a strategic plan for growthxcel energy strategic plan . drive operational excellence manage...

59
A Strategic Plan for Growth 2015 Evercore ISI Conference January 8-9, 2015

Upload: others

Post on 13-Feb-2021

2 views

Category:

Documents


0 download

TRANSCRIPT

  • A Strategic Plan for Growth

    2015 Evercore ISI Conference January 8-9, 2015

  • 2 2

    Safe Harbor Except for the historical statements contained in this release, the matters discussed herein, are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements, including our 2014 earnings per share guidance and assumptions, are intended to be identified in this document by the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should” and similar expressions. Actual results may vary materially. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them to reflect changes that occur after that date. Factors that could cause actual results to differ materially include, but are not limited to: general economic conditions, including inflation rates, monetary fluctuations and their impact on capital expenditures and the ability of Xcel Energy Inc. and its subsidiaries (collectively, Xcel Energy) to obtain financing on favorable terms; business conditions in the energy industry, including the risk of a slow down in the U.S. economy or delay in growth recovery; trade, fiscal, taxation and environmental policies in areas where Xcel Energy has a financial interest; customer business conditions; actions of credit rating agencies; competitive factors, including the extent and timing of the entry of additional competition in the markets served by Xcel Energy Inc. and its subsidiaries; unusual weather; effects of geopolitical events, including war and acts of terrorism; state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rates or have an impact on asset operation or ownership or impose environmental compliance conditions; structures that affect the speed and degree to which competition enters the electric and natural gas markets; costs and other effects of legal and administrative proceedings, settlements, investigations and claims; actions by regulatory bodies impacting our nuclear operations, including those affecting costs, operations or the approval of requests pending before the Nuclear Regulatory Commission; financial or regulatory accounting policies imposed by regulatory bodies; availability or cost of capital; employee work force factors; and the other risk factors listed from time to time by Xcel Energy in reports filed with the Securities and Exchange Commission (SEC), including Risk Factors in Item 1A and Exhibit 99.01 of Xcel Energy Inc.’s Annual Report on Form 10-K for the year ended Dec. 31, 2013 and Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 2014.

  • 3

    Fully Regulated, Diverse Utility

    NSP-Wisconsin (NSPW) 5-10% of earnings

    NSP-Minnesota (NSPM) 35-45% of earnings

    Southwestern Public Service (SPS)

    5-15% of earnings

    Public Service Co. of Colorado (PSCo) 45-55% of earnings

    Operate in 8 States

    Combination Utility 90% electric

    10% natural gas

    Customers 3.5 million electric

    1.9 million natural gas 2014 Dividend (Annualized) = $1.20 2014 EPS Guidance = $1.95 - $2.05 2015 EPS Guidance = $2.00 - $2.15

  • 4 4

    Xcel Energy Investment Merits

    Focused strategic plan Offering an attractive total return

    — EPS growth of 4% – 6% * — Dividend growth of 4% – 6%

    Strong credit metrics — Unsecured credit ratings of “BBB+” to “A” — Secured credit ratings in “A” range

    Proven track record of delivering on financial objectives

    * Based off a normalized 2013 EPS of $1.90

  • 5

    Improve Utility Performance

    ● Close ROE gap 50 bps by 2018 ● Derive 75% of revenue from MYPs

    Objectives Measurable Results Xcel Energy Strategic Plan

    Drive Operational Excellence

    ● Manage workforce transition ● Limit annual O&M growth to 0-2%

    Provide Customer Options & Solutions

    ● Offer more energy options ● Exceed customer expectations

    Invest for the Future

    ● Base capital plan drives annual rate base growth of 4.7% ● Potential incremental investment in natural gas and transmission

  • 6

    Improve Utility Performance

    6

    Objective Close ROE

    Gap by 50 bps by 2018

    NSPM ~75%

    SPS ~20%

    PSCo & NSPW ~5%

    Regulatory Lag Contribution by Jurisdiction

    Existing ROE gap is approximately 100 bps

  • 7

    Streamlining Minnesota Regulation Based upon four key objectives

    — Pursue more predictable and nimble regulation — Reduce carbon emissions by 40% by 2030 — Pioneer grid modernization — Provide new services and product offerings

