XEL
#Thanks, Ben, and good morning, everyone
We realized another solid quarter of earnings of $0.45 per share in 2017, compared with $0.39 per share in 2016. The most significant earnings drivers for the quarter include higher electric and natural gas margins, which increased earnings by $0.07 per share, largely due to the impact of rate increases in non-fuel riders to cover our capital investments, lower effective income tax rate, which increased earnings by $0.02 per share, the lower effective tax rate was mainly due to wind production tax credits which flow back to our customers through a rider or a fuel clause, and lower O&M expenses which increased earnings by $0.02 per share
Offsetting these positive drivers was increased depreciation expense, largely due to capital additions, which reduced earnings per share by $0.05 per share
Turning to sales, on a weather and leap year adjusted basis, our year-to-date electric sales improved 0.8%, reflecting approximately 1% growth in the number of customers across most customer classes and jurisdictions, offset by lower use per customer
Natural gas sales increased 1.7% year-to-date on a weather and leap year adjusted basis with a similar story, continued growth in the number of customers, partially offset by a decline in use per customer
While it's too early to call this a trend, it's nice to see that both year-to-date electric and natural gas sales are growing a bit better than expected
We continue to make progress on managing our costs
Quarter-over-quarter, O&M expenses were $19 million lower, largely driven by timing of planned maintenance at our power plants
On a year-to-date basis, our O&M expense is $10 million lower
We're focused on keeping our cost low, and are on track to deliver flat O&M expenses for the full year
Next, let me provide a quick regulatory update as we've made significant progress during the quarter and continued to execute on our plan
In the second quarter, the Minnesota Commission approved our multi-year electric rate case settlement agreement without modification
This multi-year plan covers 2016 through 2019, and provides the company and customers with revenue and price certainty
It also includes an annual sales true up, and continued use of all existing riders
In Colorado, the commission approved our advanced grid proposal and a decoupling mechanism with some modifications
First, the commission approved our advanced grid settlement
The project includes installing advanced metering infrastructure and communication networks, which will enhance grid reliability, improve the customer experience and enable new programs and rate structures
The settlement spreads the capital investment over a longer timeframe than originally proposed, deferring about $120 million of capital investment beyond our forecast
Second, the commission approved total class revenue decoupling for residential and small commercial customers
The decoupling adjustment will be based on actual sales, which eliminates the impact of weather
The commission modified our decoupling proposal and plan to file for reconsideration of the decision to calculate the decoupling based on class revenue rather than revenue per customer
We also filed rate cases in Wisconsin and Colorado
In Wisconsin, we filed to increase electric rates by $25 million and natural gas rates by $12 million
The filing is based on a 2018 forward test year, a 10% ROE and a 52.5% equity ratio
We anticipate a commission decision in the fourth quarter and final rates to be effective January of 2018. In Colorado, we filed a multi-year natural gas case seeking new revenues of $139 million over three years
The filing is based on a series of forward test years, an ROE of 10% and an equity ratio of 55%
We expect a commission decision and implementation of final rates in February of 2018. We're also planning to file electric cases in Colorado, Texas and New Mexico over the next several months
With that, I'll wrap up
Overall, it was an excellent quarter
We received regulatory approvals for a multi-year electric case in our wind proposals in Minnesota
In Colorado, the commission approved a decoupling mechanism in our advanced grid settlement
We filed proposals with the Minnesota and North Dakota commissions for termination or modification of higher cost PPAs, which will provide significant reductions to customer bills
Finally, we posted strong financial results for the quarter, and are well-positioned to deliver on our 2017 earnings guidance range of $2.25 to $2.35 per share, our 4% to 6% earnings growth objective, and our 5% to 7% dividend growth objective
This concludes our prepared remarks
Operator, we'll now take questions
Question-and-Answer Session
Good morning <UNK>
<UNK>, I think that the approval of our 400 megawatts of build-own-transfer wind projects in Minnesota would realize all that $700 million
That's correct
No, nothing discreet at this point, <UNK>
We're just working through the normal process of updating all of our capital plans for all of our operating companies
<UNK>, we've been committed to trying to close the lag in our earn to actual ROEs
We first started talking about this, I think our consolidated allowed was closer to 9.8% and we were earning closer to 8.9%
So we've obviously brought the bottom end of that number up
The top end has come down slightly, our weighted average authorized is closer to 9.6% now
I think in our first quarter call, we provided guidance that we were looking to be in or around where we were last year, and we hope to close that gap sometime in 2018.
Yes, sure, we can do that
Let me just say, I think, it's going to be more like the first quarter of 2018 for the final approval
We're on the ground, getting a lot of community support, legislative support
I think these projects are very popular for their obvious economic benefits
So this is about a $1.6 billion spend
I believe that increases our rate base and SPS by about 40%
As we know, we've suffered from some pretty significant lag at SPS
So our proposal is that we need concurrent recovery
The benefits are going to flow immediately to our customers
They're going to be significant
We need to get immediate recovery
And I'm cautiously optimistic that we'll get that, and we're going to need to get that
I mean, this is too big of an investment to put into place and suffer the historic lag we typically have
So that's what it's all about and that's what we're working on right now
Well, we haven't heard anything that would suggest that we can't work through a settlement, and that would be the ideal outcome
But these things take time
Chris, it's Bob
As Ben said, the reason and the rationale for the counterparties is really that the benefit to the customers is the fuel cost
The owners of the assets aren't making significant margins on the assets
The benefit to the customer is to get rid of a significantly high fuel cost that is relatively a pass-through to the other side's owners
Yes, 100%
Well, I think what you're talking about what jurisdictions, <UNK>
Is that what you mean, percentage?
Let me – give me some help here
I think Texas is about what, 60%?
So that's how it will be allocated
Thank you all for participating in our earnings call this morning
Please contact our Investor Relations team with any follow-up questions
