UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 20162017
or
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¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 001-3034
Xcel Energy Inc.
(Exact name of registrant as specified in its charter)
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Minnesota | | 41-0448030 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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414 Nicollet Mall | | |
Minneapolis, Minnesota | | 55401 |
(Address of principal executive offices) | | (Zip Code) |
(612) 330-5500
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 and Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”,filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer x | | Accelerated filer ¨ |
Non-accelerated filer ¨ | | Smaller reporting company ¨ |
(Do not check if smaller reporting company) | | Emerging growth company ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨ Yes x No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class | | Outstanding at August 1, 2016July 24, 2017 |
Common Stock, $2.50 par value | | 507,952,795507,762,881 shares |
TABLE OF CONTENTS
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PART I | FINANCIAL INFORMATION | |
Item 1 — | | |
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Item 2 — | | |
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Item 3 — | | |
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Item 4 — | | |
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PART II | OTHER INFORMATION | |
Item 1 — | | |
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Item 1A — | | |
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Item 2 — | | |
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Item 4 — | | |
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Item 5 — | | |
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Item 6 — | | |
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| Certifications Pursuant to Section 302 | 1 |
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| Certifications Pursuant to Section 906 | 1 |
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| Statement Pursuant to Private Litigation | 1 |
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This Form 10-Q is filed by Xcel Energy Inc. Xcel Energy Inc. wholly owns the following subsidiaries: Northern States Power Company, a Minnesota corporation (NSP-Minnesota); Northern States Power Company, a Wisconsin corporation (NSP-Wisconsin); Public Service Company of Colorado (PSCo); and Southwestern Public Service Company (SPS). Xcel Energy Inc. and its consolidated subsidiaries are also referred to herein as Xcel Energy. NSP-Minnesota, NSP-Wisconsin, PSCo and SPS are also referred to collectively as utility subsidiaries. The electric production and transmission system of NSP-Minnesota and NSP-Wisconsin, which is operated on an integrated basis and is managed by NSP-Minnesota, is referred to collectively as the NSP System. Additional information on the wholly owned subsidiaries is available on various filings with the Securities and Exchange Commission (SEC).
PART I — FINANCIAL INFORMATION
Item 1 — FINANCIAL STATEMENTS
XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (amounts in thousands, except per share data)
| XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (amounts in thousands, except per share data)
| XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (amounts in thousands, except per share data)
|
| | Three Months Ended June 30 | | Six Months Ended June 30 | Three Months Ended June 30 | | Six Months Ended June 30 |
| 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
Operating revenues | | | | | | | | | | | | | | |
Electric | $ | 2,224,142 |
| | $ | 2,213,460 |
| | $ | 4,409,261 |
| | $ | 4,438,323 |
| $ | 2,338,017 |
| | $ | 2,224,142 |
| | $ | 4,637,077 |
| | $ | 4,409,261 |
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Natural gas | 258,899 |
| | 284,131 |
| | 824,588 |
| | 1,000,127 |
| 289,839 |
| | 258,899 |
| | 915,542 |
| | 824,588 |
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Other | 16,808 |
| | 17,543 |
| | 38,273 |
| | 38,903 |
| 17,072 |
| | 16,808 |
| | 38,731 |
| | 38,273 |
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Total operating revenues | 2,499,849 |
| | 2,515,134 |
| | 5,272,122 |
| | 5,477,353 |
| 2,644,928 |
| | 2,499,849 |
| | 5,591,350 |
| | 5,272,122 |
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| | | | | | | | | | | | | | |
Operating expenses | | | | | | | | | | | | | | |
Electric fuel and purchased power | 855,968 |
| | 904,705 |
| | 1,717,820 |
| | 1,854,837 |
| 919,099 |
| | 855,968 |
| | 1,844,320 |
| | 1,717,820 |
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Cost of natural gas sold and transported | 90,071 |
| | 126,667 |
| | 402,188 |
| | 599,038 |
| 114,320 |
| | 90,071 |
| | 479,454 |
| | 402,188 |
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Cost of sales — other | 8,332 |
| | 8,164 |
| | 16,577 |
| | 18,213 |
| 8,178 |
| | 8,332 |
| | 16,765 |
| | 16,577 |
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Operating and maintenance expenses | 596,978 |
| | 594,279 |
| | 1,174,388 |
| | 1,180,109 |
| 578,133 |
| | 596,978 |
| | 1,164,563 |
| | 1,174,388 |
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Conservation and demand side management program expenses | 55,916 |
| | 54,141 |
| | 113,352 |
| | 107,946 |
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Conservation and demand side management expenses | | 64,860 |
| | 55,916 |
| | 132,393 |
| | 113,352 |
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Depreciation and amortization | 322,534 |
| | 274,602 |
| | 642,554 |
| | 547,700 |
| 365,720 |
| | 322,534 |
| | 730,924 |
| | 642,554 |
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Taxes (other than income taxes) | 138,469 |
| | 129,731 |
| | 283,792 |
| | 266,357 |
| 134,926 |
| | 138,469 |
| | 277,020 |
| | 283,792 |
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Loss on Monticello life cycle management/extended power uprate project | — |
| | — |
| | — |
| | 129,463 |
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Total operating expenses | 2,068,268 |
| | 2,092,289 |
| | 4,350,671 |
| | 4,703,663 |
| 2,185,236 |
| | 2,068,268 |
| | 4,645,439 |
| | 4,350,671 |
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Operating income | 431,581 |
| | 422,845 |
| | 921,451 |
| | 773,690 |
| 459,692 |
| | 431,581 |
| | 945,911 |
| | 921,451 |
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Other income, net | 1,560 |
| | 961 |
| | 5,810 |
| | 4,122 |
| 2,608 |
| | 1,560 |
| | 9,054 |
| | 5,810 |
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Equity earnings of unconsolidated subsidiaries | 9,617 |
| | 8,422 |
| | 22,799 |
| | 16,198 |
| 7,541 |
| | 9,617 |
| | 15,416 |
| | 22,799 |
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Allowance for funds used during construction — equity | 14,730 |
| | 12,641 |
| | 27,843 |
| | 25,301 |
| 16,386 |
| | 14,730 |
| | 30,699 |
| | 27,843 |
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Interest charges and financing costs | | | | | | | | | | | | | | |
Interest charges — includes other financing costs of $6,630 $5,861, $12,966 and $11,559, respectively | 162,980 |
| | 144,222 |
| | 319,423 |
| | 289,162 |
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Interest charges — includes other financing costs of $5,876, $6,630, $11,734 and $12,966, respectively | | 164,195 |
| | 162,980 |
| | 330,129 |
| | 319,423 |
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Allowance for funds used during construction — debt | (6,684 | ) | | (6,165 | ) | | (12,674 | ) | | (12,309 | ) | (7,613 | ) | | (6,684 | ) | | (14,635 | ) | | (12,674 | ) |
Total interest charges and financing costs | 156,296 |
| | 138,057 |
| | 306,749 |
| | 276,853 |
| 156,582 |
| | 156,296 |
| | 315,494 |
| | 306,749 |
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Income before income taxes | 301,192 |
| | 306,812 |
| | 671,154 |
| | 542,458 |
| 329,645 |
| | 301,192 |
| | 685,586 |
| | 671,154 |
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Income taxes | 104,397 |
| | 109,881 |
| | 233,047 |
| | 193,461 |
| 102,389 |
| | 104,397 |
| | 219,053 |
| | 233,047 |
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Net income | $ | 196,795 |
| | $ | 196,931 |
| | $ | 438,107 |
| | $ | 348,997 |
| $ | 227,256 |
| | $ | 196,795 |
| | $ | 466,533 |
| | $ | 438,107 |
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Weighted average common shares outstanding: | | | | | | | | | | | | | | |
Basic | 508,930 |
| | 507,707 |
| | 508,789 |
| | 507,359 |
| 508,542 |
| | 508,930 |
| | 508,411 |
| | 508,789 |
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Diluted | 509,490 |
| | 508,074 |
| | 509,311 |
| | 507,747 |
| 509,135 |
| | 509,490 |
| | 508,955 |
| | 509,311 |
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Earnings per average common share: | | | | | | | | | | | | | | |
Basic | $ | 0.39 |
| | $ | 0.39 |
| | $ | 0.86 |
| | $ | 0.69 |
| $ | 0.45 |
| | $ | 0.39 |
| | $ | 0.92 |
| | $ | 0.86 |
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Diluted | 0.39 |
| | 0.39 |
| | 0.86 |
| | 0.69 |
| 0.45 |
| | 0.39 |
| | 0.92 |
| | 0.86 |
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Cash dividends declared per common share | $ | 0.34 |
| | $ | 0.32 |
| | $ | 0.68 |
| | $ | 0.64 |
| $ | 0.36 |
| | $ | 0.34 |
| | $ | 0.72 |
| | $ | 0.68 |
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See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (amounts in thousands)
| XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (amounts in thousands)
| XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) (amounts in thousands)
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| | Three Months Ended June 30 | | Six Months Ended June 30 | Three Months Ended June 30 | | Six Months Ended June 30 |
| 2016 | | 2015 | | 2016 | | 2015 | 2017 | | 2016 | | 2017 | | 2016 |
Net income | $ | 196,795 |
| | $ | 196,931 |
| | $ | 438,107 |
| | $ | 348,997 |
| $ | 227,256 |
| | $ | 196,795 |
| | $ | 466,533 |
| | $ | 438,107 |
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Other comprehensive income | | | | | | | | | | | | | | |
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Pension and retiree medical benefits: | | | | | | | | | | | | | | |
Amortization of losses included in net periodic benefit cost, net of tax of $550, $561, $407 and $1,130, respectively | 865 |
| | 883 |
| | 1,076 |
| | 1,759 |
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Amortization of losses included in net periodic benefit cost, net of tax of $608, $550, $1,223 and $407, respectively | | 956 |
| | 865 |
| | 1,904 |
| | 1,076 |
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Derivative instruments: | | | | | | | | | | | | | | |
Net fair value increase, net of tax of $7, $11, $5 and $4, respectively | 12 |
| | 18 |
| | 8 |
| | 7 |
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Reclassification of losses to net income, net of tax of $594, $382, $1,198 and $764, respectively | 936 |
| | 600 |
| | 1,874 |
| | 1,185 |
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Net fair value increase, net of tax of $17, $7, $17 and $5, respectively | | 26 |
| | 12 |
| | 26 |
| | 8 |
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Reclassification of losses to net income, net of tax of $511, $594, $1,045 and $1,198, respectively | | 803 |
| | 936 |
| | 1,628 |
| | 1,874 |
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| 948 |
| | 618 |
| | 1,882 |
| | 1,192 |
| 829 |
| | 948 |
| | 1,654 |
| | 1,882 |
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Marketable securities: |
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Net fair value increase, net of tax of $0, $1, $0 and $1, respectively | — |
| | 1 |
| | — |
| | 2 |
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Net fair value increase, net of tax of $0, $0, $0 and $0, respectively | | 1 |
| | — |
| | 1 |
| | — |
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Other comprehensive income | 1,813 |
| | 1,502 |
| | 2,958 |
| | 2,953 |
| 1,786 |
| | 1,813 |
| | 3,559 |
| | 2,958 |
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Comprehensive income | $ | 198,608 |
| | $ | 198,433 |
| | $ | 441,065 |
| | $ | 351,950 |
| $ | 229,042 |
| | $ | 198,608 |
| | $ | 470,092 |
| | $ | 441,065 |
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See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (amounts in thousands) | XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (amounts in thousands) | XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (amounts in thousands) |
| | Six Months Ended June 30 | Six Months Ended June 30 |
| 2016 | | 2015 | 2017 | | 2016 |
Operating activities | | | | | | |
Net income | $ | 438,107 |
| | $ | 348,997 |
| $ | 466,533 |
| | $ | 438,107 |
|
Adjustments to reconcile net income to cash provided by operating activities: | | | | | | |
Depreciation and amortization | 650,336 |
| | 556,420 |
| 738,280 |
| | 650,336 |
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Conservation and demand side management program amortization | 2,323 |
| | 2,901 |
| 1,509 |
| | 2,323 |
|
Nuclear fuel amortization | 58,267 |
| | 49,454 |
| 57,003 |
| | 58,267 |
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Deferred income taxes | 252,889 |
| | 191,164 |
| 309,239 |
| | 252,889 |
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Amortization of investment tax credits | (2,613 | ) | | (2,768 | ) | (2,557 | ) | | (2,613 | ) |
Allowance for equity funds used during construction | (27,843 | ) | | (25,301 | ) | (30,699 | ) | | (27,843 | ) |
Equity earnings of unconsolidated subsidiaries | (22,799 | ) | | (16,198 | ) | (15,416 | ) | | (22,799 | ) |
Dividends from unconsolidated subsidiaries | 22,910 |
| | 19,754 |
| 23,507 |
| | 22,910 |
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Share-based compensation expense | 24,454 |
| | 21,420 |
| 31,892 |
| | 24,454 |
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Loss on Monticello life cycle management/extended power uprate project | — |
| | 129,463 |
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Net realized and unrealized hedging and derivative transactions | 3,903 |
| | 13,450 |
| 217 |
| | 3,903 |
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Other | (388 | ) | | — |
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Other, net | | (2,441 | ) | | (388 | ) |
Changes in operating assets and liabilities: | | | | | | |
Accounts receivable | 35,042 |
| | 150,283 |
| 16,906 |
| | 35,042 |
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Accrued unbilled revenues | 65,159 |
| | 145,781 |
| 121,333 |
| | 65,159 |
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Inventories | 81,880 |
| | 64,561 |
| 65,433 |
| | 81,880 |
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Other current assets | 69,493 |
| | 69,080 |
| (84,024 | ) | | 69,493 |
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Accounts payable | 27,805 |
| | (132,032 | ) | (52,349 | ) | | 27,805 |
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Net regulatory assets and liabilities | 34,264 |
| | 129,595 |
| 1,498 |
| | 34,264 |
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Other current liabilities | (164,076 | ) | | (92,108 | ) | (190,184 | ) | | (151,589 | ) |
Pension and other employee benefit obligations | (108,562 | ) | | (78,681 | ) | (140,479 | ) | | (108,562 | ) |
Change in other noncurrent assets | (6,363 | ) | | 684 |
| (6,676 | ) | | (6,363 | ) |
Change in other noncurrent liabilities | (21,649 | ) | | (36,874 | ) | (16,706 | ) | | (21,649 | ) |
Net cash provided by operating activities | 1,412,539 |
| | 1,509,045 |
| 1,291,819 |
| | 1,425,026 |
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Investing activities | | | | | | |
Utility capital/construction expenditures | (1,413,129 | ) | | (1,477,959 | ) | (1,473,793 | ) | | (1,413,129 | ) |
Proceeds from insurance recoveries | 1,595 |
| | 27,237 |
| — |
| | 1,595 |
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Allowance for equity funds used during construction | 27,843 |
| | 25,301 |
| 30,699 |
| | 27,843 |
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Purchases of investment securities | (319,880 | ) | | (640,100 | ) | (368,266 | ) | | (319,880 | ) |
Proceeds from the sale of investment securities | 262,321 |
| | 636,669 |
| 350,448 |
| | 262,321 |
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Investments in WYCO Development LLC and other | (2,170 | ) | | (764 | ) | (7,683 | ) | | (2,170 | ) |
Other, net | 100 |
| | (1,407 | ) | (5,483 | ) | | 100 |
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Net cash used in investing activities | (1,443,320 | ) | | (1,431,023 | ) | (1,474,078 | ) | | (1,443,320 | ) |
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Financing activities | | | | | | |
Repayments of short-term borrowings, net | (399,000 | ) | | (568,500 | ) | |
Proceeds from (repayments of) short-term borrowings, net | | 392,000 |
| | (399,000 | ) |
Proceeds from issuance of long-term debt | 1,337,430 |
| | 841,534 |
| 394,046 |
| | 1,337,430 |
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Repayments of long-term debt | (579,976 | ) | | (454 | ) | (250,397 | ) | | (579,976 | ) |
Proceeds from issuance of common stock | — |
| | 3,409 |
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Purchase of common stock for settlement of equity awards | (789 | ) | | — |
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Repurchases of common stock | | (2,943 | ) | | (789 | ) |
Dividends paid | (335,113 | ) | | (298,022 | ) | (355,250 | ) | | (335,113 | ) |
Net cash provided by (used in) financing activities | 22,552 |
| | (22,033 | ) | |
Other | | (18,291 | ) | | (12,487 | ) |
Net cash provided by financing activities | | 159,165 |
| | 10,065 |
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| | | | | | |
Net change in cash and cash equivalents | (8,229 | ) | | 55,989 |
| (23,094 | ) | | (8,229 | ) |
Cash and cash equivalents at beginning of period | 84,940 |
| | 79,608 |
| 84,476 |
| | 84,940 |
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Cash and cash equivalents at end of period | $ | 76,711 |
| | $ | 135,597 |
| $ | 61,382 |
| | $ | 76,711 |
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Supplemental disclosure of cash flow information: | | | | | | |
Cash paid for interest (net of amounts capitalized) | $ | (293,954 | ) | | $ | (266,840 | ) | $ | (301,350 | ) | | $ | (293,954 | ) |
Cash received for income taxes, net | 61,345 |
| | 58,598 |
| |
Cash (paid) received for income taxes, net | | (3,853 | ) | | 61,345 |
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Supplemental disclosure of non-cash investing and financing transactions: | | | | | | |
Property, plant and equipment additions in accounts payable | $ | 252,370 |
| | $ | 206,540 |
| $ | 233,250 |
| | $ | 252,370 |
|
Issuance of common stock for reinvested dividends and 401(k) plans | 13,497 |
| | 30,498 |
| |
Issuance of common stock for equity awards | | 18,505 |
| | 13,497 |
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See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (amounts in thousands, except share and per share data)
| XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (amounts in thousands, except share and per share data)
| XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (amounts in thousands, except share and per share data)
|
| | June 30, 2016 | | Dec. 31, 2015 | June 30, 2017 | | Dec. 31, 2016 |
Assets | | | | | | |
Current assets | | | | | | |
Cash and cash equivalents | $ | 76,711 |
| | $ | 84,940 |
| $ | 61,382 |
| | $ | 84,476 |
|
Accounts receivable, net | 689,564 |
| | 724,606 |
| 759,378 |
| | 776,289 |
|
Accrued unbilled revenues | 589,708 |
| | 654,867 |
| 608,499 |
| | 729,832 |
|
Inventories | 526,785 |
| | 608,584 |
| 542,044 |
| | 604,226 |
|
Regulatory assets | 325,690 |
| | 344,630 |
| 375,020 |
| | 363,655 |
|
Derivative instruments | 46,953 |
| | 33,842 |
| 78,487 |
| | 38,224 |
|
Deferred income taxes | 206,644 |
| | 140,219 |
| |
Prepaid taxes | 115,898 |
| | 163,023 |
| 196,247 |
| | 106,697 |
|
Prepayments and other | 126,146 |
| | 155,734 |
| 135,493 |
| | 138,682 |
|
Total current assets | 2,704,099 |
| | 2,910,445 |
| 2,756,550 |
| | 2,842,081 |
|
| | | | | | |
Property, plant and equipment, net | 31,823,282 |
| | 31,205,851 |
| 33,543,843 |
| | 32,841,750 |
|
| | | | | | |
Other assets | | | | | | |
Nuclear decommissioning fund and other investments | 1,987,474 |
| | 1,902,995 |
| 2,231,588 |
| | 2,091,858 |
|
Regulatory assets | 2,886,250 |
| | 2,858,741 |
| 3,023,128 |
| | 3,080,867 |
|
Derivative instruments | 50,644 |
| | 51,083 |
| 50,410 |
| | 50,189 |
|
Other | 38,415 |
| | 32,581 |
| 255,470 |
| | 248,532 |
|
Total other assets | 4,962,783 |
| | 4,845,400 |
| 5,560,596 |
| | 5,471,446 |
|
Total assets | $ | 39,490,164 |
| | $ | 38,961,696 |
| $ | 41,860,989 |
| | $ | 41,155,277 |
|
| | | | | | |
Liabilities and Equity | | | | | | |
Current liabilities | | | | | | |
Current portion of long-term debt | $ | 710,151 |
| | $ | 657,021 |
| $ | 505,345 |
| | $ | 255,529 |
|
Short-term debt | 447,000 |
| | 846,000 |
| 784,000 |
| | 392,000 |
|
Accounts payable | 921,973 |
| | 960,982 |
| 973,642 |
| | 1,044,959 |
|
Regulatory liabilities | 279,755 |
| | 306,830 |
| 261,171 |
| | 220,894 |
|
Taxes accrued | 330,398 |
| | 438,189 |
| 339,966 |
| | 457,392 |
|
Accrued interest | 169,309 |
| | 166,829 |
| 175,849 |
| | 172,901 |
|
Dividends payable | 172,704 |
| | 162,410 |
| 182,795 |
| | 172,456 |
|
Derivative instruments | 26,542 |
| | 29,839 |
| 28,019 |
| | 26,959 |
|
Other | 448,549 |
| | 490,197 |
| 439,917 |
| | 503,953 |
|
Total current liabilities | 3,506,381 |
| | 4,058,297 |
| 3,690,704 |
| | 3,247,043 |
|
| | | | �� | | |
Deferred credits and other liabilities | | | | | | |
Deferred income taxes | 6,619,681 |
| | 6,293,661 |
| 7,130,715 |
| | 6,784,319 |
|
Deferred investment tax credits | 65,806 |
| | 68,419 |
| 60,659 |
| | 63,216 |
|
Regulatory liabilities | 1,343,889 |
| | 1,332,889 |
| 1,386,675 |
| | 1,383,212 |
|
Asset retirement obligations | 2,671,320 |
| | 2,608,562 |
| 2,849,532 |
| | 2,782,229 |
|
Derivative instruments | 156,357 |
| | 168,311 |
| 136,255 |
| | 148,146 |
|
Customer advances | 212,565 |
| | 228,999 |
| 190,640 |
| | 195,214 |
|
Pension and employee benefit obligations | 825,614 |
| | 941,002 |
| 975,606 |
| | 1,112,366 |
|
Other | 280,647 |
| | 261,756 |
| 225,215 |
| | 223,965 |
|
Total deferred credits and other liabilities | 12,175,879 |
| | 11,903,599 |
| 12,955,297 |
| | 12,692,667 |
|
| | | | | | |
Commitments and contingencies |
|
| |
|
|
|
| |
|
|
Capitalization | | | | | | |
Long-term debt | 13,104,770 |
| | 12,398,880 |
| 14,091,833 |
| | 14,194,718 |
|
Common stock — 1,000,000,000 shares authorized of $2.50 par value; 507,952,795 and 507,535,523 shares outstanding at June 30, 2016 and Dec. 31, 2015, respectively | 1,269,882 |
| | 1,268,839 |
| |
Common stock — 1,000,000,000 shares authorized of $2.50 par value; 507,762,881 and 507,222,795 shares outstanding at June 30, 2017 and Dec. 31, 2016, respectively | | 1,269,407 |
| | 1,268,057 |
|
Additional paid in capital | 5,896,394 |
| | 5,889,106 |
| 5,881,475 |
| | 5,881,494 |
|
Retained earnings | 3,643,653 |
| | 3,552,728 |
| 4,079,068 |
| | 3,981,652 |
|
Accumulated other comprehensive loss | (106,795 | ) | | (109,753 | ) | (106,795 | ) | | (110,354 | ) |
Total common stockholders’ equity | 10,703,134 |
| | 10,600,920 |
| 11,123,155 |
| | 11,020,849 |
|
Total liabilities and equity | $ | 39,490,164 |
| | $ | 38,961,696 |
| $ | 41,860,989 |
| | $ | 41,155,277 |
|
| | | | | | |
See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED) (amounts in thousands)
| XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED) (amounts in thousands)
| XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED) (amounts in thousands)
|
| | Common Stock Issued | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholders’ Equity | Common Stock Issued | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholders’ Equity |
| Shares | | Par Value | | Additional Paid In Capital | | Shares | | Par Value | | Additional Paid In Capital | |
Three Months Ended June 30, 2016 and 2015 | | | | | | | | | | | |
Balance at March 31, 2015 | 506,664 |
| | $ | 1,266,659 |
| | $ | 5,844,995 |
| | $ | 3,209,904 |
| | $ | (106,688 | ) | | $ | 10,214,870 |
| |
Net income |
|
| |
|
| |
|
| | 196,931 |
| |
|
| | 196,931 |
| |
Other comprehensive income |
|
| |
|
| |
|
| |
|
| | 1,502 |
| | 1,502 |
| |
Dividends declared on common stock |
|
| |
|
| |
|
| | (163,190 | ) | |
|
| | (163,190 | ) | |
Issuances of common stock | 295 |
| | 739 |
| | 9,316 |
| |
|
| |
|
| | 10,055 |
| |
Share-based compensation |
|
| |
|
| | 8,898 |
| |
|
| |
|
| | 8,898 |
| |
Balance at June 30, 2015 | 506,959 |
| | $ | 1,267,398 |
| | $ | 5,863,209 |
| | $ | 3,243,645 |
| | $ | (105,186 | ) | | $ | 10,269,066 |
| |
| | | | | | | | | | | | |
Three Months Ended June 30, 2017 and 2016 | | Three Months Ended June 30, 2017 and 2016 | | | | | | | | | | |
Balance at March 31, 2016 | 507,953 |
| | $ | 1,269,882 |
| | $ | 5,889,939 |
| | $ | 3,620,421 |
| | $ | (108,608 | ) | | $ | 10,671,634 |
| 507,953 |
| | $ | 1,269,882 |
| | $ | 5,889,939 |
| | $ | 3,620,421 |
| | $ | (108,608 | ) | | $ | 10,671,634 |
|
Net income |
|
| |
|
| |
|
| | 196,795 |
| |
|
| | 196,795 |
|
|
| |
|
| |
|
| | 196,795 |
| |
|
| | 196,795 |
|
Other comprehensive income |
|
| |
|
| |
|
| |
|
| | 1,813 |
| | 1,813 |
|
|
| |
|
| |
|
| |
|
| | 1,813 |
| | 1,813 |
|
Dividends declared on common stock |
|
| |
|
| |
|
| | (173,563 | ) | |
|
| | (173,563 | ) |
|
| |
|
| |
|
| | (173,563 | ) | |
|
| | (173,563 | ) |
Issuances of common stock | — |
| | — |
| | (187 | ) | |
|
| |
|
| | (187 | ) | — |
| | — |
| | (187 | ) | |
|
| |
|
| | (187 | ) |
Share-based compensation |
|
| |
|
| | 6,642 |
| |
|
| |
|
| | 6,642 |
|
|
| |
|
| | 6,642 |
| |
|
| |
|
| | 6,642 |
|
Balance at June 30, 2016 | 507,953 |
| | $ | 1,269,882 |
| | $ | 5,896,394 |
| | $ | 3,643,653 |
| | $ | (106,795 | ) | | $ | 10,703,134 |
| 507,953 |
| | $ | 1,269,882 |
| | $ | 5,896,394 |
| | $ | 3,643,653 |
| | $ | (106,795 | ) | | $ | 10,703,134 |
|
| | | | | | | | | | | | | | | | | | | | | | |
Balance at March 31, 2017 | | 507,763 |
| | $ | 1,269,407 |
| | $ | 5,872,933 |
| | $ | 4,036,352 |
| | $ | (108,581 | ) | | $ | 11,070,111 |
|
Net income | |
|
| |
|
| |
|
| | 227,256 |
| |
|
| | 227,256 |
|
Other comprehensive income | |
|
| |
|
| |
|
| |
|
| | 1,786 |
| | 1,786 |
|
Dividends declared on common stock | |
|
| |
|
| |
|
| | (183,738 | ) | |
|
| | (183,738 | ) |
Share-based compensation | |
|
| |
|
| | 8,542 |
| | (802 | ) | |
|
| | 7,740 |
|
Balance at June 30, 2017 | | 507,763 |
| | $ | 1,269,407 |
| | $ | 5,881,475 |
| | $ | 4,079,068 |
| | $ | (106,795 | ) | | $ | 11,123,155 |
|
| | | | | | | | | | | | |
See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED) (Continued) (amounts in thousands)
| XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED) (Continued) (amounts in thousands)
| XCEL ENERGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED) (Continued) (amounts in thousands) |
| | Common Stock Issued | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholders’ Equity | | | | | | | | | | | |
| Shares | | Par Value | | Additional Paid In Capital | | Common Stock Issued | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholders’ Equity |
Six Months Ended June 30, 2016 and 2015 | | | | | | | | | | | |
Balance at Dec. 31, 2014 | 505,733 |
| | $ | 1,264,333 |
| | $ | 5,837,330 |
| | $ | 3,220,958 |
| | $ | (108,139 | ) | | $ | 10,214,482 |
| |
Net income | | | | | | | 348,997 |
| | | | 348,997 |
| |
Other comprehensive income | | | | | | | | | 2,953 |
| | 2,953 |
| |
Dividends declared on common stock | | | | | | | (326,310 | ) | | | | (326,310 | ) | |
Issuances of common stock | 1,226 |
| | 3,065 |
| | 10,209 |
| | | | | | 13,274 |
| |
Share-based compensation | | | | | 15,670 |
| | | | | | 15,670 |
| |
Balance at June 30, 2015 | 506,959 |
| | $ | 1,267,398 |
| | $ | 5,863,209 |
| | $ | 3,243,645 |
| | $ | (105,186 | ) | | $ | 10,269,066 |
| |
| | | | | | | | | | | | Shares | | Par Value | | Additional Paid In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholders’ Equity |
Six Months Ended June 30, 2017 and 2016 | | Six Months Ended June 30, 2017 and 2016 | | | | | |
Balance at Dec. 31, 2015 | 507,536 |
| | $ | 1,268,839 |
| | $ | 5,889,106 |
| | $ | 3,552,728 |
| | $ | (109,753 | ) | | $ | 10,600,920 |
| 507,536 |
| | $ | 1,268,839 |
| | $ | 5,889,106 |
| | $ | 3,552,728 |
| | $ | (109,753 | ) | | $ | 10,600,920 |
|
Net income | | | | | | | 438,107 |
| | | | 438,107 |
| | | | | | | 438,107 |
| | | | 438,107 |
|
Other comprehensive income | | | | | | | | | 2,958 |
| | 2,958 |
| | | | | | | | | 2,958 |
| | 2,958 |
|
Dividends declared on common stock | | | | | | | (347,182 | ) | | | | (347,182 | ) | | | | | | | (347,182 | ) | | | | (347,182 | ) |
Issuances of common stock | 417 |
| | 1,043 |
| | (3,942 | ) | | | | | | (2,899 | ) | 417 |
| | 1,043 |
| | (3,942 | ) | | | | | | (2,899 | ) |
Purchase of common stock for settlement of equity awards | | | | | (789 | ) | | | | | | (789 | ) | |
Repurchases of common stock | | | | | | (789 | ) | | | | | | (789 | ) |
Share-based compensation | | | | | 12,019 |
| | | | | | 12,019 |
| | | | | 12,019 |
| | | | | | 12,019 |
|
Balance at June 30, 2016 | 507,953 |
| | $ | 1,269,882 |
| | $ | 5,896,394 |
| | $ | 3,643,653 |
| | $ | (106,795 | ) | | $ | 10,703,134 |
| 507,953 |
| | $ | 1,269,882 |
| | $ | 5,896,394 |
| | $ | 3,643,653 |
| | $ | (106,795 | ) | | $ | 10,703,134 |
|
| | | | | | | | | | | | | | | | | | | | | | |
Balance at Dec. 31, 2016 | | 507,223 |
| | $ | 1,268,057 |
| | $ | 5,881,494 |
| | $ | 3,981,652 |
| | $ | (110,354 | ) | | $ | 11,020,849 |
|
Net income | | | | | | | | 466,533 |
| | | | 466,533 |
|
Other comprehensive income | | | | | | | | | | 3,559 |
| | 3,559 |
|
Dividends declared on common stock | | | | | | | | (367,553 | ) | | | | (367,553 | ) |
Issuances of common stock | | 611 |
| | 1,527 |
| | 3,510 |
| | | | | | 5,037 |
|
Repurchases of common stock | | (71 | ) | | (177 | ) | | (2,943 | ) | | | | | | (3,120 | ) |
Share-based compensation | | | | | | (586 | ) | | (1,564 | ) | | | | (2,150 | ) |
Balance at June 30, 2017 | | 507,763 |
| | $ | 1,269,407 |
| | $ | 5,881,475 |
| | $ | 4,079,068 |
| | $ | (106,795 | ) | | $ | 11,123,155 |
|
| | | | | | | | | | | | |
See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (UNAUDITED)
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly, in accordance with accounting principles generally accepted in the United States of America (GAAP), the financial position of Xcel Energy Inc. and its subsidiaries as of June 30, 20162017 and Dec. 31, 2015;2016; the results of its operations, including the components of net income and comprehensive income, and changes in stockholders’ equity for the three and six months ended June 30, 20162017 and 2015;2016; and its cash flows for the six months ended June 30, 20162017 and 2015.2016. All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after June 30, 20162017 up to the date of issuance of these consolidated financial statements. These statements contain all necessary adjustments and disclosures resulting from that evaluation. The Dec. 31, 20152016 balance sheet information has been derived from the audited 20152016 consolidated financial statements included in the Xcel Energy Inc. Annual Report on Form 10-K for the year ended Dec. 31, 2015.2016. These notes to the consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP on an annual basis have been condensed or omitted pursuant to such rules and regulations. For further information, refer to the consolidated financial statements and notes thereto, included in the Xcel Energy Inc. Annual Report on Form 10-K for the year ended Dec. 31, 2015,2016, filed with the SEC on Feb. 19, 2016.24, 2017. Due to the seasonality of Xcel Energy’s electric and natural gas sales, interim results are not necessarily an appropriate base from which to project annual results.
| |
1. | Summary of Significant Accounting Policies |
The significant accounting policies set forth in Note 1 to the consolidated financial statements in the Xcel Energy Inc. Annual Report on Form 10-K for the year ended Dec. 31, 2015,2016, appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.
| |
2. | Accounting Pronouncements |
Recently Issued
Revenue Recognition — In May 2014, the Financial Accounting Standards Board (FASB) issued Revenue from Contracts with Customers, Topic 606 (Accounting Standards Update (ASU) No. 2014-09), which provides a new framework for the recognition of revenue, with the objective that recognized revenues properly reflect amounts an entity is entitled to receiverevenue. Xcel Energy expects its adoption will result in exchange for goods and services. The new guidance also includes additional disclosure requirementsincreased disclosures regarding revenue, cash flows and obligations related to arrangements with customers, as well as separate presentation of alternative revenue programs. Xcel Energy has not yet fully determined the impacts of adoption for several aspects of the standard, including a determination whether and how much an evaluation of the collectability of regulated electric and gas revenues will impact the amounts of revenue recognized upon delivery. Xcel Energy currently expects to implement the standard on a modified retrospective basis, which requires application to contracts with customers. The guidance iscustomers effective for interim and annual reporting periods beginning after Dec. 15, 2017. Xcel Energy is currently evaluatingJan. 1, 2018, with the impact of adopting ASU 2014-09 on its consolidated financial statements.
Presentation of Deferred Taxes — In November 2015, the FASB issued Balance Sheet Classification of Deferred Taxes, Topic 740 (ASU No 2015-17), which eliminates the requirement to present deferred tax assets and liabilities as current and noncurrent on the balance sheet based on the classification of the related asset or liability, and instead requires classification of all deferred tax assets and liabilities as noncurrent. This guidance will be effective for interim and annual reporting periods beginning after Dec. 15, 2016, and early adoption is permitted. Other than the prescribed classification of all deferred tax assets and liabilities as noncurrent, Xcel Energy does not expect the implementation of ASU 2015-17 to have a materialcumulative impact on its consolidated financial statements.contracts not yet completed as of Dec. 31, 2017 recognized as an adjustment to the opening balance of retained earnings.
Classification and Measurement of Financial Instruments — In January 2016, the FASB issued Recognition and Measurement of Financial Assets and Financial Liabilities, Subtopic 825-10 (ASU No. 2016-01), which among other changes in accountingeliminates the available-for-sale classification for marketable equity securities and disclosure requirements,also replaces the cost method of accounting for non-marketable equity securities with a model for recognizing impairments and observable price changes, and also eliminates the available-for-sale classification for marketable equity securities.changes. Under the new guidance,standard, other than when the consolidation or equity method of accounting is utilized, changes in the fair value of equity securities are to be recognized in earnings. This guidance will be effective for interim and annual reporting periods beginning after Dec. 15, 2017. Xcel Energy isexpects that as a result of application of accounting principles for rate regulated entities, changes in the fair value of the securities in the nuclear decommissioning fund, currently evaluatingclassified as available-for-sale, will continue to be deferred to a regulatory asset, and that the impactoverall impacts of adopting ASU 2016-01 on its consolidated financial statements.the Jan. 1, 2018 adoption will not be material.
