Xcel Energy Q1 2022 Earnings Call Transcript

Quartr
Provided by Quartr
April 28, 2022

There are 11 speakers on the call.

Operator

Good day, and welcome to the Xcel Energy's First Quarter 2022 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 their Investor Relations. At this time, I would like to turn the conference over to Paul Johnson, Vice President, Treasurer and Investor Relations.

Speaker 1

Good morning, and welcome to Xcel Energy's 2022 First Quarter Earnings Call. Joining me today are Bob Frenzel, Chairman, President, Chief Executive Officer and Brian Van Avel, Executive Vice President and Chief Financial Officer. In addition, we have other members of

Speaker 2

the management team in the

Speaker 1

room to answer your questions if needed. This morning, we'll review our 2022 results, share recent business and regulatory developments. Slides that accompany today's call are available on our website. As a reminder, some of the comments during today's All may contain forward looking information. Significant factors that could cause results to differ from those anticipated are described in our earnings release and our SEC filings.

Speaker 1

In addition, today we will discuss certain metrics that are non GAAP measures. Information on the comparable GAAP measures and reconciliations are included in our earnings release. With that, I'll turn the

Speaker 3

call over to Bob. Thank you, Paul. Good morning, everybody. At Accel, we had another strong quarter Recording earnings of $0.70 per share for 2022 compared with $0.67 per share in 2021. And as a result, we're reaffirming our 2022 earnings guidance of $3.10 to $3.20 per share.

Speaker 3

During the quarter, we made strong progress on our clean energy plans achieving significant and constructive regulatory outcomes. In February, the Minnesota Commission approved our resource plan, which achieves an 85% carbon reduction and a full coal exit by 2,030. Other key components include an early retirement of the King Coal Plant in 2028 and the Sherco Unit 3 in 2,030, 10 year extension of our Monticello Nuclear Facility and the addition of approximately 6,000 megawatts of new wind and solar resources The ownership of 2 new generation tie lines associated with the retiring coal plants as well as the associated 2,600 megawatts of renewable resources on those lines. And finally, the Commission recognized the need for approximately 800 megawatts of firm dispatchable resources, We should go through a separate certificate of need process. As you can tell that based on the latest MISO capacity auction results, It's critical that we add these firm dispatchable resources to ensure the reliability and affordability of the transition for our customers.

Speaker 3

Shifting to Colorado earlier this week, we reached a revised settlement on our electric resource plan. As a result, additional parties joined that settlement. The revised agreement further accelerates the retirement of our Comanche 3 Coal Unit to no later than January 1, 2000 and 31, which we believe addresses the concerns expressed by the commission during previous deliberations. The settlement includes approximately 4,000 megawatts of renewable additions in the conversion of our Pawnee coal plant to natural gas no later than January 1, for 2026. This resource plan is expected to reduce carbon by at least 85% by 2,030.

Speaker 3

We believe the revised segment will enable the commission to rule on the resource plan in June. Together, our Minnesota and Colorado resource plans will add nearly 10,000 megawatts of renewables to our system And achieve an 85% carbon reduction by 2,030. This is consistent with our Steel for Fuel strategy, which provides a significant hedge against rising commodity prices and is projected to generate over $1,000,000,000 of fuel related customer savings in 2022 alone. In terms of next steps, we anticipate issuing RFPs in the second half of this year with insight into the preferred portfolios early next year and commission decisions in the first half of twenty twenty three. We expect the recommended portfolio generation assets will include self build, build own transfers as well as some power purchase agreements.

Speaker 3

This timeline represents a modest delay in our original plans, but provides additional time for more clarity given the solar supply chain considerations. Last quarter, the Colorado Commission approved our $1,700,000,000 pathway transmission project to enable access to 5,500 Megawatts of new renewables in some of the richest wind and solar resources in the region. The commission also conditionally approved the 90 mile May Valley to Longhorn line extension with an additional investment opportunity of Approximately $250,000,000 These constructive regulatory outcomes reflect our alignment with our commissions on our clean energy transition, It's critical as we work to deliver reliable, affordable and sustainable energy to the states, the communities and the customers that we serve. We also remain excited about the transmission expansion opportunities in our Midwest region. MISO's Future 1 scenario, which reflects an $30,000,000,000 of investment opportunity is expected to be awarded in 4 discrete tranches.