    Potential mechanisms — Longer and more holistic multi-year rate plans — Use the nuclear depreciation surplus as a mitigation tool — Seek additional riders — Pursue legislation to provide clarification and authorization

  • 8

    2014 Q4

    2015 Q1

    2015 Q2

    2015 Q3

    2015 Q4

    Minnesota Regulatory Calendar

    MN 2014 – 2015 Rate Case

    Monticello Case

    MN Legislative Session

    MN Regulatory Filing

    Resource Plan Filing

    Alternative Plan: 2016 – 2018 Rate Case Filing

  • 9

    Legislative Initiatives in Texas

    Collaborating with other non-ERCOT utilities

    Pursuing legislative changes to reduce regulatory lag

    — Ability to implement temporary rates 35 days from filing

    — Allow the addition of post test year capital additions

    — Allow for the filing of a transmission rider twice a year

    — Allow for generation cost recovery rider

  • 10

    Closing the ROE Gap Key Opportunity for EPS Growth

    2014 Estimated Rate Base $20.7 billion $20.7 billion $20.7 billion

    Equity Ratio 54% 54% 54%

    ROE Improvement 25 bps 50 bps 75 bps

    Net Income $28 million $56 million $84 million

    Ongoing EPS $0.06 $0.11 $0.17

    10

  • 11

    Impact of Improved Earned ROE

    Consolidated Earned ROE

    10.0%

    5-year EPS CAGR

    4% - 5%

    10.5%

    11.0%

    5% - 6%

    6% - 7%

    11

    Based on Xcel Energy’s consolidated GAAP ROE

  • 12

    Improve Utility Performance Derive 75% of Revenue from Multi-Year Plans

    Jurisdiction Status Rate Plan Percent of Rate Base

    Minnesota Electric Pending Multi-Year Plan (2014-15) ≈ 35%

    Colorado Electric Pending Multi-Year Plan (2015-17) ≈ 31%

    North Dakota Electric Approved Multi-Year Plan (2013-16) ≈ 2%

  • Driving Operational Excellence Bending the Cost Curve

    Sustainable cost control – Standardization of processes – Optimize purchasing power – Technology

    Stabilization of nuclear costs Workforce transition Proactive maintenance Employee benefits programs Investing in capital to reduce O&M

    Objective Annual O&M Growth 2014: 2% - 3% 2015-2019: 0% - 2%

    Drives

    13

  • 14

    2015 2016 2017 2018 2019Transmission Generation Distribution Other

    Dollars in millions

    14

    Base Capital Investment Plan Five-Year Total of $14.5 Billion

    $3,375

    $2,780 $2,825 $2,650 $2,850

  • 15

    Base Capital Investment Plan Drives Rate Base Growth

    15

    2015-2019 Base Capital Expenditures

    $14.5 Billion

    Drives

    ≈ 4.7% Rate Base

    CAGR 2014 - 2019

    Transmission 31%

    Generation 23%

    Distribution 22%

    Other 24%

  • 16 16

    Investing for the Future Potential Natural Gas Investment

    Take advantage of organic growth opportunities Leverage existing natural gas footprint Potential incremental investment opportunities

    — Natural gas pipelines — Natural gas storage — Rate-basing of natural gas reserves

    We will continue to be disciplined and thoughtful as we pursue growth

  • Operating Company

    Miles of Gas Transmission

    Number of Customers

    PSCo 2,118 1,330,000

    NSPM 96 493,000

    NSPW 3 110,000

    SPS 20 N/A

    Xcel Energy 2,237 1,933,000

    Sixth largest natural gas consumer in the country Annual natural gas usage ~450 Bcf Spend $1.5 - $2.0 billion annually

    Xcel Energy An Experienced Natural Gas Provider

    17

    NSPW 4%

    SPS 20% PSCO

    48%

    NSPM 28%

    2013 Natural Gas Consumption

  • 18

    Transmission: A Two-Pronged Strategy Operating Company: A low risk base business

    — Driven by reliability standards & state/regional energy policies — Incumbent in areas with a substantial need for investment

    Will defend using ROFR provisions when available ROFR statutes in MN, ND, and SD

    Transco: Optimizing the opportunity in an evolving landscape — Expansion into broader FERC Order 1000 regions — Pursuing growth in an aggressive but disciplined manner — Making smart investments that position us well for the future

