Q3 2020 Xcel Energy Inc Earnings Call
[music].
Good day and welcome to the XL Energy third quarter 2020 earnings Conference call.
Today's conference is being recorded.
Questions will only be taken from institutional investors reporters can contact media relations with increase on individual investors and others can reach out to Investor Relations App.
This time I would like to turn the conference over to Mr., Paul Johnson, Vice President of Investor Relations. Please go ahead Sir.
Thank you and good morning, welcome to XL Energys, 2023rd quarter earnings Conference call joining.
Joining me today are Ben folk Chairman and Chief Executive Officer, Bob Frenzel, President and Chief operating Officer, Bryan been able executive Vice President and Chief Financial Officer, and the man to Rome, Executive Vice President and General Counsel.
This morning, we will review our third quarter results.
Our recent business and regulatory developments provide.
Provide 2021 guidance in our updated five year financial plan.
Slides that accompany today's call are available on our website as a reminder, some of the comments during today's call may contain forward looking information.
Significant factors that could cause results to differ from those anticipated are described in our earnings release and our filings with the FCC.
Today, we will discuss certain metrics that are non-GAAP measures, including ongoing earnings and electric and natural gas margins information on comparable GAAP measures and reconciliations are included in our earnings release with that I'll turn the call over to Benfold well.
Thank you Paul and good morning, everyone. We had another strong quarter booking earnings of one dollar and 14 cents per share for the third quarter of 2020.
Compare with a dollar and one cents per share last year.
Our year to date earnings are on track with our financial plan and we are mitigating the impact of cold at 19 as a result, we are narrowing our 2020 guidance range to $2.75.
$2.81 per share.
Now consistent with our third quarter tradition, we have provided our updated based investment plan, which reflects 22.6 billion of capital expenditures over the next five years.
This represents a rate base growth of 6.3% off of 2020 base year.
This represents our base capital.
In addition, we've identified potential incremental capex of $1.1 billion associated with the Minnesota relief and recovery proposal, which if approved would drive rate base growth of 6.9% well.
We're also initiating 2021 guidance of $2 to 90 cents to $3 per share, which is consistent with our 5% to 7% long term EPS growth objective.
We're very excited about our plan, which provides significant customer valued keeps bills low and delivers attractive returns for our investors.
We also continue to help our customers and protect our employees during this pandemic.
Stepped up charitable giving to help our communities, including donating the gain from the sale of our Mankato facility for more detail see our slides.
Our business continuity plans have been executed extremely well, including the completing of a refueling outage at our Prairie Island used for facility.
So keeping employees safe, while providing reliable customer service.
We're helping to restart the economy through our capital investment programs, which create jobs in our communities.
Earlier this year, the Minnesota Commission opened a relief and recovery docket and invited utilities to submit potential projects that will create jobs and jump start the economy.
September we thought of Repowering proposal that includes four excel energy wind farms of approximately 650 megawatts was 750 million of capital investment in.
In addition to the proposal includes 67 megawatts of re powered PPA extensions.
The portfolio is projected to provide customer savings of over $160 million over the life of the assets.
We have requested a commission decision on a win proposal by year end.
We're also proposing 460 megawatts of solar facilities near our retiring Sherco coal plant to take advantage of the existing transmission.
Project represents an estimated investment of 650 million.
We plan to file our solar proposal in early 2021 and anticipate a decision in mid 21.
We are confident the commission will see the customer benefits of these projects.
We continue to make progress on our PPA buyout strategy.
In August the Minnesota Commission approved our request to acquire the 99 megawatt now a windfarm afterwards, we powered mauer is currently a PPA.
In addition, we filed to buy out the KEPCO solar facility in Colorado and.
And while the 41 million dollar investment is relatively small the PPA is out of the money and the buyout will save our customers $38 million over the 11 years I think this is another example, our of our keeping bills low priority.
We continue to make strong progress on our wind development initiatives in August our 500 megawatt Cheyenne Ridge wind farm went into operation.
Hi, Enbridge was completed ahead of schedule and under budget.
Since it began operations, we set a record with 70% of hourly load coming from wind generation in Colorado.
We also reached an agreement to acquire a 74 megawatt solar facility in Wisconsin for approximately $100 million.
We expect a commission decision later in 2021, and this will be our first universal scale solar rate base investment.
I'm also excited to announce that Excel energy was recently awarded a 10 million dollar deal. We grant for an innovation pilot to produce carbon free hydrogen and one of our nuclear power plants.
We're partnering with the Idaho National lab, and others to use excess electricity and steam to separate the hydrogen and oxygen molecules and water using a high temperature electrolysis process, which is 30% more efficient and in a sustainable and a sustainable way to produce hydrogen.
And while it's not currently economical we think hydrogen has long term potential to be a carbon free form of dispatch, we'll generation, which will allow the country to achieve its carbon goals, while maintaining reliability.
I want to wrap up with a couple of comments on electric vehicles.
We recently announced our vision to enable 1.5 million E. These in our service territory by 2030.
