Good day and welcome to the Xcel Energy Second Quarter 2020 Earnings Conference Call. Conference is being recorded.
At this time, I'd like
to turn the conference over to Paul Johnson, Vice President of Investor Relations. Please go ahead, sir.
Good morning, and welcome to Xcel Energy's 20 22nd quarter earnings conference call. Joining me today are Ben Foulke, Chairman and Chief Executive Officer Bob Frenzel, President and Chief Operating Officer Brian Van Abel, Executive Vice President and Chief Financial Officer and Amanda Rome, Executive Vice President and General Counsel. This morning, we will review our 2nd quarter results, share recent business and regulatory developments and discuss how we're managing through uncertainty around COVID. Slides that accompany today's call are available on our website. As a reminder, some of the comments we made during today's call may contain forward looking information.
Significant factors that could cause results to differ from those anticipated are described in our earnings release and our SEC filings. Today, we will discuss certain metrics that are non GAAP measures, including items ongoing earnings, electric and natural gas margins. Information on comparable GAAP measures and reconciliations are included in our earnings release. And I'll turn the call over to Ben Fowke. Well, thanks, Paul, and good morning, everyone.
We had a strong quarter, booking earnings of 0 point 5 compared with $0.46 per share last year. Our year to date earnings are on track with our financial plan and we are mitigating the impact of COVID-nineteen. As a result, we are reaffirming our 2020 guidance. We continue to help our customers and protect our employees during the pandemic. We're stepping up our charitable giving to help our communities.
Our business continuity plans have been executed extremely well. We're keeping employees safe while providing reliable service to our customers, and we're helping to restart the economy through investment programs that create jobs in our communities. Earlier this year, the Minnesota Commission opened a relief and recovery docket and invited utilities in the state to submit potential projects that would create jobs and help jumpstart the economy. In June, we filed plan that proposes $3,000,000,000 of capital investment. This includes approximately $1,800,000,000 of incremental CapEx for wind repowering, a 460 Megawatt solar facility, expanded EV infrastructure and about $1,200,000,000 of accelerated transmission, distribution and natural gas investments.
We recently announced a solicitation for repowering of wind projects that are either owned by Xcel Energy or under PPAs. We estimate 800 to 1,000 megawatts of potential repowering repowering projects and expect to make a commission recommendation by year end. We're also proposing options to mitigate customer bills. Overall, feedback has been very positive and we look forward to working through the process with the commission. Now as you might have heard, the U.
S. Treasury recently announced a 1 year extension of the safe harbor for renewable projects. Wind projects that began construction in 2016 now have until the end of 2021 to complete construction and receive PTCs at the 100% level. While we were confident that our projects would qualify for 100% PTC level regardless of this change, the extension assures this benefit for our customers should any project slip into 2021. Importantly, this change also presents the opportunity to move Dakota range from the originally planned 80% PTC level to 100% PTC level.
While this will not impact earnings, it will significantly reduce costs, which is a great outcome for our customers. Advancing our strategic priority of leading the clean energy transition, we and our co owners recently announced the early retirement of the 2nd coal unit at Craig. While we only have a small ownership stake in Craig, we are proud to help drive the early retirement of another coal unit. We're also making significant strides to improve ESG transparency and disclosure. We recently issued our TCFD report and risk report enhanced our disclosures and results in a full TCFP compliance for Xcel Energy.
Another strategic priority is to keep our customer bills low. As a result, it was very satisfying to see that SPS's electric rates in Texas and New Mexico were the lowest in the country for 2019 as recently reported by S&P Global. Providing strong customer service and reliability at an attractive price is a hallmark of Xcel Energy and we're very proud of this recognition. We're also excited that after 10 years, we've reached a settlement agreement with Boulder that will result in a new franchise agreement and also a partnership to explore grid side options to meet our carbon goals. The approval process for the settlement will include a vote by City Council in August, a ballot referendum and vote by the people of Boulder in November.
If approved, the franchise will go into effect in January of 2021. Finally, I was recently elected Chairman of EEI. It will be an honor to lead the industry in such an important and challenging time, and I tend to focus on 3 areas. My first priority is the industry's ongoing COVID-nineteen response related to the workforce, customers and recovery from the pandemic. 2nd, I intend to focus on clean energy innovation.
