Q2 2023 Xcel Energy Inc Earnings Call

July 27, 2023

And for the duration of the call your lines will be listen only if you require assistance at any point. Please press star zero and youll be connected to an operator.

We'll have the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your questions questions will only be taken from institutional investors reporters can contact media relations with inquiries and individual investors and others can reach out to Investor Relations I will now hand, you over to your host Paul Johnson Vice President.

<unk> Treasurer and Investor Relations to begin today's conference. Thank you.

Good morning, and welcome to <unk> Energy's 2023 second quarter earnings call. Joining me today are Bob Frenzel, Chairman, President and Chief Executive Officer.

And 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 your questions. If needed. This morning, We will review, our 2023 second quarter results and highlights and share our recent business developments.

Hello, and welcome to XL energy at a quarter 2023 earnings Conference call. My name is Melissa and I will be your coordinator for today's event. Please note. This conference is being recorded and for the duration of the call. Your lines will be listen only if you require assistance at any point, Please press, sorry zero and you'll be.

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 SEC filings.

Connected to an operator.

Will have the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question questions will only be taken from institutional investors reported can contact media relations with inquiries and individual investors and others can reach out to Investor Relations I will now hand, you over to your host Paul Johnson Vice President.

Today, we will discuss certain metrics that are non-GAAP measures information on the comparable GAAP measures and reconciliations are included in our earnings release and with that I'll turn it over to Bob Frenzel.

Thanks, Paul and good morning, everybody, let's start with our results.

Treasurer and Investor Relations to begin today's conference. Thank you.

We faced some headwinds from weather and other items in the second quarter recording earnings of 52 per share for the second quarter of 2023 as compared to <unk> 60 per share in 2022.

Welcome to Excel energy 2023 second quarter earnings Cool, joining me today or Bob Friendswood, Sherman, President and Chief Executive Officer, Brian Ban Eatable Executive Vice President and Chief Financial officers. In addition, we have other members of the management team in the room to answer your questions if needed.

We've got tangible plans in place for the second half of the year to overcome the inflationary pressures as well as the impact of the lower than expected ROE and the Minnesota electric rate case and allow us to deliver on our 2023 guidance.

This morning.

We review, our 2023 second quarter results and highlights ensure recent business development.

But our strategic priorities are unchanged.

Slides that accompanies today's call are available on our website.

Leading the clean energy transition enhancing our customers' experience and keeping our customers' bills low and we've delivered on this strategic vision across our eight states for the past decade.

As a reminder, some of the comments during today's call may contain forward looking information significant factors that could cause results are different from those anticipated are described in our earnings release and are a SEC filings.

We invest in clean energy resources that provide both financial cost savings to our customers, while transitioning to a lower carbon economy.

They will discuss certain metrics that are non-GAAP measures information of the comparable GAAP measures and reconciliations are included in our original lease and with that I'll turn it over to Bob rental.

We invest in network infrastructure to foster economic development for new businesses to provide top quartile reliability and to provide resiliency in the face of more volatile and unpredictable weather.

Thanks, Paul and good morning, everybody, let's start with our results.

We face some headwinds from weather and other items in the second quarter recording earnings of 52 cents per share for the second quarter of 2023 as compared to 60 per share in 2022.

We're also building infrastructure to accelerate clean transportation for all of our customers and exploring innovative technologies like batteries and clean fuels to enable the policy objectives and the customer desires for a lower carbon economy.

We got tangible plans in place for the second half of the year to overcome the inflationary pressures as well as the impact of the lower than expected <unk> and the Minnesota electric rate case and allow us to deliver on our 2023 guidance.

And we focused on continuous improvement to operate efficiently with a lower expense burden to our customers and as a result, we've been able to keep our operating expenses nearly flat for over the past for over a decade.

But our strategic priorities are unchanged.

Leading to clean energy transition enhancing our customer's experience in keeping our customers bills low and we've delivered on the strategic vision across are eight states for the past decade.

Our customers benefit from these actions, including significant carbon reductions in residential bills that are 20% below the national average.

We invest in clean energy resources that provide both financial cost savings to our customers, while transitioning to a lower carbon economy.

As you can see we have a long history of delivering on our commitments to all of our stakeholders and are confident in our ability to meet our earnings guidance again in 2023.

We invest in network infrastructure to foster economic development for new businesses.

This quarter, we made progress on our clean energy transition plans with a growing portfolio of both company owned resources and power purchase agreements.

To provide top quartile reliability and to provide resiliency in the face of more volatile and unpredictable weather.

And our NSP solicitation, we recommended an incremental 250 megawatts of self build solar generation and 100 megawatt power purchase agreement Springs, Our total company owned solar projects at Serco to over 700 megawatts, which will utilize the transmission rates for the first of the three retiring coal units there.

And the Sps RFP, we recommended a portfolio of 418 megawatts of self build solar projects and a 230 megawatt power purchase agreement.

Our customers benefit from these actions, including significant carbon reductions in residential bills that are 20% below the national average.

We're also proposing a battery storage project and one of the new self build solar facilities.

In addition later in the quarter, we expect to file our recommended Colorado portfolio for nearly 4000 megawatts of potential resources and based on our interim analysis the outcomes should be very beneficial to our customers.

As you can see we have a long history of delivering on our commitments to all of our stakeholders and are confident in our ability to meet our earnings guidance again in 2023.

This quarter, we made progress on our clean energy transition plans with a growing portfolio both company owned resources and power purchase agreements.

Across our eight state footprint, we enjoy a geographic advantage for wind and solar resources, which enables higher capacity factors and as a result, XL energy can deliver new renewables at low and competitive prices due to a combination of high capacity factors IRA tax benefits.

And our Nsp's solicitation, we recommended an incremental 250 megawatts of self build solar generation and 100 megawatt power purchase agreement Springs are total company owned solar projects at Serco to over 700 megawatts.

And the ability to reuse transmission from retiring plants, all of which provides significant benefits to our customers.

Which will utilize the transmission rates for the first of the three retiring coal units there.

<unk> is a faster transition to a clean energy economy.

And the Sps RFP, we recommended a portfolio of 418 megawatts.

Each of these rfps would represent incremental opportunities as compared to our base capital forecast we.

Self build solar projects and a 230 megawatt power purchase agreement.

We anticipate commission decisions on these proceedings in the second half of 2023 for Minnesota, and Colorado and in the first half of 2024 for Sps.

We are also proposing a battery storage project to one of the new self build solar facilities.

In addition later in the quarter, we expect to follow recommended Colorado portfolio for nearly 4000 megawatts of potential resources and based on our interim analysis the outcomes should be very beneficial to our customers.

And May breakthrough energy ventures announced a $20 million grant to support our 210 megawatt pilot projects perform energies 100 hour battery technology.

In July the Minnesota Commission unanimously approved the form energy pilot to be installed at our Serco site alongside our new solar projects.

Across our state footprint, we enjoy a geographic advantage for wind and solar resources, which enables higher capacity factors and as a result, excel energy can deliver new renewables at low and competitive prices due to a combination of high capacity factors IRI tax benefits.

We plan on filing for our second form energy pilot later in the quarter and are evaluating sites that could be supportive of this exciting new clean energy technology.

We're also working with the department of energy on additional funding opportunities to further reduce the cost of these projects for our customers.

And the ability to reuse transmission from retiring plants, all of which provides significant benefits to our customers and.

In May we filed our second transportation electrification plan in Colorado. The proposed plan, which covers the 2024 to 2026 period includes expanded solutions and rebates to support new public charging stations and charging at homes businesses multifamily buildings and community locations.

Enables a faster transition to a clean energy economy.

Each of these rfp's represent incremental opportunities as compared to our base capital forecast.

Anticipate commission decisions on these proceedings in the second half of 2023 from Minnesota, and Colorado and in the first half of 2024 for Sps.

It also proposals programs supporting electric school buses innovation and income qualified customers.

And May breakthrough energy ventures announced a 20 million dollar grant to support our 210 megawatt pilot projects perform energies 100 hour battery technology.

Our focus is to bring clean transportation to all customers and communities and to expeditiously assist and the build out of quarter charging to reduce range anxiety of EV purchasers.

In July the Minnesota Commission unanimously approved the form energy pilot to be installed that are serco site alongside our new solar projects.

Next month, we plan to file our clean heat plan in Colorado and will follow with our natural gas innovation plan for Minnesota during the fourth quarter.

The planet filing for our second form energy pilot later in the quarter and are evaluating sites that could be supportive of this exciting new clean energy technology.

These plans will be similar to our electric resource plans and provide a framework for our natural gas system to achieve our carbon reduction goals, while meeting the reliability and affordability needs of our customers.

We're also working with the department of energy and additional funding opportunities to further reduce the cost of these projects for our customers.

Taken as a whole these innovative projects and partnerships in electricity and clean transportation and home heating are essential for XL energy to meet our sustainability goals and to continue to deliver our customers a safe clean reliable and affordable energy that they expect now and long into the future.

And May we filed our second transportation electrification plan in Colorado. The proposed plan, which covers the 2024 to 2026th period includes expanded solutions and rebates to support new public charging stations and charging at homes businesses multifamily buildings and community locations.

It also proposes program supporting electric school buses innovation and income qualified customers.

In June the Boulder County Sheriff's office announced the finding of its investigation into the cause of the Marshall fire in December of 2021.

Our focus is to bring clean transportation to all customers in communities into expeditiously assist in the build out a quarter charging to reduce range anxiety of easy purchasers.

Our thoughts continue to be with the families and the communities impacted by this devastating fire, including our own employees, whose homes and families were directly affected.

Next month, we plan to file a clean heat plan in Colorado and will follow with our natural gas innovation plan from Minnesota during the fourth quarter.

The report states that the first Marshall fires started as a result of an ignition on a property affiliated with an entity called the 12 tribes and that this ignition had nothing to do with <unk> power lines.

The Sheriff's report also discusses our second ignition that started more than an hour. After the first fire at a different location, which the report estimates as approximately 80% to 110 feet away from our power lines.

Taken as a whole these innovative projects and partnerships and electricity and clean transportation and and home heating our essential for XL energy to meet our sustainability goals and to continue to deliver our customers the safe clean.

Sure support says that the most probable cause of the second ignition with <unk> power lines, and we strongly disagree with that conclusion.

Reliable and affordable energy that they expect now and long into the future.

Because of the pending litigation that has been filed we're not in a position to discuss the marshal fire in more detail at this time, but.

In June the Boulder County Sheriff's office announced the findings of its investigation into the cause of the martial fire in December of 2021.

But we will vigorously defend ourselves and look forward to presenting our position in court.

Our thoughts continue to be with the families and the communities impacted by this devastating fire, including our own employees, whose homes and families were directly affected.

Importantly, additional information about the lawsuits and some of the relevant legal standards is included in our earnings release.

And our 10-Q filing and I would direct you there.

The report states that the first Marshall fire started as a result of an ignition on a property affiliated with an entity called the 12 tribes and that this ignition had nothing to do with Excel energy power lines.

Finally, we recently released our comprehensive sustainability report.

The report focuses on four core ESG pillars.

The Sheriff's report also discusses second ignition that started more than an hour. After the first fire at a different location, which the report estimates is approximately 80 to 110 feet away from our power lines.

Reached net zero responsibly.

Strengthen our communities.

Operate with integrity and a value people.

Details of our progress in achieving our industry, leading ESG goals as well as our priorities moving forward.

Sure support says that the most probable cause of the second ignition was <unk> power lines, and we strongly disagree with that conclusion.

Some of the key highlights include XL energy has reduced our carbon emissions by 53% since 2005 and.

More than half of the electricity, we provide to our customers comes from carbon free resources as compared to 41% nationwide.

Because of the pending litigation that's been filed we're not in a position to discuss the martial fire in more detail at this time, but.

We outperformed the industry reliability standard restoring power to 94% of customers within 24 hours during major storm events.

But we will vigorously defend ourselves and look forward to presenting our position in court.

Importantly, additional information about the lawsuits and some of the relevant legal standards is included in our earnings release.

And this past year in addition to contributing over $10 million to local organizations through the XL Energy Foundation.

And our 10-Q filing and I would direct you there.

Our employees contributed $3 million and volunteered over 74000 hours for nonprofit and community improvement projects.

Finally, we recently released our comprehensive sustainability report.

We're proud of our track record is keeping with our corporate strategy and it's based on our values of connected committed.

Report focuses on four core ESG pillars.

Reached net zero responsibly.

Strengthen our communities.

Just worthy and safe.

Operate with integrity and a value people.

And with that I'll turn it over to Brian .

Thanks, Bob and good morning, everyone.

Tales, our progress in achieving our industry, leading ESG goals as well as our priorities moving forward.

We had earnings of <unk> 52 per share for the second quarter of 2023.

Some of the key highlights include XL energy has reduced our carbon emissions by 53% since 2005 and.

Compared to <unk> 60 per share in 2022.

Please note that the line by line income statement comparisons are more complicated this quarter as a result of true ups for the Minnesota rate case, this year and the Texas rate case last year.

More than half of the electricity, we provide to our customers comes from carbon free resources as compared to 41% nationwide.

Most significant earnings drivers for the quarter included the following.

We outperformed the industry reliability standard restoring power to 94% of customers within 24 hours during major storm events.

Lower depreciation and amortization expense increased earnings by <unk> 10 per share largely due to the reversal of deferrals in the Texas rate case last year and the extension of depreciation lives from the Minnesota rate case. These decreases were partially offset by our capital investment program.

And this past year in addition to contributing over $10 billion to local world.

Foundation.

Our employees contributed $3 million and volunteer there were 74000 hours for nonprofit and community improvement projects.

Lower taxes other than income taxes increased earnings by <unk> <unk> per share, reflecting property tax deferrals in Minnesota and Colorado.

We're proud of our track record.

Keeping with our corporate strategy and it's based on our values of connected committed trustworthy and safe.

In addition, other items combined to increase earnings by <unk> <unk> per share.

And with that I'll turn it over to Brian .

Offsetting these positive drivers.

Thanks, Bob Good morning, everyone.

Lower electric revenues less fuel decreased earnings by <unk> 23 per share, reflecting unfavorable weather the impact of the Minnesota rate case and recognition of revenue from the Texas rate case last year.

We had earnings of 52 per share for the second quarter of 2023.

Byrd to 60 cents per share in 2022.

