Summary
Xcel Energy Inc.'s subsidiary, Northern States Power Company (NSP-Wisconsin), received approval from the Public Service Commission of Wisconsin (PSCW) for its 2022-2023 rate case settlement and 2022 fuel cost plan. This approval is a significant positive development for investors, as it provides regulatory certainty and allows for anticipated revenue adjustments. The approved settlement includes base rate increases for both electric and natural gas services, effective January 1, 2022. These increases are driven by various factors including general operational costs and higher fuel prices, particularly natural gas. The settlement establishes key financial parameters, including authorized returns on equity (ROE) of 9.80% for 2022 and 10.00% for 2023, and an equity ratio of 52.5%. Notably, the agreement includes a customer-friendly aspect by returning $9 million in net regulatory liability in 2023 and incorporates an earnings-sharing mechanism that allows customers to benefit from earnings exceeding certain thresholds. The deferral of pension and post-employment benefit expenses, as well as potential tax expenses, provides some short-term financial flexibility. The PSCW's approval without modification removes a significant point of uncertainty for the company and its investors.
Key Highlights
- 1NSP-Wisconsin's rate case settlement and 2022 fuel cost plan approved by the PSCW without modification.
- 2New electric base rates to increase by $35 million (4.9%) in 2022 and $18 million (2.5%) in 2023.
- 3New natural gas base rates to increase by $10 million (8.4%) in 2022 and $3 million (2.3%) in 2023.
- 4Electric rates to increase by an additional $24 million (5.2%) in 2022 due to higher fuel costs and congestion expenses.
- 5Authorized Return on Equity (ROE) set at 9.80% for 2022 and 10.00% for 2023.
- 6An earnings-sharing mechanism is in place, returning a portion of excess earnings to customers.
- 7New rates and tariffs are expected to become effective on January 1, 2022, providing revenue certainty.