I'm asking EEI to develop federal and state policy proposals that will bring dispatchable 0 carbon technologies into the marketplace to enable the industry to meet our long term carbon goals. Finally, I've asked EEI to focus on what our industry can do to promote racial justice and increasing our commitment to advance diversity and inclusion. Like our country, our entire industry has been shaken by the death of George Floyd. Mr. Floyd died only a few miles from our corporate headquarters and Minneapolis was the 1st city to experience widespread protests and rioting.
I think as a society, we have a lot of work to do. We need to look hard at ourselves, our unconscious biases and our business practices to ask some hard questions about how we can improve our diversity. I'm confident that Xcel Energy can play a leadership role in driving positive change for country and our communities. So with that, let me turn the call over to Brian, who will provide more detail on our financial results and our outlook. Brian?
Thanks, Ben, and good morning, everyone. We had a strong quarter, booking $0.54 per share for the Q2 of 2020 compared with $0.46 per share last year. The most significant earnings drivers for the quarter include the following: lower O and M expenses, primarily driven by our cost management efforts increased earnings by $0.05 per share higher electric margins increased earnings by $0.02 per share, which reflects riders and rate increases that offset the negative $0.07 per share impact from declining sales, largely due to COVID-nineteen. Higher AFUDC equity increased earnings by $0.03 per share. And finally, our lower effective tax rate increased earnings by $0.07 per share.
However, the majority of the lower ETR is due to an increase in production tax credits, which flow back to customers through electric margin and is largely earnings neutral. Offsetting these positive drivers were increased depreciation and interest expense, reflecting our capital investment program and other items, which combined reduced earnings by $0.09 per share. Next, I want to discuss the status of COVID-nineteen impacts on our mitigation efforts. As expected, COVID-nineteen had a major impact on 2nd quarter sales. Our 2nd quarter weather adjusted electric sales declined by 7.1%.
However, these impacts are better than projected in our base case scenario, which is embedded in our guidance assumptions. On a weather adjusted basis, April retail electric sales declined 9.6%. May showed improvement as retail electric sales declined 6.7% and June showed further improvement as retail electric sales declined 4.7%. This monthly trend reflects the economic shutdown that started in mid March and the gradual opening up of the economy in May June. As a reminder, we have a sales true up mechanism for all electric classes in Minnesota and decoupling for the electric residential and non demand small C and I classes in Colorado.
This covers about 45% of our total retail electric sales. Since Q2 sales came in better than projected in our base case scenario, we have additional cushion should the economic collapse occur as a recovery falter. Conversely, if sales continue to come in better than expected, we'll adjust our contingency plans accordingly. We're also closely monitoring bad debt expense and working with customers on payment plans. While it is difficult to reject where we'll land, bad debt expense increased approximately $25,000,000 in the 2000 2,009 time period as a reference point.
Our commissions in Minnesota, Wisconsin, Texas, New Mexico and Michigan have issued orders to defer pandemic related expenses. We also reached a settlement in Colorado with the staff and OCC that would allow us to defer COVID-nineteen related bad debt expense pending a commission decision. Finally, our filings in North Dakota and South Dakota remain under commission review. We've also made strong progress on our efforts to reduce O and M costs to mitigate the impacts of COVID-nineteen. Based on our contingency plans, we expect annual O and M expenses will decline 4% to 5 percent in 2020, which would offset COVID-nineteen impacts in the base case scenario.
We're also prepared to implement additional contingency plans if the impact exceeds our base case scenario. As we discussed in the Q1, there are limitations to what we can offset. We remain focused on providing strong customer service and reliability and will not make short term decisions that have a negative long term impact on our customers or shareholders. The last COVID-nineteen topic I want to cover is liquidity. We finished our planned debt issuances for the year and we were able to access the capital markets on strong terms and issue bonds at record low coupons.
