Xcel Energy Inc.

Good day and welcome to the Xcel Energy third quarter 2020 earnings conference call. Today's conference is being recorded. Questions will only be taken from institutional investors. Reporters can contact media relations with inquiries and individual investors and others can reach out to investor relations. At this time, I would like to turn the conference over to Mr. Paul Johnson, Vice President of Investor Relations. Please go ahead, sir.

Thank you. Good morning and welcome to Xcel Energy's 2020 Third Quarter Earnings Conference Call. Joining me today are Ben Folk, Chairman and Chief Executive Officer, Bob Frenzel, President and Chief Operating Officer, Brian Van Abel, Executive Vice President and Chief Financial Officer, and Amanda Rome, Executive Vice President and General Counsel. This morning we will review our third quarter results, share recent business and regulatory developments, provide 2021 guidance in our updated five-year financial plan. Slides that accompany today's call are available on our website. As a reminder, some of the comments during today's call may contain forward-looking information. Significant factors that could cause results to differ from those anticipated are described in our earnings release and our findings with the SEC. Today we will discuss certain metrics that are non-GAAP measures, including ongoing earnings, electric and natural gas margins. Information on comparable gap measures and reconciliations are included in our earnings release. With that, I'll turn the call over to Ben Foulkes. Well, thank you, Paul, and good morning, everyone. We had another strong quarter, booking earnings of $1.14 per share for the third quarter of 2020, compared with $1.01 per share last year. Our year-to-date earnings are on track with our financial plan, and we are mitigating the impact of COVID-19. As a result, we are narrowing our 2020 guidance range to $2.75 to $2.81 per share. Consistent with our third quarter tradition, we have provided our updated base investment plan, which reflects $22.6 billion of capital expenditures over the next five years. This represents rate-based growth of 6.3% off the 2020 base year. This represents our base capital forecast. In addition, we've identified potential incremental CapEx of $1.4 billion associated with the Minnesota Relief and Recovery Proposal, which, if approved, would drive rate-based growth of 6.9%. We're also initiating 2021 guidance of $2.90 to $3 per share, which is consistent with our 5% to 7% long-term EPS growth objective. We're very excited about our plan, which provides significant customer value, keeps bills low, and delivers attractive returns for our investors. We also continue to help our customers and protect our employees during this pandemic. We've stepped up charitable giving to help our communities, including donating the game from the sale of our Mankato facility. For more details, see our slides. Our business continuity plans have been executed extremely well, including the completing of a refueling outage at our Prairie Island Mutual facility. We're keeping employees safe while providing reliable customer service. And we're helping to restart the economy through our capital investment programs, which create jobs in our communities. Earlier this year, the Minnesota Commission opened a relief and recovery docket and invited utilities to submit potential projects that will create jobs and jumpstart the economy. In September, we filed a repowering proposal that includes four Xcel Energy wind farms of approximately 650 megawatts with $750 million of capital investment. In addition, the proposal includes 67 megawatts of repowered PPA extensions. The portfolio is projected to provide customer savings of over $160 million over the life of the assets. We've requested a commission decision on the wind proposal by year end. We're also proposing 460 megawatts of solar facilities near our retiring Sherco coal plant to take advantage of the existing transmission. The project represents an estimated investment of $650 million. We plan to file our solar proposal in early 2021 an anticipated decision in mid-21. We are confident the Commission will see the customer benefits of these projects. We continue to make progress on our PPA buyout strategy. In August, the Minnesota Commission approved our request to acquire the 99-megawatt Maurer wind farm after it is repowered. Maurer is currently a PPA. In addition, we filed to buy out the KEPCO solar facility in Colorado. While the $41 million investment is relatively small, the PPA is out of the money and the buyout will save our customers $38 million over the 11 years. I think this is another example of our keeping bills low priority. We continue to make strong progress on our wind development initiatives. In August, our 500 megawatt Cheyenne Ridge wind farm went into operation. Cheyenne Ridge was completed ahead of schedule and under budget. Since we began operations, we set a record with 70% of hourly load coming from wind generation in Colorado. We also reached an agreement to acquire a 74 megawatt solar facility in Wisconsin for approximately $100 million. We expect a commission decision later in 2021, and this will be our first universal scale solar rate-based investment. I'm also excited to announce that Xcel Energy, was recently awarded a $10 million DOE grant for an innovation pilot to produce carbon-free hydrogen at one of our nuclear power plants. We're partnering with the Idaho National Lab and others to use excess electricity and steam to separate the hydrogen and oxygen molecules in water using a high-temperature electrolysis process, which is 30% more efficient and a sustainable way to produce hydrogen. And while it's not currently economical, we think hydrogen has long-term potential to be a carbon-free form of dispatchable generation, which will allow the country to achieve its carbon goals while maintaining reliability. I want to wrap up with a couple of comments on electric vehicles. We recently announced our vision to enable 1.5 million EVs in our service territory by 2030. We spent the last few years working with our commission on programs that will enable EVs in our service territory and help turn this vision into reality. Electrification of the transport system will reduce carbon and save our customers money. I'm also proud of the recent award we received from Fort Knightly, which declared our EV program the smartest transportation electrification project as part of its smartest utility projects in 2020. We've developed an EV subscription that makes it easier for customers to have charging stations installed at their homes and to be charged a monthly rate for off-peak usage, which can save customers money and makes more efficient use of the electric grid. So before I do turn it over to Brian for more detail on financial results and outlook, I just want to say that, as you probably know, the Southeast is wrestling with Hurricane Zeta and its widespread outages. And the Southwest is working around the clock restoring our customers from the damages due to Winter Storm Billy. Our customers over the past three days have restored two-thirds of 145 customers in SPS that have been out as a result of this ice storm. I know there are hundreds of thousands out there in other parts of the Southwest that are out. And I'm just so proud of our team for focusing on our customers in these adverse conditions, and I'm proud of the industry. We have a history of mutual aid, It's been never more evident than storm recovery in these last two events and, quite frankly, the entire year. So with that, I will