UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2020 2021
or
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-3034
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Xcel Energy Inc. | | |
(Exact name of registrant as specified in its charter) | | |
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Minnesota | | | | 001-3034 | | 41-0448030 |
(State or Other Jurisdictionother jurisdiction of Incorporationincorporation or Organization)organization) | | | | (Commission File Number)
| | (IRSI.R.S. Employer Identification No.) |
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414 Nicollet Mall | Minneapolis | Minnesota | | | | 55401 |
(Address of Principal Executive Offices)principal executive offices)
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612(612) | 330-5500 |
(Registrant’s Telephone Number, Including Area Code)telephone number, including area code) | |
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N/A |
(Former Name, Former Addressname, former address and Former Fiscal Year,former fiscal year, if Changed Since Last Report)changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | | Trading SymbolSymbol(s) | | Name of each exchange on which registered |
Common Stock, $2.50 par value | | XEL | | Nasdaq Stock Market LLC |
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. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of 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 such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☒ | | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | | 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 ☒ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| | | | | | | | |
Class | | Outstanding at July 28, 202022, 2021 |
Common Stock, $2.50 par value | | 525,342,304538,436,651 shares |
TABLE OF CONTENTS
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PART I | FINANCIAL INFORMATION | | |
Item 1 — | | | |
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Item 2 — | | | |
Item 3 — | | | |
Item 4 — | | | |
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PART II | OTHER INFORMATION | | |
Item 1 — | | | |
Item 1A — | | | |
Item 2 — | | | |
Item 6 — | | | |
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| Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | |
| Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | |
This Form 10-Q is filed by Xcel Energy Inc. Additional information is available on various filings with the Securities and Exchange Commission (SEC).Commission.
Definitions of Abbreviations
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Xcel Energy Inc.’s Subsidiaries and Affiliates (current and former) | |
e prime | e prime inc. |
NSP-Minnesota | Northern States Power Company, a Minnesota corporation |
NSP System | The electric production and transmission system of NSP-Minnesota and NSP-Wisconsin operated on an integrated basis and managed by NSP-Minnesota |
NSP-Wisconsin | Northern States Power Company, a Wisconsin corporation |
PSCo | Public Service Company of Colorado |
SPS | Southwestern Public Service Co.Company |
Utility subsidiaries | NSP-Minnesota, NSP-Wisconsin, PSCo and SPS |
WGI | West Gas Interstate |
WYCO | WYCO Development, LLC |
Xcel Energy | Xcel Energy Inc. and its subsidiaries |
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Federal and State Regulatory Agencies | |
CPUC | Colorado Public Utilities Commission |
D.C. Circuit | United States Court of Appeals for the District of Columbia Circuit |
DOC | Department of Commerce |
EPA | United States Environmental Protection Agency |
FERC | Federal Energy Regulatory Commission |
IRS | Internal Revenue Service |
MPUC | Minnesota Public Utilities Commission |
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NDPSC | North Dakota Public Service Commission |
NMPRC | New Mexico Public Regulation Commission |
NRC | Nuclear Regulatory Commission |
OAG | Minnesota Office of the Attorney General |
PSCW | Public Service Commission of Wisconsin |
PUCT | Public Utility Commission of Texas |
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SEC | Securities and Exchange Commission |
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Electric, Purchased Gas and Resource Adjustment Clauses | |
DSM | Demand side management |
FCA | Fuel clause adjustment |
FPPCAC | Fuel and purchased power cost adjustment clause |
GUIC | Gas utility infrastructure cost rider |
PSIA | Pipeline System Integrity Adjustment |
RES | Renewable energy standard |
TCR | Transmission cost recovery adjustment |
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Other | |
AFUDC | Allowance for funds used during construction |
ALJ | Administrative Law Judge |
ASC | FASB Accounting Standards Codification |
C&I | Commercial and Industrial |
CCR | Coal combustion residualresiduals |
CCR Rule | Final rule (40 CFR 257.50 - 257.107) published by the EPA regulating the management, storage and disposal of CCRs as a nonhazardous waste |
CDD | Cooling degree-days |
CEO | Chief executive officer |
CFO | Chief financial officer |
COVID-19 | Novel coronavirus |
CWIP | Construction work in progress |
DRIP | Dividend Reinvestment and Stock Purchase Program |
EIP | Energy Impact Partners |
EPS | Earnings per share |
ETR | Effective tax rate |
FASB | Financial Accounting Standards Board |
FTR | Financial transmission right |
GAAP | GenerallyUnited States generally accepted accounting principles |
GE | General Electric Company |
HDD | Heating degree-days |
IPP | Independent power producing entity |
IRP | Integrated Resource Plan |
ISO | Independent System Operator |
LLC | Limited liability company |
LP&L | Lubbock Power and Light |
MDL | Multi district litigation |
MEC | Mankato Energy Center |
MGP | Manufactured gas plant |
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MISO | Midcontinent Independent System Operator, Inc. |
NAV | Net asset value |
NOL | Net operating loss |
NOPR | Notice of Proposed Rulemaking |
O&M | Operating and maintenance |
OATT | Open Access Transmission Tariff |
PFAS | Per- and PolyFluoroAlkyl Substances |
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PPA | Power purchase agreement |
PTC | Production tax credit |
ROE | Return on equity |
ROFR | Right-of-first refusal |
RTO | Regional Transmission Organization |
SMMPA | Southern Minnesota Municipal Power Agency |
SPP | Southwest Power Pool, Inc. |
THI | Temperature-humidity index |
TOs | Transmission owners |
VaR | Value at Risk |
VIE | Variable interest entity |
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Measurements | |
KV | Kilovolts |
MW | Megawatts |
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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 the 2020those relating to 2021 EPS guidance, long-term EPS and dividend growth rate objectives, future sales, future bad debt expense, andexpenses, future tax rates, future operating performance, estimated base capital expenditures and financing plans, projected capital additions and forecasted annual revenue requirements with respect to rider filings, expected rate increases to customers, expectations and intentions regarding regulatory proceedings, and expected impacts on our results of operations, financial condition and cash flows or resettlement calculations and credit losses relating to certain energy transactions, as well as assumptions and other statements are intended to be identified in this document by the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “objective,” “outlook,” “plan,” “project,” “possible,” “potential,” “should,” “will,” “would” 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 with the SEC (including Xcel Energy’s Annual Report on Form 10-K for the fiscal year ended Dec. 31, 2019,2020, and subsequent securities filings), could cause actual results to differ materially from management expectations as suggested by such forward-looking information: uncertainty around the impacts and duration of the COVID-19 pandemic; operational safety, including our nuclear generation facilities; successful long-term operational planning; commodity risks associated with energy markets and production; rising energy prices and fuel costs; qualified employee work force and third-party contractor factors; ability to recover costs,costs; changes in regulation and subsidiaries’ ability to recover costs from customers; reductions in our credit ratings and the cost of maintaining certain contractual relationships; general economic conditions, including inflation rates, monetary fluctuations and their impact on capital expenditures and the ability of Xcel Energy Inc. and its subsidiaries to obtain financing on favorable terms; availability or cost of capital; our customers’ and counterparties’ ability to pay their debts to us; assumptions and costs relating to funding our employee benefit plans and health care benefits; our subsidiaries’ ability to make dividend payments; tax laws; effects of geopolitical events, including war and acts of terrorism; cyber security threats and data security breaches; seasonal weather patterns; changes in environmental laws and regulations; climate change and other weather; natural disaster and resource depletion, including compliance with any accompanying legislative and regulatory changes; and costs of potential regulatory penalties.
PART I — FINANCIAL INFORMATION
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ITEM 1 — FINANCIAL STATEMENTS |
XCEL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(amounts in millions, except per share data)
| | | Three Months Ended June 30 | | | Six Months Ended June 30 | | | Three Months Ended June 30 | | Six Months Ended June 30 |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
Operating revenues | Operating revenues | | | | | | | | Operating revenues | | | | | | | |
Electric | Electric | $ | 2,286 | | | $ | 2,249 | | | $ | 4,489 | | | $ | 4,574 | | Electric | $ | 2,597 | | | $ | 2,286 | | | $ | 5,467 | | | $ | 4,489 | |
Natural gas | Natural gas | 280 | | | 308 | | | 863 | | | 1,102 | | Natural gas | 449 | | | 280 | | | 1,096 | | | 863 | |
Other | Other | 20 | | | 20 | | | 45 | | | 42 | | Other | 22 | | | 20 | | | 46 | | | 45 | |
Total operating revenues | Total operating revenues | 2,586 | | | 2,577 | | | 5,397 | | | 5,718 | | Total operating revenues | 3,068 | | | 2,586 | | | 6,609 | | | 5,397 | |
| Operating expenses | Operating expenses | | Operating expenses | |
Electric fuel and purchased power | Electric fuel and purchased power | 833 | | | 813 | | | 1,630 | | | 1,727 | | Electric fuel and purchased power | 1,047 | | | 833 | | | 2,433 | | | 1,630 | |
Cost of natural gas sold and transported | Cost of natural gas sold and transported | 86 | | | 112 | | | 371 | | | 591 | | Cost of natural gas sold and transported | 218 | | | 86 | | | 517 | | | 371 | |
Cost of sales — other | Cost of sales — other | 8 | | | 10 | | | 17 | | | 19 | | Cost of sales — other | 9 | | | 8 | | | 17 | | | 17 | |
Operating and maintenance expenses | Operating and maintenance expenses | 550 | | | 586 | | | 1,129 | | | 1,184 | | Operating and maintenance expenses | 600 | | | 550 | | | 1,184 | | | 1,129 | |
Conservation and demand side management expenses | Conservation and demand side management expenses | 68 | | | 65 | | | 142 | | | 137 | | Conservation and demand side management expenses | 71 | | | 68 | | | 144 | | | 142 | |
Depreciation and amortization | Depreciation and amortization | 473 | | | 439 | | | 936 | | | 872 | | Depreciation and amortization | 528 | | | 473 | | | 1,049 | | | 936 | |
Taxes (other than income taxes) | Taxes (other than income taxes) | 146 | | | 142 | | | 295 | | | 292 | | Taxes (other than income taxes) | 157 | | | 146 | | | 320 | | | 295 | |
Total operating expenses | Total operating expenses | 2,164 | | | 2,167 | | | 4,520 | | | 4,822 | | Total operating expenses | 2,630 | | | 2,164 | | | 5,664 | | | 4,520 | |
| Operating income | Operating income | 422 | | | 410 | | | 877 | | | 896 | | Operating income | 438 | | | 422 | | | 945 | | | 877 | |
| Other income (expense), net | Other income (expense), net | 5 | | | 2 | | | (7) | | | 6 | | Other income (expense), net | 3 | | | 5 | | | 8 | | | (7) | |
Equity earnings of unconsolidated subsidiaries | 6 | | | 9 | | | 17 | | | 19 | | |
Earnings from equity method investments | | Earnings from equity method investments | 20 | | | 6 | | | 34 | | | 17 | |
Allowance for funds used during construction — equity | Allowance for funds used during construction — equity | 37 | | | 20 | | | 61 | | | 40 | | Allowance for funds used during construction — equity | 18 | | | 37 | | | 32 | | | 61 | |
| Interest charges and financing costs | Interest charges and financing costs | | Interest charges and financing costs | |
Interest charges — includes other financing costs of $7, $6, $14 and $13, respectively | 208 | | | 189 | | | 407 | | | 379 | | |
Interest charges — includes other financing costs of $7, $7, $14 and $14, respectively | | Interest charges — includes other financing costs of $7, $7, $14 and $14, respectively | 212 | | | 208 | | | 417 | | | 407 | |
Allowance for funds used during construction — debt | Allowance for funds used during construction — debt | (12) | | | (10) | | | (22) | | | (20) | | Allowance for funds used during construction — debt | (6) | | | (12) | | | (11) | | | (22) | |
Total interest charges and financing costs | Total interest charges and financing costs | 196 | | | 179 | | | 385 | | | 359 | | Total interest charges and financing costs | 206 | | | 196 | | | 406 | | | 385 | |
| Income before income taxes | Income before income taxes | 274 | | | 262 | | | 563 | | | 602 | | Income before income taxes | 273 | | | 274 | | | 613 | | | 563 | |
Income tax (benefit) expense | (13) | | | 24 | | | (19) | | | 49 | | |
Income tax benefit | | Income tax benefit | (38) | | | (13) | | | (60) | | | (19) | |
Net income | Net income | $ | 287 | | | $ | 238 | | | $ | 582 | | | $ | 553 | | Net income | $ | 311 | | | $ | 287 | | | $ | 673 | | | $ | 582 | |
| Weighted average common shares outstanding: | Weighted average common shares outstanding: | | Weighted average common shares outstanding: | |
Basic | Basic | 527 | | | 516 | | | 526 | | | 515 | | Basic | 539 | | | 527 | | | 539 | | | 526 | |
Diluted | Diluted | 527 | | | 518 | | | 527 | | | 517 | | Diluted | 539 | | | 527 | | | 539 | | | 527 | |
| Earnings per average common share: | Earnings per average common share: | | Earnings per average common share: | |
Basic | Basic | $ | 0.54 | | | $ | 0.46 | | | $ | 1.10 | | | $ | 1.07 | | Basic | $ | 0.58 | | | $ | 0.54 | | | $ | 1.25 | | | $ | 1.10 | |
Diluted | Diluted | 0.54 | | | 0.46 | | | 1.10 | | | 1.07 | | Diluted | 0.58 | | | 0.54 | | | 1.25 | | | 1.10 | |
| See Notes to Consolidated Financial Statements | See Notes to Consolidated Financial Statements | | See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(amounts in millions)
| | | Three Months Ended June 30 | | | Six Months Ended June 30 | | | Three Months Ended June 30 | | Six Months Ended June 30 |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
Net income | Net income | $ | 287 | | | $ | 238 | | | $ | 582 | | | $ | 553 | | Net income | $ | 311 | | | $ | 287 | | | $ | 673 | | | $ | 582 | |
Other comprehensive income (loss) | Other comprehensive income (loss) | | Other comprehensive income (loss) | |
Pension and retiree medical benefits: | Pension and retiree medical benefits: | | Pension and retiree medical benefits: | | |
Net pension and retiree medical gains arising during the period, net of tax of $—, $—, $— and $1, respectively | — | | | 1 | | | — | | | 3 | | |
Reclassifications of loss to net income, net of tax of $1, $—, $1 and $—, respectively | 2 | | | — | | | 3 | | | 1 | | |
| Reclassifications of loss to net income, net of tax of $0, $1, $1 and $1, respectively | | Reclassifications of loss to net income, net of tax of $0, $1, $1 and $1, respectively | 1 | | | 2 | | | 1 | | | 3 | |
Derivative instruments: | Derivative instruments: | | Derivative instruments: | | |
Net fair value decrease, net of tax of $—, $(3), $(3) and $(5), respectively | — | | | (10) | | | (10) | | | (17) | | |
Reclassification of loss to net income, net of tax of $1, $—, $1 and $—, respectively | 1 | | | 1 | | | 3 | | | 2 | | |
| Net fair value increase (decrease), net of tax of $0, $0, $0 and $(3), respectively | | Net fair value increase (decrease), net of tax of $0, $0, $0 and $(3), respectively | 0 | | | 0 | | | 0 | | | (10) | |
Reclassification of losses to net income, net of tax of $0, $1, $1 and $1, respectively | | Reclassification of losses to net income, net of tax of $0, $1, $1 and $1, respectively | 2 | | | 1 | | | 5 | | | 3 | |
| Total other comprehensive income (loss) | Total other comprehensive income (loss) | 3 | | | (8) | | | (4) | | | (11) | | Total other comprehensive income (loss) | 3 | | | 3 | | | 6 | | | (4) | |
Total comprehensive income | Total comprehensive income | $ | 290 | | | $ | 230 | | | $ | 578 | | | $ | 542 | | Total comprehensive income | $ | 314 | | | $ | 290 | | | $ | 679 | | | $ | 578 | |
| See Notes to Consolidated Financial Statements | See Notes to Consolidated Financial Statements | | See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(amounts in millions)
| | | Six Months Ended June 30 | | | Six Months Ended June 30 |
| | 2020 | | 2019 | | 2021 | | 2020 |
Operating activities | Operating activities | | | | Operating activities | | | |
Net income | Net income | $ | 582 | | | $ | 553 | | Net income | $ | 673 | | | $ | 582 | |
Adjustments to reconcile net income to cash provided by operating activities: | Adjustments to reconcile net income to cash provided by operating activities: | | Adjustments to reconcile net income to cash provided by operating activities: | |
Depreciation and amortization | Depreciation and amortization | 942 | | | 881 | | Depreciation and amortization | 1,043 | | | 942 | |
Nuclear fuel amortization | Nuclear fuel amortization | 65 | | | 58 | | Nuclear fuel amortization | 56 | | | 65 | |
Deferred income taxes | Deferred income taxes | — | | | 47 | | Deferred income taxes | (67) | | | 0 | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | (61) | | | (40) | | Allowance for equity funds used during construction | (32) | | | (61) | |
Equity earnings of unconsolidated subsidiaries | (17) | | | (19) | | |
Dividends from unconsolidated subsidiaries | 21 | | | 20 | | |
Earnings from equity method investments | | Earnings from equity method investments | (34) | | | (17) | |
Dividends from equity method investments | | Dividends from equity method investments | 21 | | | 21 | |
Provision for bad debts | Provision for bad debts | 26 | | | 17 | | Provision for bad debts | 27 | | | 26 | |
Share-based compensation expense | Share-based compensation expense | 41 | | | 35 | | Share-based compensation expense | 21 | | | 41 | |
Changes in operating assets and liabilities: | Changes in operating assets and liabilities: | | Changes in operating assets and liabilities: | |
Accounts receivable | Accounts receivable | 19 | | | 105 | | Accounts receivable | (63) | | | 19 | |
Accrued unbilled revenues | Accrued unbilled revenues | 97 | | | 115 | | Accrued unbilled revenues | 14 | | | 97 | |
Inventories | Inventories | 15 | | | 25 | | Inventories | 7 | | | 15 | |
Other current assets | Other current assets | 7 | | | 19 | | Other current assets | 24 | | | 7 | |
Accounts payable | Accounts payable | (160) | | | (157) | | Accounts payable | (15) | | | (160) | |
Net regulatory assets and liabilities | Net regulatory assets and liabilities | 12 | | | 25 | | Net regulatory assets and liabilities | (794) | | | 12 | |
Other current liabilities | Other current liabilities | (241) | | | (195) | | Other current liabilities | (265) | | | (241) | |
Pension and other employee benefit obligations | Pension and other employee benefit obligations | (146) | | | (139) | | Pension and other employee benefit obligations | (128) | | | (146) | |
Other, net | Other, net | (54) | | | (16) | | Other, net | 1 | | | (54) | |
Net cash provided by operating activities | Net cash provided by operating activities | 1,148 | | | 1,334 | | Net cash provided by operating activities | 489 | | | 1,148 | |
| Investing activities | Investing activities | | Investing activities | |
Capital/construction expenditures | Capital/construction expenditures | (2,569) | | | (1,689) | | Capital/construction expenditures | (1,967) | | | (2,569) | |
Purchases of investment securities | (1,160) | | | (488) | | |
Purchase of investment securities | | Purchase of investment securities | (628) | | | (1,160) | |
Proceeds from the sale of investment securities | Proceeds from the sale of investment securities | 1,150 | | | 478 | | Proceeds from the sale of investment securities | 410 | | | 1,150 | |
Other, net | Other, net | (1) | | | (9) | | Other, net | (17) | | | (1) | |
Net cash used in investing activities | Net cash used in investing activities | (2,580) | | | (1,708) | | Net cash used in investing activities | (2,202) | | | (2,580) | |
| Financing activities | Financing activities | | Financing activities | |
Proceeds from short-term borrowings, net | Proceeds from short-term borrowings, net | 815 | | | 559 | | Proceeds from short-term borrowings, net | 1,161 | | | 815 | |
Proceeds from issuances of long-term debt | Proceeds from issuances of long-term debt | 2,447 | | | 819 | | Proceeds from issuances of long-term debt | 1,821 | | | 2,447 | |
Repayments of long-term debt, including reacquisition premiums | Repayments of long-term debt, including reacquisition premiums | — | | | (400) | | Repayments of long-term debt, including reacquisition premiums | (399) | | | 0 | |
| Dividends paid | Dividends paid | (421) | | | (387) | | Dividends paid | (460) | | | (421) | |
Other, net | Other, net | (23) | | | (11) | | Other, net | (1) | | | (23) | |
Net cash provided by financing activities | Net cash provided by financing activities | 2,818 | | | 580 | | Net cash provided by financing activities | 2,122 | | | 2,818 | |
| Net change in cash, cash equivalents and restricted cash | Net change in cash, cash equivalents and restricted cash | 1,386 | | | 206 | | Net change in cash, cash equivalents and restricted cash | 409 | | | 1,386 | |
Cash, cash equivalents and restricted cash at beginning of period | Cash, cash equivalents and restricted cash at beginning of period | 248 | | | 147 | | Cash, cash equivalents and restricted cash at beginning of period | 129 | | | 248 | |
Cash, cash equivalents and restricted cash at end of period (a) | Cash, cash equivalents and restricted cash at end of period (a) | $ | 1,634 | | | $ | 353 | | Cash, cash equivalents and restricted cash at end of period (a) | $ | 538 | | | $ | 1,634 | |
| Supplemental disclosure of cash flow information: | Supplemental disclosure of cash flow information: | | Supplemental disclosure of cash flow information: | |
Cash paid for interest (net of amounts capitalized) | Cash paid for interest (net of amounts capitalized) | $ | (364) | | | $ | (344) | | Cash paid for interest (net of amounts capitalized) | $ | (390) | | | $ | (364) | |
Cash (paid) received for income taxes, net | (10) | | | 54 | | |
Cash paid for income taxes, net | | Cash paid for income taxes, net | (5) | | | (10) | |
| Supplemental disclosure of non-cash investing and financing transactions: | Supplemental disclosure of non-cash investing and financing transactions: | | Supplemental disclosure of non-cash investing and financing transactions: | |
Accrued property, plant and equipment additions | Accrued property, plant and equipment additions | $ | 436 | | | $ | 304 | | Accrued property, plant and equipment additions | $ | 509 | | | $ | 436 | |
Inventory transfers to property, plant and equipment | Inventory transfers to property, plant and equipment | 194 | | | 40 | | Inventory transfers to property, plant and equipment | 43 | | | 194 | |
Operating lease right-of-use assets | Operating lease right-of-use assets | 8 | | | 1,843 | | Operating lease right-of-use assets | 1 | | | 8 | |
Allowance for equity funds used during construction | Allowance for equity funds used during construction | 61 | | | 40 | | Allowance for equity funds used during construction | 32 | | | 61 | |
Issuance of common stock for equity awards | Issuance of common stock for equity awards | 35 | | | 32 | | Issuance of common stock for equity awards | 35 | | | 35 | |
| (a) As of June 30, 2020, $9 million of cash was recorded in Prepayments and other current assets related to MEC. | (a) As of June 30, 2020, $9 million of cash was recorded in Prepayments and other current assets related to MEC. | | (a) As of June 30, 2020, $9 million of cash was recorded in Prepayments and other current assets related to MEC. | |
| See Notes to Consolidated Financial Statements | See Notes to Consolidated Financial Statements | | See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(amounts in millions, except share and per share data)
| | | June 30, 2020 | | Dec. 31, 2019 | | June 30, 2021 | | Dec. 31, 2020 |
Assets | Assets | | | | Assets | | | |
Current assets | Current assets | | Current assets | |
Cash and cash equivalents | Cash and cash equivalents | $ | 1,625 | | | $ | 248 | | Cash and cash equivalents | $ | 538 | | | $ | 129 | |
Accounts receivable, net | Accounts receivable, net | 799 | | | 837 | | Accounts receivable, net | 948 | | | 916 | |
Accrued unbilled revenues | Accrued unbilled revenues | 613 | | | 713 | | Accrued unbilled revenues | 699 | | | 714 | |
Inventories | Inventories | 487 | | | 544 | | Inventories | 500 | | | 535 | |
Regulatory assets | Regulatory assets | 513 | | | 488 | | Regulatory assets | 1,041 | | | 640 | |
Derivative instruments | Derivative instruments | 72 | | | 55 | | Derivative instruments | 148 | | | 49 | |
Prepaid taxes | Prepaid taxes | 73 | | | 43 | | Prepaid taxes | 52 | | | 42 | |
Prepayments and other | Prepayments and other | 208 | | | 185 | | Prepayments and other | 221 | | | 250 | |
Total current assets | Total current assets | 4,390 | | | 3,113 | | Total current assets | 4,147 | | | 3,275 | |
| Property, plant and equipment, net | Property, plant and equipment, net | 41,124 | | | 39,483 | | Property, plant and equipment, net | 44,141 | | | 42,950 | |
| Other assets | Other assets | | Other assets | |
Nuclear decommissioning fund and other investments | Nuclear decommissioning fund and other investments | 2,683 | | | 2,731 | | Nuclear decommissioning fund and other investments | 3,389 | | | 3,096 | |
Regulatory assets | Regulatory assets | 2,973 | | | 2,935 | | Regulatory assets | 3,225 | | | 2,737 | |
Derivative instruments | Derivative instruments | 38 | | | 22 | | Derivative instruments | 92 | | | 30 | |
Operating lease right-of-use assets | Operating lease right-of-use assets | 1,229 | | | 1,672 | | Operating lease right-of-use assets | 1,390 | | | 1,490 | |
Other | Other | 1,019 | | | 492 | | Other | 395 | | | 379 | |
Total other assets | Total other assets | 7,942 | | | 7,852 | | Total other assets | 8,491 | | | 7,732 | |
Total assets | Total assets | $ | 53,456 | | | $ | 50,448 | | Total assets | $ | 56,779 | | | $ | 53,957 | |
| Liabilities and Equity | Liabilities and Equity | | Liabilities and Equity | |
Current liabilities | Current liabilities | | Current liabilities | |
Current portion of long-term debt | Current portion of long-term debt | $ | 1,101 | | | $ | 702 | | Current portion of long-term debt | $ | 21 | | | $ | 421 | |
Short-term debt | Short-term debt | 1,410 | | | 595 | | Short-term debt | 1,745 | | | 584 | |
Accounts payable | Accounts payable | 1,188 | | | 1,294 | | Accounts payable | 1,273 | | | 1,237 | |
Regulatory liabilities | Regulatory liabilities | 420 | | | 407 | | Regulatory liabilities | 336 | | | 311 | |
Taxes accrued | Taxes accrued | 343 | | | 466 | | Taxes accrued | 428 | | | 578 | |
Accrued interest | Accrued interest | 200 | | | 192 | | Accrued interest | 207 | | | 203 | |
Dividends payable | Dividends payable | 226 | | | 212 | | Dividends payable | 246 | | | 231 | |
Derivative instruments | Derivative instruments | 40 | | | 38 | | Derivative instruments | 65 | | | 53 | |
Operating lease liabilities | Operating lease liabilities | 149 | | | 194 | | Operating lease liabilities | 220 | | | 214 | |
Other | Other | 396 | | | 468 | | Other | 409 | | | 407 | |
Total current liabilities | Total current liabilities | 5,473 | | | 4,568 | | Total current liabilities | 4,950 | | | 4,239 | |
| Deferred credits and other liabilities | Deferred credits and other liabilities | | Deferred credits and other liabilities | |
Deferred income taxes | Deferred income taxes | 4,569 | | | 4,509 | | Deferred income taxes | 4,807 | | | 4,746 | |
Deferred investment tax credits | 47 | | | 49 | | |
| Regulatory liabilities | Regulatory liabilities | 5,310 | | | 5,077 | | Regulatory liabilities | 5,387 | | | 5,302 | |
Asset retirement obligations | Asset retirement obligations | 2,881 | | | 2,701 | | Asset retirement obligations | 3,059 | | | 2,884 | |
Derivative instruments | Derivative instruments | 181 | | | 175 | | Derivative instruments | 147 | | | 131 | |
Customer advances | Customer advances | 201 | | | 203 | | Customer advances | 196 | | | 197 | |
Pension and employee benefit obligations | Pension and employee benefit obligations | 636 | | | 785 | | Pension and employee benefit obligations | 521 | | | 666 | |
Operating lease liabilities | Operating lease liabilities | 1,125 | | | 1,549 | | Operating lease liabilities | 1,236 | | | 1,344 | |
Other | Other | 185 | | | 186 | | Other | 208 | | | 228 | |
Total deferred credits and other liabilities | Total deferred credits and other liabilities | 15,135 | | | 15,234 | | Total deferred credits and other liabilities | 15,561 | | | 15,498 | |
| Commitments and contingencies | Commitments and contingencies | | | | Commitments and contingencies | 0 | | 0 |
Capitalization | Capitalization | | Capitalization | |
Long-term debt | Long-term debt | 19,463 | | | 17,407 | | Long-term debt | 21,476 | | | 19,645 | |
Common stock — 1,000,000,000 shares authorized of $2.50 par value; 525,204,978 and 524,539,000 shares outstanding at June 30, 2020 and Dec. 31, 2019, respectively | 1,313 | | | 1,311 | | |
Common stock — 1,000,000,000 shares authorized of $2.50 par value; 538,305,927 and 537,438,394 shares outstanding at June 30, 2021 and Dec. 31, 2020, respectively | | Common stock — 1,000,000,000 shares authorized of $2.50 par value; 538,305,927 and 537,438,394 shares outstanding at June 30, 2021 and Dec. 31, 2020, respectively | 1,346 | | | 1,344 | |
Additional paid in capital | Additional paid in capital | 6,679 | | | 6,656 | | Additional paid in capital | 7,435 | | | 7,404 | |
Retained earnings | Retained earnings | 5,538 | | | 5,413 | | Retained earnings | 6,146 | | | 5,968 | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (145) | | | (141) | | Accumulated other comprehensive loss | (135) | | | (141) | |
Total common stockholders’ equity | Total common stockholders’ equity | 13,385 | | | 13,239 | | Total common stockholders’ equity | 14,792 | | | 14,575 | |
Total liabilities and equity | Total liabilities and equity | $ | 53,456 | | | $ | 50,448 | | Total liabilities and equity | $ | 56,779 | | | $ | 53,957 | |
| See Notes to Consolidated Financial Statements | See Notes to Consolidated Financial Statements | | See Notes to Consolidated Financial Statements |
XCEL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS’ EQUITY (UNAUDITED)
(amounts in millions, except per share data; shares in thousands)actual amounts)
| | | 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 | | | | | | | Total Common Stockholders’ Equity | Shares | | Par Value | | Additional Paid In Capital | | Retained Earnings | Accumulated Other Comprehensive Loss | Total Common Stockholders' Equity |
Three Months Ended June 30, 2020 and 2019 | | | | | | | | | | | | |
Balance at March 31, 2019 | 514,668 | | | $ | 1,287 | | | $ | 6,173 | | | $ | 4,996 | | | $ | (127) | | | $ | 12,329 | | |
Net income | | 238 | | | 238 | | |
Other comprehensive loss | | (8) | | | (8) | | |
Dividends declared on common stock ($0.41 per share) | | (209) | | | (209) | | |
Issuances of common stock | 197 | | | — | | | 10 | | | 10 | | |
| Share-based compensation | | 7 | | | (1) | | | 6 | | |
Balance at June 30, 2019 | 514,865 | | | $ | 1,287 | | | $ | 6,190 | | | $ | 5,024 | | | $ | (135) | | | $ | 12,366 | | |
| Three Months Ended June 30, 2021 and 2020 | | Three Months Ended June 30, 2021 and 2020 | | | | | | | | | | | |
Balance at March 31, 2020 | Balance at March 31, 2020 | 525,034 | | | $ | 1,313 | | | $ | 6,659 | | | $ | 5,478 | | | $ | (148) | | | $ | 13,302 | | Balance at March 31, 2020 | 525,033,594 | | | $ | 1,313 | | | $ | 6,659 | | | $ | 5,478 | | | $ | (148) | | | $ | 13,302 | |
Net income | Net income | | 287 | | | 287 | | Net income | | 287 | | | 287 | |
Other comprehensive income | Other comprehensive income | | 3 | | | 3 | | Other comprehensive income | | 3 | | | 3 | |
Dividends declared on common stock ($0.43 per share) | Dividends declared on common stock ($0.43 per share) | | (226) | | | (226) | | Dividends declared on common stock ($0.43 per share) | | (226) | | | (226) | |
Issuances of common stock | Issuances of common stock | 171 | | | — | | | 11 | | | 11 | | Issuances of common stock | 171,384 | | | 0 | | | 11 | | | 11 | |
| Share-based compensation | Share-based compensation | | 9 | | | (1) | | | 8 | | Share-based compensation | | 9 | | | (1) | | | 8 | |
Balance at June 30, 2020 | Balance at June 30, 2020 | 525,205 | | | $ | 1,313 | | | $ | 6,679 | | | $ | 5,538 | | | $ | (145) | | | $ | 13,385 | | Balance at June 30, 2020 | 525,204,978 | | | $ | 1,313 | | | $ | 6,679 | | | $ | 5,538 | | | $ | (145) | | | $ | 13,385 | |
| Balance at March 31, 2021 | | Balance at March 31, 2021 | 538,076,662 | | | $ | 1,345 | | | $ | 7,411 | | | $ | 6,082 | | | $ | (138) | | | $ | 14,700 | |
Net income | | Net income | | 311 | | | 311 | |
Other comprehensive income | | Other comprehensive income | | 3 | | | 3 | |
Dividends declared on common stock ($0.4575 per share) | | Dividends declared on common stock ($0.4575 per share) | | (246) | | | (246) | |
Issuances of common stock | | Issuances of common stock | 229,265 | | | 1 | | | 14 | | | 15 | |
| Share-based compensation | | Share-based compensation | | 10 | | | (1) | | | 9 | |
Balance at June 30, 2021 | | Balance at June 30, 2021 | 538,305,927 | | | $ | 1,346 | | | $ | 7,435 | | | $ | 6,146 | | | $ | (135) | | | $ | 14,792 | |
| | Common Stock Issued | | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholders’ Equity | | | | | | | | | | | | |
| | Shares | | Par Value | | Additional Paid In Capital | | | | | | | Total Common Stockholders’ Equity | Common Stock Issued | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholders' Equity |
Six Months Ended June 30, 2020 and 2019 | | | | | | | | | | | | |
Balance at Dec. 31, 2018 | 514,037 | | | $ | 1,285 | | | $ | 6,168 | | | $ | 4,893 | | | $ | (124) | | | $ | 12,222 | | |
Net income | | 553 | | | 553 | | |
Other comprehensive loss | | (11) | | | (11) | | |
Dividends declared on common stock ($0.81 per share) | | (419) | | | (419) | | |
Issuances of common stock | 834 | | | 2 | | | 20 | | | 22 | | |
Repurchases of common stock | (6) | | | — | | | — | | | — | | |
Share-based compensation | | 2 | | | (3) | | | (1) | | |
Balance at June 30, 2019 | 514,865 | | | $ | 1,287 | | | $ | 6,190 | | | $ | 5,024 | | | $ | (135) | | | $ | 12,366 | | |
| | | | | | | | | | | | | | Shares | | Par Value | | Additional Paid In Capital | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Common Stockholders' Equity |
Six Months Ended June 30, 2021 and 2020 | | Six Months Ended June 30, 2021 and 2020 | | | | | | |
Balance at Dec. 31, 2019 | Balance at Dec. 31, 2019 | 524,539 | | | $ | 1,311 | | | $ | 6,656 | | | $ | 5,413 | | | $ | (141) | | | $ | 13,239 | | Balance at Dec. 31, 2019 | 524,539,000 | | | $ | 1,311 | | | $ | 6,656 | | | $ | 5,413 | | | $ | (141) | | | $ | 13,239 | |
Net income | Net income | | 582 | | | 582 | | Net income | | 582 | | | 582 | |
Other comprehensive loss | Other comprehensive loss | | (4) | | | (4) | | Other comprehensive loss | | (4) | | | (4) | |
Dividends declared on common stock ($0.86 per share) | Dividends declared on common stock ($0.86 per share) | | (453) | | | (453) | | Dividends declared on common stock ($0.86 per share) | | (453) | | | (453) | |
Issuances of common stock | Issuances of common stock | 666 | | | 2 | | | 21 | | | 23 | | Issuances of common stock | 665,978 | | | 2 | | | 21 | | | 23 | |
| Share-based compensation | Share-based compensation | | 2 | | | (2) | | | — | | Share-based compensation | | 2 | | | (2) | | | 0 | |
Adoption of ASC Topic 326 | Adoption of ASC Topic 326 | | (2) | | | (2) | | Adoption of ASC Topic 326 | | (2) | | | (2) | |
Balance at June 30, 2020 | Balance at June 30, 2020 | 525,205 | | | $ | 1,313 | | | $ | 6,679 | | | $ | 5,538 | | | $ | (145) | | | $ | 13,385 | | Balance at June 30, 2020 | 525,204,978 | | | $ | 1,313 | | | $ | 6,679 | | | $ | 5,538 | | | $ | (145) | | | $ | 13,385 | |
| Balance at Dec. 31, 2020 | | Balance at Dec. 31, 2020 | 537,438,394 | | | $ | 1,344 | | | $ | 7,404 | | | $ | 5,968 | | | $ | (141) | | | $ | 14,575 | |
Net income | | Net income | | 673 | | | 673 | |
Other comprehensive income | | Other comprehensive income | | 6 | | | 6 | |
Dividends declared on common stock ($0.915 per share) | | Dividends declared on common stock ($0.915 per share) | | (492) | | | (492) | |
Issuances of common stock | | Issuances of common stock | 867,533 | | | 2 | | | 28 | | | 30 | |
| Share-based compensation | | Share-based compensation | | 3 | | | (3) | | | 0 | |
Balance at June 30, 2021 | | Balance at June 30, 2021 | 538,305,927 | | | $ | 1,346 | | | $ | 7,435 | | | $ | 6,146 | | | $ | (135) | | | $ | 14,792 | |
| See Notes to Consolidated Financial Statements | See Notes to Consolidated Financial Statements | | 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 U.S. GAAP, the financial position of Xcel Energy Inc. and its subsidiaries as of June 30, 20202021 and Dec. 31, 2019;2020; the results of itsXcel Energy’s operations, including the components of net income, and comprehensive income, and changes in stockholders’ equity for the three and six months ended June 30, 20202021 and 2019;2020, and its cash flows for the six months ended June 30, 20202021 and 2019.2020.