Speaker 3

Tranche 1 includes roughly $10,000,000,000 of projects. Opportunity for Xcel Energy within Tranche 1. We expect to have more clarity this summer after MISO provides more detail on the recommended portfolio. Longer term, we expect to be awarded approximately $5,000,000,000 to $6,000,000,000 in total FutureOne Investments. And as we've previously discussed, our capital investment plan is not dependent on changes in federal policy.

Speaker 3

However, the energy provisions that were included in the Build Back Better legislation would provide substantial customer benefits While that legislation has stalled, there is ongoing discussion of a more modest version potentially moving forward this year. We would expect it to include new and extended tax credits for wind, solar, hydrogen, Storage, nuclear and even transmission, along with a direct pay option for those tax credits. We continue to work with our federal delegation as well as the EEI to advocate for these provisions, which we believe would benefit our customers And we recently received approval of our transportation plan in Minnesota, which outlined future program focus areas and allows for implementation of new fast chargers in our service territory in Minnesota. We're also supporting comprehensive transportation legislation in Minnesota that includes the potential for customer rebates similar to what we're implementing in Colorado. We're planning a more substantial update around these programs this summer to coincide with potential federal funding from the IIJA, And these are important steps in helping drive electric vehicle adoption as we support the goals of our states.

Speaker 3

Given strong alignment with our states on EV goals and our progress to date, we continue to anticipate significant We've made significant progress this quarter and I'm proud of the way our teams delivered those results. Our regulatory settlements and outcomes reflect our diligent efforts to listen, engage and collaborate with our many stakeholders, not just through regulatory processes, but also through our sustainability priorities and our core values. We have a history of Strong storm restoration and earlier this month had another opportunity to showcase our operational excellence when we experienced 2 feet of snow in North Dakota. Our teams were prepared and restored power to customers quickly despite battling Frigid conditions. Our system resilience and storm preparedness are great examples of our continued discipline in proactive planning, Strong execution and our employees' commitment to customer service.

Speaker 3

We strive to live our company values every day and as a result, we were again named as 1 of the world's most ethical companies by Athosfhere and the world's most admired companies by Fortune. We're also recognized by Military Times And GI Jobs for our continued commitment to veteran hiring. And finally, I want to pause and remember that today, April 28, is Workers Memorial Day, which for more than 50 years has been a day of remembrance for workers Who have been injured or killed in the line of work. And I want to acknowledge that all the women and men of Xcel Energy, Contractor partners and all utility workers across the country sacrificed to provide the critical energy needs of our customers and our communities. And with that, I'll turn it over to Brian.

Speaker 4

Thanks, Bob, and good morning, everyone. We had another solid quarter recording earnings of $0.70 per share for the Q1 of 2022 compared with $0.67 per share in 2021. The most significant earnings drivers for the quarter included the following: higher electric and natural gas margins increased earnings by $0.12 per share, primarily driven by riders and regulatory outcomes to recover our capital investments. In addition, a lower effective tax rate increased earnings by $0.05 per share. Keep in mind, production tax credits lower the ETR.

Speaker 4

However, PTCs are flowed back to customers Through lower electric margin and are largely earnings neutral. Offsetting these positive drivers were Increased depreciation expense, which reduced earnings by $0.06 per share, reflecting our capital investment program Higher O and M expense, which decreased earnings by $0.02 per share higher interest expense and other taxes, primarily property taxes, Decreased earnings by $0.02 per share and other items combined to reduce earnings by $0.04 per share. Turning to sales. Weather adjusted electric sales increased by 3.9% for the Q1 of 2022, largely due to higher C and I sales driven by improved economic activity as COVID impacts lessened. Our unemployment rate is 60 basis points below the national Average and our economies are growing faster than the average for the country.