He spent the last few years working with our commission on programs that will enable easy used in our service territory and help turn this vision into reality electrification of the transport system will reduce carbon and save our customers money.
I'm also proud of the recent award we received from fortnightly, which declared our TV program. The smartest transportation electrification project as part of its smartest utility projects in 2020.
We have developed an easy subscription that makes it easy easier for customers to have charging stations installed at their homes and to be charged a monthly rate for off peak usage, which can save customers money and make more efficient use of the electric grid. So before I do turn it over to Brian for more detail.
So on financial results and outlook I, just want to say that as you probably know the south East is wrestling with hurricane data and its widespread outages and the southwest is working around the clock restoring our customers from the damages due to winter storm billing.
Customers over the past three days every store with two thirds of 145 customers in Sps that have been out as a result of this ice storm I.
I know there are hundreds of thousands out there and other parts of the southwest that are out.
I'm, just so proud of our team for focusing on our customers in these adverse conditions and I'm proud of the industry. We have a history of mutual aid that's been never more evident in storm recovery in these last two events and quite frankly, the entire year, so with that I will turn it over to Brian.
Thanks, Ben and good morning, everyone.
We had another strong quarter booking $1.14 cents per share for the third quarter of 2020.
Paired with $1 to one cents per share last year.
Most significant earnings drivers for the quarter include the following.
Our electric margins increased earnings by 20 cents per share primarily driven by rising rate outcomes.
On M. expenses were flat for the quarter, primarily driven by our cost management efforts and a lower effective tax rate increase earnings by seven cents per share as.
As a reminder, production tax credits lower the DTR. However, ptcs are flowed back to customers through lower electric margins are largely earnings neutral.
Offsetting these positive drivers were increased depreciation interest expense, which reduced earnings by 12 cents per share, reflecting our capital investment program.
In addition, other items combined to reduce earnings by two cents per share.
Next I'll discuss the status of corporate banking impacts and our mitigation efforts.
As expected profit 19 had an adverse impact us third quarter weather adjusted electric sales declined by 2.4%.
However, these impacts were better than projected in our guidance assumptions, we now assume annual electric sales will decline approximately 3% for 2014.
As a reminder, we have a sales true up mechanism for all electric classes in Minnesota, and decoupling for the electric residential and non demand small to unite classes in Colorado, which covers about 45% of our total retail electric sales.
Good sales have come in better than projected in weather has unfavorable we've adjusted our own them contingency plans accordingly.
We continue to closely monitor bad debt expense and work with customers on payment plans.
At this point, we expect bad debt expense will increase approximately $25 million over normal levels, which remains in line with previous forecast.
We have received approval of the first certain pandemic related expenses and all in all states, except for North Dakota, where our request remains on the Commission review.
We've also made strong progress on reducing our onetime expenses to mitigate COVID-19 impacts.
Based on our year to date results and updated sales projections. We now expect annual on him expenses will decline, 1% to 2% in 2020 compared to our initial guidance of a 2% increase.
Next let me provide a quick regulatory update.
In Texas, We commission approved our rate case settlement that reflects on the electric rate increase of $88 million.
Our we have 9.45% in equity ratio of 54.6% for APC purposes.
And acceleration of the depreciation life of the total coal plants.
In October the Colorado Commission accepted the LG is a recommended decision to approve our natural gas rate case settlement without modification, reflecting a.
The net rate increase of $77 million or are we have 9.2% and equity ratio of 55.6%.
And the historic test year over an adjustment for the tungsten to Blackrock project.
We view, both the Texas, and Colorado decisions as constructive regulatory outcomes.
Our preference is to avoid rate cases impossible. So in July we filed for rider recovery of our wildfire in advanced grid investments in Colorado and set of filing a comprehensive rate case, the wireless will cover 2021 through 2025 and provide regulatory flexibility there.
We're still early phases of these proceedings.
In September we filed a 2020 on sale proposal, Minnesota as an alternative path to the rate case, we plan to file in early November.
I expect the commission to decide in December whether it will accept the sale or proceed with a multi year rate case.
And as Bill noted.
We're initiate initiating our 20 from you on earnings guidance range of $2 or 90 cents to $3 per share, which is consistent with our long term EPS growth objective of 5% to 7%.
Our 2014 and EPS guidance is based on several assumptions are detailed in our earnings release with the highlights several of these items here.
We assume constructive regulatory outcomes in all proceedings.
We anticipate modest impacts from overnight team.
We project Electrics electric sales growth of approximately 1%, which reflects modest recovery over the cold the depressed sales levels in 2020.
We expect OEM expenses to increase approximately 1%, which reflects increased costs for new wind projects and lower auto OEM levels in 2020 due to covert mitigation.
Please note that the window in EMS recover through regulatory mechanisms in most jurisdictions and was offset by fuel savings.
And finally, we anticipate an effective tax rate of approximately negative 9% largely driven by increased levels of when ptcs, which are credited to customers and generally have no material impact on earnings.
In our earnings release, you'll find more detail about our updated $22.6 billion five year base capital forecast.