turn it over to Brian. Thanks, Ben, and good morning, everyone. We had another strong quarter, booking $1.14 per share for the third quarter of 2020, compared with $1.01 per share last year. Most significant earnings drivers for the quarter include the following. Higher electric margins increased earnings by $0.20 per share, primarily driven by riders and rate outcomes. O&M expenses were flat for the quarter, primarily driven by our cost management efforts. The lower effective tax rate increased earnings by $0.07 per share. As a reminder, production tax credits lower the ETR. However, PTCs are flowed back to customers through lower electric margin and are largely earnings neutral. Offsetting these positive drivers were increased depreciation and interest expense, which reduced earnings by $0.12 per share, reflecting our capital investment program. And in addition, other items combined to reduce earnings by $0.02 per share. Next, I want to discuss the status of COVID-19 impacts in our mitigation efforts. As expected, COVID-19 had an adverse impact as third quarter weather-adjusted electric sales declined by 2.4%. However, these impacts were better than projected in our guidance assumptions We now assume annual electric sales will decline approximately 3% for 2020. As a reminder, we have a sales true-up mechanism for all electric classes in Minnesota and decoupling for the electric residential and non-demand small C&I classes in Colorado. This covers about 45% of our total retail electric sales. Since sales have come in better than projected and weather has been favorable, we have adjusted our O&M contingency plans accordingly. We continue to closely monitor bad debt expense and work with customers on payment plans. At this point, we expect bad debt expense will increase approximately $25 million over normal levels, which remains in line with previous forecasts. We have received approval to defer certain pandemic-related expenses in all states, except for North Dakota, where our request remains under commission review. We've also made strong progress on reducing O&M expenses to mitigate COVID-19 impacts. Based on our year-to-date results and updated sales projections, we now expect annual O&M expenses will decline 1% to 2% in 2020, compared to our initial guidance of a 2% increase. Next, let me provide a quick regulatory update. In Texas, the Commission approved our rate-case settlement that reflects an electric rate increase of $88 million, an ROE of 9.45% and equity ratio of 54.6% for AFEDC purposes, and acceleration of the depreciation life of the total coal plant. In October, the Colorado Commission accepted the ALJ's recommended decision to approve our natural gas rate case settlement without modification, reflecting a net rate increase of $77 million, an ROE of 9.2%, an equity ratio of 55.6%, and a historic test year with an adjustment for the Tungsten to Blackhawk project. We view both the Texas and Colorado decisions as constructive regulatory outcomes. My preference is to avoid rate cases when possible. So in July, we filed for rider recovery of our wildfire and advanced grid investments in Colorado instead of filing a comprehensive rate case. The riders will cover 2021 through 2025 and provide regulatory flexibility. We're still in the early phases of these proceedings. In September, we filed a 2021 stale proposal in Minnesota as an alternative path to the rate case we plan to file in early November. We expect the Commission to decide in December whether it will accept the stay-out or proceed with a multi-year rate case. And as Ben noted, we're initiating our 2021 earnings guidance range of $2.90 to $3 per share, which is consistent with our long-term EPS growth objective of 5% to 7%. Our 2021 EPS guidance is based on several assumptions that are detailed in our earnings release. I want to highlight several of these items here. We assume constructive regulatory outcomes in all proceedings. We anticipate modest impacts from COVID-19. We project electric sales growth of approximately 1%, which reflects modest recovery over the COVID-depressed sales levels in 2020. We expect O&M expenses to increase approximately 1%, which reflects increased costs for new wind projects and lower O&M levels in 2020 due to COVID mitigation. Please note that wind O&Ms are covered through regulatory mechanisms in most jurisdictions and is offset by field savings. And finally, we anticipate an effective tax rate of approximately negative 9%, largely driven by increased levels of wind PTCs, which are credited to customers and generally have no mature impact on earnings. In our earnings release, you'll find more detail about our updated $22.6 billion five-year base capital forecasts. The base forecasts reflect significant grid investment including our advanced grid initiative and additional investment in the transmission system to maintain asset health and reliability and enable renewable generation. It also includes a modest level of renewables, expenditures to improve the customer experience, and a natural gas combined cycle plant at our Sherco facility to ensure reliability as we have proposed to retire all of our Minnesota coal plants by 2030. Our base capital plan results in annual rate-based growth of approximately 6.3% using 2020 as a base. We also have potential incremental capex of approximately $750 million for wind repowering projects and $650 million for a solar facility, which are pending commission approval as part of the Minnesota Relief and Recovery filing. We're confident the commission will see the customer benefits of these projects. If approved, rate-based growth would be 6.9%. In addition, we think there is other potential upside capex that could materialize in the future. Our capital investment plan supports our 5% to 7% long-term earnings growth objective, and our goal is to deliver EPS and dividend growth in the upper half of the range. We've also updated our financing plan, which reflects a combination of internal cash generation and debt issuances to fund the majority of our capital expenditures. In addition, We expect to issue $250 million of equity and $400 million of drip and benefits equity, consistent with our previous forecasts. Importantly, the financing plan maintains our current credit metrics. We anticipate that the incremental capital, if approved by the Minnesota Commission, will be financed with approximately 50% equity and 50% debt. This incremental equity will allow us to fund accretive capital investments, which will benefit our customers while maintaining solid credit ratings and favorable access to the capital markets. And with that, I'll wrap up. We're effectively mitigating COVID-19 impacts. We continue to provide reliable service to our customers while ensuring the safety and well-being of our employees and communities. The Colorado and Texas commissions approved our constructive rate case settlements. Our relief and recovery proposal in Minnesota will create jobs, help rejuvenate our local economies, and result in significant customer benefits. We narrowed our 2020 guidance range to $2.75 to $2.81 per share, based on solid year-to-date results and progress on contingency plans. We announced a robust updated capital investment program that provides strong, transparent rate-based growth and significant customer value. We initiated 2021 earnings guidance of $2.90 to $3 per share, consistent with our long-term objective. And finally, we remain confident we can deliver long-term earnings and dividend growth within our 5% to 7% objective range. This concludes our prepared remarks. Operator, we will now take questions.