  • Majority of base plan is driven by reliability targets, state & regional energy policies and asset renewal

    Minimal execution risk

    19

    Transmission Base Capital Investment Plan

    Reliability Driven 67%

    Regional Expansion 17%

    SW Oil Patch 16%

    Transmission CapEx of $4.5 billion 2015 – 2019

  • 20

    Advancing Transco Strategy

    Create transco subsidiaries Submit proposed projects to SPP Initiate FERC filing process Make state regulatory filings Pursue initial SPP RFPs – 2015 Reply to MISO RFPs – 2015/2016

    20

  • 21

    $0.86

    2005

    2013

    $0.89 $0.92 $0.95 $0.98

    $1.01 $1.04 $1.08 $1.12

    Annual Dividend Increase

    Proven Track Record of Delivering Value Consistent Dividend Growth

    2014

    $1.20

    Dividend growth CAGR 2005-2013 = 3.4% Dividend increase for 2014 = 7.1%

    Dividend Annual Growth Objective = 4-6% 21

  • 22 * Reconciliation to GAAP EPS included in appendix

    Proven Track Record of Delivering Value Consistent EPS Growth

    2014E

    2005

    Ongoing earnings per share *

    $1.15

    $1.95 $1.95-$2.05

    2014 & 2015 Ongoing Earnings Guidance Ranges

    2015E

    22

    Ongoing EPS CAGR 2005-2013 = 6.8% EPS Annual Growth Objective = 4-6%

    $2.00-$2.15

  • 23

    Proven Track Record Delivering on Financial Objectives

    2005 Achieved 2006 Achieved 2007 Exceeded 2008 Achieved 2009 Achieved 2010 Achieved 2011 Achieved 2012 Achieved 2013 Achieved 2014 On Track

    EPS Guidance

  • 24

    Appendix

    24

  • 25

    Reconciliation – Ongoing EPS to GAAP EPS 2005 2006 2007 2008 2009 2010 2011 2012 2013

    Ongoing EPS $1.15 $1.30 $1.43 $1.45 $1.50 $1.62 $1.72 $1.82 $1.95

    PSRI-COLI $0.05 $0.05 $(0.08) $0.01 $(0.01) $(0.01) - - -

    Prescription Drug Tax Benefit - - - - - - - $0.03 - SPS FERC Order - - - - - - - - $(0.04) Cont. Ops $1.20 $1.35 $1.35 $1.46 $1.49 $1.61 $1.72 $1.85 $1.91 Discont. Ops $0.03 $0.01 - - $(0.01) $0.01 - - - GAAP EPS $1.23 $1.36 $1.35 $1.46 $1.48 $1.62 $1.72 $1.85 $1.91

    Xcel Energy’s management believes that ongoing earnings provide a meaningful comparison of earnings results and is representative of Xcel Energy’s fundamental core earnings power. Xcel Energy’s management uses ongoing earnings internally for financial planning and analysis, for reporting of results to the Board of Directors, and when communicating its earnings outlook to

    analysts and investors.

    25

  • 26

    Dividend Flexibility

    Annual dividend growth target range of 4% – 6% — No dividend payout range target — Dividend growth may periodically exceed EPS growth

    Dividend considerations — Providing a competitive dividend yield — Capital investment growth opportunities — Balance sheet and credit ratings — Projected cash generation and requirements

    Dividend decisions are the responsibility of the Board of Directors

    In February 2014, Xcel Energy’s Board of Directors increased the dividend 8 cents per share on an annual basis, or 7.1%

  • 27 27

    Strong Credit Ratings and Liquidity

    45% equity ratio as of September 30, 2014 $2.75 billion credit line, maturity of October 2019

    Moody’s * S&P Fitch Xcel Unsecured A3 BBB+ BBB+ NSPM Secured Aa3 A A+ NSPW Secured Aa3 A A+ PSCo Secured A1 A A+ SPS Secured A2 A A-

    * Moody’s upgraded the credit ratings of Xcel Energy and its subsidiaries one notch in January 2014

