xcel energy regulation
TRANSCRIPT
Executing The Regulatory PlanExecuting The Regulatory Plan
Dave Sparby Vice President – Government and Regulatory Affairs
Dave Sparby Vice President – Government and Regulatory Affairs
Regulators/Legislators
Value toValue toCustomersCustomers
EnvironmentalEnvironmentalStewardshipStewardship
FinancialFinancialPerformancePerformance
Invest in Regulated Utility BusinessInvest in Regulated Utility Business
This material includes forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements include projected earnings, cash flows, capital expenditures and other statements and are identified in this document by the words “anticipate,”“estimate,” “expect,” “projected,” “objective,” “outlook,” “possible,”“potential” and similar expressions. Actual results may vary materially. Factors that could cause actual results to differ materially include, but are not limited to: general economic conditions, including the availability of credit, actions of rating agencies and their impact on capital expenditures; business conditions in the energy industry; competitive factors; unusual weather; effects of geopolitical events, including war and acts of terrorism; changes in federal or state legislation; regulation; final approval and implementation of the pending settlement of the securities, ERISA and derivative litigation; costs and other effects of legal administrative proceedings, settlements, investigations and claims including litigation related to company-owned life insurance (COLI); actions of accounting regulatory bodies; risks associated with the California power market; the higher degree of risk associated with Xcel Energy’s nonregulated businesses compared with Xcel Energy’s regulated business; and other risk factors listed from time to time by Xcel Energy in reports filed with the SEC, including Exhibit 99.01 to Xcel Energy’s report on Form 10-K for year 2004.
This material includes forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements include projected earnings, cash flows, capital expenditures and other statements and are identified in this document by the words “anticipate,”“estimate,” “expect,” “projected,” “objective,” “outlook,” “possible,”“potential” and similar expressions. Actual results may vary materially. Factors that could cause actual results to differ materially include, but are not limited to: general economic conditions, including the availability of credit, actions of rating agencies and their impact on capital expenditures; business conditions in the energy industry; competitive factors; unusual weather; effects of geopolitical events, including war and acts of terrorism; changes in federal or state legislation; regulation; final approval and implementation of the pending settlement of the securities, ERISA and derivative litigation; costs and other effects of legal administrative proceedings, settlements, investigations and claims including litigation related to company-owned life insurance (COLI); actions of accounting regulatory bodies; risks associated with the California power market; the higher degree of risk associated with Xcel Energy’s nonregulated businesses compared with Xcel Energy’s regulated business; and other risk factors listed from time to time by Xcel Energy in reports filed with the SEC, including Exhibit 99.01 to Xcel Energy’s report on Form 10-K for year 2004.
Safe HarborSafe Harbor
Well-Positioned for Regulatory SuccessWell-Positioned for Regulatory Success
Constructive regulationConstructive regulation
Innovative regulatory recoveryInnovative regulatory recovery
Competitive rates due to strong cost managementCompetitive rates due to strong cost management
Increase investment to meet customer requirementsIncrease investment to meet customer requirements
Environmental stewardshipEnvironmental stewardship
An Experienced Regulatory TeamAn Experienced Regulatory TeamAn Experienced Regulatory Team
YearsYears
Xcel EnergyXcel Energy Dave SparbyDave Sparby 2525(Cross Functional)(Cross Functional) Debbie BlairDebbie Blair 2323
Ron DarnellRon Darnell 2222NSP (M)NSP (M) Scott WilenskyScott Wilensky 2020
Judy PoferlJudy Poferl 2020NSP (W)NSP (W) Don ReckDon Reck 2626PSCoPSCo Fred StoffelFred Stoffel 2626SPSSPS David HudsonDavid Hudson 2222
Key Regulatory InitiativesKey Regulatory Initiatives
Minnesota electric rate caseMinnesota electric rate case
Minnesota rate rider recovery and resource Minnesota rate rider recovery and resource planningplanning
Monticello nuclear plant relicensingMonticello nuclear plant relicensing
Wisconsin gas and electric rate casesWisconsin gas and electric rate cases
Colorado gas and electric rate casesColorado gas and electric rate cases
Texas electric rate caseTexas electric rate case
North Dakota electric rate caseNorth Dakota electric rate case
Minnesota Regulatory StructureMinnesota Regulatory Structure
Public Utilities CommissionPublic Utilities Commission—— Five membersFive members—— SixSix--year termsyear terms—— Appointed by GovernorAppointed by Governor—— Balanced party affiliationsBalanced party affiliations
Department of CommerceDepartment of Commerce—— Public advocate and enforcement agencyPublic advocate and enforcement agency
for Commissionfor Commission
Office of the Attorney GeneralOffice of the Attorney General—— Represents residential and commercial Represents residential and commercial
customerscustomers
