Q4 2022 Xcel Energy Inc Earnings Call
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Good day, ladies and gentlemen, and welcome to today's XL energy year end 2022 earnings conference call.
For your information today's conference is being recorded.
Questions will be taken from institutional investors reporters, Quebec, Cognex media relations within quantities of individual investors and others can reach out to Investor relations.
At this time I'll turn the conference over to your host flags Paul Johnson.
This president Investor Relations and Treasurer. Please go ahead Sir.
Good morning, and welcome to <unk> Energy's 2002.
Fourth quarter earnings call. Joining me today are Bob Frenzel, Chairman, President and Chief Executive Officer, Brian Van Abel Executive Vice President and Chief Financial Officer. In addition, we have other members of the management team in the room to answer questions if needed.
This morning, we will review, our 2020 to results and highlights and share recent business developments and regulatory developments.
Slides that accompany today's call are available on our website.
As a reminder, some of our comments during todays 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 SEC filings.
Today, we will also discuss certain metrics that are non-GAAP measures information on the comparable GAAP measures and reconciliations are included in our earnings release I will now turn the call over to Bob Frenzel.
Thanks, Paul and good morning, everyone and welcome to our fourth quarter call.
We had another very successful year at XL energy continuing to execute on our strategy, while delivering strong financial and operational performance.
For our investors, we delivered EPS of $3 17, representing the 18th consecutive year of meeting or exceeding our initial earnings guidance.
In February we raised our annual dividend for the 19th straight year, increasing at <unk> 12 per share or six 6%.
More recently in November we extended our long term investment plan, which features a 10 year capital outlook.
With an approximate 7% rate base growth.
We ranked in the top quartile and customer reliability or safety and our residential electric bills are more than 20% below the national average.
And amidst the backdrop of significant commodity increases this year.
<unk> Energy's 4500 megawatts of owned wind farms continue to be an industry leader in net capacity factor performance.
Generated approximately $1 billion of fuel related customer savings in 2022.
And almost $3 billion since 2017.
Our nuclear fleet remains the top performing fleet in the country and achieved a capacity factor of 96% last year.
We had an active regulatory year resolved multiple rate cases, and Yuri storm cost recovery proceeding.
The commissions in Minnesota, and Colorado approved resource plans that will add nearly 10000 megawatts of utility scale renewables.
So our systems through this decade.
The Minnesota Commission approved our 460 megawatt <unk> Solar project, the Colorado Commission approved our $2 billion power pathway transmission project.
And MISO awarded us $1 $2 billion of transmission projects, and we accelerated our timeline for transitioning out of coal and now expect to be coal free by the end of 2030.
All of which contribute to our leadership in clean energy transition for our customers.
We continue to lead in carbon reduction as well.
2022, our estimated carbon emissions were approximately 52% below 2005 levels.
And we remain on track to achieve 80% carbon reduction across the company by 2030.
The passage of the inflation reduction act will reduce the cost of renewables for our customers.
Improved cash flow and credit metrics for the company and enhances the competitiveness of our renewable offerings.
Continue to execute on our electric vehicle vision implementing multiple new programs for our customers.
We also filed comprehensive transportation plans in Minnesota, and Wisconsin that are pending commission approval.
We've advanced our ESG leadership and have been recognized by multiple entities, including an upgraded rating by MSCI from double AA or AAA.
And finally, we were named among the world's most ethical admired and responsible companies.
And we are recognized for being a best veteran employer as well as for our disability inclusion in the workplace.
I'm really proud to lead a team that can deliver on operational financial environmental and diversity goals all simultaneously.
Looking ahead we're.
We're well positioned for sustainable organic growth over the next decade.
Including affordable renewable additions in our resource plans.
The transmission needed to enable those carbon free resources and responsible community transitions as we retire our coal plants.
We've recently issued request for proposals in Minnesota, Colorado.
And at STS seeking approximately 6000 megawatts of new renewable generation.
Portion of the 10000 megawatts that have been approved in our jurisdiction.
We will submit a recommended portfolios of generation assets to our commissions by the middle of this year and anticipate decisions in the second half of this year.
We also expect to issue additional rfps in Minnesota, and Colorado in 2000, this year and next year for the remainder of our approved needs.