Base forecast reflects significant grid investment, including our advanced grid initiative and additional investment in the transmission system domain AG maintain after the health and reliability and enable renewable generation.
It also includes a modest level of renewables expenditures to improve the customer experience and the natural gas can block combined cycle plant at our surgical facilities to ensure reliability.
As we have proposed retire all of our Minnesota coal plants by 2030.
Our base capital plan results in annual rate base growth of approximately 6.3% using 2020 as a base.
We also have potential incremental capex of approximately $750 million for wind repowering projects and $650 million for solar facility, which are pending commission approval as part of the Minnesota relief and recovery filings.
We're confidently commission will see the customer benefits of these projects if approved rate based growth would be 6.9%.
In addition, we think there's other potential upside capex that could materialize in the future our.
Our capital investment plan supports are 5% to 7% long term earnings growth objective and our goal to deliver EPS and dividend growth in the upper half of the range.
We've also updated our financing plan, which reflects a combination of internal cash generation and debt issuances to fund the majority of our capital expenditures.
In addition, we expect to issue $250 million of equity and $400 million of drip and benefits equity consistent with our previous forecast importantly, the financing plan maintains our current the current credit metrics.
We anticipate that the incremental capital if approved by the Minnesota Commission refinance with approximately 50% equity and 50% debt.
This incremental equity will allow us to fund accretive capital investments, which will benefit our customers, while maintaining solid credit ratings and favorable access to the capital markets.
And with that I will wrap up we are effectively mitigating.
COVID-19 impacts we continue to provide reliable service to our customers, while ensuring the safety and well being of our employees and communities.
The Colorado, and Texas commissions approved or constructive rate case settlements.
Our relief and recovery proposal, Minnesota will create jobs upper Jude rejuvenate, our local economies and result in significant customer benefits.
We narrowed our 2020 guidance range to $2.75 to 2081 cents per share based on solid year to date results and progress on contingency plans.
We announced a robust updated capital investment program that provides strong transparent rate based growth and significant customer value.
We initiated 2021 earnings guidance of $2 or 90 cents to $3 per share consistent with our long term objective and finally, we remain confident we can deliver long term earnings and dividend growth within our 5% to 7% objective range.
This concludes our prepared remarks, operator, we will now take questions.
Ladies and gentlemen, if you would like to ask a question. Please signal by pressing star one on your telephone keypad. Please.
Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipments again. Please press star one to ask a question.
Our first question today comes from Julien Dumoulin Smith of Bank of America.
Hey, good morning team congratulations on a litany of update there.
Active engagement that you've done here on the 21 update can you talk a little bit about the thought process on the 1% on an increasing.
Conceptually I get that you had a down year. This year. So you would reverse that how are you thinking about that reversing obviously you guys. There what are the first out there in the industry to give the.
21, with Covidien packs, how are you thinking about the back that business and the base sustain some of the benefits you saw this year.
Hey, Julie and good morning.
So it so the way we think about it maybe frame it up into two if you remember going into this year our own NIM guidance was 2% up we're investing significantly in our wind farms, along with our other strategic priorities such as our grid investments in customer.
And then you know we Didnt prove you didnt see our guidance for 2021 by we expected a similar increase prior to cold and in that range and now if you look at where we'll land this year down 1% to 2% and slightly up next year will roughly be flat to 2019, so that kind of gives and that's on a consolidated level obviously its.
It varies a little bit by Opco, but overall that kind of gives you a sense of how were kind of driving cost transformation through our business as we absorb our our call strategic priorities and remained flat.
Got it and even to clarify that lightly you put it you said your prepared remarks the EM.
The wind aspect of the Ellen increase that would be also just flow through as well. So when you net the impacting that margin.
I heard you right, yes, yes, that's correct in terms of where it gets recovered.
Got it excellent and then if I can a little bit more conceptually here as you're thinking about prospects into next year, and obviously things are pending next Tuesday here, but.
With respect to subs.
Subsequent legislation in Minnesota, specifically around Rps reform et cetera can you help frame some of the possibilities that are out there today domain.
Rps reform drilling this is Ben.
And the energy and.
Energy legislation as it is I suppose is oh, well talked about right and as Ed.
I will lead you to fill in the blank the deal.
Yeah, I mean, I think I mean, we'll have to see obviously, how it plays out at the state level.
Or and obviously, the federal level as well, but generally I think we're very well positioned.
For whatever happens I mean remember.
One of the things I'm. So proud of is we're leading the way, we've got an 80% and on target.
100% target by 2015, but we do that with the liability and economics in mind, so that tends to bring both sides of the aisle along.
At the federal level of it does become a binding administration and maybe the Senate pledged as well I think I think we're probably well position to do more with renewables I.
I think it would probably accelerate east.
And help with our 1.5 million target I will also welcome the chance as both.
CEO of Excel and chairman of the Guy to work with the Biden administration and kind of let them know that 2025 and utility timeframe protecting that for the technologies that will be needed, which is very aggressive. So there was a reason why we chose 2050 now at the state level just play it out, but I mean, I think we'd be.
