Q1 2024 Xcel Energy Inc Earnings Call
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Speaker Change: Hello, and welcome to XL energy first quarter 'twenty 'twenty four earnings conference call.
Name is Melissa and I will be your coordinator for today's event.
Note. This conference is being recorded and for the duration of the call. Your lines will be in a listen only mode. However, you will have the opportunity to ask questions at the end of the presentation that can be done by pressing star one on your telephone keypad to register your questions questions will only be taken from institutional investors report.
Speaker Change: Others can contact media relations with inquiries and individual investors and others can reach out to Investor relations.
If you require assistance at any point, please press star zero and you'll be connected to an operator I'll now turn the call over to Paul Johnson, Vice President Treasurer, and Investor Relations. Please go ahead.
Paul Andrew Johnson: Good morning, welcome to XL Energy's 2024 first quarter earnings call.
Paul Andrew Johnson: Joining me today are Bob Frenzel, Chairman, President and Chief Executive Officer.
Paul Andrew Johnson: Ryan Van Abel Executive Vice President and Chief Financial Officer.
Paul Andrew Johnson: In addition, we have other members of the management team in the room to answer your questions if needed.
Speaker Change: Good morning to review, our 24, our first quarter results and highlights discuss recent wildfires and our mitigation efforts and share recent business developments.
Speaker Change: Slides accompanying today's call are available on our website.
Speaker Change: Please note that we changed our presentation as a result, we no longer referred to electric and natural gas margin instead will discuss changes in revenue and cost of goods sold from the income statement. Please.
Speaker Change: Please note that these most fluctuations in cost of electric fuel and natural gas are recovered through a regulatory mechanisms and are generally earnings neutral.
Speaker Change: As a reminder, some of the comments during today's call may contain forward looking information.
Speaker Change: Factors that could cause results to differ from those anticipated are described in our earnings release and SEC filings.
Speaker Change: Today, we'll discuss certain GAAP.
Speaker Change: <unk> not get certain measures that are non-GAAP measures information on comparable GAAP measures and reconciliations are included our earnings.
Speaker Change: With that I'll turn it over to Bob.
Robert C. Frenzel: Thank you Paul and good morning, and welcome everyone. It's been too.
Robert C. Frenzel: Two months since wildfires impacted our Texas neighbors and before Brian walks through our financial results I'd like to discuss the actions, we're taking to protect the public.
Robert C. Frenzel: To strengthen our system's resiliency in the states that we serve.
Robert C. Frenzel: In February multiple multiple wildfires for our guys in Texas and from the outset of those fires our focus has been on the people and the communities in the Panhandle and on the safety and the wellbeing of our coworkers and their families. There.
Robert C. Frenzel: I want to thank all the first responders.
Robert C. Frenzel: Regency personnel state local employees and our own NPS employees worked tirelessly in support of our customers and our communities during and after the event.
Robert C. Frenzel: Can you provide a wildfire response community assistance, where lean services and worked tirelessly in the field to restore essential services.
Robert C. Frenzel: Then to the Panhandle I've witnessed the impacted areas.
Robert C. Frenzel: Can speak for the entire <unk>, what I would say that we are saddened by the losses and we will stay on with the Panhandle community as we recover rebuild and renew that area as we have.
Robert C. Frenzel: Over 100 years.
LNG: Thanks, LNG has acknowledged that our distribution poles appear to have been involved in an ignition of the smokehouse Creek fire than smaller revert buyer, which quickly burned into the smoke out pre fire footprint.
LNG: We achieved claimed that extra LNG acted negligently and maintaining operating its infrastructure.
LNG: In addition, we do not believe that our facilities caused the way reduced or with a great find creek fires I believe that their addictions are caused by distribution lines owned by other companies.
LNG: In an effort to expedite relief and recovery in the community. We've established the claims process is for those who have property or livestock law and the smokehouse Creek buyers.
LNG: And are actively selling a number of claims.
LNG: So far 46 claims have been submitted.
LNG: And as on April 22nd XL energy and Sps have been named as defendants in 15 markets.
LNG: Based on the most current information we believe it's probable that we incur a loss due to the slowdown Street wildfire.
LNG: And accrued a liability of $215 million, which is offset by an insurance receivable since is lower than our approximately $500 million of insurance.
LNG: Please note that the $215 million loss accrual preliminary estimate which reflect the low end of our range and is subject to change.
LNG: Based on new information.
LNG: More information on Smokehouse Creek, please see our disclosures in our earnings release and our Form 10-Q.
LNG: Like all utilities are experiencing profound changes in weather and climate related impacts on our operations.
LNG: As a result, we must continue to evolve our operations for the.
LNG: Unparallel dynamics.
LNG: Risk mitigation and system resiliency has long been a priority <unk> continuing into the future.
LNG: Our strategy consists of three phases first immediate near term response.
LNG: Regulatory activities needed to address comprehensive wildfire mitigation and resiliency plans third.
LNG: Additional state and federal legislation that could be valuable.
LNG: Part of our first phase, we've accelerated risk reduction initiatives across our system, including accelerating all expecting some replacements as well as operational actions such as proactive de energizing aligned and adjusting re closer settings.
LNG: Palisade empower ourselves and enhanced power line safety settings.
LNG: Well, we've been operating under an approved wildfire plan in Colorado since 2020.
LNG: As part of our second phase strategy, we will file updated wildfire mitigation plans in our respective states beginning with an updated Colorado Nwfp later this quarter.
LNG: The plans incorporate industry learning, but are tailored to our unique geographies and risk profiles.
LNG: Newly expanded actions, including increased vegetation management.
LNG: Accelerating pole inspections hardening and replacements.
LNG: Distribution underground and segmentation and covered conductor program.
LNG: Transmission line hardening or rebuilds.
LNG: Enhanced rig closer settings, and proactive de energizing, the wines and situational awareness programs, including weather stations cameras and other monitoring software.
LNG: Later this year, we intend to file system resiliency plan that will include wildfire mitigation of SBS as contemplated under recent Texas law.
LNG: And the third part of our strategy is to continue to step up our efforts to innovate and plan for evolving climate wildfire risks.
LNG: We know that our ability to enable and clean energy transition and to deliver an affordable product to our customers is predicated on maintaining a reasonable cost of capital and we believe that proactive legislation at the state and federal level as a potential vehicle to ensure that our customers continue to receive affordable reliable sustainable and safe power served.
LNG: Yes.
LNG: We arent doing this alone we're working across the industry with peer utility industry.
unknown: www.xcel.co.uk
LNG: Industry groups, such as <unk> and <unk>.
LNG: Energy Federal state local agencies first responders are labor partners and countless others.
Melissa: Hello, and welcome to Xcel Energy's first quarter 2024 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 in a listen-only mode. However, you will have the opportunity to ask questions at the end of the presentation. 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.
LNG: While we need to reduce wildfire risk our core operations remained strong.
LNG: In our investment opportunities robust.
LNG: During the first quarter, we made significant progress on our clean energy transition and resource plans.
LNG: In February file our resource plan for the NSP system.
LNG: We propose to add 6400 megawatts of new resources and extend the lives of our Prairie Island, and Monticello nuclear facility past 2015.
LNG: The competitive claim reduces carbon emissions by more than 80%, while increasing customer bills by approximately 1% annually.
LNG: We anticipate a decision on our proposal by the Minnesota Commission in 2025.
LNG: In the Mexico. The Commission accepted our resource planning proposed approximately $5 to 10000 megawatts of new generation by 2030.
Melissa: This morning we will review our 24 first quarter results and highlights, discuss recent wildfires and our mitigation efforts, and share recent business developments. As a reminder, some of the comments during today's call may contain forward-looking information, gap, and non-gap, certain measures that are non-gap measures, information on comparable gap measures, and reconciliations are included. With that, I'll turn it over to Bob.
LNG: We anticipate issuing an RFP for the resource needs. This summer.
LNG: And finally, the Minnesota Commission recently approved our updated transportation electrification plan.
LNG: The updated transportation electric.
LNG: Electrification plant in Mexico in April.
LNG: We also made continued progress with several economic and commercial development projects in February we announced we're working with Microsoft to bring a new data center to a retiring sugarcoat coal facility.
LNG: The proposed data set is positioned to be one of our largest customers in Minnesota and are projected to bring jobs and investment to the community.
LNG: And March data broke ground on its previously announced data center that will be powered by NSP, Minnesota.
LNG: Now I will provide funding for new infrastructure upgrades, including transmission lines to support the project and the facility is slated to open in late summer 2025.
LNG: It's still hard to proactively work with data center developer in the.