All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after June 30, 2020,2021, 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, 2019,2020 balance sheet information has been derived from the audited 20192020 consolidated financial statements included in the Xcel Energy Inc. Annual Report on Form 10-K for the year ended Dec. 31, 2019.2020. 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, 2019,2020, filed with the SEC on Feb. 21, 2020. 17, 2021. 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, 2019,2020 appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference. | | |
2. Accounting Pronouncements |
Recently Adopted
Credit Losses — In 2016, the FASB issued Financial Instruments - Credit Losses, Topic 326 (ASC Topic 326), which changes how entities account for losses on receivables and certain other assets. The guidance requires use of a current expected credit loss model, which may result in earlier recognition of credit losses than under previous accounting standards.
Xcel Energy implemented the guidance using a modified-retrospective approach, recognizing a cumulative effect charge of $2 million (after tax) to retained earnings on Jan. 1, 2020. Other than first-time recognition of an allowance for doubtful accountsbad debts on accrued unbilled revenues, the Jan. 1, 2020, adoption of ASC Topic 326 did not have a significant impact on Xcel Energy’s consolidated financial statements.
| | |
3. Selected Balance Sheet Data |
| (Millions of Dollars) | (Millions of Dollars) | | June 30, 2020 | | Dec. 31, 2019 | (Millions of Dollars) | | June 30, 2021 | | Dec. 31, 2020 |
Accounts receivable, net | Accounts receivable, net | | | | | Accounts receivable, net | | | | |
Accounts receivable | Accounts receivable | | $ | 859 | | | $ | 892 | | Accounts receivable | | $ | 1,039 | | | $ | 995 | |
Less allowance for bad debts | Less allowance for bad debts | | (60) | | | (55) | | Less allowance for bad debts | | (91) | | | (79) | |
Accounts receivable, net | Accounts receivable, net | | $ | 799 | | | $ | 837 | | Accounts receivable, net | | $ | 948 | | | $ | 916 | |
| (Millions of Dollars) | (Millions of Dollars) | | June 30, 2020 | | Dec. 31, 2019 | (Millions of Dollars) | | June 30, 2021 | | Dec. 31, 2020 |
Inventories | Inventories | | | | | Inventories | | | | |
Materials and supplies | Materials and supplies | | $ | 277 | | | $ | 270 | | Materials and supplies | | $ | 281 | | | $ | 275 | |
Fuel | Fuel | | 173 | | | 191 | | Fuel | | 166 | | | 176 | |
Natural gas | Natural gas | | 37 | | | 83 | | Natural gas | | 53 | | | 84 | |
Total inventories | Total inventories | | $ | 487 | | | $ | 544 | | Total inventories | | $ | 500 | | | $ | 535 | |
| (Millions of Dollars) | (Millions of Dollars) | | June 30, 2020 | | Dec. 31, 2019 | (Millions of Dollars) | | June 30, 2021 | | Dec. 31, 2020 |
Property, plant and equipment, net | Property, plant and equipment, net | | | | | Property, plant and equipment, net | | | | |
Electric plant | Electric plant | | $ | 45,413 | | | $ | 44,355 | | Electric plant | | $ | 48,861 | | | $ | 47,104 | |
Natural gas plant | Natural gas plant | | 6,747 | | | 6,560 | | Natural gas plant | | 7,315 | | | 7,135 | |
Common and other property | Common and other property | | 2,385 | | | 2,341 | | Common and other property | | 2,524 | | | 2,503 | |
Plant to be retired (a) | Plant to be retired (a) | | 292 | | | 259 | | Plant to be retired (a) | | 630 | | | 677 | |
CWIP | | 3,060 | | | 2,329 | | |
Construction work in progress | | Construction work in progress | | 1,851 | | | 1,877 | |
Total property, plant and equipment | Total property, plant and equipment | | 57,897 | | | 55,844 | | Total property, plant and equipment | | 61,181 | | | 59,296 | |
Less accumulated depreciation | Less accumulated depreciation | | (17,097) | | | (16,735) | | Less accumulated depreciation | | (17,382) | | | (16,657) | |
Nuclear fuel | Nuclear fuel | | 2,925 | | | 2,909 | | Nuclear fuel | | 3,057 | | | 2,970 | |
Less accumulated amortization | Less accumulated amortization | | (2,601) | | | (2,535) | | Less accumulated amortization | | (2,715) | | | (2,659) | |
Property, plant and equipment, net | Property, plant and equipment, net | | $ | 41,124 | | | $ | 39,483 | | Property, plant and equipment, net | | $ | 44,141 | | | $ | 42,950 | |
(a)In 2018, the CPUC approved early retirementIncludes regulator-approved retirements of PSCo’s Comanche Units 1 and 2 in approximately 2022 and 2025, respectively. PSCo also expectsjointly owned Craig Unit 1 for PSCo and Sherco Units 1 and 2 for NSP-Minnesota. Also includes SPS’ expected retirement of Tolk and conversion of Harrington to be retired early in 2025. Amounts are presented netnatural gas, and PSCo’s planned retirement of accumulated depreciation.jointly owned Craig Unit 2.
| | |
4. Borrowings and Other Financing Instruments |
Short-Term Borrowings
Short-Term Debt — 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 and term loan agreements.
Commercial paper and term loan borrowings outstanding for Xcel Energy were as follows:Energy:
| (Amounts in Millions, Except Interest Rates) | (Amounts in Millions, Except Interest Rates) | | Three Months Ended June 30, 2020 | | Year Ended Dec. 31, 2019 | (Amounts in Millions, Except Interest Rates) | | Three Months Ended June 30, 2021 | | Year Ended Dec. 31, 2020 |
Borrowing limit | Borrowing limit | | $ | 4,300 | | | $ | 3,600 | | Borrowing limit | | $ | 4,300 | | | $ | 3,100 | |
Amount outstanding at period end | Amount outstanding at period end | | 1,410 | | | 595 | | Amount outstanding at period end | | 1,745 | | | 584 | |
Average amount outstanding | Average amount outstanding | | 1,496 | | | 1,115 | | Average amount outstanding | | 1,521 | | | 1,126 | |
Maximum amount outstanding | Maximum amount outstanding | | 1,770 | | | 1,780 | | Maximum amount outstanding | | 1,745 | | | 2,080 | |
Weighted average interest rate, computed on a daily basis | Weighted average interest rate, computed on a daily basis | | 1.65 | % | | 2.72 | % | Weighted average interest rate, computed on a daily basis | | 0.66 | % | | 1.45 | % |
Weighted average interest rate at period end | Weighted average interest rate at period end | | 0.76 | | | 2.34 | | Weighted average interest rate at period end | | 0.58 | | | 0.23 | |
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 both June 30, 20202021 and Dec. 31, 2019,2020, there were $20 million of letters of credit outstanding under the credit facilities. The contract amounts of these letters of creditAmounts approximate their fair value and are subject to fees.
Revolving Credit Facilities — In order to useissue 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 facilities.facility capacity. 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.
As of June 30, 2020,2021, Xcel Energy Inc. and its utility subsidiaries had the following committed revolving credit facilities available:
| (Millions of Dollars) | (Millions of Dollars) | | Credit Facility (a) | | Outstanding (b) | | Available | (Millions of Dollars) | | Credit Facility (a) | | Drawn (b) | | Available |
Xcel Energy Inc. | Xcel Energy Inc. | | $ | 1,250 | | | $ | 210 | | | $ | 1,040 | | Xcel Energy Inc. | | $ | 1,250 | | | $ | 545 | | | $ | 705 | |
PSCo | PSCo | | 700 | | | 8 | | | 692 | | PSCo | | 700 | | | 8 | | | 692 | |
NSP-Minnesota | NSP-Minnesota | | 500 | | | 2 | | | 498 | | NSP-Minnesota | | 500 | | | 9 | | | 491 | |
SPS | SPS | | 500 | | | 10 | | | 490 | | SPS | | 500 | | | 2 | | | 498 | |
NSP-Wisconsin | NSP-Wisconsin | | 150 | | | — | | | 150 | | NSP-Wisconsin | | 150 | | | 0 | | | 150 | |
Total | Total | | $ | 3,100 | | | $ | 230 | | | $ | 2,870 | | Total | | $ | 3,100 | | | $ | 564 | | | $ | 2,536 | |
(a)Expires in June 2024.
(b)Includes outstanding commercial paper and letters of credit.
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.
All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the respective credit facilities.facilities capacity. Xcel Energy Inc. and its utility subsidiaries had 0 direct advances on the credit facilities outstanding as of June 30, 20202021 and Dec. 31, 2019.2020.
Term Loan Agreements — In December 2019,February 2021, Xcel Energy Inc. entered into a $500 million$1.2 billion 364-Day Term Loan Agreement that matures Dec. 1, 2020.Feb. 17, 2022. Xcel Energy has an option to request an extensionextend through Nov. 30, 2021. In March 2020, Xcel Energy Inc. entered into a $700 million, 364-Day Term Loan Agreement. The loan is unsecured and matures March 22, 2021. Xcel Energy has an option to request an extension through March 21, 2022.Feb. 16, 2023. The term loans includeloan includes one financial covenant, requiring Xcel Energy’s consolidated funded debt to total capitalization ratio to be less than or equal to 65 percent. Interest is at a rate equal to either the Eurodollar rate, plus 60.0 basis points, or an alternate base rate.65%.
As of June 30, 2020,2021, Xcel Energy Inc.’s term loan borrowings were as follows:
| (Millions of Dollars) | (Millions of Dollars) | | Limit | | Amount Used | | Available | (Millions of Dollars) | | Limit | | Amount Used | | Available |
Xcel Energy Inc. | Xcel Energy Inc. | | $ | 1,200 | | | $ | 1,200 | | | $ | — | | Xcel Energy Inc. | | $ | 1,200 | | | $ | 1,200 | | | $ | 0 | |
Bilateral Credit Agreement
In March 2019, NSP-Minnesota entered into a one yearApril 2021, the uncommitted bilateral credit agreement.agreement was renewed for an additional one-year term. The credit agreement is limited in use to support letters of credit. In March 2020, NSP-Minnesota renewed its bilateral credit agreement for an additional one year term.
As of June 30, 2020,2021, NSP-Minnesota’s outstanding letters of credit under the bilateral credit agreement were as follows:
| (Millions of Dollars) | (Millions of Dollars) | | Limit | | Amount Outstanding | | Available | (Millions of Dollars) | | Limit | | Amount Outstanding | | Available |
NSP-Minnesota | NSP-Minnesota | | $ | 75 | | | $ | 31 | | | $ | 44 | | NSP-Minnesota | | $ | 75 | | | $ | 75 | | | $ | 0 | |
Long-Term Borrowings and Other Financing Instruments
During the six months ended June 30, 2020,2021, Xcel Energy Inc. and its utility subsidiaries issued the following:
•Xcel Energy Inc. PSCoissued $600$750 million of 3.40% senior unsecured notes due June 1, 2030;
•PSCo issued $375 million of 2.70%1.875% first mortgage bonds due Jan.June 15, 2051 and $375 million of 1.90% first mortgage bonds due Jan. 15, 2031;2031.
•SPS issued $350$250 million of 3.15% first mortgage bonds due May 1, 2050;
•NSP-Wisconsin issued $100 million of 3.05% first mortgage bonds due May 1, 2051; and2050.
•NSP-Minnesota issued $700$425 million of 2.60%2.25% first mortgage bonds due JuneApril 1, 2051.
Forward Equity Agreements —In November 2019, Xcel Energy Inc. entered into forward sale agreements in connection with a completed $743 million public offering of 11.8 million shares of Xcel Energy common stock. The initial forward agreement was for 10.3 million shares with an additional agreement for 1.5 million shares that was exercised at the option of the banking counterparty.
At June 30, 2020, the forward agreements could have been settled with physical delivery of 11.8 million common shares to the banking counterparty in exchange for cash of $728 million. The forward instruments could also have been settled at June 30, 2020, with delivery of approximately $242031 and $425 million of cash or approximately 0.4 million shares of common stock to the counterparty, if Xcel Energy unilaterally elected net cash or net share settlement, respectively.
The forward price used to determine amounts3.20% first mortgage bonds due at settlement is calculated based on the November 2019 public offering price for Xcel Energy’s common stock of $62.69, increased for the overnight bank funding rate, less a spread of 0.75% and less expected dividends on Xcel Energy’s common stock during the period the instruments are outstanding.
Xcel Energy may settle the agreements at any time up to the maturity date of Dec. 31, 2020. Depending on settlement timing, cash proceeds are expected to be approximately $720 million to $730 million.
Forward equity instruments were recognized within stockholders’ equity at fair value at execution of the agreements and will not be subsequently adjusted until settlement.April 1, 2052.
Other Equity — Xcel Energy Inc. issued $28 million and $20 million and $19 millionof equity through the DRIP during the six months ended June 30, 20202021 and 2019,2020, respectively. The program allows shareholders to elect dividend reinvestmentreinvest their dividends in Xcel Energy Inc. common stock through a non-cash transaction.
Revenue is classified by the type of goods/services rendered and market/customer type. Xcel Energy’s operating revenues consistsconsisted of the following:
| | | Three Months Ended June 30, 2020 | | | Three Months Ended June 30, 2021 |
(Millions of Dollars) | (Millions of Dollars) | | Electric | | Natural Gas | | All Other | | Total | (Millions of Dollars) | | Electric | | Natural Gas | | All Other | | Total |
Major revenue types | Major revenue types | | | | | | | | | Major revenue types | | | | | | | | |
Revenue from contracts with customers: | Revenue from contracts with customers: | | Revenue from contracts with customers: |
Residential | Residential | | $ | 718 | | | $ | 167 | | | $ | 10 | | | $ | 895 | | Residential | | $ | 756 | | | $ | 257 | | | $ | 11 | | | $ | 1,024 | |
C&I | C&I | | 1,075 | | | 73 | | | 6 | | | 1,154 | | C&I | | 1,282 | | | 126 | | | 6 | | | 1,414 | |
Other | Other | | 31 | | | — | | | 1 | | | 32 | | Other | | 32 | | | 0 | | | 2 | | | 34 | |
Total retail | Total retail | | 1,824 | | | 240 | | | 17 | | | 2,081 | | Total retail | | 2,070 | | | 383 | | | 19 | | | 2,472 | |
Wholesale | Wholesale | | 160 | | | — | | | — | | | 160 | | Wholesale | | 234 | | | 0 | | | 0 | | | 234 | |
Transmission | Transmission | | 153 | | | — | | | — | | | 153 | | Transmission | | 148 | | | 0 | | | 0 | | | 148 | |
Other | Other | | 21 | | | 26 | | | — | | | 47 | | Other | | 20 | | | 42 | | | 0 | | | 62 | |
Total revenue from contracts with customers | Total revenue from contracts with customers | | 2,158 | | | 266 | | | 17 | | | 2,441 | | Total revenue from contracts with customers | | 2,472 | | | 425 | | | 19 | | | 2,916 | |
Alternative revenue and other | Alternative revenue and other | | 128 | | | 14 | | | 3 | | | 145 | | Alternative revenue and other | | 125 | | | 24 | | | 3 | | | 152 | |
Total revenues | Total revenues | | $ | 2,286 | | | $ | 280 | | | $ | 20 | | | $ | 2,586 | | Total revenues | | $ | 2,597 | | | $ | 449 | | | $ | 22 | | | $ | 3,068 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2019 | | | | | | |
(Millions of Dollars) | | Electric | | Natural Gas | | All Other | | Total |
Major revenue types | | | | | | | | |
Revenue from contracts with customers: | | | | | | | | |
Residential | | $ | 624 | | | $ | 182 | | | $ | 10 | | | $ | 816 | |
C&I | | 1,201 | | | 90 | | | 6 | | | 1,297 | |
Other | | 31 | | | — | | | 1 | | | 32 | |
Total retail | | 1,856 | | | 272 | | | 17 | | | 2,145 | |
Wholesale | | 154 | | | — | | | — | | | 154 | |
Transmission | | 127 | | | — | | | — | | | 127 | |
Other | | 11 | | | 26 | | | — | | | 37 | |
Total revenue from contracts with customers | | 2,148 | | | 298 | | | 17 | | | 2,463 | |
Alternative revenue and other | | 101 | | | 10 | | | 3 | | | 114 | |
Total revenues | | $ | 2,249 | | | $ | 308 | | | $ | 20 | | | $ | 2,577 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2020 | | | | | | |
(Millions of Dollars) | | Electric | | Natural Gas | | All Other | | Total |
Major revenue types | | | | | | | | |
Revenue from contracts with customers: | | | | | | | | |
Residential | | $ | 1,394 | | | $ | 522 | | | $ | 21 | | | $ | 1,937 | |
C&I | | 2,141 | | | 253 | | | 15 | | | 2,409 | |
Other | | 60 | | | — | | | 2 | | | 62 | |
Total retail | | 3,595 | | | 775 | | | 38 | | | 4,408 | |
Wholesale | | 326 | | | — | | | — | | | 326 | |
Transmission | | 285 | | | — | | | — | | | 285 | |
Other | | 38 | | | 58 | | | — | | | 96 | |
Total revenue from contracts with customers | | 4,244 | | | 833 | | | 38 | | | 5,115 | |
Alternative revenue and other | | 245 | | | 30 | | | 7 | | | 282 | |
Total revenues | | $ | 4,489 | | | $ | 863 | | | $ | 45 | | | $ | 5,397 | |
| | | Six Months Ended June 30, 2019 | | | Three Months Ended June 30, 2020 |
(Millions of Dollars) | (Millions of Dollars) | | Electric | | Natural Gas | | All Other | | Total | (Millions of Dollars) | | Electric | | Natural Gas | | All Other | | Total |
Major revenue types | Major revenue types | | | | | | | | | Major revenue types | | | | | | | | |
Revenue from contracts with customers: | Revenue from contracts with customers: | | Revenue from contracts with customers: |
Residential | Residential | | $ | 1,351 | | | $ | 677 | | | $ | 19 | | | $ | 2,047 | | Residential | | $ | 718 | | | $ | 167 | | | $ | 10 | | | $ | 895 | |
C&I | C&I | | 2,341 | | | 345 | | | 15 | | | 2,701 | | C&I | | 1,075 | | | 73 | | | 6 | | | 1,154 | |
Other | Other | | 63 | | | — | | | 2 | | | 65 | | Other | | 31 | | | 0 | | | 1 | | | 32 | |
Total retail | Total retail | | 3,755 | | | 1,022 | | | 36 | | | 4,813 | | Total retail | | 1,824 | | | 240 | | | 17 | | | 2,081 | |
Wholesale | Wholesale | | 343 | | | — | | | — | | | 343 | | Wholesale | | 160 | | | 0 | | | 0 | | | 160 | |
Transmission | Transmission | | 258 | | | — | | | — | | | 258 | | Transmission | | 153 | | | 0 | | | 0 | | | 153 | |
Other | Other | | 29 | | | 60 | | | — | | | 89 | | Other | | 21 | | | 26 | | | 0 | | | 47 | |
Total revenue from contracts with customers | Total revenue from contracts with customers | | 4,385 | | | 1,082 | | | 36 | | | 5,503 | | Total revenue from contracts with customers | | 2,158 | | | 266 | | | 17 | | | 2,441 | |
Alternative revenue and other | Alternative revenue and other | | 189 | | | 20 | | | 6 | | | 215 | | Alternative revenue and other | | 128 | | | 14 | | | 3 | | | 145 | |
Total revenues | Total revenues | | $ | 4,574 | | | $ | 1,102 | | | $ | 42 | | | $ | 5,718 | | Total revenues | | $ | 2,286 | | | $ | 280 | | | $ | 20 | | | $ | 2,586 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2021 |
(Millions of Dollars) | | Electric | | Natural Gas | | All Other | | Total |
Major revenue types | | | | | | | | |
Revenue from contracts with customers: |
Residential | | $ | 1,489 | | | $ | 642 | | | $ | 21 | | | $ | 2,152 | |
C&I | | 2,315 | | | 312 | | | 15 | | | 2,642 | |
Other | | 62 | | | 0 | | | 3 | | | 65 | |
Total retail | | 3,866 | | | 954 | | | 39 | | | 4,859 | |
Wholesale | | 977 | | | 0 | | | 0 | | | 977 | |
Transmission | | 294 | | | 0 | | | 0 | | | 294 | |
Other | | 34 | | | 61 | | | 0 | | | 95 | |
Total revenue from contracts with customers | | 5,171 | | | 1,015 | | | 39 | | | 6,225 | |
Alternative revenue and other | | 296 | | | 81 | | | 7 | | | 384 | |
Total revenues | | $ | 5,467 | | | $ | 1,096 | | | $ | 46 | | | $ | 6,609 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2020 |
(Millions of Dollars) | | Electric | | Natural Gas | | All Other | | Total |
Major revenue types | | | | | | | | |
Revenue from contracts with customers: |
Residential | | $ | 1,394 | | | $ | 522 | | | $ | 21 | | | $ | 1,937 | |
C&I | | 2,141 | | | 253 | | | 15 | | | 2,409 | |
Other | | 60 | | | 0 | | | 2 | | | 62 | |
Total retail | | 3,595 | | | 775 | | | 38 | | | 4,408 | |
Wholesale | | 326 | | | 0 | | | 0 | | | 326 | |
Transmission | | 285 | | | 0 | | | 0 | | | 285 | |
Other | | 38 | | | 58 | | | 0 | | | 96 | |
Total revenue from contracts with customers | | 4,244 | | | 833 | | | 38 | | | 5,115 | |
Alternative revenue and other | | 245 | | | 30 | | | 7 | | | 282 | |
Total revenues | | $ | 4,489 | | | $ | 863 | | | $ | 45 | | | $ | 5,397 | |
Note 7 to the consolidated financial statements included in Xcel Energy’s Annual Report on Form 10-K for the year ended Dec. 31, 2019,2020 represents, in all material respects, the current status of other income tax matters except to the extent noted below, and are incorporated herein by reference. The following table reconciles the differenceDifference between the statutory rate and the ETR:
| | | Three Months Ended June 30 | | | Six Months Ended June 30 | | | Three Months Ended June 30 | | Six Months Ended June 30 |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
Federal statutory rate | Federal statutory rate | | 21.0 | % | | 21.0 | % | | 21.0 | % | | 21.0 | % | Federal statutory rate | | 21.0 | % | | 21.0 | % | | 21.0 | % | | 21.0 | % |
State tax (net of federal tax effect) | State tax (net of federal tax effect) | | 5.1 | | | 5.0 | | | 5.0 | | | 5.0 | | State tax (net of federal tax effect) | | 4.9 | | | 5.1 | | | 4.9 | | | 5.0 | |
Decreases in tax from: | | | | | |
Decreases: | | Decreases: | |
Wind PTCs | Wind PTCs | | (21.1) | | | (11.9) | | | (19.1) | | | (10.0) | | Wind PTCs | | (33.1) | | | (21.1) | | | (28.4) | | | (19.1) | |
Plant regulatory differences (a) | Plant regulatory differences (a) | | (7.1) | | | (5.5) | | | (7.8) | | | (5.6) | | Plant regulatory differences (a) | | (6.6) | | | (7.1) | | | (6.3) | | | (7.8) | |
Other tax credits, net NOL & tax credit allowances | | (1.9) | | | (0.6) | | | (1.4) | | | (1.8) | | |
Other (net) | Other (net) | | (0.7) | | | 1.2 | | | (1.1) | | | (0.5) | | Other (net) | | (0.1) | | | (2.6) | | | (1.0) | | | (2.5) | |
Effective income tax rate | Effective income tax rate | | (4.7) | % | | 9.2 | % | | (3.4) | % | | 8.1 | % | Effective income tax rate | | (13.9) | % | | (4.7) | % | | (9.8) | % | | (3.4) | % |
(a) Regulatory differences for income tax primarily relate to the credit of excess deferred taxes to customers through the average rate assumption method. Income tax benefits associated with the credit of excess deferred credits are offset by corresponding revenue reductions.
Federal Audits — Statute of limitations applicable to Xcel Energy’s consolidated federal income tax returns expire as follows:
| | | | | | | | |
Tax Years | | Expiration |
2009 — 2013
| | September 2020 |
2014 — 2016 | | JuneJanuary 2022 |
2017 | | September 2021 |
In 2017,Additionally, the IRS concluded the auditstatute of limitations related to a federal tax years 2012 and 2013 and proposed an adjustment that would impact Xcel Energy’s NOL and ETR.loss carryback claim filed in 2020 has been extended. Xcel Energy filedhas recognized its best estimate of income tax expense that will result from a protest withfinal resolution of this issue; however, the IRS. In April 2020, Xcel Energyoutcome and Appeals reached an agreement and no material adjustments were required.
In 2018, the IRS began an audittiming of tax years 2014 - 2016. As of June 30, 2020, no adjustments have been proposed.a resolution is unknown.
State Audits — Xcel Energy files consolidated state tax returns based on income in its major operating jurisdictions and various other state income-based tax returns.
As of June 30, 2020,2021, Xcel Energy’s earliest open tax years (subject to examination by state taxing authorities in its major operating jurisdictions) were as follows:
| | | | | | | | |
State | | Year |
Colorado | | 2009 |
Minnesota | | 20092013 |
Texas | | 20092012 |
Wisconsin | | 20142016 |
•In 2018, WisconsinJuly 2020, Minnesota began a review of tax years 2015 - 2018. In February 2021, Minnesota concluded its review and commenced an audit of the same tax years 2014 - 2016. As of June 30, 2020, 0years. NaN material adjustments have been proposed.
•In March 2021, Wisconsin began an audit of tax years 2016 - 2019. NaN material adjustments have been proposed.
•In April 2021, Texas began an audit of tax years 2016 - 2019. No material adjustments have been proposed.
•NaN other state income tax audits were in progress as of June 30, 2020.2021.