Demonstrated we can we can work very well crafting legislation that works for customers and shareholders alike.
Got it excellent.
Well I'll leave it there segments and thank you all.
Thank you Joan.
Our next question comes from Jeremy Tonet of JP Morgan.
Hi, good morning, Jeremy.
Just wanted to start off.
It's possible you could provide any early feedback that you might be having on your Minnesota recovery plan application at this point.
Hey, Jeremy it's Bob and thanks for the question.
I love the headline on the report this morning in the who reference.
You know on a.
On the Minnesota or in our plan and the broader stay our proposal we.
We are working productively with all.
All stakeholders I think we've got support from the L. AG in the environmental advocates.
For a stay out and we are in our proposal will I would say proactively working with the department and trying to gain their support we expect to file our men rate case next week as the alternative to this day. Our proposal is similar to last year. We would expect the commission to take that up in about six to eight weeks.
So call it early to mid December timeframe, but we'd expect them to make a decision and what we think they are in our plan and the and the sale proposal are very much in line with the administrations and the conditions goals.
And we'd expect a productive outcome in December.
Got it that's very helpful. Thanks for that.
And then just switching gears share they span multiple reports of potential M&A in the industry and some transactions have happened recently, just wondering physic shell have any role to play in industry consolidation or just you know the great plans that you guys have in front of yourself as far as the attractive organic growth that really kind of keeps all here.
Attention focused there and M&A is not really a big consideration for you guys.
Well I mean, we don't it's a great question by the way and you know won't comment on anything specific but I mean, you know you've heard me speak over the years that our focus is primarily on organic growth is nothing like one times book and I think our investors love that but we obviously see what's happening in the.
Industry in the long term trend toward consolidation and you know it's not like we don't look at things, but I will just tell you we can be disciplined because we do have good organic growth and we're not looking to fill some.
Some sort of earnings Boyd or something like that so we're very disciplined about it and I think that's one of the reasons why we.
Right at a bit of a premium to our peers.
Got it that makes sense that's helpful. Thank you.
Our next question comes from target shop proud of Evercore ISI.
Warning.
Hey, good morning, Thanks for taking my question I just wanted to go back and clarify the December or sort of timeline that you gave us is that partly on our filing I'm just trying to see what kind of the milestones or timeline that we should be watching for for you to kind of get approval on.
The incremental capex that you laid out.
Yeah sure. So this is Bob again.
For the December mid December filing, we would expect a decision on rate case or stay out provision. We also would expect the rating component of our our plan to be heard in the December timeframe as well I think the solar piece of our plan. It is more likely going to be a key.
Two of 2021 timeframe and I think that makes up the bulk of the investment opportunity. There's some other areas around electric vehicles and distribution and transmission spend.
Which we get taken up in normal course in separate dockets, but those are the two big buckets.
Super helpful. So so just to clarify wind.
By this year and then solar by.
First quarter next year right did I get that right.
Correct second consecutive record quarters ended second quarter is probably more realistic.
Okay understood. Thank you that's great and then maybe just going back to your comments around a potential regime change Biden administration.
I think we hear you on sort of the aggressive 2035 targets, but generally speaking you know.
How does it how does it fit into.
Into your current plan is it a tailwind to oil future future rate base Capex growth if I Miss lime that is and then maybe just starting these costs in a potential tax rate change and implications for you.
Well I'm going to let Brian talk about the tax implications.
As far as the headwind tailwind I think it's I think it's probably helpful to accelerate our renewable program.
I, absolutely think it'd be helpful to our 1.5 million electric vehicle, our goal and that's something that would create.
Additional opportunities for investment.
I'm, particularly excited about Easy's, if you've heard me speak before because.
I don't know if that steel for fuel, but it's a type of steel for fuel than the variable cost of the navy is significantly below that of a gasoline its peak charge off peak for some of our rates its equivalent of 60 cents a gallon. So while he these are expensive today, we think that cost comes down by the administration might help that costs come down even.
More and we're getting more he these out they're reducing the carbon and our footprint, obviously and creating investment opportunities for us in additional sales load, which all customers benefit from.
I'll turn it over to Brian for your tax question.
Yeah in the.
The details on the Biden tax on are still a little bit light, but I'll hit on a couple of high points right. If you think you know it was a tax rate increase from 21% to 28% you know just like the T.C.J., where we went from 35% to 21% our customers saw a savings of 3% to 4%. So if we go there.
The way, we don't we will see expect to see a onetime customer impact of one and a half 2% email, while it's never well positive to see that impact to our customer base. We do think it's manageable and we did set that precedent in all the regulatory proceedings going through the TC Jay in terms of you know through the majority.
Many of our jurisdictions, we have customers saw a timely refund or savings that we expect similar treatment. If the tax rate goes up on the credit metric side, you know certainly an increase in the tax rates.
Would would help on your credit metrics side, you probably expect for us to see you know 100 to 150 basis point increase in our credit metrics.
But that also depends on the details I know there is a.
Talk about the A.M.T. related to book income, which would be no detrimental.
