Xcel Energy Inc.
) announced a change in its plan for the proposed hike in
electric rates originally filed in Nov 2012 with the Minnesota
Public Utilities Commission. The fresh rate hike request reduces
the extent of the hike asked for in the earlier application.
As per the proposal, electric rate will now rise to around
$220.0 million from the prior $285.0 million, which roughly
translates into an overall rate hike of 8.2% from the 10.7%
requested earlier. If approved, an Xcel Energy customer will
witness a 10% increase in electricity bill compared to the
earlier 12%. The company expects the rate of return on equity to
remain the same at 10.6%.
The rate decline move was a part of Xcel Energy's strategy to
maintain a balanced growth objective by cushioning its customers
from excessive cost pressure while simultaneously recovering
The company believes this even approach will help achieve a
constructive regulatory outcome. If approved, the new competitive
rates will come into effect from the first quarter of 2014. We
note that from Jan 1, 2013, the interim rate increase has come
The key alterations made in the new fillings include reduction
of $35.0 million for the Sherburne County (Sherco) Generating
Station Unit 3 and deferment of 2012 and 2013 costs. This will
equalize the cost of the unit with its return to service by the
end of the year. At present, the Sherburne facility is undergoing
extensive repair works from the aftermath of an accident in late
In addition, the company proposed another $8.0 million
reduction for the expansion of power production in the Monticello
Plant. This also includes the 2013 costs which have been deferred
for later recovery, subject to the review of the commission.
Lastly, a $9.0 million for leveling the impacts of the 2008
recession on pension expenses was proposed by the company.
On the flip side, besides the Minnesota rate case the company
has in store other rate fillings under review in North Dakota,
South Dakota and New Mexico. This might be an overhang on Xcel
Energy's operations. Presently, the company has a Zacks Rank #3
Other energy stocks that we presently prefer are Zacks Ranked
Otter Tail Corp.
Pike Electric Corp.
Brookfield Infrastructures L.P.
Based in Minneapolis, Minn., Xcel Energy through its
subsidiaries engages in the generation, purchase, transmission,
distribution, and sale of electricity in the United States.
BROOKFIELD INFR (BIP): Free Stock Analysis
OTTER TAIL CORP (OTTR): Free Stock Analysis
PIKE ELECTRIC (PIKE): Free Stock Analysis
XCEL ENERGY INC (XEL): Free Stock Analysis
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