Unrecognized Benefits — UnrecognizedThe unrecognized tax benefit balance includes permanent tax positions, which if recognized would affect the annual ETR. In addition, the unrecognized tax benefit balance includes temporary tax positions for which ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductibility.timing. A change in the periodtiming of deductibility would not affect the ETR but would accelerate the payment to the taxing authority to an earlier period.authority.
Unrecognized tax benefits — permanent vs. temporary:
| (Millions of Dollars) | (Millions of Dollars) | | June 30, 2020 | | Dec. 31, 2019 | (Millions of Dollars) | | June 30, 2021 | | Dec. 31, 2020 |
Unrecognized tax benefit — Permanent tax positions | Unrecognized tax benefit — Permanent tax positions | | $ | 36 | | | $ | 35 | | Unrecognized tax benefit — Permanent tax positions | | $ | 43 | | | $ | 41�� | |
Unrecognized tax benefit — Temporary tax positions | Unrecognized tax benefit — Temporary tax positions | | 10 | | | 9 | | Unrecognized tax benefit — Temporary tax positions | | 11 | | | 11 | |
Total unrecognized tax benefit | Total unrecognized tax benefit | | $ | 46 | | | $ | 44 | | Total unrecognized tax benefit | | $ | 54 | | | $ | 52 | |
Unrecognized tax benefits were reduced by tax benefits associated with NOL and tax credit carryforwards:
| | | | | | | | | | | | | | |
(Millions of Dollars) | | June 30, 2020 | | Dec. 31, 2019 |
NOL and tax credit carryforwards | | $ | (41) | | | $ | (40) | |
Net deferred tax liability associated with the unrecognized tax benefit amounts and related NOLs and tax credits carryforwards were $31 million at June 30, 2020 and $29 million at Dec. 31, 2019. | | | | | | | | | | | | | | |
(Millions of Dollars) | | June 30, 2021 | | Dec. 31, 2020 |
NOL and tax credit carryforwards | | $ | (33) | | | $ | (31) | |
As the IRS audits resume and the state audits progress, it is reasonably possible that the amount of unrecognized tax benefit could decrease up to approximately $23$28 million in the next 12 months.
PayablesPayable for interest related to unrecognized tax benefits were not materialis partially offset by the interest benefit associated with NOL and 0 amountstax credit carryforwards.
Interest payable related to unrecognized tax benefits:
| | | | | | | | | | | | | | |
(Millions of Dollars) | | June 30, 2021 | | Dec. 31, 2020 |
Payable for interest related to unrecognized tax benefits at beginning of period | | $ | (3) | | | $ | 0 | |
Interest expense related to unrecognized tax benefits | | 0 | | | (3) | |
Payable for interest related to unrecognized tax benefits at end of period | | $ | (3) | | | $ | (3) | |
NaN penalties were accrued for penalties related to unrecognized tax benefits as of June 30, 20202021 or Dec. 31, 2019.2020.
Basic EPS was computed by dividing the earnings available to common shareholders by the average weighted average number of common shares outstanding. Diluted EPS was computed by dividing the earnings available to common shareholders by the diluted weighted average number of common shares outstanding.
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 diluted EPS is calculated using the treasury stock method.
Common Stock Equivalents — Xcel Energy Inc. has common stock equivalents related to forward equity agreements and time-based equity compensation awards.
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 issued to employees 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; andperiod.
•Liability awards subject to a performance condition; any portions settled in shares are included in common shares outstanding upon settlement.
Common shares outstanding used in the basic and diluted EPS computation:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30 | | Six Months Ended June 30 |
(Shares in Millions) | | 2021 | | 2020 | | 2021 | | 2020 |
Basic | | 539 | | | 527 | | 539 | | 526 |
Diluted (a) | | 539 | | 527 | | | 539 | | | 527 | |
(a) Diluted common shares outstanding included common stock equivalents of 0.3 million and 0.5 million for the three months ended June 30, 2021 and 2020, respectively. Diluted common shares outstanding included common stock equivalents of 0.3 million and 0.7 million for the three and six months ended June 30, 2021 and 2020, respectively, and 1.8 million and 1.5 million for the three and six months ended June 30, 2019, respectively.
| | |
8. Fair Value of Financial Assets and Liabilities |
Fair Value Measurements
Accounting guidance for fair value measurements and disclosures provides a single definition of fair value and requires 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.
•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;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; andinputs.
•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:
Cash equivalents — The fair values of cash equivalents are generally based on cost plus accrued interest; money market funds are measured using quoted NAV.
Investments in equity securities and other funds — Equity securities are valued using quoted prices in active markets. The fair values for commingled funds are measured using NAVs. The investments in commingled funds may be redeemed for NAV with proper notice. Private equity commingled fund 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 commingled fundsfunds’ investments may be redeemed with proper notice, however, withdrawals 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 — Fair values of interest rate derivatives are based on broker quotes that utilize current market interest rate forecasts.
Commodity derivatives — 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 classification. When contractual settlements relate to inactive delivery locations or extend to periods beyond those readily observable on active exchanges or quoted by brokers, the significance of the use of less observable forecasts of forward prices and volatilitiesinputs 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 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 transmission congestion. In addition to overall transmission load, congestion is also influenced by the operating schedules of power plants and the consumption of 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.
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. Given the limited observability of certain inputs to the value of FTRs between auction processes, including expected plant operating schedules and retail and wholesale demand, fair value measurements for FTRs have been assigned a Level 3.
Non-trading monthly FTR settlements are included inexpected to be recovered through 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 pertinent to the value of FTRs are insignificantimmaterial to the consolidated financial statements.
Non-Derivative Fair Value Measurements
The NRC requires NSP-Minnesota to maintain a portfolio of investments to fund the costs of decommissioning its nuclear generating plants. Assets of the nuclear decommissioning fund are legally restricted for the purpose of decommissioning these facilities. The fund contains cash equivalents, debt securities, equity securities and other investments. 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 over the lives of the nuclear plants, assuming rate recovery of all costs. 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 are deferred as a component of the regulatory asset.
Unrealized gains for the nuclear decommissioning fund were $637 million$1.2 billion and $706$981 million as of June 30, 20202021 and Dec. 31, 2019,2020, respectively, and unrealized losses were $16$3 million and $6$5 million as of June 30, 20202021 and Dec. 31, 2019,2020, respectively.
Non-derivative instruments with recurring fair value measurements in the nuclear decommissioning fund:
| | | June 30, 2020 | | | June 30, 2021 |
| | | Fair Value | | | | Fair Value |
(Millions of Dollars) | (Millions of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | NAV | | Total | (Millions of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | NAV | | Total |
Nuclear decommissioning fund (a) | Nuclear decommissioning fund (a) | | | | | | | | | | | | | Nuclear decommissioning fund (a) | | | | | | | | | | | | |
Cash equivalents | Cash equivalents | | $ | 22 | | | $ | 22 | | | $ | — | | | $ | — | | | $ | — | | | $ | 22 | | Cash equivalents | | $ | 30 | | | $ | 30 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 30 | |
Commingled funds | Commingled funds | | 766 | | | — | | | — | | | — | | | 897 | | | 897 | | Commingled funds | | 800 | | | 0 | | | 0 | | | 0 | | | 1,164 | | | 1,164 | |
Debt securities | Debt securities | | 513 | | | — | | | 531 | | | 10 | | | — | | | 541 | | Debt securities | | 612 | | | 0 | | | 641 | | | 16 | | | 0 | | | 657 | |
Equity securities | Equity securities | | 473 | | | 934 | | | 1 | | | — | | | — | | | 935 | | Equity securities | | 408 | | | 1,185 | | | 2 | | | 0 | | | 0 | | | 1,187 | |
Total | Total | | $ | 1,774 | | | $ | 956 | | | $ | 532 | | | $ | 10 | | | $ | 897 | | | $ | 2,395 | | Total | | $ | 1,850 | | | $ | 1,215 | | | $ | 643 | | | $ | 16 | | | $ | 1,164 | | | $ | 3,038 | |
(a) Reported in nuclear decommissioning fund and other investments on the consolidated balance sheet,sheets, which also includes $155$189 million of equity method investments in unconsolidated subsidiaries and $133$162 million of rabbi trust assets and miscellaneous investments.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Dec. 31, 2019 | | | | | | | | | | |
| | | | Fair Value | | | | | | | | |
(Millions of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | NAV | | Total |
Nuclear decommissioning fund (a) | | | | | | | | | | | | |
Cash equivalents | | $ | 33 | | | $ | 33 | | | $ | — | | | $ | — | | | $ | — | | | $ | 33 | |
Commingled funds | | 733 | | | — | | | — | | | — | | | 935 | | | 935 | |
Debt securities | | 489 | | | — | | | 495 | | | 13 | | | — | | | 508 | |
Equity securities | | 485 | | | 962 | | | 2 | | | — | | | — | | | 964 | |
Total | | $ | 1,740 | | | $ | 995 | | | $ | 497 | | | $ | 13 | | | $ | 935 | | | $ | 2,440 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Dec. 31, 2020 |
| | | | Fair Value |
(Millions of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | NAV | | Total |
Nuclear decommissioning fund (a) | | | | | | | | | | | | |
Cash equivalents | | $ | 40 | | | $ | 40 | | | $ | 0 | | | $ | 0 | | | $ | 0 | | | $ | 40 | |
Commingled funds | | 787 | | | 0 | | | 0 | | | 0 | | | 1,041 | | | 1,041 | |
Debt securities | | 528 | | | 0 | | | 572 | | | 13 | | | 0 | | | 585 | |
Equity securities | | 446 | | | 1,109 | | | 2 | | | 0 | | | 0 | | | 1,111 | |
Total | | $ | 1,801 | | | $ | 1,149 | | | $ | 574 | | | $ | 13 | | | $ | 1,041 | | | $ | 2,777 | |
(a)Reported in nuclear decommissioning fund and other investments on the consolidated balance sheet,sheets, which also includes $155$165 million of equity method investments in unconsolidated subsidiaries and $136$154 million of rabbi trust assets and other miscellaneous investments.
For the three and six months ended June 30, 20202021 and 2019,2020, there were immaterial Level 3 nuclear decommissioning fund investments or transfer of amounts between levels.
Contractual maturity dates of debt securities in the nuclear decommissioning fund as of June 30, 2020:2021:
| | | Final Contractual Maturity | | | Final Contractual Maturity |
(Millions of Dollars) | (Millions 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 | (Millions 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 |
Debt securities | Debt securities | | $ | (4) | | | $ | 98 | | | $ | 212 | | | $ | 235 | | | $ | 541 | | Debt securities | | $ | 2 | | | $ | 153 | | | $ | 210 | | | $ | 292 | | | $ | 657 | |
Rabbi Trusts
Xcel Energy has established rabbi trusts to provide partial funding for future distributions of its supplemental executive retirement plan and deferred compensation plan.
Cost and fair value of assets held in rabbi trusts:
| | | June 30, 2020 | | | June 30, 2021 |
| | | Fair Value | | | | Fair Value |
(Millions of Dollars) | (Millions of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | Total | (Millions of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | Total |
Rabbi Trusts (a) | Rabbi Trusts (a) | | | | | | | | | | | Rabbi Trusts (a) | | | | | | | | | | |
Cash equivalents | Cash equivalents | | $ | 17 | | | $ | 17 | | | $ | — | | | $ | — | | | $ | 17 | | Cash equivalents | | $ | 23 | | | $ | 23 | | | $ | 0 | | | $ | 0 | | | $ | 23 | |
Mutual funds | Mutual funds | | 57 | | | 61 | | | — | | | — | | | 61 | | Mutual funds | | 71 | | | 84 | | | 0 | | | 0 | | | 84 | |
Total | Total | | $ | 74 | | | $ | 78 | | | $ | — | | | $ | — | | | $ | 78 | | Total | | $ | 94 | | | $ | 107 | | | $ | 0 | | | $ | 0 | | | $ | 107 | |
| | | Dec. 31, 2019 | | | Dec. 31, 2020 |
| | | Fair Value | | | | Fair Value |
(Millions of Dollars) | (Millions of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | Total | (Millions of Dollars) | | Cost | | Level 1 | | Level 2 | | Level 3 | | Total |
Rabbi Trusts (a) | Rabbi Trusts (a) | | | | | | | | | | | Rabbi Trusts (a) | | | | | | | | | | |
Cash equivalents | Cash equivalents | | $ | 17 | | | $ | 17 | | | $ | — | | | $ | — | | | $ | 17 | | Cash equivalents | | $ | 32 | | | $ | 32 | | | $ | 0 | | | $ | 0 | | | $ | 32 | |
Mutual funds | Mutual funds | | 57 | | | 65 | | | — | | | — | | | 65 | | Mutual funds | | 60 | | | 70 | | | 0 | | | 0 | | | 70 | |
Total | Total | | $ | 74 | | | $ | 82 | | | $ | — | | | $ | — | | | $ | 82 | | Total | | $ | 92 | | | $ | 102 | | | $ | 0 | | | $ | 0 | | | $ | 102 | |
(a) Reported in nuclear decommissioning fund and other investments on the consolidated balance sheet.sheets.
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 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, with changes in fair value prior to settlement recorded as other comprehensive income.
As of June 30, 2020,2021, accumulated other comprehensive loss related to settled interest rate derivatives included $5$6 million of net losses expected to be reclassified into earnings during the next 12 months as the hedged transactions impact earnings. As of June 30, 2020.2021, Xcel Energy had 0 unsettled interest rate derivatives.
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 natural gas-related instruments, including derivatives. Xcel Energy is allowed to conduct these activities within guidelines and limitations as approved by its risk management committee, comprised of management personnel not directly involved in the activities governed by this policy. Sharing of any margins is determined through state regulatory proceedings as well as the operation of the FERC approved joint operating agreement.
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.
Xcel Energy may enter into derivative instruments that mitigate commodity price risk on behalf of electric and natural gas customers, but may not be designated as qualifying hedging transactions. Changes in the fair valueThe classification of non-trading commodity derivativegains or losses for these instruments are recorded as other comprehensive income or deferred as a regulatory asset or liability. The classification as a regulatory asset or liability, if applicable, is based on approved regulatory recovery mechanisms.
As of June 30, 2020,2021, Xcel Energy had 0 commodity contracts designated as cash flow hedges.
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.
Gross notional amounts of commodity forwards, options and FTRs:
| (Amounts in Millions) (a)(b) | (Amounts in Millions) (a)(b) | | June 30, 2020 | | Dec. 31, 2019 | (Amounts in Millions) (a)(b) | | June 30, 2021 | | Dec. 31, 2020 |
Megawatt hours of electricity | Megawatt hours of electricity | | 127 | | | 95 | | Megawatt hours of electricity | | 122 | | | 87 | |
Million British thermal units of natural gas | Million British thermal units of natural gas | | 153 | | | 110 | | Million British thermal units of natural gas | | 169 | | | 175 | |
|
(a)Not reflective of net positions in the underlying commodities.
(b)Notional amounts for options included on a gross basis but weighted for the probability of exercise.
Consideration of Credit Risk and Concentrations — Xcel Energy continuously monitors the creditworthiness of counterparties to its interest rate derivatives and commodity derivative contracts prior to settlement, and assesses each counterparty’s ability to perform on the transactions set forth in the contracts. Impact of credit risk was immaterial to the fair value of unsettled commodity derivatives presented in the consolidated balance sheets.
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.
As of June 30, 2020,2021, 6 of Xcel Energy’s 10 most significant counterparties for these activities, comprising $152$118 million, or 57%44%, of this credit exposure, had investment grade credit ratings from S&P Global Ratings, Moody’s Investor Services or Fitch Ratings. NaN of the 10 most significant counterparties, comprising $36$27 million, or 14%10%, of this credit exposure, were not rated by these external ratings agencies, but based on Xcel Energy’s internal analysis, had credit quality consistent with investment grade. NaN of these significant counterparties, comprising $13$62 million or 5%23% of this credit exposure, had credit quality less than investment grade, based on internal analysis. NaN of these significant counterparties are municipal or cooperative electric entities, RTOs or other utilities.
Impact of Derivative Activity —
| | | | | | | | | | | | | | |
| | Pre-Tax Fair Value Gains (Losses) Recognized During the Period in: |
(Millions of Dollars) | | Accumulated Other Comprehensive Loss | | Regulatory (Assets) and Liabilities |
Three Months Ended June 30, 2021 | | | | |
Other derivative instruments | | | | |
Electric commodity | | $ | 0 | | | $ | 11 | |
Natural gas commodity | | 0 | | | (1) | |
Total | | $ | 0 | | | $ | 10 | |
| | | | |
Six Months Ended June 30, 2021 | | | | |
| | | | |
| | | | |
| | | | |
Other derivative instruments | | | | |
Electric commodity | | $ | 0 | | | $ | 13 | |
| | | | |
Total | | $ | 0 | | | $ | 13 | |
| | | | |
| | | | |
Three Months Ended June 30, 2020 | | | | |
| | | | |
| | | | |
| | | | |
Other derivative instruments | | | | |
| | | | |
Natural gas commodity | | $ | 0 | | | $ | (3) | |
Total | | $ | 0 | | | $ | (3) | |
| | | | |
Six Months Ended June 30, 2020 | | | | |
Derivatives designated as cash flow hedges | | | | |
Interest rate | | $ | (13) | | | $ | 0 | |
Total | | $ | (13) | | | $ | 0 | |
Other derivative instruments | | | | |
| | | | |
Natural gas commodity | | $ | 0 | | | $ | (3) | |
Total | | $ | 0 | | | $ | (3) | |
Impact of derivative activity: | | | | | | | | | | | | | | | | | | | | | | | |
| | Pre-Tax (Gains) Losses Reclassified into Income During the Period from: | | Pre-Tax Gains (Losses) Recognized During the Period in Income | |
(Millions of Dollars) | | Accumulated Other Comprehensive Loss | | Regulatory Assets and (Liabilities) | | |
Three Months Ended June 30, 2021 | | | | | |
Derivatives designated as cash flow hedges | | | | | | | |
Interest rate | | $ | 2 | | (a) | $ | 0 | | | $ | 0 | | |
Total | | $ | 2 | | | $ | 0 | | | $ | 0 | | |
Other derivative instruments | | | | | | | |
Commodity trading | | $ | 0 | | | $ | 0 | | | $ | 12 | | (b) |
Electric commodity | | 0 | | | 3 | | (c) | 0 | | |
| | | | | | | |
Total | | $ | 0 | | | $ | 3 | | | $ | 12 | | |
| | | | | | | |
Six Months Ended June 30, 2021 | | | | | |
Derivatives designated as cash flow hedges | | | | | | | |
Interest rate | | $ | 6 | | (a) | $ | 0 | | | $ | 0 | | |
Total | | $ | 6 | | | $ | 0 | | | $ | 0 | | |
Other derivative instruments | | | | | | | |
Commodity trading | | $ | 0 | | | $ | 0 | | | $ | 48 | | (b) |
Electric commodity | | 0 | | | (23) | | (c) | 0 | | |
Natural gas commodity | | 0 | | | 8 | | (d) | (10) | | (d) |
Total | | $ | 0 | | | $ | (15) | | | $ | 38 | | |
| | | | | | | |
Three Months Ended June 30, 2020 | | | | | |
Derivatives designated as cash flow hedges | | | | | | | |
Interest rate | | $ | 2 | | (a) | $ | 0 | | | $ | 0 | | |
Total | | $ | 2 | | | $ | 0 | | | $ | 0 | | |
Other derivative instruments | | | | | | | |
Commodity trading | | $ | 0 | | | $ | 0 | | | $ | (3) | | (b) |
Electric commodity | | 0 | | | (3) | | (c) | 0 | | |
Total | | $ | 0 | | | $ | (3) | | | $ | (3) | | |
| | | | | | | |
Six Months Ended June 30, 2020 | | | | | |
Derivatives designated as cash flow hedges | | | | | | | |
Interest rate | | $ | 4 | | (a) | $ | 0 | | | $ | 0 | | |
Total | | $ | 4 | | | $ | 0 | | | $ | 0 | | |
Other derivative instruments | | | | | | | |
Commodity trading | | $ | 0 | | | $ | 0 | | | $ | (5) | | (b) |
Electric commodity | | 0 | | | (7) | | (c) | 0 | | |
Natural gas commodity | | 0 | | | 5 | | (d) | (6) | | (d) |
Total | | $ | 0 | | | $ | (2) | | | $ | (11) | | |
| | | | | | | | | | | | | | |
| | Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:(a) | | |
(Millions of Dollars) | | Accumulated Other Comprehensive Loss | | Regulatory (Assets) and Liabilities |
Three Months Ended June 30, 2020 | | | | |
| | | | |
| | | | |
| | | | |
Other derivative instruments | | | | |
| | | | |
Natural gas commodity | | $ | — | | | $ | (3) | |
Total | | $ | — | | | $ | (3) | |
| | | | |
Six Months Ended June 30, 2020 | | | | |
Derivatives designated as cash flow hedges | | | | |
Interest rate | | $ | (13) | | | $ | — | |
Total | | $ | (13) | | | $ | — | |
Other derivative instruments | | | | |
| | | | |
Natural gas commodity | | $ | — | | | $ | (3) | |
Total | | $ | — | | | $ | (3) | |
| | | | |
Three Months Ended June 30, 2019 | | | | |
Derivatives designated as cash flow hedges | | | | |
Interest rate | | $ | (13) | | | $ | — | |
Total | | $ | (13) | | | $ | — | |
Other derivative instruments | | | | |
Electric commodity | | $ | — | | | $ | 26 | |
Natural gas commodity | | — | | | (2) | |
Total | | $ | — | | | $ | 24 | |
| | | | |
Six Months Ended June 30, 2019 | | | | |
Derivatives designated as cash flow hedges | | | | |
Interest rate | | $ | (22) | | | $ | — | |
Total | | $ | (22) | | | $ | — | |
Other derivative instruments | | | | |
Electric commodity | | $ | — | | | $ | 4 | |
Natural gas commodity | | — | | | (2) | |
Total | | $ | — | | | $ | 2 | |
| | | | | | | | | | | | | | | | | | | | |
| Pre-Tax (Gains) Losses Reclassified into Income During the Period from: | | | | Pre-Tax Gains (Losses) Recognized During the Period in Income | |
(Millions of Dollars) | Accumulated Other Comprehensive Loss | | Regulatory Assets and (Liabilities) | | | |
Three Months Ended June 30, 2020 | | | | | | |
Derivatives designated as cash flow hedges | | | | | | |
Interest rate | $ | 2 | | (a) | $ | — | | | $ | — | | |
Total | $ | 2 | | | $ | — | | | $ | — | | |
Other derivative instruments | | | | | | |
Commodity trading | $ | — | | | $ | — | | | $ | (3) | | (b) |
Electric commodity | — | | | (3) | | (c) | — | | |
Total | $ | — | | | $ | (3) | | | $ | (3) | | |
| | | | | | |
Six Months Ended June 30, 2020 | | | | | | |
Derivatives designated as cash flow hedges | | | | | | |
Interest rate | $ | 4 | | (a) | $ | — | | | $ | — | | |
Total | $ | 4 | | | $ | — | | | $ | — | | |
Other derivative instruments | | | | | | |
Commodity trading | $ | — | | | $ | — | | | $ | (5) | | (b) |
Electric commodity | — | | | (7) | | (c) | — | | |
Natural gas commodity | — | | | 5 | | (d) | (6) | | (d) |
Total | $ | — | | | $ | (2) | | | $ | (11) | | |
| | | | | | |
Three Months Ended June 30, 2019 | | | | | | |
Derivatives designated as cash flow hedges | | | | | | |
Interest rate | $ | 1 | | (a) | $ | — | | | $ | — | | |
Total | $ | 1 | | | $ | — | | | $ | — | | |
Other derivative instruments | | | | | | |
Commodity trading | $ | — | | | $ | — | | | $ | 5 | | (b) |
Total | $ | — | | | $ | — | | | $ | 5 | | |
| | | | | | |
Six Months Ended June 30, 2019 | | | | | | |
Derivatives designated as cash flow hedges | | | | | | |
Interest rate | $ | 2 | | (a) | $ | — | | | $ | — | | |
Total | $ | 2 | | | $ | — | | | $ | — | | |
Other derivative instruments | | | | | | |
Commodity trading | $ | — | | | $ | — | | | $ | 4 | | (b) |
Electric commodity | — | | | 1 | | (c) | — | | |
Natural gas commodity | — | | | (1) | | (d) | (4) | | (d) |
Total | $ | — | | | $ | — | | | $ | — | | |
(a)Recorded to interest charges.
(b)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.
(c)Recorded to electric fuel and purchased power. These derivative settlement gains and losses 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.
(d)Amounts for both the three and six months ended June 30, 20202021 and 20192020 included 0 settlement gains or losses on derivatives entered to mitigate natural gas price risk for electric generation recorded to electric fuel and purchased power, subject to cost-recovery mechanisms and reclassified to a regulatory asset, as appropriate. Remaining settlement losses for both the three and six months ended June 30, 2021 and 2020 and 2019 relatedrelate to natural gas operations and were 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 0 derivative instruments designated as fair value hedges during the three and six months ended June 30, 20202021 and 2019.2020.
Credit Related Contingent Features ���— Contract provisions for derivative instruments that the utility subsidiaries enter, including those accounted for as normal purchase-normal sale contracts and therefore not reflected on the consolidated balance sheets, may require the posting of collateral or settlement of the contracts for various reasons, including if the applicable utility subsidiary’s credit ratings are downgraded below its investment grade credit rating by any of the major credit rating agencies, or foragencies. At June 30, 2021 and Dec. 31, 2020, there were $6 million and $4 million of derivative liabilities with such underlying contract provisions, respectively. Certain contracts also contain cross default contractual provisions that may require the posting of collateral or settlement of the contracts if there was a failure under other financing arrangements related to payment terms or other covenants.
As of June 30, 20202021 and Dec. 31, 2019,2020, there were $8approximately $69 million and $7$60 million of derivative instruments in a liability positionliabilities with such underlying contract provisions, respectively.
Certain derivative instruments are also subject to contract provisions that contain adequate assurance clauses. ProvisionsThese 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 0 collateral posted related to adequate assurance clauses in derivative contracts as of June 30, 20202021 and Dec. 31, 20192020.
Recurring Fair Value Measurements — Derivative assets and liabilities measured at fair value on a recurring basis:
| | | June 30, 2020 | | | Dec. 31, 2019 | | | June 30, 2021 | | Dec. 31, 2020 |
| | Fair Value | | | Fair Value Total | | Netting (a) | | Total | | Fair Value | | | Fair Value Total | | Netting (a) | | Total | | Fair Value | | Fair Value Total | | Netting (a) | | Total | | Fair Value | | Fair Value Total | | Netting (a) | | Total |
(Millions of Dollars) | (Millions of Dollars) | | Level 1 | | Level 2 | | Level 3 | | | | | | | | Level 1 | | Level 2 | | Level 3 | | | | | | | Netting (a) | (Millions of Dollars) | | Level 1 | | Level 2 | | Level 3 | | Fair Value Total | | | Level 2 | | Level 3 | | Fair Value Total | |
Current derivative assets | Current derivative assets | | | | | | | | | | | | | | | | | | | | | | | | | Current derivative assets | | | | | | | | | | | | | | | | | | | | | | |
Other derivative instruments: | Other derivative instruments: | | Other derivative instruments: | |
Commodity trading | Commodity trading | | $ | 5 | | | $ | 52 | | | $ | 11 | | | $ | 68 | | | $ | (50) | | | $ | 18 | | | $ | 3 | | | $ | 51 | | | $ | 24 | | | $ | 78 | | | $ | (52) | | | $ | 26 | | Commodity trading | | $ | 17 | | | $ | 178 | | | $ | 11 | | | $ | 206 | | | $ | (168) | | | $ | 38 | | | $ | 2 | | | $ | 67 | | | $ | 1 | | | $ | 70 | | | $ | (52) | | | $ | 18 | |
Electric commodity | Electric commodity | | — | | | — | | | 46 | | | 46 | | | (2) | | | 44 | | | — | | | — | | | 21 | | | 21 | | | (1) | | | 20 | | Electric commodity | | 0 | | | 0 | | | 98 | | | 98 | | | (1) | | | 97 | | | 0 | | | 0 | | | 20 | | | 20 | | | (1) | | | 19 | |
Natural gas commodity | Natural gas commodity | | — | | | 7 | | | — | | | 7 | | | — | | | 7 | | | — | | | 6 | | | — | | | 6 | | | — | | | 6 | | Natural gas commodity | | 0 | | | 10 | | | 0 | | | 10 | | | 0 | | | 10 | | | 0 | | | 9 | | | 0 | | | 9 | | | 0 | | | 9 | |
Total current derivative assets | Total current derivative assets | | $ | 5 | | | $ | 59 | | | $ | 57 | | | $ | 121 | | | $ | (52) | | | 69 | | | $ | 3 | | | $ | 57 | | | $ | 45 | | | $ | 105 | | | $ | (53) | | | 52 | | Total current derivative assets | | $ | 17 | | | $ | 188 | | | $ | 109 | | | $ | 314 | | | $ | (169) | | | 145 | | | $ | 2 | | | $ | 76 | | | $ | 21 | | | $ | 99 | | | $ | (53) | | | 46 | |
PPAs (b) | PPAs (b) | | | | | | | | | | | | 3 | | | | | | | | | | | | | 3 | | PPAs (b) | | | | | | | | | | | | 3 | | | | | | | | | | | | | 3 | |
Current derivative instruments | Current derivative instruments | | $ | 72 | | | $ | 55 | | Current derivative instruments | | $ | 148 | | | $ | 49 | |
Noncurrent derivative assets | Noncurrent derivative assets | | | | | Noncurrent derivative assets | | | | |
Other derivative instruments: | Other derivative instruments: | | Other derivative instruments: | |
Commodity trading | Commodity trading | | $ | 11 | | | $ | 42 | | | $ | 23 | | | $ | 76 | | | $ | (49) | | | $ | 27 | | | $ | 9 | | | $ | 38 | | | $ | 7 | | | $ | 54 | | | $ | (45) | | | $ | 9 | | Commodity trading | | $ | 10 | | | $ | 117 | | | $ | 82 | | | $ | 209 | | | $ | (125) | | | $ | 84 | | | $ | 8 | | | $ | 66 | | | $ | 8 | | | $ | 82 | | | $ | (62) | | | $ | 20 | |
| Total noncurrent derivative assets | Total noncurrent derivative assets | | $ | 11 | | | $ | 42 | | | $ | 23 | | | $ | 76 | | | $ | (49) | | | 27 | | | $ | 9 | | | $ | 38 | | | $ | 7 | | | $ | 54 | | | $ | (45) | | | 9 | | Total noncurrent derivative assets | | $ | 10 | | | $ | 117 | | | $ | 82 | | | $ | 209 | | | $ | (125) | | | 84 | | | $ | 8 | | | $ | 66 | | | $ | 8 | | | $ | 82 | | | $ | (62) | | | 20 | |
PPAs (b) | PPAs (b) | | | | | | | | | | | | 11 | | | | | | | | | | | | | 13 | | PPAs (b) | | | | | | | | | | | | 8 | | | | | | | | | | | | | 10 | |
Noncurrent derivative instruments | Noncurrent derivative instruments | | $ | 38 | | | $ | 22 | | Noncurrent derivative instruments | | $ | 92 | | | $ | 30 | |
| | | June 30, 2020 | | | Dec. 31, 2019 | | | June 30, 2021 | | Dec. 31, 2020 |
| | Fair Value | | | Fair Value Total | | Netting (a) | | Total | | Fair Value | | | Fair Value Total | | Netting (a) | | Total | | Fair Value | | Fair Value Total | | Netting (a) | | Total | | Fair Value | | Fair Value Total | | Netting (a) | | Total |
(Millions of Dollars) | (Millions of Dollars) | | Level 1 | | Level 2 | | Level 3 | | | | | | | | Level 1 | | Level 2 | | Level 3 | | | | | | | Netting (a) | (Millions of Dollars) | | Level 1 | | Level 2 | | Level 3 | | Fair Value Total | | | Level 2 | | Level 3 | | Fair Value Total | |
Current derivative liabilities | Current derivative liabilities | | | | | | | | | | | | | | | | | | | | | | | | | Current derivative liabilities | | | | | | | | | | | | | | | | | | | | | | |
| Other derivative instruments: | Other derivative instruments: | | Other derivative instruments: | |
Commodity trading | Commodity trading | | $ | 6 | | | $ | 54 | | | $ | 8 | | | $ | 68 | | | $ | (50) | | | $ | 18 | | | $ | 4 | | | $ | 59 | | | $ | 15 | | | $ | 78 | | | $ | (63) | | | $ | 15 | | Commodity trading | | $ | 20 | | | $ | 188 | | | $ | 12 | | | $ | 220 | | | $ | (175) | | | $ | 45 | | | $ | 4 | | | $ | 64 | | | $ | 17 | | | $ | 85 | | | $ | (58) | | | $ | 27 | |
Electric commodity | Electric commodity | | — | | | — | | | 2 | | | 2 | | | (2) | | | — | | | — | | | — | | | 1 | | | 1 | | | (1) | | | — | | Electric commodity | | 0 | | | 0 | | | 1 | | | 1 | | | (1) | | | 0 | | | 0 | | | 0 | | | 1 | | | 1 | | | (1) | | | 0 | |
Natural gas commodity | Natural gas commodity | | — | | | 5 | | | — | | | 5 | | | — | | | 5 | | | — | | | 5 | | | — | | | 5 | | | — | | | 5 | | Natural gas commodity | | 0 | | | 3 | | | 0 | | | 3 | | | 0 | | | 3 | | | 0 | | | 9 | | | 0 | | | 9 | | | 0 | | | 9 | |
Total current derivative liabilities | Total current derivative liabilities | | $ | 6 | | | $ | 59 | | | $ | 10 | | | $ | 75 | | | $ | (52) | | | 23 | | | $ | 4 | | | $ | 64 | | | $ | 16 | | | $ | 84 | | | $ | (64) | | | 20 | | Total current derivative liabilities | | $ | 20 | | | $ | 191 | | | $ | 13 | | | $ | 224 | | | $ | (176) | | | 48 | | | $ | 4 | | | $ | 73 | | | $ | 18 | | | $ | 95 | | | $ | (59) | | | 36 | |
PPAs (b) | PPAs (b) | | | | | | | | | | | | 17 | | | | | | | | | | | | | 18 | | PPAs (b) | | | | | | | | | | | | 17 | | | | | | | | | | | | | 17 | |
Current derivative instruments | Current derivative instruments | | $ | 40 | | | $ | 38 | | Current derivative instruments | | $ | 65 | | | $ | 53 | |
Noncurrent derivative liabilities | Noncurrent derivative liabilities | | | | | Noncurrent derivative liabilities | | | | |
Other derivative instruments: | Other derivative instruments: | | Other derivative instruments: | |
Commodity trading | Commodity trading | | $ | 4 | | | $ | 95 | | | $ | 36 | | | $ | 135 | | | $ | (20) | | | $ | 115 | | | $ | 2 | | | $ | 79 | | | $ | 32 | | | $ | 113 | | | $ | (13) | | | $ | 100 | | Commodity trading | | $ | 7 | | | $ | 116 | | | $ | 107 | | | $ | 230 | | | $ | (132) | | | $ | 98 | | | $ | 3 | | | $ | 58 | | | $ | 60 | | | $ | 121 | | | $ | (47) | | | $ | 74 | |
Total noncurrent derivative liabilities | Total noncurrent derivative liabilities | | $ | 4 | | | $ | 95 | | | $ | 36 | | | $ | 135 | | | $ | (20) | | | 115 | | | $ | 2 | | | $ | 79 | | | $ | 32 | | | $ | 113 | | | $ | (13) | | | 100 | | Total noncurrent derivative liabilities | | $ | 7 | | | $ | 116 | | | $ | 107 | | | $ | 230 | | | $ | (132) | | | 98 | | | $ | 3 | | | $ | 58 | | | $ | 60 | | | $ | 121 | | | $ | (47) | | | 74 | |
PPAs (b) | PPAs (b) | | | | | | | | | | | | 66 | | | | | | | | | | | | | 75 | | PPAs (b) | | | | | | | | | | | | 49 | | | | | | | | | | | | | 57 | |
Noncurrent derivative instruments | Noncurrent derivative instruments | | $ | 181 | | | $ | 175 | | Noncurrent derivative instruments | | $ | 147 | | | $ | 131 | |
(a)Xcel Energy nets derivative instruments and related collateral inon its consolidated balance sheetsheets 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, 20202021 and Dec. 31, 2019.2020. At both June 30, 20202021 and Dec. 31, 2019,2020, derivative assets and liabilities include $32$15 million of obligations to return cash collateralcollateral. At June 30, 2021 and Dec. 31, 2020, derivative assets and liabilities include rights to reclaim cash collateral of $4$29 million and $11$6 million, respectively. Counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.