We also closed on the sale of the Mankato Energy Center, which provided approximately $650,000,000 of cash proceeds after carving out the gain for charitable contributions. As a result, we now have available liquidity of approximately $4,500,000,000 And finally, we issued an equity forward last year, which we expect to settle later this year, bringing our total liquidity to approximately $5,200,000,000 Next, let me provide a quick regulatory update. In New Mexico, the commission approved our constructive settlement a rate increase of $31,000,000 a ROE of 9.45 percent and equity ratio of 54.8 percent and accelerated depreciation of the Tote Coal plant to reflect an earlier retirement. In Texas, we reached a constructive unopposed black box settlement, which reflects an electric rate increase of $88,000,000 equity ratio of 54.6 percent for AFUDC purposes and acceleration of the depreciation life of the choke coal plant. We anticipate a commission decision in the Q3.
And in July, we also reached a constructive settlement in our Colorado natural gas rate case, which reflects a net rate increase of $77,000,000 a ROE of 9.2 percent and equity ratio of 55 point percent and the historic test year with an adjustment for the Tungsten to Black Hawk project, the anticipated commission decision later this year. On our last call, we discussed our preference to avoid rate cases when possible, especially in light of COVID-nineteen. So we recently filed for rider recovery of our wildfire and advanced grid investments in Colorado instead of filing a comprehensive rate case. The riders will cover 2021 through 2025 and provide regulatory flexibility. And as part of our Minnesota relief and recovery filing, we expressed our interest in seeking an alternative path to avoid a rate case filing this year.
We think this would be a constructive outcome for all parties. We've had initial discussions and we'll keep you posted. With that, I'll wrap up. We're effectively mitigating COVID-nineteen impacts. We continue to provide reliable energy service to our customers while ensuring the safety and well-being of our communities.
We reached constructive settlements in our Texas and Colorado rate cases. We avoided an electric rate case in Colorado by filing for wildfire in advanced grid riders. We filed our relief and recovery proposal in Minnesota, which will create jobs, help rejuvenate our local economies and result in significant customer benefits. We announced the early retirement of another coal and achieved TCFD full compliance. We reached a settlement with Volar that should end their municipalization efforts.
We are reaffirming our 2020 guidance range of $2.73 to $2.83 per share based on our solid year to date results and progress on contingency plans. And finally, we remain committed to delivering long term earnings and dividend growth within our 5% to 7% objective range. This concludes our prepared remarks. Operator, we will now take questions.
Thank you. And we'll take our first question from Jeremy Tonet with JPMorgan.
Hi, good morning. Good morning, Jeremy. Good morning. Just wanted to touch base, I guess, on your retail sales expectations at this point. Didn't know if you had any data from July, if you could provide us any more color.
It seems so far in the Q2, you guys are trended somewhere between the base case and the mild case. I'm just wondering if you'd give us any feeling, I guess, from what you can see so far, how the Q3 might be shaping up initially between those two scenarios? Yes, happy to. But just as you know, we don't have AMI. So we have some visibility into July information, particularly from we have some sample customers.
And what we're seeing on the C and I side is we're seeing a slight improvement as we look at some of the specific data that we have. We've seen some improvement in the oil and gas slowdown in SPS, something we're
watching closely. If you look at the results down there,
then kind of bottomed about in May and we've seen improvements relative, still below about 5% from where it was pre COVID levels, but good to see the C and I improvement there. We're also watching Colorado C and I. If you look at our earnings release in our presentation, you can see that the C and I sales from May to June didn't improve as much as they did from April to May. So that's something we're focusing on in Q3. But we are seeing positive trends there.
In the residential, I think we're still continuing to see the strength that we saw in Q2. So overall, positive trends going into Q3, but if you look at our base scenario, we did have significant improvement from the depths in Q2 to Q3. So some are watching closely. Got it. That's very helpful.
Thanks. And just with regards to the Minnesota relief and recovery proposal, just wondering if you might be able share anymore as far as any early feedback that you might have received so far or just kind of expectations going forward at this point?
Hey, Jeremy, it's Bob. And thanks for the question. Coincidentally, we actually had a Minnesota planning meeting yesterday with the department and the commission to talk through the Relief and Recovery Act. We think this is a really interesting example of coordination between the industrial utilities and the political community to try and solve some of the problems that are affecting our communities from the pandemic. I think the commentary yesterday was kicked off by the Lieutenant Governor with a positive tone.