Ladies and gentlemen, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, please press star 1 to ask a question. Our first question today comes from Julian DeMullen-Smith of Bank of America.

Hey, good morning team. Congratulations on the A lot of new updates there. Francis, I get going here on the 21 update. Can you talk a little bit about the thought process on the 1% on increase?

I mean, you know, conceptually, I get that you had a down year this year, so it would reverse. But how are you thinking about that reversing?

Obviously, you guys are one of the first out there in the industry to give a 21 with COVID impacts. How are you thinking about the back to business and the ability to sustain some of the benefits you saw this year? Hey, Julian. Good morning. So the way we think about it, maybe frame it up into, if you remember going into this year, our O&M guidance was 2% up. You know, we're investing significantly in our wind farms, along with our other strategic priorities, such as our grid investments in customer. And then, you know, we didn't see our guidance for 2021, but we expected a similar increase prior to COVID in that range. But now if you look at where we'll land this year, down 1% to 2%, and slightly up next year, we'll roughly be flat to 2019. And that's on a consolidated level. Obviously, it varies a little bit by opco. But overall, that kind of gives you a sense of how we're kind of driving cost transformation through our business as we absorb our strategic priorities and remain flat. Got it. And even to clarify that slightly, You said in your prepared remarks the wind aspect of the L&M increase, that would be also just slowed through as well, so it wouldn't necessarily impact your net margins. I heard you right. Yeah, that's correct in terms of where it gets recovered. Excellent. And then if I can, a little bit more conceptually here. As you're thinking about prospects for the next year, and obviously things are pending next Tuesday here, but with respect to –

subsequent legislation in Minnesota, specifically around RPS reform, et cetera.

Can you help frame some of the possibilities that are out there today, if you don't mind? RPS reform, Julian? This is Ben. Sorry. Energy legislation in Minnesota.

I suppose there's a variety of things to talk about. Right. I mean, I'll leave you to fill in the blanks if you like.

Yeah, I mean, we'll have to see, obviously, how it plays out at the state level and, obviously, the federal level as well. But, Julian, I think we're very well positioned for whatever happens. I mean, remember, one of the things I'm so proud of is we're leading the way. We've got an 80% interim target, a 100% target by 2050, but we do that with the liability and economics in mind. So that tends to bring both sides of the aisle along. At the federal level, if it does become a Biden administration and maybe the Senate flips as well, I think we're probably well positioned to do more with renewables. I think it would probably accelerate EVs and help with our $1.5 million target. I would also welcome the chance, as both CEO of Accel and Chairman of EI, work with the Biden administration and kind of let them know that 2035 and the utility timeframe for the technologies that will be needed is very aggressive. So there's a reason why we chose 2050. You know, at the state level, we'll just play it out. But, I mean, I think we've demonstrated we can work very well crafting legislation that works for customers and shareholders alike. Got it. Excellent. Well, I'll leave it there. Thank you all. Thank you, Julian.