  • 28

    $14,480

    $11,500

    $0

    $2,995$2,605$375

    Modest Financing Needs Financing Plan 2015-2019

    Cap Ex

    CFO * New Debt

    DRIP & Benefits

    Equity **

    Funding capital expenditures

    Refinanced Debt

    $ millions

    * Cash from operations is net of dividend and pension funding ** No external equity required during 5 year plan

    Financing plans are subject to change

  • 29

    $0

    $400

    $800

    $1,200

    $1,600

    2015 2016 2017 2018 2019 2020 2021 2022 2023

    Hold Co NSPM NSPWPSCo SPS

    Manageable Debt Maturities Dollars in millions

    29

  • 30

    Projected Rate Base Growth Dollars in billions

    $26.1$25.2$24.5$23.5

    $22.5$20.7

    $19.2$17.6$16.9

    $15.2

    $10.8$11.7

    $14.4$13.3$12.5

    2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

    CAGR 2005 – 2013 = 7.5%

    CAGR 2014 – 2019 = 4.7%

    Estimate 30

  • 31

    2012 2013 2014 2015 2016 2017 2018 2019

    Dollars in Billions

    31

    Transmission Rate Base Growth

    $3.0 $3.8

    $5.7

    $6.9 $7.5

    $4.6 $5.2

    $6.2

    CAGR 2014 – 2019 = 10%

    Estimate

  • 32

    Capital Expenditures by Major Project

    Major Project Summary 2014 2015 2016 2017 2018 2019

    2015 – 2019 Total

    CapX 2020 $270 $130 $5 $5 - - $140

    CACJA $240 $90 $10 - - - $100

    Nuclear Fuel $130 $90 $120 $120 $65 $150 $545

    SPP Infrastructure (Generation) $5 $35 $110 $120 $30 - $295

    SPP Infrastructure (Transmission) $30 $105 $140 $100 $115 $110 $570

    Gas Pipeline Replacements - $135 $135 $100 $140 $155 $665

    NSPM Wind Projects $35 $575 $5 - - - $580

    La Crosse-Madison (Transmission) $5 $5 $65 $75 $40 $5 $190

    Tolk Water Pipeline $5 $30 $80 $65 - - $175

    TUCO-Amoco-Hobbs (Transmission) - $5 $5 $5 $55 $110 $180

    Other Major Transmission $500 $335 $255 $310 $285 $270 $1,455

    Other Capital Expenditures $1,780 $1,840 $1,850 $1,925 $1,920 $2,050 $9,585

    Total Capital Expenditures $3,000 $3,375 $2,780 $2,825 $2,650 $2,850 $14,480

    Dollars in millions

    32

  • 33

    Capital Expenditures by Function

    2014 2015 2016 2017 2018 2019

    2015 - 2019 Total

    Electric Generation $715 $1,190 $630 $620 $415 $450 $3,305 Electric Transmission $985 $875 $780 $905 $975 $1,000 $4,535 Electric Distribution $560 $605 $630 $640 $650 $680 $3,205 Natural Gas $380 $370 $370 $305 $355 $380 $1,780 Nuclear Fuel $130 $90 $120 $120 $65 $150 $545 Other $230 $245 $250 $235 $190 $190 $1,110 Total $3,000 $3,375 $2,780 $2,825 $2,650 $2,850 $14,480

    Dollars in millions

  • 34

    Capital Expenditures by Company

    Dollars in millions

    2014 2015 2016 2017 2018 2019

    2015 – 2019 Total

    NSPM $1,130 $1,625 $990 $975 $845 $950 $5,385

    PSCO $1,055 $950 $820 $815 $885 $1,010 $4,480

    SPS $535 $570 $710 $735 $595 $565 $3,175

    NSPW $280 $230 $260 $300 $325 $325 $1,440

    Total $3,000 $3,375 $2,780 $2,825 $2,650 $2,850 $14,480

    34

  • 35

    NSP-M Capital Expenditures by Function Dollars in millions

    NSPM 2015 2016 2017 2018 2019 Total Electric Generation $860 $245 $270 $220 $210 $1,805 Electric Transmission $285 $205 $195 $170 $190 $1,045 Electric Distribution $210 $220 $220 $225 $230 $1,105 Natural Gas $80 $90 $65 $95 $100 $430 Nuclear Fuel $90 $120 $120 $65 $150 $545 Other $100 $110 $105 $70 $70 $455 Total $1,625 $990 $975 $845 $950 $5,385