Please note that the line by line income statement comparisons are more complicated this quarter as a result of troops for the minutes of the rig cases here in the Texas right case last year.

Higher O&M expense decreased earnings by <unk> <unk> per share.

Higher interest expense decreased earnings by <unk> <unk> per share.

Most significant earnings drivers for the quarter included the following.

Turning to sales year.

Year to date weather adjusted electric sales increased by.

Lower depreciation and amortization expense increase earnings by 10 per share largely due to the reversal of deferrals in the Texas right case last year and the extension of depreciation lives from the Minnesota right case. These decreases are partially offset bar capital investment program.

6%, we continue to expect annual electric sales growth of approximately 1% in 2023, which was driven by growth in C&I sales, partially offset by projected declines in residential sales.

Now shifting to the expenses.

Lower taxes other than income taxes increase earnings by six per share, reflecting property tax deferrals in Minnesota and Colorado.

O&M expenses increased $14 million for the second quarter.

This increase was primarily due to the timing of generation outages higher bad debt expense insurance costs and inflation.

In addition, other items combined to increase earnings by force that's for sure.

Partially offset by the recognition of previously deferred costs from the Texas electric rate case in 2022.

Offsetting these positive drivers.

Lowered electric revenues less fuel decreased earnings by 23 per share, reflecting unfavourable weather the impact of the <unk> and recognition of revenue from the Texas Ricky's last year.

Given these drivers as well as the Minnesota rate case decision, we are taking actions to mitigate O&M, which will include evaluating discretionary programs staffing levels consulting employee expenses variable compensation and other management actions.

Higher O&M expense decreased earnings by two per share.

And higher interest expense decreased earnings by three per share.

As a result, we now expect the O&M expenses declined 3% for the year.

Turning to sales.

Year to date, whether adjusted electric sales increase by.

During the second quarter, we also made progress on several regulatory proceedings.

6%, we continue to expect annual electric sales growth of approximately 1% in 2023, which is driven by growth in <unk> sales, partially offset by projected declines in residential sales.

Starting with our completed proceedings.

In June Minnesota Commission approved a three year electric rate increase of $311 million based on an ROE of nine 5% an equity ratio of 52, 5% and a forward test year.

No shifting to his expenses.

O&M expenses increased $14 million for the second quarter.

We plan to file for reconsideration of the decision as we felt the ROE was not consistent with the ALJ recommendation or recent commission decisions in other Minnesota proceedings.

This increase was primarily due to the timing of generation outages higher bed that expense insurance costs and inflation.

Partially offset by the recognition of previously deferred costs from the Texas Electric Brachiation 2022.

In our South Dakota Electric rate case, the commission approved a settlement for approximately $14 million revenue increase.

Given these drivers as well as the Minnesota Reiki decision, we are taking actions to mitigate O&M, which will include evaluating discretionary programs staffing levels consulting employ expenses variable compensation and other management actions.

And our pending Colorado electric rate case, we reached a partial settlement that reflects a $95 million rate increase based on an ROE of nine 3%.

<unk> ratio of 55, 7% in 2022 historic test year.

As a result, we now expect the O&M expenses to declined 3% for the year.

Remaining items for litigation or the structure of the TCA rider in treatment of coal plant depreciation.

During the second quarter, we also made progress on several regulatory proceedings.

We expect a commission decision later this summer of rates going into effect in September .

Starting with our completed proceedings.

And our new Mexico electric rate case, we reach a contestant settlement that reflects a rate increase of $33 million based on an ROE of nine 5%.

In June Minnesota Commission approved a three year electric rate increase of $311 million based on an <unk> of 9.25% equity ratio of 52.5% in a forward test here.

<unk> equity ratio of 54, 7% in the forecast test year.

We plan to file for reconsideration of the decision as we felt the <unk> was not consistent with the ALJ recommendation or recent commission decisions and other Minnesota proceedings.

We expect the decision and implementation of final rates by October .

Both the Colorado, and new Mexico settlements reflect significant negotiation and compromise by excel our energy in a wide range of intervenors with varied interest.

And our South Dakota Electric Ricky's The commission approved the settlement for approximately $14 million revenue increase.

The party to believe that the settlements resulted in a justin reasonable outcome for our customers.

As a result, we are hopeful our commissions will approve the settlement without modifications.

And are pending Colorado electric Ricky's, we reached a partial settlement that reflects in $95 million rate increase based on an <unk> of $9, 3% equity ratio of 55.7%.

Yeah.

We also have pending rate cases in Wisconsin, and Texas, which are early in the process Intervenor testimony is expected in the Texas case in August with a decision in the first quarter of next year.

While in Wisconsin, We expect intervenor testimony in the fall and a commission decision by year end.

Vision.

We expect the commission decision later this summer at rates going into effect in September .

Turning to the inflation reduction act as most of you are aware of the U S. Treasury recently provided guidance on tax credit transfer ability, which was consistent with our expectations. We have considerable demand and anticipate monetizing excess excess tax credits later in the year.

And our new Mexico electric rate case, we reach a contested settlement that reflects a rate increase of $33 million based on an <unk> of 9.5%.

Equity ratio of 54.7% in the forecast us here.

We expect a decision and implementation of final rates by October .

Finally, we are reaffirming our 2023 earnings guidance range of $3 30 to.

Both the Colorado, and new Mexico settlements reflect significant.

The $3 40 per share, which is consistent with our long term EPS growth objective of 5% to 7%.

We've updated our key assumptions to reflect the latest information which are detailed in our earnings release.

Please note that the guidance assumption changes regarding capital riders depreciation property taxes, and ETR, primarily reflect regulatory decisions or changes to assume PTC levels and are largely earnings neutral.

However, the lower O&M and a portion of the interest expense assumptions will generally impact earnings.

Yeah.

With that I'll wrap up with a quick summary.

We continue to expect to deliver 2023 earnings within our guidance range as we have for the past 18 years, managing through regulatory outcomes changing economic environments and periodic headwinds.

We're delivering on our capital plan and executing on opportunities, including clean generation transmission and distribution to support reliability resiliency and broader economic growth.

And 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 support our communities and states and the clean energy transition.

This concludes our prepared remarks, operator, we will now take questions.

As a reminder, if you would like to ask a question on todays call. Please press star one on your telephone keypad to withdraw your question you May Press Star two.

Okay.

And our first question comes from Jeremy Tonet from Jpmorgan. Please go ahead.

Hi, good morning.

Hey, good morning, Jeremy how are you.

Alright, good thanks Rami.

Just wanted to touch base with.

On the targeted O&M reductions as you called out there.

These efficiencies in 2023 I was wondering if you could peel back the onion, a little bit more to see how much of this is onetime in nature versus carry forward into future years.

Just any thoughts there would be helpful.

Sure Hey, good morning, Jeremy.

Thanks for the question, So I think I'll hit on a couple.

A couple of different ways to talk about kind of the near term actions.

And when you think about it now how do we hit our year end O&M guidance, one as we look at second half of last year, we had elevated O&M. If you look at versus the first half of last year and particularly in Q4 as there was some onetime items in Q4 relative to having a <unk>.

Good year investing in the system.

And then there are some impacts this year, where we've had some timing of generation outages earlier in this year and.

And we also expect bad debt expense to decline, we saw some higher bad debt expense levels, given the commodity price impacts earlier in this year. So as I think about that bad debt expense level should be more sustainable I guess, some timing of the generation outages. But then we're also looking at a number of what I call. It near term and long term opportunities near term is what you would call more one <unk>.

Discretionary items around program spend consulting third party contracts and variable compensation levers, even more traditional management initiatives, but I think we are spending a lot of time on longer term initiatives around our innovation and transformation transformation team.

We've invested heavily in driving what we call waste elimination and process improvements across our orange.

And then we're also investing heavily in technology you heard me I've talked about before some we've called the digital operations factory.

Which is focused on using AI in our operations, we started that in nuclear with our corrective action program now, we're rolling that out to distribution and gas in our field operations and Thats using traditional AI. We're also looking at and I'll use cases for <unk>. So as we look at it or.

Our goal is to hit 3% down for the year longer term. Our goal is to kind of keep O&M flat and as Bob said, we've done that for nearly a decade and so we do have some work to do to get there a balance of the year, but then think longer term O&M flat as we go forward.

Got it.

Very comprehensive very helpful. There.

And so that kind of touches on I guess the next question I had is just with regards to.

Well, the Minnesota order.

Cause you to revisit any embedded assumptions over.

The remainder of your five year plan at this point.

These kind of O&M.

Items as you called out.

<unk> for that.

No I don't think it does I think about our long term assumptions and our long term, 5% to 7% earnings growth rate. We've continued affected lever in the upper half of that that long term guidance.

Got it.

And then just at a high level, if I could given the growth of wildfire risk.

Yes.

<unk> mitigation strategy I guess evolved over time or do you have any other thoughts on that side.

Hey, Jeremy it's Bob I. Appreciate the question as you know we've been operating under and Colorado under our wildfire mitigation plan that was instituted probably more than three years ago and that plan is due to be refreshed in Colorado at the end of this year and we expect to propose.

<unk>.

Continuation of existing programs and new programs in Colorado that understand the.

The volatility of weather in the west and the footprint of the Colorado Company in particular, so we're still working through that.

Nothing specific right now, but certainly.

Looking at.

Everything that we can in terms of the risk and the opportunities to strengthen our own system.

Sure, we protect our communities and our customers.

Got it just one last one if I could post what we've seen in Minnesota here so far.

Does your view of the relative attractiveness of Minnesota versus <unk>.

<unk> wider footprint change in any way.

Look I think as I said in my opening remarks.

We feel like we've run a really good utility in Minnesota and across our eight states focusing on our customers and our communities and helping our state achieve their policy objectives around clean energy and clean transportation.

And the outcome.

<unk> was disappointing.

For two reasons, Paul and Brian mentioned, one which was.

It was inconsistent with previous decisions in Minnesota.

That had been 94 to 96, 5%.

But equally important probably didn't recognize what I think excel energy as a national leading utility and advancing a lot of these initiatives, making sure we do it reliably and affordably and sustainably.

We will continue to review our investment opportunities and our programs in the state.

But I think generally we're really.

Confident that this is our headquarter state we want to work proactively with the governor and the legislature and the PUC to advance these initiatives.

Got it that's very helpful I'll leave it there thanks.

Okay.

Thank you. Our next question comes from <unk> Chopra of Evercore. Please go ahead.

Hey, good morning, Thanks, sorry.

Good.

Thanks, Brian .

Years later, we're still getting caught by the mute button.

Okay can you hear me now I'm, sorry, yes, Brian Okay.

Okay, perfect sorry about that guys.

Ryan I heard you mention.

The Minnesota rate case item.

A FILO rehearing could you just give us a little bit more color there as to what the next steps our timeline.

Yes, the reconsideration.

Need to file for reconsideration 20 days after the written order so that's coming up and so certainly we will file for reconsideration.

Around Roe around.

The decision on the prepaid pension asset in some other expense levels.

We're hopeful the Missouri Commission will take that up and look at hard at our reconsideration filing.

And they have 60 days once that they.

They have 60 days to decide so thats the process.

Got it okay, so that should be coming out shortly and then 60 days after the decision whether they take it up or not.

So the commission okay. Thank you.

And then just you mentioned the transferability guidance was in line with your expectations Theres been a lot of discussion.

Within the industry to investors and credit agencies on the implications to CFO .

I know.

You're very knowledgeable on this topic in general.

Your thoughts there how you're seeing this play out and implications for your credit metrics.

Yes, so I mean, we've spent a lot of as I would call. It an industry collaboration on how we worked us through our financials and so not only worked with a lot of our peer utilities. We've also work with the big four accounting firms and so everything will renew is going to be in accordance with GAAP and is going to take the income tax approach.

Operator: Please note, this conference is being recorded, and for the duration of the call, your lines will be listen-only. If you require assistance at any point, please press star zero, and you'll be connected to an operator. You will have the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question. Questions will only be taken from institutional investors. Reporters can contact Media Relations with inquiries, and individual investors and others can reach out to Investor Relations. I will now hand you over to your host, Paul Johnson, Vice President, Treasurer, and Investor Relations, to begin today's conference. Thank you.

And following on that.

And they have 60 days once that they have 60 days to decide so thats the process.

It's going to flow through our income tax expense lines little also flow through cash from operations and so I think it's pretty straightforward and I know there's been a lot of discussion whether it'll show up in <unk> to debt metrics and I feel pretty good about it because it absolutely will reflect the economics of our underlying financials.

Got it okay, so that should be coming out shortly and then 60 days after the decision whether they take it up or not.

The Minnesota Commission, Okay. Thank you.

And then just.

You mentioned the transferability guidance was in line with your expectations. There has been a lot of discussion.

And it is for US right it'll be a reoccurring cash flow benefit as we look to monetize these tax credits so.

Within the industry investors and credit agencies on the implications to CFO .

I know.

Paul Johnson: Good morning, and welcome to Xcel Energy's 2023 Q2 earnings call. Joining me today are Bob Frenzel, Chairman, President, and Chief Executive Officer, and 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 your questions if needed. This morning, we will review our 2023 Q2 results and highlights and share recent business developments. 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 SEC filings. Today, we will discuss certain metrics that are non-GAAP measures. Information on the comparable GAAP measures and reconciliations are included in our earnings release.

I'm.

You're very knowledgeable on this topic in general to just get your thoughts there how you're seeing this play out and implications for your credit metrics.

I feel pretty good about how we'll be reflected across the rating agencies and we've spent time with each of those talking them through that and like I said also work closely with the big four accounting firms and this is generally approach the whole industry will take.

Yeah. So I mean, we've spent a lot of as I would call it an industry collaboration.

That's very helpful. Thanks, and then maybe just to the extent you're willing to comment on this just a little bit more pointed question on 2020 guidance.

On how we worked us through our financials and so not only worked with a lot of our peer utilities. We've also work with the big four accounting firms.

Obviously, you mentioned the history of.

And so every renewal is going to be in accordance with GAAP, it's going to take the income tax approach that's going to flow through our income tax expense line little also flow through cash from operations and so I think it's pretty straightforward and I know there's been a lot of discussion whether it'll show up in <unk> that metrics and I feel pretty good about it because it absolute.

Meeting and exceeding expectations.

Just with the unfavorable weather.