Leases — InIn February 2016, the FASB issued Leases, Topic 842 (ASU No. 2016-02), which for lessees requires balance sheet recognition of right-of-use assets and lease liabilities for allmost leases. Additionally, for leases that qualify as finance leases, the guidance requires expense recognition consisting of amortization of the right-of-use asset as well as interest on the related lease liability using the effective interest method. This guidance will be effective for interim and annual reporting periods beginning after Dec. 15, 2018, and early2018. Xcel Energy has not yet fully determined the impacts of implementation. However, adoption is permitted.expected to occur on Jan. 1, 2019 utilizing the practical expedients provided by the standard. As such, agreements entered prior to Jan. 1, 2017 that are currently considered leases are expected to be recognized on the consolidated balance sheet, including contracts for use of office space, equipment and natural gas storage assets, as well as certain purchased power agreements (PPAs) for natural gas-fueled generating facilities. Xcel Energy is currently evaluatingexpects that similar agreements entered after Dec. 31, 2016 will generally qualify as leases under the impactnew standard, but has not yet completed its evaluation of adopting ASU 2016-02 on its consolidated financial statements.certain other contracts, including arrangements for the secondary use of assets, such as land easements.
Stock CompensationPresentation of Net Periodic Benefit Cost — InIn March 2016,2017, the FASB issued Improvements to Employee Share-Based Payment Accounting,Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, Topic 718715 (ASU 2016-09),No. 2017-07), which amends existingestablishes that only the service cost element of pension cost may be presented as a component of operating income in the income statement. Also under the guidance, to simplify several aspectsonly the service cost component of pension cost is eligible for capitalization. Xcel Energy has not yet fully determined the impacts of adoption of the standard, but expects that as a result of application of accounting principles for rate regulated entities, a similar amount of pension cost, including non-service components, will be recognized consistent with the current ratemaking treatment and presentation for share-based payment transactions, includingthat the accounting for income taxes and forfeitures, as well as presentationimpacts of adoption will be limited to changes in classification of non-service costs in the consolidated statement of cash flows.income. This guidance will be effective for interim and annual reporting periods beginning after Dec. 15, 2016, and early adoption is permitted. Xcel Energy does not expect the implementation of ASU 2016-09 to have a material impact on its consolidated financial statements.2017.
Recently Adopted
ConsolidationStock Compensation — —I In February 2015,n March 2016, the FASB issued AmendmentsImprovements to the Consolidation Analysis,Employee Share-Based Payment Accounting, Topic 810718 (ASU No. 2015-02), which reduces the number of consolidation models and amends certain consolidation principles related to variable interest entities. Xcel Energy implemented the guidance on Jan. 1, 2016, and other than the classification of certain real estate investments held within the Nuclear Decommissioning Trust as non-consolidated variable interest entities, the implementation did not have a significant impact on its consolidated financial statements.
Presentation of Debt Issuance Costs— In April 2015, the FASB issued Simplifying the Presentation of Debt Issuance Costs, Subtopic 835-30 (ASU No. 2015-03), which requires the presentation of debt issuance costs on the balance sheet as a deduction from the carrying amount of the related debt, instead of presentation as an asset. Xcel Energy implemented the new guidance as required on Jan. 1, 2016, and as a result, $94.5 million of deferred debt issuance costs were presented as a deduction from the carrying amount of long-term debt on the consolidated balance sheet as of March 31, 2016, and $91.8 million of such deferred costs were retrospectively reclassified from other non-current assets to long-term debt on the consolidated balance sheet as of Dec. 31, 2015.
Fair Value Measurement— In May 2015, the FASB issued Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent), Topic 820 (ASU No. 2015-07)2016-09), which eliminatessimplifies accounting and financial statement presentation for share-based payment transactions. The guidance requires that the requirementdifference between the tax deduction available upon settlement of share-based equity awards and the tax benefit accumulated over the vesting period be recognized as an adjustment to categorize fair value measurements using a net asset value (NAV) methodologyincome tax expense. Xcel Energy adopted the guidance in 2016, resulting in immaterial 2016 adjustments to income tax expense and changes in classification of cash flows related to tax withholding in the fair value hierarchy. Xcel Energy implementedconsolidated statements of cash flows for the guidance on Jan. 1,years ended Dec. 31, 2016, 2015 and the implementation did not have a material impact on its consolidated financial statements. For related disclosures, see Note 8 to the consolidated financial statements.2014.
| |
3. | Selected Balance Sheet Data |
| | (Thousands of Dollars) | | June 30, 2016 | | Dec. 31, 2015 | | June 30, 2017 | | Dec. 31, 2016 |
Accounts receivable, net | | | | | | | | |
Accounts receivable | | $ | 735,586 |
| | $ | 776,494 |
| | $ | 808,705 |
| | $ | 827,112 |
|
Less allowance for bad debts | | (46,022 | ) | | (51,888 | ) | | (49,327 | ) | | (50,823 | ) |
| | $ | 689,564 |
| | $ | 724,606 |
| | $ | 759,378 |
| | $ | 776,289 |
|
|
| | | | | | | | |
(Thousands of Dollars) | | June 30, 2016 | | Dec. 31, 2015 |
Inventories | | | | |
Materials and supplies | | $ | 304,055 |
| | $ | 290,690 |
|
Fuel | | 164,054 |
| | 202,271 |
|
Natural gas | | 58,676 |
| | 115,623 |
|
| | $ | 526,785 |
| | $ | 608,584 |
|
|
| | | | | | | | |
(Thousands of Dollars) | | June 30, 2017 | | Dec. 31, 2016 |
Inventories | | | | |
Materials and supplies | | $ | 321,426 |
| | $ | 312,430 |
|
Fuel | | 156,736 |
| | 181,752 |
|
Natural gas | | 63,882 |
| | 110,044 |
|
| | $ | 542,044 |
| | $ | 604,226 |
|
| | (Thousands of Dollars) | | June 30, 2016 | | Dec. 31, 2015 | | June 30, 2017 | | Dec. 31, 2016 |
Property, plant and equipment, net | | | | | | | | |
Electric plant | | $ | 36,990,529 |
| | $ | 36,464,050 |
| | $ | 38,810,158 |
| | $ | 38,220,765 |
|
Natural gas plant | | 5,065,218 |
| | 4,944,757 |
| | 5,465,224 |
| | 5,317,717 |
|
Common and other property | | 1,746,789 |
| | 1,709,508 |
| | 1,959,703 |
| | 1,888,518 |
|
Plant to be retired (a) | | 29,853 |
| | 38,249 |
| | 17,820 |
| | 31,839 |
|
Construction work in progress | | 1,687,397 |
| | 1,256,949 |
| | 1,571,362 |
| | 1,373,380 |
|
Total property, plant and equipment | | 45,519,786 |
| | 44,413,513 |
| | 47,824,267 |
| | 46,832,219 |
|
Less accumulated depreciation | | (14,035,591 | ) | | (13,591,259 | ) | | (14,703,391 | ) | | (14,381,603 | ) |
Nuclear fuel | | 2,461,008 |
| | 2,447,251 |
| | 2,660,606 |
| | 2,571,770 |
|
Less accumulated amortization | | (2,121,921 | ) | | (2,063,654 | ) | | (2,237,639 | ) | | (2,180,636 | ) |
| | $ | 31,823,282 |
| | $ | 31,205,851 |
| | $ | 33,543,843 |
| | $ | 32,841,750 |
|
| |
(a) | In the second half of 2017, PSCo expects to both early retire Valmont Unit 5 and convert Cherokee Unit 4 from a coal-fueled generating facility to natural gas, as approved by the Colorado Public Utilities Commission (CPUC).gas. PSCo also expects Craig Unit 1 to be early retired in approximately 2025. Amounts are presented net of accumulated depreciation. |
Except to the extent noted below, Note 6 to the consolidated financial statements included in Xcel Energy Inc.’s Annual Report on Form 10-K for the year ended Dec. 31, 20152016 appropriately represents, in all material respects, the current status of other income tax matters, and are incorporated herein by reference.
Federal Tax Loss Carryback Claims — In 2012, 2013, 2014 and 2015,2012-2015, Xcel Energy identified certain expenses related to 2009, 2010, 2011, 2013, 2014 and 2015 that qualify for an extended carryback beyond the typical two-year carryback period. As a result of a higher tax rate in prior years, Xcel Energy recognized a tax benefit of approximately $5 million in 2015, $17 million in 2014, $12 million in 2013 and $15 million in 2012.
Federal AuditAudits — Xcel Energy files a consolidated federal income tax return. The statute of limitations applicable to Xcel Energy’s 2009 through 2013 federal income tax returns, following extensions, expires in December 2017.
In 2012, the Internal Revenue Service (IRS) commenced an examination of tax years 2010 and 2011, including the 2009 carryback claim. As of June 30, 2016, theThe IRS hadhas proposed an adjustment to the federal tax loss carryback claims that would result in $14 million of income tax expense for the 2009 through 2011 and 2013 claims, the recently filed 2014 claim, and the anticipated claim for 2015.2013 through 2015 claims. In the fourth quarter of 2015, the IRS forwarded the issue to the Office of Appeals (Appeals). In the second quarter of 2016 the IRS audit team and Xcel Energy presented their casecases to the Office of Appeals; however, the outcome and timing of a resolution is uncertain. The statute of limitations applicable to Xcel Energy’s 2009 through 2011 federal income tax returns expires in December 2016 following an extension to allow additional time for the Appeals process.
In the third quarter of 2015, the IRS commenced an examination of tax years 2012 and 2013. AsIn the second quarter of June 30, 2016,2017, the IRS had not proposed any material adjustmentsan adjustment to tax yearsyear 2012 that may impact Xcel Energy’s net operating loss (NOL) and 2013.effective tax rate (ETR). Xcel Energy is evaluating the IRS’ proposal and the outcome and timing of a resolution is uncertain.
State Audits — Xcel Energy files consolidated state tax returns based on income in its major operating jurisdictions of Colorado, Minnesota, Texas, and Wisconsin, and various other state income-based tax returns. As of June 30, 2016,2017, Xcel Energy’s earliest open tax years that are subject to examination by state taxing authorities in its major operating jurisdictions were as follows:
|
| | |
State | | Year |
Colorado | | 2009 |
Minnesota | | 2009 |
Texas | | 2009 |
Wisconsin | | 20112012 |
In February2016, Minnesota began an audit of years 2010 through 2014. As of June 30, 2017, Minnesota had not proposed any adjustments;
In 2016, Texas began an audit of years 2009 and 2010. As of June 30, 2016,2017, Texas had not proposed any adjustments.
material adjustments;
In June 2016, MinnesotaWisconsin began an audit of years 2010 through 2014.2012 and 2013. As of June 30, 2016, Minnesota2017, Wisconsin had not proposed any adjustments. material adjustments; and
As of June 30, 2016,2017, there were no other state income tax audits in progress.
Unrecognized Tax Benefits — The unrecognized tax benefit balance includes permanent tax positions, which if recognized would affect the annual effective tax rate (ETR).ETR. In addition, the unrecognized tax benefit balance includes temporary tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. A change in the period of deductibility would not affect the ETR but would accelerate the payment of cash to the taxing authority to an earlier period.
A reconciliation of the amount of unrecognized tax benefit is as follows:
| | (Millions of Dollars) | | June 30, 2016 | | Dec. 31, 2015 | | June 30, 2017 | | Dec. 31, 2016 |
Unrecognized tax benefit — Permanent tax positions | | $ | 26.8 |
| | $ | 25.8 |
| | $ | 30.8 |
| | $ | 29.6 |
|
Unrecognized tax benefit — Temporary tax positions | | 97.6 |
| | 94.9 |
| | 106.6 |
| | 104.1 |
|
Total unrecognized tax benefit | | $ | 124.4 |
| | $ | 120.7 |
| | $ | 137.4 |
| | $ | 133.7 |
|
The unrecognized tax benefit amounts were reduced by the tax benefits associated with net operating loss (NOL)NOL and tax credit carryforwards. The amounts of tax benefits associated with NOL and tax credit carryforwards are as follows:
| | (Millions of Dollars) | | June 30, 2016 | | Dec. 31, 2015 | | June 30, 2017 | | Dec. 31, 2016 |
NOL and tax credit carryforwards | | $ | (40.4 | ) | | $ | (36.7 | ) | | $ | (47.4 | ) | | $ | (43.8 | ) |
It is reasonably possible that Xcel Energy’s amount of unrecognized tax benefits could significantly change in the next 12 months as the IRS Appeals and audit progress, the Minnesota, Texas and TexasWisconsin audits progress, and other state audits resume. As the IRS Appeals and IRS, Minnesota, Texas and TexasWisconsin audits progress, it is reasonably possible that the amount of unrecognized tax benefit could decrease up to approximately $58$61 million.
The payable for interest related to unrecognized tax benefits is partially offset by the interest benefit associated with NOL and tax credit carryforwards. The payablesA reconciliation of the beginning and ending amount of the payable for interest related to unrecognized tax benefits at June 30, 2016 and Dec. 31, 2015 were not material. are as follows:
|
| | | | | | | | |
(Millions of Dollars) | | June 30, 2017 | | Dec. 31, 2016 |
Payable for interest related to unrecognized tax benefits at beginning of period | | $ | (3.4 | ) | | $ | (0.1 | ) |
Interest expense related to unrecognized tax benefits recorded during the period | | (1.7 | ) | | (3.3 | ) |
Payable for interest related to unrecognized tax benefits at end of period | | $ | (5.1 | ) | | $ | (3.4 | ) |
No amounts were accrued for penalties related to unrecognized tax benefits as of June 30, 20162017 or Dec. 31, 2015.2016.
Except to the extent noted below, the circumstances set forth in Note 12 to the consolidated financial statements included in Xcel Energy Inc.’s Annual Report on Form 10-K for the year ended Dec. 31, 20152016 and in Note 5 to Xcel Energy Inc.’s Quarterly Report on
Form 10-Q for the quarterly period ended March 31, 2016,2017, appropriately represent, in all material respects, the current status of other rate matters, and are incorporated herein by reference.
NSP-Minnesota
Pending and Recently Concluded Regulatory Proceedings — Minnesota Public Utilities Commission (MPUC)
Minnesota 2016 Multi-Year Electric Rate Case — In November 2015,June 2017, the MPUC issued a written order. NSP-Minnesota filed a three-year electricestimates the total rate case withincrease to be approximately $245 million over the MPUC. The rate case is based on a requested returnfour-year period covering 2016-2019.
Key terms:
Four-year period covering 2016-2019;
Annual sales true-up;
Return on equity (ROE) of 10.09.2 percent and an equity ratio of 52.5 percent;
Nuclear related costs will not be considered provisional;
Continued use of all existing riders, however no new riders may be utilized during the four-year term;
Deferral of incremental 2016 property tax expense above a 52.50 percent equity ratio. The request is detailed in the table below:fixed threshold to 2018 and 2019;
Four-year stay-out provision for rate cases;
Property tax true-up mechanism for 2017-2019; and
Capital expenditure true-up mechanism for 2016-2019.
|
| | | | | | | | | | | | |
Request (Millions of Dollars) | | 2016 | | 2017 | | 2018 |
Rate request | | $ | 194.6 |
| | $ | 52.1 |
| | $ | 50.4 |
|
Increase percentage | | 6.4 | % | | 1.7 | % | | 1.7 | % |
Interim request | | $ | 163.7 |
| | $ | 44.9 |
| | N/A |
|
Rate base | | $ | 7,800 |
| | $ | 7,700 |
| | $ | 7,700 |
|
|
| | | | | | | | | | | | | | | | | | | | |
(Millions of Dollars, incremental) | | 2016 | | 2017 | | 2018 | | 2019 | | Total |
Revenues | | $ | 74.99 |
| | $ | 59.86 |
| | $ | — |
| | $ | 50.12 |
| | $ | 184.97 |
|
NSP-Minnesota’s sales true-up | | 59.95 |
| | — |
| | — |
| | (0.20 | ) | | 59.75 |
|
Total rate impact | | $ | 134.94 |
| | $ | 59.86 |
| | $ | — |
| | $ | 49.92 |
| | $ | 244.72 |
|
In December 2015, the MPUC approved interim rates for 2016.
Intervenor Testimony:
Annual Automatic Adjustment of Fuel Clause Charges — In June 2016, intervening parties filed direct testimony proposing modifications to NSP-Minnesota’s rate request. Thethe Minnesota Department of Commerce (DOC) subsequently filed revised testimony recommending an increase of approximately $45.6 million in 2016, a step increase of $53.8 million for 2017, and a step decrease of $5.0 million for 2018, based on a recommended ROE of 9.06 percent and an equity ratio of 52.50 percent.
Based on NSP-Minnesota’s interpretation of the DOC’s testimony, certain recommended adjustments of approximately $72.7 million would not be expected to impact earnings, assuming MPUC approval. The following table summarizes NSP-Minnesota’s estimate of the DOC’s recommendations:
|
| | | | | | | | | | | | | | | | |
(Millions of Dollars) | | 2016 | | 2017 Step | | 2018 Step | | Total |
Filed rate request | | $ | 194.6 |
| | $ | 52.1 |
| | $ | 50.4 |
| | $ | 297.1 |
|
| | | | | | | | |
DOC recommended adjustments: | | | | | | | | |
ROE | | (65.0 | ) | | 0.3 |
| | 1.0 |
| | (63.7 | ) |
Sales forecast | | (39.4 | ) | | — |
| | — |
| | (39.4 | ) |
Property tax | | (5.2 | ) | | (0.3 | ) | | (0.1 | ) | | (5.6 | ) |
Depreciation life | | (8.0 | ) | | 0.4 |
| | (2.2 | ) | | (9.8 | ) |
Purchased demand timing changes | | — |
| | — |
| | (19.4 | ) | | (19.4 | ) |
Nuclear capital costs | | (3.6 | ) | | 0.8 |
| | (11.2 | ) | | (14.0 | ) |
Tax related items | | (12.2 | ) | | 18.4 |
| | (6.9 | ) | | (0.7 | ) |
Operating and maintenance (O&M) | | (15.5 | ) | | (17.8 | ) | | (16.7 | ) | | (50.0 | ) |
Other, net | | (0.1 | ) | | (0.1 | ) | | 0.1 |
| | (0.1 | ) |
Total DOC Adjustments | | (149.0 | ) | | 1.7 |
| | (55.4 | ) | | (202.7 | ) |
| | | | | | | | |
Total DOC recommended rate increase | | $ | 45.6 |
| | $ | 53.8 |
| | $ | (5.0 | ) | | $ | 94.4 |
|
Estimated non-earnings DOC adjustments: | | | | | | | | |
Depreciation life | | 8.0 |
| | (0.4 | ) | | 2.2 |
| | 9.8 |
|
Sales forecast | | 37.4 |
| | — |
| | — |
| | 37.4 |
|
Property tax | | 5.2 |
| | 0.3 |
| | 0.1 |
| | 5.6 |
|
Purchased demand timing changes | | — |
| | — |
| | 19.4 |
| | 19.4 |
|
Other | | 0.5 |
| | — |
| | — |
| | 0.5 |
|
Total estimated non-earnings adjustments | | 51.1 |
| | (0.1 | ) | | 21.7 |
| | 72.7 |
|
Total pre-tax earnings impact | | $ | 96.7 |
| | $ | 53.7 |
| | $ | 16.7 |
| | $ | 167.1 |
|
The DOC also presented several nuclear recommendations related to capital recovery for spent fuel storage investments and Prairie Island LCM projects.
The use of certificate of need estimates as a recovery cap, and/or provisionally exclude recovery of amounts in excess of the cap unless the costs are deemed reasonable by the DOC’s nuclear consultant and/or the MPUC.
No recovery of a portion of capital costs associated with Monticello fuel storage Cask 16, representing the amount beyond the originally anticipated project cost, or approximately $15 million. The additional costs incurred were for testing of cask lid welds to demonstrate compliance with Nuclear Regulatory Commission requirements.
Settlement Agreement
In August 2016, NSP-Minnesota reached a settlement in principal with several of the parties, which resolves all revenue requirement issues in dispute. The terms and conditions of the agreement are still subject to final documentation. The settlement agreement requires the approval of the MPUC.
The next steps in the procedural schedule are expected to be as follows:
Rebuttal testimony — Aug. 9, 2016;
Surrebuttal testimony — Sept. 16, 2016;
Settlement conference — Sept. 26, 2016;
Evidentiary hearing — Oct. 4-7, 2016;
Administrative Law Judge report — Feb. 21, 2017; and
MPUC order — June 1, 2017.
A current liability representing NSP-Minnesota’s best estimate of a refund obligation for 2016 associated with interim rates was recorded as of June 30, 2016.
NSP-Minnesota – Gas Utility Infrastructure Costs (GUIC) Rider —In July 2016, the MPUC verbally approved NSP-Minnesota’s request to recover approximately $15 million in natural gas infrastructure costs through the GUIC Rider, based on NSP-Minnesota’s proposed capital structure and a ROE of 9.64 percent, as proposed by the DOC. Recovery was approved for the 15-month period from January 2016 to March 2017.
Annual Automatic Adjustment (AAA) of Charges — In June 2016, the DOC recommended the MPUC should hold utilities responsible for incremental costs of replacement power incurred due to unplanned outages at nuclear facilities under certain circumstances. As it pertainsIn May 2017, the MPUC voted to NSP-Minnesota, the DOC’s recommendation could impactdisallow approximately $4.4 million of replacement power cost recoveryenergy costs for the Prairie Island (PI) nuclear facility outages allocated to the Minnesota jurisdiction during the 2015 AAA fiscal year. NSP-Minnesota expects a MPUC decision in mid-2017.
Nuclear Project Prudence Investigation — In 2013, NSP-Minnesota completed the Monticello LCM/extended power uprate (EPU) project. The multi-year project extended the life of the facility and increased the capacity from 600 to 671 megawatts (MW) in 2015. The Monticello LCM/EPU project expenditures were approximately $665 million. Total capitalized costs were approximately $748 million, which includes allowance for funds used during construction (AFUDC). In 2008, project expenditures were initially estimated at approximately $320 million, excluding AFUDC.
In 2013, the MPUC initiated an investigation to determine whether the final costs for the Monticello LCM/EPU project were prudent. In March 2015, the MPUC voted to allow for full recovery, including a return, on approximately $415 million of the total plant costs (inclusive of AFUDC), but only allow recovery of the remaining $333 million of costs with no return on this portion of the investment over the remaining life of the plant. Further, the MPUC determined that only 50 percent of the investmentThis disallowance was considered used-and-useful for 2014. As a result of these determinations, Xcel Energy recorded an estimated pre-tax loss of $129 millionrecognized in the firstsecond quarter of 2015, after which2017. The MPUC issued a written order in July 2017. In addition, the remaining book value ofDOC is currently reviewing nuclear costs and operations under the Monticello project representedinitial rate case and resource plan orders as well as the present value of the estimated future cash flows.recently finalized rate case.
NSP-Wisconsin
Pending Regulatory ProceedingsProceeding — Public Service Commission of Wisconsin (PSCW)
Wisconsin 20172018 Electric and Natural Gas Rate Case— In April 2016,May 2017, NSP-Wisconsin filed a request with the PSCW for anto increase in annual electric rates of $17.4by $24.7 million, or 2.43.6 percent, and an increase in natural gas rates by $4.8$12.0 million, or 3.910.1 percent, effective January 2017.
The following table outlines the filed request:
|
| | | | |
Electric Rate Request (Millions of Dollars) | | Request |
Rate base investments | | $ | 11.0 |
|
Generation and transmission expenses (excluding fuel and purchased power) | | 6.8 |
|
Fuel and purchased power expenses | | 11.0 |
|
Subtotal | | 28.8 |
|
2015 fuel refund (a) | | (9.5 | ) |
DOE settlement refund | | (1.9 | ) |
Total electric rate increase | | $ | 17.4 |
|
| |
(a)
| In July 2016, the PSCW required NSP-Wisconsin to return the 2015 fuel refund directly to customers, rather than using it to offset the proposed 2017 rate increase, as originally proposed by NSP-Wisconsin. This decision effectively increases NSP-Wisconsin’s requested electric rate increase to $26.9 million, or 3.8 percent. |
The electric rate request is for the limited purpose10.0 percent, an equity ratio of recovering increases in (1) generation52.53 percent and transmission fixed charges and fuel and purchased power expenses related to the interchange agreement with NSP-Minnesota, and (2) costs associated witha forecasted average net investment rate base of $1.188approximately $1.2 billion in 2017.
Thefor the electric utility and $138.4 million for the natural gas rate request is for the limited purpose of recovering expenses related to the ongoing environmental remediation of a former manufactured gas plant (MGP) site and adjacent area in Ashland, Wis.
No changes are being requested to the capital structure or the 10.0 percent ROE authorized by the PSCW in the 2016 rate case. As part of an agreement with stakeholders to limit the size and scope of the case, NSP-Wisconsin also agreed to an earnings cap, solely for 2017, in which 100 percent of the earnings in excess of the authorized ROE would be refunded to customers.utility.
Key dates in the procedural schedule are as follows:
Staff and intervenor direct testimony — Aug.Sept. 12, 2016;2017;
Rebuttal testimony — Aug.Sept. 26, 2016;2017;
SurrebuttalSur-rebuttal testimony — Sept. 2, 2016;Oct. 3, 2017; and
Hearing — Sept. 7, 2016;Oct. 5, 2017.
Initial brief due — Sept. 21, 2016;
Reply brief due — Sept. 28, 2016; and
A final PSCW decision is anticipated in the fourth quarter of 2016 with final rates effective in January 2017.
PSCo
Pending and Recently Concluded Regulatory Proceedings — Colorado Public Utilities Commission (CPUC)
Multi-Year Natural Gas Rate Case — In June 2017, PSCo filed a multi-year request with the CPUC seeking to increase retail natural gas rates to recover capital investments and increased operating costs since PSCo’s previous case in 2015. The request, detailed below, is based on forecast test years, a 10.0 percent ROE and an equity ratio of 55.25 percent.
|
| | | | | | | | | | | | | | | | |
Revenue Request (Millions of Dollars) | | 2018 | | 2019 | | 2020 | | Total |
New revenue request | | $ | 63.2 |
| | $ | 32.9 |
| | $ | 42.9 |
| | $ | 139.0 |
|
Pipeline System Integrity Adjustment (PSIA) revenue conversion to base rates (a) | | — |
| | 93.9 |
| | — |
| | 93.9 |
|
Total | | $ | 63.2 |
| | $ | 126.8 |
| | $ | 42.9 |
| | $ | 232.9 |
|
| | | | | | | | |
Expected Year-End Rate Base (Billions of dollars) (b) | | $ | 1.5 |
| | $ | 2.3 |
| | $ | 2.4 |
| | N/A |
|
(a) The roll-in of PSIA rider revenue into base rates will not have an impact on customer bills or total revenue as these costs are already being recovered from customers through the rider. PSCo plans to request new PSIA rates for 2018 in November 2017. The recovery of new, incremental PSIA related investments in 2019 and 2020 are included in the base rate request.
(b) The additional rate base in 2019 predominantly reflects the roll-in of capital associated with the PSIA rider.
Final rates are expected to be effective in February 2018. In conjunction with the multi-year base rate step increases, PSCo is also proposing a stay-out provision and an earnings test through the end of 2020.
Annual Electric Earnings TestsTest — As part of an annual earnings test, PSCo must share with customers earnings that exceed the authorized ROE threshold of 9.83 percent for 2015 through 2017.2017, as part of an annual earnings test. In AprilJuly 2017, the CPUC approved PSCo’s 2016 PSCo filed the 2015 earnings test, proposing an electric customer refund obligation of $14.9 million, which was approved by the CPUCdoes not result in July 2016. The proposed refund obligation related to the 2015any earnings test was accrued for as of June 30, 2016.sharing. The current estimate of the 20162017 earnings test, based on annual forecasted information, did not result in the recognition of a liability as of June 30, 2016.2017.
SPS
Pending and Recently Concluded Regulatory Proceedings — Public Utility Commission of Texas (PUCT)
Appeal of the Texas 2015 Electric Rate Case Decision — In 2014, SPS had requested an overall retail electric revenue rate increase of $42.1 million. In 2015, the PUCT approved an overall rate decrease of approximately $4.0 million, net of rate case expenses. In April 2016, SPS filed an appeal, with the Texas State District Court, of the PUCT’s order that had denied SPS’ request for rehearing on certain items in SPS’ Texas 2015 electric rate case related to capital structure, incentive compensation and wholesale load reductions.
In 2014, SPS had requested an overall retail electric revenue rate increase of $64.8 million, which it subsequently revised to $42.1 million. In 2015, the PUCT approved an overall rate decrease of approximately $4.0 million, net of rate case expenses.
The hearing in the appeal is scheduled for February 2017.
Texas 2015 Electric Rate Net Refund Case — Under an agreement in the Texas 2015 electric rate case, the final rates were retroactively applied to June 11, 2015. In June 2016, SPS filed an application to provide a net refund of approximately $1.25 million to reflect the difference in revenue SPS would have received for usage had SPS been charging the final rates approved by the PUCT from June 11, 2015 through Jan. 31, 2016. SPS has proposed to make the net refund over a six-month period beginning October 2016. The application is pending before the PUCT.Appeals.
Texas 2016 Electric Rate CaseTransmission Cost Recovery Factor (TCRF) Application — In February 2016,2017, SPS filed a retail electric, non-fuel rate case in Texas with each of its Texas municipalities and the PUCT requesting an overall increase into recover additional annual base rate revenue of approximately $71.9$16.1 million through its TCRF, or 14.41.8 percent. The filing iswas based on a historic test year (HTY) ended Sept. 30, 2015, a requested ROE of 10.25 percent, an electric rate baseupon capital transmission additions made during 2016. In June 2017, the PUCT approved TCRF rider recovery of approximately $1.7 billion, and an equity ratio of 53.97 percent. In April 2016, SPS revised its requested rate increase to $68.6 million.
The following table summarizes the revised net request: |
| | | | |
(Millions of Dollars) | | Request |
Capital expenditure investments | | $ | 38.9 |
|
Change in jurisdictional allocation factors | | 9.8 |
|
Changes in ROE and capital structure | | 11.6 |
|
Estimated rate case expenses | | 4.5 |
|
Other, net | | 3.8 |
|
Total | | $ | 68.6 |
|
Key dates in the procedural schedule are as follows:
Intervenor direct testimony — Aug. 16, 2016;
PUCT Staff direct testimony — Aug. 23, 2016;
PUCT Staff and Intervenors’ cross-rebuttal testimony — Sept. 7, 2016;
SPS’ rebuttal testimony — Sept. 9, 2016; and
Hearings — Sept. 27 - Oct. 7, 2016.
SPS and various parties are having discussions regarding a potential settlement of the rate case. The final rates established at the end of the case are expected to be$14.4 million effective retroactive to July 20, 2016. A PUCT decision is expected in the first quarter of 2017.immediately.
Pending Regulatory ProceedingsProceeding — New Mexico Public Regulation Commission (NMPRC)
New Mexico 20152016 Electric Rate Case —In October 2015,November 2016, SPS filed an electric rate case with the NMPRC seeking an increase in non-fuel base rates of $45.4 million. The proposedapproximately $41.4 million, representing a total revenue increase would be offset by a decrease in base fuel revenue of approximately $21.1 million.10.9 percent. The rate filing is based on a June 30, 2015 HTY adjusted for known and measurable changes, a requested ROE of 10.2510.1 percent, an equity ratio of 53.97 percent, an electric rate base of approximately $734$832 million and an equity ratio of 53.97 percent.a future test year ending June 30, 2018.
In May 2016, SPS, the NMPRC Staff and all other parties filed a unanimous black-box stipulation that resolves all issues in the case. Under the stipulation, SPS will implement a non-fuel base rate increase of $23.5 million and a decrease in base fuel revenue of approximately $21.1 million. The decrease in base fuel revenue will be reflected in adjustments collected through the fuel and purchased power cost adjustment clause. The stipulation places no restriction on when SPS may file its next base rate case.
In July 2016,On April 10, 2017, the hearing examiner issued a recommendationdetermined that SPS’ rate filing was deficient and recommended the NMPRC extend the procedural schedule by approximately one month and restart the suspension period once it is determined that the NMPRC approve the stipulation. The stipulation is subject to approval bydeficiencies are resolved. On April 19, 2017, the NMPRC anddismissed SPS’ rate case. On May 15, 2017, SPS filed a notice of appeal to the New Mexico Supreme Court. A decision onfrom the settlement and implementationNew Mexico Supreme Court is not expected until the second or third quarter of final rates is expected in fall of 2016.
Pending Regulatory ProceedingsProceeding — FERCFederal Energy Regulatory Commission (FERC)
Midcontinent Independent System Operator, Inc. (MISO) ROE Complaints/ROE AdderComplaints — In November 2013, a group of customers filed a complaint at the FERC against MISO transmission owners (TOs), including NSP-Minnesota and NSP-Wisconsin. The complaint argued for a reduction in the ROE in transmission formula rates in the MISO region from 12.38 percent to 9.15 percent, a prohibition on capital structures in excess of 50 percent equity, and the removal of ROE adders (including those for regional transmission organizationRegional Transmission Organization (RTO) membership and being an independent transmission company)membership), effective Nov. 12, 2013.
In December 2015, an ALJ initial decisionadministrative law judge (ALJ) recommended the FERC approve a base ROE of 10.32 percent. A FERC order is expectedpercent for the MISO TOs. The ALJ found the existing 12.38 percent ROE to be unjust and unreasonable. The recommended 10.32 percent ROE applied a FERC ROE policy adopted in a June 2014 order (Opinion 531). The FERC approved the ALJ recommended 10.32 percent base ROE in an order issued in lateSeptember 2016. This ROE would be applicable for the 15 month refund period from Nov. 12, 2013 to Feb. 11, 2015, and prospectively from the date of the FERC order. The total prospective ROE would be 10.82 percent, including a 50 basis point adder for RTO membership. Various parties requested rehearing of the September 2016 or in 2017.order. The requests are pending FERC action.
In February 2015, a second complaint was filed seeking to reduce the MISO region ROE from 12.38 percent to 8.67 percent prior to any adder. Theadder was filed with the FERC, set theresulting in a second complaint for hearings, and established aperiod of potential refund effective date offrom Feb. 12, 2015. The MPUC, the North Dakota Public Service Commission (NDPSC), the South Dakota Public Utilities Commission and the DOC joined a joint complainant/intervenor initial brief recommending an ROE of either 8.82 percent or 8.81 percent. FERC staff recommended a ROE of 8.78 percent. The MISO TOs recommended a ROE of 10.92 percent. On2015 to May 11, 2016. In June 30, 2016, the ALJ issued an initial decision recommendingrecommended a ROE of 9.7 percent, applying the midpointmethodology adopted by the FERC in Opinion 531. A final FERC decision on the second ROE complaint was expected later in 2017, but in April 2017, the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) by opinion, vacated and remanded Opinion 531. It is unclear how the D.C. Circuit’s opinion to vacate and remand Opinion 531 will affect the September 2016 FERC order or the timing and outcome of the upper halfsecond ROE complaint. The MISO TOs are evaluating the impact of the discounted cash flow (DCF) range, withD.C. Circuit ruling on the November 2013 and February 2015 ROE complaints.
As of June 30, 2017, NSP-Minnesota has processed the refunds for the 15 monthNov. 12, 2013 to Feb. 11, 2015 complaint period beginning Feb.12, 2015. Abased on the 10.32 percent ROE provided in the September 2016 FERC decision is expected in 2017.
FERC approved of a 50 basis point ROE adder for RTO membership, effective Jan. 6, 2015, subject to the outcome of the ROE complaint. Under FERC policy, the total ROE including the RTO membership adder cannot exceed the top of the DCF range.
order. NSP-Minnesota has recordedalso recognized a current refund liability representingconsistent with the best estimate of a refund obligation associated with the newfinal ROE including the RTO membership adder, as of June 30, 2016. The new FERC ROE methodology is estimated to reduce transmission revenue, net of expense, between $8 million and $10 million, annually, for the NSP System.Feb. 12, 2015 to May 11, 2016 complaint period.
Southwest Power Pool, Inc. (SPP) Open Access Transmission Tariff (OATT) Upgrade Costs — Under the SPP OATT, costs
In April 2016, SPP filed a request with the FERC for a waiver that would allow SPP to recover the charges not billed since 2008. The FERC approved the waiver request in July 2016. SPS is considering whether to seek clarification or rehearing of the FERC order. SPP has indicated it anticipates completing its process and invoicing customers during the fourth quarter of 2016. SPS estimates the charges to be $5 million to $10 million, based on preliminary information. SPS anticipates these costs would be recoverable through regulatory mechanisms.
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6. | Commitments and Contingencies |
Except to the extent noted below and in Note 5 above, the circumstances set forth in Notes 12, 13 and 14 to the consolidated financial statements included in Xcel Energy Inc.’s Annual Report on Form 10-K for the year ended Dec. 31, 2015,2016, and in Notes 5 and 6 to the
consolidated financial statements included in Xcel Energy Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016,2017 appropriately represent, in all material respects, the current status of commitments and contingent liabilities and are incorporated herein by reference. The following include commitments, contingencies and unresolved contingencies that are material to Xcel Energy’s financial position.
