Xcel Energy Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 31, 2024

There are 15 speakers on the call.

Operator

Hello, and welcome to Xcel Energy Third Quarter 2024 Earnings

Speaker 1

Call.

Operator

My name is Melissa, and I will be your coordinator for today's event. Please note this conference is being recorded and for the duration of the call, your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the presentation. This can be done by pressing star followed by 1 on your telephone keypad to register your question. Questions will only be taken from institutional investors.

Operator

Reporters can contact media relations with inquiries and individual investors and others can reach out to Investor Relations. I'll now turn the call over to Paul Johnson, Vice President, Treasury and Investor Relations. Please go ahead.

Speaker 2

Thank you. Good morning, and welcome to Xcel Energy's 2024 Q3 earnings call. Joining me today are Bob Frenzel, President, Chairman, Chief Executive Officer Brian Van Aebel, Executive Vice President and Chief Financial Officer. In addition, we have other members of the management team in the room to answer questions if needed. This morning, we'll review our Q3 results and highlights, share recent business and regulatory updates, update our capital and financing plans and provide 2025 guidance.

Speaker 2

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 releases and SEC filings. Today, we will discuss certain metrics that are non GAAP measures. Information on comparable GAAP measures and reconciliations are included in our earnings release.

Speaker 2

In the Q3 of 2024, the Minnesota Commission disallowed $46,000,000 of replacement power costs associated with the extended outage at our Sherco plant in 2011. As a result, we recorded a charge of $35,000,000 or $0.04 in the 3rd quarter, which was in addition to an $11,000,000 or $0.02 charge that was accrued in the 2nd quarter of 2024 related to that matter. Given the non recurring nature of these items, both charges have been excluded from 3rd quarter and year to date earnings. As a result, our GAAP earnings for the Q3 of 2024 dollars were $1.21 per share, while our ongoing earnings, which exclude this charge, were $1.25 per share. All further discussion in our earnings call today will focus on ongoing earnings.

Speaker 2

For more information on this, please see the disclosure in our earnings release. I'll now turn the call over to Bob.

Speaker 3

Thank you, Paul. Good morning, everyone, and thank you for joining us today. I'm pleased to report that we delivered another quarter of solid operational and financial progress. We continue to deploy capital for the benefit of our customers and communities and we enable a future powered by cleaner fuels and a more resilient and intelligent grid. We partner with stakeholders to encourage economic development and we provide products and services capable of meeting our customers' most important needs.

Speaker 3

In the most recent quarter, we invested $2,000,000,000 in resilient and reliable energy infrastructure. We delivered ongoing earnings of $1.25 per share for our owners. We provided industry leading storm response and strong customer reliability despite challenging conditions. We accelerated our wildfire risk reduction measures to enable safer and more resilient communities. Xcel Energy's commitment to our communities and investors is anchored by our core investment thesis as a clean energy leader.

Speaker 3

For more than 2 decades, we've provided we've been a leading provider of wind energy. And with our filed resource plans, we expect to stay in that position. We've delivered on our earnings guidance for 19 straight years, one of the best records in the industry and looking to make it 20 this year. We have a long term and transparent growth plan, making investments in clean generation, new and enhanced energy grids and economic development programs to support our community's vitality. We've deepened our commitment to serve and support customer needs efficiently.

Speaker 3

For example, since 2020, our continuous improvement programs have saved almost $500,000,000 in O and M expense, while improving operating outcomes and reducing risk. In addition, we've kept our O and M costs significantly below the rate of inflation over the last 10 years. And our Steel for Fuel strategy has delivered more than $4,000,000,000 in customer fuel related savings since 2017. And finally, this discipline alongside supportive state and federal policies enable us to reduce emissions and keep residential electric and natural gas bills 28% 14% below the industry average and growth well under the rate of inflation. We're $0.16 ahead of 2023 year to date earnings and as a result, we are reaffirming our 2024 guidance of $3.50 to $3.60 per share and we are initiating our 2025 earnings guidance range of $3.75 to $3.85 per share.

Speaker 3

And today, we're introducing our updated 5 year $45,000,000,000 capital investment plan, which centers on 4 key areas: Clean Energy, which continues investment in generation that provides customers with a secure and clean energy future, while helping our states and our customers meet their ambitious policy goals customer electrification, which helps customers electrify their transportation needs, transitioning homes and businesses away from fossil fuel heating and converting fossil fuel loads to clean electric powered loads new load growth, which expands our electric system to support customers' surging demand and requirements over the next decade and beyond and safety and reliability, which modernizes and hardens our system to ensure continued safe operations and address increasing risks from severe weather. There's a lot of focus across our industry and country regarding data centers. Xcel Energy has nearly 9,000 megawatts of opportunities in our customer pipeline before 2,030. The scale of this pipeline gives us the ability to thoughtfully negotiate agreements that deliver the energy and capacity needed to important new customers in the region, while protecting Xcel Energy and its customers, ensuring lasting relationships with our data center customers ensures that new data center load that's brought onto our system benefits all customers drives load growth to our increasingly decarbonized energy system generates economic growth and vitality in our communities and delivers on the national imperative to support a domestic data center industry.

Speaker 3

As a result of these guiding principles, we anticipate we will secure contracts with about 25% of this pipeline in the 5 year forecast period. We also expect these opportunities to continue to grow and the need extends well past the next decade. We previously signed data center agreements with Meta and QTS and completed land sales with entities including Microsoft to support new facilities. In October, a new data center customer completed a land acquisition in our service territory and we're in the final stages of signing service contracts with that party. Turning to the supply side of the equation, we continued progress during the quarter on our clean energy transition through multiple resource planning and RFP processes.