LNG: Turning to stakeholders across our state to ensure that we can reliably and affordably served as new demand.
Bob: Two months since the wildfires impacted our Texas neighbors, and before Brian walks through our financial results, I'd like to discuss the actions we're taking to protect the public. I want to thank all the first responders, emergency personnel, state and local employees, and our own SPS employees who worked tirelessly. Please note that the $215 million loss approval is a preliminary estimate that reflects the low end of a range and is subject to change.
LNG: While providing benefits.
LNG: Our other customers.
LNG: With several additional opportunities in the pipeline, we expect data center to drive further growth for the foreseeable future.
LNG: Our employees are at the heart of these many accomplishments.
LNG: Our team is composed of dedicated and hardworking and courageous employees are committed to serving our communities.
LNG: Safe clean reliable and affordable energy.
LNG: On the 11th year in a row external energy was honored as one of the world's most admired companies by Fortune magazine.
LNG: Ladies and second overall once the most admired gas and electric company in the country.
LNG: For the <unk>, one of the world, but ethical companies by Ethisphere.
LNG: And so I think one of only five energy companies in United States recognize this year.
LNG: Accelerating also joined the economic opportunity coalition, a public private partnership with the U S government, where we committed to allocating 15% of our U S based contract spending in the areas of energy supply distribution transmission and clean energy small and other sort of businesses by 2025.
LNG: With that I'll turn it over to Brian.
Brian: Thanks, Bob and good morning, everyone.
Brian: Turning to our financial results Excel energy had earnings of 88 per share for the first quarter of 2024.
Brian: Compared to 76 per share in 2023.
Brian: The increase in earnings reflects our investment of approximately $8 billion over the last five quarters to improve resiliency and enable clean energy for our customers, while delivering economic growth and vitality for our communities.
Brian: The most significant earnings drivers for the quarter included the following.
Brian: The impact of electric and natural gas rate reviews to recover our capital investments increased earnings by <unk> <unk> per share.
Brian: Lower O&M expenses increased earnings by <unk> <unk> per share.
Brian: Selecting lower labor and benefit costs.
Brian: Lower bad debt expenses and gains from a land sale for a data center.
Brian: Non fuel riders to recover capital investment increased earnings by <unk> <unk>.
Brian: Offsetting these positive drivers were higher depreciation and amortization decreased earnings by five cents per share, reflecting our capital investment programs.
Brian: Higher interest charges decreased earnings by <unk> <unk> per share.
Brian: Yes.
Brian: Other items combined to decrease earnings by one for sure.
Brian: Turning to sales.
Brian: Year to date weather and leap year, adjusted electric sales decreased by 3% and natural gas sales increased by one 7% as compared to 2043.
Brian: Please note that we revised our projected electric sales growth of 1% to 2% for the year.
Brian: Largely due to the declining use per customer.
Brian: Timing delays for expansions for some of our large C&I customers.
Brian: However, we can certainly expect long term electric sales growth 3% annually.
Brian: During the quarter. We also made progress on a relatively light rate case calendar.
Brian: In April the Texas Commission approved our electric rate case settlement without modification.
Brian: So I'll, let reflects a rate increase of $65 million based on a black box settlement, which includes a ROE of nine 5% and an equity ratio of 54, 5% rated <unk> brokers.
Bob: Part of our first phase, we've accelerated risk reduction initiatives across our system, including accelerating full inspections and replacement. Department of Energy, federal, state, and global agencies, first responders, our labor partners, and countless others. We anticipate a decision on our proposal by the Minnesota Commission in 2025.
Brian: In our Minnesota natural gas rate case.
Brian: We received intervenor testimony last week.
Brian: Hearings are scheduled for July and we expect a commission decision by year end or in the first quarter of next year.
Brian: And in our Colorado natural gas rate case.
Brian: Residual schedule has been established that reflects intervenor testimony in July hearings in September and a commission decision in the fourth quarter.
Brian: Please see our earnings release for more details on our regulatory proceedings.
Brian: We are reaffirming our 2020 of our earnings guidance range of $3 50.
Brian: The $3 60 per share, which is consistent with our long term EPS growth objective of five 7%.
Brian: In addition, we've updated our key assumptions to reflect the latest information which are detailed in our earnings release.
Brian: With that I'll wrap up with a great summary.
Brian: We are proactively enhancing our operational and wildfire mitigation actions to manage the risk tort system to protect our customers from extreme weather.
Brian: We continue to expect to deliver 2020 of our earnings within our guidance range of the Tam for the past 19 years.
Brian: We are executing on our capital investment plan, including clean generation transmission and distribution to support reliability and resiliency and economic development to support our communities.
Brian: And we remain confident we can deliver long term earnings growth at or above the top end of our 5% to 7% range starting in 2000 to 35 dividend growth at the low end of our five 7% objective range.
Speaker Change: This concludes our prepared remarks, operator, we will now take questions.
Speaker Change: Thank you.
Speaker Change: A reminder, if he would like to ask a question. Please press star one on your telephone keypad to withdraw your question for any reason you May press star two.
Speaker Change: We'll be advised when you ask your question.
Speaker Change: Our first question is from Nick Campanella with Barclays. Please go ahead.
Nicholas Joseph Campanella: Hey, Thanks for all the information today.
Nicholas Joseph Campanella: If I can add a couple of questions. Yes. Thank you. Thank you.
Nicholas Joseph Campanella: I guess, a couple of questions to kick it off.
Nicholas Joseph Campanella: You have a lot of resource plan activity going on across SCS and.
Speaker Change: And the Rfps seen seeming like they're coming out this summer.
Speaker Change: How are you kind of thinking about competition for capital within the current Capex plan now that you are seemingly.
Speaker Change: Accelerating some resiliency plan that Sps and <unk>.
Speaker Change: Maybe you can kind of remind us what's incremental versus not and then.
Speaker Change: Also just touch on your financing plan and equity needs. Thanks.
Speaker Change: Yes, it's certainly making good morning.
Speaker Change: Vital touched upon all the multiple parts of that question just to deal with.
Speaker Change: I'll follow up.
Speaker Change: Absolutely, we're pretty excited about the upcoming RFP in Sps, we talked about it before on seeking a range of generation between 5000 10000 megawatts of combination of renewables and dispatching bolt filling capacity and will look to launch that RFP in July.
Speaker Change: Hum.
Speaker Change: It's a little bit of a longer timeline. So help me understand in terms of how we'll launch that July we would expect to file <unk> in the summer of 2020 by summer of next year.
Speaker Change: Great decisions in Q1 of 2006, so that capital it really will be kind of in the 27 to 2030 type spend timeframe. So I think what is the elongated and adding to that some of the back end of our five year body long gaining our growth opportunities beyond their five year, what we're seeing there.
Speaker Change: So that's how I think of all of our capital, but really great opportunity excited to get started on that you talked a little bit on yield absolutely. We're looking to continue to invest in resiliency and risk mitigation spend.
Speaker Change: Why don't we have about $10 billion and our current Capex plan of around.
Speaker Change: Distribution and transmission resiliency.
Speaker Change: But as we look to file a Colorado <unk> here later in the skewed to Q2, there are some of the incremental investment needs related to reducing overall wildfire risks. So we will evaluate all of that within our kind of occurrence.
Speaker Change: Notable cadence when we come back in October of this year to provide a kind of roll forward for a 25% to $29 plan and vault.
Unknown Executive: For the 11th year in a row, Xcel Energy was honored as one of the world's most admired companies by Fortune magazine, placing second overall amongst the most admired gas and electric companies in the country. Xcel is one of only five energy companies in the United States recognized this year. Thanks, Bob.
Speaker Change: While competition for capital I think it will.
Speaker Change: We sit here today we're.
Speaker Change: Very comfortable with.
Speaker Change: I reiterated nor will be at or above the 5% top ended at 5% to 7% range I think I was looking at all the opportunities we have in front of us.
Speaker Change: <unk> III is above 9% and what was the finance that as we always have that well I think it's important to maintain a strong balance sheet.
Speaker Change: Important to keep that going forward and so we will look at it.
Speaker Change: Financing incremental growth with accretive equity at that kind of 60, 40% range.
Speaker Change: The whole way at Hudson, everything you're asking about and Nick I'll just add one thing on a variety of comments I think you asked about sort of.
Speaker Change: Relative competitiveness of the company, we would expect to offer in our own development projects into the Sps proposal and we've proven that we.
Speaker Change: With our scale and utility owned wind and our growing expertise in solar and storage, we think we'd be very competitive for some of the generation and southwestern public service RFP process.
Speaker Change: Got it that's really helpful and then I guess just.
