP-Minnesota, PSCo and SPS each have the right to request an extension of the revolving credit facility for two additional one-year periods beyond the June 2024 termination date. NSP-Wisconsin has the right to request an extension of the revolving credit facility termination date for an additional one-year period. All extension requests are subject to majority bank group approval.
As of Oct. 21, 2019,May 4, 2020, Xcel Energy Inc. and its utility subsidiaries had the following committed credit facilities available to meet liquidity needs: | | (Millions of Dollars) | | Credit Facility (a) | | Drawn (b) | | Available | | Cash | | Liquidity | | Credit Facility (a) | | Drawn (b) | | Available | | Cash | | Liquidity |
Xcel Energy Inc. | | $ | 1,250 |
| | $ | 379 |
| | $ | 871 |
| | $ | 1 |
| | $ | 872 |
| | $ | 1,250 |
| | $ | 107 |
| | $ | 1,143 |
| | $ | 311 |
| | $ | 1,454 |
|
PSCo | | 700 |
| | 9 |
| | 691 |
| | 256 |
| | 947 |
| | 700 |
| | 117 |
| | 583 |
| | 1 |
| | 584 |
|
NSP-Minnesota | | 500 |
| | 19 |
| | 481 |
| | 181 |
| | 662 |
| | 500 |
| | 10 |
| | 490 |
| | 52 |
| | 542 |
|
SPS | | 500 |
| | 2 |
| | 498 |
| | 110 |
| | 608 |
| | 500 |
| | 126 |
| | 374 |
| | 1 |
| | 375 |
|
NSP-Wisconsin | | 150 |
| | 66 |
| | 84 |
| | 1 |
| | 85 |
| | 150 |
| | 55 |
| | 95 |
| | 1 |
| | 96 |
|
Total | | $ | 3,100 |
| | $ | 475 |
| | $ | 2,625 |
| | $ | 549 |
| | $ | 3,174 |
| | $ | 3,100 |
| | $ | 415 |
| | $ | 2,685 |
| | $ | 366 |
| | $ | 3,051 |
|
| |
(a) | Credit facilities expire in June 2024. |
| |
(b) | Includes outstanding commercial paper and letters of credit. |
Term Loan Agreement —In December 2018, Xcel Energy Inc. renewed its $500 million, 364-Day Term Loan Agreement. No additional capacity remains as loans borrowed and repaid may not be redrawn.
As of Sept. 30, 2019, Xcel Energy Inc.’s term loan borrowings were as follows:
|
| | | | | | | | | | | | |
(Millions of Dollars) | | Limit | | Amount Used | | Available |
Xcel Energy Inc. | | $ | 500 |
| | $ | 500 |
| | $ | — |
|
Bilateral Credit Agreement
In March 2019, NSP-Minnesota entered into a one yearone-year uncommitted bilateral credit agreement. The credit agreement is limited in use to support letters of credit. In March 2020, NSP-Minnesota renewed its bilateral credit agreement for an additional one-year term.
As of Sept. 30, 2019,March 31, 2020, NSP-Minnesota’s outstanding letters of credit under the Bilateral Credit Agreement were as follows:
|
| | | | | | | | | | | | |
(Millions of Dollars) | | Limit | | Amount Outstanding | | Available |
NSP-Minnesota | | $ | 75 |
| | $ | 26 |
| | $ | 49 |
|
|
| | | | | | | | | | | | |
(Millions of Dollars) | | Limit | | Amount Outstanding | | Available |
NSP-Minnesota | | $ | 75 |
| | $ | 20 |
| | $ | 55 |
|
Short-Term Debt — Xcel Energy Inc., NSP-Minnesota, NSP-Wisconsin, PSCo and SPS each have individual commercial paper programs. The authorized levels for these commercial paper programs are:
$1.25 billion for Xcel Energy Inc.;
$700 million for PSCo;
$500 million for NSP-Minnesota;
$500 million for SPS; and
$150 million for NSP-Wisconsin.
In addition, in December 2019, Xcel Energy Inc. entered into a $500 million 364-Day Term Loan Agreement that matures Dec. 1, 2020. Xcel Energy has an option to request an extension through Nov. 30, 2021. In March 2020, Xcel Energy Inc. entered into a $700 million 364-Day Term Loan Agreement that matures March 22, 2021. Xcel Energy has an option to request an extension through March 21, 2022.