Speaker 3

We reached a settlement in our Upper Midwest Resource Plan. And as part of that settlement, 7 20 megawatts of company owned natural gas CTs and battery investments were selected. In addition, the agreement reflects the need for an incremental 4,200 megawatts of wind, solar and storage, a portion of which is included in existing RFP solicitations.

Speaker 4

The settlement is pending a

Speaker 3

decision by the Minnesota Commission, which is expected in the Q1 of 2025. In October, we made a new energy resource filing in Colorado called the Just Transition solicitation. Our projections indicate the need for up to 14,000 megawatts of new generation to meet the phase out of our coal plants, to accommodate increasing demand from data centers and to achieve state and customer emissions goals. We anticipate a decision on that filing in fall of 2025 with RFPs to be issued in early 2026. And we're working on our solicitation in SPS, which could ultimately yield more than 5,000 megawatts of renewable and firm dispatchable generation.

Speaker 3

These are due in January of next year and we expect commission approvals in 2026. Protecting our customers from the threats of extreme weather also remains a top priority. In August, severe thunderstorms brought heavy rain, hail and winds of over 60 miles an hour to customers in Minnesota and Wisconsin. Xcel Energy employees and contractors safely and promptly restored power to over 250,000 customers who lost service during those storms. We're thankful for the dedication of our employees and contractors that ensure that our communities continue to have safe and reliable service that they expect from Xcel Energy.

Speaker 3

In addition, we'd like to thank our crews who've worked tirelessly to provide mutual aid assistance to other utilities to support recovery and restoration efforts from the devastating Hurricanes Helene and Milton. And regarding wildfire risk reduction, we continue to make progress on our accelerated wildfire mitigation efforts as well as our Colorado wildfire mitigation plan filing. In the Q4, we anticipate filing our Texas resiliency plan, which will include wildfire mitigation in the Southwest. Finally, turning to a tradition that I'm very proud. During the Q3, nearly 2,200 volunteers from Xcel Energy in our communities took action to support non profit organizations during our 14th annual day of service.

Speaker 3

Volunteers dedicated almost 8000 hours to support 125 projects for nonprofits across our 8 states. We're grateful to the thousands of volunteers and nonprofits that came together come together year after year to put good energy that fuels growth, influences change and lifts up our neighbors. With that, I'll turn it over to Brian.

Speaker 5

Thanks, Bob, and good morning, everyone. Starting with our financial results. Xcel Energy had ongoing earnings of $1.25 per share for the Q3 of 2024 compared to ongoing earnings of $1.23 per share in 2023. The most significant earnings drivers for the quarter included the following. Outcomes from rate cases in non fuel riders increased earnings by $0.25 per share and higher AFUDC increased earnings by $0.04 per share.

Speaker 5

Offsetting these positive drivers were higher O and M expenses decreased earnings by $0.09 per share higher depreciation and amortization decreased earnings by $0.08 per share reflecting our capital investment programs higher interest charges decreased earnings by $0.08 per share driven by rising interest rates and increased debt levels to fund capital investments and other items decreased earnings by $0.02 per share. Turning to sales. Year to date weather and LEAP year adjusted electric sales increased 0.2%. However, 3rd quarter weather adjusted sales increased 1.3%. Based on our forecast, we are reaffirming our full year guidance of a 1% increase in weather adjusted electric sales.

Speaker 5

Our new 5 year plan includes 5% per year electric sales growth, of which approximately 50% is from data centers with other growth coming from the oil and gas industry and EVs. Our sales forecast only assumes contracted or high probability data centers. We also expect large data center low we also expect that large data center low growth will continue beyond our 5 year plan and there is upside to what we have included. Year to date, O and M increased $58,000,000 primarily driven by increased generation maintenance, damage prevention, wildfire mitigation and storm expenses. In addition, we are facing increased costs from our recent excess liability insurance renewal.

Speaker 5

As such, we're revising our full year O and M forecast to 3% to 4% increase relative to 2023. During the quarter, we also made progress in several rate cases. Earlier this month, the Colorado Commission completed deliberations

Speaker 6

on

Speaker 5

our natural gas rate case, which reflects an estimated rate increase of approximately $130,000,000 which includes $15,000,000 of incremental depreciation that was not included in our original request. The decision was based on a historic test year of an average rate base and a weighted average cost of capital of 7%, reflecting an ROE range of 9.2% to 9.5% and an equity ratio of 52% to 55%. Rates will go into effect in November. In early November, we plan to file a Minnesota Electric rate case seeking a rate increase of $490,000,000 over 2 years based on an ROE of 10.3 percent and a 52.5 percent equity ratio. We're also requesting interim rates of $224,000,000 to go into effect in January of 2025.

Speaker 5

Final decision is expected in 2026. We continue to make progress in the Smokehouse Creek wildfire claims process. We've settled 86 of the 179 submitted claims, which we view as a positive and constructive outcome. 23 lawsuits have also been filed. In addition, there is no change to our estimated accrued liability of $215,000,000 As a reminder, we have approximately $500,000,000 of excess liability insurance coverage for this fire.

Speaker 5

Shifting to our investment plans. We provided an updated $45,000,000,000 5 year base capital expenditure forecast, which reflects annual rate base growth of 9.4%. These investments are critical to serve growing electric demand, meet clean energy goals and ensure system safety and reliability. We have an additional $10,000,000,000 plus of pipeline of potential investment, which we view as conservative and could be significantly higher. This additional capital reflects generation from RFPs and resource plans, low growth from data centers and beneficial electrification and additional transmission including opportunities from MISO Tranche 2 and the Southwest Power Pool.