Speaker Change: And you did hit all the points.
Speaker Change: To put a finer point on the equity needs I guess do you see really kind of no change to current plans, even with multiple a little bit a little bit lower here. Thank you.
Speaker Change: Yes, so the way we think about it obviously like I said and reiterated where rates are expected to be ordered with a growth range.
Unknown Executive: Good morning, everyone. Lower VAT debt expenses and gains from a land sale for a data center. Non-fuel riders recover capital investment increase earnings by 5%, offsetting these positive drivers or higher appreciation and amortization decrease earnings by five cents per share, reflecting our capital investment program. Higher interest charges decreased earnings by five cents per share. Year-to-date weather and leap year adjusted electric sales decreased by 0.3%, and natural gas sales increased by 1.7% as compared to 2023.
Speaker Change: And that takes into account our lower multiple of impacts over the past quarter certainly.
Speaker Change: Mentioned that we think about there is significant investment opportunities going forward.
Speaker Change: And it's important we had a strong balance sheet, we plan to maintain that strong balance sheet, but obviously you would look at what is that thats on balance sheet gives us some timing flexibility from an equity issuance perspective, and obviously, we will evaluate that and obviously, we'll evaluate whether this older vessel timing flexibility around capital in the near term, but I think overall is.
Speaker Change: We think fundamentally everything's impact from a long term perspective in terms of maintaining a strong balance sheet and funding.
Speaker Change: <unk>.
Unknown Executive: Please note that we revised the projected electric sales growth to 1-2% for the year. During the quarter, we also made progress on the relatively light breaks used calendar. We received an interview with Captain Money last week. Please see our early release for more details on our regulatory...
Speaker Change: The investment needs of the clean energy transition with equity as we need to maintain that balance sheet.
Speaker Change: Thanks, a lot really appreciate the time.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question is from Steve Fleishman with Wolfe Research. Please go ahead.
Steven Isaac Fleishman: Hi, good morning, Thank you.
Steven Isaac Fleishman: So just on the.
Steven Isaac Fleishman: Texas Fire you mentioned the.
Steven Isaac Fleishman: Legislative report coming out in May.
Steven Isaac Fleishman: What should we expect to be coming out and that is that.
Steven Isaac Fleishman: Is that.
Steven Isaac Fleishman: Cause did or what how should we think about what's going to come out in that report.
Steven Isaac Fleishman: Luckily for us.
Speaker Change: Thanks, Bobby and good morning.
Steven Isaac Fleishman: Look at the macro level allowance I was pretty encouraged by the process. We went through with the Texas House in the committee.
Steven Isaac Fleishman: I think.
Steven Isaac Fleishman: One of the tenants.
Speaker Change: Good risk mitigation is involving all the stakeholders, who have a hand in doing that and I think the committee hearings were.
Speaker Change: Pretty good example of getting all or mostly all of the interested parties and participants in our room.
Steven Isaac Fleishman: Proactively talking about the issues and on balance.
Steven Isaac Fleishman: I think the sessions were productive.
Steven Isaac Fleishman: Kill the committee was looking to be prospective and gathering information about our future solutions.
Steven Isaac Fleishman: That's how I would expect to report in May to come out.
Steven Isaac Fleishman: I think we will see stuff on recommendations for utilities emergency responders proactive and we've been doing in the counties that to mitigate fire risk.
Steven Isaac Fleishman: I think theres already.
Steven Isaac Fleishman: Texas A&M for service report on causation I'm not certain we will see something else from the committee on that.
Steven Isaac Fleishman: But what I think the report is going to be.
Steven Isaac Fleishman: In line with the sessions themselves.
Steven Isaac Fleishman: Constructive recommendations for how to proceed going forward.
Steven Isaac Fleishman: Okay.
Steven Isaac Fleishman: And then.
Steven Isaac Fleishman: Just on the on the damage estimate that you took as you've noted I think in your release a lot of.
Steven Isaac Fleishman: Kind of what's in there what's not in there.
Steven Isaac Fleishman: One clarification, just as how about.
Steven Isaac Fleishman: Not punitive damages, but non economic damages.
Steven Isaac Fleishman: Is that in your estimate or not in your estimate.
Steven Isaac Fleishman: Yes.
Speaker Change: I'll handle this one.
Steven Isaac Fleishman: Ed I'll give you a case for US obviously, we will point to our disclosures, but I'll give you a little bit more color in terms of.
Speaker Change: That 250 $215 million due to the lower end that would be great.
Speaker Change: Here is the large volume pockets it includes.
Speaker Change: Residential properties and related losses cattle and feed agricultural structures and fencing non economic damages and there are a number of other items. So obviously this is subject to change as we gain additional information since we're still early in the process.
unknown: I've got maybe a couple, and the RFPs seem like they're coming out this summer. Just how are you kind of thinking about competition for capital within the current CapEx plan now that you're seemingly, you know, accelerating some resiliency plans at SPS and PSCO? Maybe you can kind of remind us what's incremental versus not, and then also just touch on your financing plan and equity needs. Thanks.
Speaker Change: That's helpful. Thank you.
Speaker Change: And then.
Speaker Change: Just on a follow up on the question about equity.
Speaker Change: Just given some of the overhang that's been caused by this how are you.
Speaker Change: Are you re kind of revisiting like other options of getting equity and just issuing it are there.
Asset sales or other things that you might consider or is that just not.
Speaker Change: Not as.
Speaker Change: Attractive is just.
Speaker Change: It's just funded with equity.
Speaker Change: Obviously, the insult you'd expect.
Speaker Change: Bob <unk> Evaluable weights.
Speaker Change: Normal course, what other options are there I think we've been you've already seen from US is that we were a pretty straightforward.
Speaker Change: Conservative financing plan from a coffee perspective.
Speaker Change: I think right now Thats, our current plan of action.
Speaker Change: <unk> been on record about not only interested in minority interest sale in the light that biomass here and as we sit here today.
Speaker Change: Okay, and then last thing on the data center.
unknown: So just on the on the facility at the <unk> side, how is that.
Speaker Change: How is that being served and then just Bob you mentioned talking to a lot of others could you just talk to.
unknown: How they're viewing your territory.
Robert C. Frenzel: And just making sure youre able to kind of do this in a way that is kind of good for a broader customer base.
Robert C. Frenzel: Yes, great question and in conversations and Steve and it's very topical.
Speaker Change: Both inside the walls of the building as well as around the industry.
Speaker Change: On your specific questions with regard to the second site the site okay.
Speaker Change: Talented with.
Speaker Change: <unk> energy.
Speaker Change: And as you know, we're the first company to commit to being 100% carbon free electricity.
Speaker Change: So we already had a significant importance in the renewable of our system and that will benefit from all of our system actions.
Speaker Change: More broadly as we look across our footprint as a company.
Speaker Change: We think depending on the operating company, we have really attractive dynamics for <unk>.
Speaker Change: For Super scalar is another data center and high energy use customers and whether it's.
Speaker Change: Very low cost C&I energy in the southwest or weather and higher renewables in Colorado or similar footprint here in the upper Midwest I think that we're having conversations across our footprint and I think we've got.
Speaker Change: Both access to water transmission infrastructure.
unknown: Thanks. The whole way across and everything you're asking about. Can you comment on one thing about the Brian comment? I think you asked about sort of the relative competitiveness of the company, which we would expect to offer in, you know, our own development projects into the SPS proposal. We've proven that we
Speaker Change: Land and energy and clean energy that they find attractive and so we've got a significant amount of interest from super scalar than others and.
Speaker Change: Look forward to sharing more of that as we develop our forecast.
unknown: Yes.
Speaker Change: I just wanted to.
Speaker Change: Just add a little bit of color to that because I think you've kind of hinted at how do we think about it from a from a current customer perspective.
Speaker Change: I think.
Speaker Change: As we bring on new data centers, and that's something we did with meta and approval of <unk>. We made sure. It's a win win for our existing customers. That's really important as we continue to move forward with this significant opportunity and I think there is opportunity there to work with our policymakers and regulators to help drive economic development within the.
unknown: Got it. That's really helpful. And then I guess just, and you hit all the points. To put a finer point on the equity needs, I guess, do you just see really kind of no change to current plans, even with the multiple a little bit lower here? Thank you.
Speaker Change: Alright contacts, but also ensuring that we can move quickly because you will need to build our infrastructure both on the generation side and the wireless side to ensure that we can serve some of these significant opportunities that we're seeing over the next five to 10 years.
unknown: And that takes into account our lower multifold impacts over the past quarter. Certainly, you know, we, as I mentioned, think about there are significant investment opportunities going forward. And it's important to have a strong balance sheet, and we plan to maintain that strong balance sheet. But obviously, we'll look at what that means, that strong balance sheet gives us some timing flexibility from an equity issuance perspective, and obviously, we'll evaluate that. And obviously, we'll evaluate whether there's some potential timing flexibility around capital in the near term.