  • 36

    PSCo Capital Expenditures by Function

    PSCo 2015 2016 2017 2018 2019 Total Electric Generation $195 $125 $85 $95 $170 $670 Electric Transmission $155 $100 $170 $215 $230 $870 Electric Distribution $245 $250 $265 $270 $280 $1,310 Natural Gas $265 $260 $220 $240 $260 $1,245 Other $90 $85 $75 $65 $70 $385 Total $950 $820 $815 $885 $1,010 $4,480

    Dollars in millions

  • 37

    SPS Capital Expenditures by Function

    SPS 2015 2016 2017 2018 2019 Total Electric Generation $125 $245 $250 $85 $50 $755 Electric Transmission $315 $330 $360 $390 $380 $1,775 Electric Distribution $95 $100 $95 $95 $105 $490 Other $35 $35 $30 $25 $30 $155 Total $570 $710 $735 $595 $565 $3,175

    Dollars in millions

  • 38

    NSP-W Capital Expenditures by Function

    NSPW 2015 2016 2017 2018 2019 Total Electric Generation $10 $15 $15 $15 $20 $75 Electric Transmission $120 $145 $180 $200 $200 $845 Electric Distribution $55 $60 $60 $60 $65 $300 Natural Gas $25 $20 $20 $20 $20 $105 Other $20 $20 $25 $30 $20 $115 Total $230 $260 $300 $325 $325 $1,440

    Dollars in millions

  • 39

    Proximity to U.S. Energy Plays

    39

    Increasing oil & gas exploration

    — D-J Basin (Colorado) — Bakken/Williston (Dakotas)

    — Permian Basin (NM/Texas) Current assets are well positioned

    — Multiple gas supply basins — Associated gas from Bakken is

    looking for demand areas

  • 40 40

    WYCO Development Company

    Joint venture (50/50) owned with Kinder Morgan — Operates and develops natural gas pipelines, storage

    and compression WYCO assets

    — High Plains Pipeline 164 miles of 30” pipe

    — Front Range Pipeline 53 miles of 24” pipe

    — Douglas Compression — Totem Storage

  • 41

    Potential Transmission Opportunities

    MISO North – Next MVP/EPA 111(d) Portfolio

    MISO South Congestion

    WECC/WestConnect – First Regional Portfolio

    SPP North-South Integration

    ERCOT CREZ/Renewable Expansion

    MISO/SPP Seam

    Oil & Gas Expansion

    Oil & Gas Expansion

    MISO North-South Integration

    Interregional Ties

  • 42

    SPP Planning Process Timeline

    Draft Regional

    Plan Released

    Initial Detailed Project

    Proposals Due

    SPP Board Approval and Initial

    RFPs Issued

    May/June 2014

    2014 Q4

    2015 Q1

    Mid 2015

    Initial RFP Responses

    Due and Next Round of DPPs Due

    2015 2H

    RFP Winners

    Announced

  • 43

    SPP Scoring Methodology

    Engineering Design – 200 pts Project Management – 200 pts Operating Ability – 250 pts Cost Analysis – 225 pts Creditworthiness – 125 pts Project proposal bonus – 100 pts

    Accomplished development team Skillful project execution Seasoned operator Proven low cost leader Industry leading Balance Sheet Submitted ~15% of proposed SPP projects

    Criteria Xcel Energy Brings

  • 44

    Proven Low Cost Leader – 345 kV Lines

    $0.0

    $0.5

    $1.0

    $1.5

    $2.0

    $2.5

    Xcel Energy Average

    $1.72

    SPP Average

    $1.76

    ERCOT Average

    $1.80

    MISO Average

    $2.22

    WECC Average

    $2.11

    * Adjusted to 2013 dollars using the Handy Whitman Construction Cost Index

    Average Cost per Mile, Adjusted *

    13 25 55 12 35 # of projects

    Overall Average = $2.1 million/mile

    Dollars in millions per mile

    Source: Analysis uses data from FERC, State Commissions, Regional Transmission Organizations, EEI publications and other publicly available data sources