Our next question comes from Jeremy Tunis of JPMorgan.

Hi, good morning, Jeremy.

Just wanted to start off to see if it's possible if you could provide any early feedback that you might be having on your Minnesota Recovery Plan application at this point.

Hey, Jeremy, it's Bob, and thanks for the question. Love the headline on the report this morning and the WHO reference. You know, on the Minnesota R&R plan and the broader stay-out proposal, we are working productively with all stakeholders. I think we've got support from the OAG and the environmental advocates for a stay-out and for the R&R proposal. We're, I would say, proactively working with the Department of and trying to gain their support. We expect to file our min-rate case next week as the alternative to the stay-out proposal. And similar to last year, we would expect the Commission to take that up in about six to eight weeks. So call it early to mid-December timeframe where we'd expect them to make a decision. And look, we think the R&R plan and the stay-out proposal are very much in line with the administration's and the Commission's goals, and we'd expect a productive outcome in December. Got it. That's very helpful. Thanks for that. And then just switching gears here, there's been multiple reports of potential M&A in the industry and some transactions have happened recently. Just wondering, does Excel have any role to play in industry consolidation or just You know, the great plans that you guys have in front of yourself as far as the attractive organic growth, that really kind of keeps all of your attention and focus there, and M&A is not really a big consideration for you guys. Well, I mean, we don't – it's a great question, by the way, and, you know, I won't comment on anything specific. But, I mean, you know, you've heard me speak over the years that our focus is primarily on organic growth. It's nothing like one time's book. and I think our investors love that. But we obviously see what's happening in the industry and the long-term trend to consolidation, and it's not like we don't look at things, but I will just tell you we can be disciplined because we do have good organic growth and we're not looking to fill some sort of earnings void or something like that. So we're very disciplined about it, and I think that's one of the reasons why we traded a bit of a premium to our peers. Got it. That makes sense. That's helpful. Thank you.

Our next question comes from Dargash Chopra of Evercore ISA.

Good morning. Hey, good morning, team. Thanks for taking my question. Just wanted to go back and clarify the December sort of timeline that you gave us. Is that for the R&R filing? I'm just trying to see what kind of milestones or timeline that we should be watching for you to kind of get approval on the incremental capex that you made out? Yeah, sure. So this is Bob again. For the mid-December filing, we would expect a decision on rate case or stay-out provision. We also would expect the win component of our R&R plan to be heard in the December timeframe as well. I think the solar piece of our plan is more likely going to be a Q2 of 2021 timeframe. And I think that makes up the bulk of the investment opportunity. There's some other areas around electric vehicles and distribution and transmission spend, which we would have taken up in normal course in separate dockets. But those are the two big buckets. Super helpful. So just to clarify, wind by this year and then solar by – first quarter next year. Did I get that right? Correct. Second quarter. And the second quarter is probably more realistic. Okay. Understood. Thank you. That's great. And then maybe just going back to your comments around a potential regime change, Biden administration, I think we hear you on sort of the aggressive 2035 targets, but generally speaking, you know, how does it fit into your current plan? Is it a tailwind to you know, future rate-based capital growth, the climate plan, that is, and then maybe just early thoughts on the potential tax rate change and implications for you. Well, I'm going to let Brian talk about the tax implications. As far as, you know, headwind, tailwind, I think it's probably helpful to accelerate our renewable program. I absolutely think it would be helpful to our 1.5 million electric vehicle goal, and that's something that would create additional opportunities for investment. I'm particularly excited about EVs, if you've heard me speak before, because I don't know if it's steel for fuel, but it's a type of steel for fuel. The variable cost of an EV is significantly below that of gasoline. If you charge off peak with some of our rates, it's equivalent of $0.60 a gallon. So while EVs are expensive today, we think that cost comes down. A Biden administration might help that cost come down even more. And then we're getting more EVs out there, reducing the carbon footprint, obviously, and creating investment opportunities for us and additional sales load, which all customers benefit from. I'll turn it over to Brian for your tax question. Yeah, and the details on the Biden tax plan are still a little bit light, but I'll hit on a couple of high points, right? If you think, you know, with a tax rate increase from 21% to 28%, you know, just like the TCJA where, you know, we went from 35% to 21%. Our customers saw savings of 3% to 4%. So if we go the other way, you know, we expect to see a one-time customer impact of 1.5%, 2%. You know, while it's never – positive to see that impact to our customer bills. We do think it's manageable, and we did set that precedent in all the regulatory proceedings going through the TCJA in terms of through the majority of our jurisdictions, the customers saw a timely refund of those savings, and we expect similar treatment if the tax rate goes up. On the credit metric side, certainly an increase in the tax rates would help on the credit metric side. You would probably expect for us to see 100 to 150 basis point increase in our credit metrics, but that also depends on the details. I know there is a talk about an AMT related to book income, which would be detrimental in that sense, but if that 100 to 150 basis point benefit to our credit metrics really related to if AMT goes back to the prior regime. So those are the two big components from the tax perspective. Excellent. Brian, thank you. I want to talk a little bit about that. Hey, digressions, Bob. Just a couple add-ons to Ben's comments. First and foremost, on the federal side, one of the tailwinds we would expect to see is a real increase in the budgets for R&D for new generation, which we've been very focused on as a company. and at EEI in making sure that the next generation of dispatchable generation that will provide reliability and affordability for our customers in the R&D has started today. And secondly, I don't want to diminish the impact that partnering with our states has had. You know, federal tailwinds are good, but our partnerships with our states have enabled us to deliver over the past four years a substantial amount of carbon reduction, electric vehicle penetration goals, and other investment opportunities around cyber and wildfires and other areas that have been very helpful. So while the feds can be helpful, I think the partnerships of the state are really important as well, and I think we're very much aligned there. And that's all customer-driven, which is why I think, you know, this clean energy transition happens, you know, under just about any type of administration. Super helpful, guys. Yeah, no, thank you. I appreciate all the... Maybe just one quick follow-up for Brian, really, Just, Brian, on PTCs, doesn't the actual increase in tax rate kind of help you with using hard PTCs? Increases your appetite for using PTCs? Yeah, you're absolutely right. And it also actually helps from just the LCOE from our customers. So you're right about that. Okay, perfect. Thanks, guys. Much appreciate the time. Thank you.