And the regulatory decision where are you tracking with your sort of cost efforts in place what are you targeting or what are you tracking within the guidance range.

Yes so.

Sitting here today, it's six months of the year, we're tracking to midpoint to midpoint of guidance and I'll give you a little bit more color Ryan I think about it in kind of three buckets versus execution of our on our O&M plans, which.

We will reflect yet economics.

Paul Johnson: With that, I'll turn it over to Bob Frenzel.

With that, I'll turn it over to Bob Frenzel.

Our underlying financials.

Bob Frenzel: Thanks, Paul, and good morning, everybody. Let's start with our results. We faced some headwinds from weather and other items in Q2, recording earnings of $0.52 per share for Q2 2023, as compared to $0.60 per share in 2022. We've got tangible plans in place for H2 of the year to overcome the inflationary pressures, as well as the impact of a lower-than-expected ROE in the Minnesota electric rate case, and allow us to deliver on our 2023 guidance. But our strategic priorities are unchanged: leading the clean energy transition, enhancing our customers' experience, and keeping our customers' bills low. We've delivered on this strategic vision across our eight states for the past decade. We invest in clean energy resources that provide both financial cost savings to our customers while transitioning to a lower carbon economy.

It is Ross right it'll be reoccurring cash flow benefit as you look to monetize these tax credits so.

Talked about earlier.

Second is we do have additional rate case revenue that will come in the door in the second half of the year, particularly with the Colorado rate case in flight the new Mexico rate case in flight and then there's still continued benefits from Wisconsin last year and then we do have expected continued sales growth in our service territories and so those are really the three buckets.

I'm.

I feel pretty good about how we'll be reflected across the <unk> and we spent time with each of those talking them through that and like I said also worked closely with the big four accounting firms and these generally approach the whole industry will take.

That's very helpful. Thanks, and then maybe just to the extent you are willing to comment on this just a little bit more pointed question on 2020 guidance.

I think about it in targeting mid point of guidance and obviously as we normally do in Q3.

Obviously, you mentioned the history of meeting and exceeding expectations.

We will.

Look at where we are in Q3 and necessarily when we tightened guidance.

Just with the unfavorable weather.

Very clear thanks, so much Brian I appreciate the time.

The regulatory decision where are you tracking and with your sort of cost efforts in place what are you targeting or what are you tracking within the guidance range.

Thank you. Our next question comes from Julien Dumoulin Smith of Bank of America. Please go ahead.

Yeah. So.

Hey, good morning team. Thank you so much of the size of the opportunity appreciate it.

Sitting here today six months of the year, we're tracking to midpoint to midpoint of guidance and I'll give you a little bit more color right I think about it in kind of three buckets versus execution of our on our O&M plans.

Bob Frenzel: We invest in network infrastructure to foster economic development for new businesses, to provide top-quartile reliability, and to provide resiliency in the face of more volatile and unpredictable weather. We're also building infrastructure to accelerate clean transportation for all of our customers and exploring innovative technologies like batteries and clean fuels to enable the policy objectives and the customer desires for a lower carbon economy. We've focused on continuous improvement to operate efficiently with a lower expense burden to our customers. As a result, we've been able to keep our operating expenses nearly flat for over a decade. Our customers benefit from these actions, including significant carbon reductions and residential bills that are 20% below the national average.

We invest in network infrastructure to foster economic development for new businesses, to provide top-quartile reliability, and to provide resiliency in the face of more volatile and unpredictable weather. We're also building infrastructure to accelerate clean transportation for all of our customers and exploring innovative technologies like batteries and clean fuels to enable the policy objectives and the customer desires for a lower carbon economy. We've focused on continuous improvement to operate efficiently with a lower expense burden to our customers. As a result, we've been able to keep our operating expenses nearly flat for over a decade. Our customers benefit from these actions, including significant carbon reductions and residential bills that are 20% below the national average.

I wanted to focus on the wildfire dynamics, obviously, a lot of fixation on this perhaps principally coming from out of state as well can you elaborate a little bit I know in the prepared remarks, you said you referred us to the 10-Q immediately here, but can you could you elaborate at least on your insurance.

Talked about earlier.

Levels today, your insurance programs across the states as well.

Benefits from Wisconsin last year, and then we do have expected the continued sales growth in our service territories and so those are really the three buckets that I think about it in targeting the midpoint of guidance and obviously as we normally do in Q3.

Do you frame the risks here from the lawsuits that have been filed I imagine that some of the commentary you alluded to in the queue here, but can you help frame up your understanding as well as maybe some of the differences critically.

From some of the out of state considerations that are drawing renewed scrutiny.

We'll.

Look at where we are in Q3, industrial and we've tightened guidance.

Yeah, Hey, Julien, it's Bob and thanks for the question and here's what I can say about Marshall right now the Boulder County Sheriff's report concluded that the Marshall fire first ignited on the property the 12 tribes and that the signature was unrelated to our equipment.

Very clear thanks, so much Brian I appreciate the time.

Thank you. Our next question comes from Julien Dumoulin Smith of Bank of America. Please go ahead.

Bob Frenzel: As you can see, we have a long history of delivering on our commitments to all of our stakeholders and are confident in our ability to meet our earnings guidance again in 2023. This quarter, we made progress on our clean energy transition plans with a growing portfolio of both company-owned resources and power purchase agreements. In our NSP solicitation, we recommended an incremental 250MW of self-built solar generation and a 100MW power purchase agreement. This brings our total company-owned solar projects at Sherco to over 700MW, which will utilize the transmission rights for the first of the three retiring coal units there. In the SPS RFP, we recommended a portfolio of 418MW of self-built solar projects and a 230MW power purchase agreement.

As you can see, we have a long history of delivering on our commitments to all of our stakeholders and are confident in our ability to meet our earnings guidance again in 2023. This quarter, we made progress on our clean energy transition plans with a growing portfolio of both company-owned resources and power purchase agreements. In our NSP solicitation, we recommended an incremental 250MW of self-built solar generation and a 100MW power purchase agreement. This brings our total company-owned solar projects at Sherco to over 700MW, which will utilize the transmission rights for the first of the three retiring coal units there. In the SPS RFP, we recommended a portfolio of 418MW of self-built solar projects and a 230MW power purchase agreement.

Hey, good morning team. Thank you so much for the time and the opportunity appreciate it.

With respect to the cause of the second ignition, which began an hour. After the first we strongly disagree with the conclusion of the share support and we will vigorously defend ourselves in court. The shares report concluded that there were no design or installation or maintenance defects or deficiencies and public services electrical circuit in the air.

Hey team.

The focus on the wildfire dynamics, obviously, a lot of fixation on this perhaps principally coming from out of state as well.

Can you elaborate a little bit I know in the prepared remarks, you said you referred us to the 10-Q immediately here, but can you can you elaborate at least on your insurance.

Levels today, your insurance programs across the states as well.

<unk> of the second ignition and so.

Regarding the litigation there is a hearing in September where we expect to learn more about the procedural next steps.

How do you frame the risks here from the lawsuits that have been filed I imagine that some of the commentary you alluded to in the queue here, but can you help frame up your understanding as well as maybe some of the differences critically from some of the out of state.

Additional information about the lawsuits in the legal standards are included in our disclosures in our earnings release and in our 10-Q.

Given the lawsuits and I don't think we're going to comment any further beyond those particular disclosures I'll, let Brian comment on insurance coverage.

<unk> that are drawing renewed scrutiny.

Hey, Julien it's Bob.

Thanks for the question and here's what I can say about Marshall right now the Boulder County Sheriff's report concluded that the Marshall <unk> guided on the property. The 12 tribes that the signature was unrelated to our equipment.

But other than that I think we're going to stick to stick to our disclosure statements. Yes, Julian the insurance coverage is included in our disclosure and was approximately $500 million.

Bob Frenzel: We're also proposing a battery storage project to one of the new self-built solar facilities. In addition, later in the quarter, we expect to file our recommended Colorado portfolio for nearly 4,000 MW of potential resources, and based on our interim analysis, the outcomes should be very beneficial to our customers. Across our eight-state footprint, we enjoy a geographic advantage for wind and solar resources, which enables higher capacity factors. And as a result, Xcel Energy can deliver new renewables at low and competitive prices due to a combination of high capacity factors, IRA tax benefits, and the ability to reuse transmission from retiring plants, all of which provides significant benefits to our customers and enables a faster transition to a clean energy economy. Each of these RFPs would represent incremental opportunities as compared to our base capital forecast.

We're also proposing a battery storage project to one of the new self-built solar facilities. In addition, later in the quarter, we expect to file our recommended Colorado portfolio for nearly 4,000 MW of potential resources, and based on our interim analysis, the outcomes should be very beneficial to our customers. Across our eight-state footprint, we enjoy a geographic advantage for wind and solar resources, which enables higher capacity factors. And as a result, Xcel Energy can deliver new renewables at low and competitive prices due to a combination of high capacity factors, IRA tax benefits, and the ability to reuse transmission from retiring plants, all of which provides significant benefits to our customers and enables a faster transition to a clean energy economy. Each of these RFPs would represent incremental opportunities as compared to our base capital forecast.

Okay.

With respect to the cause of the second ignition, which began an hour. After the first we strongly disagree with the conclusion of the share support and we will vigorously defend ourselves in court.

Got it alright understood and then any further commentary about the differences in context across the different states, especially whether it pertains to the legal.

Recovery construct <unk> jewelry contracts.

Sure support concluded that there were no design or installation or maintenance defects or deficiency and public services electrical circuit in the area of the second ignition.

Yes. It's all included in the disclosure is an entire page of disclosures in the earnings release in the Q.

Alright fair enough, we'll leave it there. Thank you guys very much I appreciate it appreciate it thanks Julie.

So.

Regarding the litigation there is a hearing in September where we expect to learn more about the procedural next steps.

Thank you. Our next question comes from Anthony crowd out of Mizuho. Please go ahead.

Additional information about the lawsuit and the legal standards are included in our disclosures in our earnings release and in our 10-Q.

Hey, good morning, Bob Good morning, Brian .

Given the losses and I don't think we're going to comment any further beyond those particular disclosures I'll, let Brian comment on insurance coverage.

Good morning, Paul sorry.

I don't want to leave you out.

Just first of all hopefully.

Hopefully two quick questions one on Julian.

But other than that I think we're going to stick to stick to our disclosure statements. Yes, Julian the insurance coverage is included in our disclosure of approximately $500 million.

Following up on Julien with the Marshall.

Bob Frenzel: We anticipate commission decisions on these proceedings in H2 2023 for Minnesota and Colorado, and in H1 2024 for SPS. In May, Breakthrough Energy Ventures announced a $20 million grant to support our two 10-megawatt pilot projects for Form Energy's 100-hour battery technology. In July, the Minnesota Commission unanimously approved the Form Energy pilot to be installed at our Sherco site alongside our new solar projects. We plan on filing for our second Form Energy pilot later in the quarter and are evaluating sites that could be supportive of this exciting new clean energy technology. We're also working with the Department of Energy on additional funding opportunities to further reduce the cost of these projects for our customers. In May, we filed our second transportation electrification plan in Colorado. The proposed plan, which covers 2024 to-...

We anticipate commission decisions on these proceedings in H2 2023 for Minnesota and Colorado, and in H1 2024 for SPS. In May, Breakthrough Energy Ventures announced a $20 million grant to support our two 10-megawatt pilot projects for Form Energy's 100-hour battery technology. In July, the Minnesota Commission unanimously approved the Form Energy pilot to be installed at our Sherco site alongside our new solar projects. We plan on filing for our second Form Energy pilot later in the quarter and are evaluating sites that could be supportive of this exciting new clean energy technology. We're also working with the Department of Energy on additional funding opportunities to further reduce the cost of these projects for our customers. In May, we filed our second transportation electrification plan in Colorado. The proposed plan, which covers 2024 to-...

Is there a timing.

That resolves itself, where you just have a lot of places of course, and you can't give any real.

Sheila when that proceeding will wrap up and that overhang lifted.

Okay.

Got it alright understood and then any further commentary about the differences in context across the different states.

As I mentioned look we have a September hearing where we're going to learn a lot more about the procedural schedule.

Especially whether it pertains to legal.

And we'll know more then.

Recovery construct <unk> jewelry contracts.

Anthony we really cant go beyond what we've already said in the disclosure. So we have to limit the questions on that.

Yes, it's all included and disclosures an entire page of disclosures in the earnings release in the Q.

Okay, Great and then on slide 11.

Pending settlement.

Alright fair enough I'll leave it there. Thank you guys very much I appreciate it appreciate it thank you Sheila.

Colorado, just you talked about I think an alternate alternative rate increased $47 million.

Okay.

That's dependent upon I guess, some coal plant deferrals.

Thank you. Our next question comes from Anthony crowd out make it happen.

Please go ahead.

Just curious if you could talk about how the commission.

Hey, good morning, Bob Good morning, Brian .

Hopefully when they approved the settlement is that when they will address how they handle the coal plant deferrals or does that get rolled into a separate proceeding.

Sorry.

I didn't want to leave you out.

Just first of all hopefully [laughter].

Hopefully two quick questions one on Julian.

Bob Frenzel: to 2026 period includes expanded solutions and rebates to support new public charging stations and charging at homes, businesses, multifamily buildings, and community locations. It also proposes programs supporting electric school buses, innovation, and income-qualified customers. Our focus is to bring clean transportation to all customers and communities, and to expeditiously assist in the build-out of fast charging to reduce range anxiety of EV purchasers. Next month, we plan to file our Clean Heat Plan in Colorado, and we'll follow with our Natural Gas Innovation Plan for Minnesota during Q4. These plans will be similar to our electric resource plans and provide a framework for our natural gas system to achieve our carbon reduction goals, while meeting the reliability and affordability needs of our customers.

to 2026 period includes expanded solutions and rebates to support new public charging stations and charging at homes, businesses, multifamily buildings, and community locations. It also proposes programs supporting electric school buses, innovation, and income-qualified customers. Our focus is to bring clean transportation to all customers and communities, and to expeditiously assist in the build-out of fast charging to reduce range anxiety of EV purchasers. Next month, we plan to file our Clean Heat Plan in Colorado, and we'll follow with our Natural Gas Innovation Plan for Minnesota during Q4. These plans will be similar to our electric resource plans and provide a framework for our natural gas system to achieve our carbon reduction goals, while meeting the reliability and affordability needs of our customers.