As we've discussed in the path, we believe that we have a geographical advantage in the clean energy transition due to the strong wind and solar resources in our service territory.
This access to low cost renewable energy should also give us further advantage in developing green hydrogen and other clean fuel projects, which are becoming more feasible as a result of federal support from the infrastructure and jobs Act and the IRR.
Late last year, we submitted hydrogen hub concept papers for both the Rocky Mountain and the upper Midwest regions to the department of energy to compete for awards from the $8 billion hydrogen hub program in December we received favorable notice from the Doe.
For our concept and were encouraged to submit full applications in April .
In addition, our pink hydrogen production pilot at our Prairie Island nuclear generating station is expected to be operational this year.
Yeah.
Finally, we expect to bring forward opportunities this year and to utilize clean fuels and green hydrogen blending at both our gas fired generation stations and in our gas networks for home and building heating.
As we continue to utilize innovative technologies to Decarbonize, our business, we are well positioned to take advantage of potentially significant hydrogen capital investment opportunities in the future.
As the penetration of renewable assets in our states increases were also interested in pursuing advanced storage opportunities to balance our electric system needs.
Today, we're excited to announce a new partnership with form energy.
To develop to long duration energy storage pilot projects.
For <unk> 100 hour battery technology could be a critical component to our de carbonization strategy, providing the resiliency and reliability that we need on the system to support our significant renewable portfolio.
We plan to deploy a 10 megawatt multi day storage system at our retiring coal plant in both Minnesota and Colorado.
These projects are expected to be online as early as 2025.
And as we wrap up.
I want to thank the thousands of employees, who worked in below zero temperatures sustained high winds.
Several feet of wet heavy snow keep the lights on and the houses warm during our recent winter storms.
Your efforts exemplify our company values of connected committed.
Trustworthy and safe.
And I believe that our dedicated employees and partners are what distinguishes XL energy with our customers.
With that I'll turn it over to Brian .
Thanks, Bob and good morning, all.
We had another strong year recording earnings of $3 17 per share for 2022, compared with $2 96 per share in 2021.
This represents EPS growth of seven 1% slightly above our long term growth rate target of 5% to 7%.
The most significant earnings drivers for the year included the following higher electric and natural gas margins increased earnings by $1 <unk> per share, primarily driven by regulatory outcomes and riders to recover capital investments.
In addition, our lower effective tax rate increased earnings by <unk> 15 per share for.
Keep in mind production tax credits lower ETR ptc's, our floor back to customers through lower electric margins are largely earnings neutral.
Offsetting these positive drivers were increased depreciation expense, which reduced earnings by <unk> 40 per share, reflecting our capital investment program.
Higher O&M expense, which decreased earnings by <unk> 24 per share.
Higher interest expense and other taxes, primarily property taxes decreased earnings by 23 per share.
And other items combined to reduce earnings by <unk> 12 per share.
Turning to sales our weather adjusted electric sales increased by one 8% largely due to higher C&I sales driven by strong economic activity in our service territories.
We anticipate a modest slowing of our sales with growth of 1% in 2023.
Shifting to expense O&M expenses increased $170 million for the year driven by costs related to technology and customer programs storms vegetation management inflation and additional actions due to weather. We also invested in our employees to ensure we retained our top talent.
While we expect inflationary pressures to remain we continue to focus on our continuous improvement programs do you expect to drive increased productivity and efficiency. As a result, we anticipate O&M expenses will decline approximately 2% in 2023.
We've made progress on a number of regulatory proceedings.
In Minnesota, the natural gas rate case, the ALJ recommended the commission approve our settlement, which reflects a rate increase of $21 million.
ROE of 957% an equity ratio of 52, 5%, a decoupling mechanism and a property tax tracker.
We anticipate a commission decision later this year.
And the Minnesota Electric rate case, the commission accepted our proposal to reduce our requests for MISO capacity revenue and establish a tracker hearings were completed in the summer and we continue to meet with parties to see if we can reach a constructive settlement.
However, we have a strong case and are comfortable with a fully litigated outcome absent in the settlement. We anticipate a commission decision later in 2023.
