Xcel Energy (NYSE:XEL) is planning to invest about $3.5bn in renewables over the next five years, Xcel Chairman, President and CEO Ben Fowke said on Feb. 2 during the company’s 4Q16 earnings call.
He noted that Xcel in 2016 implemented its steel-for-fuel strategy, adding that because of the strong wind resources in the company’s service territories, Xcel has a unique opportunity to invest in renewable generation, in which the capital costs can be offset by fuel savings.
The 600-MW Rush Creek wind project was approved by Colorado regulators last year and is progressing as planned, he said, adding that the project is expected to go into service in 2018.
In Minnesota, Xcel is seeking to add 1,500 MW of new wind generation, which reflects a request for proposals (RFPs) for power purchase agreements (PPAs) for build-own-transfer projects and the company’s own self-build proposal to develop 750 MW of wind generation, he said.
“As part of the RFP process, we received proposals from 17 bidders with 95 proposals for almost 10,000 MW of wind generation, featuring a combination of PPAs and build-own-transfer projects,” he said. “We’ve analyzed the bids, developed a short list, and are negotiating with the developers. We believe our 750-MW self-build wind proposal is competitive and will complement the RFP portfolio. We plan to file a recommendation with the Minnesota commission later in the first quarter, and we expect a decision in the summer.”
Xcel also continues to make progress on the $1.5bn of undefined renewable projects, which are included in the company’s capital forecast, Fowke said.
“We are working with various stakeholders and are in advanced discussions with site developers about adding 500 to 1,000 MW of wind generation at SPS, and we expect to share further details later in the year,” he said. “Finally, last year, we entered into a wind turbine supply agreement with Vestas, which provides us the flexibility to develop up to 2,500 MW of wind generation. This agreement allows us to secure 100% of the PTC benefit and maximize the fuel savings for our customers. It’s all part of our steel-for-fuel strategy.”
He continued: “We have strong wind resources, with high capacity factors in our service territories. We have support for the development of renewable projects from state policymakers, interested stakeholders, and our customers, and we have taken timely actions to secure the full utilization of the wind production tax credits. As a result, we expect the fuel savings of wind projects will more than offset the capital costs, and that’s what steel-for-fuel is all about.”
He also said that Xcel in 2016 successfully completed the construction of the 200-MW Courtenay Wind Farm in North Dakota, on time and under budget.
“This was our first wind project in which we were the general contractor, and it’s further evidence of our ability to develop, manage, and construct wind projects,” he said.
Also speaking on the call was Xcel Executive Vice President and CFO Robert (Bob) Frenzel, who noted that the company has reached a four-year settlement in its Minnesota rate case, which is pending regulatory approval. He also said that the company “reached constructive outcomes in our Wisconsin, New Mexico, and Texas rate cases.”
Minnesota regulators approved the company’s resource plan, which will result in significant carbon reductions due to the early retirement of two coal units and the addition of wind and solar generation, he said.
The company filed requests with Colorado regulators for approval of a partial decoupling mechanism and for a certificate of need for the advanced grid initiative, he said, adding, “We expect decisions on both initiatives later in the second quarter.”
According to the company’s website, the long-term “Advanced Grid Intelligence and Security (Advanced Grid)” strategic initiative would improve power reliability, reduce power outages, make service smarter, integrate increasingly clean energy onto the grid, and empower customers with more information to control and track their energy use.
As noted in an August 2016 company filing submitted to the Public Utilities Commission of Colorado Xcel’s Public Service Company of Colorado requests a certificate of public convenience and necessity for the implementation of the company’s proposed advanced metering infrastructure (AMI) and Integrated Volt-VAr Optimization (IVVO) programs, as well as the components of the communications network that are necessary to support AMI and IVVO. Those programs are part of a broader effort to advance the electric grid through Public Service’s Advanced Grid Intelligence and Security initiative, the company said.
Among other things, Frenzel discussed the company’s Texas rate case, which was recently approved by state regulators.
“We settled the case earlier in the year, and the key terms include a base rate increase of $35.2m, power factor revenue of $12.6m, and recovery of $4m of rate case expenses in a separate proceeding,” he said.
Xcel on Feb. 2 said that it “reported 2016 GAAP and ongoing earnings of $1,123 million, or $2.21 per share, compared with GAAP earnings of $984 million, or $1.94 per share, and ongoing earnings of $1,064 million, or $2.09 per share, in 2015.”
Increases in electric and natural gas margins were primarily driven by higher rates and riders across various jurisdictions to recover Xcel’s capital investments and the favorable impact of weather as compared with the previous year, the company said. Those positive factors and a lower effective tax rate were partially offset by higher depreciation, interest charges and property taxes, Xcel said.