  • 45

    Regulatory vs. Authorized ROE - 2013 OPCO Jurisdiction

    Rate Base $Millions

    Authorized ROE

    W/A Earned ROE Regulatory Plan

    NSPM

    MN Electric $6,719 9.83% 8.22% 2014-15 MYP Filed MN Gas 436 10.09 9.76 ND Electric 389 9.75 9.54 2013-2016 MYP ND Gas 43 10.75 11.39 SD Electric 409 Black box 7.28

    PSCo CO Electric 5,922 10.00 11.32* 2012-2014 MYP CO Gas 1,483 9.72 9.01 2013 Rate Case

    SPS TX Electric 1,256 Black box 10.11** 2014 Rate Case NM Electric 456 Black box 6.58** 2014 Rate Case

    NSPW

    WI Electric 777 10.40 10.23 2013 Rate Case WI Gas 85 10.40 9.81 2013 Rate Case MI Electric 17 10.30 7.57 2014 Rate Case MI Gas 3 11.25 (11.58) Wholesale 1,225 N/A N/A

    45

    * Before customer refund based on earnings test. PSCo earned 10.27%, after customer refund. ** Actual ROE, not weather-normalized

  • 46

    Pending Regulatory Cases

    Monticello EPU/LCM prudence review - expected decision 2015 Q1 46

    Rate Case Requested Increase Requested

    ROE Expected Decision

    Minnesota Electric $248 million

    Over Two Years 10.25% 2015 Q1

    Colorado Electric $107 million 10.25% 2015 Q2

    South Dakota Electric $16 million 10.25% 2015 Q1

    Texas Electric 2015 $65 million 10.25% 2015 Q2

  • 47

    Minnesota Multi-Year Electric Rate Case NSP-Minnesota filed a two-year, electric rate case seeking a

    revised $248 million over two years The filing is based on a requested ROE of 10.25%, a 52.5% equity

    ratio, a 2014 average rate base of $6.67 billion and an additional average rate base of $0.412 billion in 2015.

    MPUC approved interim rates of $127 million effective Jan. 2014 Commission deliberation – March 26, 2015

    47

  • 48

    Minnesota Multi-Year Electric Rate Case

    (Millions of Dollars) 2014 2015

    Amount % increase Amount %

    increase

    Initial pre-moderation deficiency 273.8 81.4

    Excess depreciation reserve (81.1) 52.9

    DOE settlement proceeds __ (35.8)

    Initial rate request 192.7 98.5

    Adjustments to request (50.5) 7.5

    Revised rate request 142.2 5.1% 106.0 3.8%

    Interim rate adjustments (65.3) 65.3

    Prairie Island EPU 4.8 (4.8)

    Revenue impact 81.7 166.5

    Excess depreciation reserve 81.1 (45.7)

    Sales forecast (18.2) -

    Property tax forecast (4.2) -

    DOE settlement proceeds __ 25.7

    Estimated impact on operating income $140.4 $146.5

    48 NSPM’s total revenue for 2014 is capped at the interim rate level of $127 million (subject to refund) and pre-tax operating income is capped at $208 million. This table demonstrates the impact of reducing NSP-Minnesota’s rebuttal request.

  • 49 49

    Minnesota Multi-Year Electric Rate Case

    * The ALJ recommended that the MPUC accept the DOC and NSPM agreement to true up the sales forecast to W/N actual sales and to a limited true-up mechanism for property taxes.

    (millions of dollars) 2014

    ALJ DOC Surrebuttal NSP-M

    Rebuttal

    NSP-Minnesota’s original request $192.7 $192.7 $192.7 Monticello EPU (31.3) (33.9) (12.2) Sales forecast* (15.8) (43.2) (15.8) ROE (DOC = 9.64%, ALJ = 9.77%) (28.4) (36.2) - Health care, pension and other benefits (1.9) (11.4) (1.9) Property taxes* (9.0) (9.0) (9.0) Prairie Island EPU (5.1) (5.1) (5.1) Other, net (5.2) (8.0) (6.5) Recommended 2014 rate increase (unadjusted) $96.0 $45.9 $142.2 Sales forecast - estimated true-up adjustment (18.2) 9.2 (18.2) Property tax - estimated true-up adjustment (4.2) (4.2) (4.2) Total Recommended rate increase (adjusted) $ 73.6 $ 50.9 $119.8

  • 50 50

    Minnesota Multi-Year Electric Rate Case

    * In July 2014, the Minnesota Department of Commerce (DOC) recommended a cost disallowance of approximately $71.5 million on a Minnesota jurisdictional basis which equates to a total NSP System disallowance of approximately $94 million. This would reduce NSP-Minnesota’s revenue requirement by approximately $10.2 million in 2015. ** Adjustment relates to timing differences and/or methodology of accelerating amortization of the excess depreciation reserve over three years.