Minnesota Regulatory PracticeMinnesota Regulatory Practice
Provides direct recovery for stateProvides direct recovery for state--supported supported initiatives (conservation, renewable energy, initiatives (conservation, renewable energy, transmission)transmission)
Provides monthly forecast fuel and purchased Provides monthly forecast fuel and purchased energy cost recoveryenergy cost recovery
Provides interim rates 60 days after rate caseProvides interim rates 60 days after rate casefiling and decision in 10 monthsfiling and decision in 10 months
Allows forecast test yearAllows forecast test year
Minnesota Electric Case HighlightsMinnesota Electric Case Highlights
Requested $168 million increase, basedRequested $168 million increase, basedon forecasted 2006 test yearon forecasted 2006 test year
11% return on common equity11% return on common equity
$141 million interim rate increase,$141 million interim rate increase,expected January 1, 2006expected January 1, 2006
Customer impactCustomer impact—— Base rate increase of 8%Base rate increase of 8%—— Interim rate increase of 6.9%Interim rate increase of 6.9%
Final decision expected third quarter 2006Final decision expected third quarter 2006
Increasing DemandIncreasing Demand
0
2,000
4,000
6,000
8,000
10,000
12,000
1992 1994 1996 1998 2000 2002 2004 2006 2008
MWMW
60%
1992 1994 1996 1998 2000 2002 2004 2006
Effective Demand-Side Management (DSM)Effective Demand-Side Management (DSM)
Number of plantsNumber of plants
1 Plant = 250 MW Combined Cycle 1 Plant = 250 MW Combined Cycle
Plants Avoided through Conservationand Load ManagementPlants Avoided through Conservationand Load Management
1.61.62.72.7
3.73.74.74.7
5.55.56.56.5
7.47.48.28.2
400
500
600
700
800
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Dollars in millionsDollars in millions Composite Inflation 44%
Careful Management of CostsMinnesota O&M ExpensesCareful Management of CostsCareful Management of CostsMinnesota O&M ExpensesMinnesota O&M Expenses
0100200300400500600700800
2002 2003 2004 2005 2006 2007
General & Common
Other Generation
Nuclear
Transmission &DistributionMERP
Dollars in millionsDollars in millions
NSP (M) Increasing Capital InvestmentsNSP (M) Increasing Capital Investments
Proposed Policy ChangesProposed Policy Changes
Resource selection – Making the shareholders indifferent to DSM, purchased power or build
Wholesale margins – Sharing the benefits of the new market
Time-of-day rates – Charging the cost of service for large customers
Nuclear – Reflecting the prospect of life extension
Resource selection Resource selection –– Making the shareholders Making the shareholders indifferent to DSM, purchased power or buildindifferent to DSM, purchased power or build
Wholesale margins Wholesale margins –– Sharing the benefits of the Sharing the benefits of the new marketnew market
TimeTime--ofof--day rates day rates –– Charging the cost of service Charging the cost of service for large customersfor large customers
Nuclear Nuclear –– Reflecting the prospect of life extensionReflecting the prospect of life extension
Equalizing Resource ImpactsEqualizing Resource ImpactsPurchased Capacity Equity Rider (PCER)Purchased Capacity Equity Rider (PCER)
Proposed mechanism to address increased Proposed mechanism to address increased imputed debt costs of new power purchase imputed debt costs of new power purchase agreementsagreements
Calculate by applying equity ratio to imputed debt Calculate by applying equity ratio to imputed debt and earning an equity return less the embedded and earning an equity return less the embedded debt cost on this equity capital debt cost on this equity capital
If approved, recovery through PCER effective July If approved, recovery through PCER effective July 2007 with annual adjustments2007 with annual adjustments
Equalizing Resource ImpactsEqualizing Resource ImpactsDSM Financial Neutrality FactorDSM Financial Neutrality Factor
Proposed annual recovery of reduced earnings Proposed annual recovery of reduced earnings growth resulting from avoided plant investmentsgrowth resulting from avoided plant investments
Supplement existing DSM mechanismSupplement existing DSM mechanism
Calculation based on equity return on avoided Calculation based on equity return on avoided capital investmentcapital investment
Supports accomplishment of expansionSupports accomplishment of expansionof DSM goalsof DSM goals
ShortShort--Term Wholesale Margin Term Wholesale Margin
Proposed pass through of proceeds from Proposed pass through of proceeds from traditional wholesale margins up to a set thresholdtraditional wholesale margins up to a set threshold
First $16 million of shortFirst $16 million of short--term wholesale margin term wholesale margin flows through fuel clause to customerflows through fuel clause to customer
Allow for 50/50 sharing beyond threshold amountAllow for 50/50 sharing beyond threshold amount
Reduces exposure by using fuel clause to pass Reduces exposure by using fuel clause to pass through actual results rather than forecasting a through actual results rather than forecasting a base rate creditbase rate credit
0
2
4
6
8
10
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005Base Rate Fuel Cost Other CPI
Average Residential RateAverage Residential Rate
Average rate (675 KWh monthly use) has increased 17% during the same period. Average rate (675 KWh monthly use) has increased 17% during the same period.