Detrimental in that sense, but if you that hundred to 150 basis point benefit to our credit metrics really related to if they empty goes back to the prior regime. So those are the two big components of that from the tax perspective.
Excellent Brian will talk a little bit about eight a. Degression Bob.
A couple of add ons to Ben's comments first and foremost on the federal side one of the Tailwinds. We would expect to see is a real increase in the budgets for R&D for new generation, which we've been very focused on as a company and at E.R. and making sure that the next generation of Dispatchable generation that would provide reliability and afford.
Ability for our customers.
And the R&D is started today and secondly, I want to diminish the impacts that partnering with our states has had federal tailwinds are good but our partnerships with our states have enabled us to deliver over the past four years, a substantial amount of carbon reduction electric vehicle penetration goals.
And other investment opportunities around cyber and wildfires and other areas that have been very helpful. So while the fed can be helpful. I think the partnerships as a state or a really important as well I think we're very much a line there.
That's all customer driven which is why I think you know this this clean energy transition happens under just about any type of administration.
Super helpful guys I just.
Yeah no. Thank you I appreciate all that but maybe just one quick follow up for Brian really up it.
Just right on on Bdcs.
Doesn't the actual increase in tax rate kind of help you with using higher ptcs increases your appetite for using ptcs.
Yeah, you're absolutely right. It also actually helps from just the L. Sue you from our customers. So.
So you're right about that.
Okay perfect. Thanks, guys much appreciate the time.
Thank you.
Our next question comes from James Harlacher of BMO capital markets.
Hi, Good morning, guys and thanks. Thanks for the question time for the question I'm just.
Just looking at your updated Capex forecast and the rate base forecasts and understanding that the bulk of the incremental spend is probably not going to be sort of the.
Fully articulated I guess until Twoq you have 21, but how are you guys I guess thinking about that translation into where you fit within the growth rate right now it looks like you guys are kind of solidly at the midpoint, but should a you'd be successful in Minnesota would do you think that that could put to use.
I will be at the upper end, even with the modest dilution you have with financing the incremental.
Yes incremental I mean, we're not next week.
We strive to be at the upper end of that 5% to 7%.
Goal and the additional 1.4 million, albeit we'll make sure we're sensitive to credit quality, which is really important would be would be helpful to that goal. So.
We're very confident that we're going to be able to achieve our long term growth rate.
It is outside is Ah, yes outside of a an adverse outcome I guess on the solar side is there anything that would prevent you from being at the top end of the growth rate.
Well I mean, yeah, there's there's always things I mean, who thought we thought we'd be in coated two years ago. So no I I.
There's a lot of things that could happen and of course it could be you know, we've always have regulatory outcomes and things like that to consider sales and there's there's always things, but again I think we're we're in very good shape.
Right and I guess, just following up on that point on on sales. It looks like the 2021 assumption is for a 1% increase in retail rates could you talk I guess, a little bit about the component to the mix of that as you're thinking about it for 2021.
Yes, yes, sure Hey, Adam Good morning, Jim So you kind of break it down between residential and see Eni residential and we expected to be fairly flat to this year. We are seeing good strong customer growth of about 1% across the consolidated family. So we expect to suit.
That customer growth to continue and little bit of a I'll call. It a reduction in the use per customer.
On the sea Eni side, I think what you'll see is no we're expecting that we'll call. It around a 2% increase in sea Eni sales in the best way to think about that is really as well.
We don't expect in April and May to happen next year, but we do expect to see nice sales to be impact and so if you kind of took April and may out kind of the worst parts of colder. This year is kind of gives you a sense of what were thinking for next year.
Great. Thank you very much for that color.
Thanks.
Our next question comes from Stephen Byrd of Morgan Stanley.
Hey, good morning.
Hey, Steven.
Part of the spin covered already I didn't want to talk more about E. These and then you had provided some some interesting commentary I was just curious let's assume that there is an interest at.
At the federal level and giving.
Specific financial support for any infrastructure, what form of support will be most helpful is it tax credits direct spending and how might some level of increase federal support accelerate your plans in terms of spending on TV infrastructure.
Well I think you know rebates to the consumer to buy down the costs of the disease I do think they're going to come down naturally as more and more models are introduced but you know that would that obviously.
Stimuli.
Purchases and.
You know just making you know and overall pack part of you know.
Industry wide carbon goals and.
Would be helpful to Steven So I think that's important comment a number forms.
You know the other thing I would say is kind of this you know the.
Addressing range anxiety, maybe a public private partnership you have to make sure we have fast charging stations around the quarters for people to travel those are all things that I think you are more likely to happen under a Biden administration and then a Trump administration. So I mean, I think we can get through our.
Oh, either way, but I was asked to comment whether it'd be a tailwind or headwind and I definitely think that could be a tailwind for us.
That's really helpful and I guess just building on that if you did receive or if we did see that kind of federal support is that the kind of support where you would then start to really take moves to you know to specifically sort of accelerate your peer existing plans or is that just more more helpful to ensure adoption more helpful to ensure that you exist.