I feel like we had some positive tone from some of the commissioners with a special interest to an expeditious resolution in time line. So we'll know more as we work through the rest of the summer in terms of time line, but I think yesterday's planning meeting felt fairly positive.
That's encouraging. That's great. And if I could just sneak in a last one here. It seems like your guide D and A interest in AFUDC equity all kind of changed a little bit there. I was wondering if you could help us with some of the drivers?
Yes, certainly. I mean, when you put them all together, bottom line impacts pretty immaterial for the year. Puts and takes, depreciation changes, coming out of our rate cases, we had some depreciation rate changes that were implemented. Obviously, interest expense, we set a record low coupons. Minnesota, we issued a 30 year bond at 2.6%, which is the lowest 30 year first mortgage bond for utilities.
So really good results there out of the team. And then on the other pieces of rider revenue, right, just a little bit of delays in the implementation of wind farms. But net net, pretty immaterial impact when you take them all together. Great. Thanks so much.
And next we'll go to Julien Dumoulin Smith with Bank of America.
[SPEAKER JULIEN
DUMOULIN SMITH:] Hey, Steve. Good morning. Hey, thanks for the time guys. So let me take the other side of what Jeremy was just talking about. Let's talk about cost reductions and let's talk about that in the context of your progress year to date and what this means going forward in the future years, right?
I hear you guys talking about staying out in Colorado, for instance, leveraging riders a little bit more. But give us a little bit of context in where you are against the plan, given the 4% to 5% articulated. And then what that means for sustainability and prospects to stay out in these states? Let me I'm going to let Brian give you the details on that, Julien. But let me just say, I'm really proud of how the entire team, the entire Accel workforce has really stepped up to mitigate the impacts of COVID-nineteen, while still providing this important, obviously, product that we deliver.
And we've done it in a number of different ways. But what has most impressed me is the innovation, the creativity, the use of technology to improve our business. So, I'm optimistic that a lot of that we've got to work through it, but a lot of this will give us a lot of momentum as we go into 2021. And with that, I'll ask Brian to give some more details. Yes.
Thanks, Pat. And good morning, Julian. Yes, so from a run rate, right, we put in the contingency plans in essentially the end of March as we saw this hit. And so we had 9 months from a year to date perspective. We're about little over $50,000,000 ahead of 2019.
So executing, I would say, slightly ahead of plan when we look at what our plans were for Q2. So that puts us in a good position for the balance of the year. Obviously, if sales come in a little bit better, we can adjust those contingency plans for the year. And Ben said it well, the team has done a great job of developing and executing those plans for this year and we've really turned our attention to what is sustainable in 2021 and beyond. But I think you got to when you talk about regulatory flexibility and rate case sales, we're also the other side of the equation is everything we've learned over the past few months from the impacts of COVID-nineteen is we're incorporating into our sales forecast for 2021 and incorporating that into our sales forecast for 2021.
And so we're looking at both sides of the equation. And so big focus for the team in Q3 from an O and M sustainability perspective, which will deliver further guidance and clarity in Q3 on that. Got it. But net net, fairly confident to consistently earn at authorized levels to the extent to which that you're successful in staying out in these cases, inclusive of, for instance, the Colorado? Yes.
I think that's a fair assumption. You broke up a little bit. I think you said you would expect to run at our authorized levels with the regulatory proceedings, just to make sure I heard you correctly? Yes. Where exactly are you, Julian?
We'll talk about that later.
We have enjoyed your notes from the road, Julian.
There we go. So in Colorado and speaking of Colorado, what are your prospects for stimulus here as you think about the potential mirroring your efforts in Minnesota?
Hey, Julien, it's Bob. So if you're in Colorado, hope you're having good weather out there. We've had a nice warm summer. I think you saw some of our weather adjusted sales were pretty strong in Colorado. As far as relief and recovery goes, what we've done in Minnesota, we believe has been relatively unique for the country.
But we're certainly open to the ideas and trying to partner in other jurisdictions.