In November of 2022, we filed an electric rate case in Colorado seeking a net increase of $262 million based on an ROE of 10, 5% an equity ratio of 55, 7% in 2023 forward test year.
<unk> paid a commission decision and implementation of final rates in the third quarter.
We also filed a new Mexico electric rate case, seeking a rate increase of $78 million based on an ROE of 10, 75%.
Equity ratio of 54, 7% of forecast test year and the early retirement of the coal plant, we anticipate a commission decision and implementation of final rates in the fourth quarter.
As far as future filings, we plan to file a Texas rate case later in the quarter in Wisconsin in the second quarter.
As we have discussed in the past.
The inflation reduction act provides significant customer benefits key elements include the following.
Tax credit Transferability will provide $1 8 billion of liquidity, increasing cash flow and reducing equity needs. We've met with companies in our service territory and expect to enter into bilateral tax credit sale contracts later this year.
Our <unk> to debt metrics improved by 100 basis points during the forecast time period.
The solar PTC and tax credit transfer ability improve the competitiveness of our renewable bids.
And we anticipate pricing will decline in solar projects by 25% to 40% in wind projects by $50 to 6 billion due to the new and extended tax credits, which is great for our customers as we embark on this clean energy transition.
Finally, we don't anticipate any material impact from IMT as a result of makers depreciation and existing tax credits on our balance sheet.
We are reaffirming our 2023 earnings guidance range of $3 30 to $3 40 per share, which is consistent with our long term EPS growth objective of 5% to 7%.
We have updated our key assumptions reflect extra year results, which are detailed in our earnings release.
With that I'll wrap up with a quick summary.
We had a strong operational and financial year in 2022.
We delivered 2022 earnings within our guidance range, the 18th consecutive year and increase our dividend for the 19th consecutive year.
We received approval of our resource plans in Colorado, and Minnesota, which results in approximately 10000 megawatts of new renewables.
So inflation reduction act was passed a significant benefits for our customers and the company.
We are reaffirming 2023 guidance consistent with our long term earnings growth rate.
We remain confident we can continue to deliver long term earnings and dividend growth within the upper half of our 5% to 7% objective range.
As we lead the clean energy transition and keep bills low for our customers.
This concludes our prepared remarks, operator, we will now take questions.
Thank you so much sir.
As a reminder to the participants to ask a question. Please signal for pressing star one on your type of keypads.
If you're using a speaker phone. Please make sure your mute function is not certain.
On those devices bleach equipment.
First one to ask a question.
We'll pause for just one whats going over to Jessa signal.
You can hear me okay.
First question is coming from Mr. Nick Campanella, calling from credit Suisse. Please go ahead. Your line is open Sir.
Hey, good morning, everyone.
Hey, good morning, Thanks for taking the question.
So I guess just on the the O&M and the 23 guide that really stuck out to us and I heard some of your comments in the prepared remarks talking about continuous improvement.
Can you, maybe just give us a little bit more on what levers you're pulling thats, leading to that O&M reduction and is this more onetime in nature to 'twenty three are sustainable through the plan. Thank you.
Hi, Nick Yes, good question and a couple of let me make a couple of points. One is a little bit of a function of where actuals and 2022 ended up in terms of updating our 2023 O&M guidance, but we're really proud of the continuous improvement efforts that we've had underway and they've been underway for a long time, you know from 2014.
For 2021, we kept O&M flat and that's something I'm really proud of our employees for doing any.
Really good benefit to our customers.
We did have inflationary pressures in 2022.
But also took actions given the good weather year to to reinvest in 2022 and the system within our employees as I think about 2023 and a couple of things one is <unk>.
While we are investing a lot in technology.
And how do we make.
US more efficient in our plants, we have something called the digital operations factory, which is really using AI in our plants to move from more reactive proactive maintenance, we're investing significantly in call. It.
Real time schedule lighting and other opportunities to use AI. We also are starting to get on a treadmill of shutting down our coal plants. We have bought a coal unit a year that will start the shutdown, which provides us with a tailwind as we think not only in 'twenty three but through basically the end of this decade.
In terms of as we lead this clean energy transition.