Plans could you know could.
Good work, well and that Theres actually no phebe adoption to make sense for from what you're already planning.
I mean, I think it was I think could give us more confidence and the 1.5 million vehicle is definitely a vision of record reflects 20% of the cars that are currently on the road so I.
I think would be very helpful to getting there.
Got you. Thank you so much that's all I have.
Thank you.
Our next question comes from Paul Fremont of Mizuho.
Morning, Paul.
All right. Thank you very much.
Basically my first question is how you initially most of the time or any incremental spend okay, but there has to be 15 million in eastern has that now been moved in.
To your base spending.
Hey, Paul Yes that is correct. It is in the base numbers.
And then my other question is.
What's driving sort of the higher level, and and Pexco and NSP, Wisconsin and sort of the 400 million improvement on that.
The incremental spend in NSP, Minnesota Mason.
So I think the big part is just big part is now in Colorado, We're really starting to roll out our advanced grid initiatives on them. We also have some transmission investment that we need to do in Colorado in longer term. We as you know we talked about before that we have significant transmission investments in all of our Opcos low.
Longer term ROI to enable the generation transition.
In Wisconsin, we do have some the solar farm that we just announced a $100 million solar farms, which Wisconsin, which as you know for Wisconsin size that is material and we do as a some transmission projects in Wisconsin. So those are really the big drivers of furloughs Opcos.
In Minnesota keep in mind, there's a lot of when it's going into service, which would lead to in a lot of that when is it in Minnesota.
Right, the Minnesota is actually lower.
Yeah, you're right you're rolling forward, the big win spend in Minnesota. This year. So when you roll forward from.
20 to 24 to 20 women 25 is where you're seeing.
Got it so some of that wind is actually agenda.
And that would have taken place in years.
It's the projects have been completed and 20, yeah going in service yet.
But then if you think of the incremental plan right related to our Minnesota, Minnesota Iron ore, that's all Minnesota spend if you know the significant customer value and if we get that approved that will increase the overall capex from Minnesota.
Right.
Thank you [laughter].
Thank you.
Our next question is from Insoo Kim of Goldman Sachs.
Good morning.
Morning, <unk>, let's say one question from me I in Minnesota, or what what type of momentum. If any is there for securitization legislation for you know to retire coal plants and I think I'm correct me if I'm wrong. There is a precedent of state for getting some accelerated depreciation for the remaining.
Valeo coal plants, how do you frame all of that and the potential to further accelerate that.
Carmen for Corplex Sherco, three or are they can't plan.
I'd say, it's Bob good to hear you. This morning, you know Weve got except we are accelerating the depreciation on the two plants that we have approval to retire early that's sherco units, one and two.
And they're being accelerated in depreciated fully by their projected retirement date, and 23 and 2026, respectively.
As part of our Minnesota Resource plan, we have offered to retire sherco three and the King plant early also with accelerated depreciation.
And we think those proposals will be likely heard sometime in 2021 next year as we go through the resource planning process, we've been very successful and working with our stakeholders.
In mitigating the transition of these these legacy plants of ours, we're taking care of the workforces in the property taxes in the jurisdictions and.
And so we think this is just part of the overall package and we've been successful at that in the past and we would expect to continue in that fashion.
Yeah, Hi, there as you know he had the only place we have a securitization is in Colorado.
As of now we don't have it.
Right No I was just talking about asking about momentum for any potential securitization in the state but are understood and just on that I understand it's circa three and king and what the proposals for the.
The 2028 and 2032 points respectively. It's is that the the earliest states that we should be considering for these plants given the accelerated depreciation on line.
Yeah look I think that you know we've taken a proactive approach to propose those in our resource plan. It gives us a runway to manage to the employee and community issues and so that's that's our proposal right now.
Got it thank you very much.
The next question today is from Sophie Karp of Keybanc.
Yeah.
Hi, Good morning, Thank you for taking my question.
Ah missing from your suppose incremental fragile is energy storage and I was wondering if you could discuss maybe more broadly what plays synergistic which would have in your portfolio going forward.
In that and you could find it that into potential election outcome, what kind of policy from the federal level that would be helpful to accelerate that adoption that thinking.
Yeah. That's a great question. Thanks for that I mean, we're I.
I think you're going to see us and it.
The emphasis on storage will take place and I and our resource planning football.
Proposals, both in Minnesota, and Colorado, and we do see a role for storage.
It's not a pen panacea minutes four hour batteries cannot only do so much a week. So when you think of technologies that are needed to get that last 20% that we're going to need perhaps some form of long term storage.
You know address those seasonal variations, but yes, you know.
Just thinking about the Minnesota plan, you know, we talk about peaking resources that will be needed will that come back.
Batteries are definitely part of it we can resources and the sandal battles same hold true in Colorado.
I just don't I was you had to you know when we look at what we did with the our in our plan in Minnesota, we're actually saving customers money by Repowering wind projects.
So you know to us given the economic conditions were in that that made all the sense in the world.