Following up on Julien with the Marshalls.

Anthony that will all be decided within the rate case decision. The commission will make here in Q3, you saw a very deliberate.

Is there a timing.

That resolves itself or are you just have a lot of places of course, and you can't give any real.

Sheila when that proceeding will wrap up and that overhang lifted.

Hearings on it in July and so that's all part of the record. So it is kind of either the $95 million one or the alternative if you defer some additional depreciation is $47 million in that $48 million difference is just the deferral of depreciation so all will be decided.

As I mentioned look we have a September hearing what we're going to learn a lot more about the procedural schedule.

No more of that.

You really cant go beyond what we've already said in the disclosure. So we have to limit the questions on that.

So it would be earnings neutral, but it would have a cash flow impact obviously.

Okay, Great and then on slide 11.

Great. Thanks, I am going from here, Thanks, again for taking the questions yes. Thank.

Pending settlement in Colorado, just you talked about I think an ultimate alternative rate increased $47 million, but that's dependent upon I guess, some coal plant deferrals.

Thank you.

Yeah.

Thank you. Our next question comes from Sophie Karp of Keybanc. Please go ahead.

Hi.

I'm just curious if you could talk about how the commission.

Thanks for taking my question.

Will they hopefully when they approved the settlement is that when they will address how they handle the coal plant deferrals or does that get rolled into a separate proceeding.

Bob Frenzel: Taken as a whole, these innovative projects and partnerships in electricity, in clean transportation, and in-home heating are essential for Xcel Energy to meet our sustainability goals and to continue to deliver our customers the safe, clean, reliable, and affordable energy that they expect now and long into the future. In June, the Boulder County Sheriff's Office announced the findings of its investigation into the cause of the Marshall Fire in December 2021. Our thoughts continue to be with the families and the communities impacted by this devastating fire, including our own employees, whose homes and families were directly affected. The report states that the first Marshall Fire started as a result of an ignition on a property affiliated with an entity called the Twelve Tribes, and that this ignition had nothing to do with Xcel Energy's power lines.

Taken as a whole, these innovative projects and partnerships in electricity, in clean transportation, and in-home heating are essential for Xcel Energy to meet our sustainability goals and to continue to deliver our customers the safe, clean, reliable, and affordable energy that they expect now and long into the future. In June, the Boulder County Sheriff's Office announced the findings of its investigation into the cause of the Marshall Fire in December 2021. Our thoughts continue to be with the families and the communities impacted by this devastating fire, including our own employees, whose homes and families were directly affected. The report states that the first Marshall Fire started as a result of an ignition on a property affiliated with an entity called the Twelve Tribes, and that this ignition had nothing to do with Xcel Energy's power lines.

Yeah, Hi lot of my questions have been answered, but maybe I can just ask a couple of them.

Questions here.

On volumes.

Just curious if you could discuss a little bit what drives the volumes any ability here aside from weather it seems like.

No Anthony that will all be decided within the rate case decision. The commission will make here in Q3, you saw they deliberate.

C&I volumes.

<unk> or close to equally.

Hearings on it in July and so that's all part of the record. So it's kind of either the $95 million one or the alternative if you defer some additional depreciation is $47 million of that did that $48 million difference is just the deferral of depreciation so all will be decided.

<unk>.

As well as residential.

There's some puts and takes that drive against year over year.

Okay.

If I think about sales in really looking at the weather normalized sales. We continue to see really strong growth on the C&I side at Sps and in Q2 on weather normalized basis, we had strength in Minnesota and Wisconsin to.

So it would be earnings neutral, but it would have a cash flow impact obviously.

Great. Thanks I'm good from here, Thanks, again for taking the questions. Thank.

Thank you.

Yeah.

Thank you. Our next question comes from Sophie Karp of Keybanc. Please go ahead.

Colorado on a year to date basis on C&I or there is a.

Hi, good morning.

Bob Frenzel: The sheriff's report also discusses a second ignition that started more than an hour after the first fire at a different location, which the report estimates is approximately 80 to 110 feet away from our power lines. The sheriff's report says that the most probable cause of the second ignition was PSCO's power lines, and we strongly disagree with that conclusion. Because of the pending litigation that's been filed, we're not in a position to discuss the Marshall Fire in more detail at this time, but we will vigorously defend ourselves and look forward to presenting our position in court. Importantly, additional information about the lawsuits and some of the relevant legal standards is included in our earnings release and our 10-Q filing, and I would direct you there. Finally, we recently released our comprehensive sustainability report.

The sheriff's report also discusses a second ignition that started more than an hour after the first fire at a different location, which the report estimates is approximately 80 to 110 feet away from our power lines. The sheriff's report says that the most probable cause of the second ignition was PSCO's power lines, and we strongly disagree with that conclusion. Because of the pending litigation that's been filed, we're not in a position to discuss the Marshall Fire in more detail at this time, but we will vigorously defend ourselves and look forward to presenting our position in court. Importantly, additional information about the lawsuits and some of the relevant legal standards is included in our earnings release and our 10-Q filing, and I would direct you there. Finally, we recently released our comprehensive sustainability report.

Thanks for taking my question.

A large manufacturing facility was down for the first quarter in.

Yeah, Hi lot of my questions have been answered, but maybe I can just ask a couple of them.

In the first quarter of this year in Colorado, So that had some weakness on the residential side the residential while we're down close to a percent for the year, it's tracking in line with our forecasts or expectations for the year right. We continue to see good customer growth, but we do see continued use per customer declines as are we are.

Questions here.

On the volumes.

Just curious if you could discuss a little bit what drives the volumes variability here aside from weather. It seems like you know with CN.

C&I volumes were equally or close to equally.

Really strong energy efficiency in DSM programs. So I think overall it is tracking both on the C&I side and on the resi side is tracking to expectations offer kind of through the first six months and for the balance of year with our with our guidance on sales.

As well as residential.

Like what are some puts and takes that drive that I guess year over year.

Okay.

Yes, if I think about sales in really looking at the weather normalized sales. We continue to see really strong growth on the C&I side that Sps and in Q2 on weather normalized basis.

Okay. Thank you and maybe I can just ask a bigger picture question here I know you've been looking at potentially involve an upfront and then Mr. Maher.

Strength in Minnesota, and Wisconsin to.

Adjacent to one of your territories, just kind of curious.

Bob Frenzel: The report focuses on four core ESG pillars: reach net zero responsibly, strengthen our communities, operate with integrity, and to value people. It details our progress in achieving our industry-leading ESG goals, as well as our priorities moving forward. Some of the key highlights include Xcel Energy has reduced our carbon emissions by 53% since 2005, and more than half of the electricity we provide to our customers comes from carbon-free resources, as compared to 41% nationwide. We outperform the industry reliability standard, restoring power to 94% of customers within 24 hours during major storm events. In this past year, in addition to contributing over $10 million to local organizations through the Xcel Energy Foundation, our employees contributed $3 million and volunteered over 74,000 hours for nonprofit and community improvement projects. We're proud of our track record.

The report focuses on four core ESG pillars: reach net zero responsibly, strengthen our communities, operate with integrity, and to value people. It details our progress in achieving our industry-leading ESG goals, as well as our priorities moving forward. Some of the key highlights include Xcel Energy has reduced our carbon emissions by 53% since 2005, and more than half of the electricity we provide to our customers comes from carbon-free resources, as compared to 41% nationwide. We outperform the industry reliability standard, restoring power to 94% of customers within 24 hours during major storm events. In this past year, in addition to contributing over $10 million to local organizations through the Xcel Energy Foundation, our employees contributed $3 million and volunteered over 74,000 hours for nonprofit and community improvement projects. We're proud of our track record.

Colorado on a year to date basis on C&I or there is a.

How are you still thinking about that and it's been then you progress to report.

Large manufacturing facility was down for the first quarter in.

Yes, hi, its Bob.

In the first quarter of this year in Colorado, So that has some weakness on the residential side residential while we're down close to a percent for the year, it's tracking in line with our forecasts or expectations for the year right. We continue to see good customer growth, but we do see continued use per customer declines as our we have real.

Look we as a company, we certainly have a view on nuclear both current and future.

A key priority for us is preserving the existing nuclear fleet and making sure that there is a potential for a nuclear future for the country.

We have been working with a company called new scale on their technology, It's an SLR technology, mostly helping them through the nuclear regulatory process and making sure that their applications need the NRC guidelines and hoping to get that that technology can get through.

Really strong energy efficiency in DSM program. So I think overall it is tracking both on the C&I side and on the resi side is tracking to expectations for kind of through the first six months and for the balance of year with our guidance on sales.

Thank you.

Can get through.

Maybe I can just ask a bigger picture question here I know you've been looking at potentially involve an upfront and then that's EMR.

The regulatory process.

Don't have plans as a company to own or operate.

At this point.

Do you think one of your territories just kind of curious.

We really are just taking our nuclear expertise and helping with the nuclear future for that company.

Bob Frenzel: It's keeping with our corporate strategy, and it's based on our values of connected, committed, trustworthy, and safe. With that, I'll turn it over to Brian.

It's keeping with our corporate strategy, and it's based on our values of connected, committed, trustworthy, and safe. With that, I'll turn it over to Brian.

How are you still thinking about that then.

Any progress to report.

So we don't have any specific plans to announce on SMS and specifics.

Yeah, Hey, it's Bob.

Look we as a company, we certainly have a view on nuclear both current and future.

Brian Van Abel: Thanks, Bob, and good morning, everyone. We had earnings of $0.52 per share for Q2 2023, compared to $0.60 per share in 2022. Please note that the line-by-line income statement comparisons are more complicated this quarter as a result of true-ups for the Minnesota rate case this year and the Texas rate case last year. Most significant earnings drivers for the quarter included the following: Lower depreciation and amortization expense increased earnings by $0.10 per share, largely due to the reversal of deferrals in the Texas rate case last year and the extension of depreciation lives from the Minnesota rate case. These decreases are partially offset by our capital investment program. Lower taxes other than income taxes increased earnings by $0.06 per share, reflecting property tax deferrals in Minnesota and Colorado.

Alright. Thank you that's all for me.

A key priority for us is preserving existing nuclear fleet and making sure that it is.

Thank you our next question comes from.

Yeah.

The potential for a nuclear future for the country.

Harley Devonport Goldman Sachs. Please go ahead.

We have been working with a company called new scale on their technology.

Hey, good morning, Thanks for taking the question.

<unk> technology.

<unk> welcome aboard.

<unk>, helping them through the nuclear regulatory process, and making sure that their applications need the NRC guidelines and hoping to get that that technology can get through.

Thank you I appreciate that.

Bob you've been vocal about sort of an all of the above approach kind of on the energy transition from a technology perspective, and you talked a little bit about the grass farm energy pilot could you just talk a little bit about kind of how that pilots involving and other opportunities that might exist in that space. For instance, do you think about long duration storage.

Can get through the regulatory process, we don't have plans as a company to own or operate ASMR at this point.

We really are just taking our nuclear expertise and helping with the nuclear feature for that company.

Yes happy to look as we think about it as a company.

<unk>.

Brian Van Abel: In addition, other items combined to increase earnings by $0.04 per share. Offsetting these positive drivers, lower electric revenues, less fuel, decreased earnings by $0.23 per share, reflecting unfavorable weather, the impact of the Minnesota rate case, and recognition of revenue from the Texas rate case last year. Higher O&M expense decreased earnings by $0.02 per share, and higher interest expense decreased earnings by $0.03 per share. Turning to the sales. Year-to-date, weather-adjusted electric sales increased by 0.6%. We continue to expect annual electric sales growth of approximately 1% in 2023, which is driven by growth in C&I sales, partially offset by projected declines in residential sales. Now, shifting to the expenses. O&M expenses increased $14 million for the second quarter.

In addition, other items combined to increase earnings by $0.04 per share. Offsetting these positive drivers, lower electric revenues, less fuel, decreased earnings by $0.23 per share, reflecting unfavorable weather, the impact of the Minnesota rate case, and recognition of revenue from the Texas rate case last year. Higher O&M expense decreased earnings by $0.02 per share, and higher interest expense decreased earnings by $0.03 per share. Turning to the sales. Year-to-date, weather-adjusted electric sales increased by 0.6%. We continue to expect annual electric sales growth of approximately 1% in 2023, which is driven by growth in C&I sales, partially offset by projected declines in residential sales. Now, shifting to the expenses. O&M expenses increased $14 million for the second quarter.

With.

First first utility to announce a 100% carbon free given our geographic position our ability to transition with wind and solar cost effectively for our customers through the end of this decade allowed us to make an interim target of an 80% carbon reduction and we feel very confident in that but we've always been focus.

We don't have any specific plans to announce on SMS and specifics.

Alright, Thank you that's awesome.

Okay.

Thank you our next question comes from.

Are they in Davenport Goldman Sachs. Please go ahead.

On.

We need new technology, New research development and deployment of new technologies to achieve our 100% goal and the nation's clean energy goals one of the big pieces of that is obviously energy storage.

Hey, good morning, Thanks for taking my question.

<unk> welcome aboard.

Thank you I appreciate that.

Bob.

All about sort of an all of the above approach kind of on the energy transition from a technology perspective, and you are talking about them in about the granting of farm energy pilot could you just talk a little bit about kind of how that pilots involving and other opportunities that might exist in that space. For example, do you think about long duration storage.

We have a lot of lithium ion for our batteries around the country and we have some on our own systems.

The long duration energy storage is a critical part of the energy future and so the form energy battery.

As a 100 megawatt hour.

Yes happy to look as we think about it as a company.

Battery, so instead of four hours, it's four days.

Brian Van Abel: This increase was primarily due to the timing of generation outages, higher bad debt expense, insurance costs, and inflation, partially offset by the recognition of previously deferred costs from the Texas electric rate case in 2022. Given these drivers, as well as the Minnesota rate case decision, we're taking actions to mitigate O&M, which will include evaluating discretionary programs, staffing levels, consulting, employee expenses, variable compensation, and other management actions. As a result, we now expect O&M expenses to decline 3% for the year. During Q2, we also made progress on several regulatory proceedings. Starting with our completed proceedings, in June, the Minnesota Commission approved a three-year electric rate increase of $311 million, based on an ROE of 9.25%, an equity ratio of 52.5% in a forward test year.