Speaker 5

We also refreshed our base financing plan, which reflects approximately $19,000,000,000 of debt and $4,500,000,000 of equity. We anticipate that any incremental capital investment would be funded by approximately 40% equity and 60% debt. It's important to recognize we've always maintained a balanced financing strategy, which includes a mix of debt and equity to fund accretive growth, while maintaining a strong balance sheet and credit metrics. As a result, you'll notice we issued $1,100,000,000 of equity via our ATM program this year. This equity issuance is not part of our 2025 to 2019 financing plan and reflects our commitment to credit quality while delivering on our long term financial objectives.

Speaker 5

Maintaining solid credit ratings and favorable access to capital markets are critical to fund the clean energy transition, deliver strong shareholder returns and keep customer bills low. Moving to earnings, we're reaffirming our 2024 ongoing earnings guidance range

Speaker 7

of

Speaker 5

$3.50 to $3.60 per share. We're also initiating our 2025 earnings guidance range of $3.75 to $3.85 per share, which reflects 7% growth from the midpoint of 2024 guidance. Key assumptions are detailed in our earnings release. We are updating our long term EPS growth objective to 6% to 8% with expectations to deliver earnings in the upper half of the range. The increase in the EPS growth rate reflects our significant investment pipeline and confidence in our financial outlook.

Speaker 5

We also modified our dividend growth objective to 4% to 6%, with the expectation to be at the low end of the range. A lower dividend growth rate allows us to retain additional cash flow to fund growth and lowers equity funding needs. In addition, it will lower our dividend payout ratio over time, which provides greater financial flexibility and dry powder for the future. With that, I'll wrap up with a quick summary. We reached a settlement in our Minnesota resource plan and filed our latest Colorado resource plan, which allow us to lead the clean energy transition, ensuring customer affordability and reliability while driving economic growth.

Speaker 5

We continue to make progress on our wildfire mitigation plans, which will reduce risk from extreme weather. We announced an updated capital investment program that provides strong transparent rate base growth and significant customer value. We provided a balanced financing plan to fund accretive growth, while maintaining a strong balance sheet and credit metrics. We're on track to meet our 2024 ongoing earnings guidance and have provided 2025 guidance consistent with our growth objectives. And we revised our long term earnings growth to the upper half of the 6% to 8% objective range and dividend growth to the low end of the 4% to 6% objective range, which is indicative of our significant capital investment pipeline.

Speaker 5

This concludes our prepared remarks. Operator, we will now take questions.

Operator

Thank you very much. Our first question is from Nicholas Campanella with Barclays. Please go ahead.

Speaker 8

Hey, good morning. Thanks for taking my questions.

Speaker 2

Good morning, Nick.

Speaker 8

Good morning. So I just wanted to ask, you talked in your prepared remarks, you had a customer make a large land acquisition. What specifically where was that exactly? Was that in Minnesota? Or could you provide more details on that?

Speaker 8

And then is that included in this 5% kind of consolidated load growth outlook long term for the company? Or is that pressure higher? And then how do we think about rate design there? I know that's a lot in one. Thanks.

Speaker 5

Hey, Nick. Yes, good morning. Underscore this customer, but yes, it was in Minnesota. And that's one of the call it as we think about high probability loads. We've been, as you can imagine, in active discussions with them and significant progress on services agreement.

Speaker 5

So great to see the continued progress we have on the data center front. And so, I mean, we're getting into as part of the negotiations, you get into rate design and in terms of pricing, but I think it's important as Bob laid out the guiding principles and how we think about it and ensuring that all of our customers benefit from these large loads that come on. So it helps drive economic growth for our state, but also benefits all of our customers. I think it was just something I'm not sure if people caught it, but there was a planning session at the Minnesota Commission on Tuesday, that included the data centers, IBEW, Department of Commerce, us and other significant stakeholders talking about, how do we support and move faster on the data center front. And so we're pretty excited about those conversations, that's not really constructive and look forward to working with our commission on these opportunities.

Speaker 9

And Nick, just to answer,

Speaker 3

I think, probably part 2 of a 3 part question was, is it included in our forecast? So we've got about a quarter of that 9,000 megawatts are included in our 5 year sales forecast. This land acquisition would be one of the projects that would be a part of that forecast. Obviously, we think that this is a trend that's likely to continue in our regions for a lot of reasons and we have real confidence in our ability to meet that forecast as well as to continue to see sales growth transition into our regions over time.

Speaker 8

Hey, that's great. I appreciate that. Maybe a one part question, but on the financing, I know you've priced the $1,100,000,000 Are you done for the year? Would you de risk the 5 year plan at this point? And what's the right mechanisms to do that in your mind?

Speaker 8

Thanks.

Speaker 5

Yes. Nick, thanks for the question. Yes, as you can see, we did about $1,000,000,000 of ATM issuance in Q3. So certainly, a very strong quarter for us. And that does fulfill our equity needs for the year.

Speaker 5

That was our plan for the year. Now it doesn't mean that we can't be opportunistic if we think through the end of the year we like something, but we actually we don't need to do anything through the end of the year. Second part of your question, look, we view an ATM and we've always talked about this as it's an efficient mechanism to get our equity issuances done, but it doesn't mean we won't look at all other products and options on the table as we move forward.

Speaker 9

Thank you so much.

Operator

Thank you. Our next question comes from Steve Fleishman from Wolfe Research. Please go ahead.

Speaker 10

Yes. Hi, good morning. Good morning, Steve. Good morning, Steve. Good.

