Dive Brief:
- Xcel Energy reported operating earnings of $195 million for Q2 2014, slightly below the $197 million in operating earnings the electric and gas utility holding company posted for the same period last year.
- Xcel's earnings were positively impacted by "better-than-expected sales growth," CEO Ben Fowke told investors on an earnings call, noting that "it is the third quarter in a row in which weather adjusted sales have exceeded expectations."
- While Xcel's year-to-date weather-adjusted electric sales have grown 1.7%, Fowke was "hesistant to call this a trend."
Dive Insight:
One possible reason for the better-than-expected sales growth is that the economy in Xcel's region is performing above the national average according to several key metrics such as the unemployment rate and job growth.
In addition to reporting earnings, Xcel announced it was creating two new transmission subsidiaries to compete in the Midcontinent Independent System Operator (MISO) and Southwest Power Pool (SPP) footprints.
"Our objective is to optimize our transmission investment as the FERC rules and market opportunities continue to involve," Fowke explained on the earnings call. The transcos will "complement our existing transmission business, which is expected to spend $4.5 billion over the next five years."
The Federal Energy Regulatory Commission's (FERC) recent ruling to lower the rate of return on equity (ROE) for transmission projects in New England could impact Xcel's new transmission ventures as MISO is expecting a similar decision soon.
"Clearly, the lower the allowed ROE is, the more of a damper it puts on the enthusiasm to build transmission," Fowke said. "But the advantage I think of having a Transco is it allows you to look at a larger footprint that allows you to more efficiently collaborate with other partners and it gives you much more financial flexibility."