Got it and so are you comparing than any other types of storage on the newsstand lie on may be pumped storage or any other kind of older technology. So hydrogen even oh that can be effectively deployed to select contract situation that you have in a cost effective manner or is it just.
To say right now.
Oh, yes to all of those I mean, I think hydrogen is perhaps that long term storage. It can be used in different ways, but stores you definitely one of the things.
Storages is on the table how you know we're we're looking at what we can do with our cabin Creek.
Plant.
As pump storage in Colorado, and so yeah, I mean, it's all those things are on the table and.
Yeah Yeah.
And you'll see some of that but I think.
Flushed out a little bit as we go through the resource planning process.
Right Okay.
Thank you.
Yeah.
The next question comes from Ryan Levine.
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Good morning.
So regarding yes, it looks like you announced a couple updates around the PPA buyout program can you comment around how's that pace of development or opportunity.
Changing to the election.
Higher federal tax rate could infer anything a PPA passages.
Sure a good morning, Ryan Yeah, we announced two right. We've got more in the wind farm buyouts approved in Minnesota, which is which is very good to see and deliver significant customer benefits.
And then that solar a buyout in Colorado, you know would file that and again significant customer benefits, even though it's a pretty small dollar amount from a capital perspective, and it is something that we spend a lot of time that corporate debt development team in terms of discussions and just conversations with our with the Indian.
The IP piece that we do business with.
No a couple of things right that we watch it if you want it kinda talk about the election opportunities right. If you could see an extension of Ptcs, maybe that provides more repowering opportunities. If ptcs are extended certainly a change in the corporate tax rate could impact.
Hobbies, I P views or wind farm. So it is something that will continue continue to look at and deep conversations with no I speak about this is just something that we continue to have conversations is really a long term opportunity because it is about finding kind of the sweet spot in terms of ensuring that we deliver significant customer value.
Finding the price point that works for us to actually acquire it.
Have there been any recent acceleration of commercial development activity I in those efforts in the last few months or has it been relatively ratable around.
The conversations you're having with Counterparties.
I would say relatively ratable certainly showing some conversations pick up during our kind of the impacts of coated.
As some of the developers had challenges in the lead there was a.
A P. P 80 that was built into our Minnesota relief and recovery wind RFP I'm, though the PPA buyout was bid in you know we know you are close to getting there, but we couldn't get to the customer savings number that we wanted to deliver in that RFP and so we'll continue to negotiate with the counterparty to see if we can actually reaching.
Agreement that provides our customers significant savings so like I said, it's important for us to deliver real savings for customers.
Appreciate it thank you.
Our next question is from Travis Miller of Morningstar.
Morning, Travis running.
Good morning. Thank you they would want to talk about the election and issues. There. So wondering how the other follow ups all that conversation what at the state level or the regulatory level are.
Are you looking at.
On election day or any key.
Well races or regulatory elections.
If you're looking at or policies at the local level stuff like that.
Well I mean, I I think what.
We'll be looking at in Minnesota is whether or not you know the.
Senate, which is currently Republican if it were to go Democrats and you'd have an all all Democratic DFL UBS.
The branches and who knows them. So we would be looking.
Probably it increased corporate taxes, you know and I and maybe some legislation energy wise, but I again I think.
I think we've done a really good job of developing.
Developing relationships across the aisle and actually executing on on just.
On just these you know pretty bold and aggressive carbon reduction plans and I do think the administration has appreciated what we've been able to do for our communities and things like the order in our plan, but we talked about so I don't I'm not particularly.
Focused on any kind of you know.
Transformative type legislation that might come out of an election and I say that.
Five or Amanda.
Common try this is Bob I think the only other thing to watch is obviously the ballot initiative in new Mexico on elected versus appointed to our mission Ers and and I think we've got a good history of working there well and you know any new condition.
We would like.
So actively engage with.
Right, if there's any and every only other one we're obviously watching closely is the boulder as though I mean liquidation.
Okay. Okay, great no. That's very helpful. Thank you and then another quick follow up to the whole easy discussion and a lot of coffee and speculation about who my own and how they might own a charging stations.
What are your thoughts around them and then in terms of your rule are you inclined to own them as rate base quite the absence and expand that way would you be inclined to own them is pseudo merchant pipe so to speak.
Assets or you have to look the charging b.
A third party is just wondering your thoughts around who owns and how the economics. The Chargers. Yeah are you talking about fast charging Travis.
Either either way whatever not not not only in home would probably be the residential customer but.
Yeah on the residential side or you know multi dwelling things like that I think we're.
We're very well positioned.
To own those charging stations in fact Ah you know I'm really excited about.
Our easy plans that would allow you to think that you know you had a a home and you wanted to get an easy we try to make it easy for you because it's not as easy as you think sometimes and so with a call to US we can get the home charge are installed at no cost for you build it into a subscription rate, which encourages you to charge off peak.
And saves you a significant amount of money. So you don't have to compare kwh and equivalents. It's like you know I think it's $44 a month.
And that's all you can use off peak and you know we've done the math, we think it works out really well for easy on her but just as importantly other customers.