Short-term debt outstanding for Xcel Energy was as follows:
| | (Amounts in Millions, Except Interest Rates) | | Three Months Ended Sept. 30, 2019 | | Year Ended Dec. 31, 2018 | | Three Months Ended March 31, 2020 | | Year Ended Dec. 31, 2019 |
Borrowing limit | | $ | 3,600 |
| | $ | 3,250 |
| | $ | 4,300 |
| | $ | 3,600 |
|
Amount outstanding at period end | | 933 |
| | 1,038 |
| | 1,765 |
| | 595 |
|
Average amount outstanding | | 1,303 |
| | 788 |
| | 1,404 |
| | 1,115 |
|
Maximum amount outstanding | | 1,780 |
| | 1,349 |
| | 2,080 |
| | 1,780 |
|
Weighted average interest rate, computed on a daily basis | | 2.62 | % | | 2.34 | % | | 2.05 | % | | 2.72 | % |
Weighted average interest rate at period end | | 2.54 |
| | 2.97 |
| | 1.96 |
| | 2.34 |
|
Money Pool — Xcel Energy received FERC approval to establish a utility money pool arrangement with the utility subsidiaries, subject to receipt of required state regulatory approvals. The utility money pool allows for short-term investments in and borrowings between the utility subsidiaries. Xcel Energy Inc. may make investments in the utility subsidiaries at market-based interest rates; however, the money pool arrangement does not allow the utility subsidiaries to make investments in Xcel Energy Inc. The money pool balances are eliminated in consolidation.
NSP-Minnesota, PSCo and SPS participate in the money pool pursuant to approval from their respective state regulatory commissions. NSP-Wisconsin does not participate in the money pool.
Capital Expenditures — The estimated base capital expenditures for Xcel Energy for 2020 through 2024 are shown in the table below:
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Base Capital Forecast |
By Subsidiary (Millions of Dollars) | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | 2020 - 2024 Total |
NSP-Minnesota | | $ | 2,025 |
| | $ | 1,580 |
| | $ | 1,670 |
| | $ | 1,800 |
| | $ | 1,845 |
| | $ | 8,920 |
|
PSCo | | 1,415 |
| | 1,445 |
| | 1,720 |
| | 1,565 |
| | 1,530 |
| | 7,675 |
|
SPS | | 1,025 |
| | 530 |
| | 700 |
| | 750 |
| | 800 |
| | 3,805 |
|
NSP-Wisconsin | | 250 |
| | 320 |
| | 345 |
| | 350 |
| | 425 |
| | 1,690 |
|
Other (a) | | (85 | ) | | (65 | ) | | 10 |
| | 10 |
| | 10 |
| | (120 | ) |
Total capital expenditures | | $ | 4,630 |
| | $ | 3,810 |
| | $ | 4,445 |
| | $ | 4,475 |
| | $ | 4,610 |
| | $ | 21,970 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | Base Capital Forecast |
By Function (Millions of Dollars) | | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | 2020 - 2024 Total |
Electric distribution | | $ | 885 |
| | $ | 1,140 |
| | $ | 1,415 |
| | $ | 1,470 |
| | $ | 1,350 |
| | $ | 6,260 |
|
Electric transmission | | 625 |
| | 835 |
| | 1,295 |
| | 1,270 |
| | 1,260 |
| | 5,285 |
|
Electric generation | | 480 |
| | 595 |
| | 580 |
| | 780 |
| | 1,000 |
| | 3,435 |
|
Natural gas | | 520 |
| | 450 |
| | 600 |
| | 560 |
| | 640 |
| | 2,770 |
|
Other | | 360 |
| | 475 |
| | 555 |
| | 395 |
| | 360 |
| | 2,145 |
|
Renewables | | 1,760 |
| | 315 |
| | — |
| | — |
| | — |
| | 2,075 |
|
Total capital expenditures | | $ | 4,630 |
| | $ | 3,810 |
| | $ | 4,445 |
| | $ | 4,475 |
| | $ | 4,610 |
| | $ | 21,970 |
|
(a) Other category includes intercompany transfers for safe harbor wind turbines.
Xcel Energy’s capital expenditure forecast is subject to continuing review and modification. Actual capital expenditures may vary from estimates due to changes in electric and natural gas projected load growth, safety and reliability needs, regulatory decisions, legislative initiatives, reserve requirements, availability of purchased power, alternative plans for meeting long-term energy needs, environmental regulation, and merger, acquisition and divestiture opportunities.
