Xcel Energy Inc (NASDAQ:XEL). and its subsidiary, Public Service Company of Colorado (PSCo), have filed a request with the Colorado Public Utilities Commission (CPUC) for a $171 million increase in retail natural gas rates.
This request, filed in January 2024, aims to raise the average residential customer bill by approximately 9.5%. The proposal is based on a 2023 test year, a 10.25% return on equity (ROE), an equity ratio of 55%, and a $4.2 billion retail rate base that includes projected capital additions through December 31, 2023.
The proposed effective date for the rate increase is November 1, 2024. However, PSCo has suggested deferring the collection of the increased rates until February 15, 2025, to soften the impact on customer bills. The deferred revenues would then be collected over a 12-month period starting from that date.
On Thursday, CPUC Staff and the Utility Consumer Advocate (UCA) filed testimonies challenging the proposed rate hike and suggesting adjustments. The Staff and UCA recommendations would reduce the increase to $72 million and $91 million, respectively, and propose an 8.89% and 9.20% ROE. Additionally, both oppose the deferral of collections, instead proposing the new rates take effect on November 1, 2024.
The procedural schedule for the rate case includes rebuttal testimony on August 15, 2024, a settlement deadline on August 27, 2024, an evidentiary hearing from September 4-12, 2024, and a statement of position due on September 26, 2024. A decision from the CPUC is expected in the fourth quarter of 2024.
Despite the ongoing proceedings, Xcel Energy has reaffirmed its 2024 earnings guidance of $3.50 to $3.60 per share, contingent on favorable regulatory outcomes.
In other recent news, Xcel Energy has announced a comprehensive Wildfire Mitigation Plan, valued at approximately $1.9 billion. This plan, set to span from 2025 to 2027, includes substantial investments in situational awareness, operational mitigations, system resiliency, and customer support.
The company has also reached a settlement in its Minnesota natural gas rate case, resulting in a 7.5% rate increase, equating to an additional $46 million in annual revenue. This development will not impact Xcel Energy's 2024 earnings guidance, which projects earnings to range between $3.50 and $3.60 per share.
Mizuho has maintained an Outperform rating on Xcel Energy, citing potential for stock re-rating as the company advances its regulatory strategy. BMO Capital Markets and BofA Securities have both increased their price targets for Xcel Energy shares, while KeyBanc Capital Markets has maintained an Overweight rating.
InvestingPro Insights
As Xcel Energy Inc. navigates through its proposed rate increase with the Colorado Public Utilities Commission, investors and stakeholders are closely monitoring the company's financial health and market performance. According to real-time data from InvestingPro, Xcel Energy boasts a market capitalization of $30.19 billion, reflecting its substantial presence in the energy sector. The company's P/E ratio stands at an adjusted 15.56 for the last twelve months as of Q1 2024, offering a glimpse into its valuation relative to earnings.
InvestingPro Tips highlight that Xcel Energy operates with a significant debt burden, which could influence its financial flexibility and investment capacity. However, the company has demonstrated a strong commitment to shareholder returns, having raised its dividend for 20 consecutive years and maintained dividend payments for 53 consecutive years. With a dividend yield of 4.05% as of mid-2024, Xcel Energy remains an attractive option for income-focused investors. Additionally, the company's stock is known for low price volatility, providing a degree of stability in an investor's portfolio.
For those seeking more in-depth analysis and additional insights, InvestingPro offers further tips on Xcel Energy, which can be accessed at: https://www.investing.com/pro/XEL. Users can benefit from these insights by using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking a total of 7 additional InvestingPro Tips for a comprehensive investment perspective.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.