Speaker Change: Great. Thank you.
unknown: Yeah.
Speaker Change: Thank you our next question from Jeremy Tonet JP Morgan. Please go ahead.
Jeremy Bryan Tonet: Hi, good morning.
Jeremy Bryan Tonet: Hey, Jerry.
Speaker Change: Alright. Thanks.
Jeremy Bryan Tonet: Just wanted to continue with the data center question with one more finer point here I guess as it relates to Sps.
unknown: But I think overall, as we think fundamentally, everything's intact from a long-term perspective in terms of maintaining a strong balance sheet and funding the investment needs for the clean energy transition with equity as we need to maintain that balance sheet.
unknown: Given the need for power and given the very cheap natural gas in that area.
unknown: Don't wouldn't necessarily think of Sps is a place that way.
Jeremy Bryan Tonet: Data centers with target, but just wondering if what you're seeing there if cheap power is a draw just any thoughts in general.
unknown: Thanks a lot. I really appreciate the time.
Speaker Change: Yeah, Hey, Jeremy.
Speaker Change: As Bob mentioned, we're seeing data better interest across all of our service territories and servicer.
unknown: Thank you. Our next question is from Steve Fleishman with Wolf Research. Please go ahead.
Steven Isaac Fleishman: Preferred debit maybe a little different.
Speaker Change: Practice this and then you'd hinted at Sps as one of the lowest C&I rates in the country.
Speaker Change: Interest there, but I would say the other significant growth that we continue to see in Fps and this is really what youre seeing come through our numbers now when you look at the year over year growth C&I perspective, as the oil and gas.
Steven Isaac Fleishman: Expansion in the Permian basin, there and everything you're doing from an electrification perspective, so right now thats the near term growth.
unknown: Is that who caused it? Or what? How should we think about what's going to come out in that report? What should we focus on? Good morning, a pretty good example of getting all, or mostly all, of the...
Speaker Change: And.
Speaker Change: Sps with longer term data set of opportunity, we're discussing with some data center down there.
Speaker Change: You also have fantastic renewable resources down there from our wind and solar perspective, well that leads to that when we talk about that RFP coming out in Sps in our resource plan. There is a reason why we got a range $5 $10 a megawatt that upside of the range is ensure that we enable some of the growth that we're seeing.
unknown: I feel the committee was looking to be prospective and gathering information for future solutions, and I think that's how I expect the report in May to come out, in line with the sessions themselves with, you know, constructive recommendations for how to proceed going forward.
Speaker Change: Got it certainly new Mexico at the low end of the cost curve for production in North America there.
Speaker Change: Yes.
unknown: Maybe continuing with Texas, a little bit more in following up on the wildfires just wondering if Texas cap's non economic damages or just any other details you can provide there.
Speaker Change: Yes, right now there is no cap on non economic damages in Texas. There is a cap on punitive damages. There's two times economic damages false up to 750 <unk> are not economic.
Speaker Change: Got it thank you for that and then.
unknown: Looking forward to the Colorado wildfire mitigation plan filing.
Speaker Change: There's been some press in the state around recent D. <unk> in Colorado can you speak to the opportunity for sexualization or other efforts to reduce customer impact any other nuances to the filing you could share with us.
unknown: Okay and then just on the damage estimate that you took because you've noted, I think, in your release a lot of kind of what's in there, what's not in there. One clarification is, how about not punitive damages but non-economic damages.
Yeah, Hey, Jeremy it's Bob and thanks for the question.
unknown: First I'm really proud of what the team did in Colorado and executing on behalf of public safety during volatile weather event.
unknown: Hey, yeah, I'll handle this one. And I'll give you a little bit more color in terms of, you know, that $215 million at the lower end. Yeah, that would be great. And here's the big, some of the large pockets that Residential Properties and Related Losses.
unknown: As you can imagine.
Speaker Change: <unk>.
Speaker Change: The second filing of our wildfire mitigation plan, it's going to have a lot of continuation of the existing plan and probably incremental areas that we'd be looking for but as I think about the big buckets of opportunity there.
unknown: Really.
Speaker Change: Early warning capabilities, we've already installed 21 handheld cameras, but I think there is a.
unknown: Real opportunity for increase early warning capabilities with AI powered cameras as well as as weather stations in and around our territories and our equipment.
unknown: That's helpful, thank you. And then... Just on a follow-up on the question about equity. Given some of the overhang that's been caused by this, how are you? You know, not as attractive as you would like.
unknown: Obviously, we have opportunities to improve our operating capabilities and public safety power shutoff valves as well as even the power line.
unknown: Enhanced powers Rois safety settings.
unknown: But we're executing those today and we're doing a pretty good Scott we have more work to do there.
unknown: I think by the third bucket, where kind of where your question lead to.
unknown: So our asset with domain capabilities and can continue to expect our poles and wires replace stuff and maybe accelerating some of that but I think also system resiliency and this gets back to your comment on sexualizing. We've done some of that we have a real opportunity to do that more both our intelligence at a granular level of <unk>.
unknown: You know, obviously, it's something you'd expect Bob and I to evaluate in the normal course. But, you know, what other options are there? I think we've been, what we've seen from us is that we were a pretty straightforward conservative financing plan from a company perspective. So I don't, I think right now, that's our current plan of action. And I think I've been on record about not only being interested in minority interest sales and the like. So that's our current plan of action as we sit here today.
unknown: Whether what's happening whether as well as our ability to control our system at a more micro level to mitigate customer impact is a real priority for us in this plan.
unknown: And lastly, as part of the plan is other public policy opportunity that we might have.
unknown: To protect our customers so a big buckets, there, but hopefully I got to your sexualizing question and wellness.
unknown: Okay, and then last thing on data center growth. So just on the facility at the old Sherco site, how was that? How is that being served?
unknown: Asset hardening like underground ing covered conductors and other pieces of the both transmission and distribution systems as we think about.
unknown: And then just, Bob, you mentioned talking to a lot of others. Could you just talk to them and make sure you're able to kind of do this in a way that is kind of good for the broader customer base? Yeah, no, that's a great question.
unknown: Attempting public safety is a priority for us.
unknown: Got it very helpful. There and just a last one if I could as it relates to <unk>.
unknown: Gas cases in Minnesota, and Colorado any updates there that we should we think about our conversations with stakeholders and regulators on.
Bob: Yeah, no, that's a great question and conversation, Steve, and it's very topical, both inside the walls of the building as well as around the industry. On your specific questions with regard to the Sherco site, you know, those sites get powered by grid energy, and as you know, we're the first company to commit to being 100% carbon-free electricity. So we already have a significant importance in the renewable system, and, you know, they'll benefit from all our system actions.
unknown: On those cases, and how you feel about those cases.
Bob: Yes.
Bob: Yes, and just like all get out first the munis over to natural gas case, because thats, probably the one that's furthest along given that we just received intervenor testimony.
Bob: And the department of Commerce recommended.
Bob: $44 million increase of nine 4% Roe.
Bob: We have hearings in mid July Bolsa, when Brookfield has an opportunity to engage with our with our stakeholders to see if we can reach reach a settlement, which we did in the last Minnesota gas rate case. So we want to do that like I said hearings are July so from now until July will want to engage there.
Bob: More broadly, as we look across our footprint as a company, we think, depending on the operating company, we have really attractive dynamics for super scalers and other data center and high energy use customers. And whether it's, you know, very low-cost C&I energy in the Southwest or without any weather and higher renewables in Colorado or a similar footprint here in the upper Midwest, you know, I think that we're having conversations across our footprint.
Bob: On the net on the Colorado side.
Bob: We're still pretty early in the process. We haven't received intervenor testimony yet the procedural schedule just came out so for us it will be the the settlement we get intervenor testimony in mid July we get opportunity Theres a settlement deadline, adding of August and then if we don't reach a settlement will be hearings in mid September.
Bob: <unk> of the decision in Q4.
Bob: And I think we've got both access to water transmission infrastructure, land, and energy, and clean energy that they find attractive. So we've got a significant amount of interest from super scalers and others and look forward to sharing more of that as we develop our forecast. Yeah, thanks for watching this.
Speaker Change: Got it very helpful. Thank you.
Bob: Thank you. Our next question is from Carly Davenport with Goldman Sachs. Please go ahead.
Speaker Change: Hey, good morning, Thanks for all the detail so far.