Financing for Capital Expenditures through 2024 — Xcel Energy issues debt and equity securities to refinance retiring maturities, reduce short-term debt, fund capital programs, infuse equity in subsidiaries, fund asset acquisitions and for other general corporate purposes. The current estimated financing plans of Xcel Energy for 2020 through 2024 are shown in the table below.
|
| | | | |
(Millions of Dollars) | | |
Funding Capital Expenditures | | |
Cash from Operations(a) | | $ | 13,905 |
|
New Debt(b) | | 6,665 |
|
Equity through the Dividend Reinvestment Program (DRIP) and Benefit Program | | 400 |
|
Other equity | | 1,000 |
|
Base Capital Expenditures 2020-2024 | | $ | 21,970 |
|
| | |
Maturing Debt | | $ | 3,245 |
|
(a) Net of dividends and pension funding.
(b) Reflects a combination of short and long-term debt; net of refinancing.
2019 Debt2020 Planned Financing Activity — During 2019,2020, Xcel Energy plans to issue approximately $75 to $80 million of equity through the DRIP and benefit programs. In addition, Xcel Energy Inc. and its utility subsidiaries issued or anticipate issuing the following debt securities:
| | Issuer | | Security | | Amount | | Status | | Tenor | | Coupon | | Security | | Amount | | Status | | Tenor | | Coupon |
Xcel Energy Inc. | | | Senior Unsecured Notes | | $ | 600 | million | | Completed | | 10 Year | | 3.4 | % |
NSP-Minnesota | | | First Mortgage Bonds | | 700 | million | | Pending | | N/A | | N/A |
|
NSP-Wisconsin | | | First Mortgage Bonds | | 100 | million | | Pending | | N/A | | N/A |
|
PSCo | | First Mortgage Bonds | | $ | 400 | million | | Completed | | 30 Year | | 4.05 | % | | First Mortgage Bonds | | 750 | million | | Pending | | N/A | | N/A |
|
Xcel Energy Inc. | | Senior Unsecured Bonds | | 130 | million | | Completed | | 9 Year | | 4.00 |
| |
SPS | | First Mortgage Green Bonds | | 300 | million | | Completed | | 30 Year | | 3.75 |
| | First Mortgage Bonds | | 350 | million | | Pending | | N/A | | N/A |
|
PSCo | | First Mortgage Green Bonds | | 550 | million | | Completed | | 30 Year | | 3.20 |
| |
NSP-Minnesota | | First Mortgage Green Bonds | | 600 | million | | Completed | | 30 Year | | 2.90 |
| |
Xcel Energy Inc. | | Senior Unsecured Bonds | | 1 | billion | | Pending | | TBD | | TBD |
| |
Financing plans are subject to change, depending on capital expenditures, internal cash generation, market conditions and other factors.
2020 Planned Debt Financing — During 2020, Xcel Energy Inc. and its utility subsidiaries anticipate issuing the following:
Xcel Energy Inc. - approximately $700 million of senior unsecured bonds;
NSP-Minnesota - approximately $550 million of first mortgage bonds;
NSP-Wisconsin - approximately $100 million of first mortgage bonds;
PSCo - approximately $750 million of first mortgage bonds; and
SPS - approximately $300 million of first mortgage bonds.
Forward Equity Agreements — In 2018, Xcel Energy entered into a forward equity agreement. On Aug. 29,November 2019 Xcel Energy settled theInc. entered into forward equity agreement by delivering 9.4agreements in connection with a completed $743 million public offering of 11.8 million shares in exchange for $453 million.of common stock.
Off-Balance-Sheet Arrangements
Xcel Energy does not have any off-balance-sheet arrangements, other than those currently disclosed, that have or are reasonably likely to have a current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Earnings Guidance and Long-Term EPS and Dividend Growth Rate Objectives
Xcel Energy 20192020 Earnings Guidance — Xcel Energy narrows its 2019reaffirms 2020 EPS earnings guidance of $2.73 to $2.60 to $2.65$2.83 per share from $2.55 to $2.65 per
share.(a) (b), which assumes the implementation of contingency plans will be sufficient to offset the negative impacts of COVID-19 under the base case scenario. However, these contingency plans would not be sufficient to offset the negative impacts of COVID-19 under the severe scenario, which would likely result in earnings below the guidance range.