(b)During 2006, Xcel Energy qualified these contracts under the normal purchase exception. Based on this qualification, contracts are no longer adjusted to fair value and the previous carrying value of these contracts is being amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities.
Changes in Level 3 commodity derivatives:
| | | Three Months Ended June 30 | | | Three Months Ended June 30 |
(Millions of Dollars) | (Millions of Dollars) | | 2020 | | 2019 | (Millions of Dollars) | | 2021 | | 2020 |
Balance at April 1 | Balance at April 1 | | $ | 4 | | | $ | (7) | | Balance at April 1 | | $ | (13) | | | $ | 4 | |
Purchases | Purchases | | 37 | | | 34 | | Purchases | | 63 | | | 37 | |
Settlements | Settlements | | (25) | | | (16) | | Settlements | | (32) | | | (25) | |
Net transactions recorded during the period: | Net transactions recorded during the period: | | | Net transactions recorded during the period: | |
Gains recognized in earnings (a) | Gains recognized in earnings (a) | | 9 | | | 7 | | Gains recognized in earnings (a) | | 9 | | | 9 | |
Net gains recognized as regulatory assets and liabilities | Net gains recognized as regulatory assets and liabilities | | 9 | | | 10 | | Net gains recognized as regulatory assets and liabilities | | 44 | | | 9 | |
Balance at June 30 | Balance at June 30 | | $ | 34 | | | $ | 28 | | Balance at June 30 | | $ | 71 | | | $ | 34 | |
| | | Six Months Ended June 30 | | | Six Months Ended June 30 |
(Millions of Dollars) | (Millions of Dollars) | | 2020 | | 2019 | (Millions of Dollars) | | 2021 | | 2020 |
Balance at Jan. 1 | Balance at Jan. 1 | | $ | 4 | | | $ | 29 | | Balance at Jan. 1 | | $ | (49) | | | $ | 4 | |
Purchases | Purchases | | 49 | | | 38 | | Purchases | | 63 | | | 49 | |
Settlements | Settlements | | (42) | | | (27) | | Settlements | | (48) | | | (42) | |
Net transactions recorded during the period: | Net transactions recorded during the period: | | Net transactions recorded during the period: | |
Gains (losses) recognized in earnings (a) | | 14 | | | (11) | | |
Net gains (losses) recognized as regulatory assets and liabilities | | 9 | | | (1) | | |
Gains recognized in earnings (a) | | Gains recognized in earnings (a) | | 47 | | | 14 | |
Net gains recognized as regulatory assets and liabilities | | Net gains recognized as regulatory assets and liabilities | | 58 | | | 9 | |
Balance at June 30 | Balance at June 30 | | $ | 34 | | | $ | 28 | | Balance at June 30 | | $ | 71 | | | $ | 34 | |
(a)AmountsPresented amounts relate to commodity derivativesinstruments held at the end of the period. The consolidated income statement also includes gains and losses on Level 1 and 2 instruments, and Level 3 instruments settled during the period.
Xcel Energy recognizes transfers between levels as of the beginning of each period. There were 0 transfers of amounts between levels for derivative instruments for the three and six months ended June 30, 20202021 and 2019.2020.
Fair Value of Long-Term Debt
Other financial instruments for which the carrying amount did not equal fair value:
| | | June 30, 2020 | | | Dec. 31, 2019 | | | June 30, 2021 | | Dec. 31, 2020 |
(Millions of Dollars) | (Millions of Dollars) | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value | (Millions of Dollars) | | Carrying Amount | | Fair Value | | Carrying Amount | | Fair Value |
Long-term debt, including current portion | Long-term debt, including current portion | | $ | 20,564 | | | $ | 24,327 | | | $ | 18,109 | | | $ | 20,227 | | Long-term debt, including current portion | | $ | 21,497 | | | $ | 24,686 | | | $ | 20,066 | | | $ | 24,412 | |
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. Fair value estimates are based on information available to management as of June 30, 20202021 and Dec. 31, 2019,2020 and given the observability of the inputs, fair values presented for long-term debt were assigned as Level 2.
| | |
9. Benefit Plans and Other Postretirement Benefits |
Components of Net Periodic Benefit Cost (Credit)
| | | Three Months Ended June 30 | | | Three Months Ended June 30 |
| | 2020 | | 2019 | | 2020 | | 2019 | | 2021 | | 2020 | | 2021 | | 2020 |
(Millions of Dollars) | (Millions of Dollars) | | Pension Benefits | | | Postretirement Health Care Benefits | | (Millions of Dollars) | | Pension Benefits | | Postretirement Health Care Benefits |
Service cost | Service cost | | $ | 24 | | | $ | 22 | | | $ | — | | | $ | — | | Service cost | | $ | 26 | | | $ | 24 | | | $ | 1 | | | $ | 0 | |
Interest cost (a) | Interest cost (a) | | 31 | | | 36 | | | 5 | | | 6 | | Interest cost (a) | | 26 | | | 31 | | | 3 | | | 5 | |
Expected return on plan assets (a) | Expected return on plan assets (a) | | (52) | | | (51) | | | (5) | | | (5) | | Expected return on plan assets (a) | | (51) | | | (52) | | | (5) | | | (5) | |
Amortization of prior service credit (a) | Amortization of prior service credit (a) | | (1) | | | (1) | | | (2) | | | (3) | | Amortization of prior service credit (a) | | (1) | | | (1) | | | (2) | | | (2) | |
Amortization of net loss (a) | Amortization of net loss (a) | | 25 | | | 22 | | | 1 | | | 1 | | Amortization of net loss (a) | | 27 | | | 25 | | | 2 | | | 1 | |
| Net periodic benefit cost (credit) | Net periodic benefit cost (credit) | | 27 | | | 28 | | | (1) | | | (1) | | Net periodic benefit cost (credit) | | 27 | | | 27 | | | (1) | | | (1) | |
Credits not recognized due to effects of regulation | | 1 | | | 1 | | | 1 | | | — | | |
Effects of regulation | | Effects of regulation | | 0 | | | 1 | | | 0 | | | 1 | |
Net benefit cost (credit) recognized for financial reporting | Net benefit cost (credit) recognized for financial reporting | | $ | 28 | | | $ | 29 | | | $ | — | | | $ | (1) | | Net benefit cost (credit) recognized for financial reporting | | $ | 27 | | | $ | 28 | | | $ | (1) | | | $ | 0 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30 |
| | 2021 | | 2020 | | 2021 | | 2020 |
(Millions of Dollars) | | Pension Benefits | | Postretirement Health Care Benefits |
Service cost | | $ | 52 | | | $ | 45 | | | $ | 1 | | | $ | 1 | |
Interest cost (a) | | 52 | | | 68 | | | 7 | | | 9 | |
Expected return on plan assets (a) | | (103) | | | (103) | | | (9) | | | (10) | |
Amortization of prior service credit (a) | | (1) | | | (2) | | | (4) | | | (4) | |
Amortization of net loss (a) | | 54 | | | 47 | | | 3 | | | 2 | |
Net periodic benefit cost (credit) | | 54 | | | 55 | | | (2) | | | (2) | |
Effects of regulation | | (1) | | | 2 | | | 1 | | | 1 | |
Net benefit cost (credit) recognized for financial reporting | | $ | 53 | | | $ | 57 | | | $ | (1) | | | $ | (1) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30 | | | | | | |
| | 2020 | | 2019 | | 2020 | | 2019 |
(Millions of Dollars) | | Pension Benefits | | | | Postretirement Health Care Benefits | | |
Service cost | | $ | 45 | | | $ | 43 | | | $ | 1 | | | $ | 1 | |
Interest cost (a) | | 68 | | | 72 | | | 9 | | | 11 | |
Expected return on plan assets (a) | | (103) | | | (102) | | | (10) | | | (11) | |
Amortization of prior service credit (a) | | (2) | | | (2) | | | (4) | | | (5) | |
Amortization of net loss (a) | | 47 | | | 44 | | | 2 | | | 3 | |
Net periodic benefit cost (credit) | | 55 | | | 55 | | | (2) | | | (1) | |
Credits not recognized due to effects of regulation | | 2 | | | 2 | | | 1 | | | 1 | |
Net benefit cost (credit) recognized for financial reporting | | $ | 57 | | | $ | 57 | | | $ | (1) | | | $ | — | |
(a) ComponentsThe components of net periodic cost other than the service cost component are included in the line item “other“Other income (expense) income,, net” in the consolidated statementstatements of income or capitalized on the consolidated balance sheetsheets as a regulatory asset.
In January 2020,2021, contributions of $150$125 million were made across 4 of Xcel Energy’s pension plans.plans. Xcel Energy does not expect additional pension contributions during 2020.2021.
| | |
10. Commitments and Contingencies |
The following includeincludes commitments, contingencies and unresolved contingencies that are material to Xcel Energy’s financial position.
Legal
Xcel Energy is involved in various litigation matters 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 losses 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, would have a material effect on Xcel Energy’s consolidated financial statements. Unless otherwise required by GAAP, legalLegal fees are generally expensed as incurred.
Gas Trading Litigation — e prime is a wholly owned subsidiary of Xcel Energy Inc.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. Multiple lawsuits involving multiple plaintiffs seeking monetary damages were commenced against e prime and its affiliates, including Xcel Energy, between 2003 and 2009 alleging fraud and anticompetitive activities in conspiring to restrain the trade of natural gas and manipulate natural gas prices. Cases were all consolidated in the U.S. District Court in Nevada.
NaN cases remain active which include an MDL matter consisting of a Colorado purported class (Breckenridge) and a Wisconsin purported class (Arandell Corp.).
Breckenridge/Colorado — In February 2019, the MDL panel remanded Breckenridge back to the U.S. District Court in Colorado. Settlement of approximately $3 million was reached in February 2021. The parties have sought and are awaiting court approval of the settlement. A hearing was held on July 22, 2021. A decision is anticipated in Q3.
Arandell Corp. — In February 2019,The trial has been vacated and will be rescheduled after the case was remanded back tocourt rules on the U.S. District Court in Wisconsin. Plaintiffs are seekingpending motions for reconsideration and for class certification. It is uncertain when the court will rule on this issue.
Xcel Energy has concluded that a loss is remote for boththe remaining lawsuits.
Rate Matters
MEC Transactions — In January 2020, Xcel Energy, Inc. purchased MEC, a 760 MW natural gas combined cycle facility, for approximately $650 million from Southern Power Company (a subsidiary of Southern Company).lawsuit.
In July 2020, Xcel Energy sold MEC to Southwest Generation for $680 million, subject to working capital adjustments. Proceeds from the sale will primarily be used to reduce Xcel Energy’s overall financing needs.
The assets and liabilities of MEC, including plant assets and working capital, were classified as held for sale at June 30, 2020 pending the sale of the facility in July 2020. Amounts included in the consolidated balance sheet were classified as follows:
| | | | | | | | |
(Millions of Dollars) | | June 30, 2020 |
| | |
Prepayments and other current assets | | $ | 24 | |
Other assets | | 644 | |
Total assets | | 668 | |
| | |
Other current liabilities | | 2 | |
Other deferred credits and other liabilities | | 9 | |
Total liabilities | | $ | 11 | |
NSP-Minnesota — Sherco — In NSP-Minnesota’s 2013 fuel reconciliation filing, the MPUC made recovery of replacement power costs associated with the 2011 incident at its Sherco Unit 3 plant provisional2018, NSP-Minnesota and subject to further review following conclusion of litigation commenced by NSP-Minnesota, SMMPA (Co-owner of Sherco Unit 3) and insurance companies against GE.
In 2018, NSP-Minnesota and SMMPA reached a settlement with GE.GE related to a 2011 incident, which damaged the turbine at Sherco Unit 3 and resulted in an extended outage for repair. NSP-Minnesota notified the MPUC of its proposal to refund the GE settlement proceeds back to customers through the FCA. The insurance providers continued their litigation against GE and the case went to trial.
In 2018, GE prevailed in the lawsuit with the insurance companies, however, the jury found comparable fault, finding that GE was 52% and NSP-Minnesota was 48% at fault. At that point in the litigation, NSP-Minnesota was no longer involved in the case and was not present to make arguments about its role in the event. The specific issue leading to the fault apportionment was also not before the jury and not relevant to the outcome of the trial.
In January 2019, the DOC recommended that NSP-Minnesota refund $20 million of previously recovered purchased power costs to its customers, based on the jury’s apportionment of fault. The OAG recommended the MPUC withhold any decision until the underlying litigation by the insurance providers (currently under appeal) is concluded. The DOC subsequently filed comments agreeing with the OAG’s recommendation to withhold a decision pending the outcome of any appeals. NSP-Minnesota filed reply comments arguing that the DOC recommendations are without merit and that it acted prudently in operating the plant and its settlement with GE was reasonable.
In March 2019, the MPUC approved NSP-Minnesota’s proposal tosettlement refund proposal. Additionally, the GE settlement proceeds back to customers through the FCA. It alsoMPUC decided to withhold any decision as to NSP-Minnesota’s prudence in connection with the incident at Sherco Unit 3 until after conclusion of thean appeal pending litigation between GE and NSP-Minnesota’s insurers. The lowerIn February 2020, the Minnesota Court of Appeals affirmed the district court’s decision was affirmed on appeal.judgment in favor of GE. In March 2020, NSP-Minnesota’s insurers filed a petition seeking additional review by the Minnesota Supreme Court.
On In April 28, 2020, the Minnesota Supreme Court denied the insurers’ petition for further review, ending the litigation.
In accordance with a prior MPUC order,January 2021, the OAG and DOC recommended that NSP-Minnesota will now make a compliance filing on Aug. 21, 2020, detailing allrefund approximately $17 million of replacement power costs previously recovered through the FCA. NSP-Minnesota subsequently filed its response, asserting that resulted from the outage and all insurance recoveries received by NSP-Minnesotait acted prudently in connection with the outage. TheSherco Unit 3 outage, the MPUC has indicated it intendspreviously disallowed $22 million of related costs and no additional refund or disallowance is appropriate. A final decision by the MPUC is pending. A loss related to review the prudence of the Company’s actions and costs in connection with the outage now that the ligationthis matter is complete. The MPUC, however, has not specified what process it will use to complete that review.deemed remote.
Westmoreland Arbitration — On Nov. 14,In November 2014, certain insurers for Westmoreland Coal Company filed an arbitration demand against NSP-Minnesota, and other entities (SMMPASMMPA and Western Fuels Association),Association, seeking recovery of alleged $36 million of business losses following the Nov. 19, 2011 incident involvingdue to a turbine failure of a low-pressure turbine inat Sherco Unit 3. The Westmoreland insurers claim NSP-Minnesota’s invocation of the force majeure clause of the applicable coal supply agreement to stop the supply of coal was improper because the incident was allegedly caused by NSP-Minnesota’s failure to conform to industry maintenance standards. Westmoreland’s insurers quantified their losses as approximately $36 million.
All parties tolled the arbitration pending resolution of a separate lawsuit brought by NSP-Minnesota, SMMPA, and their insurers against various GE entities based on the inspection and maintenance advice GE provided for Sherco Unit 3. That litigation has been resolved and notice of resolution was served July 6, 2020, triggering the arbitration to resume.
NSP-Minnesota denies the claims asserted by the Westmoreland insurers and believes it properly stopped the supply of coal based upon the force majeure provision in the coal supply agreement and intends to defend the matter.provision. It is uncertain when a final resolution will occur, but it is unlikely that an arbitration hearing will take place before the fourth quarter 2021. At June 30, 2020,this stage of the proceeding, a reasonable estimate of the damages or range of damages cannot be determined.
MISO ROE Complaints — In November 2013 and February 2015, customerscustomer groups filed two ROE complaints against MISO TOs, includingwhich includes NSP-Minnesota and NSP-Wisconsin.
The first complaint argued forrequested a reduction in the base ROE in MISO transmission formula rates from 12.38% to 9.15%, for the time period of Nov. 12, 2013 to Feb. 11, 2015, and removal of ROE adders (including those for RTO membership). The second complaint sought to reducerequested, for a subsequent time period, a base ROE reduction from 12.38% to 8.67%.
In September 2016, the FERC issued an order (Opinion No. 551) granting a 10.32% base ROE (10.82% with the RTO adder) effective for the first complaint period of Nov. 12, 2013 to Feb. 11, 2015 and subsequent to the date of the order. The D.C.D.C Circuit subsequently vacated and remanded FERC Opinion No. 531, which had established the ROE methodology on which the September 2016 FERC order was based.551.
In November 2019, the FERC issued Opinionan order (Opinion No. 569 adopting a new ROE methodology and settling569), which set the MISO base ROE at 9.88% (10.38% with the RTO adder), effective Sept. 28, 2016 and for the refund period in the first complaint.complaint period. The FERC also dismissed the second complaint. In December 2019, MISO TOs filed a request for rehearing.rehearing regarding the new ROE methodology announced in Opinion No. 569. Customers also filed requests for rehearing claiming, among other points, that the FERC erred by dismissing the second complaint without refunds.
FERC accepted the requests for rehearing in January 2020.
In March 2020, the FERC issued a Notice of Proposed Rulemaking regarding changes to its policies for transmission incentives, including a proposal to increase the RTO participation adder from 50 to 100 basis points and to make the adder available regardless of whether a utility’s ongoing participation in the RTO is voluntary or required by legislation or a regulator.
In May 2020, the FERC issued Opinionan order (Opinion No. 569-A,569-A) which granted rehearing in part to Opinion 569 and further refined the FERC’s ROE methodology, most significantly to incorporate the risk premium model (in addition to the discounted cash flow and capital asset pricing models), resulting in a new base ROE of 10.02%, effective Sept. 28, 2016 and for the refund period in the first complaint.complaint period. The FERC also affirmed its decision in Opinion No. 569 to dismiss the second complaint.
AlthoughIn November 2020, the May 2020 Order remains subjectFERC issued an order (Opinion No. 569-B) in response to pending requestsrehearing requests. The FERC corrected certain inputs to its ROE calculation model, did not change the ROE effective Sept. 28, 2016, and for rehearing, as well as the pending judicial review, first MISO complaint period and upheld its decision to deny refunds for the second complaint period. NSP-Minnesota has recognized a liability for its best estimate of final refunds to customers. Each 10 basis point reduction in ROE for the first complaint period, second complaint period, and subsequent period relative to amounts accrued would reduce Xcel Energy’s net income by $1 million, $1 million and $2 million, respectively.
The MISO TOs and various parties have filed petitions for review of Opinion Nos. 569, 569-A and 569-B at the D.C. Circuit with initial briefs filed in March 2021 and final briefs expected in August 2021.
FERC NOPR on ROE Incentive Adders — In April 2021, the FERC issued a NOPR proposing to limit collection of ROE incentive adders for RTO membership to the first three years after an entity begins participation in an RTO. If adopted as a final rule, following a comment period expected to be complete by the end of 2021 or 2022, NSP-Minnesota, NSP-Wisconsin and SPS would prospectively discontinue charging their current 0.5% ROE incentive adders. Amounts related to a discontinuance of the adder would ultimately be offset by an increase in retail rates, following future rate cases.
SPP OATT Upgrade Costs — Under the SPP OATT, costsCosts of transmission upgrades may be recovered from other SPP customers whose transmission service depends on capacity enabled by the upgrade.upgrade under the SPP OATT. SPP had not been charging its customers for these upgrades, even though the SPP OATT had allowed SPP to do so since 2008. In 2016, the FERC granted SPP’s request to recover these previously unbilled charges and SPP subsequently billed SPS approximately $13 million.
In July 2018, SPS’ appeal to the D.C. Circuit over the FERC rulings granting SPP the right to recover these previously unbilled charges was remanded to the FERC. In February 2019, the FERC reversed its 2016 decision and ordered SPP to refund the charges retroactively collected from its transmission customers, including SPS, related to periods before September 2015.
In March 2020, SPP and Oklahoma Gas & Electric separately filed petitions for review of the FERC’s orders at the D.C. Circuit. SPS has intervened in both appeals in support of the FERC. Any refunds received by SPS are expected to be given back to SPS customers through future rates.
In October 2017, SPS filed a separate related complaint againstasserting SPP asserting that SPP has assessed upgrade charges to SPS in violation of the SPP OATT. In March 2018, the FERC issued an order denying the SPS complaint in its entirety, and finding SPP’s calculations to be consistent with the SPS Tariff.complaint. SPS filed a request for rehearing in April 2018. The FERC issued a tolling order granting a rehearing for further consideration in May 2018. If SPS’ complaint results in additional charges or refunds, SPS will seek to recover or refund the amountsamount through future SPS customer rates. In October 2020, SPS filed a petition for review of the FERC’s March 2018 order and May 2018 tolling order at the D.C. Circuit. This appeal is stayed pending the outcome of the separate appeal initiated in 2020 by Oklahoma Gas & Electric and SPP.
Contract Termination —SPS and LP&L have a 25-year, 170 MW partial requirements contract. In May 2021, SPS and LP&L finalized a settlement which would terminate the contract upon LP&L’s move from the SPP to the ERCOT (expected in 2023) or, absent a move by LP&L to ERCOT, upon LP&L’s election. The settlement agreement requires LP&L to pay SPS $78 million (lump sum or annual installments), to the benefit of SPS’ remaining customers. LP&L would remain obligated to pay for SPP transmission charges associated with LP&L’s load in SPP. The settlement agreement is subject to approval by the PUCT and FERC.
Gas Cost Adjustment NOPR —In June 2020,2021, the D.C. CircuitCPUC issued a NOPR addressing the recovery of costs through the GCA. The proposed rule would establish an annual forecast of GCA costs for each utility and allow each utility to recover only 90%-95% of any costs in excess of the forecasted amount. The proposed rule would allow utilities to earn an incentive equal to an undefined portion of any savings relative to forecasted costs. Initial comments were due July 23, 2021, reply comments are due Aug. 6, 2021 and a hearing is scheduled for Aug. 26, 2021. A CPUC decision in an unrelated proceeding (Allegheny Defense Project v. FERC), which held that FERC’s longstanding useexpected in the third quarter of tolling orders to extend FERC’s deadline to act on the merits of requests for rehearing is improper. The effect on this decision on tolling orders previously issued by FERC is unclear.2021.
Environmental
MGP, Landfill and Disposal Sites
Ashland MGP Site — NSP-Wisconsin was named a responsible party for contamination at the Ashland/Northern States Power Lakefront Superfund Site (the Site) in Ashland, Wisconsin. Remediation was completed in 2019 and restoration activities were completed in 2020. Groundwater treatment activities will continue for many years.
The cost estimate for remediation and restoration of the entire site is approximately $199 million. At June 30, 2020 and Dec. 31, 2019, NSP-Wisconsin had a total liability of $21 million and $23 million, respectively, for the entire site.
NSP-Wisconsin has deferred the unrecovered portion of the estimated Site remediation and restoration costs as a regulatory asset. The PSCW has authorized NSP-Wisconsin rate recovery for all remediation and restoration costs incurred at the Site and application of a 3% carrying charge to the regulatory asset.
Rice Yards (Denver) MGP Site — PSCo is cooperating with the City of Denver on an environmental investigation of the Rice Yards Site in Denver, Colorado, which had various historic industrial uses by multiple parties, including railroad, maintenance shop, scrap metal yard and MGP operations.
In June 2020, PSCo resolved claims by the current property owner and agreed to contribute up to a maximum of $9 million towards future environmental investigation, remediation and mitigation measures over the next 15 years.
In addition to the Rice Yards and Ashland Sites, Xcel Energy is currently investigating, remediating or performing post-closure actions at 12 other13 MGP, landfill or other disposal sites across its service territories.
Xcel Energy has recognized its best estimate of costs/liabilities that will result from final resolution of these issues, however, the outcome and timing is unknown. In addition, there may be insurance recovery and/or recovery from other potentially responsible parties, offsetting a portion of costs incurred.
Environmental Requirements — Water and Waste
Coal Ash Regulation — Xcel Energy’s operations are subject to federal and state regulations that impose requirements for handling, storage, treatment and disposal of solid waste. Under the CCR Rule, utilities are required to complete groundwater sampling around their CCR landfills and surface impoundments. Currently, Xcel Energy has 98 regulated ash units in operation.
Xcel Energy is conducting groundwater sampling and where appropriate,monitoring and implementing assessment of corrective measures at certain CCR landfills and surface impoundments. In 2019, groundwater monitoring consistent with the CCR Rule was conducted. In NSP-Minnesota, 0 results above the groundwater protection standards in the rule were identified. In PSCo, statistically significant levelsincreases above background concentrations were detected at 4 locations. Subsequently, assessment monitoring samples were collected at these locations and, basedBased on the results,further assessments, PSCo is evaluating options for corrective action at 2 locations. Atlocations, 1 location, monitoring results indicateof which indicates potential offsite impacts to groundwater. Until PSCo completes its assessment, itThe total cost is uncertain, what impact, if any, therebut could be up to $35 million. PSCo is continuing to assess the financial and regulatory impacts.
In August 2020, the EPA published its final rule to implement closure by April 2021 for all CCR impoundments affected by the August 2018 D.C. Circuit ruling. This final rule required Xcel Energy to expedite closure plans for 2 impoundments.
In October 2020, NSP-Minnesota completed construction and placed in service a new impoundment to replace the clay lined impoundment at a cost of $9 million. With the new ash pond in service, NSP-Minnesota has initiated closure activities for the existing ash pond at an estimated cost of $4 million. NSP-Minnesota has five years to complete closure activities.
PSCo also built an alternative collection and treatment system to remove the Comanche Station bottom ash pond from service. The total cost of the alternate treatment system is approximately $25 million. PSCo worked expeditiously to meet the April 11, 2021 deadline, but was not able to remove the pond from service until June 18, 2021. PSCo expects to negotiate a compliance order with the EPA. PSCo will be onalso now proceed with closure of the operations, financial condition or cash flows.pond, with an estimated cost of $3 million.
Closure costs for existing impoundments are included in the calculation of the ARO.
In August 2018, the D.C. Circuit ruledLeases
Xcel Energy evaluates contracts that the EPA cannot allow utilities to continue to use unlined impoundments (including clay lined impoundments)may contain leases, including PPAs and arrangements for the storage or disposaluse of coal ash. In November 2019,office space and other facilities, vehicles and equipment. A contract contains a lease if it conveys the EPA proposed rules in responseexclusive right to this decision. If finalized in their current form, these rules would require NSP-Minnesota to expedite closure plans for 1 impoundment at an estimated costcontrol the use of $4a specific asset.
Components of lease expense:
| | | | | | | | | | | | | | |
| | Three Months Ended June 30 |
(Millions of Dollars) | | 2021 | | 2020 |
Operating leases | | | | |
PPA capacity payments | | $ | 56 | | | $ | 43 | |
Other operating leases (a) | | 9 | | | 9 | |
Total operating lease expense (b) | | $ | 65 | | | $ | 52 | |
Finance leases | | | | |
Amortization of ROU assets | | $ | 2 | | | $ | 2 | |
Interest expense on lease liability | | 4 | | | 4 | |
Total finance lease expense | | $ | 6 | | | $ | 6 | |
(a)Includes short-term lease expense of $2 million and the construction of a new impoundment at the cost of $9 million. In 2019, NSP-Minnesota initiated the construction of this new impoundment, an ash pond, expected to be in service in 2020. Upon placing the new ash pond in service, the existing ash pond will be taken out of service,$1 million for 2021 and closure activities as prescribed by the CCR Rule and the facility’s National Pollutant Discharge Elimination System permit will be initiated.2020, respectively.
