Item 8.01. Other Events
On Jan. 4, 2021, Southwestern Public Service Company (SPS), a New Mexico corporation, and a wholly owned subsidiary of Xcel Energy Inc., filed an electric rate case with the New Mexico Public Regulation Commission (NMPRC) seeking an increase in base rates of approximately $88 million. SPS' net rate increase to New Mexico customers is expected to be approximately $48 million, or 10%, as a result of offsetting fuel cost reductions and production tax credits (PTCs) attributable to wind energy provided by the Sagamore wind project. PTCs are credited to customers through the fuel clause. In its rebuttal testimony, submitted June 2021, SPS revised its requested base rate increase to $84 million.
The request was based on a historic test year ended Sept. 30, 2020, including expected capital additions through Feb. 28, 2021, a return on equity (ROE) of 10.35%, an equity ratio of 54.72% (based on actual capital structure) and retail rate base of approximately $1.9 billion.
On June 23, 2021, SPS and various parties filed an uncontested comprehensive stipulation, which includes:
•A base rate revenue increase of $62 million.
•A ROE of 9.35% for limited purposes of compliance filings related to (1) the Hale and Sagamore wind projects; and (2) reconciliation of the settlement revenue requirement with certain financial statements.
•Equity ratio of 54.72%.
•Increase in depreciation expense of $6 million. This includes a change in the depreciable lives of the Tolk power plant to 2032 and the coal handling assets at the Harrington facility to 2024.
Next steps in the procedural schedule are expected to be as follows:
•Opposition to Stipulation (if any) — June 28, 2021.
•Testimony in Support of Stipulation — July 1, 2021.
•Testimony in Opposition of Stipulation (if any) — July 8, 2021.
•Rebuttal Testimony in Support of Stipulation — July 14, 2021.
•Public hearing or hearing on stipulation — July 26 - Aug. 6, 2021.
A NMPRC decision and implementation is anticipated in the fourth quarter of 2021.
Certain information discussed in this Current Report on Form 8-K is forward-looking information that involves risks, uncertainties and assumptions. Such forward-looking statements, including our expectations regarding net rate increases to consumers and regarding the regulatory proceedings, as well as assumptions and other statements are intended to be identified in this document by the words "anticipate," “believe,” “could,” “estimate,” “expect,” "intend," "may," "objective," "outlook," "plan," "project," "possible," “potential,” "should," "will," "would," and similar expressions. Actual results may vary materially. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information. The following factors, in addition to those discussed in Xcel Energy's and SPS' Annual Report on Form 10-K for the year ended Dec. 31, 2020, and subsequent filings with the Securities and Exchange Commission, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: uncertainty around the impacts and duration of the COVID-19 pandemic; operational safety, including our nuclear generation facilities; successful long-term operational planning; commodity risks associated with energy markets and production; rising energy prices and fuel costs; qualified employee work force and third-party contractor factors; ability to recover costs, changes in regulation and subsidiaries’ ability to recover costs from customers; reductions in our credit ratings and the cost of maintaining certain contractual relationships; general economic conditions, including inflation rates, monetary fluctuations and their impact on capital expenditures and the ability of Xcel Energy Inc. and its subsidiaries to obtain financing on favorable terms; availability or cost of capital; our customers’ and counterparties’ ability to pay their debts to us; assumptions and costs relating to funding our employee benefit plans and health care benefits; our subsidiaries’ ability to make dividend payments; tax laws; effects of geopolitical events, including war and acts of terrorism; cyber security threats and data security breaches; seasonal weather patterns; changes in environmental laws and regulations; climate change and other weather; natural disaster and resource depletion, including compliance with any accompanying legislative and regulatory changes; and costs of potential regulatory penalties.