Purchased Power Agreements (PPAs)PPAs
Under certain PPAs, NSP-Minnesota, PSCo and SPS purchase power from independent power producing entities for which the utility subsidiaries are required to reimburse natural gas or biomass fuel costs, or to participate in tolling arrangements under which the utility subsidiaries procure the natural gas required to produce the energy that they purchase. These specific PPAs create a variable interest in the associated independent power producing entity.
The Xcel Energy utility subsidiaries had approximately 3,467 MW and 3,698 MWapproximately 3,537 megawatts (MW) of capacity under long-term PPAs as of June 30, 20162017 and Dec. 31, 2015,2016, with entities that have been determined to be variable interest entities. Xcel Energy has concluded that these entities are not required to be consolidated in its consolidated financial statements because it does not have the power to direct the activities that most significantly impact the entities’ economic performance. These agreements have expiration dates through 2033.2041.
Guarantees and Bond Indemnifications
Xcel Energy Inc. and its subsidiaries provide guarantees and bond indemnities under specified agreements or transactions. The guarantees and bond indemnities issued by Xcel Energy Inc. guarantee payment or performance by its subsidiaries. As a result, Xcel Energy Inc.’s exposure under the guarantees and bond indemnities is based upon the net liability of the relevant subsidiary under the specified agreements or transactions. Most of the guarantees and bond indemnities issued by Xcel Energy Inc. and its subsidiaries limit the exposure tohave a stated maximum amount stated in the guarantees and bond indemnities.guarantee or indemnity amount. As of June 30, 20162017 and Dec. 31, 2015,2016, Xcel Energy Inc. and its subsidiaries had no assets held as collateral related to their guarantees, bond indemnities and indemnification agreements.
The following table presents guarantees and bond indemnities issued and outstanding for Xcel Energy:
| | (Millions of Dollars) | | June 30, 2016 | | Dec. 31, 2015 | | June 30, 2017 | | Dec. 31, 2016 |
Guarantees issued and outstanding | | $ | 15.9 |
| | $ | 12.5 |
| | $ | 18.3 |
| | $ | 18.8 |
|
Current exposure under these guarantees | | 0.1 |
| | 0.1 |
| | — |
| | 0.1 |
|
Bonds with indemnity protection | | 43.0 |
| | 41.3 |
| | 49.4 |
| | 43.0 |
|
Other Indemnification Agreements
Xcel Energy Inc. and its subsidiaries provide indemnifications through contracts entered into in the normal course of business. These are primarily indemnifications against adverse litigation outcomes in connection with underwriting agreements, as well as breaches of representations and warranties, including corporate existence, transaction authorization and income tax matters with respect to assets sold. Xcel Energy Inc.’s and its subsidiaries’ obligations under these agreements may be limited in terms of duration and amount. The maximum potential amount of future payments under these indemnifications cannot be reasonably estimated as the obligateddollar amounts of these indemnificationsare often are not explicitly stated.
Environmental Contingencies
Ashland MGPManufactured Gas Plant (MGP) Site — NSP-Wisconsin has beenwas named a potentially responsible party (PRP) for contamination at a site in Ashland, Wis. The Ashland/Northern States Power Lakefront Superfund Site (the Site) includes NSP-Wisconsin property, owned by NSP-Wisconsin, previously operated as a MGP facility (the Upper Bluff), and two other properties: an adjacent city lakeshore park area (Kreher Park); and an area of Lake Superior’s Chequamegon Bay adjoining the park (the Sediments).park.
In 2010, the United States Environmental Protection Agency (EPA) issued its Record
In 2012, under a settlement agreement, NSP-Wisconsin agreed to perform the remediation ofremediate the Phase I Project Area (which includes the Upper Bluff and Kreher Park areas of the Site). The excavation and containment remedies are complete, and, under a long-term groundwater pump and treatment program is now underway. The final design was approved bysettlement agreement with the EPA in 2015. The current cost estimate for the cleanup of the Phase I Project Area is approximately $71.4 million, of which approximately $51.8 million has already been spent.United States Environmental Protection Agency (EPA).
Negotiations are ongoing between the EPA and NSP-Wisconsin regarding who will pay for or perform the cleanup of the Sediments and which remedy will be implemented. The EPA’s ROD includes estimates that the cost of the Hybrid Remedy is between $63 million and $77 million, with a potential deviation in such estimated costs of up to 50 percent higher or 30 percent lower. NSP-Wisconsin believes the Hybrid Remedy is not safe or feasible to implement. In 2015, NSP-Wisconsin constructed a breakwater at the site to serve as wave attenuation and containment forperformed a wet dredge pilot study in 2016 and full scale sedimentdemonstrated that a wet dredge remedy atcan meet the site. Equipment mobilizationperformance standards for remediation of the Phase II Project Area (the Sediments). As a result, the EPA authorized NSP-Wisconsin to extend the wet dredge pilot study commenced in April 2016.to additional areas of the Site. In January 2017, NSP-Wisconsin agreed to remediate the Sediments, under a settlement agreement with the EPA. The pilot study is expectedsettlement was approved by the U.S. District Court for the Western District of Wisconsin. NSP-Wisconsin has initiated field activities to conclude in late summer of 2016. The EPA will then determine whether NSP-Wisconsin can perform extended pilot work into early fall of 2016 and whether a full scale wet dredge remedy of the Sediments may be performed beginning as early as 2017.in 2017, with performance of restoration activities in 2018.
which approximately $113.2 million has been spent. At June 30, 20162017 and Dec. 31, 2015,2016, NSP-Wisconsin had recorded a total liability of $95.0$46.8 million and $94.4$64.3 million, respectively, for the Site based upon potential remediation and design costs together with estimated outside legal and consultant costs; of which $18.7 million and $17.0 million, respectively, were considered a current liability. NSP-Wisconsin’s potential liability, the actual cost of remediation and the timing of expenditures are subject to change. NSP-Wisconsin also continues to work to identify and access state and federal funds to apply to the remediation cost of the entire site.
NSP-Wisconsin has deferred the unrecovered portion of the estimated siteSite remediation costs as a regulatory asset. The PSCW has consistently authorized NSP-Wisconsin rate recovery for all remediation costs incurred at the Site. In a December 2012, decision, the PSCW agreed to allow NSP-Wisconsin to pre-collect certain costs, to amortize costs over a ten-year period and to apply a three percent carrying cost to the unamortized regulatory asset. In April 2016,May 2017, NSP-Wisconsin filed a limited natural gas rate case for recoveringwhich included recovery of additional expenses associated with remediating the Site. If approved, the annual recovery of MGP clean-up costs would increase from $7.6 million in 2016 to $12.4 million in 2017.2017 to $18.1 million in 2018.
Fargo, N.D. MGP Site — In May 2015, underground pipes, tars and impacted soils were discovered in a right-of-way in Fargo, N.D., which may that appeared to be related toassociated with a former MGP site operated by NSP-Minnesota or a prior company.companies. NSP-Minnesota has removed the impacted soils and other materials from the project area. NSP-Minnesota is undertaking furtherright-of-way and commenced an investigation of the location of the historic MGP site and nearby properties. In October 2015,adjacent properties (the Fargo MGP Site). NSP-Minnesota has recommended that targeted source removal of impacted soils and historic MGP infrastructure should be performed. The North Dakota Department of Health approved NSP-Minnesota’s proposed cleanup plan in January 2017. The timing and final scope of remediation is dependent on whether reasonable access is provided to NSP-Minnesota to perform and implement the approved cleanup plan. NSP-Minnesota has also initiated insurance recovery litigation in North Dakota. The U.S. District Court for the District of North Dakota agreed to the parties’ request for a stay of the litigation until November 2016 to allow NSP-Minnesota time to further investigate site conditions.September 2017.
As of June 30, 20162017 and Dec. 31, 2015,2016, NSP-Minnesota had recorded a liability of $1.6$16.4 million and $2.7$11.3 million, respectively, for the Fargo MGP Site. The current cost estimate for the remediation of the site is approximately $23.0 million, of which approximately $6.6 million has been spent. In December 2015, the North Dakota Public Service Commission (NDPSC) approved NSP-Minnesota’s request to defer costs associated with the Fargo MGP Site, resulting in deferral of all investigation and response costs with the exception of approximately 12 percent allocable to the Minnesota jurisdiction. Uncertainties related to further investigation and additional planned activities. Uncertaintiesthe liability recognized include obtaining access to perform the nature and costapproved remediation (including the prospective purchase of the additional remediation effortshistoric MGP property), final designs that maywill be necessary,developed to implement the ability to recover costs from insurance carriersapproved cleanup plan and the potential for contributions from entities that may be identified as PRPs. Therefore, the total cost of remediation, NSP-Minnesota’s potential liability
Other MGP and amounts allocableLandfill Sites — Xcel Energy is currently involved in investigating and/or remediating several other MGP and landfill sites. Xcel Energy has identified ten sites across its service territories in addition to the North Dakotasites in Ashland, Wis. and Minnesota jurisdictions related to theFargo, N.D., where former MGP or landfill disposal activities have or may have resulted in site cannot currently be reasonably estimated. In December 2015, the NDPSC approved NSP-Minnesota’s request to defer thecontamination and are under current investigation and/or remediation. At some or all of these sites, there are other parties that may have responsibility for some portion of any remediation. Xcel Energy anticipates that the majority of the investigation or remediation at these sites will continue through at least 2018. Xcel Energy had accrued $2.9 million and response$2.0 million for these sites at June 30, 2017 and Dec. 31, 2016, respectively. There may be insurance recovery and/or recovery from other PRPs to offset any costs allocable to the North Dakota jurisdiction.incurred. Xcel Energy anticipates that any significant amounts incurred will be recovered from customers.
Environmental Requirements
Water and Waste
Coal Ash RegulationFederal Clean Water Act (CWA) Waters of the United States Rule — Xcel Energy’s operations are subject to federal and state laws that impose requirements for handling, storage, treatment and disposal of solid waste. In April 2015, the EPA and the U.S. Army Corps of Engineers (Corps) published a final rule regulatingthat significantly expands the managementtypes of water bodies regulated under the CWA and disposalbroadens the scope of coal combustion byproducts (coal ash)waters subject to federal jurisdiction. The final rule will subject more utility projects to federal CWA jurisdiction, thereby potentially delaying the siting of new generation projects, pipelines, transmission lines and distribution lines, as well as increasing project costs and expanding permitting and reporting requirements. In October 2015, the U.S. Court of Appeals for the Sixth Circuit issued a nonhazardous waste. Undernationwide stay of the final rule Xcel Energy’s costsand subsequently ruled that it, rather than the federal district courts, had jurisdiction over challenges to manage and disposethe rule. In January 2017, the U.S. Supreme Court agreed to resolve the dispute as to which court should hear challenges to the rule. A ruling is expected by the end of coal ash has not significantly increased.2017.
In 2015, industryFebruary 2017, President Trump issued an executive order requiring the EPA and environmental non-governmental organizations sought judicialthe Corps to review ofand revise the final rule. On June 27, 2017, the agencies issued a proposed rule that rescinds the 2015 final rule and reinstates the prior 1986 definition of “Water of the U.S.”
Air
Greenhouse Gas (GHG) Emission Standard for Existing Sources (Clean Power Plan or CPP) — In June2015, the EPA issued its final rule for existing power plants. Among other things, the rule requires that state plans include enforceable measures to ensure emissions from existing power plants achieve the EPA’s state-specific interim (2022-2029) and final (2030 and thereafter) emission performance targets.
The CPP was challenged by multiple parties in the D.C. Circuit Court. In February 2016, the D.C CircuitU.S. Supreme Court issued an order remandingstaying the final CPP rule. In September 2016, the D.C. Circuit Court heard oral arguments in the consolidated challenges to the CPP. The stay will remain in effect until the D.C. Circuit Court reaches its decision and vacating certain elementsthe U.S. Supreme Court either declines to review the lower court’s decision or reaches a decision of its own.
In March 2017, President Trump signed an executive order requiring the EPA Administrator to review the CPP rule and if appropriate, publish proposed rules suspending, revising or rescinding it. Accordingly, the EPA has requested that the D.C. Circuit Court hold the litigation in abeyance until the EPA completes its work under the executive order. The D.C. Circuit granted the EPA’s request to hold the litigation in abeyance until June 27, 2017, and is considering briefs by the parties on whether the court should remand the challenges to the EPA rather than holding them in abeyance, to determine whether and how the court continues or ends the stay that currently applies to the CPP. On June 9, 2017, the EPA submitted a proposed rule to the Office of Management and Budget entitled “Review of the rule as a result of partial settlements with these parties. Oral arguments are expected to be heard in the second half of 2016 and a final decision is anticipated in early 2017. Until a final decision is reached in the case, it is uncertain whether the litigation or partial settlements will have any significant impact on results of operations, financial position or cash flows on Xcel Energy.Clean Power Plan.”
Air
Regional Haze Rules — The regional haze program is designed to address widespread haze that results from emissions from a multitude of sources. In 2005, the EPA amended the best available retrofit technologyThe Best Available Retrofit Technology (BART) requirements of itsthe EPA’s regional haze rules which require the installation and operation of emission controls for industrial facilities emitting air pollutants that reduce visibility in national parks and wilderness areas. Under BART, regional haze plans identify facilities that will have to reduce sulfur dioxideSulfur Dioxide (SO22)), nitrogen oxideNitrogen Oxide (NOx) and particulate matter (PM) emissions and set emission limits for those facilities. BART requirements can also be met through participation in interstate emission trading programs such as the Clean Air Interstate Rule (CAIR) and its successor, Cross-State Air Pollution Rule (CSAPR). The regional haze plans developed by Minnesota and Colorado have been fully approved and are being implemented in those states. States are required to revise their plans every ten years. The next plans for Minnesota and Colorado will be due in 2021. Texas’ first regional haze plan is still undergoing federal review as described below. President Trump’s Administration has not yet taken any public position regarding its views of the proposed and final regional haze regulations affecting SPS facilities in Texas.
Actions affecting Harrington Units:Texas developed a state implementation planState Implementation Plan (SIP) that finds the CAIR equal to BART for electric generating units (EGUs).units. As a result, no additional controls beyond CAIR compliance would be required. In December 2014, the EPA proposed to approve the BART portion of the SIP, with the exception that the EPA would substitute thesubstitution of CSAPR compliance for Texas’ reliance on CAIR. In January 2016, the EPA adopted a final rule that defers its approval of CSAPR compliance as BART until the EPA considers further adjustments to CSAPR emission budgets under the United States Court of Appeals for the District of Columbia Circuit’s (D.C. Circuit)D.C. Circuit Court’s remand of the Texas SO2 emission budgets. In March 2016, the EPA requested information under the Clean Air Act (CAA) related to EGUs at SPS’ plants. SPS identified Harrington Units 1 and 2, Jones Units 1 and 2, Nichols Unit 3 and Plant X Unit 4 as BART-eligible units. These units will be evaluated based on their impact on visibility. Additional emission control equipment under the EPA’s BART guidelines for PM, SO2 and NOx could be required if a unit is determined to “cause or contribute” to visibility impairment. SPS cannot evaluate the impact of additional emission controls until the EPA concludes its evaluation of BART. The EPA is expected to issue a proposed rule in December 2016. In June 2016, the EPA issued a memorandum which allows Texas to voluntarily adopt the CSAPR emission budgets limiting annual SO2 and NOx emissions and rely on those emission budgets to satisfy Texas’ BART obligations under the regional haze rules. It is not yet known whether theThe Texas Commission on Environmental Quality (TCEQ) intendshas not utilized this option. The EPA then published a proposed rule in January 2017 that could have the effect of requiring installation of dry scrubbers to utilize this option.reduce SO2 emissions from Harrington Units 1 and 2. Investment costs associated with dry scrubbers for Harrington Units 1 and 2 could be approximately $400 million. The EPA’s deadline to issue a final rule for Texas is September 2017.
In December 2014, the EPA proposed to disapprove the reasonable progress portions of the SIP and instead adopt a federal implementation plan (FIP).Actions affecting Tolk units: In January 2016, the EPA adopted a final rule establishing a FIPfederal implementation plan for the state of Texas. As part of this final rule, the EPATexas, which imposed SO2 emission limitations that reflect the installation of dry scrubbers on Tolk Units 1 and 2, with compliance required by February 2021. Investment costs associated with dry scrubbers could be approximately $600 million. In March 2016, SPS appealed the EPA’s decision and asked forrequested a stay of the final rule while it is being reviewed. In July 2016, therule. The United States Court of Appeals for the Fifth Circuit (Fifth Circuit) granted the stay motion and decided that the Fifth Circuit, not the D.C. Circuit, isthey are the appropriate venue for this case. In addition, SPS filed a petition withMarch 2017, the Fifth Circuit remanded the rule to the EPA requestingfor reconsideration, while leaving the stay in effect. The Fifth Circuit is now holding the case in abeyance until the EPA completes its reconsideration of the final rule. It is likely that Texas and other affected entities including SPS believeswould continue to challenge the determinations to date. The risk of these costs would be recoverable through regulatory mechanisms if required, and therefore does not expect a material impact on resultscontrols being imposed along with the risk of operations, financial position or cash flows.investments to provide cooling water to Tolk have caused SPS to seek to decrease the remaining depreciable life of the Tolk units.
Implementation ofRevisions to the National Ambient Air Quality Standard (NAAQS) for SOOzone 2— In 2015, the EPA revised the NAAQS for ozone by lowering the eight-hour standard from 75 parts per billion (ppb) to 70 ppb. In areas where Xcel Energy operates, current monitored air quality concentrations comply with the new standard in the Twin Cities Metropolitan Area in Minnesota and meet the 70 ppb level in the Texas panhandle. In documents issued with the new standard, the EPA projects that both areas will meet the new standard. The EPA adopted aDenver Metropolitan Area is currently not meeting the prior ozone standard and will therefore not meet the new, more stringent NAAQS for SO2standard, however PSCo’s scheduled retirement of coal fired plants in 2010. The EPA is requiring statesDenver that began in 2011 and will be completed in August 2017, should help in any plan to evaluate areas in three phases. The first phase includes areas near PSCo’s Pawnee plant and SPS’ Tolk and Harrington plants. The Pawnee plant recently installed an SO2 scrubber and the Tolk and Harrington Plants utilize low sulfur coal to reduce SO2 emissions.mitigate non-attainment. In June 2016,2017, the EPA issued finalannounced that it is delaying designations which found the area near the Tolk plant to be meeting the NAAQS and the areas near the Harrington and Pawnee plants as “unclassifiable.” The area near the Harrington plant is to be monitored for three years and a final designation is expected to be made by December 2020. It is anticipated that the area near the Pawnee plant will be able to show compliance with the NAAQS through air dispersion modeling performed by the Colorado Department of Public Health and Environment.
If an area is designated nonattainment in 2020, the respective states will need to evaluate all SO2 sources in the area. The state would then submit an implementation plan, which would be due by 2022, designed to achieve the NAAQS by 2025. The TCEQ could require additional SO2 controls at Harrington as part of such a plan. The areas near the remaining Xcel Energy power plants will be evaluated in the next designation phase, ending December 2017. The remaining plants, PSCo’s Comanche and Hayden plants along with NSP-Minnesota’s King and Sherco plants, utilize scrubbers to control SO2 emissions. Xcel Energy cannot evaluate the impacts until the designation of nonattainment areas is made and any required state plans are developed. Xcel Energy believes that, should SO2 control systems be required for a plant, compliance costs will be recoverable through regulatory mechanisms and therefore does not expect a material impact on resultsunder the 2015 ozone NAAQS to October 2018 to allow it to complete its review of operations, financial position or cash flows.the 2015 ozone NAAQS.
Legal Contingencies
Xcel Energy is involved in various litigation matters that are being defended and handled in the ordinary course of business. The assessment of whether a loss is probable or is a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. Management maintains accruals for such losses that are probable of being incurred and subject to reasonable estimation. Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories. In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss. For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, arising from such current proceedings would have a material effect on Xcel Energy’s financial statements. Unless otherwise required by GAAP, legal fees are expensed as incurred.
Employment, Tort and Commercial Litigation
Pacific Northwest FERC Refund Proceeding — A complaint with the FERC posed that sales made in the Pacific Northwest in 2000 and 2001 through bilateral contracts were unjust and unreasonable under the Federal Power Act. The City of Seattle (the City) alleges between $34 million to $50 million in sales with PSCo is subject to refund. In 2003, the FERC terminated the proceeding, although it was later remanded back to the FERC in 2007 by the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit).
In May 2015, in the remand proceeding, the FERC issued an order rejecting the City’s claim that any of the sales made resulted in an excessive burden and concluded that the City failed to establish a causal link between any contracts and any claimed unlawful market activity. In February 2016, the City appealed this decision to the Ninth Circuit. This appeal is pending review by the Ninth Circuit.
Also in December 2015, the Ninth Circuit issued an order and held that the standard of review applied by the FERC to the contracts which the City was challenging is appropriate. The Ninth Circuit dismissed questions concerning whether the FERC properly established the scope of the hearing, and determined that the challenged orders are preliminary and that the Ninth Circuit lacks jurisdiction to review evidentiary decisions until after the FERC’s proceedings are final. The City joined the State of California in its request seeking rehearing of this order, which the Ninth Circuit denied.
Preliminary calculations of the City’s claim for refunds from PSCo are approximately $28 million, excluding interest, or approximately $60 million, including interest. PSCo has concluded that a loss is reasonably possible; however, given the surrounding uncertainties, PSCo is currently unable to estimate the amount or range of reasonably possible loss in the event of an adverse outcome of this matter. If a loss were sustained, PSCo would attempt to recover those losses from other PRPs. No accrual has been recorded for this matter.
Gas Trading Litigation — e prime, inc. (e prime) is a wholly owned subsidiary of Xcel Energy. e prime was in the business of natural gas trading and marketing but has not engaged in natural gas trading or marketing activities since 2003. Thirteen lawsuits were commenced against e prime and Xcel Energy (and NSP-Wisconsin, in two instances) between 2003 and 2009 alleging fraud and anticompetitive activities in conspiring to restrain the trade of natural gas and manipulate natural gas prices.
The cases were consolidated in U.S. District Court in Nevada. Five of the cases have since been settled and seven have been dismissed. Oneremain active, which includes one multi-district litigation (MDL) matter remains and it consistsconsisting of a Colorado class (Breckenridge), a Wisconsin class (NSP-Wisconsin), a Kansas class, and two other cases identified as “Sinclair Oil” and “Farmland.” In MayNovember 2016, the MDL judge granted summary judgment dismissing defendants from the Farmland lawsuit.dismissed e prime and Xcel Energy havefrom the Farmland lawsuit, and Farmland has appealed the dismissal. Motions for summary judgment were filed a motion seeking clarification that this order includes them. This motion is currently pending. Theby defendants, including e prime, defendants recently filed ain all of the remaining lawsuits. In March 2017, the U.S. District Court issued an order dismissing the claims against e prime in the Sinclair Oil lawsuit and denied plaintiffs motions for class certification in the other lawsuits. The U.S. District Court did not grant e prime’s summary judgment motionmotions in the Wisconsin or Colorado class lawsuit (Breckenridge)cases. There are currently additional motions brought by e prime for reconsideration and oppositions to class certificationssummary judgment pending in all the class actions. Trial dates have not yet been set, but are not expected to occur prior to early 2017.U.S. District Court. Xcel Energy, NSP-Wisconsin and e prime have concluded that a loss is remote.
Line Extension Disputes — In December 2015, Development Recovery Company (DRC) filed a lawsuit in Denver State Court, stating PSCo failed to award proper allowances and refunds for line extensions to new developments pursuant to the terms of electric and gas service agreements entered into by PSCo and various developers. The dispute involves assigned interests in those claims by over fifty developers. In May 2016, the district court granted PSCo’s motion to dismiss the lawsuit, concluding that jurisdiction over this dispute resides with the CPUC. In June 2016, DRC appealed the district court’s dismissal of the lawsuit, and the Colorado Court of Appeals affirmed the lower court decision in favor of PSCo. In July 2017, DRC filed a notice of appeal.petition to appeal the decision with the Colorado Supreme Court. It is uncertain whether the Colorado Supreme Court will grant the petition. DRC also brought a proceeding before the CPUC as assignee on behalf of two developers, Ryland Homes and Richmond Homes of Colorado. In March 2016, the ALJ issued an order rejecting DRC’s claims for additional allowances and refunds. In June 2016, the ALJ’s determination was approved by the CPUC. DRC did not file a request for reconsideration before the CPUC contesting the decision, but filed an appeal in Denver District Court in August 2016. DRC has requested a hearing for oral arguments, which has yet to be granted or set by the Denver District Court.
PSCo has concluded that a loss is remote with respect to this matter as the service agreements were developed to implement CPUC approved tariffs and PSCo has complied with the tariff provisions. Also, if a loss were sustained, PSCo believes it would be allowed to recover these costs through traditional regulatory mechanisms. The amount or range in dispute is presently unknown and no accrual has been recorded for this matter.
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7. | Borrowings and Other Financing Instruments |
Short-Term Borrowings
Money Pool — Xcel Energy Inc. and its utility subsidiaries have established a money pool arrangement that allows for short-term investments in and borrowings between the utility subsidiaries. NSP-Wisconsin does not participate in the money pool. Xcel Energy Inc. may make investments in the utility subsidiaries at market-based interest rates; however, the money pool arrangement does not allow the utility subsidiaries to make investments in Xcel Energy Inc. The money pool balances are eliminated in consolidation.
Commercial Paper — Xcel Energy Inc. and its utility subsidiaries meet their short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under their credit facilities. Commercial paper outstanding for Xcel Energy was as follows:
| | (Amounts in Millions, Except Interest Rates) | | Three Months Ended June 30, 2016 | | Year Ended Dec. 31, 2015 | | Three Months Ended June 30, 2017 | | Year Ended Dec. 31, 2016 |
Borrowing limit | | $ | 2,750 |
| | $ | 2,750 |
| | $ | 2,750 |
| | $ | 2,750 |
|
Amount outstanding at period end | | 447 |
| | 846 |
| | 784 |
| | 392 |
|
Average amount outstanding | | 404 |
| | 601 |
| | 778 |
| | 485 |
|
Maximum amount outstanding | | 841 |
| | 1,360 |
| | 1,247 |
| | 1,183 |
|
Weighted average interest rate, computed on a daily basis | | 0.72 | % | | 0.48 | % | | 1.28 | % | | 0.74 | % |
Weighted average interest rate at period end | | 0.80 |
| | 0.82 |
| | 1.49 |
| | 0.95 |
|
Letters of Credit — Xcel Energy Inc. and its subsidiaries use letters of credit, generally with terms of one year, to provide financial guarantees for certain operating obligations. At June 30, 20162017 and Dec. 31, 2015,2016, there were $28$14 million and $29$19 million, respectively, of letters of credit outstanding under the credit facilities. The contract amounts of these letters of credit approximate their fair value and are subject to fees.
Credit Facilities — In order to use their commercial paper programs to fulfill short-term funding needs, Xcel Energy Inc. and its utility subsidiaries must have revolving credit facilities in place at least equal to the amount of their respective commercial paper borrowing limits and cannot issue commercial paper in an aggregate amount exceeding available capacity under these credit facility capacity.facilities. The lines of credit provide short-term financing in the form of notes payable to banks, letters of credit and back-up support for commercial paper borrowings.
At June 30, 2016,2017, Xcel Energy Inc. and its utility subsidiaries had the following committed credit facilities available:
| | (Millions of Dollars) | | Credit Facility (a) | | Drawn (b) | | Available | | Credit Facility (a) | | Drawn (b) | | Available |
Xcel Energy Inc. | | $ | 1,000 |
| | $ | 414 |
| | $ | 586 |
| | $ | 1,000 |
| | $ | 549 |
| | $ | 451 |
|
PSCo | | 700 |
| | 3 |
| | 697 |
| | 700 |
| | 3 |
| | 697 |
|
NSP-Minnesota | | 500 |
| | 18 |
| | 482 |
| | 500 |
| | 91 |
| | 409 |
|
SPS | | 400 |
| | 32 |
| | 368 |
| | 400 |
| | 109 |
| | 291 |
|
NSP-Wisconsin | | 150 |
| | 8 |
| | 142 |
| | 150 |
| | 46 |
| | 104 |
|
Total | | $ | 2,750 |
| | $ | 475 |
| | $ | 2,275 |
| | $ | 2,750 |
| | $ | 798 |
| | $ | 1,952 |
|
| |
(a) | These credit facilities expire in June 2021. |
| |
(b) | Includes outstanding commercial paper and letters of credit. |
All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the respective credit facilities. Xcel Energy Inc. and its subsidiaries had no direct advances on the credit facilities outstanding at June 30, 20162017 and Dec. 31, 2015.2016.
Amended Credit Agreements - In June 2016, Xcel Energy Inc., NSP-Minnesota, NSP-Wisconsin, PSCo and SPS entered into amended five-year credit agreements with a syndicate of banks. The total borrowing limit under the amended credit agreements remained at $2.75 billion. The amended credit agreements have substantially the same terms and conditions as the prior credit agreements with the following exceptions:
The maturity extended from October 2019 to June 2021.
The Eurodollar borrowing margins on these lines of credit were reduced to a range of 75 to 150 basis points per year, from a range of 87.5 to 175 basis points per year, based upon applicable long-term credit ratings.
The commitment fees, calculated on the unused portion of the lines of credit, were reduced to a range of 6 to 22.5 basis points per year, from a range of 7.5 to 27.5 basis points per year, also based on applicable long-term credit ratings.
Xcel Energy Inc., NSP-Minnesota, PSCo and SPS each have the right to request an extension of the revolving credit facility termination date for two additional one-year periods. NSP-Wisconsin has the right to request an extension of the revolving credit facility termination date for an additional one-year period. All extension requests are subject to majority bank group approval.
Long-Term Borrowings
During the six months ended June 30, 2016, Xcel Energy Inc. and its utility subsidiaries completed the following bond issuances:
In March, Xcel Energy Inc.PSCo issued $400 million of 2.4 percent senior notes due March 15, 2021 and $350 million of 3.3 percent senior notes due June 1, 2025;
In May, NSP-Minnesota issued $350 million of 3.6 percent first mortgage bonds due May 15, 2046; and
In June, PSCo issued $250 million of 3.553.80 percent first mortgage bonds due June 15, 2046.2047.
| |
8. | Fair Value of Financial Assets and Liabilities |
Fair Value Measurements
The accounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires certain disclosures about assets and liabilities measured at fair value. A hierarchical framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value is established by this guidance. The three levels in the hierarchy are as follows:
Level 1 — Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices.
Level 2 — Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reporting date. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs.
Level 3 — Significant inputs to pricing have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 are those valued with models requiring significant management judgment or estimation.
Specific valuation methods include the following:
Cash equivalents — The fair values of cash equivalents are generally based on cost plus accrued interest; money market funds are measured using quoted prices.net asset value (NAV).
Investments in equity securities and other funds — Equity securities are valued using quoted prices in active markets. The fair values for commingled funds international equity funds, private equity investments and real estate investments are measured using a net asset value (NAV) methodology,NAVs, which takestake into consideration the value of underlying fund investments, as well as the other accrued assets and liabilities of a fund, in order to determine a per-share market value. The investments in commingled funds and international equity funds may be redeemed for NAV with proper notice. Proper notice varies by fund and can range from daily with one or two days notice to annually with 90 days notice. Private equity investments require approval of the fund for any unscheduled redemption, and such redemptions may be approved or denied by the fund at its sole discretion. Unscheduled distributions from real estate investments may be redeemed with proper notice, which is typically quarterly with 45-90 days notice; however, withdrawals from real estate investments may be delayed or discounted as a result of fund illiquidity.
Investments in debt securities — Fair values for debt securities are determined by a third party pricing service using recent trades and observable spreads from benchmark interest rates for similar securities.
Interest rate derivatives — The fair values of interest rate derivatives are based on broker quotes that utilize current market interest rate forecasts.
Commodity derivatives — The methods used to measure the fair value of commodity derivative forwards and options utilize forward prices and volatilities, as well as pricing adjustments for specific delivery locations, and are generally assigned a Level 2.2 classification. When contractual settlements extend to periods beyond those readily observable on active exchanges or quoted by brokers, the significance of the use of less observable forecasts of long-term forward prices and volatilities on a valuation is evaluated, and may result in Level 3 classification.
Electric commodity derivatives held by NSP-Minnesota and SPS include transmission congestion instruments, generally referred to as financial transmission rights (FTRs). FTRs purchased from a RTO are financial instruments that entitle or obligate the holder to monthly revenues or charges based on transmission congestion across a given transmission path. The value of an FTR is derived from, and designed to offset, the cost of energy congestion, which is caused bytransmission congestion. In addition to overall transmission load, and transmission constraints. Congestioncongestion is also influenced by the operating schedules of power plants and the consumption of electricity.electricity pertinent to a given transmission path. Unplanned plant outages, scheduled plant maintenance, changes in the relative costs of fuels used in generation, weather and overall changes in demand for electricity can each impact the operating schedules of the power plants on the transmission grid and the value of an FTR. The valuation process for FTRs utilizes complex iterative modeling to predict the impacts of forecasted changes in these drivers of transmission system congestion on the historical pricing of FTR purchases.
If forecasted costs of electric transmission congestion increase or decrease for a given FTR path, the value of that particular FTR instrument will likewise increase or decrease. GivenFair value measurements for FTRs have been assigned a Level 3 given the limited observability of management’s forecasts for several of the inputs to this complex valuation model fair value measurements for FTRs have been assigned a Level 3. Monthlymodel. Non-trading monthly FTR settlements for non-trading FTRs are included in fuel and purchased energy cost recovery mechanisms as applicable in each jurisdiction, and therefore changes in the fair value of the yet to be settled portions of most FTRs are deferred as a regulatory asset or liability. Given this regulatory treatment and the limited magnitude of FTRs, relative to the electric utility operations of NSP-Minnesota and SPS, the numerous unobservable quantitative inputs to the complex model used for valuation of FTRs are insignificant to the consolidated financial statements of Xcel Energy.
Non-Derivative Instruments Fair Value Measurements
Nuclear Decommissioning Fund
The NRCNuclear Regulatory Commission (NRC) requires NSP-Minnesota to maintain a portfolio of investments to fund the costs of decommissioning its nuclear generating plants. Together with all accumulated earnings or losses, the assets of the nuclear decommissioning fund are legally restricted for the purpose of decommissioning the Monticello and PI nuclear generating plants. The fund contains cash equivalents, debt securities, equity securities and other investments – all classified as available-for-sale. NSP-Minnesota plans to reinvest matured securities until decommissioning begins. NSP-Minnesota uses the MPUC approved asset allocation for the escrow and investment targets by asset class for both the escrow and qualified trust.
NSP-Minnesota recognizes the costs of funding the decommissioning of its nuclear generating plants over the lives of the plants, assuming rate recovery of all costs. RealizedGiven the purpose and legal restrictions on the use of nuclear decommissioning fund assets, realized and unrealized gains on fund investments over the life of the fund are deferred as an offset of NSP-Minnesota’s regulatory asset for nuclear decommissioning costs, given the purpose and legal restrictions on the use of nuclear decommissioning fund assets.costs. Consequently, any realized and unrealized gains and losses on securities in the nuclear decommissioning fund, including any other-than-temporary impairments, are deferred as a component of the regulatory asset for nuclear decommissioning.
Unrealized gains for the nuclear decommissioning fund were $336.5$462.3 million and $328.8$378.6 million at June 30, 20162017 and Dec. 31, 2015,2016, respectively, and unrealized losses and amounts recorded as other-than-temporary impairments were $95.2$34.2 million and $100.2$46.9 million at June 30, 20162017 and Dec. 31, 2015,2016, respectively.