CPI Up 35% CPI Up 35% Cents per KWhCents per KWh
Residential Interim Rate Bill ImpactResidential Interim Rate Bill Impact
Interim Rates
MERP
Riders
Fuel Cost
Base Cost
$59.97$59.97$59.97$51.40$51.40$51.40
39.5439.54
10.2710.271.591.59
39.5439.54
13.9113.911.991.990.820.823.713.71
January 2005 January 2006
Next Steps in MinnesotaNext Steps in Minnesota
AcceptanceAcceptance
November/November/DecemberDecember
20052005
January January 20062006
InterimInterimRatesRates
SpringSpring20062006
HearingsHearings SettlementSettlement(Possible)(Possible)
AugustAugust20062006
DecisionDecision
Other Minnesota InitiativesOther Minnesota Initiatives
New transmission cost recovery tariffNew transmission cost recovery tariff—— Allowed by lawAllowed by law—— Effective for costs post rate caseEffective for costs post rate case
Resource PlanResource Plan—— Identifies base load need midIdentifies base load need mid--decadedecade—— Sets up build/buy/conserve decisionsSets up build/buy/conserve decisions—— Expanded DSM, wind resourcesExpanded DSM, wind resources
Monticello Certificate of Need/RelicensingMonticello Certificate of Need/Relicensing
CommunityCommunity--based energy developmentbased energy development—— Required to purchase by lawRequired to purchase by law—— Assists in meeting renewable energy objectiveAssists in meeting renewable energy objective
Wisconsin Regulatory StructureWisconsin Regulatory Structure
Public Service Commission (PSCW) Public Service Commission (PSCW) —— Three membersThree members—— SixSix--year termsyear terms—— NonNon--partisan office, appointed by Governorpartisan office, appointed by Governor
Consumer and environmental groups as wellConsumer and environmental groups as wellas large C&I customers typically interveneas large C&I customers typically intervene
Wisconsin has an intervenor compensation fundWisconsin has an intervenor compensation fund
Wisconsin Regulatory PracticesWisconsin Regulatory Practices
File rate cases every odd year File rate cases every odd year
Forecast test yearForecast test year
Rates effective at beginning of test yearRates effective at beginning of test year
Electric fuel cost recovery cases filed ifElectric fuel cost recovery cases filed ifactual cost varies by actual cost varies by ++ 2% from base amount2% from base amount
Full recovery of public benefits chargeFull recovery of public benefits charge(DSM, low(DSM, low--income assistance)income assistance)
Wisconsin Rate Cases HighlightsWisconsin Rate Cases HighlightsCombined Electric and Gas CaseCombined Electric and Gas Case
$53.1 million electric increase requested with $53.1 million electric increase requested with a customer impact of 13.4%a customer impact of 13.4%
$7.7 million gas increase requested with$7.7 million gas increase requested witha customer impact of 4.8%a customer impact of 4.8%
11.9% return on equity11.9% return on equity
56.32% common equity56.32% common equity
New rates effective January 1, 2006New rates effective January 1, 2006
Wisconsin Rate Case StatusWisconsin Rate Case Status
PSCW staff recommendationsPSCW staff recommendations—— $45.4 million electric increase$45.4 million electric increase—— $5.8 million gas increase$5.8 million gas increase—— 11.0% ROE11.0% ROE—— 56.43% common equity56.43% common equity
Intervenor recommendationsIntervenor recommendations—— 10.25 10.25 –– 10.5% ROE10.5% ROE—— 51% common equity51% common equity
Hearings completed November 2005 Hearings completed November 2005
Commission decision expected December 2005Commission decision expected December 2005
Colorado Regulatory StructureColorado Regulatory Structure