And then we also do see some abatement of call. It the high diesel costs, we had a storm year that was above normal in 2022. For example, we had Quinn quintuple. The novel Storm days in December . So there are some things that happened in 2002 that won't happen in 'twenty three that should help us achieve it so.
A long answer, but a lot there to unpack and hopefully that helps provide some color on it.
Yes, that's great. Thank you so much that's helpful and.
On the Minnesota Electric case, it sounded like Youre confident in taking this the full distance to an order, but I just wanted to be clear is the settlement more unlikely at this point and how should we kind of be thinking about that.
Taking into consideration, where we are in the docket today.
Yeah, Hey, Nick it's Bob Thanks for the question and as we said in the prepared remarks.
We filed this case over a year ago, we private actively working with parties since the September timeframe.
And we've reduced our total initial asks dramatically.
Through extension of asset lives through the MISO capacity revenues.
And for bringing down the actual sales that we experienced in the state. So we think that that reduced revenue ask is really a tailwind for us in the case.
Some pretty decent recent decisions in Minnesota settlement of soda power case, the other day in our gas settlement.
Settlement that Brian mentioned in his prepared remarks, our data points that we feel confident.
And taking this as you say all the way, but we're always open to engaging with all the parties and if there is an opportunity.
To move forward with a settlement, we would certainly think to do so.
Yeah.
Thanks, a lot I'll get I'll get back in the queue have a great day.
Thanks, a lot Sir.
We'll now go to David Arcaro, calling from Morgan Stanley . Please go ahead.
Thanks, so much for taking my questions.
I was wondering if you might be able to give any kind of preview of what we could expect from the clean heat plan filing later this year in Colorado.
There might be potential capex investments additions to the plan and what.
And.
New technologies and opportunities that might be to invest there.
Hey, David It's Bob that's a great question look we're excited about the clean heat plan opportunity. It is.
Really an opportunity for us I think to share and align our vision for a net zero future on the gas business with our commissions and a more formal way.
I'm not certain I would expect to see a significant amount of new investment opportunities as part of that process, but really an opportunity to align on.
Our multi pronged strategy to decarbonize, the gas business as I think about it.
We're working with upstream providers to reduce methane on the purchase gas that we buy for our customers. We are working on our own system, we have been for over the past decade, and methane leak reduction we've done a terrific job there, but there's always more work to tighten up our own system and then we work on.
Customer programs that encourage energy efficiency that encourage.
Maybe fuel switching and beneficial electrification.
I think the big opportunity from an investment perspective is really the comments I made around clean fuel in my prepared remarks, we are working with multiple parties in the Colorado jurisdiction on a rocky mountain hydrogen hub, we think it's a really attractive project a multistate Mou has been signed with several of the Western states and the governors.
And all of the energy offices of the states are working together, so I think clean fuels, a real opportunity for us and for our customers to advance the clean energy transition and to help us realize a net zero future in the gas business, Yes, David I'd just add a couple of points of that one is we don't have anything in our current five year plan related to hydrogen investment opportunities.
So to the point of if theres, an opportunity to pull that forward and move faster in hydrogen who absolutely an upside opportunity as we think about it over the next five years, but also.
A lot of call it.
Industry discussion about natural gas commodity cost in the volatile volatility we think longer term now.
Owning a renewals and creating green hydrogen blending it into the LDC creates more price certainty for our customers. It takes that volatility. So I think thats a longer term opportunity and benefit as we think about how do we help our natural gas customers and improve the certainty of our overall bills.
And then just broadly.
Mentioned this in my prepared remarks was probably worth saying again, which is.
No.
We are benefited by the geography that we sit and having great access to low cost wind and low cost solar not only should we be able to do this for our customers beneficially.
But youre looking at the opportunity of making the Rocky Mountain region or the upper mid west regions energy export centers, where we're creating a product that can be broadly transmitted to the rest of the country, whether that's electricity via wire or whether that's green hydrogen via pipe for trucking, we should be a destination for those installations, which over.
Time should help economic development in our states and add to employment backlogs as well.
That's really helpful color. Thanks for thanks for that a lot of initiatives it sounds like related to that.
Program I know you will be rolling out and then separately on the announcement with form energy and long duration storage. It's nice to see that crystallizing here I was wondering if you might have a sense for how much long duration storage might makes sense on your system over time.