The following tables present the cost and fair value of Xcel Energy’s non-derivative instruments with recurring fair value measurements in the nuclear decommissioning fund at June 30, 20162017 and Dec. 31, 2015:2016:
| | | | June 30, 2016 | | June 30, 2017 |
| | | | Fair Value | | | | Fair Value |
(Thousands of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | Investments Measured at NAV (b) | | Total | | Cost | | Level 1 | | Level 2 | | Level 3 | | Investments Measured at NAV (b) | | Total |
Nuclear decommissioning fund (a) | | | | | | | | | | | | | | | | | | | | | | | | |
Cash equivalents | | $ | 15,749 |
| | $ | 15,749 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 15,749 |
| | $ | 10,990 |
| | $ | 10,990 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 10,990 |
|
Commingled funds | | 389,700 |
| | — |
| | — |
| | — |
| | 411,788 |
| | 411,788 |
| |
International equity funds | | 259,090 |
| | — |
| | — |
| | — |
| | 236,087 |
| | 236,087 |
| |
Commingled funds: | | | | | | | | | | | | | |
Non U.S. equities | | | 280,608 |
| | 191,881 |
| | — |
| | — |
| | 106,085 |
| | 297,966 |
|
Emerging market debt funds | | | 96,008 |
| | — |
| | — |
| | — |
| | 103,736 |
| | 103,736 |
|
Commodity funds | | | 106,571 |
| | — |
| | — |
| | — |
| | 82,897 |
| | 82,897 |
|
Private equity investments | | 119,370 |
| | — |
| | — |
| | — |
| | 166,054 |
| | 166,054 |
| | 138,889 |
| | — |
| | — |
| | — |
| | 195,491 |
| | 195,491 |
|
Real estate | | 72,956 |
| | — |
| | — |
| | — |
| | 102,144 |
| | 102,144 |
| | 131,270 |
| | — |
| | — |
| | — |
| | 195,515 |
| | 195,515 |
|
Other commingled funds | | | 131,243 |
| | — |
| | — |
| | — |
| | 141,918 |
| | 141,918 |
|
Debt securities: | |
|
| |
|
| |
|
| |
|
| | | |
|
| | | | | | | | | | | | |
Government securities | | 35,199 |
| | — |
| | 35,828 |
| | — |
| | — |
| | 35,828 |
| | 38,319 |
| | — |
| | 37,844 |
| | — |
| | — |
| | 37,844 |
|
U.S. corporate bonds | | 96,110 |
| | — |
| | 91,350 |
| | — |
| | — |
| | 91,350 |
| | 141,510 |
| | — |
| | 142,330 |
| | — |
| | — |
| | 142,330 |
|
International corporate bonds | | 19,959 |
| | — |
| | 19,394 |
| | — |
| | — |
| | 19,394 |
| |
Municipal bonds | | 11,966 |
| | — |
| | 12,826 |
| | — |
| | — |
| | 12,826 |
| |
Asset-backed securities | | 2,844 |
| | — |
| | 2,881 |
| | — |
| | — |
| | 2,881 |
| |
Mortgage-backed securities | | 10,708 |
| | — |
| | 11,180 |
| | — |
| | — |
| | 11,180 |
| |
Non U.S. corporate bonds | | | 24,386 |
| | — |
| | 24,859 |
| | — |
| | — |
| | 24,859 |
|
Equity securities: | |
|
| |
|
| |
|
| |
|
| | | |
|
| | | | | | | | | | | | |
Common stock | | 479,865 |
| | 649,521 |
| | — |
| | — |
| | — |
| | 649,521 |
| |
U.S. equities | | | 287,425 |
| | 526,581 |
| | — |
| | — |
| | — |
| | 526,581 |
|
Non U.S. equities | | | 171,695 |
| | 226,868 |
| | — |
| | — |
| | — |
| | 226,868 |
|
Total | | $ | 1,513,516 |
| | $ | 665,270 |
| | $ | 173,459 |
| | $ | — |
| | $ | 916,073 |
| | $ | 1,754,802 |
| | $ | 1,558,914 |
| | $ | 956,320 |
| | $ | 205,033 |
| | $ | — |
| | $ | 825,642 |
| | $ | 1,986,995 |
|
| |
(a) | Reported in nuclear decommissioning fund and other investments on the consolidated balance sheet, which also includes $133.7$133.2 million of equity investments in unconsolidated subsidiaries and $99.0$111.4 million of rabbi trust assets and miscellaneous investments. |
| |
(b) | Based on the requirementsDue to limited availability of ASU 2015-07,published pricing and a lack of immediate redeemability, certain fund investments measured at fair value using a NAV methodology haveare not been classified inrequired to be categorized within the fair value hierarchy. See Note 2 for further information on the adoption of ASU 2015-07. |
| | | | Dec. 31, 2015 | | Dec. 31, 2016 |
| | | | Fair Value | | | | Fair Value |
(Thousands of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | Investments Measured at NAV (b) | | Total | | Cost | | Level 1 | | Level 2 | | Level 3 | | Investments Measured at NAV (b) | | Total |
Nuclear decommissioning fund (a) | | | | | | | | | | | | | | | | | | | | | | | | |
Cash equivalents | | $ | 27,484 |
| | $ | 27,484 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 27,484 |
| | $ | 20,379 |
| | $ | 20,379 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 20,379 |
|
Commingled funds | | 392,838 |
| | — |
| | — |
| | — |
| | 410,634 |
| | 410,634 |
| |
International equity funds | | 259,114 |
| | — |
| | — |
| | — |
| | 231,122 |
| | 231,122 |
| |
Commingled funds: | | | | | | | | | | | | | |
Non U.S. equities | | | 260,877 |
| | 133,126 |
| | — |
| | — |
| | 112,233 |
| | 245,359 |
|
Emerging market debt funds | | | 93,597 |
| | — |
| | — |
| | — |
| | 97,543 |
| | 97,543 |
|
Commodity funds | | | 106,571 |
| | — |
| | — |
| | — |
| | 92,091 |
| | 92,091 |
|
Private equity investments | | 105,965 |
| | — |
| | — |
| | — |
| | 157,528 |
| | 157,528 |
| | 132,190 |
| | — |
| | — |
| | — |
| | 190,462 |
| | 190,462 |
|
Real estate | | 61,816 |
| | — |
| | — |
| | — |
| | 84,750 |
| | 84,750 |
| | 128,630 |
| | — |
| | — |
| | — |
| | 187,647 |
| | 187,647 |
|
Other commingled funds | | | 151,048 |
| | — |
| | — |
| | — |
| | 159,489 |
| | 159,489 |
|
Debt securities: | | | | | | | | | |
|
| | | | | | | | | | | | | | |
Government securities | | 24,444 |
| | — |
| | 21,356 |
| | — |
| | — |
| | 21,356 |
| | 32,764 |
| | — |
| | 31,965 |
| | — |
| | — |
| | 31,965 |
|
U.S. corporate bonds | | 73,061 |
| | — |
| | 65,276 |
| | — |
| | — |
| | 65,276 |
| | 104,913 |
| | — |
| | 105,772 |
| | — |
| | — |
| | 105,772 |
|
International corporate bonds | | 13,726 |
| | — |
| | 12,801 |
| | — |
| | — |
| | 12,801 |
| |
Non U.S. corporate bonds | | | 21,751 |
| | — |
| | 21,672 |
| | — |
| | — |
| | 21,672 |
|
Municipal bonds | | 49,255 |
| | — |
| | 51,589 |
| | — |
| | — |
| | 51,589 |
| | 13,609 |
| | — |
| | 13,786 |
| | — |
| | — |
| | 13,786 |
|
Asset-backed securities | | 2,837 |
| | — |
| | 2,830 |
| | — |
| | — |
| | 2,830 |
| |
Mortgage-backed securities | | 11,444 |
| | — |
| | 11,621 |
| | — |
| | — |
| | 11,621 |
| | 2,785 |
| | — |
| | 2,816 |
| | — |
| | — |
| | 2,816 |
|
Equity securities: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| | | | | | | | | | | | |
Common stock | | 473,615 |
| | 647,159 |
| | — |
| | — |
| | — |
| | 647,159 |
| |
U.S. equities | | | 270,779 |
| | 473,400 |
| | — |
| | — |
| | — |
| | 473,400 |
|
Non U.S. equities | | | 189,100 |
| | 218,381 |
| | — |
| | — |
| | — |
| | 218,381 |
|
Total | | $ | 1,495,599 |
| | $ | 674,643 |
| | $ | 165,473 |
| | $ | — |
| | $ | 884,034 |
| | $ | 1,724,150 |
| | $ | 1,528,993 |
| | $ | 845,286 |
| | $ | 176,011 |
| | $ | — |
| | $ | 839,465 |
| | $ | 1,860,762 |
|
| |
(a) | Reported in nuclear decommissioning fund and other investments on the consolidated balance sheet, which also includes $130.0$132.8 million of equity investments in unconsolidated subsidiaries and $48.9$98.3 million of rabbi trust assets and miscellaneous investments. |
| |
(b) | Based on the requirementsDue to limited availability of ASU 2015-07,published pricing and a lack of immediate redeemability, certain fund investments measured at fair value using a NAV methodology haveare not been classified inrequired to be categorized within the fair value hierarchy. See Note 2 for further information on the adoption of ASU 2015-07. |
For the three and six months ended June 30, 20162017 and 20152016 there were no Level 3 nuclear decommissioning fund investments and no transfers of amounts between levels.
The following table summarizes the final contractual maturity dates of the debt securities in the nuclear decommissioning fund, by asset class, at June 30, 2016:2017:
| | | | Final Contractual Maturity | | Final Contractual Maturity |
(Thousands of Dollars) | | Due in 1 Year or Less | | Due in 1 to 5 Years | | Due in 5 to 10 Years | | Due after 10 Years | | Total | | Due in 1 Year or Less | | Due in 1 to 5 Years | | Due in 5 to 10 Years | | Due after 10 Years | | Total |
Government securities | | $ | — |
| | $ | 10,659 |
| | $ | 982 |
| | $ | 24,187 |
| | $ | 35,828 |
| | $ | — |
| | $ | 2,770 |
| | $ | 6,497 |
| | $ | 28,577 |
| | $ | 37,844 |
|
U.S. corporate bonds | | 261 |
| | 26,988 |
| | 59,368 |
| | 4,733 |
| | 91,350 |
| | 2,824 |
| | 44,843 |
| | 78,518 |
| | 16,145 |
| | 142,330 |
|
International corporate bonds | | — |
| | 3,966 |
| | 12,368 |
| | 3,060 |
| | 19,394 |
| |
Municipal bonds | | — |
| | 212 |
| | 4,248 |
| | 8,366 |
| | 12,826 |
| |
Asset-backed securities | | — |
| | — |
| | 2,881 |
| | — |
| | 2,881 |
| |
Mortgage-backed securities | | — |
| | — |
| | — |
| | 11,180 |
| | 11,180 |
| |
Non U.S. corporate bonds | | | — |
| | 10,964 |
| | 10,851 |
| | 3,044 |
| | 24,859 |
|
Debt securities | | $ | 261 |
| | $ | 41,825 |
| | $ | 79,847 |
| | $ | 51,526 |
| | $ | 173,459 |
| | $ | 2,824 |
| | $ | 58,577 |
| | $ | 95,866 |
| | $ | 47,766 |
| | $ | 205,033 |
|
Rabbi Trusts
In June 2016, Xcel Energy established rabbi trusts to provide partial funding for future distributions of its supplemental executive retirement plan and nonqualified pension plans.deferred compensation plan. The following table presentstables present the cost and fair value of the assets held in rabbi trusts at June 30, 2017 and Dec. 31, 2016:
| | | | June 30, 2016 | | June 30, 2017 |
| | | | Fair Value | | | | Fair Value |
(Thousands of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | Total | | Cost | | Level 1 | | Level 2 | | Level 3 | | Total |
Rabbi Trusts (a) | | | | | | | | | | | | | | | | | | | | |
Cash equivalents | | $ | 47,762 |
| | $ | 47,762 |
| | $ | — |
| | $ | — |
| | $ | 47,762 |
| | $ | 11,214 |
| | $ | 11,214 |
| | $ | — |
| | $ | — |
| | $ | 11,214 |
|
Mutual funds | | 1,593 |
| | 1,778 |
| | — |
| | — |
| | 1,778 |
| | 46,171 |
| | 47,380 |
| | — |
| | — |
| | 47,380 |
|
Total | | $ | 49,355 |
| | $ | 49,540 |
| | $ | — |
| | $ | — |
| | $ | 49,540 |
| | $ | 57,385 |
| | $ | 58,594 |
| | $ | — |
| | $ | — |
| | $ | 58,594 |
|
|
| | | | | | | | | | | | | | | | | | | | |
| | Dec. 31, 2016 |
| | | | Fair Value |
(Thousands of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | Total |
Rabbi Trusts (a) | | | | | | | | | | |
Cash equivalents | | $ | 47,831 |
| | $ | 47,831 |
| | $ | — |
| | $ | — |
| | $ | 47,831 |
|
Mutual funds | | 1,663 |
| | 1,901 |
| | — |
| | — |
| | 1,901 |
|
Total | | $ | 49,494 |
| | $ | 49,732 |
| | $ | — |
| | $ | — |
| | $ | 49,732 |
|
| |
(a) | Reported in nuclear decommissioning fund and other investments on the consolidated balance sheet. |
An immaterial amount of mutual funds were held in rabbi trusts at Dec. 31, 2015.
Derivative Instruments Fair Value Measurements
Xcel Energy enters into derivative instruments, including forward contracts, futures, swaps and options, for trading purposes and to manage risk in connection with changes in interest rates, utility commodity prices and vehicle fuel prices.
Interest Rate Derivatives — Xcel Energy enters into various instruments that effectively fix the interest payments on certain floating rate debt obligations or effectively fix the yield or price on a specified benchmark interest rate for an anticipated debt issuance for a specific period. These derivative instruments are generally designated as cash flow hedges for accounting purposes.
At June 30, 2016,2017, accumulated other comprehensive losses related to interest rate derivatives included $3.4$3.0 million of net losses expected to be reclassified into earnings during the next 12 months as the related hedged interest rate transactions impact earnings, including forecasted amounts for unsettled hedges, as applicable.
Wholesale and Commodity Trading Risk — Xcel Energy Inc.’s utility subsidiaries conduct various wholesale and commodity trading activities, including the purchase and sale of electric capacity, energy, energy-related instruments and energy-related instruments.natural gas-related instruments, including derivatives. Xcel Energy’s risk management policy allows management to conduct these activities within guidelines and limitations as approved by its risk management committee.committee, which is made up of management personnel not directly involved in the activities governed by this policy.
Commodity Derivatives — Xcel Energy enters into derivative instruments to manage variability of future cash flows from changes in commodity prices in its electric and natural gas operations, as well as for trading purposes. This could include the purchase or sale of energy or energy-related products, natural gas to generate electric energy, natural gas for resale, FTRs, vehicle fuel and weather derivatives.
At June 30, 2016,2017, Xcel Energy had various vehicle fuel contracts designated as cash flow hedges extending through December 2016.2018. Xcel Energy also enters into derivative instruments that mitigate commodity price risk on behalf of electric and natural gas customers, but aremay not be designated as qualifying hedging transactions. Changes in the fair value of non-trading commodity derivative instruments are recorded in other comprehensive income or deferred as a regulatory asset or liability. The classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms. Xcel Energy recorded immaterial amounts to income related to the ineffectiveness of cash flow hedges for the three and six months ended June 30, 20162017 and 2015.2016.
At June 30, 2016,2017, net lossesgains related to commodity derivative cash flow hedges recorded as a component of accumulated other comprehensive losses included $0.1 million of net lossesimmaterial amounts expected to be reclassified into earnings during the next 12 months as the hedged transactions occur.
Additionally, Xcel Energy enters into commodity derivative instruments for trading purposes not directly related to commodity price risks associated with serving its electric and natural gas customers. Changes in the fair value of these commodity derivatives are recorded in electric operating revenues, net of amounts credited to customers under margin-sharing mechanisms.
The following table details the gross notional amounts of commodity forwards, options and FTRs at June 30, 20162017 and Dec. 31, 2015:2016:
| | (Amounts in Thousands) (a)(b) | | June 30, 2016 | | Dec. 31, 2015 | | June 30, 2017 | | Dec. 31, 2016 |
Megawatt hours of electricity | | 81,667 |
| | 50,487 |
| | 101,225 |
| | 46,773 |
|
Million British thermal units of natural gas | | 84,578 |
| | 20,874 |
| | 66,974 |
| | 121,978 |
|
Gallons of vehicle fuel | | 70 |
| | 141 |
| | 360 |
| | — |
|
| |
(a) | Amounts are not reflective of net positions in the underlying commodities. |
| |
(b) | Notional amounts for options are included on a gross basis, but are weighted for the probability of exercise. |
The following tables detail the impact of derivative activity during the three and six months ended June 30, 20162017 and 2015,2016, on accumulated other comprehensive loss, regulatory assets and liabilities, and income:
| | | | Three Months Ended June 30, 2016 | | | Three Months Ended June 30, 2017 | |
| | Pre-Tax Fair Value Gains (Losses) Recognized During the Period in: | | Pre-Tax Losses Reclassified into Income During the Period from: | | Pre-Tax Gains Recognized During the Period in Income | | | Pre-Tax Fair Value Gains (Losses) Recognized During the Period in: | | Pre-Tax (Gains) Losses Reclassified into Income During the Period from: | | Pre-Tax Gains Recognized During the Period in Income | |
(Thousands of Dollars) | | Accumulated Other Comprehensive Loss | | Regulatory (Assets) and Liabilities | | Accumulated Other Comprehensive Loss | | Regulatory Assets and (Liabilities) | | | Accumulated Other Comprehensive Loss | | Regulatory (Assets) and Liabilities | | Accumulated Other Comprehensive Loss | | Regulatory Assets and (Liabilities) | |
Derivatives designated as cash flow hedges | | | | | | | | | | | | | | | | | | | | | | |
Interest rate | | $ | — |
| | $ | — |
| | $ | 1,483 |
| (a) | $ | — |
| | $ | — |
| | | $ | — |
| | $ | — |
| | $ | 1,319 |
| (a) | $ | — |
| | $ | — |
| |
Vehicle fuel and other commodity | | 19 |
| | — |
| | 47 |
| (b) | — |
| | — |
| | | 43 |
| | — |
| | (5 | ) | (b) | — |
| | — |
| |
Total | | $ | 19 |
| | $ | — |
| | $ | 1,530 |
| | $ | — |
| | $ | — |
| | | $ | 43 |
| | $ | — |
| | $ | 1,314 |
| | $ | — |
| | $ | — |
| |
Other derivative instruments | | | | | | | | | | | | | | | | | | | | | | |
Commodity trading | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 481 |
| (c) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 5,785 |
| (c) |
Electric commodity | | — |
| | (705 | ) | | — |
| | 16,642 |
| (d) | — |
| | | — |
| | (1,299 | ) | | — |
| | (2,315 | ) | (d) | — |
| |
Natural gas commodity | | — |
| | 6,063 |
| | — |
| | — |
|
| 25 |
| (e) | | — |
| | (1,685 | ) | | — |
| | — |
|
| — |
|
|
Total | | $ | — |
| | $ | 5,358 |
| | $ | — |
| | $ | 16,642 |
| | $ | 506 |
| | | $ | — |
| | $ | (2,984 | ) | | $ | — |
| | $ | (2,315 | ) | | $ | 5,785 |
| |
| | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| | Six Months Ended June 30, 2017 | |
| | Pre-Tax Fair Value Gains (Losses) Recognized During the Period in: | | Pre-Tax (Gains) Losses Reclassified into Income During the Period from: | | Pre-Tax Gains (Losses) Recognized During the Period in Income | |
(Thousands of Dollars) | | Accumulated Other Comprehensive Loss | | Regulatory (Assets) and Liabilities | | Accumulated Other Comprehensive Loss | | Regulatory Assets and (Liabilities) | | |
Derivatives designated as cash flow hedges | | | | | | | | | | | |
Interest rate | | $ | — |
| | $ | — |
| | $ | 2,678 |
| (a) | $ | — |
| | $ | — |
| |
Vehicle fuel and other commodity | | 43 |
| | — |
| | (5 | ) | (b) | — |
| | — |
| |
Total | | $ | 43 |
| | $ | — |
| | $ | 2,673 |
| | $ | — |
| | $ | — |
| |
Other derivative instruments | | | | | | | | | | | |
Commodity trading | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 6,786 |
| (c) |
Electric commodity | | — |
| | (505 | ) | | — |
| | (6,313 | ) | (d) | — |
| |
Natural gas commodity | | — |
| | (7,846 | ) | | — |
| | 1,075 |
| (e) | (4,070 | ) | (e) |
Total | | $ | — |
| | $ | (8,351 | ) | | $ | — |
| | $ | (5,238 | ) | | $ | 2,716 |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2016 | | | Three Months Ended June 30, 2016 | |
| | Pre-Tax Fair Value Gains (Losses) Recognized During the Period in: | | Pre-Tax Losses Reclassified into Income During the Period from: | | Pre-Tax Gains (Losses) Recognized During the Period in Income | | | Pre-Tax Fair Value Gains (Losses) Recognized During the Period in: | | Pre-Tax Losses Reclassified into Income During the Period from: | | Pre-Tax Gains Recognized During the Period in Income | |
(Thousands of Dollars) | | Accumulated Other Comprehensive Loss | | Regulatory (Assets) and Liabilities | | Accumulated Other Comprehensive Loss | | Regulatory Assets and (Liabilities) | | | Accumulated Other Comprehensive Loss | | Regulatory (Assets) and Liabilities | | Accumulated Other Comprehensive Loss | | Regulatory Assets and (Liabilities) | |
Derivatives designated as cash flow hedges | | | | | | | | | | | | | | | �� | | | | | | | |
Interest rate | | $ | — |
| | $ | — |
| | $ | 2,968 |
| (a) | $ | — |
| | $ | — |
| | | $ | — |
| | $ | — |
| | $ | 1,483 |
| (a) | $ | — |
| | $ | — |
| |
Vehicle fuel and other commodity | | 13 |
| | — |
| | 104 |
| (b) | — |
| | — |
| | | 19 |
| | — |
| | 47 |
| (b) | — |
| | — |
| |
Total | | $ | 13 |
| | $ | — |
| | $ | 3,072 |
| | $ | — |
| | $ | — |
| | | $ | 19 |
| | $ | — |
| | $ | 1,530 |
| | $ | — |
| | $ | — |
| |
Other derivative instruments | | | | | | | | | | | | | |
| | |
| | |
| | |
| | |
| |
Commodity trading | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1,490 |
| (c) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 481 |
| (c) |
Electric commodity | | — |
| | (970 | ) | | — |
| | 27,533 |
| (d) | — |
| | | — |
| | (705 | ) | | — |
| | 16,642 |
| (d) | — |
| |
Natural gas commodity | | — |
| | 3,361 |
| | — |
| | 11,666 |
| (e) | (4,999 | ) | (e) | | — |
| | 6,063 |
| | — |
| | — |
|
| 25 |
| (e) |
Total | | $ | — |
| | $ | 2,391 |
| | $ | — |
| | $ | 39,199 |
| | $ | (3,509 | ) | | | $ | — |
| | $ | 5,358 |
| | $ | — |
| | $ | 16,642 |
| | $ | 506 |
| |
|
| | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2015 | |
| | Pre-Tax Fair Value Gains (Losses) Recognized During the Period in: | | Pre-Tax (Gains) Losses Reclassified into Income During the Period from: | | Pre-Tax Gains Recognized During the Period in Income | |
(Thousands of Dollars) | | Accumulated Other Comprehensive Loss | | Regulatory (Assets) and Liabilities | | Accumulated Other Comprehensive Loss | | Regulatory Assets and (Liabilities) | | |
Derivatives designated as cash flow hedges | | | | | | | | | | | |
Interest rate | | $ | — |
| | $ | — |
| | $ | 954 |
| (a) | $ | — |
| | $ | — |
| |
Vehicle fuel and other commodity | | 29 |
| | — |
| | 28 |
| (b) | — |
| | — |
| |
Total | | $ | 29 |
| | $ | — |
| | $ | 982 |
| | $ | — |
| | $ | — |
| |
Other derivative instruments | | | | | | | | | | | |
Commodity trading | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 4,401 |
| (c) |
Electric commodity | | — |
| | (4,737 | ) | | — |
| | (8,037 | ) | (d) | — |
| |
Natural gas commodity | | — |
| | (232 | ) | | — |
| | (22 | ) | (e) | — |
| |
Total | | $ | — |
| | $ | (4,969 | ) | | $ | — |
| | $ | (8,059 | ) | | $ | 4,401 |
| |
| | | | Six Months Ended June 30, 2015 | | | Six Months Ended June 30, 2016 | |
| | Pre-Tax Fair Value Gains (Losses) Recognized During the Period in: | | Pre-Tax (Gains) Losses Reclassified into Income During the Period from: | | Pre-Tax Gains Recognized During the Period in Income | | | Pre-Tax Fair Value Gains (Losses) Recognized During the Period in: | | Pre-Tax Losses Reclassified into Income During the Period from: | | Pre-Tax Gains (Losses) Recognized During the Period in Income | |
(Thousands of Dollars) | | Accumulated Other Comprehensive Loss | | Regulatory (Assets) and Liabilities | | Accumulated Other Comprehensive Loss | | Regulatory Assets and (Liabilities) | | | Accumulated Other Comprehensive Loss | | Regulatory (Assets) and Liabilities | | Accumulated Other Comprehensive Loss | | Regulatory Assets and (Liabilities) | |
Derivatives designated as cash flow hedges | | | | | | | | | | | | | | | | | | | | | | |
Interest rate | | $ | — |
| | $ | — |
| | $ | 1,894 |
| (a) | $ | — |
| | $ | — |
| | | $ | — |
| | $ | — |
| | $ | 2,968 |
| (a) | $ | — |
| | $ | — |
| |
Vehicle fuel and other commodity | | 11 |
| | — |
| | 55 |
| (b) | — |
| | — |
| | | 13 |
| | — |
| | 104 |
| (b) | — |
| | — |
| |
Total | | $ | 11 |
| | $ | — |
| | $ | 1,949 |
| | $ | — |
| | $ | — |
| | | $ | 13 |
| | $ | — |
| | $ | 3,072 |
| | $ | — |
| | $ | — |
| |
Other derivative instruments | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | |
Commodity trading | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 8,281 |
| (c) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | 1,490 |
| (c) |
Electric commodity | | — |
| | (14,208 | ) | | — |
| | (13,160 | ) | (d) | — |
| | | — |
| | (970 | ) | | — |
| | 27,533 |
| (d) | — |
| |
Natural gas commodity | | — |
| | (448 | ) | | — |
| | (8,852 | ) | (e) | 8,991 |
| (e) | | — |
| | 3,361 |
| | — |
| | 11,666 |
| (e) | (4,999 | ) | (e) |
Total | | $ | — |
| | $ | (14,656 | ) | | $ | — |
| | $ | (22,012 | ) | | $ | 17,272 |
| | | $ | — |
| | $ | 2,391 |
| | $ | — |
| | $ | 39,199 |
| | $ | (3,509 | ) | |
| |
(a) | Amounts are recorded to interest charges. |
| |
(b) | Amounts are recorded to O&Moperating and maintenance (O&M) expenses. |
| |
(c) | Amounts are recorded to electric operating revenues. Portions of these gains and losses are subject to sharing with electric customers through margin-sharing mechanisms and deducted from gross revenue, as appropriate. |
| |
(d) | Amounts are recorded to electric fuel and purchased power. These derivative settlement gain and loss amounts are shared with electric customers through fuel and purchased energy cost-recovery mechanisms, and reclassified out of income as regulatory assets or liabilities, as appropriate. |
| |
(e) | Amounts for the three and six months ended June 30, 2016 and 2015 included an immaterial amount of settlement losses onCertain derivatives enteredare utilized to mitigate natural gas price risk for electric generation and are recorded to electric fuel and purchased power, subject to cost-recovery mechanisms and reclassified to a regulatory asset, as appropriate. Amounts for the three and six months ended June 30, 2017 included no settlement gains or losses and $0.9 million of settlement gains, respectively. Amounts for the three and six months ended June 30, 2016 included an immaterial amount of settlement losses. The remaining derivative settlement gains and losses for the three and six months ended June 30, 20162017 and 20152016 relate to natural gas operations and are recorded to cost of natural gas sold and transported. These gains and losses are subject to cost-recovery mechanisms and reclassified out of income to a regulatory asset or liability, as appropriate. |
Xcel Energy had no derivative instruments designated as fair value hedges during the three and six months ended June 30, 20162017 and 2015.2016. Therefore, no gains or losses from fair value hedges or related hedged transactions were recognized for these periods.
Consideration of Credit Risk and Concentrations — Xcel Energy continuously monitors the creditworthiness of the counterparties to its interest rate derivatives and commodity derivative contracts prior to settlement, and assesses each counterparty’s ability to perform on the transactions.transactions set forth in the contracts. Given this assessment, as well as an assessment of the impact of Xcel Energy’s own credit risk when determining the fair value of derivative liabilities, the impact of considering credit risk was immaterial to the fair value of unsettled commodity derivatives presented in the consolidated balance sheets.
Xcel Energy Inc. and its subsidiaries employ additional credit risk control mechanisms when appropriate, such as letters of credit, parental guarantees, standardized master netting agreements and termination provisions that allow for offsetting of positive and negative exposures. Credit exposure is monitored and, when necessary, the activity with a specific counterparty is limited until credit enhancement is provided.
Xcel Energy’s utility subsidiaries’ most significant concentrations of credit risk with particular entities or industries are contracts with counterparties to their wholesale, trading and non-trading commodity activities. At June 30, 2016, one2017, two of Xcel Energy’s 10 most significant counterparties for these activities, comprising $13.5$28.1 million or 612 percent of this credit exposure, had investment grade credit ratings from Standard & Poor’s, Ratings Services, Moody’s Investor Services or Fitch Ratings. SevenEight of the 10 most significant counterparties, comprising $55.6$75.7 million or 2532 percent of this credit exposure, were not rated by these external agencies, but based on Xcel Energy’s internal analysis, had credit quality consistent with investment grade. The remaining two most significant counterparties, comprising $12.2 million or 6 percent of this credit exposure, had credit quality less than investment grade, based on ratings from external and internal analysis. NineAll ten of these significant counterparties are RTOs, municipal or cooperative electric entities or other utilities.
Credit Related Contingent Features — Contract provisions for derivative instruments that the utility subsidiaries enter, including those recorded to the consolidated balance sheet at fair value, as well as those accounted for as normal purchase-normal sale contracts and therefore not reflected on the balance sheet, may require the posting of collateral or settlement of the contracts for various reasons, including if the applicable utility subsidiary is unable to maintain its credit ratings. At June 30, 20162017 and Dec. 31, 2015,2016, there were no derivative instruments in a liability position with underlying contract provisions that would have required the posting of collateral or settlement of applicable outstanding contracts if the credit ratings of Xcel Energy Inc.’s utility subsidiaries were downgraded below investment grade.
Certain derivative instruments are also subject to contract provisions that contain adequate assurance clauses. These provisions allow counterparties to seek performance assurance, including cash collateral, in the event that a given utility subsidiary’s ability to fulfill its contractual obligations is reasonably expected to be impaired. Xcel Energy had no collateral posted related to adequate assurance clauses in derivative contracts as of June 30, 20162017 and Dec. 31, 2015.2016.