This increase was primarily due to the timing of generation outages, higher bad debt expense, insurance costs, and inflation, partially offset by the recognition of previously deferred costs from the Texas electric rate case in 2022. Given these drivers, as well as the Minnesota rate case decision, we're taking actions to mitigate O&M, which will include evaluating discretionary programs, staffing levels, consulting, employee expenses, variable compensation, and other management actions. As a result, we now expect O&M expenses to decline 3% for the year. During Q2, we also made progress on several regulatory proceedings. Starting with our completed proceedings, in June, the Minnesota Commission approved a three-year electric rate increase of $311 million, based on an ROE of 9.25%, an equity ratio of 52.5% in a forward test year.

And Thats, a nice asset class as we think about periods when the wind doesn't blow and the Sun doesn't shine and we've seen evidence of that.

As recently as early June of this year in the southwest where we had very limited wind production, we've seen it in polar vortex as we're in winter storm here, where we had no wind production for almost a three day period. So this idea of a long duration batteries is really interesting what's exciting about form in particular, it's a pretty old.

<unk> on.

We need new technology, New research development and deployment.

New technologies to achieve our 100% goal and the nation's clean energy goals.

Technology really this was found by the department of energy almost 60 years ago.

But is becoming commercialized will buy a new company form energy and they are a breakthrough energy VC funded company.

One of the big pieces of that is obviously energy storage.

We have a lot of lithium ion for our batteries around the country and we have some on our own systems.

In energy impact partners funded company and the technology is pretty interesting I won't call. It simple because of that because that would.

The long duration energy storage is a critical part of the energy future and so the form energy battery.

That would <unk>.

Minimize the impact and the efforts of the development team and the founders of that company, but it's basically rusting and de rusting iron and the great part about that is iron is readily available its domestically available.

As a 100 megawatt hour.

Brian Van Abel: We plan to file for reconsideration of the decision, as we felt the ROE was not consistent with the ALJ recommendation or recent Commission decisions in other Minnesota proceedings. In our South Dakota electric rate case, the Commission approved a settlement for approximately $14 million revenue increase. In our pending Colorado electric rate case, we reached a partial settlement that reflects a $95 million rate increase based on an ROE of 9.3%, an equity ratio of 55.7%, and a 2022 historic test year. Remaining items for litigation are the structure of the TCA rider and treatment of coal plant depreciation. We expect a Commission decision later this summer, with rates going into effect in September.

We plan to file for reconsideration of the decision, as we felt the ROE was not consistent with the ALJ recommendation or recent Commission decisions in other Minnesota proceedings. In our South Dakota electric rate case, the Commission approved a settlement for approximately $14 million revenue increase. In our pending Colorado electric rate case, we reached a partial settlement that reflects a $95 million rate increase based on an ROE of 9.3%, an equity ratio of 55.7%, and a 2022 historic test year. Remaining items for litigation are the structure of the TCA rider and treatment of coal plant depreciation. We expect a Commission decision later this summer, with rates going into effect in September.

So instead of four hours, it's four days.

And that's a nice asset class as we think about periods when the wind doesn't blow and the Sun doesn't shine and we've seen evidence of that.

Not subject to Counterparties in regimes in the world, where we have challenges and so when I think about new technologies.

As recently as early June of this year and the southwest where we had very limited wind production, we've seen it in polar vortex as we're in winter storm here, where we had no wind production for almost a three day period. So this idea of a long duration batteries is really interesting what's exciting about form in particular, it's a pretty old.

You know sometimes it's.

Not the best that wins is the one that's most commercialized <unk> and the one that can deploy the fastest and I was really proud to be in west, Virginia last month, and breaking ground with the <unk>.

<unk> energy team with Secretary Grand home and Senator mansion.

Technology really this was found by the department of energy almost 60 years ago.

And building 800 megawatt capable factory in West, Virginia, as we speak with loan guarantees and grants from the government. So this is a technology that's going to come to fruition. It's a technology that's going to be scalable, we're really pleased to be their first.

But is becoming commercialized we will buy it buy a new company form energy and they are a breakthrough energy VC funded company.

Brian Van Abel: In our New Mexico electric rate case, we reached a contested settlement that reflects a rate increase of $33 million based on an ROE of 9.5% and equity, equity ratio of 54.7% in the forecast test year. We expect the decision and implementation of final rates by October. Both the Colorado and New Mexico settlements reflect significant negotiation and compromise by Xcel Energy and a wide range of interveners with varied interests. The parties believe that the settlements resulted in a just and reasonable outcome for our customers. As a result, we are hopeful our commissions will approve the settlements without modifications. We also have pending rate cases in Wisconsin and Texas, which are early in the process. Intervenor testimony is expected in the Texas case in August, with a decision in Q1 next year.

In our New Mexico electric rate case, we reached a contested settlement that reflects a rate increase of $33 million based on an ROE of 9.5% and equity, equity ratio of 54.7% in the forecast test year. We expect the decision and implementation of final rates by October. Both the Colorado and New Mexico settlements reflect significant negotiation and compromise by Xcel Energy and a wide range of interveners with varied interests. The parties believe that the settlements resulted in a just and reasonable outcome for our customers. As a result, we are hopeful our commissions will approve the settlements without modifications. We also have pending rate cases in Wisconsin and Texas, which are early in the process. Intervenor testimony is expected in the Texas case in August, with a decision in Q1 next year.

Energy impact partners funded company and the technology is pretty interesting I won't call it simple because that because that would.

Partner and sales of that but it's a pilot it's 10 megawatts and we're going to put it on a 9000 megawatt system. So we have a great opportunity to build it with them.

That would.

To minimize the impact and the efforts of the development team and the founders of that company, but it's basically rusting and day resting iron and the great part about that is iron is readily available its domestically available.

Invest alongside and then the breakthrough energy grants and the potential Doa grants buy down that cost and buy down that risk for the company. So very exciting technology really excited about the future what this could mean.

Not subject to Counterparties in regimes in the world, where we have challenges and so when I think about new technologies.

Carla I would just add we have another another pilot in Colorado, Andrea which is.

You know sometimes.

It's not the best that wins is the one that's most commercialized pool and the one that can deploy the fastest and I was really proud to be in west, Virginia last month, and breaking ground with the FERC.

Liquid metal technology that will have online in 2024 eight.

<unk>, 8% to 12 hour duration, so kind of call. It mid duration. So we're spending a lot of time on this new technology and I think also longer term as you kind of broadened the definition of energy storage.

<unk> energy team with Secretary Grand home and send our mansion.

We are building and 800 megawatt capable factory in West, Virginia, as we speak with loan guarantees and grants from the government. So this is a technology that is going to come to fruition. It's a technology that is going to be scalable. We're really pleased to be there first.

Brian Van Abel: While in Wisconsin, we expect intervener testimony in the fall and a Commission decision by year-end. Turning to the Inflation Reduction Act, as most of you are aware, the US Treasury recently provided guidance on tax credit transferability, which was consistent with our expectations. We have considerable demand and anticipate monetizing excess tax credits later in the year. Finally, 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've updated our key assumptions to reflect the latest information, which are detailed in our earnings release. Please note that the guidance assumption changes regarding capital riders, depreciation, property taxes, and ETR primarily reflect regulatory decisions or changes to assumed PTC levels and are largely earnings neutral.

While in Wisconsin, we expect intervener testimony in the fall and a Commission decision by year-end. Turning to the Inflation Reduction Act, as most of you are aware, the US Treasury recently provided guidance on tax credit transferability, which was consistent with our expectations. We have considerable demand and anticipate monetizing excess tax credits later in the year. Finally, 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've updated our key assumptions to reflect the latest information, which are detailed in our earnings release. Please note that the guidance assumption changes regarding capital riders, depreciation, property taxes, and ETR primarily reflect regulatory decisions or changes to assumed PTC levels and are largely earnings neutral.

Green hydrogen as a form of energy storage as we think about longer term beyond the store and then burn through some of our firm. This basketball units longer term. So we're pretty excited about lot of vehicle of new technologies and glad really happy to see how excited our Minnesota Commission is on form energy with the unanimous approval of that project.

<unk> and sales of that but it's a pilot it's 10 megawatts and we're going to put it on a 9000 megawatt system. So we have a great opportunity to build it with them and invest alongside and then the breakthrough energy plants and the potential grants buy down that cost and buy down that risk for the company. So very exciting technology really excited about.

Awesome I appreciate those perspectives and then the follow up just around earnings guidance, obviously, you're reiterating the guidance for 2020, we just wanted to check in on temperature on on the five to seven long term guidance you kind of think about the incremental spending opportunities from a capex perspective, along with some of the regulatory.

The future what this could mean.

And Karla I would just add we have another another pilot in Colorado, Andrea which is in.

Tom Lacey and kind of how you're thinking about that long term range.

Yes, Carl good question.

Liquid metal technology that will have online in 2024, 8% to 12 hour duration, so kind of call. It mid duration. So we're spending a lot of time on this new technologies and I think also longer term if you kind of broadened the definition of energy storage.

Fully expect to continue delivering in the upper half of our 5% to 7% long term guidance, so thats unchanged.

You mentioned the incremental opportunities that we have and I think in Bob's comments. He mentioned the circle solar three farm. The Sps to 420 418 megawatts of solar farms that are going to provide significant customer benefits in Sps, we filed that CCN yesterday, so those two together.

Brian Van Abel: However, the lower O&M and a portion of the interest expense assumptions will generally impact earnings. With that, I'll wrap up with a quick summary. We continue to expect to deliver 2023 earnings within our guidance range, as we have for the past 18 years, managing through regulatory outcomes, changing economic environments, and periodic headwinds. We're delivering on our capital plan and executing on opportunities, including clean generation, transmission, and distribution to support reliability, resiliency, and broader economic growth. 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 support our communities and states in the clean energy transition. This concludes our prepared remarks. Operator, we will now take questions.

However, the lower O&M and a portion of the interest expense assumptions will generally impact earnings. With that, I'll wrap up with a quick summary. We continue to expect to deliver 2023 earnings within our guidance range, as we have for the past 18 years, managing through regulatory outcomes, changing economic environments, and periodic headwinds. We're delivering on our capital plan and executing on opportunities, including clean generation, transmission, and distribution to support reliability, resiliency, and broader economic growth. 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 support our communities and states in the clean energy transition. This concludes our prepared remarks. Operator, we will now take questions.

Green hydrogen as a form of energy storage as we think about longer term beyond those store and then burn through some of our firm to SaaS flow units longer term. So we're pretty excited about lottery called new technologies.

And glad really happy to see how excited our Minnesota Commission is on form energy with a unanimous approval of that project.

There are north of $1 billion of clean energy investments that will benefit our customers that are outside of our current Apple plan nothing.

Awesome I appreciate those perspectives and then the follow up just around earnings guidance, obviously, youre reiterating the guidance for 2020, but just wanted to check in on temperature on on the five to seven long term guidance. Thank you kind of think about the incremental spending are.

I think longer term right, we'll file here in Q3, our preferred plan for with the Colorado Commission around our.

The RFP is going into that that was decided pre IRA. The commission ruled on that resource plan before we can layer on the significant benefits significant customer benefits of the IRA So when we look at.

Opportunities from a capex perspective, along with some of the regulatory outcomes that you've seen kind of how you're thinking about that long term range.

Yeah, Carl Good question and we.

Fully expect to continue delivering in the upper half of our 5% to 7%.

How the costs are coming in relative to what was approved we believe we can go bigger and faster.

Operator: As a reminder, if you would like to ask a question on today's call, please press star one on your telephone keypad. To withdraw your question, you may press star two. Our first question comes from Jeremy Tonet from J.P. Morgan. Please go ahead.

Long term guidance, so that's unchanged.

And above what that initial 4000 megawatts of renewables and storage show and so we're excited to work with our Colorado Commission on that look for that filing in Q3, and hopefully get a decision in Q4, and then even more longer term in the next 18 to 24 months, we'll be filing more rfps in Minnesota, Colorado and Sps for.

You mentioned the incremental opportunities that we have.

I think in Bob's comments, he mentioned the Sherpa solar three farm.

Sps for 420, 418 megawatts of solar farms that are going to provide significant customer benefits in Sps, we filed that CCN yesterday. So those two together are north of $1 billion of clean energy investments that will benefit our customers that are outside of our current Apple a plant.

Jeremy Tonet: Hi, good morning.

Brian Van Abel: Hey, good morning, Jeremy. How are you?

Jeremy Tonet: Good. Good. Thanks for having me. Just wanted to touch base with a bit on the targeted O&M reductions, as you called out there, for these efficiencies in 2023. I was wondering if you could peel back the onion a little bit more to see how much of this is one time in nature versus carry forward into future years. Just any thoughts there would be helpful.

Further significant additions of clean energy assets as we March towards the 8% by 2030 goal. So I'm pretty excited about it pretty excited about the long term opportunities and.

Nothing longer term right, we'll file here in Q3, our preferred plan for with the Colorado Commission around our.

We do feel good about delivering in the upper half of our long term guidance range.

Great. Thank you.

RFP.

Thank you. Our next question comes from Steve Fleishman of Wolfe Research. Please go ahead.

Going into that those decided pre IRA the commission ruled on that resource spend before we can layer on the significant benefits significant customer benefits of the IRA. So when we look at.

Brian Van Abel: Sure. Hey, good morning, Jeremy, and thanks for the question. So I think I'll explain it a couple different ways. Talk about kind of the near-term actions. And, you know, when we think about it, you know, how do we hit our year-end O&M guidance? One is we look at, you know, second half of last year, we had elevated O&M, if you look at versus the first half of last year, and particularly in Q4, as there was some one-time items in Q4 relative to having a good year investing in the system. And then, you know, there are some impacts this year, where we've had some timing of generation outages earlier in this year, and we also expect bad debt expense to decline. We saw some higher bad debt expense levels given the commodity price impacts earlier in this year.

Yes, hi, good morning.

Hey, Steve.

Have all of you on the phone including Paul.

Now the costs are coming in relative to what was approved we believe we can go bigger and faster.

Thank you.

The.

<unk>.

One Marshall fire question is there a deadline when any claims need to be filed by.