Bob: Maybe just on the resiliency plan filing at Sps that you expect in late 'twenty. Four can you just remind us of the timing to getting that ultimately approved and one that spend would come into play and then I guess any early views on kind of the sizing of that potential filing or in addition to the wildfire mitigation piece that you flagged what other buck.
unknown: Just to add a little bit of color to that, I think you kind of hinted at how we think about it from a current customer perspective. You know, I think, as we bring on new data centers, and this is something we did with META and the approval of META in Minnesota, we make sure it's a win-win for our existing customers. That's really important as we continue to move forward with this significant opportunity.
unknown: That's of spend do you think will be important there.
unknown: I think currently it's Brian.
unknown: We're just looking to.
unknown: And I think there's an opportunity there to work with our policymakers and regulators to help drive that economic development within the right context and also ensure that we can move quickly, because you will need to build on infrastructure, both on the generation side and the wider side to ensure that we can serve some of these significant opportunities that we're seeing over the next 5 to 10 years.
unknown: <unk> put that filing together would be late in Q4 ourself.
unknown: From a timing perspective, you're probably in the Q3 of the following year.
unknown: To get approved so I think for the overall when you look at some of our kind of just distribution spend in Sps and you look at our five year capital plan and what could be eligible for <unk>.
unknown: Obviously, we are.
unknown: Currently focused on the Colorado <unk> will take a lot of those.
unknown: Programs and apply it to Sps Taylor, because STS very different geography than comp taxes severity of the geography that we think about one what should we be doing to have blips mutation for wildfire perspective, and total Taylor is but I think we'll give you more color as we get further development of that our brasilia.
unknown: All right, thanks. I just want to continue with the data center question with one more finer point here, I guess, as it relates to SPS. You know, given the need for power and given the very cheap natural gas in that area, I wouldn't necessarily think of SPS as a place that data centers would target, but just wondering if what you're seeing there is if cheap power is a draw, just any thoughts in general.
unknown: <unk> later this year.
Speaker Change: Got it Okay. That's helpful. Thank you and then the follow up is just on O&M.
unknown: You know a nice benefit during the quarter. There was that just a function of kind of year over year timing or is there potential downside to that annual guidance on O&M being up 1% to 2% for the year.
unknown: Yeah, Adrian, I think, as Bob mentioned, we're seeing data that is of interest across all of our service territories, and each of the service territories has maybe a little different point of attractiveness. And then you hit it at SPS has one of the lowest C&I rates in the country.
Speaker Change: Yeah. Good question I think from our perspective as you kind of noted we haven't changed our guidance for the year and even though we had a significant quarter over quarter change. So I look at it more from where we are from a budget perspective, which you don't see it we're slightly ahead of our budget for the first quarter.
unknown: But from where we were we said I think it's early in the year that our goal just to land within that 1%, 2% O&M guidance range.
unknown: So, interest there, but I would say the other significant growth that we continue to see in SPS, and this is really what you're seeing come through our numbers now when you look at, you know, the year-on-year growth from the C&I perspective is the oil and gas expansion in the Permian Basin there and everything to do in terms of electrification. So, right now, that's the near-term growth, and SPS has the longer-term data center opportunity.
unknown: As we sit here.
Adrian: Got it great. Thanks, so much for the color.
unknown: Thank you. Our next question is from Anthony Powell with Mizuho. Please go ahead.
unknown: We're discussing this with some data centers down there. We also have fantastic renewable resources down there from a wind and solar perspective. And that leads to that when we talk about that RP coming out in SPS in our resource plan, there's a reason why we have a range of 5,000 to 10,000 night watts and increase that range to ensure that we enable some of the growth that we're seeing.
Speaker Change: Hey, good morning, just two quick ones one is.
unknown: Any major change in the company's.
unknown: Cost to ensure.
unknown: The company's operations.
unknown: Okay.
Anthony: Hey, Anthony.
Speaker Change: Yes, that's a good question as we think about it so I assume youre asking specifically about <unk>.
unknown: Alpine insurance or excess liability yes.
unknown: Yes.
Speaker Change: I think yes, all our other folders that I'd say are relatively stable or don't have significant.
unknown: Got it. Certainly, New Mexico, the low end of the cost curve for production in North America there. Maybe continue with Texas a little bit more and follow up on the wildfires. Just wondering if Texas caps non-economic damages or just any other details you could provide there?
unknown: Challenges as I think about wildfire insurance and <unk>.
unknown: Although all of our insurance versus overall excess liabilities there are two different things.
unknown: I think this is a very key industry issue.
unknown: Yeah, right now, there is no cap on non-economic damages in Texas. There is a cap on punitive damages, which is two times economic damages, plus up to $750K for non-economic damages.
unknown: Both at the state and federal level and if you've been following this as one of their top priorities. This year from a firewall perspective.
unknown: In terms of how do we think about getting our focus.
unknown: <unk> focus on Dan's limitations or insurer backstop, our solution at a federal level.
unknown: Got it. Thank you for that. And then I'm looking forward to the Colorado wildfire mitigation plan filing. There's been some press in the state around recent de-energization in Colorado. Can you speak to the opportunity for sexualization or other efforts to reduce customer impacts? Any other nuances to the filing you could share with us?
unknown: Think about specific criteria for wildfire mitigation plans.
unknown: <unk> liability protection. So those are the broad buckets <unk> no I would say one thing you all from a state perspective, as we look forward.
unknown: Our legislation legislative sessions are wrapping up here or have already wrapped up this year. So what we'll do is we'll look to work with our policymakers in our states.
unknown: Hey, Jeremy, thanks for the question. First, I'm really proud of what the team did in Colorado in executing on behalf of public safety during a volatile weather event. If you can imagine the second file in our wildfire mitigation plan, it's going to have a lot of continuation of the existing plan and probably incremental areas that we'd be looking for. But as I think about the big buckets of opportunity there, really, Early Warning Capabilities.
unknown: For <unk> as we think about back to utilize session to see if there's any any state level solutions as we think about it now is really from a company perspective or a commercial insurance perspective.
unknown: Even prior to small cost creep.
unknown: We were <unk>.
unknown: Our understanding from some of the commercial carriers they were already looking to reduce their capacity and not just for us, but overall their exposure from a wildfire insurance perspective, and so thats going into the next policy cycle. These are annual renewals, so far with minimal Intel Q4, So we will get more visibility.
unknown: We've already installed 21 pano cameras, but I think there's a real opportunity for increased early warning capabilities with AI-powered cameras, as well as weather stations in and around our territories and our equipment, sort of asset resilience capabilities, and we can continue to inspect our poles and wires, replace stuff, and maybe accelerate some of that. But I think about system resiliency, and this gets back to your comment on sectionalizing. We've done some of that.
unknown: Intuit, but ill give you some.
unknown: A sense of where we sit today is we have.
unknown: $500 million of coverage and we're paying a lot of $40 million premium for that coverage.
unknown: Total excess liability, including wildfire, but I would expect that that covers that capacity as we called out and I expect premiums to be pressured absolutely. So.
unknown: Like I said, we're still a ways away from our renewal. So again, we'll provide more color as we also but that's where we sit today.
Speaker Change: Great and then just one last one I think Bob you had mentioned.
unknown: Yeah.
unknown: Pursuing some proactive legislation for wildfire risk.
unknown: Would you be willing to listen to like Hey that maybe top three things or what are your goals in getting legislation passed.
unknown: Would you like to be included in your fee. The first wave of legislation passed whether it's.
unknown: We have a real opportunity to do that more. Both our intelligence at a granular level about weather and what's happening in the weather, as well as our ability to control our system at a more micro level to mitigate customer impact is a real priority for us in this plan. And lastly, part of the plan is other public policy opportunities that we might have to protect our customers. So a big bucket there, but hopefully, I got to your sectionalizing question, as well as asset hardening like undergrounding, covered conductors, and other pieces of the both transition and distribution systems. As we think about, protecting public safety is a priority for us.
unknown: Limits on non economic.
Speaker Change: I'm just curious any color on that you would provide.