Our next question comes from James Salacher of BMO Capital Markets.

Good morning, guys, and thanks for the question, time for the question. Just looking at your updated, you know, CapEx forecast and the rate-based forecast and understanding that the bulk of the incremental spend is probably not going to be sort of fully articulated, I guess, until 2021, but How are you guys, I guess, thinking about that translation into where you sit within the growth rate? Right now it looks like you guys are kind of solidly at the midpoint, but should you be successful in Minnesota, do you think that that could put you solidly at the upper end, even with the modest solution you have with financing the incremental capex? Yeah. We strive to be at the upper end of that 5% to 7% goal, and the additional $1.4 million, albeit we'll make sure we're sensitive to credit quality, which is really important, would be helpful to that goal. So we're very confident that we're going to be able to achieve our long-term growth rate. Is outside of an adverse outcome, I guess, on the solar side, is there anything that would prevent you from being at the top end of the growth rate? Well, I mean, you know, there's always things. I mean, who thought we'd be in COVID two years ago? So, you know, there's a lot of things that could happen. And, of course, we always have regulatory outcomes and things like that to consider. sales, and there's all these things. But again, I think we're in very good shape. Great. And I guess just following up on that point on sales, it looks like the 2021 assumption is for a 1% increase in retail rates. Could you talk, I guess, a little bit about the component to the mix of that as you're thinking about it for 2021? Yeah, sure, Aiden. Good morning, Jim. So to kind of break it down between residential and C&I. Residential, we expect it to be fairly flat for this year. We are seeing good, strong customer growth of about 1% across the consolidated family. So we expect that customer growth to continue and a little bit of a reduction in the use per customer. On the C&I side, I think what you see is we're expecting, we'll call it a around a 2% increase in C&I sales. And the best way to think about that is really if we don't expect in April and May to happen next year, but we do expect, you know, C&I sales to be impacted. So if you kind of took April and May out, kind of the worst parts of COVID this year is kind of gives you a sense of what we're thinking for next year. Great. Thank you very much for that, Collin. Thanks.

Our next question comes from Steven Bird of Morgan Stanley.

Hey, good morning. Hey, Steven. A lot of this has been covered already. I did want to talk more about EVs, and then you provided some interesting commentary. I was just curious, let's assume that there is an interest at the federal level in giving specific financial support for EV infrastructure. What form of support would be most helpful? Is it, you know, tax credits, direct spending? And how might some level of increased federal support accelerate your plans in terms of spending on EV infrastructure?

Well, I think, you know, rebates to the consumer to buy down the cost of the EVs, I do think they're going to come down naturally as more and more models are introduced. But, you know, that would obviously stimulate purchases, you know, and You know, just making an overall pack part of, you know, industry-wide carbon goals would be helpful too, Steven. So I think the support can come in a number of forms. You know, the other thing I would say is kind of this, you know, the addressing range anxiety, maybe a public-private partnership to make sure we have fast charging stations around the corridors for people who travel. Those are all things that I think could be more likely to happen under a Biden administration than a Trump administration. So, I mean, I think we can get to our goal either way, but I was asked to comment whether it would be a tailwind or a headwind, and I definitely think that could be a tailwind for us.