I'll give
a lot of credit to the administration and the commission and the department in Minnesota for their leadership and their partnership with us on the R and R plan and getting utilities in the state to step up and try and help our communities and our customers. And if
we can find that kind
of partnership, we are absolutely looking and willing to do that. If the pandemic continues or if we see some resurgence, there may be more opportunities down the road for us on something similar in our other jurisdictions. Wouldn't rule it out. Great.
Best of luck. Thanks, guys. Talk to you soon. See you soon. Thanks, Travis.
Stay safe. Wear your mask.
And next we'll go to Travis Miller with Morningstar.
Good morning, Travis. Hi.
I wonder
if you could talk
a little bit more when you said in Minnesota, the alternative path, what that might look like in lieu of 1
of the full 3 year rate cycle filings? Yes, Travis, as we kind of put in our relief and recovery plan, the alternative path is really looking at a potential stay out for 2021. Going into 2020, we were able to reach a constructive sale with the parties, which the commission approved, and that was really focused a couple of key components around sales true up and deferral of the NDT amortization, a couple of key components. And now we're just starting we put that in our relief and recovery plan. I think there's another path there and we've just started the initial discussions around that and certainly we'll look to see if we can find a good constructive settlement that works for our customers and us.
Okay. Would it include potentially something like a rate base true up, something like that as well or other mechanisms in there that would
keep you at that allowed or slightly below the allowed ROE? Well, for Minnesota, the 2 big components, if you look at similar to at least sitting here today, similar to the settlement that we reached for this year, right? The big component is a sales true up and then the deferral of some amortizations. We do have riders who recover a lot of our investments with our renewable investments, long term renewable rider and we have our transmission cost rider, which covers some investments. So we have rider mechanisms that help recover the investments we're making for our customers.
Got it. And then just confirming that you guys are still on track for that 5 year 7% rate base growth and the $22,000,000,000 CapEx? Any changes to those numbers?
Yes, I would say Travis, this is Ben. Yes, we are on track and we're targeting the upper half And as we'll update all of that in the Q3 when we update you on our 5 year capital forecast. But I think you'll be pleased with what we're projecting.
Okay. And then just real quick, does that include the $3,000,000,000 in Minnesota
or would that be incremental? That would be well, first of all, $1,800,000,000 is incremental. The other is an acceleration. But yes, I mean that's not necessary to for us, so that would be incremental. Okay, great.
Thanks so much.
Next we'll go to Steve Fleishman with Wolfe Research.
Hey, Steve.
Yes. Hey, good morning.
Good morning. So just good to hear your voice, Ben, and have fun being the Chair of EI.
The virtual EI,
I suppose.
So on the Minnesota kind of recovery investment, has the commission gave some indication on the basis for the decisions they're going to make in terms of like, is it based on the amount of jobs created versus the rate impact or just how are they going to make that decision?
Well, I think we'll take a number of factors into consideration. But I think as you know, our Steel for Fuel strategy accomplishes capital investment, job growth and helps with rates. So to the extent we can emphasize that, I think the better we'll be. There will be a solicitation and we'll bring those projects in. We are anticipating that we'll have a very good price point for the solar that we're planning.
And Brian or Bob, I don't know if you want to add anything else.
Yes. Steve, I think it's still just a little bit early innings, but I think the comfort level with the investment, the economic development, the job creation, that portfolio coupled with the relief opportunities as Brian mentioned on rates and stay out mechanisms, I think is a big package. We haven't got a full timeline out of them. We had our big planning meeting yesterday, which was favorable with some positive comments from the commission and even the administration. And so we're comfortable and confident where
we sit, but we don't have
a lot of details other than that to share with you right now.
Okay. Did you have any sense of the rate impact of the $3,000,000,000 or you're kind of waiting to see your bidding and all that?
I think we still need to run through the solicitation process on the renewable portions for sure, which will run through August and in through September before we make some decisions. But we're pretty confident that we know the impacts of the things we would put forward and we would know a little bit of what other people would do as well. So we're pretty comfortable with the cost side of that.
Steve, we wouldn't put forward a wind repowering if it wasn't NPV positive to the consumer. So I think the real key is, will that offset the acceleration of some of the distribution and transmission spend that we're talking about? And I think likely it will, but to Bob's point, we'll run through those numbers. Yes. Steve, just some further color on the repowering, right?