Speaker Change: Yeah, Hey, good morning, Anthony and thanks for the question as Brian said this is a big an emerging national issue and we've seen pressure both on the retail side of insurance homeowners struggling to get homeowner insurance that protects from wildfire risk.
unknown: And you are seeing in the commercial side and the wholesale side as well so we've been active.
unknown: At the federal level, particularly talking about sort of a national opportunity we might have here.
unknown: I found it very helpful there. And just a last one, if I could, as it relates to gas cases in Minnesota and Colorado, any updates there that we should be thinking about in our conversations with stakeholders and regulators on those cases and how you feel about them
unknown: I think about their own precedence at the federal level <unk>.
unknown: Where goods are really important for everybody like.
unknown: The FDIC or FEMA or for flood insurance or other type programs or even nuclear backstop insurance from the price Sanderson exited this federal precedents around.
unknown: Yeah, and just like I'll get on first with the Minnesota natural gas case, because that's probably the one that's furthest along, given that we just received intervener testimony. In the Department of Commerce, the Department of Commerce recommended a $44 million increase in the 9.4% ROE.
unknown: <unk> <unk>.
unknown: <unk> home goods like banking access like access to affordable electricity. So as I think about where the federal government could help in private client state level, two which is.
unknown: Ill.
unknown: We have hearings in mid-July, but we'll certainly look into an opportunity to engage with our stakeholders to see if we can reach a settlement, which we did in the last Minnesota gas rate case. So we'll look to engage that. Like I said, hearings are in July. So from now until July, we'll look to engage there on the Colorado side. We're still pretty early in the process. We haven't received any intervener testimony yet.
unknown: Having approved wildfire mitigation plan that can be reviewed by an agency.
unknown: <unk> or federal level, and then if you are in compliance.
unknown: Current on that plan, then you have access to some form of backup insurance program.
unknown: That provides protection and may be accessed that maybe the commercial carriers are providing at an attractive or an affordable cost.
unknown: That group of entities comes up to speed on risk and risk mitigation. So I think those are the big parameters, but I would think about.
unknown: The procedural schedule just came out. So for us, it'll be the settlement. We get intervener testimony in mid-July. We get opportunity, there's a settlement deadline at the end of August, and then if we don't reach a settlement, we'll be hearing in mid-September for the decision in Q4.
unknown: And certainly there are state precedent you can take.
unknown: Utah, or Nevada, or California.
unknown: <unk> and <unk> programs were.
unknown: Companies, along with their regulators and legislators are coming up with programs that provide more cost effective backstop for companies to bring down the risk and as I said in my prepared remarks at the end of the day, we have an enormous energy transition that we need to fund.
unknown: Thank you. Our next question is from Carly Davenport with Goldman Sachs. Please go ahead.
unknown: Hey, good morning. Thanks for all the details so far. Maybe just on the resiliency plan filing at SPS that you expect in late 24, can you just remind us of the timing for getting that ultimately approved and when that spend would come into play? And then, I guess, any early views on kind of the sizing of that potential filing or, in addition to the wildfire mitigation piece that you flagged, what other buckets of spend do you think will be important there?
unknown: And making sure that our cost of capital is attractive to fund that Keith.
unknown: The transition affordable for our customers and for the country.
unknown: And so I think it's important that we manage this risk we manage the financial cost of this risks and those are some of the areas that I would think are most important for us to go after.
unknown: Thank you, Carly and Brian. You know, as I said, we're just looking to put that filing together; it'll be late in Q4. So from a timing perspective, you're probably into Q3 of the following year for it to get approved. So I think from an overall perspective, I think you'd look at some of our kind of just distribution spend in SPS and you look at our five-year capital plan, what could have been held before.
Speaker Change: Alright, thanks for taking my questions.
Brian: Yeah, just to add a little bit that I think as Bob talked about the importance of kind of that insurance back stop and falling at AWS.
unknown: Also an aspect there is no follow up when we acquired with the <unk> pieces of the presumption of Bruce.
unknown: I think.
unknown: <unk> two and also looking at a lipid job liability of alumina limited on damages.
Speaker Change: Great. Thank you.
unknown: Thank you. Our next question is from Sophie Karp with Keybanc. Please go ahead.
unknown: Obviously, we're programs and can apply it to SPS, but we have to tailor it because SPS is a very different geography than Texas, a very different geography. We think about what we should be doing to have risk mitigation from a wildfire perspective, and so we'll tailor it. But I think we'll get more color as we get further development of that resiliency plan later this year.
Speaker Change: Hi, Good morning, Thank you for taking my question.
Speaker Change: I have a couple of things.
Speaker Change: Yeah. So on the Texas fire can you clarify how I guess the claim system and the litigation that has been filed against you again.
unknown: Got it. Okay, that's helpful. Thank you.
unknown: Together for a lack of a better word.
unknown: Q4 core litigating not filing claims token they do both like how does it work.
unknown: Hey.
Speaker Change: Good morning, Yes, I mean, so first of all I'll talk about the claims process and still early but we actually encourage people to submit claims.
unknown: And then the follow up is just on O&M, you know, nice benefit during the quarter there. Is that just a function of kind of year over year timing, or is there a potential downside to that annual guidance on O&M being up 1 to 2% for the year?
unknown: 46, so far.
unknown: But how it works as anyone can submitted claims and submit that claim they don't wave the right to pursue a lawsuit but.
unknown: If those are claims settlement than that.
unknown: All of US are released any other other potential lawsuits that they could file.
unknown: So thats how it could work, but also promote solar by the lawsuit certainly could be an opportunity to sell through that losses too. So.
Speaker Change: Like I said, we're encouraging people to enter the claims processing.
unknown: We settled a couple already and are in active settlement discussions with others.
Speaker Change: Got it got it. Thank you and then my other question on the Colorado gas got this clarification from the commission there that.
unknown: Yeah, a good question. I think from our perspective, as you kind of noted, we haven't changed our guidance for the year-end, even though we had a significant quarter-over-quarter change. So I'm looking at it more from where we are from a budget perspective, which you don't see. And we're slightly ahead of our budget for the first quarter. But from where we sit, I think it's early in the year, and our goal is to land within that 1-2% O&M guidance. As we sit here,
unknown: They want their utilities to pursue non pipeline alternative I guess.
unknown: Got it, great. Thanks so much for the color.
unknown: For gas in Colorado could you comment on that and just sort of how that will impact cure.
unknown: Investment in that state, particularly with gas.
unknown: Thank you. Our next question is from Anthony Crowdell with Mutuho. Please go ahead. Take care.
Anthony Christopher Crowdell: Hey, Tobey.
Anthony Christopher Crowdell: Look we've got a number of gas proceedings in Colorado over the last year.
Anthony Christopher Crowdell: I think you're referring to are clean heat plan and.
Anthony Christopher Crowdell: But we think that that was the industry, leading or very easy filing.
Anthony Christopher Crowdell: Proactive on the company and the Commission's parts to move forward that big.
Anthony Christopher Crowdell: Big picture I think they are sitting there looking at the gas system as an effective delivery of energy, but making sure that if we got capacity needs from a growing customer base out there that we're looking at something other than pipeline alternatives and we're actively engaged and that's something we've always has the company looked at.
Anthony Christopher Crowdell: But I don't think its going to affect necessarily going forward in terms of significant changes in capital forecast from where we sit today, but.
Anthony Christopher Crowdell: But maybe a more proactive approach with stakeholders and communities about finding maybe different types of solutions to solve the similar issues, whether that's more beneficial electrification more empowering the Av homes for home heating and other needs and we're certainly engaged in that process with them.
Anthony Christopher Crowdell: So the non pipeline alternative is.
Anthony Christopher Crowdell: Basically it works for electrification or could that be something like increasing like compression station now taught us something like that like just kind of.
Anthony Christopher Crowdell: What is that.
Anthony Christopher Crowdell: Yes, Sir.
Anthony Christopher Crowdell: As you bring up increasing compression station Serbian opportunity I think generally it's thought what are the electrification opportunity say theres going to be a new neighborhood adults.
Anthony Christopher Crowdell: The <unk> per dose.
Anthony Christopher Crowdell: It's sort.
Anthony Christopher Crowdell: Sort of that being oil and gas and expansion of our pipeline or what are the alternatives for more expectation perspective.
Anthony Christopher Crowdell: That's probably the best way to think about it I'd say, there's probably one other bucket out there and it's a very.
Anthony Christopher Crowdell: A very important project for the governor and the geothermal whether at a district level or a residential level our community level exploring the possibilities of geothermal in the state are something we're willing to work with how we're going to work with our customers and our stakeholders in the state. So it's not necessarily just electrification it can be.
Anthony Christopher Crowdell: Or more different forms.
unknown: Of heat for homes and communities.
Anthony Christopher Crowdell: Got it. Thank you so much that's all from me.
Anthony Christopher Crowdell: Thank you. Our next question is from Ryan Levine with Citi. Please go ahead.
Anthony Christopher Crowdell: Good morning.