Certain number of megawatts or proportion relative to your generation fleet that might make sense wondering.
How you might see this scale up and to the extent. These initial projects are successful and make it through the regulatory process.
Yes, Thanks, David.
As we go through resource plans with each of our states. We find that we have an increasing need for as we have higher penetration of renewables and increasing need for what we'll call dispatch will energy resources and historically those would have been <unk>.
Combustion turbines, maybe they're fired with a clean fuel like hydrogen or synthetic natural gas.
Overtime as long duration storage might become more feasible and cost effective you can see duration long duration storage being a part of that solution I think if I were to add up and I'm going to do this math on the fly.
Sure.
We have several thousand megawatts in our resource plans for <unk>.
Firm dispatch of old generation, and if we had an asset with.
Lithium ion batteries are interesting and they have a.
Utilization for our systems facilities long duration storage.
These are 20 megawatt projects, there's probably several hundred in our resource plans that could be realizable within the next five to 10 years, if the technology proves out.
Yes, and I would just add to that we're really excited about this technology shows that were leaving.
And really demonstrating that we're on the forefront of this green energy transition, we've always talked about we know how to get to our 2030 goals of 80% carbon reduction and so this is really about taking that last 15% to 20% out of the stack and providing one of the solutions. So if you think about that and when you look at our kind of resource mix in 2030, you can kind of <unk>.
The size and what do we need to do beyond that in terms of storage capabilities that will be one of the solutions.
Great. Thanks, again I appreciate all the color.
Thanks, so much sir.
Well now go to Jeremy Tonet from Jpmorgan. Please go ahead.
Hi, Good morning, it's actually rich Sunderland on for Jeremy. Thank you for your time today.
Great job, Hey, rich starting with changes.
Maybe starting to choose through 'twenty two drivers.
O&M already but just curious if you can kind of parse the full range of border effectively true ups for 'twenty, two actuals versus new expectations for 'twenty, three or any of these changes you're putting your kind of higher or lower than the guidance range and at this point in time.
Okay.
Just right off the start right, we're still feeling our midpoint of the guidance range early in the year is where we expect to be in in terms of specific changes right gas sales is up a little bit, but that's really a function where we landed on the year end and really gas sales for us 1% is less than $5 million in terms of a change.
<unk>.
The increase in the rider revenue that's a function of we had a good wind in PTC year in 2022 so.
So thats relatively earnings neutral, we do see a little bit of benefit in depreciation and interest expenses lower let's say the forecast of rates for 2020 three are lower than in Q3, but overall, we look at it as relatively neutral as we think about the puts and takes in still targeting mid point of the guidance range and now looking forward to.
The discussion 12 months from now and our goal is to deliver for the 19th straight year.
Great. Thanks for the color there and then turning.
Turning back to Colorado, and a lot of their focus on the gas system quite excited you addressed this a little bit from the plan perspective, but I'm curious for your higher level thoughts on how this might impact your electric operations and state as well.
Yeah.
Okay.
Hey, rich it's Bob.
Look I didn't mentioned as part of our.
Our clean heat plan and our long term strategy.
For Decarbonising on behalf of our customers that we do expect some amount of beneficial electrification to happen, whether that's water heaters or cooking or home heating.
But we believe that the.
Asset value of the distribution system is incredibly valuable for our customers and has the ability to deliver.
Significant amount of energy on the coldest days in Colorado, and our design temperature that we planned for in Colorado is minus 30. So it's still a very cold weather climate has a need for very efficient delivery system, which we believe the pipeline system is there now I do think that we can put as part of our strategy is to look at clean fuels in green.
Hydrogen and synthetic natural gas and the opportunity that presents for our customers to realize.
Good product at an affordable price that's also sustainable.
Important but electrically.
With Evs and beneficial electrification as we think about the future of our electric business in Colorado, Theres, probably growth there that's driven by both of those aspects.
Got it very clear on both sides. So you've done your time today.
But.
Thank you Sir.
We'll now move to Julien Dumoulin Smith of Bank of America. Please go ahead.
Okay.
Hey, good morning team, thanks for the time and the opportunity nicely done.