That's really helpful. And I guess just building on that, if you did receive or if we did see that kind of federal support, is that the kind of support where you would then start to really take moves to, to specifically accelerate your existing plans, or is that just more helpful to ensure adoption, more helpful to ensure that your existing plans could work well and that there's actually enough EV adoption to make sense for what you're already planning?

I think it would give us more confidence. The $1.5 million EV goal is definitely a vision. It reflects 20% of the cars that are currently on the road, so I think it would be very helpful to getting there.

Gotcha. Thank you so much. That's all I have. Thank you.

Our next question comes from Paul Fremont of Mizuho.

Hi, Paul.

Hi. Thank you very much. Basically, my first question is, you initially also talked in the incremental spend bucket of about $150 million of EV spend. Has that now been moved into your base spending numbers?

Hey, Paul, yeah, that is correct. It is in the base numbers.

And then my other question is, What's driving sort of the higher level of spend at PSCO and MSP Wisconsin and sort of the $400 million incremental spend at MSP Minnesota in your base numbers?

Well, I think the big part is in Colorado we're really starting to roll out our advanced grid initiatives. We also have some transmission investment that we need to do in Colorado in longer term. We talked about it before that we have significant transmission investment in all of our aquas longer term to enable the generation transition. In Wisconsin, we do have the solar farm that we just announced, the $100 million solar farm with Wisconsin, which is for Wisconsin's size, that is material. And we do have some transmission projects in Wisconsin. So those are really the big drivers for those opcos. In Minnesota, keep in mind, there's a lot of wind that's going into service, which would lead to, and a lot of that wind is in Minnesota.

Right, but Minnesota's actually lower.

Yeah, you're rolling forward the big wind spending in Minnesota this year, so when you roll forward from 20 to 24 to 21 to 25 is the way you're seeing.

Got it. So some of that wind is actually just wind that will take place in later years.

The project is being completed in 20. Yep, going in service, yep. Okay. But then if you think of the incremental plan related to our Minnesota R&R, that's all Minnesota spend, you know, significant customer value, and if we can get that approved, that will increase the overall capex for Minnesota.

Great. Thank you.

That's it. Thank you. Our next question is from Insoo Kim of Goldman Sachs.

Morning. Morning. I think one question from me. In Minnesota, what type of momentum, if any, is there for securitization legislation to retire coal plants? And I think, currently if I'm wrong, there is a precedent in the state for getting some accelerated depreciation for the remaining value of coal plants. How do you frame all of that and the potential to further accelerate the retirement of coal plants like Sherco III or the King plant? Hey, it's Bob. Good to hear you this morning. You know, we've got, we are accelerating with appreciation on the two plants that we have approval to retire early. That's Sherco units one and two, and they're being accelerated and depreciated fully by their projected retirement dates in 23 and 2026, respectively. As part of our Minnesota resource plan, We have offered to retire Sherco III and the King Plant early, also with accelerated depreciation. And we think those proposals will be likely heard sometime in 2021, next year, as we go through the resource planning process. We've been very successful in working with our stakeholders in mitigating the transition of these legacy plants of ours. We're taking care of the workforces and the property taxes and the jurisdictions And so we think this is just part of the overall package, and we've been successful with that in the past, and we'd expect to continue in that fashion. Right. The only place we have securitization is in Colorado. As of now, we don't have it. Right. No, I was just asking about momentum for any potential securitization in the state. Right. And just on that, I understand that Circle 3 and King, what the proposals were, you know, of the 2028 and 2030 for the two plants respectively, is that the earliest date that we should be considering for these plants given the accelerated depreciation timeline? Yeah, look, I think that, you know, we've taken a proactive approach to propose those in our resource plan. It gives us a runway to manage through the employee and community issues, and so that's our proposal right now. Got it.

Thank you very much. The next question today is from Sophie Karp of KeyBank.

Hi. Good morning. Thank you for taking my question. So missing from your supposed incremental projects is energy storage. And I was wondering if you could discuss maybe more broadly what place energy storage would have in your portfolio going forward. And maybe tying that into a potential election outcome, what kind of policy from the federal level would be helpful to accelerate the adoption there? Thank you.

Yeah, that's a great question. Thanks for that. I mean, I think you're going to see us, and the emphasis on storage will take place in our resource planning process. both in Minnesota and Colorado, and we do see a role for storage. It's not a panacea. I mean, four-hour batteries can only do so much. So when you think of technologies that are needed to get that last 20% out, we're going to need perhaps some form of long-term storage to address those seasonal variations. But, yeah, you know, Just thinking about the Minnesota plan, we talk about peaking resources that will be needed. Batteries are definitely part of those peaking resources. The same will hold true in Colorado. I would just say, too, when we look at what we did with the R&R plan in Minnesota, we're actually saving customers money by repowering these wind projects. And so, you know, to us, given the economic conditions, that made all the sense in the world.

