Summary
Xcel Energy Inc. (XEL) subsidiary, Southwestern Public Service Company (SPS), has reached a settlement regarding its 2019 electric rate case with the Public Utility Commission of Texas (PUCT). Initially seeking an increase of approximately $141 million, the request was revised to $130 million before an uncontested settlement was reached in May 2020. The PUCT approved this settlement on August 27, 2020, with minor adjustments. The settlement grants an $88 million electric rate increase and establishes a zero Transmission Cost Recovery Factor. It also specifies an allowed Return on Equity (ROE) of 9.45% for AFUDC purposes and outlines specific depreciation rates for key generating units and transmission assets. Furthermore, the settlement includes robust ring-fencing measures designed to protect SPS's financial standing, such as provisions related to credit agreements, financial covenants, asset pledging, and maintaining a stand-alone credit facility. The retroactive effective date of the rate increase, September 12, 2019, means SPS will file in Q4 2020 to surcharge the final under-recovered amount. Investors should note the authorized ROE and the implemented depreciation schedules as key drivers for future revenue and cost recovery.
Key Highlights
- 1SPS reached an uncontested settlement for its 2019 Texas electric rate case.
- 2The approved settlement includes an $88 million electric rate increase.
- 3The Transmission Cost Recovery Factor (TCRF) will be reset to zero.
- 4An allowed Return on Equity (ROE) of 9.45% is set for AFUDC purposes.
- 5Specific depreciation rates were agreed upon for Tolk and Hale generating units, with others at SPS's proposed rates.
- 6The settlement includes significant ring-fencing measures to enhance SPS's financial stability.
- 7Rates are retroactively effective from September 12, 2019, with a surcharge filing expected in Q4 2020.