In addition, the rules proposed by the EPA under the D.C. Circuit ruling may require PSCo to expedite the closure of 1 coal ash impoundment that was not previously required to close. In March 2020, the EPA published a proposed CCR Rule amendment that, if adopted, would allow unlined impoundments that ‘perform as effectively’ as lined ones to continue to operate under a state or federal CCR permit program. PSCo is pursuing options to provide alternative storage(b)PPA capacity consistent with the CCR Rule until the generating units are retired in 2025.
Closure costs for existing impoundmentspayments are included in electric fuel and purchased power on the calculationconsolidated statements of income. Expense for other operating leases is included in O&M expense and electric fuel and purchased power.
| | | | | | | | | | | | | | |
| | Six Months Ended June 30 |
(Millions of Dollars) | | 2021 | | 2020 |
Operating leases | | | | |
PPA capacity payments | | $ | 114 | | | $ | 89 | |
Other operating leases (a) | | 17 | | 17 |
Total operating lease expense (b) | | $ | 131 | | | $ | 106 | |
Finance leases | | | | |
Amortization of ROU assets | | $ | 4 | | | $ | 3 | |
Interest expense on lease liability | | 8 | | 9 |
Total finance lease expense | | $ | 12 | | | $ | 12 | |
(a)Includes short-term lease expense of $3 million and $2 million for 2021 and 2020, respectively.
(b)PPA capacity payments are included in electric fuel and purchased power on the asset retirement obligation liability.consolidated statements of income. Expense for other operating leases is included in O&M expense and electric fuel and purchased power.
Leases
Operating lease liabilities at Dec. 31, 2019 include a present valueCommitments under operating and finance leases as of remaining lease payments of approximately $400 million for the MEC PPAs. At June 30, 2020, NSP-Minnesota operating lease liabilities and2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
(Millions of Dollars) | | PPA Operating Leases | | Other Operating Leases | | Total Operating Leases | | Finance Leases (a) |
Total minimum obligation | | $ | 1,532 | | | $ | 196 | | | $ | 1,728 | | | $ | 249 | |
Interest component of obligation | | (235) | | | (37) | | | (272) | | | (175) | |
Present value of minimum obligation | | $ | 1,297 | | | 159 | | | 1,456 | | | 74 | |
Less current portion | | | | | | (220) | | | (3) | |
Noncurrent operating and finance lease liabilities | | | | | | $ | 1,236 | | | $ | 71 | |
(a)Excludes certain amounts related right-of-use assets are eliminated fromto Xcel Energy’s consolidated balance sheet following the completed January 2020 purchase of MEC by Xcel Energy.
50% ownership interest in WYCO.
VIEs
Under certain PPAs, NSP-Minnesota, PSCo and SPS purchase power from IPPs for which the utility subsidiaries are required to reimburse 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.energy. These specific PPAs create a variable interest in the IPP.
The utility subsidiaries had approximately 3,342 MW and 3,986approximately 4,062 MW of capacity under long-term PPAs at both June 30, 20202021 and Dec. 31, 2019, respectively,2020 with entities that have been determined to be VIEs. Xcel Energy 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. AgreementsThe PPAs have expiration dates through 2041.
Other
Guarantees and Bond Indemnifications — Xcel Energy Inc. and its subsidiaries provide guarantees and bond indemnities, which guarantee payment or performance. Xcel Energy Inc.’s exposure is based upon the net liability under the specified agreements or transactions.agreements. Most of the guarantees and bond indemnities issued by Xcel Energy Inc. and its subsidiaries have a stated maximum amount.
As of June 30, 20202021 and Dec. 31, 2019,2020, Xcel Energy Inc. and its subsidiaries had 0 assets held as collateral related to their guarantees, bond indemnities and indemnification agreements. Guarantees and bond indemnities issued and outstanding for Xcel Energy were approximately $60 million and $62 million at June 30, 20202021 and Dec. 31, 2019.2020, respectively.
Other Indemnification Agreements — Xcel Energy Inc. and its subsidiaries provide indemnifications through various contracts. 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. Maximum future payments under these indemnifications cannot be reasonably estimated as the dollar amounts are often not explicitly stated.estimated.
| | |
11. Other Comprehensive Income (Loss) |
Changes in accumulated other comprehensive loss, net of tax, for the three and six months ended June 30, 20202021 and 2019:2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2020 | | | | | | | | Three Months Ended June 30, 2019 | | | | |
(Millions of Dollars) | | Gains and Losses on Cash Flow Hedges | | | | Defined Benefit Pension and Postretirement Items | | Total | | Gains and Losses on Cash Flow Hedges | | Defined Benefit Pension and Postretirement Items | | Total |
Accumulated other comprehensive loss at April 1 | | $ | (88) | | | | | $ | (60) | | | $ | (148) | | | $ | (66) | | | $ | (61) | | | $ | (127) | |
Other comprehensive (loss) gain before reclassifications (net of taxes of $—, $—, $(3) and $—, respectively) | | — | | | | | — | | | — | | | (10) | | | 1 | | | (9) | |
Losses reclassified from net accumulated other comprehensive loss: | | | | | | | | | | | | | | |
Interest rate derivatives (net of taxes of $1, $—, $— and $—, respectively) (a) | | 1 | | | | | — | | | 1 | | | 1 | | | — | | | 1 | |
Amortization of net actuarial loss (net of taxes of $—, $1, $— and $—, respectively) (b) | | — | | | | | 2 | | | 2 | | | — | | | — | | | — | |
Net current period other comprehensive income (loss) | | 1 | | | | | 2 | | | 3 | | | (9) | | | 1 | | | (8) | |
Accumulated other comprehensive loss at June 30 | | $ | (87) | | | | | $ | (58) | | | $ | (145) | | | $ | (75) | | | $ | (60) | | | $ | (135) | |
Table of Contents | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, 2021 | | Three Months Ended June 30, 2020 |
(Millions of Dollars) | | Gains and Losses on Cash Flow Hedges | | Defined Benefit Pension and Postretirement Items | | Total | | Gains and Losses on Cash Flow Hedges | | Defined Benefit Pension and Postretirement Items | | Total |
Accumulated other comprehensive loss at April 1 | | $ | (82) | | | $ | (56) | | | $ | (138) | | | $ | (88) | | | $ | (60) | | | $ | (148) | |
| | | | | | | | | | | | |
Losses reclassified from net accumulated other comprehensive loss: | | | | | | | | | | | | |
Interest rate derivatives (net of taxes of $0, $0, $1 and $0, respectively) (a) | | 2 | | | 0 | | | 2 | | | 1 | | | 0 | | | 1 | |
Amortization of net actuarial loss (net of taxes of $0, $0, $0 and $1, respectively ) (b) | | 0 | | | 1 | | | 1 | | | 0 | | | 2 | | | 2 | |
Net current period other comprehensive income | | 2 | | | 1 | | | 3 | | | 1 | | | 2 | | | 3 | |
Accumulated other comprehensive loss at June 30 | | $ | (80) | | | $ | (55) | | | $ | (135) | | | $ | (87) | | | $ | (58) | | | $ | (145) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2021 | | Six Months Ended June 30, 2020 |
(Millions of Dollars) | | Gains and Losses on Cash Flow Hedges | | Defined Benefit Pension and Postretirement Items | | Total | | Gains and Losses on Cash Flow Hedges | | Defined Benefit Pension and Postretirement Items | | Total |
Accumulated other comprehensive loss at Jan. 1 | | $ | (85) | | | $ | (56) | | | $ | (141) | | | $ | (80) | | | $ | (61) | | | $ | (141) | |
Other comprehensive gain (loss) before reclassifications (net of taxes of $0, $0, $(3) and $0, respectively) | | 0 | | | 0 | | | 0 | | | (10) | | | 0 | | | (10) | |
Losses reclassified from net accumulated other comprehensive loss: | | | | | | | | | | | | |
Interest rate derivatives (net of taxes of $1, $0, $1 and $0, respectively) (a) | | 5 | | | 0 | | | 5 | | | 3 | | | 0 | | | 3 | |
Amortization of net actuarial loss (net of taxes of $0, $1, $0 and $1, respectively) (b) | | 0 | | | 1 | | | 1 | | | 0 | | | 3 | | | 3 | |
Net current period other comprehensive income (loss) | | 5 | | | 1 | | | 6 | | | (7) | | | 3 | | | (4) | |
Accumulated other comprehensive loss at June 30 | | $ | (80) | | | $ | (55) | | | $ | (135) | | | $ | (87) | | | $ | (58) | | | $ | (145) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30, 2020 | | | | | | | | Six Months Ended June 30, 2019 | | | | |
(Millions of Dollars) | | Gains and Losses on Cash Flow Hedges | | | | Defined Benefit Pension and Postretirement Items | | Total | | Gains and Losses on Cash Flow Hedges | | Defined Benefit Pension and Postretirement Items | | Total |
Accumulated other comprehensive loss at Jan. 1 | | $ | (80) | | | | | $ | (61) | | | $ | (141) | | | $ | (60) | | | $ | (64) | | | $ | (124) | |
Other comprehensive (loss) gain before reclassifications (net of taxes of $(3), $—, $(5) and $1, respectively) | | (10) | | | | | — | | | (10) | | | (17) | | | 3 | | | (14) | |
Losses reclassified from net accumulated other comprehensive loss: | | | | | | | | | | | | | | |
Interest rate derivatives (net of taxes of $1, $—, $— and $—, respectively) (a) | | 3 | | | | | — | | | 3 | | | 2 | | | — | | | 2 | |
Amortization of net actuarial loss (net of taxes of $—, $1, $— and $—, respectively) (b) | | — | | | | | 3 | | | 3 | | | — | | | 1 | | | 1 | |
Net current period other comprehensive (loss) income | | (7) | | | | | 3 | | | (4) | | | (15) | | | 4 | | | (11) | |
Accumulated other comprehensive loss at June 30 | | $ | (87) | | | | | $ | (58) | | | $ | (145) | | | $ | (75) | | | $ | (60) | | | $ | (135) | |
(a)Included in interest charges.
(b)Included in the computation of net periodic pension and postretirement benefit costs.
Xcel Energy evaluates performance by each utility subsidiary based on profit or loss generated from the product or service provided including 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.
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 — The regulated electric utility segment generates, transmits and distributes electricity in 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. The regulated electric utility segment also includes wholesale commodity and trading operations; andoperations.
•Regulated Natural Gas — The regulated natural gas utility segment transports, stores and distributes natural gas primarily in portions of Minnesota, Wisconsin, North Dakota, Michigan and Colorado.
Xcel Energy also presents All Other, which includes operating segments with revenues below the necessary quantitative thresholds. Those operating segments primarily include steam revenue, appliance repair services, non-utility 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 and the operations of MEC.MEC until July 2020.
Xcel Energy had equity method investments in unconsolidated subsidiaries of $155$189 million and $165 million as of June 30, 20202021 and Dec. 31, 20192020, respectively, included in the natural gas utility and all other segments.
Asset and capital expenditure information is not provided for Xcel Energy’s reportable segments. As an integrated electric and natural gas utility, Xcel Energy operates significant assets that are not dedicated to a specific business segment. 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.
Certain costs, such as common depreciation, common O&M expenses and interest expense are allocated based on cost causation allocators across each segment. In addition, a general allocator is used for certain general and administrative expenses, including office supplies, rent, property insurance and general advertising.
Xcel Energy’s segment information for the three and six months ended June 30:
| | | | | | | | | | | | | | |
| | Three Months Ended June 30 | | |
(Millions of Dollars) | | 2020 | | 2019 |
Regulated Electric | | | | |
Operating revenues from external customers | | $ | 2,286 | | | $ | 2,249 | |
Intersegment revenue | | 1 | | | 1 | |
Total revenues | | $ | 2,287 | | | $ | 2,250 | |
Net income | | 289 | | | 249 | |
Regulated Natural Gas | | | | |
Operating revenues from external customers | | $ | 280 | | | $ | 308 | |
| | | | |
| | | | |
Net income | | 20 | | | 23 | |
All Other | | | | |
Total operating revenue | | $ | 20 | | | $ | 20 | |
Net loss | | (22) | | | (34) | |
| | | | |
Consolidated Total | | | | |
Total revenue | | $ | 2,587 | | | $ | 2,578 | |
Reconciling eliminations | | (1) | | | (1) | |
Total operating revenues | | $ | 2,586 | | | $ | 2,577 | |
Net income | | 287 | | | 238 | |
| | | | | | | | | | | | | | |
| | Six Months Ended June 30 | | |
(Millions of Dollars) | | 2020 | | 2019 |
Regulated Electric | | | | |
Operating revenues from external customers | | $ | 4,489 | | | $ | 4,574 | |
Intersegment revenue | | 1 | | | 1 | |
Total revenues | | $ | 4,490 | | | $ | 4,575 | |
Net income | | 516 | | | 482 | |
Regulated Natural Gas | | | | |
Operating revenues from external customers | | $ | 863 | | | $ | 1,102 | |
Intersegment revenue | | 1 | | | 1 | |
Total revenues | | $ | 864 | | | $ | 1,103 | |
Net income | | 111 | | | 128 | |
All Other | | | | |
Total operating revenue | | $ | 45 | | | $ | 42 | |
Net loss | | (45) | | | (57) | |
| | | | |
Consolidated Total | | | | |
Total revenue | | $ | 5,399 | | | $ | 5,720 | |
Reconciling eliminations | | (2) | | | (2) | |
Total operating revenues | | $ | 5,397 | | | $ | 5,718 | |
Net income | | 582 | | | 553 | |
Xcel Energy’s segment information: | | | | | | | | | | | | | | |
| | Three Months Ended June 30 |
(Millions of Dollars) | | 2021 | | 2020 |
Regulated Electric | | | | |
Operating revenues from external customers | | $ | 2,597 | | | $ | 2,286 | |
Intersegment revenue | | 1 | | | 1 | |
Total revenues | | $ | 2,598 | | | $ | 2,287 | |
Net income | | 304 | | | 289 | |
Regulated Natural Gas | | | | |
Total revenues | | $ | 449 | | | $ | 280 | |
Net income | | 33 | | | 20 | |
All Other | | | | |
Total revenues | | $ | 22 | | | $ | 20 | |
Net loss | | (26) | | | (22) | |
Consolidated Total | | | | |
Total revenues | | $ | 3,069 | | | $ | 2,587 | |
Reconciling eliminations | | (1) | | | (1) | |
Total operating revenues | | $ | 3,068 | | | $ | 2,586 | |
Net income | | 311 | | | 287 | |
| | | | | | | | | | | | | | |
| | Six Months Ended June 30 |
(Millions of Dollars) | | 2021 | | 2020 |
Regulated Electric | | | | |
Operating revenues from external customers | | $ | 5,467 | | | $ | 4,489 | |
Intersegment revenue | | 1 | | | 1 | |
Total revenues | | $ | 5,468 | | | $ | 4,490 | |
Net income | | 573 | | | 516 | |
Regulated Natural Gas | | | | |
Operating revenues from external customers | | $ | 1,096 | | | $ | 863 | |
Intersegment revenue | | 1 | | | 1 | |
Total revenues | | 1097 | | 864 |
Net income | | $ | 151 | | | $ | 111 | |
All Other | | | | |
Total revenues | | 46 | | 45 |
Net loss | | $ | (51) | | | $ | (45) | |
Consolidated Total | | | | |
Total revenues | | $ | 6,611 | | | $ | 5,399 | |
Reconciling eliminations | | (2) | | | (2) | |
Total operating revenues | | $ | 6,609 | | | $ | 5,397 | |
Net income | | 673 | | | 582 | |
| | | | | | | | | | | | | | |
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.
The demand for electric power and natural gas is affected by seasonal differences in the weather. In general, peak sales of electricity occur in the summer months, and peak sales of natural gas occur in the winter months. As a result, the overall operating results may fluctuate substantially on a seasonal basis. Additionally, Xcel Energy’s operations have historically generated less revenues and income when weather conditions are milder in the winter and cooler in the summer.
Non-GAAP Financial Measures
The following discussion includes financial information prepared in accordance with GAAP, as well as certain non-GAAP financial measures such as electric margin, natural gas margin, ongoing earnings and ongoing diluted EPS. Generally, a non-GAAP financial measure is a measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are adjusted fromadjusts measures calculated and presented in accordance with GAAP. Xcel Energy’s management uses non-GAAP measures for financial planning and analysis, for reporting of results to the Board of Directors, in determining performance-based compensation, and communicating its earnings outlook to analysts and investors. Non-GAAP financial measures are intended to supplement investors’ understanding of our performance and should not be considered alternatives for financial measures presented in accordance with GAAP. These measures are discussed in more detail below and may not be comparable to other companies’ similarly titled non-GAAP financial measures.
Electric and Natural Gas Margins
Electric margin is presented as electric revenues less electric fuel and purchased power expenses. Natural gas margin is presented as natural gas revenues less the cost of natural gas sold and transported. Expenses incurred for electric fuel and purchased power and the cost of natural gas are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are generally offset in operating revenues.
Management believes electric and natural gas margins provide the most meaningful basis for evaluating our operations because they exclude the revenue impact of fluctuations in these expenses. These margins can be reconciled to operating income, a GAAP measure, by including other operating revenues, cost of sales — other, O&M expenses, conservation and DSM expenses, depreciation and amortization and taxes (other than income taxes).
Earnings Adjusted for Certain Items (Ongoing Earnings and Ongoing Diluted EPS)
GAAP 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. Ongoing earnings reflect adjustments to GAAP earnings (net income) for certain items.
Ongoing diluted EPS for Xcel Energy is calculated by dividing the net income or loss, of each subsidiary, adjusted for certain items, by the weighted average fully diluted Xcel Energy Inc. common shares outstanding for the period. Ongoing diluted EPS for each subsidiary is calculated by dividing the net income or loss offor such subsidiary, adjusted for certain items, by the weighted average fully diluted Xcel Energy Inc. common shares outstanding for the period.
We use these non-GAAP financial measures to evaluate and provide details of Xcel Energy’s core earnings and underlying performance. We believe these measurements are useful to investors to evaluate the actual and projected financial performance and contribution of our subsidiaries.
For the three and six months ended June 30, 20202021 and 2019,2020, there were no such adjustments to GAAP earnings and therefore GAAP earnings equal ongoing earnings for these periods.
The only common equity securities that are publicly traded are common shares of Xcel Energy Inc. 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.
GAAP and ongoingSummarized 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 | Diluted Earnings (Loss) Per Share | | 2020 | | 2019 | | 2020 | | 2019 | Diluted Earnings (Loss) Per Share | | 2021 | | 2020 | | 2021 | | 2020 |
PSCo | PSCo | | $ | 0.21 | | | $ | 0.20 | | | $ | 0.45 | | | $ | 0.47 | | PSCo | | $ | 0.25 | | | $ | 0.21 | | | $ | 0.56 | | | $ | 0.45 | |
NSP-Minnesota | NSP-Minnesota | | 0.22 | | | 0.19 | | | 0.43 | | | 0.41 | | NSP-Minnesota | | 0.21 | | | 0.22 | | | 0.45 | | | 0.43 | |
SPS | SPS | | 0.14 | | | 0.11 | | | 0.22 | | | 0.22 | | SPS | | 0.13 | | | 0.14 | | | 0.23 | | | 0.22 | |
NSP-Wisconsin | NSP-Wisconsin | | 0.02 | | | 0.02 | | | 0.09 | | | 0.06 | | NSP-Wisconsin | | 0.03 | | | 0.02 | | | 0.09 | | | 0.09 | |
Equity earnings of unconsolidated subsidiaries | | 0.01 | | | 0.01 | | | 0.02 | | | 0.02 | | |
Earnings from equity method investments - WYCO | | Earnings from equity method investments - WYCO | | 0.01 | | | 0.01 | | | 0.02 | | | 0.02 | |
Regulated utility (a) | Regulated utility (a) | | 0.60 | | | 0.53 | | | 1.20 | | | 1.18 | | Regulated utility (a) | | 0.62 | | | 0.60 | | | 1.35 | | | 1.20 | |
Xcel Energy Inc. and Other | Xcel Energy Inc. and Other | | (0.07) | | | (0.06) | | | (0.10) | | | (0.11) | | Xcel Energy Inc. and Other | | (0.04) | | | (0.07) | | | (0.10) | | | (0.10) | |
| Total (a) | Total (a) | | $ | 0.54 | | | $ | 0.46 | | | $ | 1.10 | | | $ | 1.07 | | Total (a) | | $ | 0.58 | | | $ | 0.54 | | | $ | 1.25 | | | $ | 1.10 | |
(a) Amounts may not add due to rounding.
Summary of Earnings
Xcel Energy — Xcel Energy’s earnings increased $0.08$0.04 per share for the second quarter of 20202021 and $0.03increased $0.15 per share year-to-date. Earnings primarily reflect management’s actionshigher electric and natural gas margins (driven by capital investment recovery, regulatory outcomes and weather-normalized sales growth as compared to reduce O&M to offset the impact from COVID-19 and favorable weather,2020, which was more adversely impacted by COVID-19). These drivers were partially offset by higher depreciation, O&M expenses, interest charges and interest charges. Incomelower AFUDC.
PSCo — Earnings increased $0.04 per share for the second quarter of 2021 and $0.11 per share year-to-date. The increase in year-to-date earnings reflects higher natural gas and electric margins (primarily capital investment recovery and regulatory outcomes), partially offset by additional depreciation and other taxes were lower primarily due to(other than income taxes).
NSP-Minnesota — Earnings decreased $0.01 per share for the second quarter of 2021 and increased $0.02 per share year-to-date. The increase in year-to-date earnings reflects higher PTCs, which are credited to customers, resulting in lower electric margin (primarily capital investment recovery), partially offset by increased depreciation and do not materially impact earnings.O&M expenses.
PSCoSPS — Earnings decreased $0.01 per share for the second quarter of 2021 and increased $0.01 per share year-to-date. The increase in year-to-date earnings reflects higher electric margin (capital investment recovery and regulatory outcomes), partially offset by increased depreciation and O&M expenses.
NSP-Wisconsin — Earnings increased $0.01 per share for the second quarter of 2020 and decreased $0.02 per share year-to date. The decrease in year-to-date earnings was driven by lower sales and demand revenue primarily due to COVID-19, higher depreciation, interest charges and lower natural gas margins due to unfavorable weather, partially offset by higher AFUDC, an increase in electric margins (regulatory outcomes offset lower sales due to COVID-19) and lower O&M.
NSP-Minnesota — Earnings increased $0.03 per share for the second quarter of 2020 and $0.02 year-to-date. The increase in year-to-date earnings primarily reflects lower O&M and income taxes, partially offset by lower electric margins (reflecting lower sales from COVID-19) and natural gas margins as well as higher depreciation. Lower electric margins were due primarily to increased PTCs flowed back to customers (offset in income tax) and decreased sales, partially offset by non-fuel riders.
SPS — Earnings increased $0.03 per share for the second quarter of 20202021 and were flat year-to-date. Year-to-date earnings were driven by lower O&M and income taxes, offset by lower electric margin and increased depreciation. Lower electric margins were attributable to lower sales from COVID-19, increased PTCs flowed back to customers (offset in income tax) and a 2019 NMPRC revised order eliminating a $10 million retroactive refund of tax reform benefits, partially offset by an increase in wholesale transmission revenue.
NSP-Wisconsin — Earnings were flat for the second quarter of 2020 and increased $0.03 per share year-to-date. The increase in year-to-date earnings was driven by lower O&M and income taxes, as well as higher electric margin (due primarily to regulatory outcomes which offset lower sales from COVID-19), partially offset by lower natural gas margins due to unfavorable weather and increased depreciation.
Xcel Energy Inc. and Other — Primarily includes financing costs at the holding company.company and earnings from EIP funds equity method investments.
Changes in GAAP and Ongoing Diluted EPS
Components significantly contributing to changes in 20202021 EPS compared with the same period in 2019:to 2020:
| | | | | | | | | | | | | | |
Diluted Earnings (Loss) Per Share | | Three Months Ended June 30 | | Six Months Ended June 30 |
GAAP and ongoing diluted EPS — 2019 | | $ | 0.46 | | | $ | 1.07 | |
| | | | |
Components of change — 2020 vs. 2019 | | | | |
Lower ETR (a) | | 0.07 | | | 0.10 | |
Lower O&M | | 0.05 | | | 0.08 | |
Higher AFUDC | | 0.03 | | | 0.04 | |
Higher electric margin (b) | | 0.02 | | | 0.02 | |
Higher depreciation and amortization | | (0.05) | | | (0.09) | |
Higher interest charges | | (0.03) | | | (0.04) | |
Lower natural gas margins | | — | | | (0.03) | |
Lower other income (expense), net | | — | | | (0.02) | |
Other (net) | | (0.01) | | | (0.03) | |
GAAP and ongoing diluted EPS — 2020 | | $ | 0.54 | | | $ | 1.10 | |
| | | | | | | | | | | | | | |
Diluted Earnings (Loss) Per Share | | Three Months Ended June 30 | | Six Months Ended June 30 |
GAAP and ongoing diluted EPS — 2020 | | $ | 0.54 | | | $ | 1.10 | |
| | | | |
Components of change - 2021 vs. 2020 | | | | |
Higher electric margin | | 0.14 | | | 0.25 | |
Higher natural gas margins | | 0.05 | | | 0.12 | |
Lower ETR (a) | | 0.06 | | | 0.12 | |
Higher other income (expense), net | | — | | | 0.02 | |
Higher depreciation and amortization | | (0.08) | | | (0.16) | |
Higher O&M expenses | | (0.07) | | | (0.08) | |
Lower AFUDC | | (0.05) | | | (0.07) | |
Higher interest charges | | (0.01) | | | (0.01) | |
Other, net | | — | | | (0.04) | |
GAAP and ongoing diluted EPS — 2021 | | $ | 0.58 | | | $ | 1.25 | |
(a)Includes PTCs and tax reformplant regulatory amounts, which are primarily offset in electric margin.
(b)The period-over-period change in electric margin was negatively impacted by reductions in sales and demand. See table below:
| | | | | | | | | | | | | | |
Diluted Earnings (Loss) Per Share | | Three Months Ended June 30 | | Six Months Ended June 30 |
Electric margin (excluding reductions in sales and demand) | | $ | 0.09 | | | $ | 0.09 | |
Reductions in sales and demand (a) | | (0.07) | | | (0.07) | |
Higher electric margins | | $ | 0.02 | | | $ | 0.02 | |
(a) Sales decline excludes weather impact, net of decoupling/sales true-up and decrease in demand revenue is net of sales true-up.
Statement of Income Analysis
The following 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, the amount of natural gas or electricity historically used per degree of temperature and excludes any incremental related operating expenses that could result due to storm activity or vegetation management requirements. As a result, weather deviations from normal levels can affect Xcel Energy’s financial performance. However, sales true-up and decoupling mechanisms in Minnesota and Colorado predominately mitigate the positive and adverse impacts of weather.
Degree-day or 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. HDD is the measure of the variation in the weather based on the extent to which the average daily temperature falls below 65° Fahrenheit. 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. Typically, sales are not impacted in the first or fourth quarter due to THI or CDD.
Normal weather conditions are defined as either the 10, 20 or 30-year30 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. Extreme weather variations, windchill and cloud cover may not be reflected in weather-normalized estimates.
Percentage increase (decrease) in normal and actual HDD, CDD and THI:HDD:
| | | Three Months Ended June 30 | | | Six Months Ended June 30 | | | Three Months Ended June 30 | | Six Months Ended June 30 |
| | 2020 vs. Normal | | 2019 vs. Normal | | 2020 vs. 2019 | | 2020 vs. Normal | | 2019 vs. Normal | | 2020 vs. 2019 | | 2021 vs. Normal | | 2020 vs. Normal | | 2021 vs. 2020 | | 2021 vs. Normal | | 2020 vs. Normal | | 2021 vs. 2020 |
HDD | HDD | 2.2 | % | | 16.9 | % | | (11.8) | % | | (4.1) | % | | 12.8 | % | | (14.4) | % | HDD | 1.7 | % | | 2.2 | % | | (1.1) | % | | 1.4 | % | | (4.1) | % | | 4.9 | % |
CDD | CDD | 22.4 | | | (45.2) | | | 191.2 | | | 22.5 | | | (45.5) | | | 139.9 | | CDD | 6.8 | | | 22.4 | | | (26.9) | | | 3.0 | | | 22.5 | | | (16.2) | |
THI | THI | 15.0 | | | (26.7) | | | 63.6 | | | 14.7 | | | (26.9) | | | 63.6 | | THI | 88.9 | | | 15.0 | | | 67.7 | | | 88.4 | | | 14.7 | | | 67.7 | |
Weather — Estimated impact of temperature variations on EPS compared with normal weather conditions:
| | | Three Months Ended June 30 | | | Six Months Ended June 30 | | | Three Months Ended June 30 | | Six Months Ended June 30 |
| | 2020 vs. Normal | | 2019 vs. Normal | | 2020 vs. 2019 | | 2020 vs. Normal | | 2019 vs. Normal | | 2020 vs. 2019 | | 2021 vs. Normal | | 2020 vs. Normal | | 2021 vs. 2020 | | 2021 vs. Normal | | 2020 vs. Normal | | 2021 vs. 2020 |
Retail electric | Retail electric | $ | 0.028 | | | $ | (0.024) | | | $ | 0.052 | | | $ | 0.017 | | | $ | (0.005) | | | $ | 0.022 | | Retail electric | $ | 0.056 | | | $ | 0.028 | | | $ | 0.028 | | | $ | 0.055 | | | $ | 0.017 | | | $ | 0.038 | |
Decoupling and sales true-up | Decoupling and sales true-up | (0.014) | | | 0.006 | | | (0.020) | | | (0.009) | | | 0.001 | | | (0.010) | | Decoupling and sales true-up | (0.044) | | | (0.014) | | | (0.030) | | | (0.041) | | | (0.009) | | | (0.032) | |
Electric total | Electric total | $ | 0.014 | | | $ | (0.018) | | | $ | 0.032 | | | $ | 0.008 | | | $ | (0.004) | | | $ | 0.012 | | Electric total | $ | 0.012 | | | $ | 0.014 | | | $ | (0.002) | | | $ | 0.014 | | | $ | 0.008 | | | $ | 0.006 | |
Firm natural gas | Firm natural gas | 0.001 | | | 0.004 | | | (0.003) | | | (0.006) | | | 0.022 | | | (0.028) | | Firm natural gas | 0.002 | | | 0.001 | | | 0.001 | | | 0.005 | | | (0.006) | | | 0.011 | |
Total | Total | $ | 0.015 | | | $ | (0.014) | | | $ | 0.029 | | | $ | 0.002 | | | $ | 0.018 | | | $ | (0.016) | | Total | $ | 0.014 | | | $ | 0.015 | | | $ | (0.001) | | | $ | 0.019 | | | $ | 0.002 | | | $ | 0.017 | |
Sales Growth (Decline) — Sales growth (decline) for actual and weather-normalized sales in 20202021 compared to the same period in 2019:2020:
| | | 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 (a) | Actual (a) | | | | | | | | | | | Actual (a) | | | | | | | | | | |
Electric residential | Electric residential | | 13.5 | % | | 10.2 | % | | 13.4 | % | | 10.8 | % | | 11.9 | % | Electric residential | | — | % | | 6.1 | % | | (5.6) | % | | 2.7 | % | | 1.9 | % |
Electric C&I | Electric C&I | | (8.3) | | | (13.2) | | | (7.5) | | | (12.3) | | | (10.2) | | Electric C&I | | 6.2 | | | 10.1 | | | 7.5 | | | 11.6 | | | 8.3 | |
Total retail electric sales | Total retail electric sales | | (1.7) | | | (6.6) | | | (4.4) | | | (6.5) | | | (4.5) | | Total retail electric sales | | 3.9 | | | 8.7 | | | 5.2 | | | 8.9 | | | 6.3 | |
Firm natural gas sales | Firm natural gas sales | | (13.0) | | | 0.4 | | | N/A | | (3.8) | | | (8.5) | | Firm natural gas sales | | 18.8 | | | (9.5) | | | N/A | | (2.5) | | | 8.3 | |
| | | Three Months Ended June 30 | | | Three Months Ended June 30 |
| | PSCo (b) | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy | | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Weather-normalized (a) | | | | | | | | | | | |
Weather-Normalized | | Weather-Normalized | | | | | | | | | | |
Electric residential | Electric residential | | 6.1 | % | | 5.7 | % | | 3.3 | % | | 4.9 | % | | 5.4 | % | Electric residential | | 0.7 | % | | (1.6) | % | | (1.3) | % | | (2.3) | % | | (0.7) | % |
Electric C&I | Electric C&I | | (10.4) | | | (14.2) | | | (8.6) | | | (13.3) | | | (11.5) | | Electric C&I | | 6.5 | | | 8.3 | | | 8.4 | | | 10.2 | | | 7.9 | |
Total retail electric sales | Total retail electric sales | | (5.4) | | | (8.5) | | | (6.9) | | | (8.6) | | | (7.1) | | Total retail electric sales | | 4.4 | | | 5.0 | | | 6.8 | | | 6.5 | | | 5.3 | |
Firm natural gas sales | Firm natural gas sales | | (7.4) | | | 2.7 | | | N/A | | 3.1 | | | (3.9) | | Firm natural gas sales | | 12.7 | | | (2.6) | | | N/A | | 6.8 | | | 7.6 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30 | | | | | | | | |
| | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Actual (a) | | | | | | | | | | |
Electric residential | | 5.7 | % | | 2.1 | % | | 5.4 | % | | 1.0 | % | | 3.8 | % |
Electric C&I | | (4.0) | | | (8.5) | | | (2.2) | | | (6.4) | | | (5.4) | |
Total retail electric sales | | (1.0) | | | (5.4) | | | (1.1) | | | (4.3) | | | (2.9) | |
Firm natural gas sales | | (8.2) | | | (10.4) | | | N/A | | (12.0) | | | (9.1) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30 |
| | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Actual | | | | | | | | | | |
Electric residential | | 3.2 | % | | 5.6 | % | | 1.8 | % | | 3.8 | % | | 4.0 | % |
Electric C&I | | 0.4 | | | 1.3 | | | — | | | 4.5 | | | 0.9 | |
Total retail electric sales | | 1.4 | | | 2.7 | | | 0.3 | | | 4.3 | | | 1.8 | |
Firm natural gas sales | | 8.0 | | | (1.9) | | | N/A | | — | | | 4.4 | |
| | | Six Months Ended June 30 | | | Six Months Ended June 30 |
| | PSCo (b) | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy | | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Weather-normalized (a) | | | | | | | | | | | |
Weather-Normalized | | Weather-Normalized | | | | | | | | | | |
Electric residential | Electric residential | | 3.4 | % | | 2.7 | % | | 1.9 | % | | 3.0 | % | | 2.9 | % | Electric residential | | 2.9% | | 1.6% | | 1.4% | | 0.5% | | 2.0% |
Electric C&I | Electric C&I | | (5.0) | | | (8.7) | | | (2.7) | | | (6.5) | | | (5.8) | | Electric C&I | | 0.4 | | 0.4 | | 0.2 | | 3.8 | | 0.6 |
Total retail electric sales | Total retail electric sales | | (2.4) | | | (5.3) | | | (2.1) | | | (3.8) | | | (3.5) | | Total retail electric sales | | 1.2 | | 0.7 | | 0.5 | | 2.8 | | 1.0 |
Firm natural gas sales | Firm natural gas sales | | (1.4) | | | 2.6 | | | N/A | | 3.3 | | | 0.2 | | Firm natural gas sales | | 2.4 | | (1.6) | | N/A | | (0.6) | | 0.9 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30 (Leap Year Adjusted) | | | | | | | | |
| | PSCo (b) | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Weather-normalized (a) | | | | | | | | | | |
Electric residential | | 2.8 | % | | 2.2 | % | | 1.3 | % | | 2.4 | % | | 2.3 | % |
Electric C&I | | (5.5) | | | (9.2) | | | (3.3) | | | (7.1) | | | (6.4) | |
Total retail electric sales | | (3.0) | | | (5.8) | | | (2.7) | | | (4.4) | | | (4.1) | |
Firm natural gas sales | | (2.2) | | | 1.7 | | | N/A | | 2.3 | | | (0.7) | |
(a)Higher residential sales and lower C&I sales were primarily attributable to COVID-19.