Speaker 10

So just wanted to reconcile the CapEx increase with the equity Because I think CapEx went up about $6,000,000,000 but equity only went up $500,000,000 So it's kind of a lot less than that $40,000,000 $60,000,000 So is that because you prefunded some of this $1,000,000,000 Is that because cash flow is just getting better or just how should we think about that?

Speaker 5

Yes. Hey, Steve, a couple of things and thanks for the question. One, you're right. Generally, we guide investors to a 40%, 60% mix. Part of that is we do get a little bit of benefit as we lower the dividend growth rate that I talked about.

Speaker 5

That helps a little bit in the 5 year, but also gives us a more dry powder longer term. But it's really about kind of the cash flow and the timing of the capital. And if you look at how we design it, when we put together that slider on the credit metrics, our credit metrics are very stable. So but generally, still going forward, we expect that forty-sixty mix, but we were able to be a little bit flexible here and not have as much equity as we needed as we roll forward our 5 year.

Speaker 10

Okay, great. That's helpful. And then totally separate question, just knock on wood, we're getting hopefully near the end of wildfire season if it ever ends and we haven't seen anything happen. So maybe you could just talk to Bob, maybe just talk to the actions that you've taken in wildfire mitigation, how you feel they're working, what else you might do? And just and then related, could you just clarify the insurance amount?

Speaker 10

And are you including deferral debt in your guidance? Or are you assuming you have to expense it in 2025? Or yes,

Speaker 5

that'd be helpful.

Speaker 3

Yes, great questions. Appreciate it. I've said before, I'm very proud of the activities and the accomplishments that the company has executed to protect our customers and our communities since the March time frame. I think we've really built a lot of muscle around our wildfire protection mechanisms. 1st and foremost is operating the system with safety.

Speaker 3

And so our capabilities in both enhanced power line safety settings and our abilities to execute PSPS is 1st and foremost in our minds of what helps protect our customers and communities in that process. I think we built a lot of muscle and capability there. Over time, we know that we have to harden the system and segment the system and we take a lot of lessons learned from our peers in California and what they've done in terms of situational awareness, the ability to see weather coming sooner, the ability to alert their customers faster and more confidently and their ability to segment the system so that the impacts of EPSS or PSPS are mitigated or muted in that process. We've been working on the intelligence side of that. We've installed AI cameras.

Speaker 3

We're starting to look at weather stations and starting to incorporate other data feeds in this timeframe. And again, huge benefits from being a fast follower here to what other people have plowed ground on and learnings that they've had over a decade of dealing with this kind of risk. And then with on the regulatory side, obviously, we're moving forward with our wildfire plan in Colorado and a system resiliency plan in Texas. All of those will help us to accelerated accelerated poll inspections, accelerated replacements of anything that we see out there, more aggressive vegetation management. So I think we've done a lot to protect the system in the short term.

Speaker 3

And I think our actions as we go forward are going to be very much focused on how we mitigate the impacts on our customers over the long term and making sure that we have a resilient and safe system into the future.

Speaker 5

Hey, Stephen. I'll handle that second part of the question around just insurance deferrals. We completed our insurance renewable this month. Premiums are significantly higher as we kind of alluded to in Q2. We saw premiums triple on us.

Speaker 5

The capacity did shrink some. So we do have we have a regulatory deferral docket in front of the Colorado Commission, where they have set an expedited schedule to get decision by the end of the year. And we're in discussions, with our peer utilities and staff in Texas around the industry issue around increasing excess liability premium. So, we do include constructive regulatory outcomes in our 2025 guidance and that is included getting recovery of our deferrals and constructive cost recovery around our wildfire mitigation plans. This is an overall part of our constructive regulatory outcomes for 2025.

Speaker 4

Okay. Thank you.

Operator

Thank you. Our next question comes from Carly Davenport from Goldman Sachs. Please go ahead.

Speaker 11

Hey, good morning. Thanks for taking the questions and for all the updates. Maybe just to start on the new capital plan, I guess, how should we think about the kind of $6,000,000,000 capital increase relative to the 40 basis points increase in the rate base CAGR? Is that just a function of base effects rolling forward the plan in other years or anything else that we should be keeping in mind there?

Speaker 5

No, Carly, you're exactly right. It's just a function of rolling forward and having a bigger base as we roll forward to the next 5 years. So that's all it is a function of, nothing else going on.

Speaker 11

Got it. Okay, great. And then maybe to follow-up, just on the 5% new load growth forecast. You mentioned in the slides that being sort of back end loaded due to the timing of data center load coming in. So is there any other granularity you can provide in terms of sort of when you expect to see that more significant inflection and load and any sense of the magnitude there?

Speaker 5

Yes. Karla, I think if you look at our 2025 guidance, our sales guidance is 3% for 2025 and expected to go up to there to 5% to 8% in the years after that and really peaking in 20 28 as we see it. And that's really driven by, like I said, kind of a combination, which is what we view as a great type of diversity. Half of that sales growth of the 5% is coming from data centers. But we also have significant growth in the oil and gas region in SPS out of the Permian Basin.

Speaker 5

And we're starting to see the effects of Beneficial Electrification around EVs and other BE in Colorado that helps driving kind of the other part of that growth. So, I think we see kind of more kind of middle to back end weighted, but also having this diversity in growth is helpful in the overall plan.

Speaker 11

Great. Thanks so much for the color.

Operator

Thank you. Our next question is from Jeremy Tonet with JPMorgan. Please go ahead.

Speaker 4

Hi, good morning.

Speaker 3

Hey, good morning, Jeremy.