    (millions of dollars) 2015

    ALJ DOC Surrebuttal NSP-M

    Rebuttal

    NSP-Minnesota’s original request $98.5 $98.5 $98.5 Monticello EPU * 29.1 18.9 11.7 Excess depreciation reserve adjustment ** - (22.7) - Depreciation - (17.5) - Property taxes (3.3) (3.3) (3.3) Production tax credits to be included in base rates (11.1) (11.1) (11.1) DOE settlement proceeds 10.1 10.1 10.1 Other, net (0.9) (6.4) 0.1 Recommended 2015 step increase $122.4 $66.5 $106.0

  • 51

    Monticello EPU/LCM Prudence Filing Original estimate was $320 million and final cost was $665 million

    Monticello uprate & life extension was a sound investment — Rebuilt plant provides customer value for the next 20 years — Essential for carbon reduction commitment — Our experience is in line with industry performance

    In July 2014, the DOC recommended a disallowance of $72 million for Minnesota - the equivalent of $94 million for all jurisdictions

    In August 2014, the OAG recommended a disallowance of $321 million Procedural schedule:

    — ALJ recommendation expected in January 2015 — Commission deliberation – March 6, 2015

    51

  • 52

    South Dakota 2015 Electric Rate Case

    Seeking a 2015 electric rate increase of $15.6 million, or 8.0% — Requested ROE of 10.25% — Equity ratio of 53.86% — 2013 historic test year with known and measurable

    adjustments for 2014 and 2015 — Transfers $9.0 million from rider to base rates

    Interim rates went into effect in January 2015 Rates expected to go into effect in the first quarter of 2015

    52

  • 53

    Colorado 2015 Electric Rate Case Seeking a total 2015 rate increase of $107 million, or 3.8% The filing is based on a 2015 test year, an ROE of 10.25%, an equity

    ratio of 56% and an electric rate base of $6.39 billion Request reflects the initiation of a CACJA rider:

    — Will recover approximately $99 million in 2015 — Will recover incremental revenue of $34 million in 2016 — Rider revenue will decline by about $4 million in 2017

    Establishes a multi-year regulatory plan, providing certainty for PSCo and its customers

    Procedural schedule: — Hearings – January 26 – February 4, 2015 — Interim rates effective – February 13, 2015 — Commission decision – 2015 Q2

    53

  • 54

    Colorado 2015 Electric Rate Case (Millions of Dollars) Staff OCC PSCo Rebuttal

    PSCo’s filed rate request 136.0 136.0 136.0

    Transfer from transmission rider to base rates 19.9 19.9 19.9

    PSCo’s filed revenue requirement deficiency 155.9 155.9 155.9

    Lower ROE (Staff recommendation of 9.11% and OCC recommendation of 9.10%) (69.1) (66.5) (6.2)

    Capital structure (Staff equity ratio of 51.24% and OOC equity ratio of 52.7%) (20.9) (23.7) -

    Rate base adjustments (largely the removal of prepaid pension asset) (20.8) 2.3 -

    Adjustment to a historic test year (82.5) (82.5) -

    Adjustment to use 13-month average rate base (26.1) (22.0) -

    Rate base adjustments for known and measurable plant through September 2014 21.9 - -

    Operation and maintenance expense adjustments (7.2) (16.6) -

    Depreciation - (3.8) -

    Property taxes - (12.1) (5.3)

    Remove CACJA from base rates (62.4) - (98.7)

    Updated sales forecast (15.2)

    Other, net 0.1 0.1 (2.1)

    Total base rate recommendation 2015 (111.1) (68.9) 28.4

    CACJA rider mechanism 54.2 - 98.7

    (Decrease) increase – excluding transfers (56.9) (68.9) 127.1

    Transfer from transmission rider to base rates (19.9) (19.9) (19.9)