Got it. So are you considering then any other types of storage other than lithium ion, maybe pump storage, any other kind of older technologies, so hydrogen even, that can be effectively deployed to sort of address these variations that you have in a cost-effective manner? Or is it just too early to say right now?

No, yes to all of those. I mean, I think hydrogen is, you know, perhaps that long-term storage. It can be used in different ways, but storage is definitely one of the things. Pump storage is on the table. You know, we're looking at what we can do with our Cabin Creek plant that is pump storage in Colorado. So, yeah, I mean, all of those things are on the table. And, you know, you'll see some of that get, I think – flushed out a little bit as we go through the resource planning process.

All right, thank you.

Thank you.

The next question comes from Ryan Levine of CIFI. Good morning.

So regarding, it looks like you announced a couple updates around the PPA-BIO program.

Can you comment around how that case of development or opportunity could change into the election if a higher federal tax rate could influence any PPA buyout decisions?

Sure, and good morning, Ryan. Yeah, we announced, too, we got one of them from buyouts approved in Minnesota, which is very good to see and delivers significant customer benefits. And then that solar... buyout in Colorado, filed it, and again, significant customer benefits, even though it's a pretty small dollar amount from a capital perspective. Yeah, it's something that we spend a lot of time, the corporate development team, in terms of discussions and just conversations with the IPPs that we do business with. You know, a couple things, right, that we watch if you want to kind of talk about the election opportunities, right? If you could see an extension of PPCs, maybe that provides more repowering opportunities. If PPCs are extended, certainly a change in the corporate tax rate could impact how these IPPs view their wind farms. So it is something that we'll continue to look at and be in conversations with. I speak about this as just something that we continue to have conversations and is really a long-term opportunity because it is about finding kind of the sweet spot in terms of ensuring that we deliver significant customer value and finding the price point that works for us to actually acquire it.

Have there been any recent acceleration of commercial development activity in those efforts in the last few months, or has it been relatively ratable around that?

the conversations you're having with counterparty i would say it's relatively radical certainly some conversations pick up during uh kind of the impacts of covid uh as some of the developers had challenges uh you know there was a uh a ppa that was bid into our minnesota relief and recovery win rfp um though the ppa buyout was bid in you know we'd We were close to getting there, but we couldn't get to the customer savings number that we wanted to deliver in that RFP, and so we'll continue negotiating with that counterparty to see if we can actually reach an agreement that provides our customers significant savings. So, like I said, it's important for us to deliver those savings for our customers. Appreciate it. Thank you.

Our next question is from Travis Miller of Morningstar.

Morning, Travis. Morning, Chris. Good morning. Thank you. I want to talk about the election and issues there. As a follow-up to all that conversation, what at the state level or the regulatory level are you looking at on election day? Any key state-level races or regulatory elections that you're looking at or policies at the local level, stuff like that? Well, I mean, I think what we'll be looking at in Minnesota is whether or not, you know, the Senate, which is currently Republican, if it were to go Democrat, then you'd have an all-Democratic DFL branches. And, you know, so we would be looking probably at increased corporate taxes, you know, and maybe some legislation energy-wise. But, again, I think I think we've done a really good job developing relationships across the aisle and actually executing on just these pretty bold and aggressive carbon reduction plans. I do think the administration has appreciated what we've been able to do for our communities and things like the R&R plan that we talked about. I'm not particularly focused on any kind of transformative type legislation that might come out of an election. I say that. Bob or Amanda, do you want to comment? Travis, this is Bob. I think the only other thing to watch is obviously the ballot initiative in New Mexico on elected versus appointed commissioners. And I think we've got a good history of working there well. And any new commission we would proactively engage with This is Amanda.

The only other one we're obviously watching closely is the Boulder vote on municipalization.

Okay. Okay. Great. No, that's very helpful. Thank you. And then another quick follow-up to the whole EV discussion. We've done a lot of talk and speculation about who might own and how they might own the charging stations. What are your thoughts around that in terms of your role? Are you inclined to own them? as rate-based pipe assets and expand that way? Would you be inclined to own them as pseudo-merchant pipe, so to speak, assets? Or you have to let the charging be a third party? Just wondering your thoughts around who owns and how the economics, the chargers. Yeah, are you talking about fast charging, Travis? Either way, whatever. Not in-home. In-home would probably be the residential customer, but... yeah on the residential side or you know multi-dwelling things like that i think we're you know we're very well positioned uh to own those charging stations in fact uh you know i'm really excited about our ev plans that would allow you if you know you had a home and you wanted to get an ev we try to make it easy for you because it's not as easy as you think sometimes and So with a call to us, we can get the home charger installed at no cost for you, build it into a subscription rate, which encourages you to charge off-peak and saves you a significant amount of money. So you don't have to compare KWH and equivalents. I think it's $44 a month, and it's all you can use off-peak. And we've done the math. We think it works out really well for the EV owner, but just as importantly, other customers. because it minimizes the impact to the grid. Now, when you get to, like, fast charging stations, I think they're really necessary to address range anxiety, but make no bones about it, they're kind of lost leaders. So, you know, I think that that's where a public-private partnership could come into play. We're happy to play a role there, but, you know, we don't have to. We'd just like to see it done. So I guess that would be kind of, I think I answered your question. I think that's where we see it. Sure. Okay. Great. I appreciate it.