Speaker 12

And happy Halloween. Thank you for all the details that you provided on the call today. Just wanted to come back to kind of high level thought process here. Historically, you've stuck to the conservative 5% to 7% EPS CAGR with a plus more recently, but noted that there's all these array of new opportunities that you talked about. And so just wanted to get, I guess, your thought process on moving it to 6% to 8% CAGR at this point.

Speaker 12

And it sounds like you're still at the high end there. So just want to kind of walk through that a little bit more if possible.

Speaker 5

Yes. Hey, Jeremy. Good morning. I think you think about it in 2 ways. It's 1, if you just look at our base plan, the majority of that capital is investing in our wires business, right?

Speaker 5

We're focused on that kind of safety and resiliency in our wires business. And that base plan drives 9% 9.4% rate base growth. But then it's all about the additional steel and steel in the ground related to the projects we need to deliver on retiring our coal plants, as Bob talked about, and executing on 5 plus percent electric growth. So we view that as a tremendous opportunity. We've talked Bob talked about our resource plans in flight.

Speaker 5

When you add all those up, there's between 15,000 and nearly 30,000 megawatts of generation we need to add to our system to serve our customers, over the call through 2,030. So, a huge opportunity. And I think the other part is we've demonstrated through the RFP process that we can be extremely competitive in these generation procurement processes that we have a top tier internal regulated development team that can bring projects that are very competitively priced. And so we expect to build and own, I would say, at least $10,000,000,000 of those pipeline of projects. And that's why we're sitting here very confident about not only next 5 years, but longer term executing at or at that upper half of the range and potentially going above it.

Speaker 12

Got it. That's very helpful there. So with that last comment, potentially going above it, I thought it might be too early to ask there. But I just want to dive in a little bit more. I think you talked about 3 buckets that feed into the incremental CapEx opportunity.

Speaker 12

Can you weigh out, guess, over the next 12 months what some of the milestones could be and kind of what would it take to move more of that into plan?

Speaker 5

Yes. So let's hit the first ones that are more near term. MISO Tranche 2.1, which we should get a decision by the end of the year, then we'll need to go through the regulatory approval processes. But that's roughly about $2,000,000,000 of transmission opportunities. We got the SPP, ITP that was just approved by the Board this month.

Speaker 5

That's another about $2,000,000,000 of projects that we expect to be awarded to us because they're reliability driven projects, meaning that near the need is within a few years. So those are kind of the transmission buckets. The SPS RFP is another big bucket, 5000 to 10000 megawatts. We'll get biz in, in January. And the first look investors will probably get is roughly probably Q2 of next year when we file our preferred portfolio with New Mexico.

Speaker 5

So that will at least get some insight into that with approvals going into 2026 for that. The Minnesota Resource Plan, we should get a Q1 decision out of our commission on the overall resource plan, which includes, as Bob mentioned, 7 20 megawatts of storage and CTs in there, along with some additional RFPs we're working through. And then finally, related to Colorado, we just filed the Colorado resource plan, which we're pretty excited about, with upwards of 14,000 megawatts in that. We'll work through that resource plan, call it, within a year and then we'll file RFPs. So, that will be a little bit longer dated out of opportunities.

Speaker 5

But you'll continue to see execution opportunities throughout the next 12 to 24 months for us.

Speaker 3

Jeremy, just to add on to Brian's comments, I'm really excited. We're starting to see this energy transition we've been talking about and working on for the past 5 years really start to accelerate as we start to get to the periods where we're proactively removing our coal plants from the system and replacing them with cleaner and in some cases lower cost generation resources. Brian is right, the development team that we've built in house starting with our 2017 steel for fuel plan has been an incredible asset for the company. I'd be remiss if I didn't talk about our transmission capabilities. Obviously, we have a lot of transmission to build in the company and across the country.

Speaker 3

We've been the leading provider of new line miles of transmission over the last 15 years as a company. And with all the projects we mentioned here, whether it's the Colorado Power Pathway, whether it's LRTP 2.0, 2.1, the ITP process in the Southwest, we've got a terrific transmission development and construction team here that are helping us execute on a very strategic asset for the company and the country.

Speaker 4

Got it. Exciting times ahead. Thank you for that.

Operator

Thank you. Our next question is from Julien Dumoulin Smith from Jefferies. Please go ahead. [SPEAKER

Speaker 3

JULIEN DUMOULIN

Speaker 13

SMITH:] Hey, good morning team. Keep going. I'm super impressed here. So thank you. Look, I wanted to follow-up on the 6% to 8% and obviously the timing here is obviously coincident with an accelerating backdrop on sales growth here.

Speaker 13

But what does it say about confidence in wildfire outcomes in your mind? Is there anything implicit in the read into this? I mean, again, somewhat of an unknowable, but I'm just curious if there's anything that you see in a litany of recent developments on that front as well here, if you can?

Speaker 3

Look, I'd suggest sorry, Julie, it's Bob. Thanks for the question. First of all, as I think about wildfire current proceedings as well as litigation and long term outcomes in our states. I feel confident in our wildfire position both from my comments earlier on what we're doing to protect the customers and the community going forward, as well as our position is unchanged as it pertains to our litigation matters both in the Southwest and in Colorado regarding Marshall and Smokehouse Creek. Long term, I think we're doing the right things in the system to harden it and protect our customers.

Speaker 3

There's obviously some investment that's needed there. I would suggest that obviously, 6% to 8% is an ongoing earnings number. And if we had an unexpected outcome in any of the proceedings, we'd have to accommodate that. But our position has been we didn't work we didn't act negligently in our systems in the Smokehouse Creek. Our accruals are consistent quarter over quarter and within our limits of our insurance.