    Total (decrease) increase (76.8) (88.8) 107.2 54

  • 55

    Texas 2015 Electric Rate Case Requested a 2015 electric rate increase of $64.75 million (6.7%)

    — Based on a June 2014 historic test year with known and measurable adjustments

    — ROE of 10.25% — Electric rate base of $1.56 billion — Equity ratio of 53.97%

    Includes $442 million post-test year investment A PUCT decision is anticipated in mid 2015

    — Intervenor Testimony April 1, 2015 — Staff’s Testimony April 8, 2015 — SPS Rebuttal Testimony April 24, 2015 — Hearings begin May 11, 2015

    55

  • 56 56

    23%

    12% 56%

    1%5%3%

    23%

    11%

    15%46%

    1%4%

    Proactive Environmental Leadership Fuel Mix Based on Energy

    2005 2020 2013

    18%

    12%

    43%22%

    2%3%

    Coal Natural Gas Nuclear Wind Hydro Other

  • 57 57

    60

    65

    70

    75

    80

    85

    90

    95

    Proactive Environmental Leadership Emission Reductions

    CO2 Emissions Million tons

    ~30% Reduction 2005-2020

    2020 01,000

    2,000

    3,000

    2005 2007 2009 2011 2012

    Mercury Emissions (lbs/MWh)

    0

    50,000

    100,000

    150,000

    200,000

    2005 2006 2007 2008 2009 2010 2011 2012

    Sulfur Dioxide Emissions (lbs/MWh)

    0

    50,000

    100,000

    150,000

    2005 2006 2007 2008 2009 2010 2011 2012

    Nitrogen Oxide Emissions (lbs/MWh)

    2005 2006 2008 2010

  • 58

    YTD Weather-Adjusted Retail Electric Sales Through 2014 Q3

    Better Than Expected YTD Sales Growth

    0.7%1.3%

    3.3%

    2.3%

    1.4%

    XcelEnergy

    NSPM PSCo NSPW SPS

    2014 guidance assumes W/A electric sale growth of about 1%

  • 59 59

    Slide Number 1Safe HarborFully Regulated, Diverse UtilityXcel Energy Investment MeritsSlide Number 5�Slide Number 7Slide Number 8Slide Number 9Closing the ROE Gap�Key Opportunity for EPS Growth Impact of Improved Earned ROEImprove Utility Performance�Derive 75% of Revenue from Multi-Year Plans�Driving Operational Excellence�Bending the Cost CurveSlide Number 14�Investing for the Future�Potential Natural Gas InvestmentXcel Energy�An Experienced Natural Gas ProviderSlide Number 18Slide Number 19Advancing Transco StrategyProven Track Record of Delivering Value�Consistent Dividend GrowthProven Track Record of Delivering Value�Consistent EPS GrowthProven Track Record �Delivering on Financial ObjectivesSlide Number 24Reconciliation – Ongoing EPS to GAAP EPSDividend Flexibility �Strong Credit Ratings and LiquidityModest Financing Needs�Financing Plan 2015-2019�Manageable Debt MaturitiesProjected Rate Base Growth Slide Number 31Capital Expenditures by Major ProjectCapital Expenditures by FunctionCapital Expenditures by CompanyNSP-M Capital Expenditures by FunctionPSCo Capital Expenditures by FunctionSPS Capital Expenditures by FunctionNSP-W Capital Expenditures by FunctionProximity to U.S. Energy Plays�WYCO Development CompanySlide Number 41Slide Number 42Slide Number 43Proven Low Cost Leader – 345 kV LinesRegulatory vs. Authorized ROE - 2013Pending Regulatory Cases Minnesota Multi-Year Electric Rate Case�Minnesota Multi-Year Electric Rate Case�Slide Number 49Slide Number 50Monticello EPU/LCM Prudence Filing � �South Dakota 2015 Electric Rate CaseColorado 2015 Electric Rate CaseColorado 2015 Electric Rate Case�Texas 2015 Electric Rate CaseProactive Environmental Leadership�Fuel Mix Based on EnergyProactive Environmental Leadership�Emission ReductionsBetter Than Expected YTD Sales Growth Slide Number 59