(b)CPUC approved a historical 10-year weather normalization approach for retail electric, effective March 1, 2020. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six Months Ended June 30 (2020 Leap Year Adjusted) |
| | PSCo | | NSP-Minnesota | | SPS | | NSP-Wisconsin | | Xcel Energy |
Weather-Normalized | | | | | | | | | | |
Electric residential | | 3.4 | % | | 2.2 | % | | 2.0 | % | | 1.1 | % | | 2.5 | % |
Electric C&I | | 1.0 | | | 1.0 | | | 0.8 | | | 4.4 | | | 1.2 | |
Total retail electric sales | | 1.8 | | | 1.3 | | | 1.0 | | | 3.4 | | | 1.6 | |
Firm natural gas sales | | 3.3 | | | (0.7) | | | N/A | | 0.3 | | | 1.8 | |
Weather-normalized and leap-year adjusted electric sales growth (decline) — year-to-date (excluding leap day)
Weather-adjusted sales results for each of our utility subsidiaries in 2021 reflect improving economies as the adverse effects of COVID-19 lessen. The recovery reflects increased sales in the C&I sector as businesses return to a more normal level. Residential sales remain elevated on a year-to-date basis as individuals working from home have just begun returning to the office.
•PSCo — Residential sales rose based on higher use per customer from stay-at-home mandates and an increased number of customers. The C&I decline was due to lower use offsetting an increase in the number of C&I customers.customers combined with higher use per customer. The declinegrowth in large C&I sales was primarily due toled by the shutdown of the economy from COVID-19, decreasesservice, agriculture, food and energy sectors, partially offset by a decrease in the manufacturing and service industries, partially offset by an increase in the energy sector.
•NSP-Minnesota — Residential sales growth reflects an increase in the number of customers combined with higher use per customer from stay-at-home mandates and increased customer additions.customer. The dropgrowth in C&I sales was as a result ofdue to customer growth offset by lowerand slightly higher use per customer. Decreased sales to C&I customers were due to the shutdown of the economy from COVID-19 and declinescustomer, primarily in the energy, manufacturing and services sectors.sector.
•SPS — Residential sales rose based on an increase in the number of customers combined with higher use per customer. C&I sales increased due to customer growth and higher use per customer from stay-at-home mandates. The decline in C&I sales was dueand growth attributable to shutdowns of the economy from COVID-19, declines in oil and natural gas extraction due to lower commodity prices and lower manufacturing, agriculture & food and services.sector, partially offset by losses within the energy sector.
•NSP-Wisconsin — Residential sales growth was attributable to customer additions and higher use per customer from stay-at-home mandates and customer additions.customer. The declinegrowth in C&I sales was largely due toprimarily led by increases in the shutdown of the economy from COVID-19services, agriculture, food and decreased sales toenergy sectors, partially offset by a decrease in the manufacturing sector.
Weather-normalized and leap-year adjusted natural gas sales growth (decline) — year-to-date (excluding leap day)
•Natural gas sales primarily reflect an increase in the number of customers combined with lowerslightly higher customer use due to the shutdown of the economy from COVID-19.
use.
Electric Margin
Electric revenues and fuel and purchased power expenses are impacted by fluctuations in the price of natural gas, coal and uranium used in the generation of electricity.uranium. However, these price fluctuations have minimal impact on electric margin due to fuel recovery mechanisms that recover fuel expenses.
In addition, electric customers receive a credit for PTCs generated, in a particular period.which reduce electric revenue and margin.
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) | (Millions of Dollars) | | 2020 | | 2019 | | 2020 | | 2019 | (Millions of Dollars) | | 2021 | | 2020 | | 2021 | | 2020 |
Electric revenues | Electric revenues | | $ | 2,286 | | | $ | 2,249 | | | $ | 4,489 | | | $ | 4,574 | | Electric revenues | | $ | 2,597 | | | $ | 2,286 | | | $ | 5,467 | | | $ | 4,489 | |
Electric fuel and purchased power | Electric fuel and purchased power | | (833) | | | (813) | | | (1,630) | | | (1,727) | | Electric fuel and purchased power | | (1,047) | | | (833) | | | (2,433) | | | (1,630) | |
Electric margin | Electric margin | | $ | 1,453 | | | $ | 1,436 | | | $ | 2,859 | | | $ | 2,847 | | Electric margin | | $ | 1,550 | | | $ | 1,453 | | | $ | 3,034 | | | $ | 2,859 | |
Changes in electric margin:
| (Millions of Dollars) | (Millions of Dollars) | | Three Months Ended June 30, 2020 vs. 2019 | | Six Months Ended June 30, 2020 vs. 2019 | (Millions of Dollars) | | Three Months Ended June 30, 2021 vs. 2020 | | Six Months Ended June 30, 2021 vs. 2020 |
Regulatory rate outcomes (Colorado, Wisconsin and New Mexico) | | $ | 21 | | | $ | 34 | | |
Non-fuel riders | | Non-fuel riders | | $ | 89 | | | $ | 133 | |
Regulatory rate outcomes (Texas, New Mexico, Colorado, Wisconsin and North Dakota) | | Regulatory rate outcomes (Texas, New Mexico, Colorado, Wisconsin and North Dakota) | | 34 | | | 78 | |
| Proprietary commodity trading, net of sharing — Winter Storm Uri | | Proprietary commodity trading, net of sharing — Winter Storm Uri | | — | | | 27 | |
Sales and demand (a) | | Sales and demand (a) | | 24 | | | 10 | |
Estimated impact of weather (net of decoupling/sales true-up) | | Estimated impact of weather (net of decoupling/sales true-up) | | (1) | | | 5 | |
Wholesale transmission revenue (net) | Wholesale transmission revenue (net) | | 20 | | | 25 | | Wholesale transmission revenue (net) | | (8) | | | 3 | |
Non-fuel riders | | 11 | | | 24 | | |
Estimated impact of weather (net of decoupling/sales true-up) | | 21 | | | 8 | | |
PTCs flowed back to customers (offset by a lower ETR) | | (31) | | | (53) | | |
Sales and demand (a) | | (47) | | | (46) | | |
New Mexico tax reform related regulatory settlement (2019) | | — | | | (10) | | |
PTCs flowed back to customers (offset by lower ETR) | | PTCs flowed back to customers (offset by lower ETR) | | (42) | | | (79) | |
Other (net) | Other (net) | | 22 | | | 30 | | Other (net) | | 1 | | | (2) | |
Total increase in electric margin | Total increase in electric margin | | $ | 17 | | | $ | 12 | | Total increase in electric margin | | $ | 97 | | | $ | 175 | |
(a)Sales decline excludes weather impact, net of decoupling/sales true-up, and decrease in demand revenue is net of sales true-up.
Natural Gas Margin
Natural gas expense varies with changing sales requirements and the cost of natural gas. However, fluctuations in the cost of natural gas hashave minimal impact on natural gas margin due to cost recovery mechanisms.
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) | (Millions of Dollars) | | 2020 | | 2019 | | 2020 | | 2019 | (Millions of Dollars) | | 2021 | | 2020 | | 2021 | | 2020 |
Natural gas revenues | Natural gas revenues | | $ | 280 | | | $ | 308 | | | $ | 863 | | | $ | 1,102 | | Natural gas revenues | | $ | 449 | | | $ | 280 | | | $ | 1,096 | | | $ | 863 | |
Cost of natural gas sold and transported | Cost of natural gas sold and transported | | (86) | | | (112) | | | (371) | | | (591) | | Cost of natural gas sold and transported | | (218) | | | (86) | | | (517) | | | (371) | |
Natural gas margin | Natural gas margin | | $ | 194 | | | $ | 196 | | | $ | 492 | | | $ | 511 | | Natural gas margin | | $ | 231 | | | $ | 194 | | | $ | 579 | | | $ | 492 | |
Changes in natural gas margin:
| | | | | | | | | | | | | | |
(Millions of Dollars) | | Three Months Ended June 30, 2020 vs. 2019 | | Six Months Ended June 30, 2020 vs. 2019 |
Estimated impact of weather | | $ | (2) | | | $ | (19) | |
Transport sales | | — | | | (2) | |
Regulatory rate outcomes (Wisconsin) | | — | | | (2) | |
Retail sales decline | | (2) | | | (1) | |
Infrastructure and integrity riders | | 4 | | | 5 | |
Conservation revenue (offset in expenses) | | 2 | | | 3 | |
Other (net) | | (4) | | | (3) | |
Total decrease in natural gas margin | | $ | (2) | | | $ | (19) | |
| | | | | | | | | | | | | | |
(Millions of Dollars) | | Three Months Ended June 30, 2021 vs. 2020 | | Six Months Ended June 30, 2021 vs. 2020 |
Regulatory rate outcomes (Colorado) | | $ | 31 | | | $ | 71 | |
Estimated impact of weather | | 1 | | | 8 | |
| | | | |
| | | | |
| | | | |
Other (net) | | 5 | | | 8 | |
| | | | |
| | | | |
Total increase in natural gas margin | | $ | 37 | | | $ | 87 | |
Non-Fuel Operating Expenses and Other Items
O&M Expenses — O&M expenses decreased $36increased $50 million, or 6.1%9.1%, for the second quarter and $55 million, or 4.6%, year-to-date, largely reflecting management actions to reduce costs to offset the impact of lower sales from COVID-19.4.9% year-to-date. Significant changes are summarized as follows:
| | | | | | | | | | | | | | |
(Millions of Dollars) | | Three Months Ended June 30, 2020 vs. 2019 | | Six Months Ended June 30, 2020 vs. 2019 |
Distribution | | $ | (20) | | | $ | (30) | |
Employee benefits | | 6 | | | (10) | |
Transmission | | (5) | | | (6) | |
Generation | | (4) | | | (6) | |
Strategic initiatives | | — | | | 6 | |
Other (net) | | (13) | | | (9) | |
Total decrease in O&M expenses | | $ | (36) | | | $ | (55) | |
| | | | | | | | | | | | | | |
| | | | |
(Millions of Dollars) | | Three Months Ended June 30, 2021 vs. 2020 | | Six Months Ended June 30, 2021 vs. 2020 |
Wind | | $ | 14 | | | $ | 22 | |
Information technology and security | | 13 | | | 17 | |
Natural gas systems | | 6 | | | 9 | |
Distribution | | 9 | | | 8 | |
| | | | |
Other | | 8 | | | (1) | |
Total increase in O&M expenses | | $ | 50 | | | $ | 55 | |
•DistributionThe increase was primarily due to expenses declinedassociated with new wind farms, software infrastructure and security costs, natural gas damage prevention, and timing of distribution expenses, partially offset by continuous improvement initiatives. Quarterly timing impacts also occurred throughout 2020 due to cost mitigation efforts including allocationcontrol initiatives to mitigate the adverse impact of workforce, material and supply management, performance of maintenance and other items;
•Employee benefits were lower year-to-date primarily due to change in deferred compensation liability, offset in Other Income (Expense);
•Transmission expenses declined due to a reduction in labor related amounts and cost mitigation initiatives;
•Generation expenses were lower from timing of maintenance and overhauls at power plants and cost mitigation efforts, partially offset by an increase in wind related amounts;
•Strategic initiative amounts were higher year-to-date due to increased spendingCOVID-19 on customer experience transformation program expenses and advanced grid infrastructure; and
•Other primarily includes deferred amounts associated with the Texas 2019 electric rate case and the outcome of the CPUC’s rehearing of the Colorado 2019 electric rate case.sales.
Depreciation and Amortization — Depreciation and amortization increased $34$55 million, or 7.7%11.6%, for the second quarter and $64$113 million or 7.3%, year-to-date. Increase12.1% year-to-date. The increase was primarily driven by the Hale, Lake Benton, Foxtail and Blazing Star Iseveral wind facilitiesfarms going into service, as well as normal system expansion. In addition, 2021 depreciation expense increased as a result of implementation of new depreciation rates were increased in Colorado and New Mexico as part of regulatory outcomes in 2020.various states.
Other Income (Expense) — Other income (expense) increased $3decreased $2 million for the second quarter and decreased $13increased $15 million year-to-date. Decrease is dueyear-to-date, which was largely related to the performance of rabbi trust investments, which isperformance primarily offset in O&M expense (deferred compensation)expenses (compensation).
AFUDC, Equity and Debt — AFUDC increased $19decreased $25 million for the second quarter of 2021 and $23$40 million year-to-date. IncreaseThe decrease was primarily due to additional AFUDC recorded ondriven by completion of various wind projects currently under construction.projects.
Interest Charges — Interest charges increased $19$4 million, or 10.1%1.9%, for the second quarter and $28$10 million or 7.4%2.5% year-to-date. IncreaseThe increase was primarily duelargely attributable to higher long-term debt levels to fund capital investments and a term loan to finance Winter Storm Uri fuel costs, partially offset by lower long-term and short-term interest rates.
Earnings from Equity Method Investments — Earnings from equity method investments increased $14 million for the second quarter and $17 million year-to-date. The increase was largely attributable to the performance of the EIP funds, which invest in energy technology companies.
Income Taxes — Income taxes decreased $37tax benefit increased $25 million for the second quarter. Decreasequarter and $41 million year-to-date. The increase was primarily driven by an increase in wind PTCs and an increase in plant regulatory differences.due to additional facilities going into service. Wind PTCs are credited to customers (recorded as a reduction to revenue) and do not have a material impact on net income. The ETRImpact of PTCs was (4.7%) for the second quarter of 2020 compared with 9.2% for the same period in 2019.
Income taxes decreased $68 million for the first six months of 2020. Decrease was primarily drivenpartially offset by an increase in wind PTCs, lowerhigher pretax earnings and an increase in plant-related regulatory differences. Wind PTCs are credited to customers and do not have a material impact on net income. The ETR was (3.4%) for the first six months ending June 30, 2020 compared with 8.1% for the same period in 2019.2021.
Winter Storm Uri
In February 2021, the central portion of the United States experienced a major winter storm (Winter Storm Uri). Extreme cold temperatures impacted certain operational assets as well as the availability of renewable generation across the region. The cold weather also affected the country’s supply and demand for natural gas. These factors contributed to extremely high market prices for natural gas and electricity.
As a result of the extremely high market prices, Xcel Energy incurred net natural gas, fuel and purchased energy costs of approximately $985 million (largely deferred as regulatory assets) in the first quarter. Certain energy transactions are subject to final/settlement calculation adjustments, including the impacts of credit losses shared among market participants.
Total incurred costs (net) per operating utility:
| | | | | | | | |
(Millions of Dollars) | | |
NSP-Minnesota | | $ | 230 | |
NSP- Wisconsin | | 45 | |
PSCo | | 610 | |
SPS | | 100 | |
Total | | $ | 985 | |
In addition, higher market prices resulted in $27 million of net gains (after customer sharing) related to proprietary commodity trading. These transactions were primarily entered into under Xcel Energy’s ordinary trading practices prior to Winter Storm Uri.
Regulatory Overview —Xcel Energy has natural gas, fuel and purchased energy mechanisms in each jurisdiction for recovering incurred costs. However, the utility subsidiaries have deferred February cost increases for future recovery and are proposing to recover the cost increases over a period of up to 27 months to mitigate the impact to customer bills. Additionally, we are not requesting recovery of financing costs in order to further limit the impact to our customers.
Proceedings initiated:
| | | | | | | | |
Utility Subsidiary | Jurisdiction | Regulatory Status |
NSP-Minnesota | Minnesota | NSP-Minnesota filed with the MPUC seeking recovery of $179 million in incremental costs from natural gas customers over 27 months with no financing charge and an additional $36 million from natural gas customers through the standard 12 month true-up. Parties were generally supportive of the proposed recovery period commencing Sept. 1, 2021. The DOC recommended disallowances of $21 million; the OAG recommended disallowances of $34 million. A MPUC decision on the start of cost recovery is expected prior to Sept. 1, 2021. A proceeding related to the proposed disallowances is expected to continue into 2022. |
| South Dakota | In April, NSP-Minnesota filed a letter with the South Dakota Public Utilities Commission (SDPUC) proposing no impact to the fuel clause as we were a net seller in the electric market. The SDPUC has approved the proposal. |
| North Dakota | In June, the NDPSC approved recovery of $32 million in natural gas costs over 15 months (starting July 2021) with no financing charge. |
NSP-Wisconsin | Wisconsin | In March, the PSCW approved NSP-Wisconsin’s proposal to recover $45 million of natural gas costs incurred during Storm Uri over nine months through December 2021 with no financing charge. |
| Michigan | In May, the Michigan Public Service Commission approved recovery of $2 million in natural gas costs over 10 months with no financing charge. |
PSCo | Colorado | In May, PSCo filed a request with the CPUC to recover $263 million in weather-related electric costs, $287 million in incremental gas costs and $4 million in incremental steam costs over 24 months with no financing charge. A decision is expected in the first quarter of 2022. In addition, the CPUC is considering prospective changes in fuel cost recovery. |
SPS | Texas | SPS filed for a surcharge in the second quarter to recover $62 million in fuel costs over 24 months, subject to revision due to re-settlements. Prudence of costs will be subject to review in SPS's upcoming fuel reconciliation case. |
| New Mexico | The NMPRC approved SPS's request to recover $26 million of fuel costs over 24 months with no financing charge, subject to revision due to re-settlements and NMPRC review. |
COVID-19
Although the COVID-19 pandemic has led to numerous challenges, Xcel Energy believes its risk management program, including business continuity and disaster recovery planning, will continue to allow us to proactively manage and successfully navigate challenges, risks and uncertainties.
Continued uncertainty remains regarding COVID-19, the pace of economic recovery and any potential re-shut downs or reinstatement of business restrictions both domestically and globally.
An overview of certain risk considerations or areas which have or could significantly impact us is as follows:
Sales — Xcel Energy has experienced and may continue to experience sales volatility and shifts between residential and C&I sales as a result of COVID-19. Xcel Energy has decoupling and sales true-up mechanisms in Minnesota (all electric classes) and Colorado (residential and non-demand small C&I electric classes), which mitigate the impact of changes to sales levels as compared to a baseline.
Bad Debt — Bad debt expense could significantly increase due to pandemic related economic impacts, customer hardship, federal or state legislation and regulatory orders. However, several of our commissions have approved the deferral of incremental COVID-19 related costs, including bad debt expense.
Xcel Energy has received orders in Colorado, Wisconsin, Texas, New Mexico, South Dakota and Michigan, allowing regulatory deferral of incremental COVID-19 costs as a regulatory asset subject to future determination of amount and timing of recovery. As part of NSP-Minnesota’s electric rate case stay-out alternative, NSP-Minnesota agreed to not seek recovery of incremental COVID-19 related costs.
The majority of wholesale customers are subject to formula transmission and production rates, which true-up rates to actual costs to serve.
Supply Chain and Capital Expenditures— Xcel Energy’s ability to meet customer energy requirements, respond to storm-related disruptions and execute our capital expenditure program are dependent on maintaining an efficient supply chain. Overall, as a result of COVID-19, manufacturing processes have experienced disruptions related to scarcity of raw materials and interruptions in production and shipping. These disruptions have been further exacerbated by inflationary pressures, storms and labor shortages. The Company continues to monitor the availability of materials and seek alternative suppliers as necessary.
| | |
Public Utility Regulation |
The FERC and various state and local regulatory commissions regulate Xcel Energy Inc.’s utility subsidiaries and WGI. TheXcel Energy is subject to rate regulation by state utility regulatory agencies, which have jurisdiction with respect to the rates of electric and natural gas rates charged to customers of Xcel Energy Inc.’s utility subsidiariesdistribution companies in Minnesota, North Dakota, South Dakota, Wisconsin, Michigan, Colorado, New Mexico, and WGI are approved by the FERC or the regulatory commissions in the states in which they operate.Texas.
The ratesRates are designed to recover plant investment, operating costs and an allowed return on investment. Xcel Energy Inc.’sOur utility subsidiaries request changes in utility rates for utility services through filings with governing commissions.
commission filings. Changes in operating costs can affect Xcel Energy’s financial results, depending on the timing of rate case filingscases and implementation of final rates. Other factors affecting rate filings are new investments, sales, conservation and DSM efforts, and the cost of capital.
In addition, the regulatory commissions authorize the ROE, capital structure and depreciation rates in rate proceedings. Decisions by these regulators can significantly impact Xcel Energy’s results of operations.
Except to the extent noted below, the circumstances set forth in Public Utility Regulation included in Item 7 of Xcel Energy’s Annual Report on Form 10-K for the year ended Dec. 31, 20192020 and in Item 2 of Xcel Energy’s Quarterly Report on FormForm 10-Q for the quarterly period ended March 31, 20202021 appropriately represent, in all material respects, the current status of public utility regulation and are incorporated herein by reference. NSP-Minnesota
Pending and Recently Concluded Regulatory Proceedings
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mechanism | | Utility ServiceProceeding | | Amount Requested (in (in millions) | | Filing Date | | Approval | | Additional Information |
MPUC2020 North Dakota Electric Rate Case | | $19 | | November 2020 | | | | | | Pending |
2020 TCR Electric Rider | | Electric | | $82 | | November 2019 | | Pending | | In November 2019, NSP-Minnesota filed the 2020 TCR Rider. The filing included an ROE of 9.06%. Timing of an MPUC ruling is uncertain. |
20202021 GUIC Natural Gas Rider | | Natural Gas27 | | $21 | | November 2019October 2020 | | Pending | | In November 2019, NSP-Minnesota filed the 2020 GUIC Rider with the MPUC. The filing included an ROE of 9.04%. Timing of an MPUC ruling is uncertain. |
2020 RES | | Electric Rider | | $102107 | | November 2019 | | PendingReceived |
2021 RES Electric Rider | | In 189 | | November 2019, NSP-Minnesota filed the 2020 RES Rider with the MPUC. The requested amount includes a true-up for the 2019 rider of $38 million and the 2020 requested amount of $64 million. The filing included an ROE of 9.06%. Timing of an MPUC ruling is uncertain. | | Pending |
Additional Information:
2020 North Dakota Electric Rate Case — In November 2020, NSP-Minnesota filed a rate case with the NDPSC. NSP-Minnesota requested an increase in annual retail electric revenues of approximately $19 million. The rate filing was based on a 2021 forecast test year, a ROE of 10.2%, an equity ratio of 52.5% and an electric rate base of approximately $677 million. Interim rates, subject to refund, of approximately $13 million are currently in effect.
In July 2021, NSP-Minnesota and various parties filed an uncontested settlement agreement, which includes:
•Base revenue increase of $7 million.
•ROE of 9.5%.
•Equity ratio of 52.5%.
•Deferral of advanced grid intelligence and security initiative capital and O&M expenses.
•An earnings cap mechanism, which would return to customers 100% of earnings equal to or in excess of 9.75% ROE, effective until the next rate case.
A NDPSC decision on the settlement and implementation is anticipated in the fourth quarter of 2021.
2020 TCR Electric Rider — In November 2019, NSP-Minnesota filed the TCR Rider based on a ROE of 9.06%. An MPUC decision is pending.
2021 GUIC Natural Gas Rider — In October 2020, NSP-Minnesota filed the GUIC Rider based on a ROE of 9.04%. An MPUC decision is pending.
2020 RES Electric Rider — In November 2019, NSP-Minnesota filed the RES Rider. In March 2021, the MPUC voted to approve revenue requirements of $41 million for 2019 and $66 million for 2020. The filing included a ROE of 9.06%. The new rate will be implemented after an MPUC order is issued.
2021 RES Electric Rider — In November 2020, NSP-Minnesota filed the RES Rider. The requested amount includes a true-up (2019 and 2020 riders) of $96 million and the 2021 requested amount of $93 million. The filing included a ROE of 9.06%. An MPUC decision is pending.
2020 Minnesota Electric Rate Case and Stay-Out Alternative — In November 2020, NSP-Minnesota filed an electric rate case seeking a $597 million revenue increase over three years with the MPUC. NSP-Minnesota also filed a stay-out alternative in which it would withdraw its rate case filing. In December 2020, the MPUC verbally approved the stay-out alternative petition.
In February 2021, NSP-Minnesota filed a letter highlighting a change in the calculation of its total deficiency and interim rates included in its November 2020 filing. This adjustment would have reduced the filed deficiency and interim rates by approximately $43 million should the rate case have proceeded, but has no impact on the stay-out alternative petition.
In April 2021, the MPUC issued an order approving NSP-Minnesota’s proposed changes and a requirement to withdraw NSP-Minnesota’s notice of change in rates, as well as establishing a comment period allowing parties to address the changes discussed in the February letter. In June 2021, the MPUC issued an order denying a request for reconsideration of the rate case stay-out approval.
NSP-Minnesota —Minnesota Resource Plan — In July 2019,NSP-Minnesota filed its Minnesota resource plan, which runs through 2034. The initial plan wouldwas expected to result in an 80% carbon reduction by 2030 (from 2005) and puts NSP-Minnesota on a path to achieving its vision of being 100% carbon-free by 2050. Parties submitted comments in February 2021 and there was significant opposition to the proposal to build a Sherco combined cycle natural gas plant and associated pipeline infrastructure.
In June 2020,2021, NSP-Minnesota filed an alternative plan that would reduce carbon emissions 85% by 2030 and has a supplement to its resourcelower projected cost than either of the previously submitted plans. The alternative plan including new modeling scenarios required by the MPUC. The updated preferred resource plan reflectsincludes the following:
•Retirement ofRemoving the planned Sherco combined cycle natural gas plant.
•Retiring all coal generation by 2030 with reduced operations at some units prior to retirement, including the early retirement of the A.S. King coal plant (511 MW) in 2028 and the Sherco 3 coal plant (517 MW) in 2030;2030.
•Extending the life of the Monticello nuclear plant from 2030 to 2040;2040.
•Continuing to run the Prairie Island nuclear generating plant at least through current end of life (2033 and 2034);.
•ConstructionAdding 3,150 MW of the Sherco combined cycle natural gas plant;universal solar, 2,650 MW of wind and 250 MW of storage.
•The addition of 3,500Adding 800 MW of solar;new hydrogen-ready combustion-turbines and repowering 300 MW of blackstart combustion-turbines.
•The addition of 2,250Adding 1,900 MW of wind;other firm dispatchable resources.
•2,600 MWConstructing 155 miles of firm peaking (combustion turbine, pumped hydro, battery storage, demand response etc.);transmission lines.
•Achieving 780 GWhgigawatt hours in energy efficiency savings annually through 2034; and2034.
•Adding 400 MW of incremental demand response by 2023 and a total of 1,500 MW of demand response by 2034.
InitialSupplemental comments are due Oct. 30, 2020 and reply comments are due Jan. 15,Aug 13, 2021. The MPUC is anticipated to make a final decision in the first half of 2021.late 2021 or early 2022.
Minnesota Relief and Recovery — In 2020, the MPUC opened a Relief and Recovery docket and invited utilities in the state to submit potential projects that would create jobs and help jump start the economy to offset the impacts of COVID-19. In June 2020, NSP-Minnesota filed a Relief & Recovery proposal which identified approximately $3 billionThe status of capital investment which may assist in Minnesota’s economic recovery from COVID-19. The filing included the following components:various proposals is listed below:
•AIn January 2021, the MPUC approved NSP-Minnesota’s request for the repowering of 651 MW of owned wind repowering solicitation that could result in 800projects and 20 MW of wind projects under PPAs. These projects are estimated to 1,000 MW with an estimated incremental investment of $1.0 to $1.4 billion;save customers approximately $160 million over the next 25 years.
•AIn April 2021, NSP-Minnesota proposed to add 460 MWMWs of solar facilityfacilities at the Sherco site with an incremental investment of approximately $650 million;$575 million. A MPUC decision is expected in late 2021 or early 2022.
•Incremental electric vehicle investment and rebates with an estimated cost of $155 million;In June 2021, the MPUC approved NSP-Minnesota’s proposal to acquire a 120 MW repowered wind farm from ALLETE for $210 million.