Key assumptions as compared with 20182019 levels unless noted:
Constructive outcomes in all rate case and regulatory proceedings.
Normal weather patterns for the remainder of the year.
Weather-normalized retail electric sales are projected to be relatively consistent.decline ~4%, under the base case scenario.
Weather-normalized retail firm natural gas sales are projected to be within a range of 2.0% to 3.0%.
Capital rider revenue is projected to increase $115 million to $125 million (net of PTCs). PTCs are credited to customers, through capital riders and reductions to electric margin.
Purchase capacity costs are expected to decline $25 million to $30 million.
O&M expenses are projected to decrease approximately 1.0% to 2.0%.
Depreciation expense is projected to increase approximately $135 million to $145 million. Depreciation expense includes $34 million for the amortization of a prepaid pension asset at PSCo, which is tax reform related and will not impact earnings.
Property taxes are projected to increase approximately $10 million to $20 million.
Interest expense (net of AFUDC - debt) is projected to increase $80 million to $90 million.
AFUDC - equity is projected to decrease approximately $20 million to $30 million.
| |
• | The ETR is projected to be approximately 8% to 10%. The ETR reflects benefits of PTCs which are credited to customers through electric margin and will not impact net income.
|
Xcel Energy 2020 Earnings Guidance — Xcel Energy’s 2020 GAAP and ongoing earnings guidance is a range of $2.73 to $2.83 per share.(a)
Key assumptions as compared with projected 2019 levels unless noted:
Constructive outcomes in all rate case and regulatory proceedings.
Normal weather patterns.
Weather-normalized retail electric sales are projected to increase ~1%, including impact of leap year.
Weather-normalized retail firm natural gas sales are projected to increase ~1%, including impact of leap year.under the base case scenario.
Capital rider revenue is projected to increase $45 million to $55 million (net of PTCs). PTCs are credited to customers, through capital riders and reductions to electric margin.
O&M expenses are projected to increasedecline approximately 2%.4% to 5% under the base case scenario.
Depreciation expense is projected to increase approximately $180$160 million to $190 million, which includes $30 million of nuclear decommission which is expected to be recovered from customers in rate filings.$170 million.
Property taxes are projected to increase approximately $25$35 million to $35$45 million.
Interest expense (net of AFUDC - debt) is projected to increase $50$60 million to $60$70 million.
AFUDC - equity is projected to increase approximately $20$25 million to $30$35 million.
| |
• | The ETR is projected to be approximately 0%. The ETR reflects benefits of PTCs which are credited to customers through electric margin and will not have a material impact on net income. |
| |
(a) | Ongoing earnings is calculated using net income and adjusting for certain nonrecurring or infrequent items that are, in management’s view, not reflective of ongoing operations. Ongoing earnings could differ from those prepared in accordance with GAAP for unplanned and/or unknown adjustments. Xcel Energy is unable to forecast if any of these items will occur or provide a quantitative reconciliation of the guidance for ongoing EPS to corresponding GAAP EPS. |
| |
(b) | The global outbreak of COVID-19 is currently impacting countries, communities, supply chains and markets. The ultimate severity of this event is uncertain and could have a material impact on our liquidity, financial condition, or results of operations. |
Long-Term EPS and Dividend Growth Rate Objectives — Xcel Energy expects to deliver an attractive total return to our shareholders through a combination of earnings growth and dividend yield, based on the following long-term objectives:
Deliver long-term annual EPS growth of 5% to 7% based off of a 2019 base of $2.60 per share, which represents the mid-point of the original 2019 guidance range of $2.55 to $2.65 per share;
Deliver annual dividend increases of 5% to 7%;
Target a dividend payout ratio of 60% to 70%; and
Maintain senior secured debt credit ratings in the A range.
The global outbreak of the COVID-19 pandemic has adversely impacted economic conditions worldwide. Efforts to control the spread of COVID-19 have led to shutdowns or curtailments of various industries, disrupting supply chains and markets. Beginning in mid-March, wide-spread government mandates (e.g., shelter-in-place) or other initiatives impacted our service territories. COVID-19 did not significantly impact first quarter 2020 results, but could have a material impact on our financial results in the future.