Recurring Fair Value Measurements — The following table presents for each of the fair value hierarchy levels, Xcel Energy’s derivative assets and liabilities measured at fair value on a recurring basis at June 30, 2016:2017:
| | | | June 30, 2016 | | June 30, 2017 |
| | Fair Value | | Fair Value Total | | Counterparty Netting (b) | | Total | | Fair Value | | Fair Value Total | | Counterparty Netting (b) | | Total |
(Thousands of Dollars) | | Level 1 | | Level 2 | | Level 3 | | | Level 1 | | Level 2 | | Level 3 | |
Current derivative assets | | | | | | | | | | | | | | | | | | | | | | | | |
Derivatives designated as cash flow hedges: | | | | | | | | | | | | | |
Vehicle fuel and other commodity | | | $ | — |
| | $ | 25 |
| | $ | — |
| | $ | 25 |
| | $ | (25 | ) | | $ | — |
|
Other derivative instruments: | | | | | | | | | | | | | | | | | | | | | | | | |
Commodity trading | | $ | 5,384 |
| | $ | 14,675 |
| | $ | — |
| | $ | 20,059 |
| | $ | (14,017 | ) | | $ | 6,042 |
| | 2,974 |
| | 13,383 |
| | 2 |
| | 16,359 |
| | (8,958 | ) | | 7,401 |
|
Electric commodity | | — |
| | — |
| | 28,151 |
| | 28,151 |
| | (3,593 | ) | | 24,558 |
| | — |
| | — |
| | 68,069 |
| | 68,069 |
| | (4,048 | ) | | 64,021 |
|
Natural gas commodity | | — |
| | 8,525 |
| | — |
| | 8,525 |
| | (31 | ) | | 8,494 |
| | — |
| | 1,439 |
| | — |
| | 1,439 |
| | — |
| | 1,439 |
|
Total current derivative assets | | $ | 5,384 |
| | $ | 23,200 |
| | $ | 28,151 |
| | $ | 56,735 |
| | $ | (17,641 | ) | | 39,094 |
| | $ | 2,974 |
| | $ | 14,847 |
| | $ | 68,071 |
| | $ | 85,892 |
| | $ | (13,031 | ) | | 72,861 |
|
PPAs (a) | | | | | | | | | | | | 7,859 |
| | | | | | | | | | | | 5,626 |
|
Current derivative instruments | | | | | | | | | | | | $ | 46,953 |
| | | | | | | | | | | | $ | 78,487 |
|
Noncurrent derivative assets | | | | | | | | | | | | | | | | | | | | | | | | |
Derivatives designated as cash flow hedges: | | | | | | | | | | | | | |
Vehicle fuel and other commodity | | | $ | — |
| | $ | 14 |
| | $ | — |
| | $ | 14 |
| | $ | — |
| | $ | 14 |
|
Other derivative instruments: | | | | | | | | | | | | | | | | | | | | | | | | |
Commodity trading | | $ | 1,037 |
| | $ | 28,058 |
| | $ | — |
| | $ | 29,095 |
| | $ | (6,986 | ) | | $ | 22,109 |
| | 250 |
| | 30,686 |
| | 5,215 |
| | 36,151 |
| | (7,307 | ) | | 28,844 |
|
Natural gas commodity | | — |
| | 1,355 |
| | — |
| | 1,355 |
| | — |
| | 1,355 |
| |
Total noncurrent derivative assets | | $ | 1,037 |
| | $ | 29,413 |
| | $ | — |
| | $ | 30,450 |
| | $ | (6,986 | ) | | 23,464 |
| | $ | 250 |
| | $ | 30,700 |
| | $ | 5,215 |
| | $ | 36,165 |
| | $ | (7,307 | ) | | 28,858 |
|
PPAs (a) | | | | | | | | | | | | 27,180 |
| | | | | | | | | | | | 21,552 |
|
Noncurrent derivative instruments | | | | | | | | | | | | $ | 50,644 |
| | | | | | | | | | | | $ | 50,410 |
|
| | | | June 30, 2016 | | June 30, 2017 |
| | Fair Value | | Fair Value Total | | Counterparty Netting (b) | | Total | | Fair Value | | Fair Value Total | | Counterparty Netting (b) | | Total |
(Thousands of Dollars) | | Level 1 | | Level 2 | | Level 3 | | | Level 1 | | Level 2 | | Level 3 | |
Current derivative liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Derivatives designated as cash flow hedges: | | | | | | | | | | | | | | | | | | | | | | | | |
Vehicle fuel and other commodity | | $ | — |
| | $ | 82 |
| | $ | — |
| | $ | 82 |
| | $ | — |
| | $ | 82 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | (25 | ) | | $ | (25 | ) |
Other derivative instruments: | | | | | | | | | | | | | | | | | | | | | | | | |
Commodity trading | | 5,407 |
| | 12,740 |
| | 41 |
| | 18,188 |
| | (14,575 | ) | | 3,613 |
| | 3,050 |
| | 11,443 |
| | 1 |
| | 14,494 |
| | (9,280 | ) | | 5,214 |
|
Electric commodity | | — |
| | — |
| | 3,593 |
| | 3,593 |
| | (3,593 | ) | | — |
| | — |
| | — |
| | 4,048 |
| | 4,048 |
| | (4,048 | ) | | — |
|
Natural gas commodity | | — |
| | 31 |
| | — |
| | 31 |
| | (31 | ) | | — |
| |
Total current derivative liabilities | | $ | 5,407 |
| | $ | 12,853 |
| | $ | 3,634 |
| | $ | 21,894 |
| | $ | (18,199 | ) | | 3,695 |
| | $ | 3,050 |
| | $ | 11,443 |
| | $ | 4,049 |
| | $ | 18,542 |
| | $ | (13,353 | ) | | 5,189 |
|
PPAs (a) | | | | | | | | | | | | 22,847 |
| | | | | | | | | | | | 22,830 |
|
Current derivative instruments | | | | | | | | | | | | $ | 26,542 |
| | | | | | | | | | | | $ | 28,019 |
|
Noncurrent derivative liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Other derivative instruments: | | | | | | | | | | | | | | | | | | | | | | | | |
Commodity trading | | $ | 1,086 |
| | $ | 19,786 |
| | $ | — |
| | $ | 20,872 |
| | $ | (11,162 | ) | | $ | 9,710 |
| | $ | 98 |
| | $ | 22,861 |
| | $ | — |
| | $ | 22,959 |
| | $ | (10,522 | ) | | $ | 12,437 |
|
Total noncurrent derivative liabilities | | $ | 1,086 |
| | $ | 19,786 |
| | $ | — |
| | $ | 20,872 |
| | $ | (11,162 | ) | | 9,710 |
| | $ | 98 |
| | $ | 22,861 |
| | $ | — |
| | $ | 22,959 |
| | $ | (10,522 | ) | | 12,437 |
|
PPAs (a) | | | | | | | | | | | | 146,647 |
| | | | | | | | | | | | 123,818 |
|
Noncurrent derivative instruments | | | | | | | | | | | | $ | 156,357 |
| | | | | | | | | | | | $ | 136,255 |
|
| |
(a) | In 2003, as a result of implementing new guidance on the normal purchase exception for derivative accounting, Xcel Energy began recording several long-term PPAs at fair value due to accounting requirements related to underlying price adjustments. As these purchases are recovered through normal regulatory recovery mechanisms in the respective jurisdictions, the changes in fair value for these contracts were offset by regulatory assets and liabilities. During 2006, Xcel Energy qualified these contracts under the normal purchase exception. Based on this qualification, the contracts are no longer adjusted to fair value and the previous carrying value of these contracts will be amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities. |
| |
(b) | Xcel Energy nets derivative instruments and related collateral in its consolidated balance sheet when supported by a legally enforceable master netting agreement, and all derivative instruments and related collateral amounts were subject to master netting agreements at June 30, 2016.2017. At June 30, 2016,2017, derivative assets and liabilities include no obligations to return cash collateral and the rights to reclaim cash collateral of $4.7$3.5 million. The counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements. |
The following table presents for each of the fair value hierarchy levels, Xcel Energy’s derivative assets and liabilities measured at fair value on a recurring basis at Dec. 31, 2015:2016:
| | | | Dec. 31, 2015 | | Dec. 31, 2016 |
| | Fair Value | | Fair Value Total | | Counterparty Netting (b) | | Total | | Fair Value | | Fair Value Total | | Counterparty Netting (b) | | Total |
(Thousands of Dollars) | | Level 1 | | Level 2 | | Level 3 | | | Level 1 | | Level 2 | | Level 3 | |
Current derivative assets | | | | | | | | | | | | | | | | | | | | | | | | |
Other derivative instruments: | | | | | | | | | | | | | | | | | | | | | | | | |
Commodity trading | | $ | 225 |
| | $ | 10,620 |
| | $ | 1,250 |
| | $ | 12,095 |
| | $ | (5,865 | ) | | $ | 6,230 |
| | $ | 13,179 |
| | $ | 14,105 |
| | $ | — |
| | $ | 27,284 |
| | $ | (20,637 | ) | | $ | 6,647 |
|
Electric commodity | | — |
| | — |
| | 21,421 |
| | 21,421 |
| | (4,088 | ) | | 17,333 |
| | — |
| | — |
| | 19,251 |
| | 19,251 |
| | (1,976 | ) | | 17,275 |
|
Natural gas commodity | | — |
| | 496 |
| | — |
| | 496 |
| | (303 | ) | | 193 |
| | — |
| | 8,839 |
| | — |
| | 8,839 |
| | — |
| | 8,839 |
|
Total current derivative assets | Total current derivative assets | $ | 225 |
| | $ | 11,116 |
| | $ | 22,671 |
| | $ | 34,012 |
| | $ | (10,256 | ) | | 23,756 |
| Total current derivative assets | $ | 13,179 |
| | $ | 22,944 |
| | $ | 19,251 |
| | $ | 55,374 |
| | $ | (22,613 | ) | | 32,761 |
|
PPAs (a) | | | | | | | | | | | | 10,086 |
| | | | | | | | | | | | 5,463 |
|
Current derivative instruments | | | | | | | | | | | | $ | 33,842 |
| | | | | | | | | | | | $ | 38,224 |
|
Noncurrent derivative assets | | | | | | | | | | | | | | | | | | | | | | | | |
Other derivative instruments: | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Commodity trading | | $ | — |
| | $ | 27,416 |
| | $ | — |
| | $ | 27,416 |
| | $ | (6,555 | ) | | $ | 20,861 |
| | $ | 100 |
| | $ | 31,029 |
| | $ | — |
| | $ | 31,129 |
| | $ | (7,323 | ) | | $ | 23,806 |
|
Natural gas commodity | | | — |
| | 1,652 |
| | — |
| | 1,652 |
| | — |
| | 1,652 |
|
Total noncurrent derivative assets | Total noncurrent derivative assets | $ | — |
| | $ | 27,416 |
| | $ | — |
| | $ | 27,416 |
| | $ | (6,555 | ) | | 20,861 |
| Total noncurrent derivative assets | $ | 100 |
| | $ | 32,681 |
| | $ | — |
| | $ | 32,781 |
| | $ | (7,323 | ) | | 25,458 |
|
PPAs (a) | | | | | | | | | | | | 30,222 |
| | | | | | | | | | | | 24,731 |
|
Noncurrent derivative instruments | | | | | | | | | | | | $ | 51,083 |
| | | | | | | | | | | | $ | 50,189 |
|
| | | | Dec. 31, 2015 | | Dec. 31, 2016 |
| | Fair Value | | Fair Value Total | | Counterparty Netting (b) | | Total | | Fair Value | | Fair Value Total | | Counterparty Netting (b) | | Total |
(Thousands of Dollars) | | Level 1 | | Level 2 | | Level 3 | | | Level 1 | | Level 2 | | Level 3 | |
Current derivative liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Derivatives designated as cash flow hedges: | | | | | | | | | | | | | |
Vehicle fuel and other commodity | | $ | — |
| | $ | 205 |
| | $ | — |
| | $ | 205 |
| | $ | — |
| | $ | 205 |
| |
Other derivative instruments: | | | | | | | | | | | | | | | | | | | | | | | | |
Commodity trading | | 152 |
| | 7,866 |
| | 555 |
| | 8,573 |
| | (6,904 | ) | | 1,669 |
| | $ | 13,787 |
| | $ | 11,320 |
| | $ | 22 |
| | $ | 25,129 |
| | $ | (20,974 | ) | | $ | 4,155 |
|
Electric commodity | | — |
| | — |
| | 4,088 |
| | 4,088 |
| | (4,088 | ) | | — |
| | — |
| | — |
| | 1,976 |
| | 1,976 |
| | (1,976 | ) | | — |
|
Natural gas commodity | | — |
| | 5,407 |
| | — |
| | 5,407 |
| | (303 | ) | | 5,104 |
| |
Total current derivative liabilities | | $ | 152 |
| | $ | 13,478 |
| | $ | 4,643 |
| | $ | 18,273 |
| | $ | (11,295 | ) | | 6,978 |
| | $ | 13,787 |
| | $ | 11,320 |
| | $ | 1,998 |
| | $ | 27,105 |
| | $ | (22,950 | ) | | 4,155 |
|
PPAs (a) | | | | | | | | | | | | 22,861 |
| | | | | | | | | | | | 22,804 |
|
Current derivative instruments | | | | | | | | | | | | $ | 29,839 |
| | | | | | | | | | | | $ | 26,959 |
|
Noncurrent derivative liabilities | | | | | | | | | | | | | | | | | | | | | | | | |
Other derivative instruments: | | | | | | | | | | | | | | | | | | | | | | | | |
Commodity trading | | $ | — |
| | $ | 19,898 |
| | $ | — |
| | $ | 19,898 |
| | $ | (9,780 | ) | | $ | 10,118 |
| | $ | 89 |
| | $ | 23,424 |
| | $ | — |
| | $ | 23,513 |
| | $ | (10,727 | ) | | $ | 12,786 |
|
Total noncurrent derivative liabilities | | $ | — |
| | $ | 19,898 |
| | $ | — |
| | $ | 19,898 |
| | $ | (9,780 | ) | | 10,118 |
| | $ | 89 |
| | $ | 23,424 |
| | $ | — |
| | $ | 23,513 |
| | $ | (10,727 | ) | | 12,786 |
|
PPAs (a) | | | | | | | | | | | | 158,193 |
| | | | | | | | | | | | 135,360 |
|
Noncurrent derivative instruments | | | | | | | | | | | | $ | 168,311 |
| | | | | | | | | | | | $ | 148,146 |
|
| |
(a) | In 2003, as a result of implementing new guidance on the normal purchase exception for derivative accounting, Xcel Energy began recording several long-term PPAs at fair value due to accounting requirements related to underlying price adjustments. As these purchases are recovered through normal regulatory recovery mechanisms in the respective jurisdictions, the changes in fair value for these contracts were offset by regulatory assets and liabilities. During 2006, Xcel Energy qualified these contracts under the normal purchase exception. Based on this qualification, the contracts are no longer adjusted to fair value and the previous carrying value of these contracts will be amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities. |
| |
(b) | Xcel Energy nets derivative instruments and related collateral in its consolidated balance sheet when supported by a legally enforceable master netting agreement, and all derivative instruments and related collateral amounts were subject to master netting agreements at Dec. 31, 2015.2016. At Dec. 31, 2015,2016, derivative assets and liabilities include no obligations to return cash collateral and rights to reclaim cash collateral of $4.3$3.7 million. The counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements. |
The following table presents the changes in Level 3 commodity derivatives for the three and six months ended June 30, 20162017 and 2015:2016:
| | | | | | | | | | |
| | Three Months Ended June 30 | | Three Months Ended June 30 |
(Thousands of Dollars) | | 2016 | | 2015 | | 2017 | | 2016 |
Balance at April 1 | | $ | 6,854 |
| | $ | 17,429 |
| | $ | 5,836 |
| | $ | 6,854 |
|
Purchases | | 29,826 |
| | 57,446 |
| | 76,281 |
| | 29,826 |
|
Settlements | | (14,111 | ) | | (17,315 | ) | | (22,272 | ) | | (14,111 | ) |
Net transactions recorded during the period: | | | | |
| | | | |
|
(Losses) gains recognized in earnings (a) | | (18 | ) | | 1,220 |
| |
Gains (losses) recognized as regulatory assets and liabilities | | 1,966 |
| | (11,953 | ) | |
Gains (losses) recognized in earnings (a) | | | 6,016 |
| | (18 | ) |
Net gains recognized as regulatory assets and liabilities | | | 3,376 |
| | 1,966 |
|
Balance at June 30 | | $ | 24,517 |
| | $ | 46,827 |
| | $ | 69,237 |
| | $ | 24,517 |
|
| | | | | | | | |
| | Six Months Ended June 30 | | Six Months Ended June 30 |
(Thousands of Dollars) | | 2016 | | 2015 | | 2017 | | 2016 |
Balance at Jan. 1 | | $ | 18,028 |
| | $ | 56,155 |
| | $ | 17,253 |
| | $ | 18,028 |
|
Purchases | | 31,670 |
| | 63,238 |
| | 80,073 |
| | 31,670 |
|
Settlements | | (26,161 | ) | | (37,246 | ) | | (42,074 | ) | | (26,161 | ) |
Net transactions recorded during the period: | | | | | | | | |
(Losses) gains recognized in earnings (a) | | (43 | ) | | 1,280 |
| |
Gains (losses) recognized as regulatory assets and liabilities | | 1,023 |
| | (36,600 | ) | |
Gains (losses) recognized in earnings (a) | | | 5,221 |
| | (43 | ) |
Net gains recognized as regulatory assets and liabilities | | | 8,764 |
| | 1,023 |
|
Balance at June 30 | | $ | 24,517 |
| | $ | 46,827 |
| | $ | 69,237 |
| | $ | 24,517 |
|
| |
(a) | These amounts relate to commodity derivatives held at the end of the period. |
Xcel Energy recognizes transfers between levels as of the beginning of each period. There were no transfers of amounts between levels for derivative instruments for the three and six months ended June 30, 20162017 and 2015.2016.
Fair Value of Long-Term Debt
As of June 30, 20162017 and Dec. 31, 2015,2016, other financial instruments for which the carrying amount did not equal fair value were as follows:
| | | | June 30, 2016 | | Dec. 31, 2015 | | June 30, 2017 | | Dec. 31, 2016 |
(Thousands of Dollars) | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
Long-term debt, including current portion (a) | | $ | 13,814,921 |
| | $ | 15,935,100 |
| | $ | 13,055,901 |
| | $ | 14,094,744 |
| | $ | 14,597,178 |
| | $ | 15,879,594 |
| | $ | 14,450,247 |
| | $ | 15,513,209 |
|
| |
(a)
| Amounts reflect the classification of debt issuance costs as a deduction from the carrying amount of the related debt. See Note 2, Accounting Pronouncements for more information on the adoption of ASU 2015-03.
|
The fair value of Xcel Energy’s long-term debt is estimated based on recent trades and observable spreads from benchmark interest rates for similar securities. The fair value estimates are based on information available to management as of June 30, 20162017 and Dec. 31, 2015,2016, and given the observability of the inputs to these estimates, the fair values presented for long-term debt have been assigned a Level 2.
Other income, net consisted of the following:
| | | | Three Months Ended June 30 | | Six Months Ended June 30 | | Three Months Ended June 30 | | Six Months Ended June 30 |
(Thousands of Dollars) | | 2016 | | 2015 | | 2016 | | 2015 | | 2017 | | 2016 | | 2017 | | 2016 |
Interest income | | $ | 984 |
| | $ | 389 |
| | $ | 5,054 |
| | $ | 4,627 |
| | $ | 2,107 |
| | $ | 984 |
| | $ | 5,907 |
| | $ | 5,054 |
|
Other nonoperating income | | 1,496 |
| | 794 |
| | 2,176 |
| | 1,762 |
| | 1,523 |
| | 1,496 |
| | 5,168 |
| | 2,176 |
|
Insurance policy expense | | (920 | ) | | (222 | ) | | (1,420 | ) | | (2,267 | ) | | (1,022 | ) | | (920 | ) | | (2,021 | ) | | (1,420 | ) |
Other income, net | | $ | 1,560 |
| | $ | 961 |
| | $ | 5,810 |
| | $ | 4,122 |
| | $ | 2,608 |
| | $ | 1,560 |
| | $ | 9,054 |
| | $ | 5,810 |
|
The regulated electric utility operating results of NSP-Minnesota, NSP-Wisconsin, PSCo and SPS, as well as the regulated natural gas utility operating results of NSP-Minnesota, NSP-Wisconsin and PSCo are each separately and regularly reviewed by Xcel Energy’s chief operating decision maker. Xcel Energy evaluates performance by each utility subsidiary based on profit or loss generated from the product or service provided. These segments are managed separately because the revenue streams are dependent upon regulated rate recovery, which is separately determined for each segment.
Xcel Energy has the following reportable segments: regulated electric utility, regulated natural gas utility and all other.
Xcel Energy’s regulated electric utility segment generates, transmits and distributes electricity primarily in portions of Minnesota, Wisconsin, Michigan, North Dakota, South Dakota, Colorado, Texas and New Mexico. In addition, this segment includes sales for resale and provides wholesale transmission service to various entities in the United States. Regulated electric utility also includes commodity trading operations.
Xcel Energy’s regulated natural gas utility segment transports, stores and distributes natural gas primarily in portions of Minnesota, Wisconsin, North Dakota, Michigan and Colorado.
Revenues from operating segments not included above are below the necessary quantitative thresholds and are therefore included in the all other category. Those primarily include steam revenue, appliance repair services, nonutility real estate activities, revenues associated with processing solid waste into refuse-derived fuel and investments in rental housing projects that qualify for low-income housing tax credits.
Xcel Energy had equity investments in unconsolidated subsidiaries of $133.7$133.2 million and $130.0$132.8 million as of June 30, 20162017 and Dec. 31, 2015,2016, respectively, included in the regulated natural gas utility segment.
Asset and capital expenditure information is not provided for Xcel Energy’s reportable segments because as an integrated electric and natural gas utility, Xcel Energy operates significant assets that are not dedicated to a specific business segment, and reporting assets and capital expenditures by business segment would require arbitrary and potentially misleading allocations which may not necessarily reflect the assets that would be required for the operation of the business segments on a stand-alone basis.
To report income from operations for regulated electric and regulated natural gas utility segments, the majority of costs are directly assigned to each segment. However, some costs, such as common depreciation, common O&M expenses and interest expense are allocated based on cost causation allocators. A general allocator is used for certain general and administrative expenses, including office supplies, rent, property insurance and general advertising.
|
| | | | | | | | | | | | | | | | | | | | |
(Thousands of Dollars) | | Regulated Electric | | Regulated Natural Gas | | All Other | | Reconciling Eliminations | | Consolidated Total |
Three Months Ended June 30, 2017 | | | | | | | | | | |
Operating revenues from external customers | | $ | 2,338,017 |
| | $ | 289,839 |
| | $ | 17,072 |
| | $ | — |
| | $ | 2,644,928 |
|
Intersegment revenues | | 433 |
| | 285 |
| | — |
| | (718 | ) | | — |
|
Total revenues | | $ | 2,338,450 |
| | $ | 290,124 |
| | $ | 17,072 |
| | $ | (718 | ) | | $ | 2,644,928 |
|
Net income (loss) | | $ | 227,562 |
| | $ | 13,166 |
| | $ | (13,472 | ) | | $ | — |
| | $ | 227,256 |
|
| | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | |
(Thousands of Dollars) | | Regulated Electric | | Regulated Natural Gas | | All Other | | Reconciling Eliminations | | Consolidated Total |
Three Months Ended June 30, 2016 | | | | | | | | | | |
Operating revenues from external customers | | $ | 2,224,142 |
| | $ | 258,899 |
| | $ | 16,808 |
| | $ | — |
| | $ | 2,499,849 |
|
Intersegment revenues | | 421 |
| | 241 |
| | — |
| | (662 | ) | | — |
|
Total revenues | | $ | 2,224,563 |
| | $ | 259,140 |
| | $ | 16,808 |
| | $ | (662 | ) | | $ | 2,499,849 |
|
Net income (loss) | | $ | 205,440 |
| | $ | 11,933 |
| | $ | (20,578 | ) | | $ | — |
| | $ | 196,795 |
|
| | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | |
(Thousands of Dollars) | | Regulated Electric | | Regulated Natural Gas | | All Other | | Reconciling Eliminations | | Consolidated Total |
Six Months Ended June 30, 2017 | | | | | | | | | | |
Operating revenues from external customers | | $ | 4,637,077 |
| | $ | 915,542 |
| | $ | 38,731 |
| | $ | — |
| | $ | 5,591,350 |
|
Intersegment revenues | | 730 |
| | 549 |
| | — |
| | (1,279 | ) | | — |
|
Total revenues | | $ | 4,637,807 |
| | $ | 916,091 |
| | $ | 38,731 |
| | $ | (1,279 | ) | | $ | 5,591,350 |
|
Net income (loss) | | $ | 421,715 |
| | $ | 76,093 |
| | $ | (31,275 | ) | | $ | — |
| | $ | 466,533 |
|
|
| | | | | | | | | | | | | | | | | | | | |
(Thousands of Dollars) | | Regulated Electric | | Regulated Natural Gas | | All Other | | Reconciling Eliminations | | Consolidated Total |
Three Months Ended June 30, 2015 | | | | | | | | | | |
Operating revenues from external customers | | $ | 2,213,460 |
| | $ | 284,131 |
| | $ | 17,543 |
| | $ | — |
| | $ | 2,515,134 |
|
Intersegment revenues | | 420 |
| | 172 |
| | — |
| | (592 | ) | | — |
|
Total revenues | | $ | 2,213,880 |
| | $ | 284,303 |
| | $ | 17,543 |
| | $ | (592 | ) | | $ | 2,515,134 |
|
Net income (loss) | | $ | 214,955 |
| | $ | (6,883 | ) | | $ | (11,141 | ) | | $ | — |
| | $ | 196,931 |
|
| | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | |
(Thousands of Dollars) | | Regulated Electric | | Regulated Natural Gas | | All Other | | Reconciling Eliminations | | Consolidated Total |
Six Months Ended June 30, 2016 | | | | | | | | | | |
Operating revenues from external customers | | $ | 4,409,261 |
| | $ | 824,588 |
| | $ | 38,273 |
| | $ | — |
| | $ | 5,272,122 |
|
Intersegment revenues | | 756 |
| | 528 |
| | — |
| | (1,284 | ) | | — |
|
Total revenues | | $ | 4,410,017 |
| | $ | 825,116 |
| | $ | 38,273 |
| | $ | (1,284 | ) | | $ | 5,272,122 |
|
Net income (loss) | | $ | 383,677 |
| | $ | 90,271 |
| | $ | (35,841 | ) | | $ | — |
| | $ | 438,107 |
|
|
| | | | | | | | | | | | | | | | | | | | |
(Thousands of Dollars) | | Regulated Electric | | Regulated Natural Gas | | All Other | | Reconciling Eliminations | | Consolidated Total |
Six Months Ended June 30, 2015 | | | | | | | | | | |
Operating revenues from external customers | | $ | 4,438,323 |
| | $ | 1,000,127 |
| | $ | 38,903 |
| | $ | — |
| | $ | 5,477,353 |
|
Intersegment revenues | | 750 |
| | 848 |
| | — |
| | (1,598 | ) | | — |
|
Total revenues | | $ | 4,439,073 |
| | $ | 1,000,975 |
| | $ | 38,903 |
| | $ | (1,598 | ) | | $ | 5,477,353 |
|
Net income (loss) | | $ | 295,976 |
| (a) | $ | 76,793 |
| | $ | (23,772 | ) | | $ | — |
| | $ | 348,997 |
|
| |
(a)
| Includes a net of tax charge related to the Monticello LCM/EPU project. See Note 5. |
Basic earnings per share (EPS) was computed by dividing the earnings available to Xcel Energy Inc.’s common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS was computed by dividing the earnings available to Xcel Energy Inc.’s common shareholders by the diluted weighted average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other agreements to issue common stock (i.e., common stock equivalents) were settled. The weighted average number of potentially dilutive shares outstanding used to calculate Xcel Energy Inc.’s diluted EPS is calculated using the treasury stock method.
Common Stock Equivalents — Xcel Energy Inc. currently has common stock equivalents related to certain equity awards in share-based compensation arrangements.
Common stock equivalents causing dilutive impact to EPS include commitments to issue common stock related to time based equity compensation awards and time based employer matching contributions to certain 401(k) plan participants.
Stock equivalent units granted to Xcel Energy Inc.’s Board of Directors are included in common shares outstanding upon grant date as there is no further service, performance or market condition associated with these awards. Restricted stock, granted to settle amounts due to certain employees under the Xcel Energy Inc. Executive Annual Incentive Award Plan, is included in common shares outstanding when granted.
Share-based compensation arrangements for which there is currently no dilutive impact to EPS include the following:
Equity awards subject to a performance condition; included in common shares outstanding when all necessary conditions for settlement have been satisfied by the end of the reporting period.
Liability awards subject to a performance condition; any portions settled in shares are included in common shares outstanding upon settlement.
The dilutive impact of common stock equivalents affecting EPS was as follows: |
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2017 | | Three Months Ended June 30, 2016 |
(Amounts in thousands, except per share data) | | Income | | Shares | | Per Share Amount | | Income | | Shares | | Per Share Amount |
Net income | | $ | 227,256 |
| | — |
| | — |
| | $ | 196,795 |
| | — |
| | — |
|
Basic EPS: | | |
| | |
| | |
| | |
| | | | |
Earnings available to common shareholders | | 227,256 |
| | 508,542 |
| | $ | 0.45 |
| | 196,795 |
| | 508,930 |
| | $ | 0.39 |
|
Effect of dilutive securities: | | |
| | | | |
| | |
| | |
| | |
|
Time based equity awards | | — |
| | 593 |
| | — |
| | — |
| | 560 |
| | — |
|
Diluted EPS: | | |
| | |
| | |
| | |
| | |
| | |
|
Earnings available to common shareholders | | $ | 227,256 |
| | 509,135 |
| | $ | 0.45 |
| | $ | 196,795 |
| | 509,490 |
| | $ | 0.39 |
|
| | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2016 | | Three Months Ended June 30, 2015 |
(Amounts in thousands, except per share data) | | Income | | Shares | | Per Share Amount | | Income | | Shares | | Per Share Amount |
Net income | | $ | 196,795 |
| | — |
| | — |
| | $ | 196,931 |
| | — |
| | — |
|
Basic EPS: | | | | | | | | | | | | |
Earnings available to common shareholders | | 196,795 |
| | 508,930 |
| | $ | 0.39 |
| | 196,931 |
| | 507,707 |
| | $ | 0.39 |
|
Effect of dilutive securities: | | | | | | | | | | | | |
Time based equity awards | | — |
| | 560 |
| | — |
| | — |
| | 367 |
| | — |
|
Diluted EPS: | | | | | | | | | | | | |
Earnings available to common shareholders | | $ | 196,795 |
| | 509,490 |
| | $ | 0.39 |
| | $ | 196,931 |
| | 508,074 |
| | $ | 0.39 |
|
| | | | Six Months Ended June 30, 2016 | | Six Months Ended June 30, 2015 | | Six Months Ended June 30, 2017 | | Six Months Ended June 30, 2016 |
(Amounts in thousands, except per share data) | | Income | | Shares | | Per Share Amount | | Income | | Shares | | Per Share Amount | | Income | | Shares | | Per Share Amount | | Income | | Shares | | Per Share Amount |
Net income | | $ | 438,107 |
| | — |
| | — |
| | $ | 348,997 |
| | — |
| | — |
| | $ | 466,533 |
| | — |
| | — |
| | $ | 438,107 |
| | — |
| | — |
|
Basic EPS: | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | | | |
Earnings available to common shareholders | | 438,107 |
| | 508,789 |
| | $ | 0.86 |
| | 348,997 |
| | 507,359 |
| | $ | 0.69 |
| | 466,533 |
| | 508,411 |
| | $ | 0.92 |
| | 438,107 |
| | 508,789 |
| | $ | 0.86 |
|
Effect of dilutive securities: | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | |
| | |
|
Time based equity awards | | — |
| | 522 |
| | — |
| | — |
| | 388 |
| | — |
| | — |
| | 544 |
| | — |
| | — |
| | 522 |
| | — |
|
Diluted EPS: | | | | | | | | | | | | | | |
| | |
| | |
| | |
| | |
| | |
|
Earnings available to common shareholders | | $ | 438,107 |
| | 509,311 |
| | $ | 0.86 |
| | $ | 348,997 |
| | 507,747 |
| | $ | 0.69 |
| | $ | 466,533 |
| | 508,955 |
| | $ | 0.92 |
| | $ | 438,107 |
| | 509,311 |
| | $ | 0.86 |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| |
12. | Benefit Plans and Other Postretirement Benefits |
Components of Net Periodic Benefit Cost (Credit)
| | | | Three Months Ended June 30 | | Three Months Ended June 30 |
| | 2016 | | 2015 | | 2016 | | 2015 | | 2017 | | 2016 | | 2017 | | 2016 |
(Thousands of Dollars) | | Pension Benefits | | Postretirement Health Care Benefits | | Pension Benefits | | Postretirement Health Care Benefits |
Service cost | | $ | 22,945 |
| | $ | 24,828 |
| | $ | 431 |
| | $ | 529 |
| | $ | 23,547 |
| | $ | 22,945 |
| | $ | 465 |
| | $ | 431 |
|
Interest cost | | 40,028 |
| | 37,131 |
| | 6,526 |
| | 6,324 |
| | 36,702 |
| | 40,028 |
| | 5,984 |
| | 6,526 |
|
Expected return on plan assets | | (52,575 | ) | | (53,472 | ) | | (6,248 | ) | | (6,650 | ) | | (52,318 | ) | | (52,575 | ) | | (6,155 | ) | | (6,248 | ) |
Amortization of prior service credit | | (477 | ) | | (451 | ) | | (2,671 | ) | | (2,671 | ) | | (442 | ) | | (477 | ) | | (2,672 | ) | | (2,671 | ) |
Amortization of net loss | | 24,385 |
| | 31,288 |
| | 1,009 |
| | 1,351 |
| | 26,671 |
| | 24,385 |
| | 1,672 |
| | 1,009 |
|
Net periodic benefit cost (credit) | | 34,306 |
| | 39,324 |
| | (953 | ) | | (1,117 | ) | | 34,160 |
| | 34,306 |
| | (706 | ) | | (953 | ) |
Costs not recognized due to the effects of regulation | | (4,159 | ) | | (7,523 | ) | | — |
| | — |
| | (3,899 | ) | | (4,159 | ) | | — |
| | — |
|
Net benefit cost (credit) recognized for financial reporting | | $ | 30,147 |
| | $ | 31,801 |
| | $ | (953 | ) | | $ | (1,117 | ) | | $ | 30,261 |
| | $ | 30,147 |
| | $ | (706 | ) | | $ | (953 | ) |
| | | | | | | | | | | | | | | | |
| | | | Six Months Ended June 30 | | Six Months Ended June 30 |
| | 2016 | | 2015 | | 2016 | | 2015 | | 2017 | | 2016 | | 2017 | | 2016 |
(Thousands of Dollars) | | Pension Benefits | | Postretirement Health Care Benefits | | Pension Benefits | | Postretirement Health Care Benefits |
Service cost | | $ | 45,865 |
| | $ | 49,656 |
| | $ | 863 |
| | $ | 1,058 |
| | $ | 47,094 |
| | $ | 45,865 |
| | $ | 930 |
| | $ | 863 |
|
Interest cost | | 80,051 |
| | 74,262 |
| | 13,053 |
| | 12,648 |
| | 73,404 |
| | 80,051 |
| | 11,968 |
| | 13,053 |
|
Expected return on plan assets | | (105,150 | ) | | (106,945 | ) | | (12,497 | ) | | (13,300 | ) | | (104,635 | ) | | (105,150 | ) | | (12,311 | ) | | (12,497 | ) |
Amortization of prior service credit | | (961 | ) | | (902 | ) | | (5,343 | ) | | (5,343 | ) | | (884 | ) | | (961 | ) | | (5,343 | ) | | (5,343 | ) |
Amortization of net loss | | 48,770 |
| | 62,576 |
| | 2,020 |
| | 2,702 |
| | 53,341 |
| | 48,770 |
| | 3,344 |
| | 2,020 |
|
Net periodic benefit cost (credit) | | 68,575 |
| | 78,647 |
| | (1,904 | ) | | (2,235 | ) | | 68,320 |
| | 68,575 |
| | (1,412 | ) | | (1,904 | ) |
Costs not recognized due to the effects of regulation | | (8,611 | ) | | (15,019 | ) | | — |
| | — |
| | (7,914 | ) | | (8,611 | ) | | — |
| | — |
|
Net benefit cost (credit) recognized for financial reporting | | $ | 59,964 |
| | $ | 63,628 |
| | $ | (1,904 | ) | | $ | (2,235 | ) | | $ | 60,406 |
| | $ | 59,964 |
| | $ | (1,412 | ) | | $ | (1,904 | ) |
In January 2016,2017, contributions of $125.0$150.0 million were made across four of Xcel Energy’s pension plans. Xcel Energy does not expect additional pension contributions during 2016.2017.
| |
13. | Other Comprehensive Income |
Changes in accumulated other comprehensive (loss) income, net of tax, for the three and six months ended June 30, 20162017 and 20152016 were as follows:
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2017 |
(Thousands of Dollars) | | Gains and Losses on Cash Flow Hedges | | Unrealized Gains and Losses on Marketable Securities | | Defined Benefit Pension and Postretirement Items | | Total |
Accumulated other comprehensive (loss) income at April 1 | | $ | (50,326 | ) | | $ | 110 |
| | $ | (58,365 | ) | | $ | (108,581 | ) |
Other comprehensive income before reclassifications | | 26 |
| | 1 |
| | — |
| | 27 |
|
Losses reclassified from net accumulated other comprehensive loss | | 803 |
| | — |
| | 956 |
| | 1,759 |
|
Net current period other comprehensive income | | 829 |
| | 1 |
| | 956 |
| | 1,786 |
|
Accumulated other comprehensive (loss) income at June 30 | | $ | (49,497 | ) | | $ | 111 |
| | $ | (57,409 | ) | | $ | (106,795 | ) |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2016 |
(Thousands of Dollars) | | Gains and Losses on Cash Flow Hedges | | Unrealized Gains and Losses on Marketable Securities | | Defined Benefit Pension and Postretirement Items | | Total |
Accumulated other comprehensive (loss) income at April 1 | | $ | (53,928 | ) | | $ | 110 |
| | $ | (54,790 | ) | | $ | (108,608 | ) |
Other comprehensive income before reclassifications | | 12 |
| | — |
| | — |
| | 12 |
|
Losses reclassified from net accumulated other comprehensive loss | | 936 |
| | — |
| | 865 |
| | 1,801 |
|
Net current period other comprehensive income | | 948 |
| | — |
| | 865 |
| | 1,813 |
|
Accumulated other comprehensive (loss) income at June 30 | | $ | (52,980 | ) | | $ | 110 |
| | $ | (53,925 | ) | | $ | (106,795 | ) |
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2015 |
(Thousands of Dollars) | | Gains and Losses on Cash Flow Hedges | | Unrealized Gains and Losses on Marketable Securities | | Defined Benefit Pension and Postretirement Items | | Total |
Accumulated other comprehensive (loss) income at April 1 | | $ | (57,054 | ) | | $ | 111 |
| | $ | (49,745 | ) | | $ | (106,688 | ) |
Other comprehensive income before reclassifications | | 18 |
| | 1 |
| | — |
| | 19 |
|
Losses reclassified from net accumulated other comprehensive loss | | 600 |
| | — |
| | 883 |
| | 1,483 |
|
Net current period other comprehensive income | | 618 |
| | 1 |
| | 883 |
| | 1,502 |
|
Accumulated other comprehensive (loss) income at June 30 | | $ | (56,436 | ) | | $ | 112 |
| | $ | (48,862 | ) | | $ | (105,186 | ) |
| | | | Six Months Ended June 30, 2016 | | Six Months Ended June 30, 2017 |
(Thousands of Dollars) | | Gains and Losses on Cash Flow Hedges | | Unrealized Gains and Losses on Marketable Securities | | Defined Benefit Pension and Postretirement Items | | Total | | Gains and Losses on Cash Flow Hedges | | Unrealized Gains on Marketable Securities | | Defined Benefit Pension and Postretirement Items | | Total |
Accumulated other comprehensive (loss) income at Jan. 1 | | $ | (54,862 | ) | | $ | 110 |
| | $ | (55,001 | ) | | $ | (109,753 | ) | | $ | (51,151 | ) | | $ | 110 |
| | $ | (59,313 | ) | | $ | (110,354 | ) |
Other comprehensive income (loss) before reclassifications | | 8 |
| | — |
| | (653 | ) | | (645 | ) | |
Other comprehensive income before reclassifications | | | 26 |
| | 1 |
| | — |
| | 27 |
|
Losses reclassified from net accumulated other comprehensive loss | | 1,874 |
| | — |
| | 1,729 |
| | 3,603 |
| | 1,628 |
| | — |
| | 1,904 |
| | 3,532 |
|
Net current period other comprehensive income | | 1,882 |
| | — |
| | 1,076 |
| | 2,958 |
| | 1,654 |
| | 1 |
| | 1,904 |
| | 3,559 |
|
Accumulated other comprehensive (loss) income at June 30 | | $ | (52,980 | ) | | $ | 110 |
| | $ | (53,925 | ) | | $ | (106,795 | ) | | $ | (49,497 | ) | | $ | 111 |
| | $ | (57,409 | ) | | $ | (106,795 | ) |
| | | | | | | | | |
| | | | Six Months Ended June 30, 2015 | | Six Months Ended June 30, 2016 |
(Thousands of Dollars) | | Gains and Losses on Cash Flow Hedges | | Unrealized Gains and Losses on Marketable Securities | | Defined Benefit Pension and Postretirement Items | | Total | | Gains and Losses on Cash Flow Hedges | | Unrealized Gains on Marketable Securities | | Defined Benefit Pension and Postretirement Items | | Total |
Accumulated other comprehensive (loss) income at Jan. 1 | | $ | (57,628 | ) | | $ | 110 |
| | $ | (50,621 | ) | | $ | (108,139 | ) | | $ | (54,862 | ) | | $ | 110 |
| | $ | (55,001 | ) | | $ | (109,753 | ) |
Other comprehensive income before reclassifications | | 7 |
| | 2 |
| | — |
| | 9 |
| |
Other comprehensive income (loss) before reclassifications | | | 8 |
| | — |
| | (653 | ) | | (645 | ) |
Losses reclassified from net accumulated other comprehensive loss | | 1,185 |
| | — |
| | 1,759 |
| | 2,944 |
| | 1,874 |
| | — |
| | 1,729 |
| | 3,603 |
|
Net current period other comprehensive income | | 1,192 |
| | 2 |
| | 1,759 |
| | 2,953 |
| | 1,882 |
| | — |
| | 1,076 |
| | 2,958 |
|
Accumulated other comprehensive (loss) income at June 30 | | $ | (56,436 | ) | | $ | 112 |
| | $ | (48,862 | ) | | $ | (105,186 | ) | | $ | (52,980 | ) | | $ | 110 |
| | $ | (53,925 | ) | | $ | (106,795 | ) |
| | | | | | | | | |
Reclassifications from accumulated other comprehensive loss for the three and six months ended June 30, 20162017 and 20152016 were as follows: |
| | | | | | | | | |
(Thousands of Dollars) | | Amounts Reclassified from Accumulated Other Comprehensive Loss | |
| | Three Months Ended June 30, 2017 | | Three Months Ended June 30, 2016 | |
Losses (gains) on cash flow hedges: | | | | | |
Interest rate derivatives | | $ | 1,319 |
| (a) | $ | 1,483 |
| (a) |
Vehicle fuel derivatives | | (5 | ) | (b) | 47 |
| (b) |
Total, pre-tax | | 1,314 |
| | 1,530 |
| |
Tax benefit | | (511 | ) | | (594 | ) | |
Total, net of tax | | 803 |
| | 936 |
| |
Defined benefit pension and postretirement losses: | | | | | |
Amortization of net loss | | 1,621 |
| (c) | 1,478 |
| (c) |
Prior service credit | | (57 | ) | (c) | (64 | ) | (c) |
Total, pre-tax | | 1,564 |
| | 1,414 |
| |
Tax benefit | | (608 | ) | | (549 | ) | |
Total, net of tax | | 956 |
| | 865 |
| |
Total amounts reclassified, net of tax | | $ | 1,759 |
| | $ | 1,801 |
| |
|
| | | | | | | | | |
| | Amounts Reclassified from Accumulated Other Comprehensive Loss | |
(Thousands of Dollars) | | Three Months Ended June 30, 2016 | | Three Months Ended June 30, 2015 | |
(Gains) losses on cash flow hedges: | | | | | |
Interest rate derivatives | | $ | 1,483 |
| (a) | $ | 954 |
| (a) |
Vehicle fuel derivatives | | 47 |
| (b) | 28 |
| (b) |
Total, pre-tax | | 1,530 |
| | 982 |
| |
Tax benefit | | (594 | ) | | (382 | ) | |
Total, net of tax | | 936 |
| | 600 |
| |
Defined benefit pension and postretirement (gains) losses: | | | | | |
Amortization of net loss | | 1,478 |
| (c) | 1,533 |
| (c) |
Prior service credit | | (64 | ) | (c) | (89 | ) | (c) |
Total, pre-tax | | 1,414 |
| | 1,444 |
| |
Tax benefit | | (549 | ) | | (561 | ) | |
Total, net of tax | | 865 |
| | 883 |
| |
Total amounts reclassified, net of tax | | $ | 1,801 |
| | $ | 1,483 |
| |
| | | | | |
| | | | Amounts Reclassified from Accumulated Other Comprehensive Loss | | | Amounts Reclassified from Accumulated Other Comprehensive Loss | |
(Thousands of Dollars) | | Six Months Ended June 30, 2016 | | Six Months Ended June 30, 2015 | | | Six Months Ended June 30, 2017 | | Six Months Ended June 30, 2016 | |
(Gains) losses on cash flow hedges: | | | | | | |
Losses (gains) on cash flow hedges: | | | | | | |
Interest rate derivatives | | $ | 2,968 |
| (a) | $ | 1,894 |
| (a) | | $ | 2,678 |
| (a) | $ | 2,968 |
| (a) |
Vehicle fuel derivatives | | 104 |
| (b) | 55 |
| (b) | | (5 | ) | (b) | 104 |
| (b) |
Total, pre-tax | | 3,072 |
| | 1,949 |
| | | 2,673 |
| | 3,072 |
| |
Tax benefit | | (1,198 | ) | | (764 | ) | | | (1,045 | ) | | (1,198 | ) | |
Total, net of tax | | 1,874 |
| | 1,185 |
| | | 1,628 |
| | 1,874 |
| |
Defined benefit pension and postretirement (gains) losses: | | | | | | |
Defined benefit pension and postretirement losses: | | | | | | |
Amortization of net loss | | 2,956 |
| (c) | 3,068 |
| (c) | | 3,244 |
| (c) | 2,956 |
| (c) |
Prior service credit | | (128 | ) | (c) | (179 | ) | (c) | | (117 | ) | (c) | (128 | ) | (c) |
Total, pre-tax | | 2,828 |
| | 2,889 |
| | | 3,127 |
| | 2,828 |
| |
Tax benefit | | (1,099 | ) | | (1,130 | ) | | | (1,223 | ) | | (1,099 | ) | |
Total, net of tax | | 1,729 |
| | 1,759 |
| | | 1,904 |
| | 1,729 |
| |
Total amounts reclassified, net of tax | | $ | 3,603 |
| | $ | 2,944 |
| | | $ | 3,532 |
| | $ | 3,603 |
| |
| | | | | | |
| |
(a) | Included in interest charges. |
| |
(b) | Included in O&M expenses. |
| |
(c) | Included in the computation of net periodic pension and postretirement benefit costs. See Note 12 for details regarding these benefit plans. |
Item 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis by management focuses on those factors that had a material effect on Xcel Energy’s financial condition, results of operations and cash flows during the periods presented, or are expected to have a material impact in the future. It should be read in conjunction with the accompanying unaudited consolidated financial statements and the related notes to consolidated financial statements. Due to the seasonality of Xcel Energy’s operating results, quarterly financial results are not an appropriate base from which to project annual results.