Speaker 4

As a result, we've increased our 2022 electric sales growth assumption to 1% to 2%. Our O and M expenses increased $18,000,000 for the Q1, primarily driven by higher insurance costs Additional investments in technology and our customer programs. We now project an annual O and M increase of approximately 1%. While Bob touched on the resource plan and transmission regulatory approvals this past quarter, we also made strong progress on various rate cases. In March, the Colorado Commission approved our electric rate case settlement, which will provide a net rate increase of $177,000,000

Speaker 2

Based on

Speaker 4

a ROE of 9.3 percent and an equity ratio of 55.7 percent. New rates were effective in April. In February, the New Mexico Commission approved our electric rate case settlement, which will provide a net rate increase of $2,000,000 and includes a ROE of 9.35 percent and an equity ratio of 54.7 percent for determining the revenue requirements for our wind projects. Rates were effective at the end of February. Now every settlement is based on compromises and we feel these are constructive outcomes for all parties.

Speaker 4

We also have pending rate cases in other jurisdictions. In Texas, we have a black box settlement in our electric rate case, which provides a rate increase of approximately $89,000,000 The agreement also accelerates the depreciation life of the Toccoa plant to 2,034. The commission decision is anticipated later this year. We also have pending electric and natural gas rate cases in Minnesota and are early in the process. We're in the discovery phase and expect intervenor testimony this fall, followed by commission decisions in 2023.

Speaker 4

In addition, we'll look for opportunities to resettlements on both these cases after interviewing your testimony has been filed. Earlier this year, we filed a natural gas case in Colorado. The request is driven by significant capital investment to support continued customer growth, Safety, reliability and resiliency. We anticipate a commission decision later this year and final rates to be implemented in November 2022.

Speaker 2

Details on these cases and schedules

Speaker 4

are included in our earnings release. Shifting to earnings, We've updated our 2022 guidance assumptions to reflect our latest information. Details are included in our earnings release. Please note our depreciation expense assumption has increased to reflect regulatory recovery in Colorado and New Mexico. In addition, the decrease in capital riders and the lower ETR reflect an IRS increase in the value of the PTC.

Speaker 4

These assumption changes are largely earnings neutral. Finally, the combination of increased sales growth, favorable weather and lower O and M costs are expected to mitigate the headwind associated with replacement power costs related to and increased interest expense due to rising rates. As a result, we are reaffirming our 2022 earnings guidance range of $3.10 $3.20 per share, which is consistent with our long term 5% to 7% EPS growth objective. With that, I'll wrap up with a quick summary. The Minnesota Commission approved our resource plan.

Speaker 4

The Colorado Commission Our electric rate case settlement and pathway transmission project. We reached a revised settlement on the Colorado Resource Plan, Which has the support of additional parties and accelerates retirement of Comanche 3 to no later than January 1, 2001. We are reaffirming our 2022 earnings guidance, We remain confident we can continue to deliver long term earnings and dividend growth within the upper half of our 5% to 7% objective range as we lead the clean energy transition and keep those low for our customers. This concludes our prepared remarks. And operator, we will now take questions.

Operator

We will now take our first question from Jeremy Tonet from JPMorgan. Please Go ahead.

Speaker 5

Hi, good morning.

Speaker 3

Hey, Jeremy, how are you? Busy day for you.

Speaker 5

That's right. That's right. Thanks. I just want to start off on the solar supply chain. You noted in the release some timing changes there.

Speaker 5

And Just wondering if you could speak to your conversations with developers in the supply chain and any thoughts you could share or any consensus Hearing out there with regards to resolution of the DoC's anti circumvention investigation or just any thoughts on that topic in general at this point?

Speaker 4

Hey, Jeremy. Good morning. We are certainly seeing the disruptions And given you saw the impacts in our earnings release and all the impacts it's had on the panel supply. Now we're in regular contacts with developers, whether it's on No, BOT projects or PPAs that are in the works or even as we think about, we're going into potential RFPs in Minnesota and Colorado later this year. I don't think there's necessarily a consensus.

Speaker 4

I think there's good arguments for It's not to be affirmed in terms of tariff, but we'll wait and see where the Department of Commerce rules on it. Certainly, right, there'll be the preliminary finding at the end of August, will be the first real data point and then we'll see how things go from there. For us, No, I think we're in a good spot. Solar CapEx is less than 3% of our overall 5 year CapEx plan. And we have flexibility to delay our projects, the Sherkel Solar project in the Western Mustang.