An overview of certain risk considerations or areas which have or could significantly impact us, is as follows:
Sales— In the first quarter of 2020, Xcel Energy experienced a decline in weather and leap year adjusted sales. The decline in sales was primarily due to pandemic related mandates implemented in March 2020 involving the temporary closure of non-essential businesses and state directives for individuals to stay-at-home. We experienced a substantive decline in April sales and expect that our future sales will be impacted due to stay-at-home and closure provisions in place and the impact of COVID-19 on the economy and its ultimate recovery.
Xcel Energy has decoupling and sales true-up mechanisms in Minnesota (all electric classes) and Colorado (residential and non-demand SC&I electric classes), which mitigate the impact of changes to sales levels as compared to a base line.
The following scenarios outline the potential impact of the pandemic on electric and natural gas sales and EPS, based on various assumptions of the duration of the stay-at-home provisions and economic recovery:
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• | Mild Scenario (severe impact through May with a V-shaped economic recovery), resulting in the following change in electric sales for 2020: an increase of approximately 1% in residential; a decline of approximately 4% in C&I; and a decline in total retail electric sales of approximately 2%. This sales decline would reduce EPS by approximately $0.11. |
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• | Base Case Scenario (severe impact through the second quarter with slower U-shaped recovery with lingering effects throughout 2020), resulting in the following change in electric sales for 2020: an increase of approximately 1% in residential; a decline of approximately 6% in C&I; and a decline in total retail electric sales of approximately 4%. This sales decline would reduce EPS by approximately $0.17. |
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• | Severe Scenario (severe impact through the third quarter followed by protracted challenged L-shaped recovery), resulting in the following change in electric sales for 2020: an increase of approximately 1% in residential; a decline of approximately 12% in C&I; and a decline in total retail electric sales of approximately 8%. This sales decline would reduce EPS by approximately $0.37. |
The mild, base case and severe scenarios include a decrease in natural gas sales of 0%, 1% and 2%, respectively.
Potential impacts due to other items could have negative EPS impact of $0.02 to $0.05, assuming constructive regulatory treatment.
Bad Debt— In March 2020, Xcel Energy announced it would not disconnect residential customers’ electric or natural gas service during the virus outbreak. Certain states have issued additional limitations on charging late fees and extended protection to other customer classes. Bad debt expense could significantly increase due to regulatory orders, pandemic related economic impacts and customers hardship. However, several of our commissions are allowing the deferral of incremental COVID-19 related expense, including bad debt expense as discussed further under Regulatory.
Regulatory— Xcel Energy has received orders in Wisconsin, Texas and Michigan, allowing regulatory deferral of incremental COVID-19 costs as a regulatory asset subject to future determination of amount and timing of recovery. Costs include, but are not limited to, suspension of disconnections, waived late fees and other costs and/or foregone revenues. In addition, the Company has filed requests in Colorado, Minnesota, North Dakota, New Mexico and South Dakota to record a regulatory asset and defer all incremental expenses related to the pandemic.
We will continue to monitor these costs and assess whether the actions of the regulator provide the evidence necessary to defer amounts as regulatory assets. Xcel Energy serves the majority of its wholesale customers under formula transmission and production rates which true-up rates to actual costs to serve.
Contingency Plan— We are implementing contingency plans to reduce costs to offset the negative impact of COVID-19. Actions include reductions of employee expenses, consulting, variable compensation, delays of certain work activities, attrition and implementation of a hiring freeze. Based on these actions, our base case assumption is that 2020 O&M expenses will decline 4% to 5% compared with 2019. The ultimate level of O&M expenses will be dependent on actual sales levels.
In addition, we have received orders allowing the deferral of incremental pandemic related expenses in Texas, Wisconsin and Michigan. We are seeking regulatory authority to defer incremental expense in Minnesota, Colorado and other states.
We believe we can deliver earnings within our 2020 guidance range based on implementing contingency plans to offset the impact of the pandemic on sales and expense levels under the base case scenario. However, our contingency plans may not be able to offset the negative impact of COVID-19 under a severe scenario.
Supply Chain and Capital Expenditures— Xcel Energy’s ability to meet customer energy requirements, respond to storm-related disruptions and maintain our capital expenditure program are dependent on maintaining an efficient supply chain. During the first quarter of 2020, Xcel Energy did not experience any material supply chain, contractor or employee disruptions that prevented us from performing maintenance or construction activity. As a result, we have not significantly adjusted our 2020 capital expenditure plan.
