Xcel Energy downgraded at BofA as cautious rate decisions cloud outlook
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Xcel Energy (NASDAQ:XEL) is little changed in Tuesday's trading as Bank of America downgraded the stock to Neutral from Buy with a $60 price target, lowered from $72, following regulatory setbacks in Minnesota and Colorado, as well as potential wildfire liabilities that will make meaningful gains a challenge.
Xcel's (XEL) two largest jurisdictions, Minnesota and Colorado, have delivered electric rate case decisions in 2023 that locked in return on equity below 9.5% and disappointed on the final revenue requirement, BofA's Julien Dumoulin-Smith said.
"While low ROEs have historically been a staple of these jurisdictions, the lack of upward momentum in a rising rate environment exemplifies the extent to which commissions have become highly sensitive to rate increases," the analyst wrote.
The Public Utility Commission of Colorado approved a 3%-plus rate increase for its Public Service Company of Colorado subsidiary, but feedback from commissioners was cautious relating to PSCo's 55.69% equity layer settlement that is higher than the U.S. average, Dumoulin-Smith said.
Minnesota's utilities commission also made public statements that were more adversarial to the company, with the Public Utilities chair saying she was "angry at Xcel in general" related to withdrawing its Clean Transportation Portfolio.

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