'cause it minimizes the impact to the grid now when you get the bike fast charging stations I think are really necessary to address range anxiety, but make no bones about it they're kind of loss leaders.
So you know I think that that's where a public private partnership could come come into play we're happy to play a role there, but I you know I don't.
We don't have to just like to see it gone.
So I guess that would be kind of pick.
Nick I answered your question I think that's where it was.
Sure Okay.
Right and I appreciate it.
Thank you.
The next question comes from Paul Patterson of Glenrock Associates.
Hey, good morning, Paul how are you doing.
Well that's.
Good.
So just on the throughput preclude anything just to sort of clarify that the public private partnership.
Just to help me out here, what sort of who the public entities or entity that you're thinking about and who would be the private entities.
It's just really briefly through for him.
Sorry, I'm missing exactly.
That would be.
Well I mean, I think it can take a lot of different forms I mean, you know.
Got them in either federal or state could provide funding to you know.
Slide down the cost of those charging stations.
It doesn't necessarily have to have you know.
Sell energy label on it we can pop just provide the necessary.
Supporting infrastructure or we could be part of it I mean I would just tell you Paul we're wide open to that are the key to me is to get these stations built so that people you know.
The biggest barriers and purchasing and easy as his range anxiety.
And so you know you need I think the right amount of fast charging stations, which again our loss leaders.
To be built so that you know that so that you have the more easy penetration. So it's kind of a chicken or the end, placing them. It can take a lot of different forms okay and what have you.
I was just wondering what about you guys basically just having a.
Having it put into rate base so to speak.
And you know sort of socializing that cost.
For customers I mean, I'm, just wondering is that an option or do you feel that.
Okay.
As long as it's how we yes. The short answer is yes, but I mean, you want to make sure. The process has followed I mean, you know one of the things said, we'd want to show is okay. If this leads to more easy penetration how does that benefit all of our customers.
What is how much is exactly how much we're going to socialize and now you've heard me talk about.
Incentives and subsidies and things like that and I've always been okay with them.
As long as they're transparent so I would not want something that is kind of hidden where you know people not we're not really sure what is being socialize and what isn't being socialize and I I don't think that would happen with these charging stations but.
That's what would be advocating for just some real transparent process because not everybody. When you say the word socialization many bits [laughter] [laughter] [laughter]. It's you know it gets people up.
Upset sometimes a.
A selective amount of seating I think is really important and perhaps we could play a role in that.
Like always put on you know wasn't where this kind of two areas, where I think were excellent at also.
Making sure that.
In a world, where where are involved we can make sure that public charging whether it's on interstates or a neighborhood, but there are areas of town in areas that communities that they'll get left behind what to make sure that there's an equitable investment and making sure that all of our customers can benefit from the opportunity that electric vehicles provide and the second area, where I think that we are.
Very valuable in ownership and.
In control of the charging stations is really around the impacts in the grid and me, making sure that we have appropriate incentives for more off peak than on peak charging recognizes some on peak will have to happen certainly knows public spaces balancing the grid loads and making sure that we're optimizing the distribution investments around.
Around electric vehicles is really important and I think our role there is critical so that leads you to believe that we would be a very good partner or owner of those types of stations as well.
Awesome, Okay, and then just on the tax issue.
And I just have a crystal ball question and I realize it's it's kind of fraud, but.
So I guess I'm sort of trying to wonder is it I mean on the Biden plan for.
If one were to assume that he got elected would there do you do you get what kind of sense do you get a.
A buy in <unk>.
Even the Congress.
For higher corporate taxes in general and do you think it would make a significant difference if it was a democratic senators or Republican Senate or just.
The flavor there I mean, when when we're thinking about this how and how you guys look at this what you are trying to plan and everything and.
I don't know what I mean is it sort of like do you feel that there is this a strong sense that people really want to raise taxes.
In Congress on corporations and that that's probably pretty likely.
Well, I think and I think to see ample time to buy in tax plan, you're going to need to do sweep Paul.
I don't think it I think it's yeah, you might have some sort of form compromise wrapped around other things with its you know with Congress and Senate.
But you know.
I don't think that I don't think theres going to be a tremendous amount of interest. If you know the Republicans hold the Senate and implementing a full biden tax plan.
But if we ever Democratic Senate, maybe maybe yes.
So I I know, it's early I think you needed that have had like centered and then I and I think if you look at how the Senate would be taken over by Democrats. Many of those candidates are running on modern platform. So I I think you would have to be it would also depend on how big the sweepers. So.
Okay fair enough say, they're going to lose we should know sometime [laughter] not so sure. It will be November cleared by the way, but we will know at some point [laughter] kipp ways. Okay. Thanks, so much.
Okay. Thank you.
As there are many other questions I would like to hand the call.
Getting back to Mr., Bryan will enable CFO for any additional or closing remarks.
Yeah. Thank you all for participating in our earnings calls this morning. So.
If you have any follow up questions. Please contact Paul Johnson or in our Investor Relations team.
Thank you everyone. Thank you have a good day.
Ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.
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