However, the situation is fluid and in April we were informed of supply chain disruptions, which will likely result in delays in the completion of two of our wind farms into 2021. We are working through these challenges to try to complete the projects this year, however, we believe these wind farms would meet the IRS continuous efforts criteria and qualify for 100% PTC benefit even if completed in 2021.
Pension— The funded status of the Xcel Energy pension plans was approximately 90% in January 2020. The funded status of the pension plan is estimated to be in the low 80% range, based on market conditions as of early May 2020.
Our disciplined pension plan management practices include maintaining a well-diversified growth portfolio across a diverse set of asset classes and an allocation to interest rate hedging instruments. Xcel Energy does not expect any material changes to its pension funding requirement at this time. In addition, Xcel Energy has pension trackers in Colorado and Texas, which allow us to defer amounts that are above or below a baseline.
Liquidity — Xcel Energy has taken steps to enhance its liquidity and believes it has more than adequate liquidity.
As a result of these actions, Xcel Energy currently has $3.1 billion of available liquidity. In addition, there are other items that will enhance liquidity.
Xcel Energy has an outstanding forward equity agreement in connection with a $743 million public offering of 11.8 million shares. These shares have not been issued and we expect to settle this equity forward later in 2020.
The MEC sale will result in approximately $650 million of additional funds, after our previously-announced planned corporate giving, that can be used for general corporate purposes and enhanced liquidity.
Xcel Energy continues to have access to the capital markets on favorable terms.
Customer Service & Reliability — Xcel Energy remains committed to continuing to safely deliver reliable services to our customers as families and communities face the COVID-19 pandemic. We have exercised our business continuity plans to safely serve our customers, protect our employees and ensure critical positions remain staffed.
Key actions include:
Executing work-from-home practices for employees who can do their work remotely;
Enhancing cleaning practices within our facilities;
Providing proper personal protective equipment and following CDC and state guidelines;
Conducting employee temperature checks;
Changing work practices to promote social distancing;
Splitting crews and staggering work times;
Limiting employee entry into customer homes to emergency situations only; and
Reminding customers of increased risks of scam activity.
QUANTITATIVE ANDEmployees QUALITATIVE DISCLOSURES ABOUT MARKET RISK— The health and safety of our workforce is one of our core values, and we have taken several actions that reflect that during this pandemic:
See Management’s DiscussionContinued pay for employees who have been quarantined;
Expanded medical plan coverage for employees and Analysis their families to include 100% of COVID-19 medical costs;
Offered up to an additional 80 hours of paid time off to employees for pandemic related illness;
Expanded eligibility for our paid time off donation program to employees who have or are caring for a family member who has been diagnosed with the virus;
Offered new anxiety and stress management tools, in addition to our existing Employee Assistance Program; and
Provided resources and educational materials to support employees adjusting to distance learning with their children.
Communities— Xcel Energy is committed to the communities in which we operate. Early actions include the following:
Plan to donate approximately $20 million in corporate giving, including COVID-19 relief in 2020. Along with the Xcel Energy Foundation, we have already donated approximately $1.5 million to support pandemic relief efforts across our eight-state footprint and implemented a virtual volunteering program;
Donated over 300,000 masks to hospitals in the communities we serve; and launched a special $300,000 COVID-19 two-to-one matching campaign, which provides a match for employee donations to impacted non-profit organizations, in addition to our standard employee matching gift programs; and
Submitted a proposal to reduce our approved 2020 Fuel Forecast by $25 million to provide immediate relief to our Minnesota customers during the pandemic and resulting economic downturn, which will be implemented across the three summer months equally.
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ITEM 3 — QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK |
There have been no material changes from Derivatives, Risk Management and Market Risk under Item 2.from our 2019 Form 10-K.
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ITEM 4 — CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
Xcel Energy maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. In addition, the disclosure controls and procedures ensure that information required to be disclosed is accumulated and communicated to management, including the CEO and CFO, allowing timely decisions regarding required disclosure.
As of Sept. 30, 2019,March 31, 2020, based on an evaluation carried out under the supervision and with the participation of Xcel Energy’s management, including the CEO and CFO, of the effectiveness of its disclosure controls and the procedures, the CEO and CFO have concluded that Xcel Energy’s disclosure controls and procedures were effective.