Forward-Looking Statements
Except for the historical statements contained in this report, the matters discussed herein, are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements, including our 20162017 earnings per share guidance and assumptions, are intended to be identified in this document by the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should” and similar expressions. Actual results may vary materially. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information. The following factors, in addition to those discussed elsewhere in this Quarterly Report on Form 10-Q and in other securities filings (including Xcel Energy’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 20152016, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2016),subsequent securities filings, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: general economic conditions, including inflation rates, monetary fluctuations and their impact on capital expenditures and the ability of Xcel Energy Inc. and its subsidiaries (collectively, Xcel Energy) to obtain financing on favorable terms; business conditions in the energy industry; including the risk of a slow down in the U.S. economy or delay in growth, recovery, trade, fiscal, taxation and environmental policies in areas where Xcel Energy has a financial interest; customer business conditions; actions of credit rating agencies; competitive factors including the extent and timing of the entry of additional competition in the markets served by Xcel Energy and its subsidiaries; unusual weather; effects of geopolitical events, including war and acts of terrorism; cyber security threats and data security breaches; state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rates or have an impact on asset operation or ownership or impose environmental compliance conditions; structures that affect the speed and degree to which competition enters the electric and natural gas markets; costs and other effects of legal and administrative proceedings, settlements, investigations and claims; financial or regulatory accounting policies imposed by regulatory bodies; outcomes of regulatory proceedings; availability ofor cost of capital; and employee work force factors.
Financial Review
The only common equity securities that are publicly traded are common shares of Xcel Energy Inc. The diluted earnings and EPS of each subsidiary discussed below do not represent a direct legal interest in the assets and liabilities allocated to such subsidiary but rather represent a direct interest in our assets and liabilities as a whole. Ongoing diluted EPS for Xcel Energy and by subsidiary is a financial measure not recognized under GAAP. Ongoing diluted EPS is calculated by dividing the net income or loss attributable to the controlling interest of each subsidiary, adjusted for certain items, by the weighted average fully diluted Xcel Energy Inc. common shares outstanding for the period. We use this non-GAAP financial measure to evaluate and provide details of Xcel Energy’s core earnings and underlying performance. We believe this measurement is useful to investors in facilitating period over period comparisons and evaluating or projecting financial results. This non-GAAP financial measure should not be considered as an alternative to measures calculated and reported in accordance with GAAP.
Results of Operations
The following table summarizes the diluted EPS for Xcel Energy:
| | | | Three Months Ended June 30 | | Six Months Ended June 30 | | Three Months Ended June 30 | | Six Months Ended June 30 |
Diluted Earnings (Loss) Per Share | | 2016 | | 2015 | | 2016 | | 2015 | | 2017 | | 2016 | | 2017 | | 2016 |
PSCo | | $ | 0.17 |
| | $ | 0.19 |
| | $ | 0.40 |
| | $ | 0.41 |
| | $ | 0.20 |
| | $ | 0.17 |
| | $ | 0.42 |
| | $ | 0.40 |
|
NSP-Minnesota | | 0.15 |
| | 0.15 |
| | 0.34 |
| | 0.32 |
| | 0.17 |
| | 0.15 |
| | 0.36 |
| | 0.34 |
|
SPS | | 0.06 |
| | 0.05 |
| | 0.11 |
| | 0.08 |
| | 0.07 |
| | 0.06 |
| | 0.12 |
| | 0.11 |
|
NSP-Wisconsin | | 0.02 |
| | 0.02 |
| | 0.06 |
| | 0.07 |
| | 0.03 |
| | 0.02 |
| | 0.07 |
| | 0.06 |
|
Equity earnings of unconsolidated subsidiaries | | 0.01 |
| | 0.01 |
| | 0.03 |
| | 0.02 |
| | 0.01 |
| | 0.01 |
| | 0.02 |
| | 0.03 |
|
Regulated utility (a) | | 0.42 |
| | 0.42 |
| | 0.93 |
| | 0.90 |
| | 0.48 |
| | 0.42 |
| | 0.99 |
| | 0.93 |
|
Xcel Energy Inc. and other | | (0.04 | ) | | (0.03 | ) | | (0.07 | ) | | (0.05 | ) | | (0.03 | ) | | (0.04 | ) | | (0.07 | ) | | (0.07 | ) |
Ongoing diluted EPS (a) | | 0.39 |
| | 0.39 |
| | 0.86 |
| | 0.85 |
| |
Loss on Monticello LCM/EPU project | | — |
| | — |
| | — |
| | (0.16 | ) | |
GAAP diluted EPS | | $ | 0.39 |
| | $ | 0.39 |
| | $ | 0.86 |
| | $ | 0.69 |
| |
GAAP diluted EPS (a) | | | $ | 0.45 |
| | $ | 0.39 |
| | $ | 0.92 |
| | $ | 0.86 |
|
| |
(a) | Amounts may not add due to rounding. |
Earnings Adjusted for Certain Items (Ongoing Earnings)
Ongoing earnings reflect adjustments to GAAP earnings for certain items. Xcel Energy’s management believes that ongoing earnings provide a meaningful comparison of earnings results and is representative of Xcel Energy’s fundamental core earnings power. Xcel Energy’s management uses ongoing earnings internally for financial planning and analysis, for reporting of results to the Board of Directors, in determining whether performance targets are met for performance-based compensation, and when communicating its earnings outlook to analysts and investors.
For the six months ended June 30, 2015, GAAP earnings included a $0.16 per share charge related to the Monticello nuclear facility LCM/EPU project, which in total cost $748 million. In March 2015, the MPUC approved full recovery, including a return, on $415 million of the project costs, inclusive of AFUDC, but only allowed recovery of the remaining $333 million of costs with no return on this portion of the investment for years 2015 and beyond. As a result of this decision, Xcel Energy recorded a pre-tax charge of approximately $129 million in the first quarter of 2015. See Note 5 to the consolidated financial statements for further discussion.
Summary of Ongoing Earnings
Xcel Energy — Xcel Energy’s ongoing earnings were flatincreased $0.06 per share for the second quarter of 20162017 and increased $0.01 per share year-to-date, which excludes the 2015 adjustmentyear-to-date. Earnings for a charge related to the NSP-Minnesota Monticello LCM/EPU project. Higher electric and gas margins in the second quarter of 2016 were primarily2017 increased due to higher retail electric and natural gas rates across various jurisdictions, non-fuel ridersmargins to recover infrastructure investments, along with a lower effective tax rate and the impact of favorable weather. These positive factors werelower operating and maintenance (O&M) expenses, partially offset by higher depreciation, interest charges and property taxes.depreciation.
PSCo — PSCo’s ongoingEarnings increased $0.03 per share for the second quarter of 2017 and $0.02 per share year-to-date. The year-to-date increase in earnings decreasedwas driven by higher electric and natural gas margins and lower O&M expenses, partially offset by increased depreciation.
NSP-Minnesota — Earnings increased $0.02 per share for the second quarter of 20162017 and year-to-date. The year-to-date increase in earnings was due to higher electric margins driven by the rate case in Minnesota, as well as increased natural gas margins, non-fuel riders and lower O&M expenses, partially offset by increased depreciation.
SPS — Earnings increased $0.01 per share year-to-date. Year-to-date, the positive impact of higher natural gas revenues due to rate increases was more than offset by higher depreciation, O&M expenses, interest charges and the favorable impact of an adjustment to the estimated electric earnings test refund obligation recognized in 2015.
NSP-Minnesota — NSP-Minnesota’s ongoing earnings were flat for the second quarter of 20162017 and increased $0.02 per share year-to-date. Year-to-date, higher electric revenues driven by a rateThe year-to-date increase in Minnesota (interim, subjectearnings was due to refund)the positive impact of rate increases in Texas and non-fuel riders wereNew Mexico, which was partially offset by higherincreased depreciation property taxes,and timing of O&M expenses and interest charges.expenses.
SPSNSP-Wisconsin — SPS’ ongoing earningsEarnings increased $0.01 per share for the second quarter of 20162017 and $0.03 per share year-to-date. Year-to-date,The year-to-date increase in earnings was driven by higher electric margin and lower O&M expensesmargins primarily due to rate increases, which were partially offset by additional depreciation.
NSP-Wisconsin — NSP-Wisconsin’s ongoing earnings per share were flat for the second quarter of 2016 and decreased $0.01 year-to-date. Year-to-date, higher electric margins primarily driven by an electric rate increase were more than offset by higher O&M expenses and depreciation.
Xcel Energy Inc. and other — Xcel Energy Inc. and other includes financing costs at the holding company and other items. Ongoing earnings decreased by $0.01 for the second quarter of 2016 and $0.02 per share year-to-date. The change was primarily related to higher long-term debt levels.
Changes in Diluted EPS
The following table summarizes significant components contributing to the changes in 20162017 EPS compared with the same period in 2015:2016:
|
| | | | | | | | |
Diluted Earnings (Loss) Per Share | | Three Months Ended June 30 | | Six Months Ended June 30 |
2015 GAAP diluted EPS | | $ | 0.39 |
| | $ | 0.69 |
|
Loss on Monticello LCM/EPU project | | — |
| | 0.16 |
|
2015 ongoing diluted EPS | | 0.39 |
| | 0.85 |
|
| | | | |
Components of change — 2016 vs. 2015 | | | | |
Higher electric margins (a) | | 0.07 |
| | 0.13 |
|
Higher natural gas margins (b) | | 0.01 |
| | 0.03 |
|
Lower O&M expenses | | — |
| | 0.01 |
|
Higher depreciation and amortization | | (0.06 | ) | | (0.11 | ) |
Higher interest charges | | (0.02 | ) | | (0.04 | ) |
Higher taxes (other than income taxes) | | (0.01 | ) | | (0.02 | ) |
Other, net | | 0.01 |
| | 0.01 |
|
2016 GAAP and ongoing diluted EPS | | $ | 0.39 |
| | $ | 0.86 |
|
|
| | | | | | | | |
Diluted Earnings (Loss) Per Share | | Three Months Ended June 30 | | Six Months Ended June 30 |
2016 GAAP diluted EPS | | $ | 0.39 |
| | $ | 0.86 |
|
| | | | |
Components of change — 2017 vs. 2016 | | | | |
Higher electric margins | | 0.06 |
| | 0.12 |
|
Lower ETR (a) | | 0.02 |
| | 0.04 |
|
Higher natural gas margins | | 0.01 |
| | 0.02 |
|
Lower O&M expenses | | 0.02 |
| | 0.01 |
|
Higher depreciation and amortization | | (0.05 | ) | | (0.11 | ) |
Higher conservation and DSM expenses (offset by higher revenues) | | (0.01 | ) | | (0.02 | ) |
Other, net | | 0.01 |
| | — |
|
2017 GAAP diluted EPS | | $ | 0.45 |
| | $ | 0.92 |
|
| |
(a) | Lower ETR includes the impact of $4.8 million and $8.8 million of wind production tax credits (PTCs) for the three and six months ended June 30, 2017, respectively, which are largely flowed back to customers through electric margin. |
(a) Reflects $0.022 and $0.008 attributable to weather for the three and six months ended June 30, 2016, respectively.
(b) Reflects $0.001 and $(0.008) attributable to weather for the three and six months ended June 30, 2016, respectively.
Statement of Income Analysis
The following discussion summarizes the items that affected the individual revenue and expense items reported in the consolidated statements of income.
Estimated Impact of Temperature Changes on Regulated Earnings — Unusually hot summers or cold winters increase electric and natural gas sales, while mild weather reduces electric and natural gas sales. The estimated impact of weather on earnings is based on the number of customers, temperature variances and the amount of natural gas or electricity the average customer historically uses per degree of temperature. Accordingly, deviations in weather from normal levels can affect Xcel Energy’s financial performance.
Degree-day or Temperature-Humidity Index (THI) data is used to estimate amounts of energy required to maintain comfortable indoor temperature levels based on each day’s average temperature and humidity. Heating degree-days (HDD) is the measure of the variation in the weather based on the extent to which the average daily temperature falls below 65° Fahrenheit. Cooling degree-days (CDD) is the measure of the variation in the weather based on the extent to which the average daily temperature rises above 65° Fahrenheit. Each degree of temperature above 65° Fahrenheit is counted as one CDD, and each degree of temperature below 65° Fahrenheit is counted as one HDD. In Xcel Energy’s more humid service territories, a THI is used in place of CDD, which adds a humidity factor to CDD. HDD, CDD and THI are most likely to impact the usage of Xcel Energy’s residential and commercial customers. Industrial customers are less sensitive to weather.
Normal weather conditions are defined as either the 20-year or 30-year average of actual historical weather conditions. The historical period of time used in the calculation of normal weather differs by jurisdiction, based on regulatory practice. To calculate the impact of weather on demand, a demand factor is applied to the weather impact on sales as defined above to derive the amount of demand associated with the weather impact.
The percentage increase (decrease) in normal and actual HDD, CDD and THI is provided in the following table:
| | | Three Months Ended June 30 | | Six Months Ended June 30 | Three Months Ended June 30 | | Six Months Ended June 30 |
| 2016 vs. Normal | | 2015 vs. Normal | | 2016 vs. 2015 | | 2016 vs. Normal | | 2015 vs. Normal | | 2016 vs. 2015 | 2017 vs. Normal | | 2016 vs. Normal | | 2017 vs. 2016 | | 2017 vs. Normal | | 2016 vs. Normal | | 2017 vs. 2016 |
HDD | (3.7 | )% | | (8.1 | )% | | 4.9 | % | | (11.5 | )% | | (2.4 | )% | | (8.6 | )% | (9.8 | )% | | (3.7 | )% | | (7.2 | )% | | (8.5 | )% | | (11.5 | )% | | 2.3 | % |
CDD | 1.7 |
| | (19.1 | ) | | 25.8 |
| | 1.7 |
| | (19.2 | ) | | 26.4 |
| 5.4 |
| | 1.7 |
| | 3.7 |
| | 7.4 |
| | 1.7 |
| | 5.5 |
|
THI | 15.8 |
| | (20.8 | ) | | 45.5 |
| | 15.4 |
| | (21.0 | ) | | 45.6 |
| (3.9 | ) | | 15.8 |
| | (16.1 | ) | | (6.9 | ) | | 15.4 |
| | (21.4 | ) |
Weather — The following table summarizes the estimated impact of temperature variations on EPS compared with sales under normal weather conditions:
| | | Three Months Ended June 30 | | Six Months Ended June 30 | Three Months Ended June 30 | | Six Months Ended June 30 |
| 2016 vs. Normal | | 2015 vs. Normal | | 2016 vs. 2015 | | 2016 vs. Normal | | 2015 vs. Normal | | 2016 vs. 2015 | 2017 vs. Normal | | 2016 vs. Normal | | 2017 vs. 2016 | | 2017 vs. Normal | | 2016 vs. Normal | | 2017 vs. 2016 |
Retail electric | $ | 0.009 |
| (a) | $ | (0.013 | ) | | $ | 0.022 |
| | $ | (0.005 | ) | (a) | $ | (0.013 | ) | | $ | 0.008 |
| $ | 0.005 |
| | $ | 0.013 |
| | $ | (0.008 | ) | | $ | (0.021 | ) | | $ | (0.004 | ) | | $ | (0.017 | ) |
Firm natural gas | — |
| | (0.001 | ) | | 0.001 |
| | (0.013 | ) | | (0.005 | ) | | (0.008 | ) | (0.002 | ) | | — |
| | (0.002 | ) | | (0.020 | ) | | (0.013 | ) | | (0.007 | ) |
Total | $ | 0.009 |
| | $ | (0.014 | ) | | $ | 0.023 |
| | $ | (0.018 | ) | | $ | (0.018 | ) | | $ | — |
| |
Total (excluding decoupling) | | $ | 0.003 |
| | $ | 0.013 |
| | $ | (0.010 | ) | | $ | (0.041 | ) | | $ | (0.017 | ) | | $ | (0.024 | ) |
Decoupling - Minnesota | | — |
| | (0.007 | ) | | 0.007 |
| | 0.009 |
| | (0.001 | ) | | 0.010 |
|
Total (adjusted for recovery from decoupling) | | $ | 0.003 |
| | $ | 0.006 |
| | $ | (0.003 | ) | | $ | (0.032 | ) | | $ | (0.018 | ) | | $ | (0.014 | ) |
| |
(a)
| Excludes $0.006 and $0.001 favorable weather impact due to electric sales decoupling at NSP-Minnesota for the three and six months ended June 30, 2016, respectively. |
Sales Growth (Decline) — The following tables summarize Xcel Energy and its subsidiaries’ sales growth (decline) for actual and weather-normalized sales in 2017 compared to the same period in 2016:
| | | | Three Months Ended June 30 | | Three Months Ended June 30 |
| | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy | | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Actual | | | | | | | | | | | | | | | | | | | | |
Electric residential (a) | | 5.6 | % | | 4.8 | % | | (0.9 | )% | | 4.6 | % | | 4.3 | % | | (1.5 | )% | | (1.4 | )% | | 6.4 | % | | 0.7 | % | | (0.3 | )% |
Electric commercial and industrial | | (1.7 | ) | | (0.7 | ) | | 1.0 |
| | — |
| | (0.6 | ) | | 2.6 |
| | (0.9 | ) | | 2.5 |
| | 3.4 |
| | 1.3 |
|
Total retail electric sales | | 0.5 |
| | 0.8 |
| | 0.7 |
| | 1.0 |
| | 0.7 |
| | 1.4 |
| | (1.1 | ) | | 3.1 |
| | 2.7 |
| | 0.9 |
|
Firm natural gas sales | | 7.5 |
| | 4.2 |
| | N/A |
| | (6.4 | ) | | 5.8 |
| | (8.5 | ) | | 3.6 |
| | N/A |
| | 4.2 |
| | (4.7 | ) |
| | | | Three Months Ended June 30 | | Three Months Ended June 30 |
| | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy | | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Weather-normalized | | | | | | | | | | | | | | | | | | | | |
Electric residential (a) | | 3.9 | % | | 0.1 | % | | (5.6 | )% | | 0.8 | % | | 0.7 | % | | (0.3 | )% | | 0.8 | % | | 0.8 | % | | 2.3 | % | | 0.5 | % |
Electric commercial and industrial | | (2.2 | ) | | (1.7 | ) | | (0.5 | ) | | (0.7 | ) | | (1.5 | ) | | 3.0 |
| | (0.4 | ) | | 2.3 |
| | 3.7 |
| | 1.5 |
|
Total retail electric sales | | (0.4 | ) | | (1.2 | ) | | (1.4 | ) | | (0.4 | ) | | (0.9 | ) | | 2.0 |
| | (0.1 | ) | | 1.9 |
| | 3.4 |
| | 1.3 |
|
Firm natural gas sales | | 5.5 |
| | 1.6 |
| | N/A |
| | (9.7 | ) | | 3.4 |
| | (3.9 | ) | | 4.6 |
| | N/A |
| | 3.3 |
| | (1.2 | ) |
|
| | | | | | | | | | | | | | | |
| | Six Months Ended June 30 |
| | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Actual | | | | | | | | | | |
Electric residential (a) | | (1.6 | )% | | (1.2 | )% | | (2.3 | )% | | (0.5 | )% | | (1.5 | )% |
Electric commercial and industrial | | 0.5 |
| | (1.0 | ) | | 1.6 |
| | 1.5 |
| | 0.3 |
|
Total retail electric sales | | (0.1 | ) | | (1.1 | ) | | 0.8 |
| | 0.8 |
| | (0.2 | ) |
Firm natural gas sales | | (6.8 | ) | | 4.0 |
| | N/A |
| | 3.7 |
| | (2.9 | ) |
| | | | Six Months Ended June 30 | | Six Months Ended June 30 |
| | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy | | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Actual | | | | | | | | | | | |
Weather-normalized | | | | | | | | | | | |
Electric residential (a) | | 3.3 | % | | (0.1 | )% | | (3.8 | )% | | (2.2 | )% | | 0.5 | % | | (0.6 | )% | | 0.1 | % | | (1.5 | )% | | 0.9 | % | | (0.3 | )% |
Electric commercial and industrial | | (1.1 | ) | | (1.0 | ) | | 0.5 |
| | (0.5 | ) | | (0.6 | ) | | 0.7 |
| | (0.5 | ) | | 1.4 |
| | 1.6 |
| | 0.5 |
|
Total retail electric sales | | 0.3 |
| | (0.7 | ) | | (0.2 | ) | | (1.1 | ) | | (0.3 | ) | | 0.3 |
| | (0.4 | ) | | 0.7 |
| | 1.3 |
| | 0.2 |
|
Firm natural gas sales | | 3.2 |
| | (9.4 | ) | | N/A |
| | (12.4 | ) | | (2.0 | ) | | (1.0 | ) | | 4.2 |
| | N/A |
| | 3.3 |
| | 0.9 |
|
|
| | | | | | | | | | | | | | | |
| | Six Months Ended June 30 |
| | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Weather-normalized | | | | | | | | | | |
Electric residential (a) | | 2.5 | % | | (0.3 | )% | | (2.6 | )% | | (1.0 | )% | | 0.4 | % |
Electric commercial and industrial | | (1.4 | ) | | (1.2 | ) | | (0.1 | ) | | (0.5 | ) | | (1.0 | ) |
Total retail electric sales | | (0.1 | ) | | (1.0 | ) | | (0.5 | ) | | (0.7 | ) | | (0.6 | ) |
Firm natural gas sales | | 1.2 |
| | (0.2 | ) | | N/A |
| | (3.6 | ) | | 0.4 |
|
| | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30 (Excluding Leap Day) (b) | | Six Months Ended June 30 (Excluding Leap Day) (b) |
| | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy | | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Weather-normalized - adjusted for leap day | | | | | | | | | | | | | | | | | | | | |
Electric residential (a) | | 1.9 | % | | (0.9 | )% | | (3.2 | )% | | (1.6 | )% | | (0.2 | )% | | — | % | | 0.7 | % | | (0.9 | )% | | 1.5 | % | | 0.3 | % |
Electric commercial and industrial | | (2.0 | ) | | (1.8 | ) | | (0.6 | ) | | (1.0 | ) | | (1.5 | ) | | 1.2 |
| | — |
| | 1.9 |
| | 2.1 |
| | 1.0 |
|
Total retail electric sales | | (0.7 | ) | | (1.5 | ) | | (1.1 | ) | | (1.3 | ) | | (1.1 | ) | | 0.9 |
| | 0.2 |
| | 1.2 |
| | 1.9 |
| | 0.8 |
|
Firm natural gas sales | | 0.4 |
| | (1.0 | ) | | N/A |
| | (4.5 | ) | | (0.4 | ) | | (0.2 | ) | | 5.1 |
| | N/A |
| | 4.2 |
| | 1.7 |
|
| |
(a) | Extreme weather variations and additional factors such as windchill and cloud cover may not be reflected in weather-normalized and actual growth estimates. |
| |
(b) | The estimated impact of the 2016 leap day is excluded to present a more comparable year-over-year presentation. The estimated impact of the additional day of sales in 2016 was approximately 50-60 basis points for retail electric and 80-90 basis points for firm natural gas for the six months ended. |
(b) In order to assess comparable periods, Xcel Energy excluded the estimated impact of the 2016 leap day to present a more comparable year-over-year presentation. The estimated impact of the additional day of sales in 2016 was approximately 50-60 basis points for retail electric and 80-90 basis points for firm natural gas for the sixth months ended.
Weather-normalized Electric Sales Growth (Decline) — Year-To-Date (ExcludingExcluding Leap Day)
Day
PSCo’s flat residential growth reflectssales reflect an increased number of customers.customers and lower use per customer. The commercial and industrial (C&I) declinegrowth was mainly due to lower sales to certainan increase in C&I customers and higher use per customer for both small and large C&I customers. The growth was primarily led by large customers that support the mining, industry and oil and gas industries.
NSP-Minnesota’s residential sales decreased primarilygrowth reflects customer additions, partially offset by lower use per customer. Flat C&I sales resulted from lower sales to small customers, offset by customer growth. Increased sales to large customers in manufacturing and energy industries offset smaller declines in services and air transportation.
SPS’ residential fell largely due to lower use per customer. C&I sales growth reflects higher use per customer partially offsetdriven by anthe oil and natural gas industry in the Permian Basin.
NSP-Wisconsin’s residential sales increase inwas primarily attributable to higher use per customer and customer additions. The C&I sales declined as a result of lowergrowth was largely due to higher use by largeper customer and an increase in small customers primarily in the manufacturingsand mining industry. The
Weather-normalized Natural Gas Sales Growth (Decline) - Year-To-Date Excluding Leap Day
Across most natural gas service territories, higher natural gas sales decrease was partially mitigated byreflect an increase in the number of customers, within the small customer class.
SPS’ residential sales decline was primarily the result of lower use per customer, partially offset by customer additions. The C&I sales decreased as a result of reduced activity within the oil and gas industries for the small customer class. The decline was partially reduced by customer additions in both the large and small customer classes.
NSP-Wisconsin’s residential sales decrease was primarily attributable to lower use per customer, partially offset by customer additions. The C&I decline was primarily due to reduced sales to small customers in the sand mining industry. The overall decrease was partially offset by an increase in the number of large and small C&I customers as well as greater use per customer in the large C&I class for the oil and gas industries.
Weather-normalized Natural Gas Sales Decline — Year-To-Date (Excluding Leap Day)
Across natural gas service territories, lower natural gas sales reflect a decline in customer use, partially offset by a slight increase in the number of customers.use.
Electric Revenues and Margin
Electric revenues and fuel and purchased power expenses are largely impacted by the fluctuation in the price of natural gas, coal and uranium used in the generation of electricity, but as a result of the design of fuel recovery mechanisms to recover current expenses, these price fluctuations have minimal impact on electric margin. The following table details the electric revenues and margin:
| | | | Three Months Ended June 30 | | Six Months Ended June 30 | | Three Months Ended June 30 | | Six Months Ended June 30 |
(Millions of Dollars) | | 2016 | | 2015 | | 2016 | | 2015 | | 2017 | | 2016 | | 2017 | | 2016 |
Electric revenues | | $ | 2,224 |
| | $ | 2,213 |
| | $ | 4,409 |
| | $ | 4,438 |
| | $ | 2,338 |
| | $ | 2,224 |
| | $ | 4,637 |
| | $ | 4,409 |
|
Electric fuel and purchased power | | (856 | ) | | (905 | ) | | (1,718 | ) | | (1,855 | ) | | (919 | ) | | (856 | ) | | (1,844 | ) | | (1,718 | ) |
Electric margin | | $ | 1,368 |
| | $ | 1,308 |
| | $ | 2,691 |
| | $ | 2,583 |
| | $ | 1,419 |
| | $ | 1,368 |
| | $ | 2,793 |
| | $ | 2,691 |
|
The following tables summarize the components of the changes in electric revenues and electric margin:
Electric Revenues
| | (Millions of Dollars) | | Three Months Ended June 30 2016 vs. 2015 | | Six Months Ended June 30 2016 vs. 2015 | | Three Months Ended June 30 2017 vs. 2016 | | Six Months Ended June 30 2017 vs. 2016 |
Retail rate increases (Texas, Minnesota, New Mexico and Wisconsin) | | | $ | 34 |
| | $ | 75 |
|
Fuel and purchased power cost recovery | | $ | (68 | ) | | $ | (148 | ) | | 41 |
| | 56 |
|
PSCo earnings test refund | | (6 | ) | | (6 | ) | |
Trading | | 4 |
| | (4 | ) | | 14 |
| | 42 |
|
Weather decoupling-Minnesota | | (5 | ) | | (1 | ) | |
Retail rate increases (a) | | 30 |
| | 68 |
| |
Transmission revenue | | 26 |
| | 37 |
| |
Non-fuel riders | | 3 |
| | 10 |
| | 9 |
| | 20 |
|
Higher conservation and DSM revenues (offset by higher expenses) | | | 7 |
| | 14 |
|
Wholesale transmission revenue | | | 1 |
| | 12 |
|
Retail sales growth, excluding weather impact | | | 8 |
| | 9 |
|
Decoupling (weather portion - Minnesota) | | | 5 |
| | 7 |
|
Estimated impact of weather | | 22 |
| | 8 |
| | (6 | ) | | (13 | ) |
Other, net | | 5 |
| | 7 |
| | 1 |
| | 6 |
|
Total increase (decrease) in electric revenues | | $ | 11 |
| | $ | (29 | ) | |
Total increase in electric revenues | | | $ | 114 |
| | $ | 228 |
|
| |
(a)
| Increase is primarily related to the Minnesota Electric Rate Case (interim, subject to and net of estimated provision for refund) and Wisconsin. |
Electric Margin
| | (Millions of Dollars) | | Three Months Ended June 30 2016 vs. 2015 | | Six Months Ended June 30 2016 vs. 2015 | | Three Months Ended June 30 2017 vs. 2016 | | Six Months Ended June 30 2017 vs. 2016 |
Retail rate increases (a) | | $ | 30 |
| | $ | 68 |
| |
Transmission revenue, net of costs | | 11 |
| | 12 |
| |
Retail rate increases (Texas, Minnesota, New Mexico and Wisconsin) | | | $ | 34 |
| | $ | 75 |
|
Non-fuel riders | | 3 |
| | 10 |
| | 9 |
| | 20 |
|
Higher conservation and DSM revenues (offset by higher expenses) | | | 7 |
| | 14 |
|
Retail sales growth, excluding weather impact | | | 8 |
| | 9 |
|
Decoupling (weather portion - Minnesota) | | | 5 |
| | 7 |
|
Wholesale transmission revenue, net of costs | | | (6 | ) | | (13 | ) |
Estimated impact of weather | | 22 |
| | 8 |
| | (6 | ) | | (13 | ) |
PSCo earnings test refund | | (6 | ) | | (6 | ) | |
Weather decoupling-Minnesota | | (5 | ) | | (1 | ) | |
Other, net | | 5 |
| | 17 |
| | — |
| | 3 |
|
Total increase in electric margin | | $ | 60 |
| | $ | 108 |
| | $ | 51 |
| | $ | 102 |
|
| |
(a)
| Increase is primarily due to rate proceedings in Minnesota (interim, subject to and net of estimated provision for refund) and Wisconsin. |
Natural Gas Revenues and Margin
Total natural gas expense tends to vary with changing sales requirements and the cost of natural gas purchases. However, due to the design of purchased natural gas cost recovery mechanisms for sales to retail customers, fluctuations in the cost of natural gas has minimal impact on natural gas margin. The following table details natural gas revenues and margin:
| | | | Three Months Ended June 30 | | Six Months Ended June 30 | | Three Months Ended June 30 | | Six Months Ended June 30 |
(Millions of Dollars) | | 2016 | | 2015 | | 2016 | | 2015 | | 2017 | | 2016 | | 2017 | | 2016 |
Natural gas revenues | | $ | 259 |
| | $ | 284 |
| | $ | 825 |
| | $ | 1,000 |
| | $ | 290 |
| | $ | 259 |
| | $ | 916 |
| | $ | 825 |
|
Cost of natural gas sold and transported | | (90 | ) | | (127 | ) | | (402 | ) | | (599 | ) | | (114 | ) | | (90 | ) | | (479 | ) | | (402 | ) |
Natural gas margin | | $ | 169 |
| | $ | 157 |
| | $ | 423 |
| | $ | 401 |
| | $ | 176 |
| | $ | 169 |
| | $ | 437 |
| | $ | 423 |
|
The following tables summarize the components of the changes in natural gas revenues and natural gas margin:
Natural Gas Revenues
|
| | | | | | | | |
(Millions of Dollars) | | Three Months Ended June 30 2016 vs. 2015 | | Six Months Ended June 30 2016 vs. 2015 |
Purchased natural gas adjustment clause recovery | | $ | (36 | ) | | $ | (196 | ) |
Estimated impact of weather | | 1 |
| | (6 | ) |
Retail rate increases (a) | | 11 |
| | 24 |
|
Other, net | | (1 | ) | | 3 |
|
Total decrease in natural gas revenues | | $ | (25 | ) | | $ | (175 | ) |
(a) Increase is primarily related to Colorado. |
| | | | | | | | |
(Millions of Dollars) | | Three Months Ended June 30 2017 vs. 2016 | | Six Months Ended June 30 2017 vs. 2016 |
Purchased natural gas adjustment clause recovery | | $ | 23 |
| | $ | 76 |
|
Infrastructure and integrity riders | | 5 |
| | 12 |
|
Higher conservation and DSM revenues (offset by higher expenses) | | 1 |
| | 4 |
|
Estimated impact of weather | | (1 | ) | | (5 | ) |
Other, net | | 3 |
| | 4 |
|
Total increase in natural gas revenues | | $ | 31 |
| | $ | 91 |
|
Natural Gas Margin
|
| | | | | | | | |
(Millions of Dollars) | | Three Months Ended June 30 2016 vs. 2015 | | Six Months Ended June 30 2016 vs. 2015 |
Retail rate increases (a) | | $ | 11 |
| | $ | 24 |
|
Estimated impact of weather | | 1 |
| | (6 | ) |
Other, net | | — |
| | 4 |
|
Total increase in natural gas margin | | $ | 12 |
| | $ | 22 |
|
(a) Increase is primarily related to Colorado. |
| | | | | | | | |
(Millions of Dollars) | | Three Months Ended June 30 2017 vs. 2016 | | Six Months Ended June 30 2017 vs. 2016 |
Infrastructure and integrity riders | | $ | 5 |
| | $ | 12 |
|
Higher conservation and DSM revenues (offset by higher expenses) | | 1 |
| | 4 |
|
Estimated impact of weather | | (1 | ) | | (5 | ) |
Other, net | | 2 |
| | 3 |
|
Total increase in natural gas margin | | $ | 7 |
| | $ | 14 |
|
Non-Fuel Operating Expenses and Other Items
O&M Expenses — O&M expenses increased $2.7decreased $18.8 million, or 0.53.2 percent, for the second quarter of 20162017 and decreased $5.7$9.8 million, or 0.50.8 percent, for the six months ended June 30, 2016 compared with the same periods in 2015.year-to-date. The year-to-date decrease was mainlyis primarily due to the timing of planned maintenance and scopeoverhauls at a number of plant outages and discovery work along with lower nuclear outage and outage amortization costs, which were partiallygeneration facilities, offset by higher gas surveyincreases in employee benefits expense and damage prevention costs.the impact of previously deferred 2016 expenses associated with the Texas 2016 electric rate case (approximately $8 million) recognized in 2017 in connection with the settlement, offset by revenue recovery.