We had the long road repowering approved and we have mile or should be up front and the commission hopefully in Q3 and those show the front end customer savings and you got through the repowering, which is really good in this environment. And so we're working through similar analysis on our currently owned wind farms that we think would be good candidates for that.
Okay.
And since most of these things are related to things that you own and like you're pre, assuming it gets approved, pretty highly likely it would be you who actually makes the investment?
Yes. That's correct. 3rd parties.
I think that's a fair question.
And then just last question. Yes. Okay. And last question related to this. So if that is all true?
Yes.
Steve, one thing to be clear on though, there are 3rd parties that could submit PPAs for either a PPA extension or a BOT. So some be some combination of our investment plus others.
Great. And I apologize, last question on this, which is just how should we think about financing plan for as much as the incremental
more time? Yes, Steve. Yes, as we talked about before and really in the filing area, we think about 1.8, it's the incremental part. The other the 1.2 roughly is accelerated. But as we go through this process, we expect, as the commission indicated yesterday, they'll look to find a way to move through this pretty quickly.
And at the same time, we're developing our 5 year capital plans with 'twenty one through 'twenty five. And so we'll put that all together and roll out a 5 year financing plan if we have enough clarity to include this in our 5 year capital plan by October. But generally, what we've spoken about before, timing and size matters for incremental capital. And if it's significant enough and lines up, we'll generally fund that with at our consolidated capital structure. As we've spoken about before, it's important to maintain that financial strength in the credit quality of the company.
Got it. Great. Thanks so much. Appreciate it. Thanks, Steve.
Next, we'll go to Sophie Karp with KeyBanc.
Hi, good morning. Congrats on the quarter and thank you for taking my questions.
Thank you, Sophie.
So just to build on the rate strategy here and the questions around that. I'm wondering if we think a lot more, I guess, payout rates and obviously, you're right decision given the COVID situation. But as this continues to be the case when the COVID is kind of year to stay and it looks like the economic consequences will be lingering for a while, Could we see a pivot in your overall strategy where you move away from periodic rate cases and kind of switch on a more permanent basis to alternative mechanisms and just kind of move away from the strategy of being a serial rate case file or to more of a staying out for longer periods for longer? I guess that's my question. Thank you.
Sophie, it's Bob. Good to hear your voice. You were a little broke up there, but let me try and address the question, which I think is, how do you think strategically about rate cases in the context of the pandemic and longer term is just sort of my takeaway. And we have a lot of rider mechanisms in our various states and we're making 1,000,000,000 of dollars of investments on behalf of our customers and infrastructure around clean energy transition and grid modernization. And we also have to keep the utility financially healthy.
So that's the backdrop that we work with. We are obviously working with our regulators right now on mechanisms by which we would need to file rate cases and we're actively engaged in conversations with stakeholders in Minnesota. In Colorado, I think you saw us settle our gas case and then file a couple of riders, which we think would allow us to stay out of our electric case in Colorado. And that's a bit of the strategy, is to continue to invest in areas that have real time and rider recovery. You've seen us execute on decoupling and sales throughout mechanisms in our businesses and that's helpful as well.
And so strategically, I think you're in the right places. We're always going to look for mechanisms by which we can mitigate our cost structure, keep our bills low for customers, while we keep continuing to invest in the infrastructure that we need to. So we'll continue to be creative there and partner with our commissions. And the goal would be to not go into rate cases if we could avoid them, but we have to keep the utility financially healthy. And so we balance all
of that. Yes. And Sophie, just building on what Bob said, I mean, whether it's traditional rate cases or expansion of riders or some combination to bottom line is, we are going to achieve our clean energy objectives, our levels of reliability and our customer improvements and customer experience, all while keeping total bills below the pace of CPI. That's our objective and that's what we're on track for and that's what I think we still remain on forecast to do. So because that's the key thing is to make these investments while not while keeping our products affordable.
Got it. Got it. And then a follow-up, if I may, on the O and M. So you ended this year guiding for O and M growth year over year and then the COVID hit and you had to flip that and basically find cost cuts, right, to offset the impact. And it seems like it's going well.