Speaker 4

So we really just push them later into our 5 year plan. I just want to note that we are very committed to those projects, both the Sherco Solar and Western Mustang. Now Sherco Solar is going to be the largest Solar Farm in Minnesota, we're pretty excited about it. We can reuse a coal transmission interconnection. It reinvests Tax base into that community and also able to create good local paying union construction jobs.

Speaker 4

So we are very committed to that and look forward to working with our interveners And our stakeholders in the commission, as we bring forward a new plan on that. But really we just ask for some time, as you said, to work through kind of what the real supply chain impacts are here. I think broader or on a broader note, I think this really points to the importance of getting a domestic clean energy supply chain. And hopefully with this event and some of the other global events that are happening is we can get some legislation passed in Washington as Bob noted. Right.

Speaker 4

There's a lot of incentives for clean energy manufacturing and we're very supportive of that and then also very supportive on the Tax credit aside for production of wind, solar, hydrogen, I think that will be absolutely great for our customers long term. So we know certainly weighing in where we can on this issue.

Speaker 5

Got it. That's very helpful there. And then Maybe just pivoting towards Colorado and the IRP revised settlement filed in April. With the implications for the 2,031 Camanche Unit 3 Retirement as Just wondering how you think about, I guess, potential generation replacement options going forward at this point or just any other details on that that you could provide?

Speaker 3

Yes. Hey, Jeremy, it's Bob. We said that we've got about 4,000 megawatts of new renewables as part of This resource plan, as it pertains specifically to Comanche 3 replacement, we're going to need a separate regulatory To address the capacity replacement and the energy replacement of that unit and we expect that to be maybe 2 to 3 years from now.

Speaker 5

Got it. Thank you. And then maybe just a quick last one on MISO, the $1,000,000,000 to $2,000,000,000 of CapEx for Tranche 1 That you identified today, just wondering how that, I guess, squares versus your expectations? Have they been kind of changing over time based on what you're seeing Unfolding here. And just any other thoughts, I guess, for 23 sizing up what those investment opportunities might look like for Excel?

Speaker 3

Yes. Look, we see great opportunity and great need for transmission expansion in the upper Midwest and is one of the largest transmission owners in the country. Our expectations for Future 1 and Tranche 1 really haven't changed. That's still a bit of our same range, 1 to 2 in tranche 1 and 5 to 6 over Future 1. And then if you think about longer term In the country nationally, when you look at MISO's Future 3, that looks a little bit more like what would match something that has the decarbonization plans of the United States embedded into it.

Speaker 3

So we see great opportunity here. Only thing that's changed in our view was a little bit of a delay in the timing of The MISO publishing the results and then getting Board approval for the plans, but our investment opportunity looks very similar.

Speaker 5

Got it. That's all very helpful. I'll leave it there. Thanks.

Operator

We will now take our next question from Julien Dumoulin Smith from Bank of America. Please Go ahead.

Speaker 6

Hey, good morning, team.

Speaker 3

Thanks for the time. Hey, good morning, Julian.

Speaker 6

Hey. So perhaps just the nuance here on Comanche 3, just if you can speak to it, just the extent to which

Speaker 3

the plant is out and

Speaker 6

kind of Near term purchase power impacts. I imagine that that's fairly transparent. I wanted to check-in on that. And then also related on C3, Just any efforts to improve the reliability of the unit through the 2,031 timeframe?

Speaker 3

Sure. Happy to chat about it. Look, Unit 3 went down in January. In our Q4 call, we indicated that It was likely going to be a 2 month repair. After inspection and discovery, it looks more like a 4 month And our cost looks more like $25,000,000 as opposed to the $9,000,000 or $10,000,000 we talked about in the Q1.

Speaker 3

I feel comfortable with that in that the collector rings on the generator, which is what we needed to repair, were sourced, have been and have been delivered to the United States and we're starting reassembly as early as this week. So our June timeframe, I feel pretty comfortable about. We did have higher purchase power costs to replace that unit and that's reflective of the $25,000,000 estimate that we put out there. And look, longer term, the reliability of that unit, I think early in its life, it had some asset challenges and They're largely behind us. And I think we've spent a lot of time on operational excellence at And our generations lead broadly and in Colorado in particular, and I think we should have sustained reliability in that unit for the balance of the decade.