And above what the initial 4000 megawatts of renewables and storage showed so we're excited to work with our Colorado Commission on that look for that filing in Q3, and hopefully give you a decision in Q4, and then even more longer term in the next 18 to 24 months will be falling more rfps in Minnesota, Colorado and Sps for.

Yes.

Dave It's Bob My understanding is that.

Claims are a two year deadline, so that would say at the end of this year is wind claims need to be filed.

Further significant additions of clean energy assets as we March towards the 8% by 2030 goal so pretty excited about it pretty excited about the long term opportunities.

Okay.

Second question different topic on these.

Brian Van Abel: So as I think about that, bad debt expense level should be more sustainable. You have some timing in the generation outages. But then we're also looking at a number of what I call it near-term and long-term opportunities. Near term is what you'd call more one-time discretionary items around program spend, consulting, third-party contracts, and variable compensation levers, you know, your more traditional management initiatives. But I think we're spending a lot of time on longer term initiatives around our innovation and transformation, transformation team, right? We've invested heavily in driving what we call waste elimination and process improvements across our orgs.

So as I think about that, bad debt expense level should be more sustainable. You have some timing in the generation outages. But then we're also looking at a number of what I call it near-term and long-term opportunities. Near term is what you'd call more one-time discretionary items around program spend, consulting, third-party contracts, and variable compensation levers, you know, your more traditional management initiatives. But I think we're spending a lot of time on longer term initiatives around our innovation and transformation, transformation team, right? We've invested heavily in driving what we call waste elimination and process improvements across our orgs.

Colorado settlement is there.

We do feel good about delivering in the upper half of our long term guidance range.

No I think you mentioned Q3 for those final water or is there a specific date for that.

Great. Thank you.

Approval.

Thank you. Our next question comes from Steve Fleishman of Wolfe Research. Please go ahead.

Now there's not a date, but we expect that the commission will rule probably in the middle of August post deliberations at the middle of August .

Yes, hi, good morning.

David could have all of you on the phone including Paul.

Okay.

And then last.

Let me just I know.

Thank you.

The.

You all have been pretty focused on a number of hires.

Yes.

The.

One Marshall final question is there a deadline when any claims needs to be filed by.

Provisions, including the hygiene one.

<unk>.

Durgesh Chopra: ... and then we're also investing heavily in technology. You heard me, I've talked about before, something we call the Digital Operations Factory, which is focused on using AI in our operations. We started that in nuclear with our Corrective Action Program. Now we're rolling that out to distribution, gas, and our field operations, and that's using traditional AI. We're also looking at now use cases for Gen AI. So as we look at it, you know, our goal is to hit 3% down for the year. Longer term, our goal is to kind of keep O&M flat. And as Bob said, you know, we've done that for nearly a decade, and so we have some work to do to get there, balance of the year, but then think longer term, O&M flat as we go forward.

... and then we're also investing heavily in technology. You heard me, I've talked about before, something we call the Digital Operations Factory, which is focused on using AI in our operations. We started that in nuclear with our Corrective Action Program. Now we're rolling that out to distribution, gas, and our field operations, and that's using traditional AI. We're also looking at now use cases for Gen AI. So as we look at it, you know, our goal is to hit 3% down for the year. Longer term, our goal is to kind of keep O&M flat. And as Bob said, you know, we've done that for nearly a decade, and so we have some work to do to get there, balance of the year, but then think longer term, O&M flat as we go forward.

And and just kind of curious so latest thoughts on.

Yes, Steve.

Steve It's Bob My understanding is if the claim.

The.

<unk>.

Claims are a two year deadline, so that would say at the end of this year is wind claims need to be filed.

So look at hydrogen production.

Green hydrogen all those kind of.

Okay.

Pillars of the Green hydrogen and when do you think youll get we will get that in.

Second question different topic on the.

Weather nuclear might be included in that or constitutionality going to be a problem for that thanks, Steve.

Colorado settlement is there.

I think you mentioned Q3 for the final water or is there a specific date for that.

Steve It's Bob Thanks for the question, we've been very active in clean fuels in general and hydrogen in particular.

Approval.

Now, there's not a <unk>, but we expect that the commission will rule probably in the middle of August whole deliberations novartis.

Look philosophically.

We believe that we're going to undergo a large period of electrification over the next 10 or 20 years as a country.

Jeremy Tonet: Got it. That's, that's very comprehensive, very helpful there. And so that kind of touches on, I guess, the next question I had, is just with regards to, well, the Minnesota order, if and it's caused you to revisit any embedded assumptions over the remainder of your five-year plan at this point, and has these kind of O&M items, as you called out, adjusted for that?

Okay.

And then naturally just I know.

And as a company.

But there are parts of the economy that are can be difficult.

You all have been pretty focused on a number of higher rate.

Or expensive or even in some cases impossible to electrify and therefore, we feel like we need a clean molecule to help in those areas and today, that's natural gas, but tomorrow. The most promising molecule that we see is a green hydrogen molecule and this looks like is an op.

Provisions, including the hydrogen one.

Sure.

And I'm just kind of curious.

Just thoughts on.

The ability.

So look at hydrogen production.

Durgesh Chopra: No, I don't think it does. I think about our long-term assumptions and our long-term 5% to 7% earnings growth rate. You know, we continue to expect to deliver an upper half of that long-term guidance.

Brian Van Abel: No, I don't think it does. I think about our long-term assumptions and our long-term 5% to 7% earnings growth rate. You know, we continue to expect to deliver an upper half of that long-term guidance.

Green hydrogen all those.

End of <unk>.

Opportunity for the company. It's another version of steel for fuel at some level.

Pillars into green hydrogen when do you think youll get we'll get that in.

Weather nuclear might be included in that or institutional and he's going to be a problem for that thanks, Steve.

Federal government supportive of it states are supportive of it and we've got two hydrogen hub applications. One in the Rocky Mountain region with Mou's from four states.

Jeremy Tonet: Got it. And then just at a higher level, if I could, you know, given the growth of wildfire risk, has your mitigation strategy, I guess, evolved over time, or do you have any other thoughts on that side?

Steve It's Bob Thanks for the question, we've been very active in clean fuels in general and hydrogen in particular.

Two of which we serve Colorado, New Mexico, as well as Utah Wyoming.

And then here in the upper Midwest five state Mou again, two of which three of which that we serve Wisconsin, Minnesota North Dakota, Montana.

Look philosophically.

Bob Frenzel: Hey, Jeremy, it's Bob. Appreciate the question. As you know, we've been operating under, in Colorado, under a wildfire mitigation plan that was instituted probably more than three years ago. That plan is due to be refreshed, in Colorado, at the end of this year. We expect to propose continuation of existing programs and new programs in Colorado that understand the volatility of weather in the West and the footprint of the Colorado company in particular. So we're still working through that. Nothing specific right now, but certainly, you know, looking at everything that we can in terms of the risk and the opportunities to, you know, strengthen our own system, and make sure that we protect our communities and our customers.

We believe that we're going to undergo a large period of electrification over the next 10 or 20 years as a country.

And as a company.

And we are in front of the Doa those have progressed through the process and we expect to know by the end of the year, whether we're going to get to your loan grants for hydrogen and I think you are aware of some of the challenges around what qualifies for a tax credit.

But there are parts of the economy that are going to be difficult.

Hydrogen land and I think theres sort of three areas of sort of debate and.

And what we're trying to do is balance.

Cost to the customer and a need to accelerate Oems to build and take us down the technology curve of OEM.

Opportunity for the company. It's another version of steel for fuel at some level.

Federal government supportive of it states are supportive of it and we've got two hydrogen hub applications. One in the Rocky Mountain region with Mou's from four states.

<unk> and balance of plant.

And I think about those as location.

Generation matching and then additionality, so with respect to location we've been in all three of those on one and we think we need flexibility in all three of those categories.

Jeremy Tonet: Got it. Just one last one, if I could. You know, post what we've seen in Minnesota here so far, does your view of the relative attractiveness of Minnesota versus Xcel's wider footprint change in any way?

Two of which we serve Colorado, and new Mexico, as well as Utah Wyoming.

And then here in the upper Midwest, our five state Mou again, two of which three of what we serve Wisconsin, Minnesota, North Dakota, Montana.

On the location, we've been supporting as a company are balancing area type location.

Bob Frenzel: Look, you know, I think as I said in my opening remarks, we feel like we've run a really good utility in Minnesota and across our eight states, focusing on our customers and our communities, and helping our states achieve their policy objectives around clean energy and clean transportation. And the outcome, I'll say was disappointing, you know, for two reasons. Paul and Brian mentioned one, which was, you know, it was inconsistent with previous decisions in Minnesota that have been 9.4 to 9.65. But equally important, probably didn't recognize what I think Xcel Energy is a national leading utility in advancing a lot of these initiatives, making sure we do it reliably and affordably and sustainably.

And we're in front of the Doa those have progressed through the process and we expect to know by the end of the year, whether we're going to get Dewey loan grants for hydrogen and I think youre aware of some of the challenges around what qualifies for a tax credit and.

But certainly not national which causes real market distortions and challenges with generation nationally.

Similarly on matching.

That the peer level, we'd say, we need hourly matching but we probably need some transition period to get to that strict hourly matching and so we've been supportive of some period of time, where.

And hydrogen land and I think there's sort of three areas of sort of debate.

Trying to do is balance.

Cost to the customer and a need to accelerate.

Maybe by the end of the decade or late this decade, we've got hourly matching but we'll go to annually matching for for some period of time, and then with additionality again very supportive of the additionality as a concept.

Oems to build and take us down the technology curve of OEM, electrolyzed hers and balance of plant.

Think about those as location.

Generation matching and then additionality, so with respect to location we've been.

But areas of flexibility there one we would really supports nuclear.

In regards to additionality, and we have supported pretty vocally that as well as any sort of otherwise back.

Bob Frenzel: You know, we'll continue to review our investment opportunities and our programs in the state. But I think generally, you know, we're really confident that, you know, this is our headquarters state, and we want to work proactively with the governor, the legislature, and the PUC to advance these initiatives.

All three of those.

You know, we'll continue to review our investment opportunities and our programs in the state. But I think generally, you know, we're really confident that, you know, this is our headquarters state, and we want to work proactively with the governor, the legislature, and the PUC to advance these initiatives.

And we think we need flexibility in all three of those categories.

Back down energy.

On the location, we've been supporting the company's balancing area type location.

I would support that as additionality, if it came back into the grid and so.

Very active we're very active at <unk> were very active in <unk>.

But certainly not national which causes real market distortions and challenges with generation nationally.

And I think those are generally in line with principles that both of those organizations are supporting Steve.

Jeremy Tonet: Got it. That's very helpful. I'll leave it there. Thanks.

Similarly on matching I think.

Stephen you asked about timing or the statutory deadline of August 22nd.

That the peer level, we'd say, we need the hourly matching but we probably need some transition period to get to that.

Operator: Thank you. Our next question comes from Durgesh Chopra of Evercore. Please go ahead.

They haven't missed statutory deadline, yet, but what we're hearing is that there is still a lot of.

Strict hourly matching and so we've been supportive of some period of time, where.

Durgesh Chopra: Hey, good morning, team. Sorry, I was on, I was on mute. Just,

Uncertainty around the positions that we've outlined given the some of the polarizing viewpoint. So it certainly could flip in the September or October .

Maybe by the end of the decade or late this decade, we've got hourly matching but and we'll go to annually matching for for some period of time, and then with additionality again very supportive of the additionality as a concept.

Bob Frenzel: Hey, Durgesh... Three years later, we're still getting caught by the mute button.

Durgesh Chopra: Okay. Can you hear me now? I'm sorry.

Bob Frenzel: Yeah, great.

Okay.

Durgesh Chopra: Okay, perfect. Sorry about that, guys. Brian, I heard you mention the Minnesota rate case item, just appeal or rehearing. Could you just give us a little bit more color there as to what the next steps are, timeline?

That's a lot of good information. Thank you I appreciate it.

Thank you.

Yeah.

Thank you. Our next question comes from the line Ryan Levine of Citi. Please go ahead.

But areas of flexibility there one we would really supports nuclear.

Hi, everybody.

In regards to additionality, and we have supported pretty vocally that as well as any sort of otherwise back.

Alright in terms of the $500 million insurance, what was the cost of that insurance and when was it occurred.

Jeremy Tonet: Yeah, the reconsideration. It's, we need to file for reconsideration twenty days after the written order, so that's coming up. So certainly, we will file for reconsideration right around ROE, around the decision on the prepaid pension asset and some other expense levels. You know, we're hopeful the Minnesota Commission will take that up and look hard at our reconsideration filing. They have sixty days once that, they have sixty days to decide. So that's the process.

Brian Van Abel: Yeah, the reconsideration. It's, we need to file for reconsideration twenty days after the written order, so that's coming up. So certainly, we will file for reconsideration right around ROE, around the decision on the prepaid pension asset and some other expense levels. You know, we're hopeful the Minnesota Commission will take that up and look hard at our reconsideration filing. They have sixty days once that, they have sixty days to decide. So that's the process.

Back down energy.

We would support that as additionality, if it came back into the grid and so.

And then I guess go forward or are you seeing changes in pricing for wildfire related insurance and what's your strategy on a go forward basis related to.

Very active we're very active at <unk> were very active in <unk>.

And I think those are generally in line with principles that both of those organizations are supporting Steve.

Ginger.

We haven't disclosed the cost Ryan and every year, we renew or.

Stephen you asked about timing or the SaaS satori deadline of August 22nd and they haven't missed statutory deadline, yet, but what we're hearing is that there is still a lot of pulp.

<unk> program, we continue to look at that.

Insurance program is for everything is based on market experienced with insurance companies and as you can imagine it gets more challenged all the time, that's not just related to wildfire, but that's what all we have to say about insurance.

Durgesh Chopra: Got it. Okay. So that should be coming out shortly, and then 60 days after the decision, whether they take it up or not?

Certainly around the position that we've outlined given the some of the polarizing viewpoint. So it certainly could slip in the September or October .

Jeremy Tonet: Yep.

Brian Van Abel: Yep.

Durgesh Chopra: That's the Minnesota Commission. Okay.

Jeremy Tonet: Yep.

Brian Van Abel: Yep.

Durgesh Chopra: Thank you. And then just, you know, you mentioned the transferability guidance was in line with your expectations. There's been a lot of discussion, you know, within the industry, investors, and credit agencies on the implications to CFO. You know, I know, you know, you're very knowledgeable on this topic in general, so just get your thoughts there, how you're seeing this play out and implications for your credit metrics.