Internal Control Over Financial Reporting
No changes in Xcel Energy’s internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, Xcel Energy’s internal control over financial reporting.
Part II — OTHER INFORMATION
Item 1 — Legal Proceedings |
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ITEM 1 — LEGAL PROCEEDINGS |
Xcel Energy is involved in various litigation matters in the ordinary course of business. The assessment of whether a loss is probable or is a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. Management maintains accruals for losses probable of being incurred and subject to reasonable estimation. Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories.
In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss. For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, would have a material effect on Xcel Energy’s financial statements. Unless otherwise required by GAAP, legal fees are expensed as incurred.
See Note 10 to the consolidated financial statements and Part I Item 2 for further information.
There have been no material changes from the risk factors disclosed in the 2019Form 10-K except as follows: We face risks related to health epidemics and other outbreaks, which may have a material effect on our financial condition, results of operations and cash flows.
The global outbreak of COVID-19 is currently impacting countries, communities, supply chains and markets. COVID-19 has not had a material impact on our first quarter results; however, we did experience a substantive drop in our sales in April. The severity of the outbreak is uncertain and we cannot ultimately predict whether it will have a material impact on our liquidity, financial condition, or results of operations. Nor can we predict the impact of the virus on the health of our employees, our supply chain or our ability to recover higher costs associated with managing through the pandemic.
Xcel Energy Inc.’sEnergy’s risk factors are documented in Item 1A of Part I of its Annual Report on Form 10-K for the year ended Dec. 31, 2018,2019, which is incorporated herein by reference. Therereference, as well as other information set forth in this report, which could have been noa material changes from the risk factors previously disclosed in the Form 10-K.impact on our financial condition, results of operations and cash flows. |
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ITEM 2— — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
For the quarter ended Sept. 30, 2019, noThe following table provides information about our purchases of equity securities that are registered by Xcel Energy Inc., pursuant to Section 12 of the Securities Exchange Act of 1934, were purchased by or on behalf of us or any of our affiliated purchasers.
for the quarter ended March 31, 2020:
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| | Issuer Purchases of Equity Securities |
Period | | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs |
Jan. 1, 2020 - Jan. 31, 2020 | | — |
| | $ | — |
| | — |
| | — |
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Feb. 1, 2020 - Feb. 29, 2020 | | — |
| | — |
| | — |
| | — |
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March 1, 2020 - March 31, 2020 (a) | | 6,394 |
| | 62.32 |
| | — |
| | — |
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Total | | 6,394 |
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(a) | Xcel Energy Inc. withholds stock to satisfy tax withholding obligations on vesting of awards of restricted stock under the Xcel Energy Executive Annual Incentive Award Plan. |
* Indicates incorporation by reference
+ Executive Compensation Arrangements and Benefit Plans Covering Executive Officers and Directors
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Exhibit Number | Description | Report or Registration Statement | SEC File or Registration Number | Exhibit Reference |
| | Xcel Energy Inc. Form 8-K dated May 16, 2012 | 001-03034 | 3.01 |
| | Xcel Energy Inc Form 8-K dated April 3, 2020 | 001-03034 | 3.01 |
| | Xcel Energy Inc. Form 8-K dated Feb. 17, 2016April 1, 2020 | 001-03034 | 3.01 |
| | NSP-Minnesota Form 8-K dated Sept. 10, 2019 | 001-31387 | 4.01 |
| | PSCoXcel Energy Inc. Form 8-K dated August 13, 2019March 23, 2020 | 001-3280001-03034 | 4.0110.01 |
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101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH | XBRL Schema | | | |
101.CAL | XBRL Calculation | | | |
101.DEF | XBRL Definition | | | |
101.LAB | XBRL Label | | | |
101.PRE | XBRL Presentation | | | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | XCEL ENERGY INC. |
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Oct. 25, 2019May 7, 2020 | By: | /s/ JEFFREY S. SAVAGE |
| | Jeffrey S. Savage |
| | Senior Vice President, Controller |
| | (Principal Accounting Officer) |
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| | /s/ ROBERT C. FRENZELBRIAN J. VAN ABEL |
| | Robert C. FrenzelBrian J. Van Abel |
| | Executive Vice President, Chief Financial Officer |
| | (Principal Financial Officer) |