Dive Brief:

• Xcel Energy lost nearly $1 billion due to higher fuel costs related to Winter Storm Uri, which struck much of the central United States in February, the utility's CEO said during the company's Q1 earnings call Thursday.

• The majority of the $965 million incurred net costs came from the gas distribution and generation portions of its subsidiaries, according to the company's quarterly report. Gas distribution impacts totaled $600 million and gas generation cost it $520 million, while other generation costs totaled $35 million, due to the storm. Barring the revenue it earned back in excess generation sales, the storms cost Xcel $1.155 billion.

• "I think there are a lot of lessons learned from Uri," said Xcel CEO Ben Fowke during the company's Q1 call. "The need to invest in resiliency, the increased interdependency between the gas and electric sectors and the need to have 24/7 dispatchable generation available are a few that come to mind."

Dive Insight:

Financial impacts on the power sector from February's extreme weather are still being understood by power generators and other market participants. Many Texas utilities were hit hard by gas scarcity pricing, and a San Antonio utility last month sued the region's grid operator, alleging it allowed high pricing to persist beyond what was necessary. Not all power companies took a hit, however — several gas companies reported their earnings soared following the February cold snap.

For Xcel — which operates across Colorado, Minnesota, Wisconsin, Texas and New Mexico — spiking gas prices due to a choke on supply and high demand led to high fuel purchasing costs totaling over $1 billion. The utility was able to offset those costs by $190 million "primarily through sales of excess generation," according to its 10Q filing.

Its Colorado subsidiary incurred the highest costs, totaling $625 million: $620 million was due to the gas distribution and generation side, and another $5 million was due to impacts from other electric generation sources. Gas distribution and generation cost its Minnesota subsidiary $255 million, its Wisconsin footprint $45 million, and its Texas/New Mexico subsidiary $200 million. Other generation costs for those regions totaled $30 million.

The utility plans to seek recovery for those fuel costs, and Fowke said it would defer the cost recovery over one to two years in order to minimize costs added to customer bills.

Despite the excess fuel costs, Xcel delivered an earnings per share of $0.67, up from $0.56 in Q1 2020, and $3.54 billion in revenue, a 26% year-over-year increase. The utility is aiming to reduce its emissions 80% below 2005 levels by 2030, and is in the midst of carrying out plans in its territories to add 10,000 MW of renewables and meet that goal in the next decade. Xcel is also heavily focused on transmission assets, and Fowke pointed to the Midcontinent Independent System Operator's (MISO) road map released earlier this month, which found transmission needs could result in up to $100 billion of investment in the MISO region.

"While this is very preliminary, a high level conceptual framework, it does highlight the need for significant transmission over the next 15 years," said Fowke. "The transmission expansion and resource plans will provide transparency into our long-term opportunities and will likely lead to robust capital investment in the second half of this decade."