Public Utilities CommissionPublic Utilities Commission—— Three membersThree members—— FourFour--year staggered termsyear staggered terms—— Appointed by the GovernorAppointed by the Governor—— Balanced party affiliationsBalanced party affiliationsTrial Staff Trial Staff –– public advocate, enforcement public advocate, enforcement branch of the Commissionbranch of the CommissionOffice of Consumer CounselOffice of Consumer Counsel—— Public advocate for residential, small Public advocate for residential, small
commercial and irrigation customerscommercial and irrigation customersOther PartiesOther Parties—— Cities and municipalitiesCities and municipalities—— Large industrial customersLarge industrial customers
Colorado Regulatory PracticesColorado Regulatory Practices
Recovery of Comanche 3 CWIP allowedRecovery of Comanche 3 CWIP allowed
Recovery of fuel and purchased energy cost Recovery of fuel and purchased energy cost subject to incentive mechanism subject to incentive mechanism ++ $11.25 million$11.25 million
Rider recovery of approved capacity costs (PCCA)Rider recovery of approved capacity costs (PCCA)
Rider recovery of forecast gas costs Rider recovery of forecast gas costs
Rider mechanism for environmental improvement Rider mechanism for environmental improvement costs (AQIR) (Amendment 37)costs (AQIR) (Amendment 37)
Historic test yearHistoric test year
Rates effective eight months after filingRates effective eight months after filing
Colorado Gas Rate Case Highlights Colorado Gas Rate Case Highlights
Xcel Energy request:Xcel Energy request:—— $34.5 million request$34.5 million request—— 11.0% return on equity11.0% return on equityStaff recommendationStaff recommendation—— $8.5 million revenue increase $8.5 million revenue increase —— 9.5% Return on equity9.5% Return on equityOCC recommendationOCC recommendation—— $0.2 million revenue decrease $0.2 million revenue decrease —— 8.5% ROE8.5% ROEHearings scheduled for December 2005Hearings scheduled for December 2005Resolution expected February 2006Resolution expected February 2006
Colorado Electric Rate Case HighlightsColorado Electric Rate Case Highlights
Filing date April 2006Filing date April 2006
2005 test year with pro forma adjustments2005 test year with pro forma adjustments
Include Comanche 3 CWIP through 2006Include Comanche 3 CWIP through 2006
Extend fuel and purchased power adjustment Extend fuel and purchased power adjustment clausesclauses
Imputed debt recoveryImputed debt recovery
Regulatory practicesRegulatory practicesHistoric test yearHistoric test yearInterim rates 35 days after filingInterim rates 35 days after filingDecision in six monthsDecision in six monthsSemiSemi--annual fuel recovery adjustmentsannual fuel recovery adjustmentsNew transmission cost recovery riderNew transmission cost recovery rider
Electric rate case highlightsElectric rate case highlightsPlanned filing May 2006Planned filing May 2006Large industrial customer intervenersLarge industrial customer interveners
Texas RegulationTexas Regulation
North Dakota RegulationNorth Dakota Regulation
Regulatory practicesRegulatory practicesForecast test yearForecast test yearInterim rates allowed 60 days after filingInterim rates allowed 60 days after filingDecision within six months of filingDecision within six months of filingMonthly fuel cost recoveryMonthly fuel cost recovery
Electric rate case highlightsElectric rate case highlightsExpect to file early December 2005Expect to file early December 2005PLUS plan rate increases in 2004 & 2005PLUS plan rate increases in 2004 & 2005
SummarySummary
Strong basis for rate reliefStrong basis for rate relief
Experienced team to execute strategyExperienced team to execute strategy
Rate riders will provide bridge between rate casesRate riders will provide bridge between rate cases
Fuel clause mechanism will provide current Fuel clause mechanism will provide current recoveryrecovery
History of constructive regulatory treatmentHistory of constructive regulatory treatment