Dive Brief:
- Xcel Energy plans to cut spending on discretionary initiatives, employ AI and other technologies, and improve efficiencies in order to cut costs by about 3% in the wake of an unfavorable rate case outcome in Minnesota and litigation related to the Marshall Fire in Colorado, Chief Financial Officer Brian Van Abel told investors during a Thursday morning earnings call.
- The company reported that earnings fell from $328 million in the second quarter of 2022, to $288 million for the second quarter of 2023.
- Unfavorable weather, decreased customer use of electricity and other factors made for a slower second quarter, company executives said, and potential liability for the multi-billion dollar Marshall Fire looms on the horizon.
Dive Insight:
Xcel Energy faces a rash of lawsuits over the 2022 Marshall Fire in Colorado that caused some $2 billion in damages — a sum that exceeds the company's $500 million insurance policy, company executives told investors this week.
The lawsuits, which a myriad of parties including property owners and insurance companies began to file after a June 8 report by the Boulder County Sheriff concluded power lines owned by Xcel Energy were among the most likely causes of the fire, capped off a series of challenges for the company in the second quarter. According to the earnings release, Xcel Energy counted at least eight lawsuits filed on behalf of 586 plaintiffs as of July 24.
According to the sheriff's report, the Marshall Fire started with at least two independent ignitions. The first began at a property owned by a religious organization.
That same day, the sheriff's report says, high winds also dislodged a power line located less than a mile from the first ignition. The loose power line sagged low enough to contact a support brace, and hot particles from the ensuing electrical arc ignited a second fire.
The two fires later merged, according to the Boulder County Sheriff.
Xcel Energy CEO Bob Frenzel noted that the sheriff's report found no evidence of design deficiencies in the line that would have contributed to the fire, while Van Abel said the company plans to defend itself from the barrage of lawsuits “vigorously.” They both declined to comment further on the pending litigation, other than to report they had an administrative hearing scheduled in September to sort out next steps.
The company also plans to protest a rate case decision in Minnesota in which the Minnesota Public Utilities Commission limited the company's requested 10.2% return on equity to 9.25%. Van Abel said Xcel Energy plans to request a reconsideration of the case, which he said the company does not believe is consistent with past proceedings.