Perhaps.
Yes.
Hey, guys.
Just first on Unbilled I, just want to understand a little bit.
The trajectory of bills can you talk a little bit on what the rate increases are in customers for this winter, especially on the gas side.
And then also just given the cresting that we've seen in some of the commodity price here, how is that setting itself up to ultimately get reflected to back to your customers. If you think about the cadence of your hedging programs.
Yes, Hey, Julien good question, and we think about.
Talk a little bit about both sides of the business because when you think about on the electric side.
Really well position from overall customer Bill perspective now.
Now we're call it 85% electric if you just look at.
Our income statement and the cost of goods sold and fuel impacts on the electric side is modest given the inflationary environment. We saw in 2022 and Bob talked about it right is really it's our wind build out that we've always talked about being a hedge for rising commodity costs and thats played out in 2022 and <unk>.
Really good to see from a customer bill perspective.
And also we went into the year being on a national average more than 20% lower on residential customer bill. So a good place in a good place to be on the electric side, obviously on the natural gas LDC side, you have a lot fewer levers and a lot fewer offsets and so you saw some of the headlines of 40% to 50% of bill impacts for our customers obviously.
We do not like to see any sort of bill impacts of that magnitude, but youre absolutely right that that is starting to subside with where natural gas prices are going and if you caught it we've just in the past few months, we've twice updated our gas commodity clause in Colorado, which lowered the gas.
The commodity portion of the customers' bills by about 30% that will start to fuel feel in Q1 relative to Q4, because we were actually going to be over collected so we proactively did that on the commission was appreciative that so we're certainly taking every opportunity we can to make sure that we have.
Reflecting the lower commodity costs in our customers. So that's really where we see I think longer term, we feel really good about delivering bills at the level of inflation as we think about 2030 and beyond and what the IRA is doing for us and for our customers. So we feel good both near term and longer term as we think about it.
Hey, Julien look if Bob I agree with everything Brian said and add if you look at the long arc of history and look forward over the last 10 years and into the next 10 years.
I think that comment around bills at or below the inflation level is consistent.
On the electric and gas side. This has been a tough year on the gas side, we're empathetic and we worked hard with the federal government to enable significant amounts of record amounts of Lai heap.
And then actively getting that into people's hands that needed the most.
Longer term clean energy transition I think we can do this as we said because we're strategically advantage in our position we can do this very cost effectively.
Across across the country and we have a good starting point in total bills and what our customers feel 20% below the national average or more.
Our residential electric areas in our gas business.
Thank you highlighted this in one of your reports as one of the top two or three lowest.
Gas businesses in the country. So good starting point, but it doesn't mean, we don't have work to do and obviously, we're always empathetic to our customers who are feeling bill increases at the grocery store at the fuel pump at rent and mortgage payments and everything else. So, but thanks for the opportunity to talk about it.
Yeah, absolutely you bet.
And just going back to one of the questions from earlier on the settlement conversation versus fully litigated cases, obviously, the current backdrop isn't isn't ideal for having great increases altogether.
Can you talk a little bit about expectations, we will settle cases broadly speaking here.
To what extent could minutes it would be an isolated data point in the current instance, given the current back pattern or are you seeing challenges more broadly here again without pointing fingers at specific states necessarily.
Well I'll start Julien and Brian can add all of these had anything to add.
Generally we look for settlements I think we're encouraged to look for settlements.
I think as you look at some of the recent data points and Minnesota Commission's looking for settlements so with that as backdrop. Maybe this cases isolate maybe we still have a path to.
Reach a settlement with the parties.
I think we are being encouraged to do so I think broadly speaking that's the case for most of our jurisdictions and most of our staff we need to make sure that we are.
We're delivering for our customers operationally, we're delivering for our customers and.
And reliability, but we also need to make sure that we keep a financially healthy utility.
Credit metrics are really important preserving credit metrics and our operating companies is critical as we seek to raise capital cost to advantageously and to deliver on the capital investment profile that we know we need to do so I think there is where the debate happens and again I think we've got a long track record of settling in.
So I would I would take your comment is encouraging to think that we're going to continue to settle cases going forward.