Speaker 3

And we look forward to working through those proceedings and really getting them behind us and starting to partner with our communities as we move forward in time with our resiliency plans.

Speaker 13

Okay. All right. Fair enough, Bob. And actually just going back to Steve's question earlier and for the record I get Jeremy all the time. It just on what was said, you mentioned EPSS and PSPS.

Speaker 13

I mean, these are obviously terms we know well from California. I mean given you talk about being a fast follower, how quickly can some of this be implemented, right, in terms of achieving meaningful derisking of the system here? I mean what kind of timeframe are you looking at? I mean it seems like some fairly readily implemented kind of solutions.

Speaker 3

So, look, I think quickly, and I mean that in a the we have the capability to do PSPS today. We have the capability to do EPSS today as we think and every single day we do a wildfire risk assessment on the conditions across our system, across all 8 states and make decisions on how we position the system, how we set up breakers and how we set up controls. I think that probably the difference between where we sit and where some of our peers in California sit is the granularity with which we can do that. Our protection may come at an entire feeder level, which might be a 10 mile long stretch of distribution line. Our goal in the future is to be able to segment that distribution line into much more manageable, maybe 1 mile chunks instead of 1 10 mile chunks, so that we can be more targeted with the protections and more protective of customers.

Speaker 3

So I think the final analysis is we have great sort of bulk protection systems and we need to get I always say we're working with a sledgehammer today. We need a scalpel in the future and that takes investments over time. But I think from a true protection mechanism, we've got a lot of the capabilities that we need. It's just a little bit blunter than we'd like.

Speaker 13

Excellent. All right, guys. Congrats again. Nicely done.

Operator

Thank you. Our next question is from Durdesh Chopra with Evercore ISI. Please go ahead.

Speaker 4

Hey, team. Good morning. Thank you for taking my questions. Just maybe on the good to see the equity out of the way for this year, strong quarter, Brian, like you mentioned. Maybe just how should we think about the timing of the SEK4.5 billion that is in the plan?

Speaker 4

Is that ratable over basically same amount over year annually or back end loaded? Just any color there.

Speaker 5

Yes. Hey, good morning, Durgesh. Yes, I mean, I think you've heard us before is that we don't necessarily comment on or give guidance on the timing of our equity, but here's the way to think about it is if you look at the shape of our annual CapEx over the next 5 years, that's a good way to assume it kind of follows that shape as our annual CapEx is larger in the 1st few years. So that's how I think about it.

Speaker 4

That's helpful. Thank you, Brian. And something that is near and dear to you, the transferability, maybe just help out what portion of the CFO and the plan is transferability, how are you doing there versus your annual target for 2024?

Speaker 5

Yes, we've executed all of our credit sales for 2024, working on 2025, significant demand. And really it's kind of in and out, right, in terms of seeing we would give the customer what the offset in revenue and then we'd just pick it up on the tax line. So from a cash flow perspective, in and out, we've had many discussions about this. I think I view us as leaders in this in terms of the opportunities also working with the large buyers of this. It's helpful to have we have 17 Fortune 500 companies in our backyard here that we know extremely well.

Speaker 5

And so we're not only looking at 25, but also longer term deals and getting the pricing we expected. So I think overall, we expect we'll be monetizing $700,000,000 plus of credit annually going forward, and the markets there and it's been a great tool to have.

Speaker 4

Thanks, Brent. How much did you do this year? Can you just remind us quickly?

Speaker 5

Roughly $400,000,000 to 500,000,000

Speaker 4

dollars Thanks so much. Congrats.

Speaker 10

Thank you.

Operator

Thank you. Our next question is from Ross Fowler from Bank of America. Please go ahead.

Speaker 5

Good morning, Ross. Good morning.

Speaker 14

So just a couple of things. Maybe winding back to the Marshall Fire a little bit. We saw the judge's order on September 30 on the 25 file. So obviously, now we're talking a different level of multiplier from that and we sort of bucketed it in 2 pieces from what I can tell. So is there any reduction or settlement of claims related to that?

Speaker 14

Or how do we think about the calendar from here given that that order is out?

Speaker 3

Okay. Ross, it's Bob. Let me try and address what I think your question is. First of all, in Marshall, let's start with, we don't think we acted negligently. We know that the fire was started on the 12 tribes property.

Speaker 3

The first ignition occurred there. We don't believe we acted negligently in the operation of our system when we dispute the sheriff's report that we caused the second ignition. Notwithstanding, obviously, the litigation persists and the structure of the trial was architected in the judge's orders about a month ago. And so the way they've constructed it is the first trial will determine liability in the issue. Did Xcel Energy's equipment start a second ignition as part of the process of the overall fire?

Speaker 3

We'll use a second trial if necessary to determine damages And then each individual claimant is going to have to prove up their own damages and we're not going to have sort of a blanket claim or blanket number applied to any challenges. So, yes, we think that the trial structure was constructive from the judge's perspective. So that's what happened in September. I'm not certain if I answered your question or not.

Speaker 5

Yes. And I think the other part is just that in terms of I think you're asking a little bit about the multiplier effect where the actual jury would have to hear each award damages and can have a multiplier across all plaintiffs. So helpful outcome in that regard.

Speaker 14

And then next calendar steps, what should we look for as the next sort of thing to watch for here in the process?

Speaker 3

So we're in diligence right now, heavy diligence. The trial is set for next September for a couple of weeks. So I think we've got a while before there are any real milestones in the trial going forward.

