What is the main financial impact of this FERC decision on Xcel Energy?

The primary financial impact is a potential refund liability of approximately $42 million, including interest, related to the retrospective application of a new rate calculation method (3CP instead of 12CP) for its subsidiary, Southwestern Public Service Company (SPS). Additionally, the pre-tax impact on 2013 earnings is estimated to be around $35 million.

Will this refund liability affect Xcel Energy's reported earnings per share for 2013?

Xcel Energy has reaffirmed its 2013 ongoing earnings guidance of $1.85-$1.95 per share. The company states that significant refund obligations would not be considered part of ongoing earnings, which are intended to reflect the company's fundamental core earnings power.

What actions is Xcel Energy taking in response to this FERC order?

Southwestern Public Service Company (SPS) plans to seek reconsideration and clarification of the FERC's rehearing order. The company will also explore opportunities to file rate cases to potentially change the allocation method for all customers to 3CP prospectively if their rehearing request is unsuccessful.

Who are the main parties involved in this FERC dispute?

The key entities involved are Xcel Energy Inc.'s subsidiary Southwestern Public Service Company (SPS), the Federal Energy Regulatory Commission (FERC), and wholesale cooperative customer Golden Spread. Public Service Company of New Mexico (PNM) was also involved in earlier aspects of the complaint.

XEL/XELLL 8-K SEC Disclosure

Summary

This 8-K filing from Xcel Energy Inc. (XEL) on August 19, 2013, primarily concerns a Federal Energy Regulatory Commission (FERC) decision related to a rate case involving its subsidiary, Southwestern Public Service Company (SPS). The FERC reversed its prior rulings on the demand allocator for calculating rates, determining that a 3 Coincident Peak (3CP) method should be used instead of the previously applied 12 Coincident Peak (12CP) method for SPS. This change is expected to reduce rates for a wholesale customer, Golden Spread, by approximately $5 million annually. The most significant financial impact for investors stems from the potential refund liability. The FERC's order appears to require SPS to calculate refunds dating back to July 1, 2006. While the exact amount is still under review, Xcel Energy preliminarily estimates a refund liability of approximately $42 million, including interest. This would be partially offset by existing reserves and agreements. The pre-tax impact to 2013 earnings is estimated at $35 million. Despite this, Xcel Energy reaffirmed its 2013 ongoing earnings guidance, indicating that such one-time or non-recurring items are excluded from their core earnings metrics.

Key Highlights

1FERC reversed prior decisions, mandating a shift from a 12 Coincident Peak (12CP) to a 3 Coincident Peak (3CP) demand allocation method for Southwestern Public Service Company (SPS).
2This change is expected to reduce annual rates for wholesale customer Golden Spread by approximately $5 million.
3SPS faces a preliminary estimated refund liability of $42 million (including interest) due to the FERC's retrospective application of the 3CP method.
4The pre-tax impact on Xcel Energy's 2013 earnings is estimated to be around $35 million.
5Xcel Energy reaffirmed its 2013 ongoing earnings per share guidance of $1.85-$1.95, suggesting this refund liability is excluded from ongoing earnings.
6SPS plans to seek reconsideration and clarification from the FERC regarding the rehearing order.
7The FERC's decision impacts an issue that dates back to a 2004 complaint and a 2006 rate case.

XCEL ENERGY INC 8-K Report, Corporate Update (Aug 19, 2013)

Summary

Key Highlights

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