Thank you.

The next question comes from Paul Patterson of Glenrock Associates.

Hey, good morning. Hi, Paul. How are you doing? I'm okay. Good. So just quick on the ED thing, just to sort of clarify this, the public-private partnership Just to help me out here, what's the public entities or entity that you're thinking about and who would be the private entities? It's just really briefly sort of a, I'm just sorry, I'm missing exactly what that would be.

Well, I mean, I think it can take a lot of different forms. I mean, you know, the government, either federal or state, could provide funding to, you know, buy down the cost of those charging stations. It doesn't necessarily have to have an Xcel Energy label on it. We could just provide the necessary supporting infrastructure or we could be part of it. I would just tell you, Paul, we're wide open to that. The key to me is to get these stations built so that people ... One of the biggest barriers in purchasing an EV is range anxiety. You know, you need, I think, the right amount of fast charging stations, which, again, are lost leaders, to be built so that, you know, so that you have more EV penetration. So it's kind of the chicken or the egg type thing, and it can take a lot of different forms.

Okay. I was just wondering, what about you guys basically just having it put in sort of rate-based, so to speak, and, you know, sort of socializing that cost? over customers. I mean, I'm just wondering, is that an option, or do you feel that... Well, we certainly could.

As long as it's, you know, yes. The short answer is yes, but, I mean, you want to make sure the process is followed. I mean, you know, one of the things that we'd want to show is, okay, if this leads to more EV penetration, how does that benefit all of our customers? What is how much, just exactly how much are we going to socialize? You know, you've heard me talk about you know incentives and subsidies and things like that and i've always been okay with them as long as they're transparent so i would not want something that is kind of hidden where you know people not we're not really sure what is being socialized and what isn't being socialized and i i don't think that would happen with these charging stations but um that's what we'd be advocating for just a real transparent process because not everybody when you say the word socialization i mean that's It gets people upset sometimes, but a selective amount of seating I think is really important and perhaps we could play a role in that. It's kind of two areas where I think we're excellent at also making sure that in a world where we are involved, we can make sure that public charging whether it's on interstates or in neighborhoods. But there are areas of town and areas of communities that don't get left behind. We want to make sure that there's an equitable investment in making sure that all of our customers can benefit from the opportunity that electric vehicles provide. And the second area where I think that we are very valuable in ownership and control of the charging stations is really around the impacts on the grid and making sure that we have appropriate incentives for more off-peak than on-peak charging, recognizing some on-peak will have to happen, certainly in those public spaces, but balancing the grid loads and making sure that we're optimizing the distribution investments around electric vehicles is really important, and I think our role there is critical. So that leads you to believe that we would be a very good partner or owner of those types of stations as well. Awesome.

Okay, and then just on the tax issue, And I just have a crystal ball question, and I realize it's kind of fraught. But I guess what I'm sort of trying to wonder is, I mean, on the Biden plan, if one were to assume that he got elected, what kind of sense do you get of a buy-in in the Congress for higher corporate taxes in general? And do you think it would make a significant difference if it was a Democratic Senate or a Republican Senate or just any flavor there? I mean, when we're thinking about this, how and how you guys look at this when you're trying to plan and everything. And I don't know. I mean, is it sort of like you feel that there is a strong sense that people really want to raise taxes in Congress on corporations and that that's probably pretty likely?

Well, I think to implement the Biden tax plan, you're going to need a D-suite, Paul. I don't think it's, you know, you might have some sort of form of compromise wrapped around other things if it's, you know, with Congress and Senate. But, you know, I don't think there's going to be a tremendous amount of interest if, you know, the Republicans hold the Senate and, you know, implementing the full Biden tax plan.

But if we have a Democratic Senate, maybe yes. I know it's early.

Yeah, I think you need a Democratic Senate. And I think if you look at how the Senate would be taken over by Democrats, many of those candidates are running on moderate platforms. So I think it would also depend on how big the sweep is. Right. Okay. Okay. Fair enough. Stay tuned. We should know sometime. I'm not so sure it'll be November 3rd, by the way, but we will know at some point.

Yeah, can't wait. Okay, thanks so much. Okay, thank you.

As there are no further questions, I would like to hand the call back to Mr. Brian Van Abel, CFO, for any additional or closing remarks.

Yeah, thank you all for participating in our earnings call this morning. If you have any follow-up questions, please contact Paul Johnson in our investor relations team. Thank you, everyone. Thank you. Have a good day.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.