Speaker 14

Okay. And then you go through in the slides today on Slide 11, you're well below the national average in most jurisdictions on bills. So maybe contextualize, there's a lot of increase in CapEx here and really good rate base growth. Have you sort of laid out what that increase would be to customer bills over the course of the forecast?

Speaker 3

Yes. Look, I think that we sit in a really good starting position, as you mentioned, and it's for a host of reasons, obviously. And as we move forward through time, we actually think the bill impacts are relatively benign as well. We sit in a region that is incredibly advantaged for renewables and so this opportunity to invest in clean generation and maybe even fractions of the cost that other parts of the country see is really what helps us keep bills low for our customers. But there's a couple other mechanisms.

Speaker 3

Obviously, we've been very prudent in managing our operating expenses over a decade, and that helps keep bills well below the average. I think we have very proactive and productive energy efficiency and demand management programs, which help our customers manage the size of their energy usage. And obviously, the access to lower cost energy helps along the way. So these are the programs that we think help keep build down. I think probably the best thing we've done is we filed in our Colorado just transition solicitation proceeding.

Speaker 3

We filed a 20 year plan in Colorado that incorporates all the investment that's expected in Colorado over that period and yielded a customer bill increase of about 2.2% over that long duration. It will be ups and downs from that number and it won't be linear along the way, but we think it's relatively manageable. And we're always looking for ways to mitigate even those types of increases through, again, very aggressive cost management. Our 1x LNG Way program, I mentioned in my remarks, has delivered real benefits and avoided costs to our operating expense line and to our fuel line.

Speaker 5

Yes. I'll just add, I think that's something we're really proud of. You mentioned slide 11, but the slide before that around call it residential share of wallet is something we're really proud of. Our bills on inflation adjusted are lower than they were a decade ago. And then if you look at our 2 biggest jurisdictions, Colorado's 2nd lowest of the country in share of wallet, Minnesota's 5th lowest in the country in share of wallet.

Speaker 5

So we're starting from a really good place too as we think about the significant investment cycle. So appreciate the question on that.

Speaker 14

Thanks, Brian. Thanks, Bob. Great update today.

Operator

Thank you. Our next question comes from Sophie Karp from KeyBanc. Please go ahead.

Speaker 1

Hi. Good morning, everyone. Congrats on the great update all around here. A couple of questions for me. You guys have a couple of settlements in front of the Minnesota Commission.

Speaker 1

1 is the resource plan and the gas rate case. Any reason to kind of think that some items in those 2 may be controversial and will cause some delay in the settlement approval?

Speaker 5

Hey, Sophie. Good morning. No, let me take first one, this sort of gas case, unanimous settlement, I think is very straightforward. The ALJ recommended approval of our settlement, this month. And so we expect the commission decision in Q1.

Speaker 5

So, certainly optimistic that that will be approved. On the resource plan, I think, again, those a resource settlement with the major stakeholders and intervenors in that document. I think it really demonstrates kind of our work with our stakeholders to bring forward a settlement that not only addresses the resource plan in really an expeditious manner, which is great to see, but also resolves, one of our RFPs outstanding. So overall, I think we're pretty excited about the work, and partnership with our stakeholders and their resource plan and hopeful that Minnesota Commission approves that, which would be a Q1 event too.

Speaker 1

Great, great, great. Thank you. And then on kind of on wildfires, I know industry has been talking for a while about legislative solutions to that. I'm just kind of curious if you have any insight into which states where you operate or other states may be in the West may take that up in the upcoming legislative session. Is there any kind of data points on that right now?

Speaker 3

So from a Sophie, it's Bob. From a regulatory perspective, obviously, we think Colorado will take up and we expect a decision in our wildfire proceeding in August of this year. We'll sorry, August of next year. Our resiliency plan in Texas, that commission has been working through those dockets very efficiently. So we expect outcomes in Texas next year as well.

Speaker 3

On the legislative front, I think that's probably a longer burn candle, making sure we look at the legislation in all the states. I think it's on topical for certainly all the Western states as we move through time. I'm not certain, I'd suggest there's a lot of outcomes that we expect in 2025, but a lot of dialogue around how do we protect customers and communities in those states.

Speaker 5

Yes. I'd just add a lot of focus on education with our stakeholders and our legislatures, particularly in Colorado. And we're also working with our peer utilities in Texas on that front in terms of talking to stakeholders on Texas. It's also one of EEI's primary topics and issues that they're looking to address. So very topical for our industry and we'll continue to work with our states, to see if there's longer term solutions.

Speaker 1

Thank you. Appreciate the comments.

Operator

Thank you. Our next question comes from Travis Miller with Morningstar. Please go ahead.

Speaker 6

Good morning. Thank you.

Speaker 3

Hey, Travis.

Speaker 6

I know this is no longer the hot topic, but green hydrogen, I wondered if you had any update on where you all stand. I know that was a big initiative for you at least several quarters ago. Does it show up in pluses or minuses show up in the new investment plan, hydrogen hubs? Any updates just generally on the green hydrogen initiatives?

Speaker 3

Yes. Thanks for the question. You're right. It's sort of been on a bit on the back burner for the company and probably for the country as well. We're still seeing progress made in Europe around hydrogen.

Speaker 3

I saw a big energy pipeline complex get approved in Germany. This has been a big priority for the DOE and I've been on record saying that the country needs a cleaner molecule and hydrogen is probably the most flexible one that we've seen. And whether it's used in its pure form as green hydrogen or it's combined with CO2 to make something more like a clean fuel like a green methane. I think that we're going to need a molecule like that in the country for industrial processes. It has slowed down in its initiatives.