Speaker 6

Got it. Excellent. And then just if I can pivot here to the buy ins, as you previously talked about, Obviously, some of your peers have as well. I mean, how is that going, the process, the negotiations? I mean, wind cost increases, is that an issue here for the relative economics?

Speaker 6

Or is pressure on that Vertical keeping the economics close to intact here. Just to kind of revisit the wind subject, especially in light of everything going on in the solar.

Speaker 4

Hey, Julien, just to clarify, when you say buy ins, you mean PPA buyout opportunities?

Speaker 6

Yes. Absolutely. Sorry, indeed. Yes.

Speaker 4

Different nomenclature, different companies. The way we've talked about it recently, like we still see a good opportunity, but I think For us, the next opportunity comes through the RFPs that we're issuing after we resolved it Minnesota resolved the ERP and we're waiting on the Colorado Commission to approve our revised ERP settlement. So I think That's the process for us in near term in terms of seeing some potential PPA buyout opportunities as it will get bid into an RFP and we have a nice process set up, so we don't have to work outside of that. I think so as I think about it longer term with where gas prices are today and call it the upward That change in long term gas forecast is I think it provides us more opportunity on wind even if you see higher Capital cost for wind pushed up by inflation or on the solar side, right? That comparison against gas being kind of the marginal fuel, the offset fuel We'll make the renewable strategy and buyout opportunities more valuable for our customers.

Speaker 4

And right, we have to demonstrate customer benefit. And then the other data point to watch and we've spoken about it before is an extension of long term extension of PTCs Just provides a longer runway for us to look at buying something out and repowering them because we've been very successful at our recent buyouts that have been a buyout and repower. So that's a little bit of commentary before, but I think when you think about inflationary costs on renewables relative to how we look at it for customer benefit and why The fuel you're offset is, I think they'll still hunt.

Speaker 6

Right. Certainly. I'm just curious on the timing. It sounds like that's not necessarily As relatively pressing as in these other RFPs.

Speaker 4

That's what you've watched first. Yes. No, I think it's more about the commission when there's a process upcoming like an RFP. The commission, it makes sense for us to follow that RFP and have that process already laid out versus doing a separate 1 op regulatory approval.

Speaker 6

Got it. Okay. Excellent. I'll leave it there. Thank you, guys.

Operator

We will now take our next question from Durgesh Chopra from Evercore. Please go ahead.

Speaker 2

Hey, good morning team. Thank you for taking my question. Brian, just one quick one for me. Looking at the 2020 earnings guidance reaffirmation and changes, the depreciation expense increase that is the is that I know it says regulatory recovery here. Is that a depreciation expense change that to whatever studies that you were able to get?

Speaker 2

Or what does that Actually, we present.

Speaker 4

It's really the implementation of new rates with the rate cases in Colorado and New Mexico. And so that will be offset by the revenue with it. So it's really earnings neutral and just the implementation of new rates that comes out of the rate case.

Speaker 2

Got it. Is that cash flow accretive? Are you I mean is it higher rates or I'm just

Speaker 4

Yes. Are these new? Yes.

Speaker 2

Okay. So this would be cash flow positive modestly, I guess?

Speaker 4

Yes.

Speaker 2

Okay. Thank you.

Operator

We will now take our next question from Travis Miller from Morningstar. Please go ahead.

Speaker 7

Good morning. Thank you. Hey, Travis. There's been a lot of talk obviously about solar and supply chain. I'm wondering you touched on this a little bit, but wanted some more comments on could you see a shift toward wins In the near term, especially these RFPs, would you anticipate maybe seeing a little solar pullback at least again in the near term, Little more wins and are there supply chain issues that might prevent that on the wind side?

Speaker 4

You know, Travis, it's a good question. One of the reasons why at least in Minnesota, we've slowed down The RFP is to see if we can get some visibility into that preliminary finding, for the tariff investigation. And so I think that will help, but these are longer term, right? We're looking to source renewable projects, 25 and beyond. So I think it's a fair question and you certainly could see some shift from solar to wind maybe in the near term.

Speaker 4

But Ultimately, the way we look at it long term, we are adding a lot we do need a lot of solar and we need that resource diversity From wind and solar, and so it's not just purely a cost perspective, it's what is called a capacity accreditation for solar. So there's a little bit more Nuance going into it even if you do see some changes in overall capital costs.