Anthony Christopher Crowdell: What role do you see PSTN, having in terms of your wildfire mitigation plans and are there any initiatives that you can take proactively to gain more stakeholder support to be able to implement that on a go forward basis.
unknown: Hey, good morning. Just two quick ones. One is, um, any major change in the company's cost to ensure the company's operation?
unknown: Hi Anthony. Um, yeah, that's a good question as we think about it. So I assume you're asking specifically about wildfire insurance or excess liability? Yes, I do.
Bob: Hey, Brian it's Bob.
Anthony Christopher Crowdell: Certainly we think of PSP.
Speaker Change: Kind of a tool of last resort.
Anthony: But public safety is our priority in making sure that our communities are protected and volatile wind events.
Anthony: And wildfire risk case, it's really important to us as well so are there opportunities for us to gain more public support of course, there are ways that we can improve our own performance as we.
unknown: Yeah, you know, all our other programs, I would say are relatively stable or don't have significant challenges. And I think about wildfire insurance, and just let's talk about wildfire insurance versus overall access liability, because there are two different things. I think this is a very key industry issue, both at the state and federal level. And if you've been following EEI, this is one of their top priorities this year from a federal perspective, in terms of how do we think about getting a focus on damage limitations, you know, is there an insurance backstop or solution at the federal level, and think about specific criteria for wildfire mitigation plans in exchange for liability protection.
unknown: <unk> gained more muscle here, because it's something that I don't love to do but we have to do it I think theres areas of improvement that we as a company have identified and are working with our Colorado Commission to do so and that includes.
unknown: Early notification.
unknown: Excellence in outage maps, something I've talked about earlier our segmentation.
unknown: So all of this comes as a function of our wildfire mitigation plan. If we have better early warning devices like cameras weather stations, our ability to effect on a more localized level, where the risk is and where the outage would need to be.
unknown: So those are some of the broad buckets EEI is thinking about. Now, I would say one thing from a state perspective: as we look forward, our legislative sessions are wrapping up here, or have already wrapped up this year. So what we'll do is we'll work with our policymakers in our states, kind of from here forward, as we think about next year's legislative session to see if there are any state level solutions as we think about it.
unknown: You get better, but that's going to take some time and effort some partnership with our agencies and stakeholders in Colorado for sure.
unknown: And then shifting gears on the financing plan as the carrier prices continue to move.
unknown: How do you look at maybe assessing.
unknown: Time to come to market or for capital raises I think an earlier question you suggested that the avoidance of asset sales, but.
unknown: Any color on response to maybe different security prices and how that can impact your financing plan.
unknown: Hey, Ryan I think a little bit as the color I provided before is obviously.
unknown: Overall, we believe our growth plans from an investment perspective, or long term EPS growth perspective of the impact in <unk>.
unknown: Our sands and maintaining a strong balance sheet, what I talked about not necessarily an avoidance, but how do we look at the timing.
unknown: Now, specifically from a company perspective, or a commercial insurance perspective, even prior to Smokehouse Creek, we were seeing or understanding that from some of the commercial carriers, they were already looking to reduce their capacity, and not just for us, but overall, their exposure from a wildfire insurance perspective. And so that's going into the next policy cycle. These are annual renewals. So our renewal is Intel Q4. We'll get more visibility into that.
unknown: The equity and the timing of capital per square on the timing of equity given that we have a strong balance sheet.
unknown: But, you know, I'll give you a little bit of a sense of where we sit today, above $500 million of coverage, and we're paying a lot of $40 million in premium for that coverage. And that's full excess liability, including wildfire, but I would expect that that coverage that capacity to come down, and I expect premiums to be pressured. Absolutely. But you know, like I said, we're still a ways away from our renewal. So again, we'll provide more color as we get closer, but that's where we sit today.
unknown: As we can look at being flexible there, but I would expect that.
unknown: We're investing $39 billion of cash.
unknown: Capital at a 9% rate base growth that does come with the financings in January you'll require refinancing here and in Europe, that's aligned with the capital spend so that's the best way to think about it but.
unknown: But obviously you understand what happened to the cost of equity here and also with the cost of that would have gone up over the short term in terms of our treasury rates have gone, so, but thats factored into all of our plans as I sit here and talk about reiterating reiterating on being at or above our 7%.
unknown: Okay and then just last question in terms of Capex outlook, given maybe acceleration of <unk> infrastructure Buildout in North America, you are seeing any.
unknown: Great. And then just one last one.
unknown: Indications that may be costs will come higher.
Bob: I think Bobby mentioned pursuing some proactive legislation for wildfire risk. Would you be willing to let us know, like, the maybe top three things, or what are your goals in getting the legislation passed? Like, what's, you know, would you like to be included in your maybe first wave of legislation passed, whether it's, you know, limits on non-economic liability, or I'm just curious, any color on that you would provide.
unknown: For what's already slated to be built in the coming years.
Bob: Color you could share.
Speaker Change: Yes, Ryan Bob.
Bob: Look I think as we see rate ex realizations, we see data center build outs.
Bob: Certainly there can be cost pressures that come from basic materials and construction materials like concrete steel and things like that I think we take our best estimate as we put our capital forecast out, but something we watch pretty closely.
unknown: Yeah, hey, Anthony, and thanks for the question. As Brian said, this is a big and emerging national issue, and we've seen pressure both on the retail side of insurance, homeowners struggling to get homeowner insurance that protects them from wildfire risk, and you're seeing it in the commercial side and the wholesale side as well. So we've been active at the federal level, particularly talking about sort of the national opportunity we might have here.
unknown: Labor is another area.
unknown: <unk>.
unknown: Opportunity there I think that.
unknown: One of the things, we're very focused on DC and energy.
unknown: Sector transition, making sure that there is a pipeline of talent.
unknown: Starting early on and trade schools, and partnering with our labor unions and business partners there to make sure that the pipeline of line pipe Fitters welders are.
unknown: You know, I think about there are precedents at the federal level. You see stuff like where goods are really important for everybody like the FDIC or FEMA or for flood insurance or other type programs or even, you know, nuclear backstop insurance from the Price-Anderson Act. There's several precedents around, you know, protecting, you know, national goods like banking access, like access to affordable electricity. So as I think about federal, where the federal government could help and this probably applies to state level too, which is, Having an approved wildfire mitigation plan that can be reviewed by an agency of a state or federal level, and then if you're in compliance and current on that plan, then you have access to some form of backstop insurance program that provides protection and maybe access that maybe the commercial carriers aren't providing at an attractive or an affordable cost as that group of entities comes up to speed on risk and risk mitigation.
unknown: Capable of keeping up with the demand. So we try to set an early demand signals to them.
unknown: And held them in recruitment processes across our territories and really partner on a national level to make sure that we're seeing enough trading come into the business broadly that we don't see an immense amount of labor pressure.
Speaker Change: Great. Thanks for taking my questions.
unknown: Thank you. Our next question is from Paul Patterson with Glen Rock Associates. Please go ahead.
Speaker Change: Hey, good morning.
unknown: Good morning, Paul.
unknown: Yeah.
Speaker Change: I apologize if you guys have gone over this but just on the.
unknown: The nuc.
unknown: Life extension.
unknown: Could you remind me what the impact.
unknown: So I think those are the big parameters that I would think about, and certainly there are state precedents you can take. Look at Utah or Nevada or California laws and see programs where, you know, companies, along with their regulators and legislators, are coming up with programs that provide more cost-effective backstops for companies to bring down the risk. And as I said in my prepared remarks, at the end of the day, you know, we have an enormous energy transition that we need to fund and make sure that our cost of capital is attractive to fund, which keeps the transition affordable for our customers and for the country.
unknown: And so I think it's important that we manage this risk, manage the financial cost of this risk, and those are some of the areas that I would think are most important for us to go after. I think that's my question. Yeah, just to add a little bit to that, I think Bob talked about the importance of kind of the insurance tax stop and filing a WLP, but I think there's also an aspect there is, you know, if you're filing in compliance with a WLP, there's a presumption, which I think is important too. And also looking at a limit on liability or limit on damage.
unknown: Financially use.
unknown: Have you guys already.
unknown: It varies from company to company.
unknown: <unk>.
unknown: The depreciation impact.
Speaker Change: When it's recognized et cetera, I was just wondering if you could review that for me quickly, but it's not a problem.
Speaker Change: Hey, Paul.
Speaker Change: Yes, and Youre referencing the resource plan that we just filed here in Q1 related to the extension.
unknown: Mono cell mono solar we already extended to 2040, and we recognize that depreciation in terms of lower customer bills. So we're looking to extend bonney for 2040% to 2015, and then Prairie Island bulk units once a year so a little bit from the early 2000 <unk> to the early 2015, we have not recognized those three.
unknown: Call lower depreciation depreciation rates in the customer bill over into rate base, we'll have we'll wait until we get through this proceeding to get approval.
unknown: Wrap it into our next rate case. So this proceeding is probably going to take 18 months supply at the very least so it's going to be a couple of years before we can pull that back into customer rates in terms of lower depreciation.