Yes, absolutely understood alright, great. Thank you guys appreciate it.
Especially what sir.
We'll now take question is from Travis Miller, calling from Morningstar. Please go ahead Sir.
Hi, everyone and thank you.
Hey, Travis.
Obviously had a good year with the C&I demand wondering whats your outlook and up 1% total sales for C&I or we see another big year or does that moderate a bit.
Hey, Travis, Yes, I can take that one I think we continue to see.
Similar what we saw in 2022, where strong growth in the C&I AFI parse it out we have what we're expecting is about 2% up in C&I for 2023 and about a 1% decline in residential re continued kind of decline from the COVID-19 levels that we saw the increase in residential.
C&I, particularly good growth in Sps.
And I think just on the 2022 sales when you look at the C&I numbers, you see that Colorado C&I is negative, but if you actually make an adjustment we helped a large customer installed 240 megawatt solar farm to ensure that they stayed in Colorado ensured those job saving Colorado and so have you made that adjustment column.
<unk> actually been a plus 2% for the year, so strong economic activity and C&I growth across all of our service territories, and we expect that albeit a little bit of slowing in 2023, but to remain there.
Okay great.
A follow up to the hydrogen hub discussion.
I think if I heard you correctly April was kind of the next point at which your file some more information.
At what point is it there or is it later on where you'll get the start getting a sense for given your proposal of non approval, but a proposal for capex potential spending.
Yes, Travis I think it's early innings with the departments.
April for the next filing date for I'll call. It full plans I think the department of energy is looking at probably around two dozen who's going to take them a while to parse through that and award grants for the I'm going to guess four to six that move forward from that perspective, we think both of our projects are incredibly <unk>.
Interesting provide lots of regional benefits from and from multiple sources and multiple users, which I think is a criteria that the department is going to look at.
Youre going to ask me to guess I'd say, it's at least end of next year before we get any clarity on those April applications potentially longer.
But expect us.
The hydrogen hub concepts of which.
Very interested in and I think we have a great opportunity to be significant participants, but also expect us to move forward with hydrogen pilots an opportunity to bolt on the electric side and the gas side as we think about working through our <unk> plant in Colorado, Our natural gas Innovation Act in Minnesota, and then also on the electric side as we think about how do we decarbonize that last 15% to 20% and our staff.
Sure, Okay, and the next year being 2024.
Correct, Okay, and then just real quick on how many partners.
In those two proposals or Rocky mountain in the Midwest.
Proposals.
We can get back to a specific number of Travis, but I'm going to guess, it's in the five to 10 in each region. Okay. Let's just looking for a rough number okay very.
Very good Thats, all I had thanks.
Appreciate it.
Thank you much sir.
We'll now take questions from Mr. Paul Patterson from <unk> Associates. Please go ahead, Sir your line is open.
Hey, good morning.
Hey, Paul can you hear me Okay, yes.
So.
I hear you on the on the Minnesota.
Regulatory environment, it's pretty much what I've been hearing, but one thing that I was a little surprised by.
It's hard to keep track of everything there was some articles.
About some sort of state goal of being below the NAV.
National average by 5% and I think.
<unk>.
Made a filing.
About this saying that.
<unk>.
The rates are in danger of or what have you about being in line with that policy.
I was just wondering could you just refresh.
My memory about.
This.
State policy goal is.
And sort of following up on Julians question.
That's just sort of the trajectory how you see you guys performance within that thing going forward, because we have changes in cat.
Moderation in fuel prices and stuff going forward.
You do a lot of moving.
Pieces, I guess I'm, just sort of wondering if you could and it frankly.
And frankly I just.
Just not up to speed on the.
On the wall that Theyre talking about.
Hi, Paul This is Chris Clark.
The president of our Minnesota Company.
Yes, there is a goal in statute that seeks to have our prices for our commercial and industrial class.
Be within 95% of the National average.
The starting point here is really that we.
Our customers a great value and I think the look that.
That got some attention as simply a look at the rate, but if you actually look at our total bills for our C&I class Youll see that over a 10 year period, they have been relatively flat and thats because of the EIA data.
AIA data that gets pulled for rates is only one component of the bill. So I think when you look at what we achieved for our C&I class.