Conservation and DSM Program Expenses — Conservation and DSM programdemand side management (DSM) expenses increased $1.8$8.9 million, or 3.316.0 percent, for the second quarter of 20162017 and $5.4increased $19.0 million, or 5.016.8 percent, for the six months ended June 30, 2016 compared with the same periods in 2015.year-to-date. Increases were primarily attributabledue to higher electric and natural gas recovery rates at NSP-Minnesota, partially reduced by lowerand additional customer participation in electric recovery rates at PSCo. Higher conservation programs, mostly in Minnesota. Conservation and DSM program expenses are generally offset by higher revenues.recovered in our major jurisdictions concurrently through riders and base rates. Timing of recovery may not correspond to the period in which costs were incurred.
Depreciation and Amortization — Depreciation and amortization increased $47.9$43.2 million, or 17.513.4 percent, for the second quarter of 20162017 and $94.9increased $88.4 million, or 17.313.8 percent, for the six months ended June 30, 2016 compared with the same periods in 2015. Increases wereyear-to-date. The increase was primarily attributabledue to capital investments including Pleasant Valley and Border Wind Farms, which were placed into serviceprior year amortization of the excess depreciation reserve in late 2015.Minnesota.
Taxes (Other Than Income Taxes)Allowance for Funds Used During Construction (AFUDC), Equity and Debt — Taxes (other than income taxes)AFUDC increased $8.7$2.6 million or 6.7 percent, for the second quarter of 20162017 and $17.4increased $4.8 million or 6.5 percent, for the six months ended June 30, 2016 compared with the same periods in 2015. Increases wereyear-to-date. The increase was primarily due to higher property taxes primarily in Minnesota.average capital investments, particularly the Rush Creek wind project.
Interest Charges — Interest charges increased $18.8$1.2 million, or 13.00.7 percent, for the second quarter of 20162017 and $30.3,increased $10.7 million, or 10.53.4 percent, for the six months ended June 30, 2016 compared with the same periods in 2015.year-to-date. The increase was related to higher long-term debt levels to fund capital investments, partially offset by refinancings at lower interest rates.
Income Taxes — Income tax expense decreased $5.5$2.0 million for the second quarter of 20162017 compared with the same period in 2015.2016. The decrease was primarily due to loweran increase in wind PTCs in 2017, an increase in permanent plant-related adjustments (e.g., AFUDC-equity) in 2017 and a tax expense for a state tax credit valuation allowance in 2016, partially offset by higher pretax earnings in 2016 and increased wind production tax credits in 2016.the second quarter of 2017. The ETR was 34.731.1 percent for the second quarter of 20162017 compared with 35.834.7 percent for the same period in 2015.2016. The lower ETR in 2016 is2017 was primarily due to increased wind production tax credits.the adjustments referenced above.
Income tax expense increased $39.6decreased $14.0 million for the first six months of 20162017 compared with the same period in 2015.2016. The increasedecrease in income tax expense was primarily due to an increase in wind PTCs in 2017, an increase in permanent plant-related adjustments (e.g., AFUDC-equity) in 2017 and a tax expense for a state tax credit valuation allowance in 2016, partially offset by higher pretax earnings in the six months ended June 30, 2016, partially offset by increased wind production tax credits.2017. The ETR was 32.0 percent for the first six months of 2017, compared to 34.7 percent for the first six months of 2016 compared with 35.7 percent for the same period in 2015.2016. The lower ETR in 2016 is2017 was primarily due to increased wind production tax credits.the adjustments referenced above.
Public Utility Regulation
Except to the extent noted below, the circumstances set forth in Public Utility Regulation included in Item 1 of Xcel Energy Inc.’s Annual Report on Form 10-K for the year ended Dec. 31, 20152016 and Public Utility Regulation included in Item 2 of Xcel Energy Inc.’s
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016,2017, appropriately represent, in all material respects, the current status of public utility regulation and are incorporated herein by reference.
NSP-MinnesotaXcel Energy Inc.
NSP System Resource PlansWind Development — In January 2015,During the first quarter of 2017, Xcel Energy announced plans to significantly expand its wind capacity by adding 1,550 MW of new wind generation at NSP-Minnesota filed its 2016-2030 Integrated Resource Plan (the Plan) with the MPUC.and 1,230 MW at SPS. Previously, Xcel Energy received regulatory approval to build a 600 MW wind farm at PSCo.
Subsequently, NSP-Minnesota proposed revisionsIn July 2017, the MPUC approved NSP-Minnesota’s proposal to the Plan, which addressed stakeholder recommendations as well as the Clean Power Plan (CPP) issuedadd 1,550 MW of new wind generation, including ownership of 1,150 MW of wind generation by the EPA.NSP-Minnesota. The revised Plan is based on four primary elements: (1) accelerate the transition from coal energy to renewables, (2) preserve regional system reliability, (3) pursue energy efficiency gains and grid modernization, and (4) ensure customer benefits. The provisions included in the Plan would allow for a 60 percent reduction in carbon emissions from 2005 levels by 2030 and is expected to result in 63 percent of NSP System energy being carbon-free by 2030. NSP-Minnesota believes its Plan provides substantial opportunitiesMPUC approved an aggregate capital cap for the ownership750 MW of renewable generation and replacementself-build projects, allowing NSP-Minnesota to include in rate base any savings versus a capital cost generation.
Specific termsestimate for the projects. NSP-Minnesota would not recover capital costs in excess of the proposal include:cap.
The addition of 800 MW ofPUCT and NMPRC are expected to rule on SPS’ wind and 400 MW of utility scale solar to the pre-2020 time-frame;
The addition of 1000 MW of wind and 1000 MW of utility scale solar between 2020-2030;
The retirement of Sherco Unit 2 in 2023 and Sherco Unit 1 in 2026;
The addition of a 230 MW natural gas combustion turbine in North Dakotaprojects by the end of 2025;the first quarter of 2018.
Replacement of Sherco coal generation with a 786 MW natural gas combined cycle unit at
Key dates in the Sherco site no later than 2026;PUCT procedural schedule are as follows:
Intervenor testimony — Oct. 2, 2017;
Staff testimony — Oct. 9, 2017;
Rebuttal testimony — Oct. 23, 2017; and
Operation of the Monticello and PI nuclear plants through their current license periodsHearing — Nov. 6 - Nov. 17, 2017.
Key dates in the early 2030’s.NMPRC procedural schedule are as follows:
Staff and intervenor testimony — Oct. 24, 2017;
Rebuttal testimony — Nov. 9, 2017; and
Hearing — Nov. 28 - Dec. 1, 2017.
In January 2016, NSP-Minnesota filed supplemental economic and technical information in support of its revised Plan. Additionally, NSP-Minnesota addressed forecasted cost increases at PI (through end of licensed life) and committed to provide additional information if the MPUC wishes to further explore alternatives to operating PI through its current license periods. In July 2016, the DOC submitted its comments, which:
Concluded NSP-Minnesota’s revised Plan is the most cost-effective after analyzing alternative retirement scenarios for Sherco Units 1 and 2 and a possible retirement of the King plant;
Recommended a separate detailed analysis of early PI retirement;
Recommended no additional solar beyond the community solar gardens program for the first five years; and
Recommendedtotal, Xcel Energy has proposed adding up to 1,0003,380 MW of wind capacity by 2019.the end of 2020. Xcel Energy has filed to own and place in rate base 2,750 MW of these wind projects, while 630 MW would be through PPAs. These wind projects would qualify for 100 percent of the production tax credit and are intended to provide billions of dollars of savings to our customers and substantial environmental benefits. Projected savings/benefits assume fuel costs and generation mix consistent with those included in various commission approved resource plans and generation need filings.
The following table details these wind projects: |
| | | | | | | | | | | |
Project Name | | Capacity (MW) | | State | | Estimated Year of Completion | | Ownership/PPA | | Regulatory Status |
Rush Creek | | 600 |
| | CO | | 2018 | | PSCo | | Approved by CPUC |
Freeborn | | 200 |
| | MN/IA | | 2020 | | NSP-Minnesota | | Approved by MPUC |
Blazing Star 1 | | 200 |
| | MN | | 2019 | | NSP-Minnesota | | Approved by MPUC |
Blazing Star 2 | | 200 |
| | MN | | 2020 | | NSP-Minnesota | | Approved by MPUC |
Lake Benton | | 100 |
| | MN | | 2019 | | NSP-Minnesota | | Approved by MPUC |
Foxtail | | 150 |
| | ND | | 2019 | | NSP-Minnesota | | Approved by MPUC |
Crowned Ridge | | 300 |
| | SD | | 2019 | | NSP-Minnesota | | Approved by MPUC |
Hale | | 478 |
| | TX | | 2019 | | SPS | | Pending PUCT & NMPRC Approval |
Sagamore | | 522 |
| | NM | | 2020 | | SPS | | Pending PUCT & NMPRC Approval |
Total Ownership | | 2,750 |
| | | | | | | | |
| | | | | | | | | | |
Crowned Ridge | | 300 |
| | SD | | 2019 | | PPA | | Approved by MPUC |
Clean Energy 1 | | 100 |
| | ND | | 2019 | | PPA | | Approved by MPUC |
Bonita | | 230 |
| | TX | | 2019 | | PPA | | Pending PUCT & NMPRC Approval |
Total PPA | | 630 |
| | | | | | | | |
Xcel Energy’s total capital investment for the proposed wind ownership projects is approximately $4.2 billion for 2017-2020.
NSP-Minnesota
PPA Terminations and Amendments — In June and July 2017, NSP-Minnesota filed requests with the MPUC and/or the NDPSC for several initiatives including changes to four PPAs to reduce future costs for customers. These actions include the following:
The MPUC is expectedtermination of a PPA with Benson Power LLC (Benson) for its 55 MW biomass facility in Benson, Minn. The termination of the Benson PPA requires FERC approval and would result in payments of $95 million to maketerminate the PPA and acquire the facility, as well as additional expenditures of approximately $26 million to temporarily operate then close the facility.
The termination of a decisionPPA with Laurentian Energy Authority I, LLC (Laurentian) for its 35 MW of biomass facilities in Hibbing and Virginia, Minn. The termination of the Laurentian PPA would result in $108.5 million of contract cancellation payments over six years.
The remaining two requested PPA changes involve a PPA extension for a 34 MW waste-to-energy facility at a price reflective of current market conditions and termination of another 12 MW waste-to-energy PPA.
NSP-Minnesota has requested recovery of all costs associated with these changes through the Fuel Clause Adjustment, including a return on NSP-Minnesota’s total investment in the PlanBenson transaction over the remaining life of the current PPA through 2028. If approved, these actions together are intended to provide approximately $653 million in late 2016.net cost savings to customers over the next 10 years.
Nuclear Power Operations
NSP-Minnesota owns two nuclear generating plants: the Monticello plant and the PI plant. See Note 14 of Xcel Energy Inc.’s Annual Report on Form 10-K for the year ended Dec. 31, 20152016 for further discussion regarding the nuclear generating plants. The circumstances set forth in Nuclear Power Operations and Waste Disposal included in Item 1 of Xcel Energy Inc.’s Annual Report on Form 10-K for the year ended Dec. 31, 20152016 and Nuclear Power Operations included in Item 2 of Xcel Energy Inc.’s Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2016,2017, appropriately represent, in all material respects, the current status of nuclear power operations, and are incorporated herein by reference.
NSP-Wisconsin
NSP-Wisconsin / American Transmission Company, LLC (ATC) - La Crosse to Madison, Wis. Transmission Line — In 2013, NSP-Wisconsin and ATC jointly filed an application with the PSCW for a certificate of public convenience and necessity (CPCN) for a new 345 kilovolt transmission line that would extend from La Crosse, Wis. to Madison, Wis. NSP-Wisconsin’s half of the line will be shared with three co-owners, Dairyland Power Cooperative, WPPI Energy and Southern Minnesota Municipal Power Agency-Wisconsin.
In 2015, Electric Fuel Cost Recovery — NSP-Wisconsin’s electric fuel coststhe PSCW issued its order approving a CPCN and route for the year ended Dec. 31, 2015 were lower than authorized in rates and outsideproject. Two groups have appealed the two percent annual tolerance band established inCPCN order to the La Crosse County Circuit Court (Circuit Court). In May 2017, the Circuit Court determined that the project was necessary, allowing construction to continue on a seven mile segment near La Crosse, Wis. The parties have appealed various aspects of the case to the Wisconsin fuel cost recovery rules, primarilyCourt of Appeals, which is currently pending. The CPCN remains in full effect unless one of the parties seeks and receives a stay from the court and posts a bond to cover damages the utilities may incur due to lower load as a resultdelay. The 180-mile project is expected to cost approximately $541 million. NSP-Wisconsin’s portion of mild weather, lower natural gas prices and lower purchased power pricesthe investment, which includes AFUDC, is estimated to be approximately $200 million. Construction on the line began in the MISO market. NSP-Wisconsin recorded a deferral of approximately $9.2 million through Dec. 31, 2015. In JulyJanuary 2016, the PSCW required NSP-Wisconsin to provide a direct refund of $9.5 million to customers. Accordingly, NSP-Wisconsin plans to apply the refund to customer bills based on usage in September 2016.with completion anticipated by late 2018.
2016 Electric Fuel Cost Recovery — NSP-Wisconsin’s electric fuel costs for the six monthsyear ended June 30,Dec. 31, 2016 were lower than authorized in rates and outside the two percent annual tolerance band established in the Wisconsin fuel cost recovery rules, primarily due to lower sales volume and lower purchased power costs coupled with moderate weather. Under the fuel cost recovery rules, NSP-Wisconsin may retain the amount of over-recovery up to two percent of authorized annual fuel costs, or approximately $3.5$3.4 million. However, NSP-Wisconsin must defer the amount of over-recovery in excess of the two percent annual tolerance band for future refund to customers. In July 2017, the PSCW required NSP-Wisconsin to provide a refund of $9.5 million to customers, which is expected to start in September 2017.
2017 Electric Fuel Cost Recovery — NSP-Wisconsin’s electric fuel costs for the six months ended June 30, 2017 were lower than authorized in rates and outside the two percent annual tolerance band established in the Wisconsin fuel cost recovery rules, primarily due to lower sales volume and lower purchased power costs coupled with moderate weather and generation sales into the MISO market. Under the fuel cost recovery rules, NSP-Wisconsin may retain the amount of over-recovery up to two percent of authorized annual fuel costs, or approximately $3.7 million. However, NSP-Wisconsin must defer the amount of over-recovery in excess of the two percent annual tolerance band for future refund to customers. Accordingly, NSP-Wisconsin recorded a deferral of approximately $3.3$3.0 million through June 30, 2016.2017. The amount of the deferral could increase or decrease based on actual fuel costs incurred for the remainder of the year. In the first quarter of 2017,2018, NSP-Wisconsin will file a reconciliation of 20162017 fuel costs with the PSCW. The amount of any potential refund is subject to review and approval by the PSCW, which is not expected until mid-2017.mid-2018.
PSCo
Colorado 2017 Electric Resource Plan — In May 2016, PSCo filed its 2017 Electric Resource Plan which identified approximately 600 MW of additional resources need by the summer of 2023. The CPUC is expected to consider the resource plan in two phases. In the first phase, the CPUC will examine the resource need to address peak demand periods, establish the resource acquisition period and determine modeling parameters used in resource selection for the second phase. The second phase would include solicitation of new resources. PSCo’s base plan, filed in Phase I, addressed various resources including 410 MW of combined cycle generation, 700 MW of combustion turbine generation and approximately 600 MW of customer sited solar generation. Additional scenarios to the plan include adding 600 MW of the Rush Creek Wind Project or 400 MW of wind or utility solar generation. The first phase of the Electric Resource Plan is anticipated to conclude in the second quarter of 2017 with the second phase to begin shortly after.
Brush to Castle Pines 345 Kilovolt (KV) Transmission Line — In April 2015, the CPUC granted a certificate of public convenience and necessity (CPCN) to construct a new 345 KV transmission line originating from Pawnee generating station, near Brush, CO to the Daniels Park substation, near Castle Pines, CO to be placed in service by May 2022. The estimated project cost is $178.3 million. The CPUC’s decision requires that project construction begin no earlier than May 2020 to meet resource needs by 2023.
In April 2016, PSCo filed a petition with the CPUC to request that construction begin as early as February 2017 for the project to be placed in service by October 2019. This project was proposed to support the interconnection of new generation at PSCo’s Pawnee or Missile Site substations. As the Rush Creek Wind Project interconnects at the Missile Site substation, parties have requested that PSCo’s petition to start construction in 2017 be consolidated with the Rush Creek Wind Project. The CPUC granted the request for consolidation and a decision on the petition is expected by November 2016.
Rush Creek Wind Ownership Proposal — In May 2016, the CPUC granted PSCo filed an applicationa CPCN to build, own and operate a 600 MW wind generation facility in Colorado at Rush Creek. The CPCN includes a hard cost-cap of $1.096 billion (including transmission costs) and a capital cost sharing mechanism between customers and PSCo of approximately $1 billion, including transmission investment.82.5 percent to customers and 17.5 percent to PSCo requested approval of the proposal by November 2016, in order to commencefor every $10 million the project timely and capturecomes in below the full production tax credit benefit for customers.cost-cap.
Colorado legislation allowsAll major contracts required to complete the project have been executed including the Vestas turbine supply and balance of plant agreements. Vestas PTC components for utilities to own up to 50 percentsafe harboring the facility have been fabricated and are currently being stored at Vestas facilities in Colorado. Construction of new renewable resources without a competitive bidding process if projects can be developed at a reasonable priceroads, collection systems, and demonstrate economic benefit. foundations began in April 2017.
In June 2017, PSCo believesfiled its proposed facility canreport required under Colorado rules that require PSCo to consider Best Value Employment Metrics (BVEM) as a factor in selecting contractors for generation projects. On July 5, 2017, several building trades filed comments arguing that PSCo’s Balance of Plant Contractor selection was inappropriate as it did not follow a more detailed and quantitative analysis. The trade unions argued that the BVEM deficiencies could be constructed atremedied through execution of a reasonable cost compared to the cost of similar renewable resources availableProject Labor Agreement on the market, andproject. PSCo filed its reply indicating that it will be able to demonstrate tosatisfied the CPUC and the independent evaluator that the proposed wind project meets the reasonable price and economic benefit standards. If approvedBVEM rule requirements on July 18, 2017, which was discussed by the CPUC the new facilityon July 20, 2017. The CPUC took no action other than to request reconsideration of whether bidder’s BVEM information can be provided as public information. PSCo is projected to go into service in December 2018.evaluating this request.
Intervenors responded to PSCo’s application and answer testimony was filed in July 2016. The next steps in the procedural schedule are as follows:
PSCo’s rebuttal testimony — Aug. 22, 2016; and
Hearings — Sept. 7-9, 2016.
Natural Gas Reserves Investments2016 Electric Resource Plan (ERP) — In JanuaryMay 2016, PSCo filed a request with the CPUCits 2016 ERP which included its estimated need for approval of a long-term natural gas procurement and price hedging framework. In June 2016, PSCo withdrew its application as it concluded that the litigation of the application would be contentious and, as structured, the framework would not address many of the concerns raised about the program by various intervenors. PSCo will continue to examine opportunities to mitigate price volatility for its customers.
Joint Dispatch Agreement (JDA) — In February 2016, the FERC approved a JDA between PSCo, Black Hills Colorado Electric Utility Company, LP and Platte River Power Authority. Through the JDA, energy is dispatched to economically serve the combined electric customer loads of the three systems. In circumstances where PSCo is the lowest cost producer, it will sell its excessadditional generation to other JDA counterparties. Margins on these sales would be shared among PSCoresources and its customers,proposal to acquire those resources through a competitive Request for Proposal (RFP) process. The CPUC issued its decision on Phase I in late April 2017, approving the Phase I modeling assumptions to be used in Phase II and directed PSCo to file an updated capacity need prior to issuing any RFPs. PSCo plans to update the range of which 10 percent wouldresource need to be retained by PSCo.considered within the competitive RFP process and issue the RFP in August 2017. The JDA parties estimateCPUC is expected to rule on the combined net benefits of the agreement would be approximately $4.5 million, annually. The agreementRFP results in a reduction in total energy costs for the parties,second quarter of which approximately $1.4 million would be allocated to PSCo’s customers. As part of the agreement, PSCo will earn a management fee to administer the JDA. Operations under the JDA are expected to begin in August 2016.2018.
Advanced Grid Intelligence and Security —In August 2016, PSCo filed a request withJuly 2017, the CPUC to approve a certificate of public convenience and necessity (CPCN)approved PSCo’s CPCN for implementation of its advanced grid initiative. The project incorporates installing advanced meters, implementing a combination of hardware and software applications to allow the distribution system to operate at a lower voltage (integrated volt-var optimization) and installing necessary communications infrastructure to implement this hardware.infrastructure. These major projects are expected to improve customer experience, enhance grid reliability and enable the implementation of new and innovative programs and rate structures.
In June 2017, the CPUC approved a settlement, which delayed the advanced meter deployment from 2017-2021 to 2019-2024. The estimatedtotal capital investment forcost of the project is currently estimated to be approximately $500$537 million which is largely included in Xcel Energy’s basefor 2017-2024. As a result of the settlement, approximately $120 million of capital forecast for 2016-2020. The project would be completed by 2021.investment was deferred to 2022-2024.
Decoupling Filing — OnIn July 12, 2016, PSCo filed a request with the CPUC to approve a partial decoupling mechanism, for a five year period, effective in 2017. The proposed decoupling adjustmentwhich would allow PSCo to adjust annual revenues based on changes in weather normalized average use per customer for the residential and small C&Icommercial classes.
In July 2017, the CPUC issued a decision which approved the following key decisions regarding decoupling:
Effective Jan. 1, 2018 through December 2023 (subject to establishing new rates in the next electric rate case);
Applicable to the residential class and small commercial class;
Based on total class revenues (subject to establishing the base period in the next electric rate case);
Based on actual sales; and
Subject to a soft cap of 3 percent on any annual adjustment.
PSCo plans to seek reconsideration of the order.
Boulder, Colo. Municipalization — In 2011, Boulder voters passed a ballot measure authorizing the formation of a municipal utility. In 2014, the Boulder City Council passed an ordinance to establish an electric utility. PSCo challenged the formation of this utility as premature because costs and system separation plans were not final. The proposed mechanism is intended to improveBoulder District Court dismissed the case for lack of subject matter jurisdiction. PSCo appealed this decision. In September 2016, the Colorado Court of Appeals vacated the District Court’s decision, and ultimately preserved PSCo’s ability to collect base rate revenueschallenge the utility formation. Boulder subsequently filed a Petition for Writ of Certiorari with the Colorado Supreme Court. The Supreme Court has not yet ruled whether it will exercise its discretion and review the petition.
In January 2015, the Boulder District Court affirmed a prior CPUC decision that Boulder cannot serve customers outside its city limits. The District Court also ruled the CPUC has jurisdiction over the transfer of any facilities to Boulder and how the systems are separated to preserve reliability, safety and effectiveness. In February 2015, the Boulder District Court also dismissed the condemnation action Boulder had filed. The CPUC must approve the separation plan before Boulder files its condemnation proceeding.
In July 2015, Boulder filed an application with the CPUC requesting approval of its proposed separation plan. PSCo filed a motion to dismiss Boulder’s application. The CPUC dismissed a portion of Boulder’s application, but allowed Boulder to supplement its application. Boulder filed its second supplemental application in September 2016. In March 2017, PSCo and other parties filed their testimony outlining their concerns about the Boulder separation plan and raised legal concerns about aspects of the plan. In April 2017, despite extensive negotiations between PSCo and Boulder, the Boulder City Council voted to continue litigation for municipalization. Also, the CPUC ordered Boulder to file a third supplemental separation plan clearly laying out Boulder’s proposal. Boulder proposed a plan that would cost approximately $75 million. Boulder proposed sharing of certain distribution and substation facilities and requested that PSCo be required to construct Boulder’s new facilities and finance the construction. In June 2017, PSCo and other intervenors filed alternatives to Boulder’s separation plan and opposed the sharing; contracting and financing aspects of the plan. Evidentiary hearings began July 26, 2017.
Mountain West Transmission Group (MWTG) — PSCo initiated discussions with six other transmission owners from the Rocky Mountain region to evaluate the merits of creating and operating pursuant to a joint transmission tariff that may increase wholesale market efficiency and improve regional transmission planning. In 2016, the MWTG established a non-binding memorandum of understanding to guide their process and issued a request for information to four established RTOs. In January 2017, the MWTG initiated preliminary discussions with the SPP to begin evaluation of the costs and benefits of MWTG participation in the event that average use per customer declines as a result of DSM, distributed generationSPP RTO. The CPUC has held informational meetings on certain issues including financial implications and other energy saving programs. The proposed decoupling mechanism is symmetricreliability. If PSCo were to move forward with RTO participation, CPUC and may resultFERC approval would be required. If approved, operations within the RTO would not be expected to begin until 2019, at the earliest. PSCo will evaluate its options later in potential refunds to customers if there were an increase in average use per customer. PSCo did not request that revenue be adjusted as a result of weather related sales fluctuations.2017 and beyond.
SPS
TUCO Substation to Yoakum County Substation to Hobbs Plant Substation 345 KV Transmission Line — In June 2015, SPS filed a certificate of convenience and necessity (CCN) withMarch 2016, the PUCT approved SPS’ Certificate of Convenience and Necessity (CCN) for the 33-mile Yoakum County to Texas/New Mexico State line portion of this 345 KV line project. The PUCT approved thisA CCN in March 2016. CCNs for the 111-mile TUCO to Yoakum County substation segment werewas filed in June 2016. CCNsAssuming approval of this CCN, this segment is scheduled to be in service in 2020. A 36-mile CCN for the Texas/New Mexico state line to Hobbs Plant segment are planned to bewas filed in the second half of 2016.June 2017. The estimated project cost for all three segments is approximately $242 million. This line is scheduled to be in service in 2019.
Hobbs Plant Substation to China Draw Substation 345 KV Transmission Line — In May 2016, SPS filed a CCN with the NMPRC for the Hobbs Plant to China Draw transmission line. The estimated project cost is approximately $163 million. The line is anticipated to be in service in 2018.
Wholesale Customer Participation in ERCOTElectric Reliability Council of Texas (ERCOT) — In March 2016, the PUCT Staff requested comments on Lubbock Power & Light’s (LP&L’s) proposal to transition a portion of its load (approximately 430 MW on a peak basis) to the ERCOT in June 2019. LP&L’s proposal would result in an approximate seven percent reduction of load in SPS, or a loss of approximately $18 million in wholesale transmission revenue based on 2015 revenue requirements.revenue. The remaining portion of LP&L’s load (approximately 170 MW) would continue to be served by SPS. Should LP&L join ERCOT, costs to SPS’ remaining customers would increase as SPS’ transmission revenue requirementcosts would be spread across a smaller base of customers. SPS intends to participate in the PUCT’s proceeding to protect its customers’ interests. LP&L has stated that it intends to file an application with the PUCT for a CCN for approval of the transfer by late 2016.
The PUCT has indicated there will be a two-step process regarding LP&L’s possible transfer to ERCOT. The first step will be a proceeding to determine whether the proposed transfer is in the public interest and to consider certain protections for non-LP&L customers who would be affected by LP&L’s transfer. If the PUCT determines the transfer is in the public interest, the second step will be for LP&L to file a CCN application for transmission facilities to connect with ERCOT. The PUCT has stated itasked SPP and ERCOT to perform reliability and economic studies to better understand the implications of LP&L’s proposal. SPP and ERCOT filed the studies on June 30, 2017. LP&L is expected to file an application with the PUCT for a public interest determination in August 2017. SPS intends to discuss, and possibly decide, issues regarding procedures, timing, scope of proceedings and types of analysesparticipate in August 2016.the PUCT’s processes to protect its customers’ interests.
In May 2016, SPS submitted a filing to the FERC seeking approval to impose an Interconnection Switching Fee (exit fee) associated with LP&L’s proposal. In June 2016, LP&L and Golden Spread Electric Cooperative, Inc. (Golden Spread) protested SPS’ filing. LP&L argued that SPS has no legal authority to impose a charge andNo final decision regarding LP&L’s departure would reduce certain costs to SPS and asked the FERC to reject the filing. Golden Spread asked FERC to clarify that if the exit feeor its potential timing is not approved, remaining wholesale transmission customers could challenge future recovery of SPS’ costs. Additionally, the PUCT asked FERC to hold the filing in abeyance pending the outcomeexpected until completion of the PUCT proceedings evaluating the LP&L proposal. SPS requested FERC to act on the matter by mid-September 2016.proceedings.
Summary of Recent Federal Regulatory Developments
The Pipeline and Hazardous Materials Safety Administration
Pipeline Safety Act — The Pipeline Safety, Regulatory Certainty, and Job Creation Act (Pipeline Safety Act) requires additional verification of pipeline infrastructure records by pipeline owners and operators to confirm the maximum allowable operating pressure of lines located in high consequence areas or more-densely populated areas. The DOT Pipeline and Hazardous Materials Safety Administration (PHMSA) recently released proposed rules that address this verification requirement along with a number of other significant changes to gas transmission regulations. These changes include requirements around use of automatic or remote-controlled shut-off valves; testing of certain previously untested transmission lines; and expanding integrity management requirements. The Pipeline Safety Act also includes a maximum penalty for violating pipeline safety rules of $2 million per day for related violations.
Xcel Energy recently commented on the proposed rules and continues to analyze the proposed rule changes as they relate to costs, current operations and financial results. PHMSA has indicated that they intend for the rules to go into effect in late 2016.
Xcel Energy has been taking actions that were intended to comply with the Pipeline Safety Act and any related PHMSA regulations as they become effective. PSCo and NSP-Minnesota can generally recover costs to comply with the transmission and distribution integrity management programs through the PSIA and GUIC riders, respectively.
FERC
The FERC has jurisdiction over rates for electric transmission service in interstate commerce and electricity sold at wholesale, hydro facility licensing, natural gas transportation, asset transactions and mergers, accounting practices and certain other activities of Xcel Energy Inc.’s utility subsidiaries and transmission-only subsidiaries, including enforcement of North American Electric Reliability Corporation mandatory electric reliability standards. State and local agencies have jurisdiction over many of Xcel Energy Inc.’s utility subsidiaries’ activities, including regulation of retail rates and environmental matters. See additional discussion in the summary of recent federal regulatory developments and public utility regulation sections of the Xcel Energy Inc. Annual Report on Form 10-K for the year ended Dec. 31, 20152016 and Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2016.2017. In addition to the matters discussed below, see Note 5 to the consolidated financial statements for a discussion of other regulatory matters.
Status of FERC Order, NewCommissioners — The FERC is normally comprised of five commissioners appointed by the President and confirmed by the Senate. There is currently only one sitting commissioner. Without three commissioners, the FERC does not have a quorum to act on contested matters. The lack of a quorum could affect the timing of FERC decisions on proposed rules or pending, newly submitted and future filings involving, among other things, contested electric rate matters and CPCNs for construction of interstate natural gas pipeline facilities to serve the utility subsidiaries. Xcel Energy does not expect any disruption in operations or material delay in decisions on contested matters pending before the FERC. President Trump has submitted nominations to fill three of the vacant seats and has indicated his intent to submit one additional nomination. The three submitted nominations are pending confirmation by the full Senate.
FERC ROE Policy — TheIn June 2014, the FERC has adopted a new two-step ROE methodology for electric utilities.utilities in an order issued in a complaint proceeding involving New England Transmission Owners (NETOs). The issue of how to apply the new FERC ROE methodology is beinghas been contested in various complaint proceedings. Twoproceedings, including two ROE complaints againstinvolving the MISO TOs, includingwhich includes NSP-Minnesota and NSP-Wisconsin, are pendingNSP-Wisconsin. In April 2017, the D.C. Circuit vacated and remanded the June 2014 ROE order. The D.C. Circuit found that the FERC action after issuance of initial decisions by ALJs in December 2015had not properly determined that the ROE authorized for NETOs prior to June 2014 was unjust and June 2016, respectively.unreasonable. The D.C. Circuit also found that the FERC is not expectedfailed to issue orders in any ofjustify the litigatednew ROE complaint proceedings until later in 2016 or 2017.methodology. The FERC has yet to act on the D.C. Circuit’s decision and cannot act without a quorum. See Note 5 to the consolidated financial statements for discussion of the D.C. Circuit’s decision and the impact on the MISO ROE Complaints.
SPS Asset TransferPublic Utility Regulatory Policies Act (PURPA) Enforcement Complaint against CPUC —In December 2016, Sustainable Power Group, LLC (sPower) petitioned the FERC to Xcel Energy Southwest Transmission Company, LLC (XEST) —initiate an enforcement action in federal court against the CPUC under PURPA. The petition asserts that a December 2016 CPUC ruling, which indicated that a qualifying facility must be a successful bidder in a PSCo resource acquisition bidding process, violated PURPA and FERC rules. In 2015January 2017, PSCo filed a motion to intervene and protest, arguing that the FERC should decline the petition. The CPUC filed a similar pleading. sPower has proposed to construct 800 MW of solar generation and 700 MW of wind generation in Colorado and seeks to require PSCo to contract for these resources under PURPA. If sPower were to prevail, PSCo’s ability to select generation resources through early 2016, SPS submitted filingscompetitive bidding would be negatively affected. However, due to a lack of quorum at the FERC, the FERC did not act on that petition within the sixty days contemplated by PURPA. Subsequently sPower filed a complaint for declaratory and injunctive relief in the United States District Court for the District of Colorado (District Court) requesting that the court find the bidding requirement in the CPUC qualifying facility rules to be unlawful. PSCo has intervened in that proceeding and the CPUC has filed a motion to dismiss. In June 2017, the United States Magistrate Judge (Magistrate) issued a recommendation to the FERC, PUCT, NMPRC and Kansas Corporation Commission (KCC) seeking approvalDistrict Court that sPower’s complaint be dismissed because sPower failed to transfer ownershipestablish that it faced a substantial risk of SPS’ 345 KV transmission assets in Kansas and Oklahoma to XEST at net book value of approximately $103 million.harm. The Magistrate’s recommendation is pending before the District Court.
Solar Gardens Investment
In June 2016, SPSJuly 2017, a newly formed subsidiary of Xcel Energy signed an agreement with a solar developer to construct and XEST made filingsoperate approximately 19 MW of new community solar gardens in Minnesota serving existing NSP-Minnesota customers. The projects are expected to withdraw the pending PUCT, NMPRC, KCCachieve commercial operations in 2017 and FERC applications due to the relatively slow pace of Order 1000 competitive transmission development projects in the SPP. All withdrawal requests have been granted, and the matters are now closed.