Speaker 3

We were a recipient of a hydrogen grant with the DOE and that work continues albeit fairly slowly. And we're still really waiting on regulations coming out of treasury final regulations on 45Q that would be on the production tax credit for hydrogen. So a little bit back burner for us. I still think I think it's a promising technology. And as you look at the increase in growth that we're seeing across the country in terms of electricity, firming up wind and solar is going to need to happen.

Speaker 3

It's likely to happen with gas and batteries in the short term. And over the longer term, maybe a combustion turbine fired on a cleaner fuel is the path forward. And so like we're seeing the acceleration in nuclear R and D, you might see some acceleration in green hydrogen R and D and advancements in the cost curve, because I think that the need is going to be higher as we move forward in time.

Speaker 2

And nothing is included in our capital forecast for hydrogen?

Speaker 6

No. Nothing. Okay. Nothing? Did I hear you that right?

Speaker 13

Correct.

Speaker 10

Okay. Okay.

Speaker 6

And then you kind of answered my question, but the resource plans that it's too early to expect any kind of green hydrogen to

Speaker 5

be in the U. S. Yes. That's correct. Yes.

Speaker 5

Okay.

Speaker 6

That's all I had. Thanks so much.

Speaker 9

Thanks.

Operator

Thank you. Our next question is from Paul Patterson from Glenrock Associates. Please go ahead.

Speaker 7

Hey, good morning. Hey, Paul. Just Just back to the I guess Ross's question on the rate trajectory, I guess. You guys I think you guys mentioned 2.2% in Colorado. Is that over the next few years?

Speaker 7

That sounds like a long term thing. I'm just wondering just I know you guys have difference in expectation in terms of sales growth and what have you and I would assume that would offset a lot of this. Over the next few years, is that kind of the area we should be thinking about just roughly obviously, it's going

Speaker 5

to vary. But is that kind of roughly what we should be expecting around your service territories in the next 3 years or so just in that neighborhood? Hey, Paul. This is Brian. Yes.

Speaker 5

What Bob was mentioning was in our Colorado resource plan, we filed a longer term rate trajectory that encompasses all of our expected investments over it was a 5, 10, 15 20 year period. Bob was mentioning the 20 year numbers where you had 2.2% rate growth over that time period. So right in line with inflation and that included rate base growth of 9%, so significant investment. And that was the retail sales growth of roughly 5% for the timeframe helped offset that, which is really the point is this large loads can help provide customer headroom and build headroom for all of our customers. So a good piece of analysis that we included in our Colorado resource plan.

Speaker 5

I think over the next 5 years, look, it's going to vary by jurisdiction. Over the next 5 years, we're roughly seeing about a 3% bill impact, which we think is very manageable and longer term opportunity as we showed in the Colorado resource plan to have the large to have kind of customer build headroom created from the significant growth we're seeing across different industries.

Speaker 7

Okay. And then just on slide 9 and the sort of the potential there on data centers, just could you just remind me what that means, these customer requests? And I guess sort of the cadence that we might see in terms of I mean, just there's a huge delta between the 2. Just if you could I'm sorry, if you could just sort of elaborate a little bit more on that,

Speaker 5

what's that? Sure. That's I mean, think of that as our pipeline of requests, like requests that we've actually taken in our from our economic development team. But then it's then where how we get down to the high probability, lowered is what Bob talked a little bit about is through publicly announced projects with signed agreements, whether they've acquired land or purchased from us and we're close to signing maybe in the next 12 months. So that's kind of how we bring that down to that 2.6% growth that we include on that slide.

Speaker 5

But what this also demonstrates is if a high probability load doesn't come to fruition, there's a significant pipeline behind it. So not only do we think that's conservative, but we also see this growth extending beyond 2029. We just give you a 5 year sales growth number and we expect that to continue to build in our opportunity, where we're focused on is continuing to help serve these data center customers in the long term.

Speaker 3

Awesome. Thanks so much, Paul. That's the sort of the very specific company answer. I think what you're seeing though is obviously big demand across the country. And we know there's double counting in a lot of people's inbound requests as these large loads come looking for transmission and generation service.

Speaker 3

But it highlights a different need, which is we as a country, we as an industry need to be accelerating our ability to develop both transmission and generation to serve the load that we think is on the come. And on the face of it, it's a meaningful load. It's a little more concentrated. If you divide it across the entire country, it seems manageable. As you get into very specific load pockets, it comes with a lot of need and a lot of speed that's needed.

Speaker 3

And so we think about a pace and a scale of both investments to meet this need as a company and as a country and partnerships with our stakeholders and local communities, regulators, legislators coming together to make sure that we can solve this opportunity for the country as we see it. And as you mentioned, rising tide lifts all ships. If we have a higher load factor on our system, that brings the per unit cost down for everybody. And so today, if the country has a load factor in the 40% to 50% with high load factor customers like these, with EVs charging at night, with other high intensive energy loads. I think that is an opportunity for us to mitigate cost increases across the entire country as we transition both our transmission and generation footprint for the next generation.

Speaker 3

I'm excited about it. I really am. It's an opportunity that we're going to have to step into very quickly and in partnership with a lot of people and some new people at the table, but I'm excited about all of it. Awesome. Appreciate it.

Speaker 3

Thank you.

Operator

Thank you very much. As we have no further questions in the queue, I would like to turn it back over to CFO, Brian Van Ael, for any closing remarks.

Speaker 5

Yes. Thank you all for participating in our earnings call this morning. Please contact our Investor Relations team with any follow-up questions.

Operator

Thank you very much. That concludes today's conference. You may now disconnect.

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