If you take into account the conservation programs that have been really nation, leading here in Minnesota and other credits and things that those customers have done to be successful you will see that our C&I class rates are competitive and in fact, we do a great job of attracting new business to our state.
So I think it's important when we look at the picture of how we're doing with our C&I rates, either really take that into account and as Brian and Bob have said when we look at the plans for our clean energy transition. We're confident that we can deliver those results in line or.
Or less than CPI, and I think over the long term. We've shown that we can continue to be a successful company in navigating this keeping rates affordable for our customers.
Delivering great value.
Okay Awesome great answer.
The second question I have and I apologize if I missed this I got you.
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The iron battery.
Deployment.
If you've already discussed.
We're going to own these and what's the cost of them or could you just give a little bit more flavor at the economics associated with these two.
These two projects.
Yeah. Good question no we haven't disclosed the cost of these batteries, yet and we havent made the regulatory filings and we looking forward to having the discussion of our stakeholders and the commission, but we certainly will own them. We think they are a valuable grid asset and important to us to own them as we think about how do we start to deploy these new technologies.
<unk> as we look to decarbonize going into harms and carbon free so.
Obviously as with any new technology or the cost more expensive, but this is a $100 battery that we don't see other solutions out there that are viable.
And it also iron oxide right. If you think about rare metals. This is something that is readily available as we think about supply chains and what's the ability to scale. So overall, we're pretty excited about this I think it demonstrates our leadership.
As an innovative clean Tech company and we're excited to work with our commissions, but certainly more to come in terms of disclosing the cost.
Okay, Great just any idea of when you guys might makes that regulatory filing.
Roughly speaking later this year it'll be this year.
Okay. I mean, you guys are deploying into 2025 right. So yes, okay. Okay. So okay. Okay I'll see you soon thanks.
Thanks, so much.
Thank you so much sir.
Our next question is coming from SaaS Codell of news.
Please go ahead Sir.
Hey, good morning, Thanks for squeezing me in here.
Just.
Hopefully two quick ones I guess when you look at the four major rate filings you guys have.
They're all asking for a forward test year, although when we look at 2023 and beyond what do you think it's a reasonable assumption for structural lag cannot be reduced from say 90 to 100 basis points, maybe 50 60.
Hey, Anthony Good question as we think as we think about it.
Earned ROE perspective, that's always been a goal of ours right. We had a goal in 2015 to call. It from 150 bps and we were successful and then in 2018 19, and then had some now.
Covid hit and we scaled back on regulatory filings I think as we look forward. Our goal is to close that and we had some success from 2021% to 2022, albeit modest about 15 books and so our goal is to continue to focus on closing that and probably that 50 basis point range. As you mentioned is a good goal as we think about it think about it.
Going forward.
And something that we always focus on improving the regulatory construct seeing getting now is when you think about either multiyear plans are longer term plans really providing the benefit of price certainty or a customer that I think is really important and something we'll continue to work forward worked through.
Great and just one.
One follow up on top of Julians question.
I think Bob you had mentioned you prefer the settlement route and not just specific to Minnesota, but just in general.
It seems like lately some commissions, maybe our tinkering with settlements if I use that term.
Maybe turning at a greater frequency does that give you pause on.
Achieving a settlement.
Hey, Anthony it's Bob Great Great to see your name in the Inbox today no.
It doesn't give me pause.
We've had a long history here, we continue to work proactively with SaaS and commissions and.
Sometimes we go before ALJ and Theres always things that are around the edges important but I think generally speaking.
Settlements are encouraged in.
I think commissions understand that if they want to encourage settlements that they need to respect the entirety of them without tinkering I think you've seen some commentary and some of the jurisdictions you might have been thinking about to that fact.
Great. Thanks, so much guys and congrats on the quarter.
I appreciate it thanks Anthony.
Thanks, so much sir.
And as it appears to have no further questions, Brian I would like to conference back over to you for any additional or closing remarks. Thank you.
Thank you all for participating in our earnings call. This morning, please contact our Investor relations team with any follow up questions.
Okay.
Thank you much Sir ladies and gentlemen that will conclude today's conference. Thank you for your attendance you may now disconnect.