Formula Rate Treatment of Accumulated Deferred Income Taxes (ADIT) — In 2015, the MISO TOs, including NSP-Minnesota and NSP-Wisconsin, SPS and PSCo filed separate changes to their transmission formula rates and the PSCo production formula rate to modify the treatment of ADIT to comply with IRS guidance regarding how ADIT must be reflected in formula rates using future test years and a true-up. The filings were intended to ensure that NSP-Minnesota, NSP-Wisconsin, PSCo and SPS are in compliance with IRS rules and may continue to use accelerated tax depreciation.
Golden Spread protested the proposed changes to the SPS transmission formula rate. In December 2015, the FERC partially accepted the proposed NSP-Minnesota and NSP-Wisconsin transmission formula rate changes, but rejected the changes regarding the treatment of ADIT in the formula rate true-up. NSP-Minnesota and NSP-Wisconsin sought clarification or rehearing of the FERC order partially rejecting the NSP System filing. In April 2016, FERC accepted the SPS and PSCo formula rate changes, subject to a compliance filing. SPS and PSCo submitted the compliance filings in May 2016. FERC action on the NSP-Minnesota and NSP-Wisconsin request for clarification remains pending.2018.
Derivatives, Risk Management and Market Risk
Xcel Energy Inc. and its subsidiaries are exposed to a variety of market risks in the normal course of business. Market risk is the potential loss that may occur as a result of adverse changes in the market or fair value of a particular instrument or commodity. All financial and commodity-related instruments, including derivatives, are subject to market risk. See Note 8 to the consolidated financial statements for further discussion of market risks associated with derivatives.
Xcel Energy is exposed to the impact of adverse changes in price for energy and energy-related products, which is partially mitigated by the use of commodity derivatives. In addition to ongoing monitoring and maintaining credit policies intended to minimize overall credit risk, when necessary, management takes steps to mitigate changes in credit and concentration risks associated with its derivatives and other contracts, including parental guarantees and requests of collateral. While Xcel Energy expects that the counterparties will perform under the contracts underlying its derivatives, the contracts expose Xcel Energy to some credit and non-performance risk.
Though no material non-performance risk currently exists with the counterparties to Xcel Energy’s commodity derivative contracts, distress in the financial markets may in the future impact that risk to the extent it impacts those counterparties. Distress in the financial markets may also impact the fair value of the securities in the nuclear decommissioning fund and master pension trust, as well as Xcel Energy’s ability to earn a return on short-term investments of excess cash.
Commodity Price Risk — Xcel Energy Inc.’s utility subsidiaries are exposed to commodity price risk in their electric and natural gas operations. Commodity price risk is managed by entering into long- and short-term physical purchase and sales contracts for electric capacity, energy and energy-related products and for various fuels used in generation and distribution activities. Commodity price risk is also managed through the use of financial derivative instruments. Xcel Energy’s risk management policy allows it to manage commodity price risk within each rate-regulated operation to the extent such exposure exists.
Wholesale and Commodity Trading Risk — Xcel Energy Inc.’s utility subsidiaries conduct various wholesale and commodity trading activities, including the purchase and sale of electric capacity, energy, energy-related instruments and energy-related instruments.natural gas-related instruments, including derivatives. Xcel Energy’s risk management policy allows management to conduct these activities within guidelines and limitations as approved by its risk management committee, which is made up of management personnel not directly involved in the activities governed by this policy.
At June 30, 2016,2017, the fair values by source for net commodity trading contract assets were as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Futures / Forwards |
(Thousands of Dollars) | | Source of Fair Value | | Maturity Less Than 1 Year | | Maturity 1 to 3 Years | | Maturity 4 to 5 Years | | Maturity Greater Than 5 Years | | Total Futures/ Forwards Fair Value |
NSP-Minnesota | | 1 |
| | $ | 2,378 |
| | $ | 6,871 |
| | $ | 1,204 |
| | $ | 101 |
| | $ | 10,554 |
|
PSCo | | 1 |
| | 332 |
| | 47 |
| | — |
| | — |
| | 379 |
|
| | | | $ | 2,710 |
| | $ | 6,918 |
| | $ | 1,204 |
| | $ | 101 |
| | $ | 10,933 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Futures / Forwards |
(Thousands of Dollars) | | Source of Fair Value | | Maturity Less Than 1 Year | | Maturity 1 to 3 Years | | Maturity 4 to 5 Years | | Maturity Greater Than 5 Years | | Total Futures/ Forwards Fair Value |
NSP-Minnesota | | 1 |
| | $ | 1,928 |
| | $ | 6,534 |
| | $ | 1,550 |
| | $ | — |
| | $ | 10,012 |
|
PSCo | | 1 |
| | 396 |
| | (11 | ) | | — |
| | — |
| | 385 |
|
PSCo | | 2 |
| | 1 |
| | — |
| | — |
| | — |
| | 1 |
|
| | | | $ | 2,325 |
| | $ | 6,523 |
| | $ | 1,550 |
| | $ | — |
| | $ | 10,398 |
|
| | | | Options | | Options |
(Thousands of Dollars) | | Source of Fair Value | | Maturity Less Than 1 Year | | Maturity 1 to 3 Years | | Maturity 4 to 5 Years | | Maturity Greater Than 5 Years | | Total Futures/ Forwards Fair Value | | Source of Fair Value | | Maturity Less Than 1 Year | | Maturity 1 to 3 Years | | Maturity 4 to 5 Years | | Maturity Greater Than 5 Years | | Total Futures/ Forwards Fair Value |
NSP-Minnesota | | 2 |
| | $ | (839 | ) | | $ | — |
| | $ | — |
| | $ | — |
| | $ | (839 | ) | | 2 |
| | $ | (512 | ) | | $ | 2,129 |
| | $ | 3,042 |
| | $ | — |
| | $ | 4,659 |
|
1 — Prices actively quoted or based on actively quoted prices.
2 — Prices based on models and other valuation methods.
Changes in the fair value of commodity trading contracts before the impacts of margin-sharing mechanisms were as follows:
| | | | Six Months Ended June 30 | | Six Months Ended June 30 |
(Thousands of Dollars) | | 2016 | | 2015 | | 2017 | | 2016 |
Fair value of commodity trading net contract assets outstanding at Jan. 1 | | $ | 11,040 |
| | $ | 21,811 |
| | $ | 9,771 |
| | $ | 11,040 |
|
Contracts realized or settled during the period | | (1,406 | ) | | 3,472 |
| | (5,998 | ) | | (1,406 | ) |
Commodity trading contract additions and changes during period | | 460 |
| | (6,035 | ) | |
Commodity trading contract additions and changes during the period | | | 11,284 |
| | 460 |
|
Fair value of commodity trading net contract assets outstanding at June 30 | | $ | 10,094 |
| | $ | 19,248 |
| | $ | 15,057 |
| | $ | 10,094 |
|
At June 30, 2017, a 10 percent increase in market prices for commodity trading contracts would increase pretax income from continuing operations by approximately $0.3 million, whereas a 10 percent decrease would decrease pretax income from continuing operations by approximately $0.8 million. At June 30, 2016, a 10 percent increase in market prices for commodity trading contracts would increase pretax income from continuing operations by approximately $0.1 million, whereas a 10 percent decrease would decrease pretax income from continuing operations by approximately $0.1 million. At June 30, 2015, a 10 percent increase in market prices for commodity trading contracts would increase pretax income from continuing operations by approximately $0.4 million, whereas a 10 percent decrease would decrease pretax income from continuing operations by approximately $0.4 million.
Xcel Energy Inc.’s utility subsidiaries’ wholesale and commodity trading operations measure the outstanding risk exposure to price changes on transactions, contracts and obligations that have been entered into, but not closed, including transactions that are not recorded at fair value, using an industry standard methodology known as Value at Risk (VaR). VaR expresses the potential change in fair value on the outstanding transactions, contracts and obligations over a particular period of time under normal market conditions.
The VaRs for the NSP-Minnesota and PSCo commodity trading operations, calculated on a consolidated basis using a Monte Carlo simulation with a 95 percent confidence level and a one-day holding period, were as follows:
| | (Millions of Dollars) | | Three Months Ended June 30 | | VaR Limit | | Average | | High | | Low | | Three Months Ended June 30 | | VaR Limit | | Average | | High | | Low |
2017 | | | $ | 0.26 |
| | $ | 3.00 |
| | $ | 0.38 |
| | $ | 0.66 |
| | $ | 0.04 |
|
2016 | | $ | 0.22 |
| | $ | 3.00 |
| | $ | 0.22 |
| | $ | 0.38 |
| | $ | 0.06 |
| | 0.22 |
| | 3.00 |
| | 0.22 |
| | 0.38 |
| | 0.06 |
|
2015 | | 0.47 |
| | 3.00 |
| | 0.23 |
| | 1.30 |
| | 0.06 |
| |
Nuclear Fuel Supply — NSP-Minnesota is scheduled to take delivery of approximately 87 percent of its 2016 and approximately 13 percent of its 2017 and approximately 54 percent of its 2018 enriched nuclear material requirements from sources that could be impacted by events in Ukraine and sanctions against Russia. Alternate potential sources are expected to provide the flexibility to manage NSP-Minnesota’s nuclear fuel supply to ensure that plant availability and reliability will not be negatively impacted in the near-term. Long-term, through 2024, NSP-Minnesota is scheduled to take delivery of approximately 3631 percent of its average enriched nuclear material requirements from sources that could be impacted by events in Ukraine and extended sanctions against Russia. NSP-Minnesota is closely following the progression of these events and will periodically assess if further actions are required to assure a secure supply of enriched nuclear material.
Separately, NSP-Minnesota has enriched nuclear fuel materials in process with Westinghouse Electric Corporation (Westinghouse). Westinghouse filed for Chapter 11 bankruptcy protection in March 2017. NSP-Minnesota owns materials in Westinghouse’s inventory and has contracts in place under which Westinghouse will provide certain services during an upcoming outage at PI. Westinghouse has indicated its intention to perform under the arrangements. Based on Westinghouse’s stated intent and the interim financing secured to fund its on-going operations, NSP-Minnesota does not expect the bankruptcy to materially impact NSP-Minnesota’s operational or financial performance.
Interest Rate Risk — Xcel Energy is subject to the risk of fluctuating interest rates in the normal course of business. Xcel Energy’s risk management policy allows interest rate risk to be managed through the use of fixed rate debt, floating rate debt and interest rate derivatives such as swaps, caps, collars and put or call options.
At June 30, 20162017 and 2015,2016, a 100-basis-point change in the benchmark rate on Xcel Energy’s variable rate debt would impact pretax interest expense annually by approximately $5.9$9.4 million and $4.5$5.9 million, respectively. See Note 8 to the consolidated financial statements for a discussion of Xcel Energy Inc. and its subsidiaries’ interest rate derivatives.
NSP-Minnesota also maintains a nuclear decommissioning fund, as required by the NRC. The nuclear decommissioning fund is subject to interest rate risk and equity price risk. At June 30, 2016,2017, the fund was invested in a diversified portfolio of cash equivalents, debt securities, equity securities, and other investments. These investments may be used only for activities related to nuclear decommissioning. Given the purpose and legal restrictions on the use of nuclear decommissioning fund assets, realized and unrealized gains on fund investments over the life of the fund are deferred as an offset of NSP-Minnesota’s regulatory asset for nuclear decommissioning costs. Consequently, any realized and unrealized gains and losses on securities in the nuclear decommissioning fund, including any other-than-temporary impairments, are deferred as a component of the regulatory asset for nuclear decommissioning. Since the accounting for nuclear decommissioning recognizes that costs are recovered through rates, fluctuations in equity prices or interest rates affecting the nuclear decommissioning fund do not have ana direct impact on earnings.
Credit Risk — Xcel Energy Inc. and its subsidiaries are also exposed to credit risk. Credit risk relates to the risk of loss resulting from counterparties’ nonperformance on their contractual obligations. Xcel Energy Inc. and its subsidiaries maintain credit policies intended to minimize overall credit risk and actively monitor these policies to reflect changes and scope of operations.
At June 30, 2017, a 10 percent increase in commodity prices would have resulted in an increase in credit exposure of $18.1 million, while a decrease in prices of 10 percent would have resulted in an increase in credit exposure of $2.1 million. At June 30, 2016, a 10 percent increase in commodity prices would have resulted in a decrease in credit exposure of $9.2 million, while a decrease in prices of 10 percent would have resulted in an increase in credit exposure of $16.4 million. At June 30, 2015, a 10 percent increase in commodity prices would have resulted in a decrease in credit exposure of $3.4 million, while a decrease in prices of 10 percent would have resulted in an increase in credit exposure of $4.5 million.
Xcel Energy Inc. and its subsidiaries conduct standard credit reviews for all counterparties. Xcel Energy employs additional credit risk control mechanisms when appropriate, such as letters of credit, parental guarantees, standardized master netting agreements and termination provisions that allow for offsetting of positive and negative exposures. Credit exposure is monitored and, when necessary, the activity with a specific counterparty is limited until credit enhancement is provided. Distress in the financial markets could increase Xcel Energy’s credit risk.
Fair Value Measurements
Xcel Energy follows accounting and disclosure guidance on fair value measurements that contains a hierarchy for inputs used in measuring fair value and requires disclosure of the observability of the inputs used in these measurements. See Note 8 to the consolidated financial statements for further discussion of the fair value hierarchy and the amounts of assets and liabilities measured at fair value that have been assigned to Level 3.
Commodity Derivatives — Xcel Energy continuously monitors the creditworthiness of the counterparties to its commodity derivative contracts and assesses each counterparty’s ability to perform on the transactions set forth in the contracts. Given this assessment and the typically short duration of these contracts, the impact of discounting commodity derivative assets for counterparty credit risk was not material to the fair value of commodity derivative assets at June 30, 2016.2017. Adjustments to fair value for credit risk of commodity trading instruments are recorded in electric revenues. Credit risk adjustments for other commodity derivative instruments are deferred as other comprehensive income (OCI) or regulatory assets and liabilities. The classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms. Xcel Energy also assesses the impact of its own credit risk when determining the fair value of commodity derivative liabilities. The impact of discounting commodity derivative liabilities for credit risk was immaterial to the fair value of commodity derivative liabilities at June 30, 2016.2017.
Commodity derivative assets and liabilities assigned to Level 3 typically consist of FTRs, as well as forwards and options that are long-term in nature. Level 3 commodity derivative assets and liabilities represent 1.53.5 percent and 8.59.8 percent of total assets and liabilities, respectively, measured at fair value at June 30, 2016.2017.
Determining the fair value of FTRs requires numerous management forecasts that vary in observability, including various forward commodity prices, retail and wholesale demand, generation and resulting transmission system congestion. Given the limited observability of management’s forecasts for several of these inputs, these instruments have been assigned a Level 3. Level 3 commodity derivatives assets and liabilities included $28.1$68.1 million and $3.6$4.0 million of estimated fair values, respectively, for FTRs held at June 30, 2016.2017.
Determining the fair value of certain commodity forwards and options can require management to make use of subjective price and volatility forecasts which extend to periods beyond those readily observable on active exchanges or quoted by brokers. When less observable forward price and volatility forecasts are significant to determining the value of commodity forwards and options, these instruments are assigned to Level 3. There were immaterial$5.2 million in Level 3 commodity forwardsderivative assets and no liabilities for options held at June 30, 2016.2017. There were immaterial Level 3 forwards held at June 30, 2017.
Liquidity and Capital Resources
| | | | Six Months Ended June 30 | | Six Months Ended June 30 |
(Millions of Dollars) | | 2016 | | 2015 | | 2017 | | 2016 |
Cash provided by operating activities | | $ | 1,413 |
| | $ | 1,509 |
| | $ | 1,292 |
| | $ | 1,425 |
|
Net cash provided by operating activities decreased $96$133 million for the six months ended June 30, 20162017 compared with the six months ended June 30, 2015.2016. The decrease was primarily due to lower tax refunds received and the timing of vendor payments, customer receipts, refunds, and recovery onof certain electric and natural gas riders, and incentive programs, partially offset by timing of vendor payments and higher net income, excluding amounts related to non-cash operating activities (e.g., depreciation and deferred tax expenses and a charge related to the Monticello LCM/EPU project in 2015)expenses).
| | | | Six Months Ended June 30 | | Six Months Ended June 30 |
(Millions of Dollars) | | 2016 | | 2015 | | 2017 | | 2016 |
Cash used in investing activities | | $ | (1,443 | ) | | $ | (1,431 | ) | | $ | (1,474 | ) | | $ | (1,443 | ) |
Net cash used in investing activities increased $12$31 million for the six months ended June 30, 20162017 compared with the six months ended June 30, 2015.2016. The increase was primarily attributable to higher capital expenditures related to the establishment of rabbi trusts in 2016 and the impact of higher insurance proceeds received in 2015,Rush Creek wind generation facility, partially offset by higher payments for capital expenditureslower rabbi trust investments in 2015 related to the completion of certain generation and transmission projects.2017.
| | | | Six Months Ended June 30 | | Six Months Ended June 30 |
(Millions of Dollars) | | 2016 | | 2015 | | 2017 | | 2016 |
Cash provided by (used in) financing activities | | $ | 23 |
| | $ | (22 | ) | |
Cash provided by financing activities | | | $ | 159 |
| | $ | 10 |
|
Net cash provided by financing activities was $23increased $149 million for the six months ended June 30, 20162017 compared with net cash used in financing activities of $22 million for the six months ended June 30, 2015, or a change of $45 million.2017. The differenceincrease was primarily dueattributable to higher debt issuances and lower repayments of short-termlong-term debt, partially offset by repayments of long-termlower debt proceeds (net) year over year and higher dividend payments in 2016.payments.
Capital Requirements
Xcel Energy expects to meet future financing requirements by periodically issuing short-term debt, long-term debt, common stock, hybrid and other securities to maintain desired capitalization ratios.
Regulation of Derivatives — In July 2010, financial reform legislation was passed that provides for the regulation of derivative transactions amongst other provisions. Provisions within the bill provide the Commodity Futures Trading Commission (CFTC) and the SEC with expanded regulatory authority over derivative and swap transactions. The CFTC ruled that swap dealing activity conducted by entities for the preceding 12 months under a notional limit, initially set at $8 billion, will fall under the general de minimis threshold and will not subject an entity to registering as a swap dealer. The de minimis threshold is scheduled to be reduced to $3 billion in 2017.2018. Xcel Energy’s current and projected swap activity is well below these de minimis thresholds. The bill also contains provisions that exempt certain derivatives end users from much of the clearing and margin requirements and Xcel Energy’s Board of Directors has renewed the end-user exemption on an annual basis. Xcel Energy is currently meeting all reporting requirements and transaction restrictions.
Southwest Power Pool Inc. (SPP) FTR Margining Requirements — In SPP, the process for TOs involves the receipt of Auction Revenue Rights (ARRs) and, if elected by the TO, conversion of those ARRs to firm FTRs. SPP requires that the TO post collateral for the conversion of ARRs to FTRs. At June 30, 2017, SPS had a $2.5 million letter of credit posted with SPP for the annual FTR auction, which was a reduction from the initial requirement of $15 million.
Pension Fund — Xcel Energy’s pension assets are invested in a diversified portfolio of domestic and international equity securities, short-term to long-duration fixed income securities, and alternative investments, including private equity, real estate, hedge fund of funds and commodity investments.
In January 2016,2017, contributions of $125.0$150.0 million were made across four of Xcel Energy’s pension plans;
In 2015,2016, contributions of $90.0$125.2 million were made across four of Xcel Energy’s pension plans; and
For future years, we anticipate contributions will be made as necessary.deemed appropriate based on evaluation of various factors including the funded status of the plans, minimum funding requirements, interest rates and expected investment returns.
Capital Sources
Short-Term Funding Sources — Xcel Energy uses a number of sources to fulfill short-term funding needs, including operating cash flow, notes payable, commercial paper and bank lines of credit. The amount and timing of short-term funding needs depend in large part on financing needs for construction expenditures, working capital and dividend payments.
Short-Term Investments — Xcel Energy Inc., NSP-Minnesota, NSP-Wisconsin, PSCo and SPS maintain cash operating and short-term investment accounts. At June 30, 2016,2017, approximately $9.1$1.8 million of cash was held in these accounts.
Amended Credit AgreementsFacilities — - In June 2016,NSP-Minnesota, NSP-Wisconsin, PSCo, SPS and Xcel Energy Inc., NSP-Minnesota, NSP-Wisconsin, PSCo and SPS entered into amended each have five-year credit agreements with a syndicate of banks. The total borrowing limit under the amended credit agreements remained at $2.75 billion. The amended credit agreements have substantially the same terms and conditions as the prior credit agreements with the following exceptions:
The maturity extended from October 2019 to June 2021.
The Eurodollar borrowing margins on these lines of credit were reduced to a range of 75 to 150 basis points per year, from a range of 87.5 to 175 basis points per year, based upon applicable long-term credit ratings.
The commitment fees, calculated on the unused portionsize of the lines of credit were reduced to a range of 6 to 22.5 basis points per year, from a range of 7.5 to 27.5 basis points per year, also based on applicable long-termfacilities is $2.75 billion and each credit ratings.facility terminates in June 2021.
NSP-Minnesota, PSCo, SPS and Xcel Energy Inc., NSP-Minnesota, PSCo, and SPS each have the right to request an extension of the revolving credit facility termination date for two additional one-year periods. NSP-Wisconsin has the right to request an extension of the revolving credit facility termination date for an additional one-year period. All extension requests are subject to majority bank group approval.
Credit Facilities —As of July 25, 2016,24, 2017, Xcel Energy Inc. and its utility subsidiaries had the following committed credit facilities available to meet liquidity needs: | | (Millions of Dollars) | | Credit Facility (a) | | Drawn (b) | | Available | | Cash | | Liquidity | | Credit Facility (a) | | Drawn (b) | | Available | | Cash | | Liquidity |
Xcel Energy Inc. | | $ | 1,000 |
| | $ | 401 |
| | $ | 599 |
| | $ | — |
| | $ | 599 |
| | $ | 1,000 |
| | $ | 483 |
| | $ | 517 |
| | $ | 5 |
| | $ | 522 |
|
PSCo | | 700 |
| | 98 |
| | 602 |
| | 1 |
| | 603 |
| | 700 |
| | 3 |
| | 697 |
| | 1 |
| | 698 |
|
NSP-Minnesota | | 500 |
| | 18 |
| | 482 |
| | 1 |
| | 483 |
| | 500 |
| | 145 |
| | 355 |
| | 1 |
| | 356 |
|
SPS | | 400 |
| | 95 |
| | 305 |
| | 1 |
| | 306 |
| | 400 |
| | 101 |
| | 299 |
| | — |
| | 299 |
|
NSP-Wisconsin | | 150 |
| | 23 |
| | 127 |
| | — |
| | 127 |
| | 150 |
| | 70 |
| | 80 |
| | — |
| | 80 |
|
Total | | $ | 2,750 |
| | $ | 635 |
| | $ | 2,115 |
| | $ | 3 |
| | $ | 2,118 |
| | $ | 2,750 |
| | $ | 802 |
| | $ | 1,948 |
| | $ | 7 |
| | $ | 1,955 |
|
| |
(a) | These credit facilities expire in June 2021. |
| |
(b) | Includes outstanding commercial paper and letters of credit. |
Commercial Paper — Xcel Energy Inc., NSP-Minnesota, NSP-Wisconsin, PSCo and SPS each have individual commercial paper programs. The authorized levels for these commercial paper programs are:
$1 billion for Xcel Energy Inc.;
$700 million for PSCo;
$500 million for NSP-Minnesota;
$400 million for SPS; and
$150 million for NSP-Wisconsin.
Commercial paper outstanding for Xcel Energy was as follows:
|
| | | | | | | | |
(Amounts in Millions, Except Interest Rates) | | Three Months Ended June 30, 2016 | | Year Ended Dec. 31, 2015 |
Borrowing limit | | $ | 2,750 |
| | $ | 2,750 |
|
Amount outstanding at period end | | 447 |
| | 846 |
|
Average amount outstanding | | 404 |
| | 601 |
|
Maximum amount outstanding | | 841 |
| | 1,360 |
|
Weighted average interest rate, computed on a daily basis | | 0.72 | % | | 0.48 | % |
Weighted average interest rate at period end | | 0.80 |
| | 0.82 |
|
|
| | | | | | | | |
(Amounts in Millions, Except Interest Rates) | | Three Months Ended June 30, 2017 | | Year Ended Dec. 31, 2016 |
Borrowing limit | | $ | 2,750 |
| | $ | 2,750 |
|
Amount outstanding at period end | | 784 |
| | 392 |
|
Average amount outstanding | | 778 |
| | 485 |
|
Maximum amount outstanding | | 1,247 |
| | 1,183 |
|
Weighted average interest rate, computed on a daily basis | | 1.28 | % | | 0.74 | % |
Weighted average interest rate at period end | | 1.49 |
| | 0.95 |
|
Money Pool — Xcel Energy received FERC approval to establish a utility money pool arrangement with the utility subsidiaries, subject to receipt of required state regulatory approvals. The utility money pool allows for short-term investments in and borrowings between the utility subsidiaries. Xcel Energy Inc. may make investments in the utility subsidiaries at market-based interest rates; however, the money pool arrangement does not allow the utility subsidiaries to make investments in Xcel Energy Inc. The money pool balances are eliminated in consolidation.
NSP-Minnesota, PSCo and SPS participate in the money pool pursuant to approval from their respective state regulatory commissions. NSP-Wisconsin does not participate in the money pool.
Financing — Xcel Energy issues debt and equity securities to refinance retiring maturities, reduce short-term debt, fund capital programs, infuse equity in subsidiaries, fund asset acquisitions and for other general corporate purposes.
During 2017, Xcel Energy Inc.’s and its utility subsidiaries’ 2016 financing plans reflectsubsidiaries issued and anticipate issuing the following:
In March, Xcel Energy Inc.PSCo issued $400 million of 2.4 percent senior notes due March 15, 2021 and $350 million of 3.3 percent senior notes due June 1, 2025;
In May, NSP-Minnesota issued $350 million of 3.6 percent first mortgage bonds due May 15, 2046;
In June, PSCo issued $250 million of 3.553.80 percent first mortgage bonds due June 15, 2046;2047;
Xcel Energy Inc. plans to issue approximately $300 million of senior unsecured bonds in the fourth quarter;
NSP-Minnesota plans to issue approximately $600 million of first mortgage bonds in the third quarter;
NSP-Wisconsin plans to issue approximately $100 million of first mortgage bonds in the fourth quarter; and
SPS plans to issue approximately $300$450 million of first mortgage bonds in the third quarter.
Financing plans are subject to change, depending on capital expenditures, internal cash generation, market conditions and other factors.
Off-Balance-Sheet Arrangements
Xcel Energy does not have any off-balance-sheet arrangements, other than those currently disclosed, that have or are reasonably likely to have a current or future effect on financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Earnings Guidance and Long-Term EPS and Dividend Growth Rate Objectives
Xcel Energy’s 20162017 GAAP and ongoing earnings guidance is $2.12$2.25 to $2.27$2.35 per share.(a) Key assumptions related to 20162017 earnings are detailed below:
Constructive outcomes in all rate case and regulatory proceedings.
Normal weather patterns are experienced for the remainder of the year.
Weather-normalized retail electric utility sales are projected to decrease by approximatelyincrease 0 percent to 0.5 percent.
Weather normalizedWeather-normalized retail firm natural gas sales are projected to be relatively flat.increase 0 percent to 0.5 percent.
Capital rider revenue is projected to increase by $40$50 million to $50$60 million over 20152016 levels.
The change in is largely due to the level of PTC, which flows back to customers.
O&M expenses isare projected to be within a range of 0 percent to 1 percent from 2015 levels.flat.
Depreciation expense is projected to increase approximately $200$180 million to $190 million over 20152016 levels. Approximately $20 million of the increasedThe change in depreciation expense andis largely due to changes in the amortization will be recovered throughof the renewable development fund, rider (not includedwhich is offset in the capital rider) in Minnesota.revenue and will not have an impact on earnings.
Property taxes are projected to increase approximately $40$0 million to $50$10 million over 20152016 levels.
Interest expense (net of AFUDC — debt) is projected to increase $40$15 million to $50$25 million over 20152016 levels.
AFUDC — equity is projected to increase approximately $0$5 million to $10$15 million from 20152016 levels.
The ETR is projected to be approximately 3431 percent to 3633 percent. The change is largely due to the level of PTC, which flows back to customers.
Average common stock and equivalents are projected to be approximately 509 million shares.
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(a) | Ongoing earnings could differ from those prepared in accordance with GAAP for unplanned and/or unknown adjustments. Xcel Energy is unable to forecast if any of these items will occur or provide a quantitative reconciliation of the guidance for ongoing diluted EPS to corresponding GAAP diluted EPS. |
Long-Term EPS and Dividend Growth Rate Objectives—
Xcel Energy expects to deliver an attractive total return to our
shareholders through a combination of earnings growth and dividend yield, based on the following long-term objectives:
Deliver long-term annual EPS growth of 4 percent to 6 percent, based on ongoing 2015 EPS of $2.10, which was the mid-point of Xcel Energy’s 2015 ongoing guidance range;percent;
Deliver annual dividend increases of 5 percent to 7 percent;
Target a dividend payout ratio of 60 percent to 70 percent; and
Maintain senior unsecured debt credit ratings in the BBB+ to A range.
Ongoing earnings is calculated using net income and adjusting for certain nonrecurring or infrequent items that are, in management’s view, not reflective of ongoing operations.
Item 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Management’s Discussion and Analysis — Derivatives, Risk Management and Market Risk under Item 2.
Item 4 — CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Xcel Energy maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms. In addition, the disclosure controls and procedures ensure that information required to be disclosed is accumulated and communicated to management, including the chief executive officer (CEO) and chief financial officer (CFO), allowing timely decisions regarding required disclosure. As of June 30, 2016,2017, based on an evaluation carried out under the supervision and with the participation of Xcel Energy’s management, including the CEO and CFO, of the effectiveness of its disclosure controls and the procedures, the CEO and CFO have concluded that Xcel Energy’s disclosure controls and procedures were effective.
Internal Control Over Financial Reporting
Effective JanuaryIn 2016, Xcel Energy implemented the general ledger modules, as well as initiated deployment of work management systems modules, of a new enterprise resource planning (ERP) system to improve certain financial and related transaction processes. During 2016 and 2017, Xcel Energy will continue implementingis continuing to implement additional modules and expects to beginincluding the conversion of existing work management systems to this new ERP system.same system during 2017. In connection with this ongoing implementation, Xcel Energy has updated and will continueis updating its internal control over financial reporting, as necessary, to accommodate modifications to its business processes and accounting procedures.systems. Xcel Energy does not expect thebelieve that this implementation of the additional modules to materially affectwill have an adverse effect on its internal control over financial reporting.
No changes in Xcel Energy’s internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, Xcel Energy’s internal control over financial reporting.
Part II — OTHER INFORMATION
Item 1 — LEGAL PROCEEDINGS
Xcel Energy is involved in various litigation matters that are being defended and handled in the ordinary course of business. The assessment of whether a loss is probable or is a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. Management maintains accruals for such losses that are probable of being incurred and subject to reasonable estimation. Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories. In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss.
Additional Information
See Note 6 to the consolidated financial statements for further discussion of legal claims and environmental proceedings. See Part I Item 2 and Note 5 to the consolidated financial statements for a discussion of proceedings involving utility rates and other regulatory matters.
Item 1A — RISK FACTORS
Xcel Energy Inc.’s risk factors are documented in Item 1A of Part I of its Annual Report on Form 10-K for the year ended Dec. 31, 2015,2016, which is incorporated herein by reference. There have been no material changes from the risk factors previously disclosed in the Form 10-K.
Item 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
The following table provides information about our purchases of equity securities that are registered by Xcel Energy Inc. pursuant to Section 12 of the Exchange Act for the quarter ended June 30, 2016:2017:
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| | Issuer Purchases of Equity Securities |
Period | | Total Number of Shares Purchased | | Average Price Paid per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number (or Approximate Dollar Value) of Shares That May Yet Be Purchased Under the Plans or Programs |
April 1, 20162017 — April 30, 20162017 | | — |
| | $ | — |
| | — |
| | — |
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May 1, 20162017 — May 31, 20162017 | | — |
| | — |
| | — |
| | — |
|
June 1, 20162017 — June 30, 20162017 | | — |
| | — |
| | — |
| | — |
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Total | | — |
| | | | — |
| | — |
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Item 4 — MINE SAFETY DISCLOSURES
None.
Item 5 — OTHER INFORMATION
None.
Item 6 — EXHIBITS
* Indicates incorporation by reference
+ Executive Compensation Arrangements and Benefit Plans Covering Executive Officers and Directors
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3.01* | Amended and Restated Articles of Incorporation of Xcel Energy Inc., as filed on May 17,18, 2012 (Exhibit 3.01 to Form 8-K dated May 16, 2012 (file no. 001-03034)).
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3.02* | Bylaws of Xcel Energy Inc. Bylaws,, as amended on Feb. 17, 2016 (Exhibit 3.01 to Form 8-K dated Feb. 17,18, 2016 (file no. 001-03034)). |
4.01* | Supplemental Trust Indenture dated as of May 1, 2016 between NSP-Minnesota and The Bank of New York Mellon Trust Company, N.A., as successor Trustee, creating $350,000,000 principal amount of 3.600 percent First Mortgage Bonds, Series due May 15, 2046. (Exhibit 4.01 to Form 8-K of NSP-Minnesota dated May 31, 2016 (file no. 001-31387)). |
4.02* | Supplemental Indenture No. 27 dated as of June 1, 20162017 between PSCo and U.S. Bank National Association, as successor Trustee, creating $250,000,000$400 million principal amount of 3.553.80 percent First Mortgage Bonds, Series No. 2930 due 2046.2047. (Exhibit 4.01 to Form 8-K of PSCo dated June 13, 201619, 2017 (file no. 001-03280)). |
| Fifth Amendment dated May 3, 2016 to the Xcel Energy Senior Executive Severance and Change-in-Control Policy. |
10.02* | Second Amended and Restated Credit Agreement, dated as of June 20, 2016 among Xcel Energy Inc., as Borrower, the several lenders from time to time parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Barclays Bank Plc, as Syndication Agents, and Wells Fargo Bank, National Association and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Documentation Agents. (Exhibit 99.01 to Form 8-K of Xcel Energy dated June 20, 2016 (file no. 001-03034)). |
10.03* | Second Amended and Restated Credit Agreement, dated as of June 20, 2016 among NSP-Minnesota, as Borrower, the several lenders from time to time parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Barclays Bank Plc, as Syndication Agents, and Wells Fargo Bank, National Association and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Documentation Agents. (Exhibit 99.02 to Form 8-K of Xcel Energy dated June 20, 2016 (file no. 001-03034)). |
10.04* | Second Amended and Restated Credit Agreement, dated as of June 20, 2016 among PSCo, as Borrower, the several lenders from time to time parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Barclays Bank Plc, as Syndication Agents, and Wells Fargo Bank, National Association and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Documentation Agents. (Exhibit 99.03 to Form 8-K of Xcel Energy dated June 20, 2016 (file no. 001-03034)). |
10.05* | Second Amended and Restated Credit Agreement, dated as of June 20, 2016 among SPS, as Borrower, the several lenders from time to time parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Barclays Bank Plc, as Syndication Agents, and Wells Fargo Bank, National Association and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Documentation Agents. (Exhibit 99.04 to Form 8-K of Xcel Energy dated June 20, 2016 (file no. 001-03034)). |
10.06* | Second Amended and Restated Credit Agreement, dated as of June 20, 2016 among NSP-Wisconsin, as Borrower, the several lenders from time to time parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of America, N.A. and Barclays Bank Plc, as Syndication Agents, and Wells Fargo Bank, National Association and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as Documentation Agents. (Exhibit 99.05 to Form 8-K of Xcel Energy dated June 20, 2016 (file no. 001-03034)). |
| Principal Executive Officer’s certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| Principal Financial Officer’s certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| Statement pursuant to Private Securities Litigation Reform Act of 1995. |
101 | The following materials from Xcel Energy Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 20162017 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Comprehensive Income (iii) the Consolidated Statements of Cash Flows, (iv) the Consolidated Balance Sheets, (v) the Consolidated Statements of Common Stockholders’ Equity, (vi) Notes to Consolidated Financial Statements, and (vii) document and entity information. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | XCEL ENERGY INC. |
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Aug. 4, 2016July 28, 2017 | By: | /s/ JEFFREY S. SAVAGE |
| | Jeffrey S. Savage |
| | Senior Vice President, Controller |
| | (Principal Accounting Officer) |
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| | /s/ ROBERT C. FRENZEL |
| | Robert C. Frenzel |
| | Executive Vice President, Chief Financial Officer |
| | (Principal Financial Officer) |