Speaker Change: Okay. Great. So just is there any potential for for regulatory sort of positive regulatory lag.
unknown: Or does it are you guys planning on having it immediately impact customers.
unknown: No. This is a bit of a likely just be captured either either have a deferral hero or likely if we're in a multiyear plan, we had a true up mechanism part okay.
Speaker Change: Okay awesome. Thanks, so much guys.
Speaker Change: Thank you as we have no further questions in the queue I'd like to turn it back over to CFO, Brian Van Abel for any closing remarks.
Speaker Change: Yes. Thank you all for participating in our earnings call. This morning, please contact our Investor relations team with any follow up questions.
Speaker Change: Thank you very much that concludes today's conference you may now disconnect hosts you may stay on the line.
unknown: Yes.
unknown: Yes.
unknown: Okay.
unknown: Okay.
unknown: <unk>.
unknown: Okay.
unknown: Sure.
Speaker Change: Thank you.
unknown: Sure.
unknown: Yes.
unknown: Sure.
unknown: Okay.
unknown: Thank you. Our next question is from Sophie Karp with KeyBank. Please go ahead.
unknown: Hi, good morning. Thank you for taking my question. I have a couple of questions today. Yeah, so on the Texas fire, can you clarify how, I guess, the claims system and the litigation that have been filed against you are going to, well, work together for lack of a better word? Like, are people who are litigating not filing claims, or can they do both?
unknown: Hey Sophie, good morning. Yeah, I mean, first of all, I'll talk about the claims process. It's still early, but we actually encourage people to submit claims. We've received 46 so far, but how it works is, you know, anyone can submit a claim, and when they submit that claim, they don't waive the right to pursue a lawsuit, but if there's a claim settlement, then that absolves or relieves any other potential lawsuits that they could file.
unknown: So that's how it could work, but also from a if someone files a lawsuit, you know, it certainly could be an opportunity to settle through that lawsuit, too. So, like I said, we're encouraging people to enter the claims process, and we've settled with a couple already and are in active settlement discussions with others.
unknown: Got it, got it. Thank you. And then another question on Colorado and gas. Got this clarification from the commission there that, you know, they want the utilities to pursue non-pipeline alternatives, I guess, for gas in Colorado. Could you comment on that and just sort of how that will impact your investment in that state, particularly with gas?
unknown: Hey, Sophie. Look, we've done a number of gas proceedings in Colorado over the last year. I think you're referring to our Clean Heat Plan, and we think that that was an industry-leading or very unique filing and proactive on the company and the Commission's part to move forward that big picture. I think they're sitting there looking at the gas system as an effective delivery of energy, but maybe a more proactive approach with stakeholders and communities about finding maybe different types of solutions to solve similar issues, whether that's more beneficial electrification, more powering And we're certainly engaged in that process with them.
unknown: So the non-pipeline alternative is basically a word for electrification, or could that be something like increasing compression station output or something like that, like just kind of, what is that?
unknown: Yeah, you bring up increasing compression stations, certainly an opportunity. I think generally it's thought of, you know, what are the electrification opportunities, say, there's going to be a new neighborhood built? What are the old protocols?
unknown: You know, it's okay, sort of that neighborhood with gas and the expansion of a pipeline, or what are the alternatives from an electrification perspective? So that's probably the best way to think about it. I think there's probably one or two out there, and it's a very important project for the governor and the geothermal, whether at a district level, or a residential level, or community level, exploring the possibilities of geothermal in the state is something we're willing to work with, or we're going to work with our customers and our stakeholders in the state. So it's not necessarily just electrification. It could be more different forms of heat for homes and communities.
unknown: Thank you so much for listening.
unknown: Thank you. Our next question is from Ryan Levine with Citi. Please go ahead.
Bob: Good morning. What role do you see PSPS having in terms of your wildfire mitigation plans? Are there any initiatives that you can take proactively to gain more stakeholder support to be able to implement it on a go-forward basis?
Bob: Hey, Brian, it's Bob. Certainly, we think of PSPS as a kind of a tool of last resort, but public safety is our priority in making sure that our communities are protected in volatile wind events, and wildfire risk days are really important to us as well. So are there opportunities for us to gain more public support? Of course, and there are ways that we can improve our own performance as we, you know, I hate to say gain more muscle here because it's something that I don't love to do, but when we have to do it, I think there are areas of improvement that we as a company have identified and are working with our Colorado Commission to do so, and that includes, you know, early notification, excellence in outage maps, something I talked about earlier on segmentation
Bob: So all of this comes as a function of our wildfire mitigation plan: if we have better early warning devices like cameras and weather stations, our ability to affect on a more localized level where the risk is and where the outage would need to be can get better, but that's going to take some time, some effort, and some partnership with our agencies and stakeholders in Colorado, for sure.
unknown: And then shifting gears on the financing plan, as security prices continue to move, how do you look at maybe assessing a time to come to market for capital raises? I think an earlier question suggests you suggested avoidance of asset sales, but any color around response to maybe different security prices and how that could impact their financing plan?
unknown: Thank you very much. That concludes today's conference. You may now disconnect. Hosts, you may stay on the line.
unknown: Hey, Ryan, I think a little bit as the caller I provided before is obviously, you know, overall, we believe our growth plans, from an investment perspective, a long-term EBS growth perspective, impact our stance of maintaining a strong balance sheet. What I talked about, not necessarily an avoidance, but how do we look at the timing of equity and the timing of capital, particularly the timing of equity, given that we have a strong balance sheet? We can look at the plans that I sit here today and talk about reintegrating, reiterating, being at or above our 570.
unknown: Okay, and then just last question in terms of CAFX Outlook, given maybe the acceleration of infrastructure build out in North America, are you seeing any indications that maybe costs will come higher for what's already slated to be built in the coming years, or any color you could share on that?
unknown: Hey, Ryan, look, I think as we see reindustrialization, we see data center build out. Certainly, there can be cost pressures that come from, you know, basic materials and construction materials like concrete, steel, and things like that. I think we take our best estimates; we put our capital forecast out, but it's something we watch pretty closely. You know, labor is another area of opportunity there. I think that, you know, one of the things we're very focused on is seeing an energy sector transition, making sure that there's a pipeline of talent, starting early on in trade schools and partnering with our labor unions and business partners there to make sure that the pipeline of linemen, pipefitters, and welders is capable of keeping up with the demand.
unknown: And so we try to send early demand signals to them and help them in recruitment processes across our territories and really partner on a national level to make sure that we're seeing enough trade come into the business broadly so that we don't see an immense amount of labor.
unknown: Great, thanks for taking my question.
unknown: Thank you. Our next question is from Paul Patterson with Glenrock Associates. Please go ahead.
unknown: [inaudible]
unknown: Good morning, all. Just, I apologize if you guys have gone over this, but just on the Nuke life extension, could you remind me what the impact... financially is? Have you guys already?
unknown: It varies from company to company how the depreciation impact is recognized, etc. I was just wondering if you could review that for me shortly, quickly, if it's not a problem.
unknown: Hey, Paul. You're referencing the resource plan that we just filed here in Q1 related to the extension of Monticello. So Monticello, we've already extended it to 2040, and we recognize that depreciation in terms of lower customer bills. So, we're looking to extend Bonnie from 2040 to 2050, and then Prairie Island, both units, 20 years. So, we'll go from the early 2030s to the early 2050s. We have not recognized those three so-called lower depreciation rates in the customer bill or in the rate case.
unknown: We'll wait until we get through this proceeding to get approval, and then we'll wrap it into our next rate case. So, this proceeding is probably going to take 18 months at the very least. And it's going to be a couple of years before we can pull that back into customer rates in terms of lower depreciation.
unknown: Okay, great. Just, is there any potential for regulatory, sort of positive regulatory lag? Or are you guys planning on having it immediately impact customer rates?
unknown: No, this is likely to just be captured, either have a deferral here, or likely, if we're in a multi-year plan, we'd have to throw in a mechanism for it. Okay, awesome.
unknown: Okay. Awesome. Thanks so much, guys.
Brian J. Van Abel: Thank you. As we have no further questions in the queue, I'd like to turn it back over to CFO Brian Van Abel for any closing remarks.
Brian J. Van Abel: Yeah, thank you all for participating in our early call this morning. Please contact our investor relations team with any follow-up questions.