Have you already procured it in.

Okay.

2003 for the next year or is that.

That's a lot of good information. Thank you appreciate it.

Coming event for the back half of the year.

Thank you.

Thank you. Our next question comes from Ryan Levine of Citi. Please go ahead.

We're still in the process.

Okay.

Hi, everybody.

And I guess, one last question on that.

In terms of the $500 million insurance, what was the cost of that insurance.

$500 million any associated cost with procuring it is that passed onto ratepayers or is that embedded in your O&M cost outlook.

Was it occurred.

And then I guess go forward or are you seeing changes in pricing for wildfire related insurance and what's your strategy on a go forward basis.

Jeremy Tonet: Yeah. So I mean, we've spent a lot, as I would call it, an industry collaboration on how we worked this through our financials. And so not only have we worked with, you know, a lot of our peer utilities, we've also worked with the Big Four accounting firms. And so everything we're going to do is going to be in accordance with GAAP. It's gonna-- We'll take the income tax approach. It's gonna flow through our income tax expense line, and it'll also flow through cash from operations.

Brian Van Abel: Yeah. So I mean, we've spent a lot, as I would call it, an industry collaboration on how we worked this through our financials. And so not only have we worked with, you know, a lot of our peer utilities, we've also worked with the Big Four accounting firms. And so everything we're going to do is going to be in accordance with GAAP. It's gonna-- We'll take the income tax approach. It's gonna flow through our income tax expense line, and it'll also flow through cash from operations.

It's a reflection.

Covered through rate cases, yes.

Insurance.

And it's included in Ireland.

We haven't disclosed the cost Ryan and every year, we renew our insurance program and we continue to look at that.

Included in.

It's included in O&M expense.

Insurance program is for everything is based on market experience for the insurance companies and as you can imagine it gets more challenged all the time, that's not just related to wildfire, but that's about all we have to say about insurance.

Okay I appreciate the color. Thank you.

Thank you we have no further questions in the queue I will turn the call back over to CFO , Brian Van Abel for closing remark.

Brian Van Abel: ... And so I think it's pretty straightforward, and I know there's been a lot of discussion, you know, whether it'll show up in the FFO to debt metrics, and I feel pretty good about it, because it absolutely will reflect the economics of our underlying financials. And it is for us, right, it'll be a reoccurring cash flow benefit as we look to monetize these tax credits. So I feel pretty good about how it'll be reflected across the rating agencies, and we've spent time with each of those, talking them through that. And like I said, also work closely with the Big Four accounting firms, and this is generally the approach the whole industry will take.

... And so I think it's pretty straightforward, and I know there's been a lot of discussion, you know, whether it'll show up in the FFO to debt metrics, and I feel pretty good about it, because it absolutely will reflect the economics of our underlying financials. And it is for us, right, it'll be a reoccurring cash flow benefit as we look to monetize these tax credits. So I feel pretty good about how it'll be reflected across the rating agencies, and we've spent time with each of those, talking them through that. And like I said, also work closely with the Big Four accounting firms, and this is generally the approach the whole industry will take.

Yes.

And thank you all for participating in our earnings call. This morning, please contact our Investor relations team with any follow up questions. Thank.

Have you already procured it.

In 2003 for the next year, where does that come.

Coming event for the back half of the year.

Thank you.

Okay.

We're still in the process.

Okay.

That concludes today's conference you may now disconnect.

Okay.

And I guess, one last question on that I mean, so the 500 million any associated cost with procuring it is that passed on to ratepayers.

Is that embedded in your O&M costs down.

It's a reflects its recovered through rate cases, yes.

Durgesh Chopra: That's very helpful. Thanks. Then maybe just to the extent you are willing to comment on this, just a little bit more pointed question on 2023 guidance. Obviously, you mentioned the history of, you know, meeting and exceeding expectations. You know, just with the unfavorable weather, you know, and the regulatory decision, where are you tracking? And with your sort of cost efforts in place, what are you targeting or where are you tracking within the guidance range?

And it's included in Ireland.

Included in.

It's included in O&M expense.

Okay I appreciate the color. Thank you.

Thank you I think further questions in the queue I will turn the call back over to CFO , Brian Van Abel for closing remark.

And thank you all for participating in our earnings call. This morning, please contact our Investor relations team with any follow up questions.

Brian Van Abel: Yeah, so, you know, sitting here today, six months through the year, right, we're tracking to midpoint of guidance. I'll give you a little bit more color, right? I think about it in kind of three buckets. First is execution on our O&M plans, which I talked about earlier. Second is we do have additional rate case revenue that will come in the door in the second half of the year, particularly with the Colorado rate case in flight, the New Mexico rate case in flight, and then there's still continued benefits from Wisconsin last year. Then we do have expected continued sales growth in our service territories. So those are really the three buckets that I think about it in targeting midpoint of guidance.

Thank you.

Yeah.

Okay.

That concludes today's conference you may now disconnect.

Contact our Investor relations team with any follow up questions.

Thank you.

Brian Van Abel: Obviously, as we normally do in Q3, we will look at where we are in Q3, and that's certainly when we tighten guidance.

Obviously, as we normally do in Q3, we will look at where we are in Q3, and that's certainly when we tighten guidance.

Durgesh Chopra: Very clear. Thanks so much, Brian. Appreciate the time.

Operator: Thank you. Our next question comes from Julien Dumoulin-Smith of Bank of America. Please go ahead.

Julien Dumoulin-Smith: Hey. Hey, good morning, team. Thank you so much for the time and the opportunity. Appreciate it. Hey, team, I wanted to focus on the wildfire dynamics. Obviously, a lot of fixation on this, perhaps, principally coming from out of state as well. Can you elaborate a little bit? I know in the prepared remarks, you said you referred us to the 10-Q immediately here, but can you elaborate at least on your insurance levels today, your insurance programs across the states, as well as how do you frame the risks here from the lawsuits that have been filed? I imagine that's some of the commentary you alluded to in the 10-Q here.

Julien Dumoulin-Smith: Can you help frame up your understanding as well as maybe some of the differences critically from some of the out-of-state considerations that are drawing renewed scrutiny?

Can you help frame up your understanding as well as maybe some of the differences critically from some of the out-of-state considerations that are drawing renewed scrutiny?

Bob Frenzel: Yeah. Hey, Julien, it's Bob, and thanks for the question. Here's what I can say about Marshall right now. The Boulder County Sheriff's report concluded that the Marshall Fire first ignited on the property of the Twelve Tribes and that this ignition was unrelated to our equipment. With respect to the cause of the second ignition, which began an hour after the first, we strongly disagree with the conclusion of the sheriff's report, and we will vigorously defend ourselves in court. The sheriff's report concluded that there were no design or installation or maintenance defects or deficiencies in Public Service's electrical circuit in the area of the second ignition. You know, regarding the litigation, there's a hearing in September, where we expect to learn more about the procedural next steps.

Bob Frenzel: Additional information about the lawsuits and the legal standards are included in our disclosures, in our earnings release, and in our 10-Q. Given the lawsuits, you know, I don't think we're going to comment any further beyond those particular disclosures. I'll let Brian comment on insurance coverage, but other than that, I think we're gonna, you know, stick to our disclosure statements.

Additional information about the lawsuits and the legal standards are included in our disclosures, in our earnings release, and in our 10-Q. Given the lawsuits, you know, I don't think we're going to comment any further beyond those particular disclosures. I'll let Brian comment on insurance coverage, but other than that, I think we're gonna, you know, stick to our disclosure statements.

Brian Van Abel: Yeah, and Julien, the insurance coverage is included in our disclosure. It's approximately $500 million.

Julien Dumoulin-Smith: Got it. All right, understood. And then any further commentary about the differences in context across the different states, especially whether it pertains to legal, recovery constructs and/or jury constructs?

Bob Frenzel: Yeah, it's, it's all included in the disclosures, an entire page of disclosures-

Julien Dumoulin-Smith: Got it.

Bob Frenzel: in the earnings release in the Q.

Julien Dumoulin-Smith: All right. Fair enough. We'll leave it there. Thank you guys very much.

Bob Frenzel: Thanks.

Julien Dumoulin-Smith: Appreciate it.

Bob Frenzel: Appreciate it.

Brian Van Abel: Thanks, Julian.

Operator: Thank you. Our next question comes from Anthony Crowdell of Mizuho. Please go ahead.

Anthony Crowdell: Hey, hey, good morning, Bob. Good morning, Brian, and good morning, Paul.

Bob Frenzel: Hey, Anthony.

Anthony Crowdell: Sorry, I didn't want to leave you out. Just-

Bob Frenzel: That's perfect.

Anthony Crowdell: Hopefully, hopefully two quick questions, one on Julien, following up on Julien with the Marshall Fire. Is there a timing when that resolves itself, or you just have to let it play through the course and you can't give any real feel of when that proceeding will wrap up and that overhang lifted?

Bob Frenzel: As I mentioned, look, we have a September hearing where we're gonna learn a lot more about the procedural schedule, and we'll know more then.

Brian Van Abel: Yeah, and Anthony, we really can't go beyond what we've already said in the disclosure, so we have to limit the questions on that.

Anthony Crowdell: Okay, great. Then on slide 11, the settlement pending in Colorado, just, you talk about, I think an alternative rate increase, $47 million, but that's dependent upon, I guess, some coal plant deferrals. I'm just curious if you could talk about how the commission will, hopefully, when they approve the settlement, is that when they will address how they handle the coal plant deferrals, or does that get rolled into a separate proceeding?

Brian Van Abel: No. Hey, hey, Anthony, that will all be decided within the rate case decision that the commission will make here in Q3. So they deliberate. They had hearings on it in July, and so that's all part of the record. So it's kind of either the $95 million one or the alternate is if you defer some additional depreciation, it's $47 million. And that $48 million difference is just the deferral of the depreciation. So all will be decided.

Bob Frenzel: ...So it would be earnings neutral, but it would have a cash flow impact, obviously.

Carly Davenport: Great, thanks. I'm good from here. Thanks again for taking the questions.

Anthony Crowdell: Great, thanks. I'm good from here. Thanks again for taking the questions.

Bob Frenzel: Yeah, thank you.

Operator: Thank you. Our next question comes from Sophie Karp of KeyBanc. Please go ahead.

Sophie Karp: Hi, good morning, and thanks for taking my question.

Bob Frenzel: Hey, Sophie.

Sophie Karp: Yeah, hi. A lot of my questions have been answered, but maybe I can just ask a couple of questions here. So on volumes, I'm just curious if you could discuss a little bit what drives the volumes variability here, aside from weather? It seems like, you know, CNI volumes were equally or close to equally weak as well as residential. You know, so, like, what are some puts and takes that drive that, I guess, year over year?

Bob Frenzel: Hey, Sophie. Yeah, if I think about sales and really looking at the weather-normalized sales, we continue to see really strong growth on the CNI side, out at SPS and in Q2, on a weather-normalized basis. We had strength in Minnesota and Wisconsin, too. Colorado, on a year-to-date basis on CNI, there was a large manufacturing facility that was down for Q1 in Q1 of this year in Colorado, so that had some weakness. On the residential side, the residential, while we're down, you know, close to 1% for the year, it's tracking in line with our forecasts or expectations for the year, right? We continue to see good customer growth, but we do see continued use for customer declines, as we have really strong energy efficiency and DSM program.

Brian Van Abel: Hey, Sophie. Yeah, if I think about sales and really looking at the weather-normalized sales, we continue to see really strong growth on the CNI side, out at SPS and in Q2, on a weather-normalized basis. We had strength in Minnesota and Wisconsin, too. Colorado, on a year-to-date basis on CNI, there was a large manufacturing facility that was down for Q1 in Q1 of this year in Colorado, so that had some weakness. On the residential side, the residential, while we're down, you know, close to 1% for the year, it's tracking in line with our forecasts or expectations for the year, right? We continue to see good customer growth, but we do see continued use for customer declines, as we have really strong energy efficiency and DSM program.

Bob Frenzel: So I think overall, it is tracking both on the C&I side and on the resi side; it's tracking to expectations for kind of through the first six months and for the balance of the year with our guidance on sales.

So I think overall, it is tracking both on the C&I side and on the resi side; it's tracking to expectations for kind of through the first six months and for the balance of the year with our guidance on sales.

Sophie Karp: All right, thank you. And maybe I can just ask, like, a bigger picture question here. I know you've been looking at potentially involving in operating an SMR adjacent to one of your territories. Just kind of curious how you're still thinking about that, and if it's been any progress to report?

Bob Frenzel: Yeah. Hey, it's Bob. We look, we as a company, we certainly have a view on nuclear, both current and future. Key priority for us is preserving the existing nuclear fleet and making sure that there's a potential for a nuclear future for the country. We have been working with a company called NuScale on their technology. It's an SMR technology, mostly helping them through the nuclear regulatory process and making sure that their applications meet the NRC guidelines, and hoping to get that technology can get through the regulatory process. We don't have plans as a company to own or operate a SMR at this point. We really are just taking our nuclear expertise and helping with the nuclear future for that company, with...

Bob Frenzel: So we don't have any specific plans to announce on SMRs in specifics.

So we don't have any specific plans to announce on SMRs in specifics.

Sophie Karp: All right. Thank you. That's all from me.

Operator: Thank you. Our next question comes from Carly Davenport of Goldman Sachs. Please go ahead.

Carly Davenport: Hey, good morning. Thanks for taking the question.

Bob Frenzel: Hey, Carly, welcome aboard.

Carly Davenport: Thank you. Appreciate that. Bob, you've been vocal, you know, about sort of an all of the above approach, kind of on the energy transition from a technology perspective. You talked a little bit about the grant to support the Form Energy pilot. Could you just talk a little bit about kind of how that pilot's evolving and other opportunities that might exist in that space for itself, as you think about long-duration storage?

Bob Frenzel: Yeah, happy to. Look, as we think about it as a company, you know, first utility to announce a 100% carbon free, given our geographic position, our ability to transition with wind and solar cost effectively for our customers through the end of this decade, allowed us to make an interim target of an 80% carbon reduction. We feel very confident in that. But we've always been focused on, you know, we need new technology, new research, development, and deployment of new technologies to achieve our 100% goal and the nation's clean energy goals. One of the big pieces of that is obviously energy storage. We have a lot of lithium-ion four-hour batteries around the country, and we have some on our own systems.