•Accelerated transmission investment of $180 million;
•Accelerated distribution investment of $615 million; and
•Accelerated natural gas investment of $50 million.
The MPUC scheduled a planning meeting to determine the procedural process and next steps.
NSP-Minnesota — Mower Wind Facility —In August 2019, NSP-Minnesota filed a petition with the MPUC to acquire the Mower wind facility from affiliates of NextEra Energy, Inc. The facility is currently contracted under a PPA with NSP-Minnesota through 2026. Mower is expected to continue to have approximately 99 MW of capacity following a planned repowering. The acquisition would occur after repowering, which is expected to be completed in 2020 and qualify for the full PTC. NSP-Minnesota will need approval from both the MPUC and FERC to complete the transaction. The MPUC is expectedalso considering NSP-Minnesota’s proposal to rule on the request in the third quarterprovide $150 million of 2020.incremental electric vehicle rebates.
Minnesota State ROFR Statute Complaint — In September 2017, LSP Transmission filed a complaint in the Minnesota District Court against the Minnesota Attorney General, MPUC and DOC. The complaint was in response to MISO assigning NSP-Minnesota and ITC Midwest, LLC to jointly own a new 345 KV transmission line from Mankato to Winnebago, Minnesota. The project is estimated to cost $140 million and projected to be in-service by the end of 2021. It was assigned to NSP-Minnesota and ITC Midwest as the incumbent utilities, consistent with a Minnesota state ROFR statute.
The complaint challenged the constitutionality of the statute and is seeking declaratory judgment that the statute violates the Commerce Clause of the U.S. Constitution and should not be enforced. In June 2018, the Minnesota District Court granted Minnesota state agencies and NSP-Minnesota’s motions to dismiss with prejudice. LSP Transmission filed an appeal in July 2018. In February 2020, the Eighth Circuit Court of Appeals upheld the Minnesota District Court decision to dismiss. In June 2020, the Eighth Circuit denied LSP Transmission’s petition for rehearing.
Nuclear Power Operations
NSP-Minnesota owns two nuclear generating plants: the Monticello plant and the Prairie Island plant. See Note 12 to the consolidated financial statements of Xcel Energy’s Annual Report on Form 10-K for the year ended Dec. 31, 2019,2020, for further information. The circumstances set forth in Nuclear Power Operations and Waste Disposal included in Item 17 of Xcel Energy’s Annual Report on Form 10-K for the year ended Dec. 31, 2019,2020, appropriately represent, in all material respects, the current status of nuclear power operations, and are incorporated by reference. NSP-Wisconsin
2019 Electric Fuel Cost Recovery —NSP-Wisconsin Solar Proposal NSP-Wisconsin’s electric fuel costs for 2019 were lower than authorized in rates and outside the 2% annual tolerance band, primarily due to increased sales to other utilities compared to the forecast used to set authorized rates. Under the fuel cost recovery rules, NSP-Wisconsin may retain approximately $3 million of fuel costs and defer the amount of over-recovery in excess of the 2% annual tolerance band for future refund to customers.— In March 2020, NSP-Wisconsin filed withJune 2021, the PSCW indicating over-collections ofapproved NSP-Wisconsin’s request to purchase the 74 MW Western Mustang build-own-transfer solar facility for approximately $10 million$100 million. The project is scheduled to customers and proposed for refunds to be issuedgo into service in September 2020.2023.
2021NSP-Wisconsin Electric Fuel Cost Recovery —and Natural Gas Settlement — In June 2020,July 2021, NSP-Wisconsin filed an application with the PSCW to update its 2021 fuel costs and return biomass fuel savings, which would decrease retailseeking approval of a rate case settlement with various intervenors for 2022-2023.
The settlement agreement increases electric rates by $35 million (4.9%) for 20212022 and an incremental $18 million increase (2.5%) for 2023. For the natural gas utility, rates increase by approximately $14 million. The PSCW will decide on$10 million (8.4%) for 2022 and an incremental $3 million (2.3%) increase for 2023.
Key elements of the application later in 2020.
settlement include:
Table•ROE of Contents9.80% for 2022 and 10.00% for 2023.
•Equity ratio of 52.5% for both 2022 and 2023.
•Returning $9 million in various net regulatory liabilities to offset customer impacts in 2023.
•Deferring certain pension and other post-employment benefit expense in 2021 through 2023.
•Addressing COVID-19 deferral recovery in the next rate case proceeding.
•Deferring potential changes in tax expenses due to changes in federal or state tax law in 2021 through 2023.
•Incorporating an earnings sharing mechanism for 2022 and 2023.
A PSCW decision is anticipated in the fourth quarter of 2021.
PSCo
Pending and Recently Concluded Regulatory Proceedings
| | | | | | | | | | | | | | | | | | | | |
Proceeding | | Amount (in millions) | | Filing Date | | Approval |
PSIA Extension | | $464 | | February 2021 | | Pending |
Electric Rate Case | | $470 | | July 2021 | | Pending |
Additional Information:
PSIA Rider Extension — In February 2021, PSCo requested to extend its PSIA rider for three years (through the end of 2024), which would recover $464 million in project costs. The extension is intended to allow for a wind down of the rider and transition of recovery of the projects included in the rider to base rates in 2025. The Staff and OCC have recommended the CPUC deny the extension of the rider. However, if the CPUC were to allow the rider extension, the scope of the rider would be limited and only allow a return on debt. A CPUC decision is expected in the fourth quarter of 2021.
Colorado Electric Rate Request— In July 2021, PSCo filed a request with the CPUC seeking a net increase to retail electric base rate revenue of $343 million (or 12.4%). The total request reflects a $470 million increase, which includes $127 million of previously authorized costs currently recovered through various rider mechanisms. The request is based on a 10.0% ROE, an equity ratio of 55.64% and a 2022 forecast test year. The request also includes impacts of a new depreciation study. A required test year, including a 10.5% ROE, was also filed. Rates are expected to be effective April 9, 2022.
| | | | | | | | |
MechanismRevenue Request (millions of dollars) | | Utility Service2022 |
Changes since 2019 rate case: | | |
Plant-related growth | | Amount Requested (in millions)$ | 95 | |
AGIS | | Filing Date73 | |
Updated cost of capital | | Approval53 | |
New depreciation rates | | Additional Information43 | |
Wildfire mitigation | | 25 |
CPUCProperty taxes | | 25 |
Amortization of previously approved deferrals | | 17 | |
Other | | 12 | |
Net increase to revenue | | 343 | |
Roll-in of previously authorized costs: | | |
TCA rider revenues and Cheyenne Ridge costs | | 127 | |
Total base revenue request | | $ | 470 | |
| | | | |
| | |
Rate Case | | Natural GasExpected average 2022 rate base (billions of dollars) | | $127 | | February 202010.3 | | Pending | | In February 2020, PSCo filed a rate case with the CPUC seeking a net increase to retail gas rates of $126.8 million, reflecting a $144.5 million increase in base rate revenue, partially offset by $17.7 million of costs previously authorized through the Pipeline Integrity rider. The request was based on a 9.95% ROE, an equity ratio of 55.81% and a historic test year as of Sept. 30, 2019, adjusted for known and measurable differences for the 12-month period ended Sept. 30, 2020. In June 2020, PSCo revised its net increase to $121 million.
In July 2020, PSCo, the CPUC Staff and various intervenors filed a comprehensive unopposed settlement, which results in a net increase to retail gas rates of $77.3 million, reflecting a $94.1 million increase in base rate revenue, partially offset by $16.8 million of costs previously authorized through the Pipeline Integrity rider. The settlement is based on:
•A ROE of 9.20%;
•An equity ratio of 55.62%; and
•A historic test year as of Sept. 30, 2019, utilizing a year-end rate base, and incorporating a known and measurable adjustment for the Tungsten to Black Hawk pipeline as of April 30, 2020.
Rates will be implemented on April 1, 2021 and will be retroactively effective back to November 2020. In July 2020, the ALJ granted an unopposed motion to schedule a hearing for Aug. 13, 2020 to review the settlement.
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Rate Case | | Electric | | $158 | | May 2019 | | Received | | In 2019, PSCo filed a request with the CPUC seeking a net rate increase of $108.4 million, based on a requested ROE of 10.2% and an equity ratio of 55.6%.
In February 2020, the CPUC issued a written decision, resulting in an estimated $34.9 million net base rate revenue increase. The CPUC decision included a 9.3% ROE, an equity ratio of 55.61%, based on a current test year ended Aug. 31, 2019, implementation of decoupling in 2020 and other items.
In May 2020, the CPUC deliberated on PSCo’s request for rehearing and revised its prior decision on the test year calculation, return on prepaid pension and medical assets, a disallowance of a capital investment for the Comanche Unit 3 superheater and Board compensation. In July 2020, the CPUC’s written decision was received. As a result, electric rates will increase approximately $12 million, retroactive back to Feb. 25, 2020. In addition, as a part of the rehearing, the CPUC plans to discuss the merits of opening an investigation of Comanche Unit 3 performance.
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Rate Case Appeal | | Natural Gas | | N/A | | April 2019 | | Pending | | In April 2019, PSCo filed an appeal seeking judicial review of the CPUC’s prior ruling regarding PSCo’s last natural gas rate case (approved in December 2018). The appeal requested review of the following: denial of a return on the prepaid pension and retiree medical assets; the use of a capital structure not based on the actual historical test year; and use of an average rate base methodology rather than a year-end rate base methodology.
In March 2020, The District Court of Denver County ruled in favor of allowing the prepaid pension assets to be included in rate base; but it upheld the CPUC treatment of the retiree medical assets and capital structure methodology. The CPUC did not appeal the decision allowing inclusion of the prepaid pension assets in rate base.
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PSCo 2020 Rider Filings
2019 Electric Rate Case Appeal — In JulyAugust 2020, PSCo filed Wildfirean appeal with the Denver District Court seeking a review of CPUC decisions on gains and Advanced Grid rider requestslosses on sales of assets, oil and gas royalty revenues, Board of Directors equity compensation and a true-up surcharge to collect the difference between what rates should have been in place from February through August 2020 (based onthe CPUC’s decision on the Company’s Application for Reconsideration, Rehearing or Reargument) and what rates were actually in place. Briefing was completed on July 9, 2021 and a decision is pending.
2017 Natural Gas Rate Case Appeal — In April 2019, PSCo filed an appeal of the CPUC’s ruling regarding PSCo’s natural gas rate case. In March 2020, The District Court of Denver County ruled in favor of allowing the prepaid pension assets to be included in rate base; but it upheld the CPUC treatment of the retiree medical assets and capital structure methodology. In July 2021, the CPUC approved a weighted average cost of capital return for the applicable period of Jan. 1, 2018 through Oct. 31, 2020.
Decoupling Filing— PSCo's 2019 Electric Rate Case included a decoupling program, effective April 1, 2020 through Dec. 31, 2023. The program applies to Residential and metered small C&I customers who do not pay a demand charge. The program includes a refund and surcharge cap not to exceed 3% of forecasted base rate revenue for a specified period.
In April 2021, PSCo made its annual filing for 2020, and the revised tariff went into effect by operation of law on June 1, 2021. In the annual filing review, the CPUC indicated they may pursue reopening the case in order to revisit the cap. As of June 30, 2021, PSCo has recognized a refund for Residential customers and a surcharge for C&I customers based on 2020 results and 2021 estimated amounts to date.
Colorado’s Power Pathway Transmission Expansion — In March 2021, PSCo filed for a Certificate of Public Convenience and Necessity for the Power Pathway transmission project, proposing a 560-mile, 345 kilovolt double circuit transmission network to enable approximately 4,000-5,000 MW of renewable generation in eastern Colorado with an estimated cost of approximately $1.7 billion.
PSCo also presented an extension of the Power Pathway project into southeast Colorado, referred to as the May Valley - Longhorn Extension ($0.3 billion). PSCo expects future filings for related network upgrades, voltage support and interconnection facilities, which with the May Valley - Longhorn Extension, could result in an incremental investment of $0.5 - $0.8 billion. A CPUC decision regarding the Power Pathway project, as well as the May Valley - Longhorn Extension, is expected by February 2022.
PSCo KEPCO Filing —In September 2020, PSCo filed with the CPUC insteadfor approval to terminate a solar PPA with KEPCO Solar of filing a comprehensive electric rate case in 2020.
Wildfire Protection Rider— Seeks toAlamosa, Inc. and establish a Wildfire Protection Riderregulatory asset to recover incrementaltransaction costs associated with system investments to reduce wildfire risk. The riderof approximately $41 million. By terminating the PPA, customers would be effective no later than Junesave approximately $38 million over an 11-year period. However, the ALJ ruled against approval of the Termination Agreement. In July 2021, and continue through 2025. Wildfire Protection capital additions are projected to total approximately $325 million. Forecasted annual revenue requirements from 2021 through 2025 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Millions of Dollars) | | 2021 | | 2022 | | 2023 | | 2024 | | 2025 |
Forecasted annual revenue requirement | | $ | 17 | | | $ | 24 | | | $ | 29 | | | $ | 32 | | | $ | 34 | |
the CPUC upheld the ALJ’s recommended decision. PSCo anticipates filing an Application for Reconsideration.
Advanced Grid Rider Electric Resource Plan — SeeksIn March 2021, PSCo filed its 2021 Electric Resource Plan with the CPUC. The filing outlines the proposed future retirements/conversions of PSCo’s remaining coal plants and is expected to establishresult in an Advanced Grid Rider80% renewable fuel mix and an 85% carbon emissions reduction target by 2030.
Major components of PSCo's proposed preferred plan include:
•Early retirement of Comanche Generating Station: Unit 3 in 2040 (currently 2070).
•Early retirement of Hayden Generating Station: Unit 1 in 2028 (currently 2030); Unit 2 in 2027 (currently 2036).
•Conversion of Pawnee Generating Station from coal to natural gas in 2028 with retirement in 2041.
•2,300 MW of wind power.
•1,600 MW of large-scale solar power.
•400 MW of energy storage.
•1,300 MW of flexible dispatchable resources (including natural gas).
The preferred plan proposes to create a regulatory asset to recover incremental costs associatedover their original depreciation lives for the Hayden power plant and the coal handling equipment at Pawnee. It also proposes the use of securitization to finance and recover the remaining book value and decommissioning costs for Comanche Unit 3 upon retirement in 2040.
A CPUC decision on the resource plan is expected in January of 2022 with the Advanced Grid Intelligence and Security Initiative (AGIS). The rider wouldcompetitive solicitation for resource additions expected in Q2 2022. Incremental generation system costs to meet carbon emission reduction targets are proposed to be effective no later than May 2021 and continuerecovered through 2025. The a Clean Energy Plan Rider.
PSCo portion of the AGIS initiative is projected to total approximately $850 million of capital additions. Forecasted annual revenue requirements from 2021 through 2025 are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(Millions of Dollars) | | 2021 | | 2022 | | 2023 | | 2024 | | 2025 |
Forecasted annual revenue requirement | | $ | 53 | | | $ | 69 | | | $ | 83 | | | $ | 89 | | | $ | 99 | |
PSCo — Comanche Unit 3
— PSCo is part owner and operator of Comanche Unit 3, a 750 MW, coal-fueled electric generating unit. PSCo is the operating agent under the joint ownership agreement. In JuneJanuary 2020, the unit experienced a turbine failure causing the unit to be taken offline for repairs, which were completed in June 2020. During start-up, the unit experienced a loss of turbine oil, during start-up which damaged the plant. It is currently anticipated that Comanche Unit 3 will recommencerecommenced operations in the fourth quarter of 2020.January 2021. Replacement and repair of damaged systems in excess of a $2 million deductible are expected to be recovered through insurance policies. PSCo has obtainedincurred replacement power for a portioncosts of approximately $16 million during the unit’s output through purchase power agreements.
Boulder Municipalization
In 2011, Boulder passed a ballot measure authorizing the formation of an electric municipal utility, subject to certain conditions. Subsequently, there have been various legal proceedings in multiple venues with jurisdiction over Boulder’s plan. In 2014, the Boulder City Council passed an ordinance to establish an electric utility. PSCo challenged the formation of this utility and the Colorado Court of Appeals ruled in PSCo’s favor, vacating a lower court decision. In June 2018, the Colorado Supreme Court rejected Boulder’s request to dismiss the case and remanded it to the Boulder District Court. The case was then settled in June 2019 after Boulder agreed to repeal the ordinance establishing the utility.
outage.
Boulder has filed multiple separation applications withIn October 2020, the CPUC which have been challenged by PSCoinitiated a non-adjudicatory review of Comanche Unit 3’s performance. A report on performance was issued in March 2021. The CPUC Staff’s report noted higher-than average outages and other intervenors. In September 2017, the CPUC issued a written decision, agreeing with several key aspectsincluded some criticisms of PSCo’s position.operations of Comanche Unit 3 over the last ten years. The CPUC has approvedreport recommended thorough explanation of the designationfuture of some electrical distribution assetsComanche Unit 3 operations in the next resource plan, performance standards for transfer, subject to Boulder completing certain filings.all company-owned generation and a review of outage and repair costs in the upcoming proceedings.
In February 2021, the fourth quarterjoint owners of 2018, the Boulder City Council also adopted an Ordinance authorizing Boulder to begin negotiations for the acquisition of certain property or to otherwise condemn that property after Feb. 1, 2019. In the first quarter of 2019, Boulder sentComanche Unit 3 (Intermountain Rural Electric Association and Holy Cross Electric) served PSCo with a notice of intentclaim related to acquire certain electric distribution assets. In the third quarter of 2019, Boulder filed its condemnation litigation, which was later dismissed by the Boulder District Court in September 2019 on the grounds that Boulder had not completed the pre-requisite CPUCComanche Unit 3's operation and availability. Discussions are proceeding pursuant to a contractual dispute resolution process and filings. Boulderthe amount of any alleged damages depends on multiple factors and is currently appealing this order. In October 2019, the CPUC approved the subsequent filings regarding asset transfers outside of substations, reaffirmed its 2017 decision on assets outside of substations and closed the CPUC proceeding.
unknown.In December 2019, Boulder filed a new condemnation action despite its ongoing appeal of the last condemnation case. PSCo subsequently filed a motion to dismiss or stay the new condemnation action. In February 2020, Boulder filed an application under section 210 of the Federal Power Act asking FERC to order PSCo to interconnect its facilities with a future Boulder municipal utility under Boulder’s preferred terms and conditions.
In July 2020, PSCo reached a settlement with certain Boulder officials that would end the city’s effort to municipalize. The settlement, if approved, would result in a 20-year franchise arrangement (with multiple opt-out conditions), an energy partnership, an undergrounding agreement and establish how the municipalization would move forward if Boulder exercised an opt-out. The settlement will require approval by the Boulder City Council in August 2020 and will further require approval by the citizens of Boulder in a ballot referendum in November 2020.
SPS
Pending and Recently Concluded Regulatory Proceedings
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Mechanism | | Utility ServiceProceeding | | Amount Requested (in (in millions) | | Filing Date | | Approval | | Additional Information |
NMPRC | | | | | | | | | | |
2021 New Mexico Electric Rate Case | | Electric$88 | | $31January 2021 | | July 2019 | | Received | | In July 2019, SPS filed an electric rate case with the NMPRC seeking an increase in retail electric base rates of approximately $51 million. The rate request was based on an ROE of 10.35%, an equity ratio of 54.77%, a rate base of approximately $1.3 billion and a historic test year with rate base additions through Aug. 31, 2019. In December 2019, SPS revised its base rate increase request to approximately $47 million, based on an ROE of 10.10% and updated information. The request also included an increase of $14.6 million for accelerated depreciation including the early retirement of the Tolk coal plant in 2032. In January 2020, SPS and various parties filed an uncontested comprehensive stipulation. The stipulation includes a base rate revenue increase of $31 million, an ROE of 9.45% and an equity ratio of 54.77%. The stipulation also includes an acceleration of depreciation on the Tolk coal plant to reflect early retirement in 2037, which results in a total increase in depreciation expense of $8 million. The parties to the stipulation agreed not to oppose the full application of depreciation rates associated with the 2032 retirement date in SPS’ next base rate case. On May 11, 2020, the Hearing Examiner issued a Certification of Stipulation recommending approval of the uncontested comprehensive stipulation without modification. On May 20, 2020, the NMPRC approved the stipulation without modification. New rates and tariffs were effective beginning May 28, 2020.Pending |
PUCT | | | | | | | | | | |
2021 Texas Electric Rate Case | | Electric$143 | | $141 | | August 2019February 2021 | | Pending | | In August 2019, SPS filed an electric rate case with the PUCT seeking an increase in retail electric base rates of approximately $141 million. The filing requests an ROE of 10.35%, a 54.65% equity ratio, rate base of approximately $2.6 billion and utilizes a historic 12 month period that ended June 30, 2019. SPS’ request was subsequently revised in March 2020 to approximately $130 million, based on a requested ROE of 10.1%, a 54.62% equity ratio, rate base of approximately $2.6 billion and historic test year ended June 30, 2019.
On May 20, 2020, SPS, the PUCT Staff and various intervenors reached an uncontested settlement, which includes:
•An electric rate increase of $88 million and a reset of the Transmission Cost Recovery Factor to zero;
•ROE of 9.45% and equity ratio of 54.62% for AFUDC purposes;
•Depreciation rates:
◦Tolk - 2037 end-of-life date;
◦Hale - 25-year end-of-life date;
◦All other generating units - end-of-life dates as proposed by SPS; and
◦Transmission - 35% of the incremental change between existing depreciation rates and rates proposed by SPS.
•Ring-fencing measures like those in other recent PUCT settlements, including:
◦Credit agreements and indentures (e.g., no cross-default provisions);
◦Financial covenants;
◦Restrictions on pledging of assets and securing debt;
◦Maintaining stand-alone credit facility and ratings; and
◦Affiliate and non-affiliate limitations.
Final rates are expected to be retroactively applied as of Sept. 12, 2019. A decision from the PUCT is anticipated in the third quarter of 2020.
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Additional Information:
Texas State ROFR Litigation 2021 New Mexico Electric Rate Case — In May 2019, the Governor signed into law Senate Bill 1938, which grants incumbent utilities a ROFR to build transmission infrastructure when it directly interconnects to the utility’s existing facility. In June 2019, a complaint was filed in the United States District Court for the Western District of Texas claiming the new ROFR law to be unconstitutional. In February 2020, the federal court complaint was dismissed by the district court. In March 2020, the district court ruling was appealed to the United States Court of Appeals for the Fifth Circuit. The parties are awaiting a decision.
Texas Fuel Refund —Fuel and purchased power costs are recoverable in Texas through a fixed fuel factor, which is part of SPS’ rates. The PUCT rule requires refunding or surcharging of under and over-recovered amounts, including interest, when they exceed 4% of the utility’s annual fuel costs.
SPS’ 2019 total fuel and purchased power costs were over-collected by approximately $39 million. As a result, SPS filed a request with the PUCT to refund the amount to customers. In April 2020, interim rates were granted by a Texas ALJ. This case is pending final review and approval by the PUCT.
New Mexico FPPCAC Continuation — In October 2019,January 2021, SPS filed an application toelectric rate case with the NMPRC seeking an increase in base rates of approximately $88 million. SPS' net rate increase to approve SPS’ continued useNew Mexico customers is expected to be approximately $48 million, or 10%, as a result of the offsetting fuel cost reductions and PTCs from the Sagamore wind project. PTCs are credited to customers through the fuel clause. In June 2021, SPS revised its FPPCACrequested base rate increase to $84 million.
The request was based on a historic test year ended Sept. 30, 2020, including expected capital additions through Feb. 28, 2021, a ROE of 10.35%, an equity ratio of 54.72% and a retail rate base of approximately $1.9 billion.
In June 2021, SPS and various parties filed an uncontested comprehensive stipulation, which includes:
•Base rate revenue increase of $62 million.
•ROE of 9.35% for purposes of filings related to (1) the Hale and Sagamore wind projects; and (2) reconciliation of fuel costs for the period Sept. 1, 2015, through June 30, 2019, which will determine whether all fuel costs incurred are eligible for recovery. SPS also proposed that it annually review its average New Mexico Deferred Fuelsettlement revenue requirement.
•Equity ratio of 54.72%.
•Increase in depreciation expense of $6 million. This includes a change in the depreciable lives of the Tolk power plant to 2032 and Purchased Power balance and requestscoal handling assets at the NMPRC approve an Annual Deferred Fuel Balance True-Up. The proposed true-up is designedHarrington facility to maintain the Deferred Fuel and Purchased Power balance within a bandwidth of plus or minus 5% of annual New Mexico fuel and purchased power costs. 2024.
A public hearing is scheduled for July 26 - Aug. 6, 2021. A NMPRC decision and implementation of final rates is anticipated in the fourth quarter of 2021.
2021 Texas Electric Rate Case— In February 2021, SPSfiled an electric rate case with the PUCT and its municipalities seeking an increase in base rates of approximately $143 million. SPS' net rate increase to beginTexas customers is expected to be approximately $74 million, or 9.2%, as a result of the offsetting $69 million in fuel cost reductions and PTCs from the Sagamore wind project.
The request is based on a ROE of 10.35%, an equity ratio of 54.60%, a rate base of approximately $3.3 billion and a historic test year based on the 12-month period ended Dec. 31, 2020.
The request includes the effect of losing approximately 400 MW from a wholesale transmission customer and changes to depreciation lives of SPS’ Tolk power plant (from 2037 to 2032) and coal handling assets at the Harrington facility (to 2024).
Procedural schedule expected to be as follows:
•Intervenor testimony — Aug. 13, 2021.
•Staff testimony — Aug. 20, 2020.2021.
•Rebuttal testimony — Sept. 15, 2021.
•Public hearing — Oct. 18 - Oct. 28, 2021.
The PUCT set current rates as temporary as of March 15, 2021. Once final rates are approved, a surcharge will be requested from March 15, 2021 through the effective date of new base rates. A PUCT decision is expected in the first quarter of 2022.
New Mexico Integrated Resource Plan — In July 2021, SPS filed an IRP with the NMPRC, as required every three years. SPS is forecasting sufficient resources through 2025. A projected capacity deficit was identified totaling approximately 174 MW in 2031, increasing to 4,194 MW by 2041.
SPS has provided a number of alternatives, including a proposed portfolio of resources incorporating the addition of wind generation, solar generation, firm and dispatchable peaking generation, and purchased power agreements. SPS will continue to evaluate other options including energy storage and emerging technologies, taking into consideration cost-effectiveness. The IRP is subject to public comment and potential public hearings and will ultimately be reviewed by the NMPRC for approval.
Environmental RegulationAffordable Clean Energy
In July 2019, the EPA adopted the Affordable Clean Energy rule, which requires states to develop plans by 2022 for greenhouse gas reductions from coal-fired power plants. The state plans, due toIn January 2021, the U.S. Court of Appeals for the D.C. Circuit issued a decision vacating and remanding the Affordable Clean Energy rule. That decision, if not successfully appealed or reconsidered, would allow the EPA in July 2022, will evaluate and potentiallyto proceed with alternate regulation of coal-fired power plants. If the new rules require heat rate improvements at existing coal-fired plants. It is not yet known how these state plans will affect our existing coal plants, but they could require substantial additional investment, even in plants slated for retirement. Xcel Energy believes, based on prior state commission practice,practices, that the cost of these initiatives or replacement generation would be recoverable through rates.
Emerging Regulation
New regulations and legislation are being considered to regulate PFAS in drinking water, water discharges, commercial products, wastes, and other areas. PFAS are man-made chemicals found in many consumer products that can persist and accumulate in the environment. These chemicals have received heightened attention by environmental regulators. Increased regulation of PFAS and other emerging contaminants at the federal, state, and local level could have a potential adverse effect on our operations but at this time, it is uncertain what impact, if any, there will be on our results of operations, financial condition or cash flows. Xcel Energy will continue to monitor these regulatory developments and their potential impact on its operations.
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Derivatives, Risk Management and Market Risk |
We 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, 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 we expect that the counterparties will perform under the contracts underlying its derivatives, the contracts expose us to some credit and non-performance risk.
Distress in the financial markets may impact counterparty risk, the fair value of the securities in the nuclear decommissioning fund and pension fund and Xcel Energy’s ability to earn a return on short-term investments.
Commodity Price Risk — We are exposed to commodity price risk in our 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 fuels used in generation and distribution activities. Commodity price risk is also managed through the use of financial derivative instruments. Our risk management policy allows itus to manage commodity price risk within each rate-regulated operation per commission approved hedge plans.
Wholesale and Commodity Trading Risk — Xcel Energy conducts various wholesale and commodity trading activities, including the purchase and sale of electric capacity, energy, energy-related instruments and natural gas-related instruments, including derivatives. Our risk management policy allows management to conduct these activities within guidelines and limitations as approved by itsour risk management committee.
Fair value of net commodity trading contracts as of June 30, 2020:2021:
| | | Futures / Forwards Maturity | | | Futures / Forwards Maturity |
(Millions of Dollars) | (Millions of Dollars) | | Less Than 1 Year | | 1 to 3 Years | | 4 to 5 Years | | Greater Than 5 Years | | Total Fair Value | (Millions of Dollars) | | Less Than 1 Year | | 1 to 3 Years | | 4 to 5 Years | | Greater Than 5 Years | | Total Fair Value |
NSP-Minnesota (a) | NSP-Minnesota (a) | | $ | — | | | $ | — | | | $ | 3 | | | $ | 3 | | | $ | 6 | | NSP-Minnesota (a) | | $ | (7) | | | $ | (2) | | | $ | 1 | | | $ | 1 | | | $ | (7) | |
NSP-Minnesota (b) | | — | | | (2) | | | (4) | | | (5) | | | (11) | | |
| NSP- Minnesota (b) | | NSP- Minnesota (b) | | 2 | | | 4 | | | (10) | | | — | | | (4) | |
PSCo (a) | | PSCo (a) | | 4 | | | 3 | | | — | | | — | | | 7 | |
PSCo (b) | PSCo (b) | | (1) | | | (40) | | | (15) | | | — | | | (56) | | PSCo (b) | | (35) | | | (60) | | | (1) | | | — | | | (96) | |
| | $ | (1) | | | $ | (42) | | | $ | (16) | | | $ | (2) | | | $ | (61) | | | $ | (36) | | | $ | (55) | | | $ | (10) | | | $ | 1 | | | $ | (100) | |
| | | Options Maturity | | | Options Maturity |
(Millions of Dollars) | (Millions of Dollars) | | Less Than 1 Year | | 1 to 3 Years | | 4 to 5 Years | | Greater Than 5 Years | | Total Fair Value | (Millions of Dollars) | | Less Than 1 Year | | 1 to 3 Years | | 4 to 5 Years | | Greater Than 5 Years | | Total Fair Value |
NSP-Minnesota (b) | NSP-Minnesota (b) | | $ | — | | | $ | 3 | | | $ | — | | | $ | — | | | $ | 3 | | NSP-Minnesota (b) | | $ | — | | | $ | — | | | $ | — | | | $ | 4 | | | $ | 4 | |
PSCo (b) | PSCo (b) | | — | | | (1) | | | — | | | — | | | (1) | | PSCo (b) | | 22 | | | 39 | | | — | | | — | | | 61 | |
| | $ | — | | | $ | 2 | | | $ | — | | | $ | — | | | $ | 2 | | | $ | 22 | | | $ | 39 | | | $ | — | | | $ | 4 | | | $ | 65 | |
(a) Prices actively quoted or based on actively quoted prices.
(b) Prices based on models and other valuation methods.