Speaker 3

Yes. So, Travis, this is Bob. Just to add on to what Brian said, When you think about our renewable mix right now, we're about 11 gigs of wind and 2 gigs of solar, if you count community and rooftop in that number. As we look forward, the 10,000 megawatts that we're likely to add over the next decade is probably 6040 wind solar, but that's for us and it's indicative of our needs and where we what our starting point is. You asked a good question about nationally, could you see A shift towards wind in lieu of solar.

Speaker 3

I think it's going to be company dependent, but you do raise a nice thoughtful point around The wind supply chain looks a little bit more certain right now than the solar supply chain. But again, we expect the DOC outcome sometime in August, and we're hopeful to not have a significant tariff there for the benefit of our customers. And in the meantime, just the fact that we've got Still working hard on federal legislation for tax credits, recognizing that with inflationary pressures on both, All these will be mitigants for a clean energy transition across the country.

Speaker 7

Great. Thanks so much. I appreciate all that detail. And then just one other quick thing, when might we see some of these transmission projects and proposals start flowing through Your CapEx plan, is this a year away, 2 years away, months away?

Speaker 4

So Travis, we expect Approval in, call it, the summer timeframe, MISO July timeframe. And then certainly, we would need to go through a certificate of need process with our commissions. But right now, we don't have any of that MISO Capital that in, call it, Tranche 1 in our 5 year plan. So could you start to see it in the 25, 2026 timeframe? Certainly, potentially, and we'll give you more No visibility into that as we get some ourselves with the approval of MISO and then we start the regulatory proceedings at the state level.

Speaker 4

Okay, great. Thanks.

Operator

We will now take our next question from Nicholas Campella from Credit Suisse. Please go ahead.

Speaker 8

Hey, everyone. Thanks for squeezing me in here and taking my question.

Speaker 1

Our pleasure, Nick.

Speaker 3

I heard you on the yes, thank you. I heard

Speaker 8

your prepared remarks on just the MISO capacity print. Can you just kind of Update us on how Exela is exposed to these higher capacity prices on the supply side here. Just kind of saw some of your MISO peers Put out some releases on some seemingly high bill impacts. And I know it's very specific How your own vertically integrated portfolio is positioned? So just how should we kind of think about the impact of supply costs for Xcel customers?

Speaker 8

Thank you.

Speaker 4

Yes. Nick, good morning and good question. Clearly, it's hit some headlines here in April as a result of Planning auction and I would say it was unexpected by parties, right? You had the capacity payment last year, right, was $5 Per megawatt per day and it hit the cost of new entry here and ultimately MISO was short when you look at the numbers. I think it really highlights the importance of dispatchable generation in making this Transition reliably and methodically.

Speaker 4

And I think you saw that in our commission decision with our resource plan As they saw the need for us to add dispatchable generation as we shut down our coal units. And so But for us in this auction specifically, we're long. And so it's a benefit to us. And so ultimately, it will be a benefit To our customers and the way we look at it is it will flow through in our Minnesota rate case and help us mitigate our electric rate case and hopefully facilitate a settlement. So overall, it's we're in a good position with capacity auction, and it's important and just a Credit to how we think about this transition and ensure that we have the capacity to serve our customers.

Speaker 8

That's real helpful. And then just one cleanup question on the MISO transmission CapEx upside. Is it still for any kind of Capital upside that's not in the plan today, should we still be thinking 50% equity funding there?

Speaker 4

Yes, that's fair. I mean, the one caveat that we've spoken out before is, no, we get federal legislation passed that does help us from a financing perspective improves our credit metrics. So but If we don't get that, then that's a good way to think about how we finance incremental capital.

Speaker 8

Thank you. See you in New York here in a little bit.

Speaker 4

Absolutely. Looking forward to it.

Operator

We will now take our next question from Ryan Levine from Citi. Please go ahead.

Speaker 5

Good morning.

Speaker 9

If the Colorado resource plant tilts away from solar, how could this impact incremental CapEx Connected to the Colorado Pathway. I assume that there is some language in your presentation. I was hoping to clarify.