Bob Frenzel: But long-duration energy storage is a critical part of the energy future. So the Form Energy battery is a 100-MWh battery, so instead of four hours, it's four days. And that's a nice asset class as we think about periods when the wind doesn't blow and the sun doesn't shine. And we've seen evidence of that as recently as early June of this year in the Southwest, where we had very limited wind production. We've seen it in polar vortexes, where in Winter Storm Uri, where we had no wind production for almost a three-day period. So this idea of a long-duration battery is just really interesting. What's exciting about Form in particular, it's a pretty old technology, really.

But long-duration energy storage is a critical part of the energy future. So the Form Energy battery is a 100-MWh battery, so instead of four hours, it's four days. And that's a nice asset class as we think about periods when the wind doesn't blow and the sun doesn't shine. And we've seen evidence of that as recently as early June of this year in the Southwest, where we had very limited wind production. We've seen it in polar vortexes, where in Winter Storm Uri, where we had no wind production for almost a three-day period. So this idea of a long-duration battery is just really interesting. What's exciting about Form in particular, it's a pretty old technology, really.

Bob Frenzel: This was found by the Department of Energy almost 60 years ago, but is becoming commercializable by a new company, Form Energy, and they're a Breakthrough Energy VC-funded company, an Energy Impact Partners-funded company. The technology's pretty interesting. I won't call it simple, because that would minimize the impact and the efforts of the development team and the founders of that company. But it's basically rusting and derusting iron, and the great part about that is iron is readily available, it's domestically available, not subject to counterparties and regimes in the world where we have challenges.

This was found by the Department of Energy almost 60 years ago, but is becoming commercializable by a new company, Form Energy, and they're a Breakthrough Energy VC-funded company, an Energy Impact Partners-funded company. The technology's pretty interesting. I won't call it simple, because that would minimize the impact and the efforts of the development team and the founders of that company. But it's basically rusting and derusting iron, and the great part about that is iron is readily available, it's domestically available, not subject to counterparties and regimes in the world where we have challenges.

Bob Frenzel: You know, when I think about new technologies, you know, sometimes it's not the best that wins, it's the one that's most commercializable and the one that can deploy the fastest. I was really proud to be in West Virginia last month and breaking ground with the Form Energy team, with Secretary Granholm and Senator Manchin. They're building an 800MW-capable factory in West Virginia, as we speak, with loan guarantees and grants from the government. So this is a technology that's gonna come to fruition. It's a technology that's gonna be scalable. We're really pleased to be their first partner in sales of that, but it's a pilot. It's 10MW, and we're gonna put it on a 9,000MW system.

You know, when I think about new technologies, you know, sometimes it's not the best that wins, it's the one that's most commercializable and the one that can deploy the fastest. I was really proud to be in West Virginia last month and breaking ground with the Form Energy team, with Secretary Granholm and Senator Manchin. They're building an 800MW-capable factory in West Virginia, as we speak, with loan guarantees and grants from the government. So this is a technology that's gonna come to fruition. It's a technology that's gonna be scalable. We're really pleased to be their first partner in sales of that, but it's a pilot. It's 10MW, and we're gonna put it on a 9,000MW system.

Bob Frenzel: So we have a great opportunity to build it with them and invest alongside, and then the Breakthrough Energy grants and the potential DOE grants buy down that cost and buy down that risk for the company. So very exciting technology. Really excited about the future, what this could mean.

So we have a great opportunity to build it with them and invest alongside, and then the Breakthrough Energy grants and the potential DOE grants buy down that cost and buy down that risk for the company. So very exciting technology. Really excited about the future, what this could mean.

Brian Van Abel: And Carly, I would just add, you know, we have another pilot in Colorado, Ambri, which is a liquid metal technology that we'll have online in 2024. That's an eight- to 12-hour duration, so kind of call it mid-duration. So we're spending a lot of time on this new technology. And I think also longer term, we kind of broaden the definition of energy storage. Green hydrogen is a form of energy storage. As we think about longer term, being able to store and then burn it through some of our firm dispatchable units longer term. So pretty excited about a lot of these, call it new technologies, and really happy to see how excited our Minnesota Commission is on Form Energy with the unanimous approval of that project.

Carly Davenport: Awesome, appreciate those perspectives. And then to follow up, just around earnings guidance, you know, obviously you're reiterating the guidance for 2023. We just wanted to check in on temperature on the five to seven long-term guidance as you kind of think about the incremental spending opportunities from a CapEx perspective, along with some of the regulatory outcomes that you've seen, kind of how you're thinking about that long-term range.

Brian Van Abel: Yeah, Carly, good question, and we fully expect to continue delivering in the upper half of our 5% to 7% long-term guidance. That's unchanged. You know, I think you mentioned the incremental opportunities that we have, and I think in Bob's comments, he mentioned the Sherco Solar Three farm, the SPS, the 424MW and 418MW of solar farms that are gonna provide significant customer benefits in SPS. We filed that CCN yesterday. So those two together are north of $1 billion of clean energy investments that will benefit our customers that are outside of our current Clean Energy Plan. And I think longer term, right, we'll file here in Q3 our preferred plan for with the Colorado Commission around our RFP. You know, going into that, that was decided pre-IRA.

Brian Van Abel: The commission ruled on that resource plan before we could layer on the significant benefits, significant customer benefits of the IRA. So when we look at how the costs are coming in relative to what was approved, we believe we can go bigger and faster, and above what that initial 4,000MW of renewables and storage showed. So we're excited to work with our Colorado commission on that. Look for that filing in Q3, and hopefully, get a decision in Q4. Then even more longer term, in the next 18 to 24 months, we'll be filing more RFPs in Minnesota, Colorado, and SPS for further significant additions to clean energy assets as we march towards the 80% by 2030 goal.

The commission ruled on that resource plan before we could layer on the significant benefits, significant customer benefits of the IRA. So when we look at how the costs are coming in relative to what was approved, we believe we can go bigger and faster, and above what that initial 4,000MW of renewables and storage showed. So we're excited to work with our Colorado commission on that. Look for that filing in Q3, and hopefully, get a decision in Q4. Then even more longer term, in the next 18 to 24 months, we'll be filing more RFPs in Minnesota, Colorado, and SPS for further significant additions to clean energy assets as we march towards the 80% by 2030 goal.

Brian Van Abel: So pretty excited about it, pretty excited about long-term opportunities, and we do feel good about delivering the upper half of our long-term guidance range.

So pretty excited about it, pretty excited about long-term opportunities, and we do feel good about delivering the upper half of our long-term guidance range.

Carly Davenport: Great. Thank you.

Operator: Thank you. Our next question comes from Steve Fleishman of Wolfe Research. Please go ahead.

Steve Fleishman: Yeah. Hi, good morning.

Bob Frenzel: Hey, Steve.

Steve Fleishman: Good, good to have all of you on the phone, including Paul. Just,

Bob Frenzel: Thank you, Steve.

Steve Fleishman: The one Marshall Fire question: Is there a deadline when any claims need to be filed by?

Bob Frenzel: Yeah, Steve, it's Bob. My understanding is that claims are a two-year deadline, so that would say the end of this year is when claims need to be filed.

Steve Fleishman: Okay. Second question, different topic on the Colorado settlement: Is there-- I know, I think you mentioned Q3 for the final order. Is there a specific date for that approval?

Bob Frenzel: There's not a date, Steve, but we expect that the commission will rule probably in the middle of August. Hold deliberations in the middle of August.

Brian Van Abel: There's not a date, Steve, but we expect that the commission will rule probably in the middle of August. Hold deliberations in the middle of August.

Steve Fleishman: Okay. And then, lastly, just, I know you all have been pretty focused on a number of IRA provisions, including the hydrogen one. And, I'm just kind of curious, latest thoughts on the, you know, ability to look at hydrogen production, you know, the green hydrogen, you know, all those kind of pillars of the green hydrogen, when you think you'll get-- we'll get that, and whether nuclear might be included in that, or is additionality going to be a problem for that? Thanks.

Bob Frenzel: Yeah. Hey, Steve, it's Bob. Thanks for the question. You know, we've been very active in clean fuels in general and hydrogen in particular. You know, look, philosophically, you know, we believe that we're going to undergo a large period of electrification over the next 10 or 20 years as a country and as a company, but that there are, you know, parts of the economy that are going to be difficult, or expensive, or even in some cases, impossible to electrify. And therefore, we feel like we need a clean molecule to help in those areas. And, you know, today that's natural gas, but tomorrow, you know, the most promising molecule that we see is a green hydrogen molecule. And this looks like it's an opportunity for the company.

Bob Frenzel: It's another version of, of steel for fuel at some level. The federal government's supportive of it, the states are supportive of it, and we've got two hydrogen hub applications, one in the Rocky Mountain Region, with MOUs from four states, two of which we serve Colorado and New Mexico, as well as Utah and Wyoming. And then here in the Upper Midwest, a five-state MOU, again, two of which-- three of which that we serve, Wisconsin, Minnesota, North Dakota, and Montana. And, you know, we're in front of the DOE. Those have progressed through the process, and we expect to know by the end of the year whether we're going to get DOE loan grants for hydrogen. And I think you're aware of some of the challenges around what qualifies for a tax credit, in hydrogen land.

It's another version of, of steel for fuel at some level. The federal government's supportive of it, the states are supportive of it, and we've got two hydrogen hub applications, one in the Rocky Mountain Region, with MOUs from four states, two of which we serve Colorado and New Mexico, as well as Utah and Wyoming. And then here in the Upper Midwest, a five-state MOU, again, two of which-- three of which that we serve, Wisconsin, Minnesota, North Dakota, and Montana. And, you know, we're in front of the DOE. Those have progressed through the process, and we expect to know by the end of the year whether we're going to get DOE loan grants for hydrogen. And I think you're aware of some of the challenges around what qualifies for a tax credit, in hydrogen land.

Bob Frenzel: I think there's sort of three areas of sort of debate. And what we're trying to do is balance cost to the customer and a need to accelerate OEMs to build and take us down the technology curve of electrolyzers and balance of plant. I think about those as location, generation matching, and then additionality. So with respect to location, you know, we've been, in all three of those, you know, on one end, we think we need flexibility in all three of those categories. On the location, we've been supporting, as a company, a balancing area type location, but certainly not national, which causes real market distortions and challenges with generation nationally.

I think there's sort of three areas of sort of debate. And what we're trying to do is balance cost to the customer and a need to accelerate OEMs to build and take us down the technology curve of electrolyzers and balance of plant. I think about those as location, generation matching, and then additionality. So with respect to location, you know, we've been, in all three of those, you know, on one end, we think we need flexibility in all three of those categories. On the location, we've been supporting, as a company, a balancing area type location, but certainly not national, which causes real market distortions and challenges with generation nationally.

Bob Frenzel: You know, similarly on matching, you know, I think that the purist level would say we need hourly matching, but we probably need some transition period to get to that strict hourly matching. So we've been supportive of some period of time where, you know, maybe by the end of the decade or late this decade, we've got hourly matching, but we'll go to annually matching for some period of time. With additionality, again, very supportive of the additionality as a concept, but areas of flexibility there, one, we would really support nuclear in regards to additionality, and we have supported pretty vocally that, as well as any sort of otherwise back down energy, we would support that as additionality if it came back into the grid.

You know, similarly on matching, you know, I think that the purist level would say we need hourly matching, but we probably need some transition period to get to that strict hourly matching. So we've been supportive of some period of time where, you know, maybe by the end of the decade or late this decade, we've got hourly matching, but we'll go to annually matching for some period of time. With additionality, again, very supportive of the additionality as a concept, but areas of flexibility there, one, we would really support nuclear in regards to additionality, and we have supported pretty vocally that, as well as any sort of otherwise back down energy, we would support that as additionality if it came back into the grid.

Bob Frenzel: And so, very active. We're very active at EEI, we're very active at ACPA, and I think those are generally in line with principles that both of those organizations are supporting.

And so, very active. We're very active at EEI, we're very active at ACPA, and I think those are generally in line with principles that both of those organizations are supporting.

Brian Van Abel: Hey, Steve, and you asked about timing. The statutory deadline is 22 August, and they haven't missed the statutory deadline yet. But what we're hearing is that there's still a lot of uncertainty around the position that is outlined, given some of the polarizing viewpoints. So it certainly could slip into September or October.

Steve Fleishman: Okay. That's a lot of good information. Thank you. Appreciate it.

Bob Frenzel: Thank you.

Operator: Thank you. Our next question comes from Ryan, Ryan Levine of Citi. Please go ahead.

Ryan Levine: Hi, everybody.

Brian Van Abel: Ryan.

Ryan Levine: In terms of the $500 million insurance, what was the cost of that insurance, and when was it procured? And then I guess, go forward, are you seeing changes in pricing for wildfire-related insurance, and what's your strategy on a go-forward basis related to insurance?

Brian Van Abel: We haven't disclosed the cost, Ryan, and every year we renew our insurance program. We continue to look at that. You know, insurance program is, for everything, is based on market experience with insurance companies, and as you can imagine, it gets more challenging all the time. That's not just related to wildfire, but that's what all we have to say about insurance.

Ryan Levine: Have you already procured it in 2023 for the next year, or is that an upcoming event for the back half of the year?

Brian Van Abel: We're still in the process.

Ryan Levine: Okay. And I guess one last question on that. I mean, this was a $500 million... Any associated costs with procuring it, is that passed on to ratepayers, or is that embedded in your O&M cost ballot?

Brian Van Abel: It's recovered through rate cases, yes. It's included in O&M expense.

Ryan Levine: Included in?

Brian Van Abel: It's included in O&M expense.

Ryan Levine: Okay. Appreciate the call. Thank you.

Operator: Thank you. As we have no further questions in the queue, I will turn the call back over to CFO, Brian Van Abel, for closing remarks.

Brian Van Abel: Hey, thank you all for participating in our earnings call this morning. Please contact our investor relations team with any follow-up questions. Thank you.

Bob Frenzel: That concludes today's conference. You may now disconnect.

Operator: That concludes today's conference. You may now disconnect.

Q2 2023 Xcel Energy Inc Earnings Call

Request a DemoDemo

XEL

Xcel Energy

Earnings