Changes in the fair value of commodity trading contracts before the impacts of margin-sharing for the six months ended June 30:
| | | | | | | | | | | | | | |
(Millions of Dollars) | | 2020 | | 2019 |
Fair value of commodity trading net contract (liabilities) assets outstanding at Jan. 1 | | $ | (59) | | | $ | 17 | |
Contracts realized or settled during the period | | (7) | | | (8) | |
Commodity trading contract additions and changes during the period | | 7 | | | 7 | |
Fair value of commodity trading net contract (liabilities) assets outstanding at June 30 | | $ | (59) | | | $ | 16 | |
| | | | | | | | | | | | | | |
(Millions of Dollars) | | 2021 | | 2020 |
Fair value of commodity trading net contracts outstanding at Jan. 1 | | $ | (54) | | | $ | (59) | |
Contracts realized or settled during the period | | (37) | | | (7) | |
Commodity trading contract additions and changes during the period | | 56 | | | 7 | |
Fair value of commodity trading net contracts outstanding at June 30 | | $ | (35) | | | $ | (59) | |
2021, a 10% increase in market prices for commodity trading contracts through the forward curve would increase pre-tax income from continuing operations by approximately $19 million, whereas a 10% decrease would decrease pre-tax income from continuing operations by approximately $19 million. At June 30, 2020, a 10% increase in market prices for commodity trading contracts would increase pre-tax income from continuing operations by approximately $12 million, whereas a 10% decrease would decrease pre-tax income from continuing operations by approximately $12 million. At June 30, 2019, aMarket price movements can exceed 10% increase in market prices for commodity trading contracts would decrease pre-tax income from continuing operations by approximately $2 million, whereas a 10% decrease would increase pre-tax income from continuing operations by approximately $2 million.under abnormal circumstances.
The utility subsidiaries’ commodity trading operations measure the outstanding risk exposure to price changes on contracts and obligations that have been entered into, but not closed, using an industry standard methodology known as Value at Risk (VaR).VaR. VaR expresses the potential change in fair value on the outstanding contracts and obligations over a particular period of time under normal market conditions.
The VaRs for the NSP-Minnesota and PSCo commodity trading operations, excluding both non-derivative transactions and derivative transactions designated as normal purchase, normal sales, calculated on a consolidated basis using a Monte Carlo simulation with a 95% confidence level and a one-day holding period, were as follows:
| (Millions of Dollars) | (Millions of Dollars) | | Three Months Ended June 30 | | VaR Limit | | Average | | High | | Low | (Millions of Dollars) | | Three Months Ended June 30 | | VaR Limit | | Average | | High | | Low |
2021 | | 2021 | | $ | 1.7 | | | $ | 3.0 | | | $ | 1.2 | | | $ | 1.9 | | | $ | 0.7 | |
2020 | 2020 | | $ | 0.8 | | | $ | 3.0 | | | $ | 0.9 | | | $ | 1.1 | | | $ | 0.6 | | 2020 | | 0.8 | | | 3.0 | | | 0.9 | | | 1.1 | | | 0.6 | |
2019 | | 1.1 | | | 3.0 | | | 0.9 | | | 1.3 | | | 0.7 | | |
A short-term increase in VaR occurred during the week of Feb. 12, 2021 through Feb. 18, 2021. On Feb. 17, 2021, the portfolio VaR reached a high of $52 million. This increase in VaR was driven by the unprecedented market conditions during Winter Storm Uri. Prior to this widespread weather event, VaR was $1 million and returned to $1 million by Feb. 19, 2021.
Nuclear Fuel Supply — NSP-Minnesota has contracted for approximately 51% of23% of its 20202021 enriched nuclear material requirements from sources that could be impacted by sanctions against entities doing business with Iran. Those sanctions may impact the supply of enriched nuclear material supplied from Russia. Long-term, through 2030, NSP-Minnesota is scheduled to take delivery of approximately 30% of its average enriched nuclear material requirements from these sources. Alternate potential sources provide the flexibilityNSP-Minnesota is able to manage NSP-Minnesota’s nuclear fuel supply.supply with alternate potential sources. NSP-Minnesota periodically assesses if further actions are required to assure a secure supply of enriched nuclear material.
Interest Rate Risk — Xcel Energy is subject to interest rate risk. Our 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, 20202021 and 2019,2020, a 100-basis-point change in the benchmark rate on Xcel Energy’s variable rate debt would impact pre-tax interest expense annually by approximately $18 million and $14 million, and $17 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 maintains a nuclear decommissioning fund, as required by the NRC. The nuclear decommissioning fund is subject to interest rate risk and equity price risk. The fund is invested in a diversified portfolio of cash equivalents, debt securities, equity securities and other investments. These investments may be used only for purpose of decommissioning NSP-Minnesota’s nuclear generating plants.
Realized and unrealized gains on the decommissioning fund investments are deferred as an offset of NSP-Minnesota’s regulatory asset for nuclear decommissioning costs. Fluctuations in equity prices or interest rates affecting the nuclear decommissioning fund do not have a direct impact on earnings due to the application of regulatory accounting.
Changes in discount rates and expected return on plan assets impact the value of pension and postretirement plan assets and/or benefit costs.
Credit Risk — Xcel Energy is also exposed to credit risk. Credit risk relates to the risk of loss resulting from counterparties’ nonperformance on their contractual obligations. Xcel Energy maintains credit policies intended to minimize overall credit risk and actively monitor these policies to reflect changes and scope of operations.
At June 30, 2021, a 10% increase in commodity prices would have resulted in an increase in credit exposure of $64 million, while a decrease in prices of 10% would have resulted in a decrease in credit exposure of $24 million. At June 30, 2020, a 10% increase in commodity prices would have resulted in an increase in credit exposure of $27 million, while a decrease in prices of 10% would have resulted in a decrease in credit exposure of $2 million. At June 30, 2019, a 10% increase in commodity prices would have resulted in an increase in credit exposure of $14 million, while a decrease in prices of 10% would have resulted in an increase in credit exposure of $16 million.
Xcel Energy conducts credit reviews for all counterparties and employs credit risk control, such as letters of credit, parental guarantees, master netting agreements and termination provisions. 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 our credit risk.
Xcel Energy uses derivative contracts such as futures, forwards, interest rate swaps, options and FTRs to manage commodity price and interest rate risk. Derivative contracts, with the exception of those designated as normal purchase-normal sale contracts, are reported at fair value.
The Company’s investments held in the nuclear decommissioning fund, rabbi trusts, pension and other postretirement funds are also subject to fair value accounting.
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 monitors the creditworthiness of the counterparties to its commodity derivative contracts and assesses each counterparty’s ability to perform on the transactions. 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, 2020.2021.
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 or deferred as regulatory assets and liabilities. Classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms. The impact of discounting commodity derivative liabilities for credit risk was immaterial at June 30, 2020.
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LIQUIDITY AND CAPITAL RESOURCES |
Cash Flows
| | | | | | | | | | | | | | |
| | Six Months Ended June 30 | | |
(Millions of Dollars) | | 2020 | | 2019 |
Cash provided by operating activities | | $ | 1,148 | | | $ | 1,334 | |
Operating Cash Flows | | | | | | | | |
(Millions of Dollars) | | Six Months Ended June 30 |
Cash provided by operating activities — 2020 | | $ | 1,148 | |
| | |
Components of change — 2021 vs. 2020 | | |
Higher net income | | 91 | |
Non-cash transactions (a) | | 18 | |
Changes in working capital (b) | | (35) | |
Changes in net regulatory and other assets and liabilities | | (733) | |
Cash provided by operating activities — 2021 | | $ | 489 | |
(a)Non-cash transactions applicable to net income (e.g., depreciation and amortization, nuclear fuel amortization, changes in deferred income taxes, allowance for equity funds used during construction, etc.).
(b)Working capital includes accounts receivable, accrued unbilled revenues, inventories, accounts payable, other current assets and other current liabilities.
Net cash provided by operating activities decreased $186$659 million for the six months ended June 30, 20202021 compared with the prior year. Decrease (excluding amounts related to non-cash operating activities (e.g., depreciation and amortization and deferred tax expenses) was primarily due to lower collections on accounts receivable as a resultthe deferral of net natural gas, fuel and purchased energy costs related to Winter Storm Uri in the COVID-19 pandemic and reduced O&M expenditures.first quarter.
| | | | | | | | | | | | | | |
| | Six Months Ended June 30 | | |
(Millions of Dollars) | | 2020 | | 2019 |
Cash used in investing activities | | $ | (2,580) | | | $ | (1,708) | |
Investing Cash Flows | | | | | | | | |
(Millions of Dollars) | | Six Months Ended June 30 |
Cash used in investing activities — 2020 | | $ | (2,580) | |
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Components of change — 2021 vs. 2020 | | |
Decreased capital expenditures | | 602 | |
Other investing activities | | (224) | |
Cash used in investing activities — 2021 | | $ | (2,202) | |
Net cash used in investing activities increased $872decreased $378 million for the six months ended June 30, 20202021 compared with the prior year. Increase was driven byThe decrease in capital expenditures (primarily for wind projects) as well aswas due to the purchase of MEC in January 2020, which was subsequently sold in July 2020.
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| | Six Months Ended June 30 | | |
(Millions of Dollars) | | 2020 | | 2019 |
Cash provided by financing activities | | $ | 2,818 | | | $ | 580 | |
Financing Cash Flows | | | | | | | | |
(Millions of Dollars) | | Six Months Ended June 30 |
Cash provided by financing activities — 2020 | | $ | 2,818 | |
| | |
Components of change — 2021 vs. 2020 | | |
Lower debt issuances | | (280) | |
Higher repayments of long-term debt | | (399) | |
Higher dividends paid to shareholders | | (39) | |
Other financing activities | | 22 | |
Cash provided by financing activities — 2021 | | $ | 2,122 | |
Net cash provided by financing activities increased $2,238decreased $696 million for the six months ended June 30, 20202021 compared with the prior year. IncreaseThe decrease was primarily attributable to proceeds from issuancesthe timing of short-term and long-term debt.debt issuances.
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.
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 and hedge funds.
•In January 2020,2021, contributions of $150$125 million were made across four of Xcel Energy’s pension plans.
•In 2019,2020, contributions of $154$150 million were made across four of Xcel Energy’s pension plans.
•For future years, contributions will be made as 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 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.
Revolving Credit Facilities — Xcel Energy Inc., NSP-Minnesota, PSCo and SPS each have the right to request an extension of the revolving credit facility for two additional one-year periods beyond the June 2024 termination date. 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.
As of July 27, 2020, Xcel26 2021, Xcel Energy Inc. and its utility subsidiaries had the following committed credit facilities available to meet liquidity needs:
| (Millions of Dollars) | (Millions of Dollars) | | Credit Facility (a) | | Drawn (b) | | Available | | Cash | | Liquidity | (Millions of Dollars) | | Credit Facility (a) | | Drawn (b) | | Available | | Cash | | Liquidity |
Xcel Energy Inc. | Xcel Energy Inc. | | $ | 1,250 | | | $ | 76 | | | $ | 1,174 | | | $ | 621 | | | $ | 1,795 | | Xcel Energy Inc. | | $ | 1,250 | | | $ | 508 | | | $ | 742 | | | $ | — | | | $ | 742 | |
PSCo | PSCo | | 700 | | | 8 | | | 692 | | | 9 | | | 701 | | PSCo | | 700 | | | 9 | | | 691 | | | 3 | | | 694 | |
NSP-Minnesota | NSP-Minnesota | | 500 | | | 10 | | | 490 | | | 682 | | | 1,172 | | NSP-Minnesota | | 500 | | | 9 | | | 491 | | | 226 | | | 717 | |
SPS | SPS | | 500 | | | 2 | | | 498 | | | 186 | | | 684 | | SPS | | 500 | | | 13 | | | 487 | | | 2 | | | 489 | |
NSP-Wisconsin | NSP-Wisconsin | | 150 | | | — | | | 150 | | | 10 | | | 160 | | NSP-Wisconsin | | 150 | | | — | | | 150 | | | 2 | | | 152 | |
Total | Total | | $ | 3,100 | | | $ | 96 | | | $ | 3,004 | | | $ | 1,508 | | | $ | 4,512 | | Total | | $ | 3,100 | | | $ | 539 | | | $ | 2,561 | | | $ | 233 | | | $ | 2,794 | |
(a)Credit facilities expire in June 2024.
(b)Includes outstanding commercial paper and letters of credit.
Bilateral Credit Agreement
In March 2019, NSP-Minnesota entered into a one-yearApril 2021, the uncommitted bilateral credit agreement.agreement was renewed for an additional one-year term. The credit agreement is limited in use to support letters of credit. In March 2020, NSP-Minnesota renewed its bilateral credit agreement for an additional one-year term.
As of June 30, 2020,2021, NSP-Minnesota’s outstanding letters of credit under the Bilateral Credit Agreement were as follows:
| (Millions of Dollars) | (Millions of Dollars) | | Limit | | Amount Outstanding | | Available | (Millions of Dollars) | | Limit | | Amount Outstanding | | Available |
NSP-Minnesota | NSP-Minnesota | | $ | 75 | | | $ | 31 | | | $ | 44 | | NSP-Minnesota | | $ | 75 | | | $ | 75 | | | $ | — | |
Short-Term Debt — 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:
•$1.25 billion for Xcel Energy Inc.;
•$700 million for PSCo;PSCo.
•$500 million for NSP-Minnesota;NSP-Minnesota.
•$500 million for SPS; andSPS.
•$150 million for NSP-Wisconsin.
In addition, in December 2019,February 2021, Xcel Energy Inc. entered into a $500 million$1.2 billion 364-Day Term Loan Agreement that matures Dec. 1, 2020.Feb. 17, 2022. Xcel Energy has an option to request an extensionextend through Nov. 30, 2021. In March 2020, Xcel Energy Inc. entered into a $700 million, 364-Day Term Loan Agreement that matures March 22, 2021. Xcel Energy has an option to request an extension through March 21, 2022.Feb. 16, 2023.
Short-term debt outstanding for Xcel Energy was as follows:
| (Amounts in Millions, Except Interest Rates) | (Amounts in Millions, Except Interest Rates) | | Three Months Ended June 30, 2020 | | Year Ended Dec. 31, 2019 | (Amounts in Millions, Except Interest Rates) | | Three Months Ended June 30, 2021 | | Year Ended Dec. 31, 2020 |
Borrowing limit | Borrowing limit | | $ | 4,300 | | | $ | 3,600 | | Borrowing limit | | $ | 4,300 | | | $ | 3,100 | |
Amount outstanding at period end | Amount outstanding at period end | | 1,410 | | | 595 | | Amount outstanding at period end | | 1,745 | | | 584 | |
Average amount outstanding | Average amount outstanding | | 1,496 | | | 1,115 | | Average amount outstanding | | 1,521 | | | 1,126 | |
Maximum amount outstanding | Maximum amount outstanding | | 1,770 | | | 1,780 | | Maximum amount outstanding | | 1,745 | | | 2,080 | |
Weighted average interest rate, computed on a daily basis | Weighted average interest rate, computed on a daily basis | | 1.65 | % | | 2.72 | % | Weighted average interest rate, computed on a daily basis | | 0.66 | % | | 1.45 | % |
Weighted average interest rate at period end | Weighted average interest rate at period end | | 0.76 | | | 2.34 | | Weighted average interest rate at period end | | 0.58 | | | 0.23 | |
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, NSP-Wisconsin, PSCo and SPS participate in the money pool pursuant to approval from their respective state regulatory commissions. NSP-Wisconsin currently does not participate in the money pool, however, in July 2020, an application to participate was filed.
20202021 Planned Financing Activity — During 2020,2021, Xcel Energy plans to issue approximatelyapproximately $75 to $80 million ofof equity through the DRIP and benefit programs. In addition, Xcel Energy Inc. and its utility subsidiaries issued or anticipate issuing the following debt securities:following.
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Issuer | | Security | | Amount | | Status | | Tenor | | Coupon |
Xcel Energy Inc. | | Senior Unsecured Notes | | $ | 600 | million | | Completed | | 10 Year | | 3.40 | % |
PSCo | | First Mortgage Bonds | | 375 | million | | Completed | | 31 Year | | 2.70 | |
PSCo | | First Mortgage Bonds | | 375 | million | | Completed | | 11 Year | | 1.90 | |
SPS | | First Mortgage Bonds | | 350 | million | | Completed | | 30 Year | | 3.15 | |
NSP-Wisconsin | | First Mortgage Bonds | | 100 | million | | Completed | | 31 Year | | 3.05 | |
NSP-Minnesota | | First Mortgage Bonds | | 700 | million | | Completed | | 31 Year | | 2.60 | |
Financing plans are subject to change, depending on capital expenditures, internal cash generation, market conditions and other factors. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Issuer | | Security | | Amount | | Status | | Tenor | | Coupon |
PSCo | | First Mortgage Bonds | | $ | 750 | million | | Completed | | 10 Year | | 1.875 | % |
SPS | | First Mortgage Bonds | | 250 | million | | Completed | | 29 Year | | 3.15 | |
NSP-Minnesota | | First Mortgage Bonds | | 425 | million | | Completed | | 10 Year | | 2.25 | |
NSP-Minnesota | | First Mortgage Bonds | | 425 | million | | Completed | | 31 Year | | 3.20 | |
NSP-Wisconsin | | First Mortgage Bonds | | 100 | million | | Q3 (a) | | 30 Year | | 2.82 | % |
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Forward Equity Agreements(a) —The NSP-Wisconsin private placement first mortgage bond has been priced and is expected to close on July 30, 2021.
In November 2019addition, Xcel Energy Inc. entered into forward equity agreementsmay issue a holding company bond in connection with a completed $743 million public offering of 11.8 million shares of common stock.the fourth quarter to pay down the outstanding term loan.
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 20202021 Earnings Guidance — Xcel Energy reaffirms 2020 EPSEnergy’s 2021 GAAP and ongoing earnings guidance is a range of $2.73$2.90 to $2.83$3.00 per share share.(a) (b), which assumes the implementation of contingency plans will be sufficient to offset the negative impacts of COVID-19 under the base case scenario. However, these contingency plans would not be sufficient to offset the negative impacts of COVID-19 under the severe scenario, which would likely result in earnings below the guidance range.
Key assumptions as compared with 20192020 levels unless noted:
•Constructive outcomes in all rate case and regulatory proceedings.
•Modest impacts from COVID-19.
•Normal weather patterns for the remainder of the year.
•Weather-normalized retail electric sales are projected to decline ~4%, under the base case scenario.increase ~1%.
•Weather-normalized retail firm natural gas sales are projected to declineincrease ~1%, under the base case scenario..
•Capital rider revenue is projected to increase $40$100 million to $45$110 million (net of PTCs). PTCs are credited to customers, through capital riders, fuel clause or base rates and reductionsresults in a reduction to electric margin.
•O&M expenses are projected to decline approximately 4%increase 0% to 5% under the base case scenario.1%.
•Depreciation expense is projected to increase approximately $180$155 million to $190 million, reflecting updated depreciation rates in regulatory proceedings which are offset by revenue increases.$165 million.
•Property taxes are projected to increase approximately $35$40 million to $45$50 million.
•Interest expense (net of AFUDC - debt) is projected to increase $45$20 million to $55$30 million.
•AFUDC - equity is projected to increasedecline approximately $35$40 million to $45$50 million.
•The ETR is projected to be ~0%(7%) to (8%). The ETR reflects benefits of PTCs which are credited to customers through electric margin and will not have a material impact on net income.
(a)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. 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 EPS to corresponding GAAP EPS.
(b) The global outbreak of COVID-19 is currently impacting countries, communities, supply chains and markets. The ultimate severity of this event is uncertain and could have a material impact on our liquidity, financial condition, or results of operations.
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 5% to 7% based off of a 20192020 base of $2.60$2.78 per share, which represents the mid-point of the original 20192020 guidance range of $2.55$2.73 to $2.65$2.83 per share;share.
•Deliver annual dividend increases of 5% to 7%;.
•Target a dividend payout ratio of 60% to 70%; and.
•Maintain senior secured debt credit ratings in the A range.
Although COVID-19 represents an unprecedented event that has led to numerous challenges, Xcel Energy believes its risk management program, including business continuity and disaster recovery planning, will allow us to proactively manage and successfully navigate the challenges, risks and uncertainties associated with the pandemic. In addition, we have implemented O&M contingency plans to reduce costs and seek regulatory deferral mechanisms to offset the negative impact of COVID-19 on sales, bad debt and other aspects of our business.
A high degree of uncertainty exists regarding COVID-19, the duration and magnitude of business restrictions, re-shut downs, if any, and the level and pace of recovery of the economy. Also, while we are implementing contingency plans, there are no guarantees these plans will be sufficient to offset the impact of COVID-19. The ultimate impact of this pandemic could have a material impact on Xcel Energy’s operations, financial results and cash flow.
An overview of certain risk considerations or areas which have or could significantly impact us, is as follows.
Sales — In the first half of 2020, Xcel Energy experienced a decline in weather and leap year adjusted sales. The decline in sales was primarily due to pandemic related mandates implemented in March 2020 involving the closure of non-essential businesses and state directives for individuals to stay-at-home. The stay-at-home directives and business closures moderated in May 2020.
Xcel Energy has decoupling and sales true-up mechanisms in Minnesota (all electric classes) and Colorado (residential and non-demand small C&I electric classes), which mitigate the impact of changes to sales levels as compared to a base line.
The following scenarios outline the potential impact of the pandemic on electric and natural gas sales and EPS, based on various assumptions of the duration of the stay-at-home provisions and economic recovery:
•Mild Scenario (severe impact through May with a V-shaped economic recovery).
◦Impact on weather-adjusted electric sales for 2020: an increase of ~1% in residential sales; a decline of ~4% in C&I sales; and a decline in total retail electric sales of ~2%.
◦Impact on 2020 natural gas sales: ~0%.
◦This sales decline would reduce EPS by approximately $0.11.
•Base Case Scenario (severe impact through the second quarter with slower U-shaped recovery with lingering effects).
◦Impact on weather-adjusted electric sales for 2020: an increase of ~1% in residential sales; a decline of 6% in C&I sales; and a decline in total retail electric sales of ~4%.
◦Impact on 2020 natural gas sales: a decline of ~1%.
◦This sales decline would reduce EPS by approximately $0.17.
•Severe Scenario (severe impact through the third quarter followed by protracted challenged L-shaped recovery).
◦Impact on weather-adjusted electric sales for 2020: an increase of ~1% in residential sales; a decline of ~12% in C&I sales; and a decline in total retail electric sales of ~8%.
◦Impact on 2020 natural gas sales: a decline of ~2%.
◦This sales decline would reduce EPS by approximately $0.37.
•Potential impacts due to other items could have negative EPS impact of $0.02 to $0.05, assuming constructive regulatory treatment.
The estimated impact on our monthly weather-adjusted electric sales in the second quarter (primarily COVID-19) is as follows:
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Month | | Residential | | C&I | | Total Electric Sales |
April | | 3.2% | | (13.7)% | | (9.6)% |
May | | 5.1 | | (10.6) | | (6.7) |
June | | 8.9 | | (10.0) | | (4.7) |
Xcel Energy incorporated the base case scenario into our 2020 guidance assumptions. The second quarter sales results came in better than anticipated in our base case scenario, however there still is substantial uncertainty on the adverse impact of COVID-19 for the remainder of the year.
Bad Debt — In March 2020, Xcel Energy announced it would not disconnect residential customers’ electric or natural gas service during the virus outbreak. Certain states have issued additional limitations on charging late fees and extended protection to other customer classes. Bad debt expense could significantly increase due to regulatory orders, pandemic related economic impacts and customers hardship.
However, several of our commissions are allowing the deferral of incremental COVID-19 related expense, including bad debt expense as discussed further under Regulatory.
Regulatory— Xcel Energy has received orders in Minnesota, Wisconsin, Texas, New Mexico and Michigan, allowing regulatory deferral of incremental COVID-19 costs as a regulatory asset subject to future determination of amount and timing of recovery. Costs include, but are not limited to, bad debt expense, suspension of disconnections, waived late fees and other costs and/or foregone revenues.
Xcel Energy has also filed requests in North Dakota and South Dakota to record a regulatory asset and defer all incremental expenses related to the pandemic. In July 2020, PSCo reached an agreement with Staff and the Office of Consumer Counsel on the deferral of COVID-19 related bad debt expense. These requests are pending regulatory approval.
Xcel Energy serves the majority of its wholesale customers under formula transmission and production rates which true-up rates to actual costs to serve.
Xcel Energy deferred approximately $3 million of related expenses as of June 30, 2020. We will continue to monitor these costs and assess whether the actions of the regulator provide the evidence necessary to defer amounts as regulatory assets.
Contingency Plan — Xcel Energy has implemented contingency plans to reduce costs to offset the negative impact of COVID-19. Actions include reductions of employee expenses, consulting, variable compensation, delays of certain work activities, attrition and implementation of a hiring freeze. Based on these actions, our base case assumption is that 2020 O&M expenses will decline 4% to 5% compared with 2019. The ultimate level of O&M expenses will be dependent on actual sales levels.
We believe we can deliver earnings within our 2020 guidance range based on implementing contingency plans to offset the impact of the pandemic on sales and expense levels under the base case scenario. However, our contingency plans may not be able to offset the negative impact of COVID-19 under a severe scenario.
Supply Chain and Capital Expenditures — Xcel Energy’s ability to meet customer energy requirements, respond to storm-related disruptions and maintain our capital expenditure program are dependent on maintaining an efficient supply chain. During the first half of 2020, Xcel Energy did not experience any material supply chain, contractor or employee disruptions that prevented us from performing maintenance or construction activity. As a result, we have not significantly adjusted our 2020 capital expenditure plan.
However, in April 2020, we were informed of supply chain disruptions, which will likely result in delays in the completion of two of our wind farms into 2021. In May 2020, the U.S. Treasury provided a one-year extension of the continuity PTC safe harbor for renewable projects, including wind and solar, that began construction in 2016 or 2017. Thus, we believe these wind farms will meet the IRS continuity requirements if ultimately placed in service in 2021. As a result, we expect these wind projects will qualify for 100% PTC benefit.
Pension — The funded status of the Xcel Energy pension plans was approximately 90% in January 2020. The funded status of the pension plan is estimated to be approximately 83%, based on market conditions as of June 2020.
Xcel Energy does not expect any material changes to its pension funding requirement at this time. In addition, Xcel Energy has pension trackers in Colorado and Texas, which allow us to defer amounts that are above or below a baseline.
Liquidity — Xcel Energy has taken steps to enhance its liquidity and believes it has more than adequate liquidity. We have completed our debt issuance plans for Xcel Energy and its operating companies for 2020. In July 2020, we completed the sale of the MEC facility which provided an additional $650 million of funds. As a result of these actions, Xcel Energy had approximately $4.5 billion of available liquidity as of July 27, 2020.
Furthermore, Xcel Energy has an outstanding forward equity agreement in connection with a $743 million public offering of 11.8 million shares. These shares have not been issued and we expect to settle this equity forward later in 2020, which will further enhance liquidity. Finally, Xcel Energy continues to have access to the capital markets on favorable terms.
Customer Service & Reliability — Xcel Energy remains committed to continuing to safely deliver reliable services to our customers as families and communities face the COVID-19 pandemic. We have exercised our business continuity plans to safely serve our customers, protect our employees and ensure critical positions remain staffed.
Key actions include:
•Executing work-from-home practices for employees who can do their work remotely;
•Enhancing cleaning practices within our facilities;
•Providing proper personal protective equipment and following CDC and state guidelines;
•Conducting employee temperature checks;
•Changing work practices to promote social distancing;
•Splitting crews and staggering work times;
•Limiting employee entry into customer homes to emergency situations only; and
•Reminding customers of increased risks of scam activity.
Employees — The health and safety of our workforce is one of our core values and we have taken several actions that reflect that during this pandemic:
•Continued pay for employees who have been quarantined and provide training to employees on how to stay safe and social distance;
•Expanded medical plan coverage for employees and their families to include 100% of COVID-19 medical costs;
•Offered up to an additional 80 hours of paid time off to employees for pandemic related illness;
•Expanded eligibility for our paid time off donation program to employees who have or are caring for a family member who has been diagnosed with the virus;
•Offered new anxiety and stress management tools, in addition to our existing Employee Assistance Program;
•Provided resources and educational materials to support employees adjusting to distance learning with their children; and
•Implemented an employee part-time and voluntary leave of absence program for pandemic-related needs.
Communities — Xcel Energy is committed to the communities in which we operate. Actions include the following:
•Plan to donate approximately $20 million in corporate giving, including COVID-19 relief in 2020.
•Donated over 300,000 masks to hospitals in the communities we serve; and launched a special $300,000 COVID-19 two-to-one matching campaign, which provides a match for employee donations to impacted non-profit organizations, in addition to our standard employee matching gift programs;
•Donating over 2.5 million high efficiency light bulbs;
•Submitted a proposal to reduce our approved 2020 Fuel Forecast by $25 million to provide immediate relief to our Minnesota customers, which will be implemented across the three summer months equally. Additionally, we proposed temporary relief to certain businesses in Minnesota through the Business Incentive and Sustainability Rider (approximately $6 million); and
•See Public Utility Regulation - NSP-Minnesota above for discussion of the Minnesota Relief and Recovery filing.
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ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
There have been no material changes from Derivatives,to the market risk disclosure included in our Annual Report on Form 10-K for the year ended Dec. 31, 2020 under “Derivatives, Risk Management and Market Risk from our 2019 Form 10-K.Risk.” | | |
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 CEO and CFO, allowing timely decisions regarding required disclosure.
As of June 30, 2020,2021, 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
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
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ITEM 1 — LEGAL PROCEEDINGS |
Xcel Energy is involved in various litigation matters 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 losses 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, would have a material effect on Xcel Energy’s consolidated financial statements. Unless otherwise required by GAAP, legalLegal fees are generally expensed as incurred.
See Note 10 to the consolidated financial statements and Part I Item 2 for further information.
There have been no material changes from the risk factors disclosed in our Form 10-K for the year ended Dec. 31, 2019 except as follows:We face risks related to health epidemics and other outbreaks, which may have a material effect on our financial condition, results of operations and cash flows.
The global outbreak of COVID-19 is currently impacting countries, communities, supply chains and markets. A high degree of uncertainty continues to exist regarding COVID-19, the duration and magnitude of business restrictions, re-shut downs, if any, and the level and pace of economic recovery. While we are implementing contingency plans, there are no guarantees these plans will be sufficient to offset the impact of COVID-19.
We cannot ultimately predict whether it will have a material impact on our liquidity, financial condition, or results of operations. Nor can we predict the impact of the virus on the health of our employees, our supply chain or our ability to recover higher costs associated with managing through the pandemic.
Xcel Energy’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, 2019,2020, which is incorporated herein by reference, as well as other information set forthreference. There have been no material changes from the risk factors previously disclosed in this report, which could have a material impact on our financial condition, results of operations and cash flows.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
For the quarter ended June 30, 2020,2021, no equity securities that are registered by Xcel Energy Inc. pursuant to Section 12 of the Securities Exchange Act of 1934 were purchased by or on behalf of us or any of our affiliated purchasers.
* Indicates incorporation by reference
+ Executive Compensation Arrangements and Benefit Plans Covering Executive Officers and Directors
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Exhibit Number | Description | Report or Registration Statement | SEC File or Registration Number | Exhibit Reference |
| | Xcel Energy Inc. Form 8-K dated May 16, 2012 | 001-03034 | 3.01 |
| | Xcel Energy Inc Form 8-K dated April 3, 2020 | 001-03034 | 3.01 |
| | Xcel Energy Inc. Form 8-K dated April 1, 2020 | 001-03034 | 4.01 |
| | PSCo Form 8-K dated May 15, 2020 | 001-03280 | 4.01 |
| | SPS Form 8-K dated May 18, 2020 | 001-03789 | 4.02 |
| | NSP-Wisconsin 8-K dated May 26, 2020 | 001-03140 | 4.01 |
| | NSP-Minnesota 8-K dated June 15, 2020 | 001-31387 | 4.01 |
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101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | | | |
101.SCH | Inline XBRL Schema | | | |
101.CAL | Inline XBRL Calculation | | | |
101.DEF | Inline XBRL Definition | | | |
101.LAB | Inline XBRL Label | | | |
101.PRE | Inline XBRL Presentation | | | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | | | |
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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July 31, 202029, 2021 | By: | /s/ JEFFREY S. SAVAGE |
| | Jeffrey S. Savage |
| | Senior Vice President, Controller |
| | (Principal Accounting Officer) |
| | |
| | /s/ BRIAN J. VAN ABEL |
| | Brian J. Van Abel |
| | Executive Vice President, Chief Financial Officer |
| | (Principal Financial Officer) |