Could you give us some sense on the shape of that throughout the year? Are you kind of easing into it now and plan to ramp up in the second half? Or are you pretty much on a run rate at this point? And we should discuss the steady kind of O and M trajectory throughout the year? How should we think about that?
Hey, Sophie, this is Brian. I think the way you said it, you assume a steady run rate pretty rapidly over the quarter. So I think you're thinking about it right that continue to see that run
rate. Next, we'll go to Paul Patterson with Glenrock Associates.
Hey, good morning.
Hey, Paul. Just a few quick follow ups. So back to Minnesota, I'm sorry, but I didn't completely understand this. How much did you guys were you guys saying of this CapEx might be going to 3rd parties through contracts? Of the total is subject to that?
The $1,800,000 incremental is that's our spend. Okay. But what Paul was saying is when we do a solicitation, we'll have our own wind projects that we own that we bid into that. And but we will also encourage independents to bid in as well, and they can bid in either as a build on transfer, which would result in our ownership or they could bid in with an extension of a power purchase agreement, and we'll take a look at all of those. But at the end of the day, our incremental CapEx will come from ownership in wind projects, perhaps our own and perhaps BOTs, the solar facility that we're talking about at our coal plant in Becker, Minnesota, advances in EV infrastructure, and I think that covers the incremental.
And then we look at the We're not going to know what other parties are going to build in until we get through the process, which will be more towards the end of August.
Okay. And then but when we say incremental, just to be clear, that doesn't mean bringing something in from the future. Is just incremental. In other words, it wouldn't happen anyway. It doesn't change the trajectory of your CapEx outlook from in other words, you're not moving something from the future to now.
It's as an Accelerator would suggest, when you say metal, it wouldn't have occurred otherwise. Is that the way to think of that? I think I understand. And then with respect to
the Paul, just on the
I mean, look, I think the way to think about it is the $1,200,000,000 that we're not calling incremental, that's an acceleration of something that's already in our forecast. The $1,800,000,000 would not be in our existing forecast. Now over the course of 15 years, might it have happened? Yes, but that's how we're defining that.
That's really helpful. I appreciate it. And then with respect to the CPI goal, is that still 2%?
Yes. I mean, I think it's just a little
bit by jurisdiction. Is that yes, that's roughly at Excel level a good way to think about it.
Okay. And then just in general, I mean, this happens touched on by other people, but I'm just sort of wondering if this if things continue down this road, is there any potential maybe to upsize this if we have a weaker economy? If, Deepak, what I'm saying, is there any sort of discussion of a potential like, hey, maybe this is a good jobs idea or economic stimulus idea and we could see something maybe even bigger than this?
I think I'll let the team weigh in on this, Paul, but I think it probably would come from other jurisdictions.
Okay. And okay, you always have addressed that. Okay. I really appreciate it. Thanks so much.
Thank you. Have a good day.
We'll go to Insoo Kim with Goldman Sachs.
Thank you. I just have one quick question. In your guidance for the year end, the base case assumption, the type of, I guess, assumption are you making on DIFO treatment of COVID related costs? Around, yes, bad debt deferrals. Hey, Anjul, this is Brian.
As we talked about in Q1, we assume that we get constructive treatment around the regulatory deferrals. When we think about our bad debt expense, we have roughly about $25,000,000 increase. And we look at what happened in 2,008 and 2,009, and that's everything we've seen for the 3 months of impacts that remains pretty consistent as our thinking going into this. And if we think about it right, we have about 90 5% of our businesses is covered with our 6 deferral orders, and the 2 we're waiting for are the Dakotas. So we feel like we've reached a constructive place with those deferral orders and we'll continue to evaluate the deferrals as we go through the balance of the year.
Got it. So the
bulk of I think the bulk of what's happened in terms of the approvals were somewhat embedded in making that guidance then?
Yes, that's correct.
Got it. That's all. Thank you.
That concludes today's question and answer session. I'll now turn the call back over to Brian Van Ael for any additional or closing remarks.
Yes. Thank you all for participating in our earnings call this morning. Please contact our Investor Relations team with any follow-up questions. Have a good day. Thank you.