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Morningstar | Xcel's Growth Plan Features Move Toward Carbon-Free Future

Xcel's diverse group of U.S. regulated utilities that serve gas and electric customers across eight states and own infrastructure that ranges from nuclear plants to wind farms makes it a barometer for the entire industry.Xcel also aims to be the industry's leading renewable energy provider, a strategy that supports one of the largest investment plans among all U.S. utilities. Xcel is set to invest $20 billion in 2019-23, much of it going to renewable energy and other environmentally friendly projects. In the short run, this includes $1 billion for its Colorado Energy Plan and $1.6 billion for wind farms in Texas and New Mexico. In the long run, we think Xcel could spend more than $1 billion per year on renewable energy and other clean energy initiatives.Xcel's investment plan gives investors a transparent runway of 6% annual earnings and dividend growth potential. However, unfavorable regulatory decisions could slow growth, particularly in its largest jurisdictions, Colorado and Minnesota, where it plans to invest $15 billion in 2019-23.Xcel's investment plan creates more regulatory risk than peers. Xcel will need political, regulatory, and public support for environmentally friendly projects to meet its growth targets. Xcel has made substantial progress bringing earned returns closer to allowed returns through constructive regulatory negotiations across its system. Lower energy costs have helped keep customer bills mostly flat despite higher infrastructure charges.Xcel's multiyear rate plan in Minnesota expires in 2019, setting up critical rate negotiations this year. In Colorado, Xcel faces challenging gas and electric regulatory negotiations that will be critical for investment clarity through 2023. Xcel received regulatory pushback on new gas rates but then won approval of its preferred CEP, creating significant uncertainty going into an electric rate review in 2019. In Texas and New Mexico, recent approval for new wind energy projects and continued work with regulators on base rates should improve returns.