Speaker 4

So Ryan, I think you're talking about the potential incremental capital that we need for the Colorado Power Pathway that we have we haven't called upside, but we haven't identified yet around voltage support, system stability. Correct. I think it really depends. It's a tough one to answer because it depends on exactly where these projects are end up Being located. And so I think it's a little bit too early to say if we shift some more to wind than solar because it is so location dependent, asset dependent in how we think about it.

Speaker 4

So we certainly No. Broader point is we absolutely believe we need that capital. It's just more of Where it's going to be located, right? We've talked about it. A lot of it's the think of the 345 that we're building as a freeway and these are the on ramps And so we'll need it, but it's a fair question.

Speaker 4

We just don't there needs to be a little bit more visibility into what the actual portfolio could look like. And a marginal shift between wind and solar probably doesn't change that number much.

Speaker 1

And to be clear, Ryan, we've not made any Change in our view of solar versus wind. It's really going to come through the RFP process to determine how many megawatts of solar, how many megawatts

Speaker 9

Okay. And then one just broader question, given some of the moving timelines with given supply chain challenges And some of the solar policies from the government. How broadly are you feeling about reliability within your service territory And needs for incremental capacity to help serve your customers?

Speaker 3

It's a great question. Appreciate it, Ryan. This is Bob. If you saw on both of our resource plans, we have continuing need for firm dispatchable resources in the upper Midwest. We got a separate certificate process to build back firm capacity in the upper Midwest.

Speaker 3

Similarly, in the Colorado Resource Plan proposal, so we recognize the need for reliability. Now you'll see that we moved in the upper Midwest, for example, from a combined cycle to combustion turbines. We do think that With the geographic advantage and the place that we sit in the country, we do have high capacity factors for wind and coincident On Peak Solar, so we do think that the assets that need to come back are largely combustion turbines. We're prepared and have offered in all of our jurisdictions to be able to Co fire those with green hydrogen when and if that becomes available. And so we're looking at the very low capacity factors that are real need System Reliability.

Speaker 3

As I think about CTs broadly, it's a bit of an insurance policy. We need them for the very rare times when the sun doesn't shine and the wind doesn't blow and the batteries aren't available, But it's a great insurance policy to have.

Speaker 4

And Ryan, just to add on to that, absolutely agree with everything Bob said in terms of longer term. In the short term, certainly, we expected some solar plus storage projects to come online in Colorado, and we're negotiating with the developers there about the impacts they're seeing. So We'll evaluate alternative opportunities to ensure we have reliability in the system.

Speaker 9

Appreciate the color. Thank you.

Operator

We will now take our next question from David Peters from Wolfe Research. Please go ahead.

Speaker 10

Hey, good morning, everyone. Just curious to maybe get an update on some of the regulatory items in Minnesota near term. I think you have The Yuri Gas Recovery case where an ALJ report is due soon. I know initially you were pretty far off with some of the intervener positions, but wasn't sure if Conversations have developed since then to where you can maybe resolve that. And then just related, any commentary on the rate case, if any, I know it's still early there.

Speaker 4

Yes. Hey, Dave. And on Yuri, we are awaiting that ALJ decision we should get it at the end of May, about 25th. And we're still Fairly far apart with the Office of Attorney General and Department of Commerce. I mean, if you read our testimony in our comments, we strongly disagree with their Assertions and we believe we acted prudently and accordingly into the commission approved hedging procedures, really for the best interest So we'll await that ALJ recommendation.

Speaker 4

And then once you get the ALJ recommendation, it should likely be in August With the commission decision on that. On the rate cases, it is like I said, it's still early In the proceeding, right, there

Speaker 7

was a couple of other

Speaker 4

rate cases in front of us that they call it or have been serially working through. So we haven't received a lot of discovery yet in the electric or gas case. So not a whole lot to update you on. But certainly as we get through the year, like I said, we talked about, so the MISO capacity auction being Help mitigating the impacts. We've seen really good sales growth in Minnesota, and our economy is strong here in Minnesota.

Speaker 4

So it's good things to see that hopefully as we get later in the year and can start to talk about settlement opportunities with Innovations, we can reach a pretty constructive outcome for all of our parties.

Speaker 10

Great. Thank you.

Operator

I would now like to turn the call back to Brian Van Ael, CFO, for any additional or closing remarks.

Speaker 4

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. That will conclude today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.

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