Good day, ladies and gentlemen, welcome to today's Xcel Energy Year-End 2022 Earnings Conference Call. For your information, today's conference is being recorded. Questions will be taken from institutional investors. Reporters can contact media relations with inquiries, and individual investors and others can reach out to investor relations. At this time, I turn the conference over to your host today, Paul Johnson, Vice President, Investor Relations, and Treasurer. Please go ahead, sir.
Good morning, welcome to Xcel Energy's 2022 fourth quarter earnings call. Joining me today are Bob Frenzel, Chairman, President, Chief Executive Officer, Brian Van Abel, Executive Vice President and Chief Financial Officer. In addition, we have other members of the management team in the room to answer questions if needed. This morning, we will review our 2022 results and highlights and share recent business developments and regulatory developments. Slides that accompany today's call are available on our website. As a reminder, some of our comments 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'll also discuss certain metrics that are non-GAAP measures. Information on the comparable GAAP measures and reconciliations are included in our earnings release.
I'll now turn the call over to Bob Frenzel.
Thanks, Paul, and good morning, everyone. Welcome to our fourth quarter call. We had another very successful year at Xcel Energy, continuing to execute on our strategy while delivering strong financial and operational performance. For our investors, we delivered EPS of $3.17, representing the 18th consecutive year of meeting or exceeding our initial earnings guidance. In February, we raised our annual dividend for the 19th straight year, increasing it $0.12 per share or 6.6%. More recently, in November, we extended our long-term investment plan, which features a 10-year capital outlook with an approximate 7% rate-based growth. We ranked in the top quartile in customer reliability or SAIDI, and our residential electric bills are more than 20% below the national average.
Amidst the backdrop of significant commodity increases this year, Xcel Energy's 4,500 megawatts of owned wind farms continued to be an industry leader in net capacity factor performance, and generated approximately $1 billion of fuel-related customer savings in 2022 and almost $3 billion since 2017. Our nuclear fleet remains the top-performing fleet in the country and achieved a capacity factor of 96% last year. We had an active regulatory year and resolved multiple rate cases in Uri storm cost recovery proceedings. The commissions in Minnesota and Colorado approved resource plans that will add nearly 10,000 megawatts of utility-scale renewables to our systems through this decade. The Minnesota Commission approved our 460 megawatt Sherco Solar project. The Colorado Commission approved our $2 billion Power Pathway transmission project. MISO awarded us $1.2 billion of transmission projects.
We accelerated our timeline for transitioning out of coal and now expect to be coal-free by the end of 2030. All of which contribute to our leadership in clean energy transition for our customers. We continue to lead in carbon reduction as well. In 2022, our estimated carbon emissions were approximately 52% below 2005 levels, and we remain on track to achieve 80% carbon reduction across the company by 2030. The passage of the Inflation Reduction Act will reduce the cost of renewables for our customers, improves cash flow and credit metrics for the company, and enhances the competitiveness of our renewable offerings. We continue to execute on our electric vehicle vision, implementing multiple new programs for our customers. We also filed comprehensive transportation plans in Minnesota and Wisconsin that are pending commission approval.
We've advanced our ESG leadership and have been recognized by multiple entities, including an upgraded rating by MSCI from AA to AAA. Finally, we were named among the world's most ethical, admired, and responsible companies, and we were recognized for being a best veteran employer as well as for our disability inclusion in the workplace. I'm really proud to lead a team that can deliver on operational, financial, environmental, and diversity goals all simultaneously. Looking ahead, we're well positioned for sustainable organic growth over the next decade, including affordable renewable additions in our resource plans, the transmission needed to enable those carbon-free resources and responsible community transitions as we retire our coal plants.
We've recently issued requests for proposals in Minnesota, Colorado, and at SPS, seeking approximately 6,000 megawatts of new renewable generation, a portion of the 10,000 megawatts that have been approved in our jurisdiction. We'll submit our recommended portfolios of generation assets to our commissions by the middle of this year and anticipate decisions in the second half of this year. We also expect to issue additional RFPs in Minnesota and Colorado this year and next year for the remainder of our approved needs.
As we've discussed in the past, we believe that we have a geographical advantage in the clean energy transition due to the strong wind and solar resources in our service territory. This access to low-cost renewable energy should also give us further advantage in developing green hydrogen and other clean fuel projects, which are becoming more feasible as a result of federal support from the Infrastructure Investment and Jobs Act and the IRA. Late last year, we submitted hydrogen hub concept papers for both the Rocky Mountain and the Upper Midwest regions to the Department of Energy to compete for awards from the $8 billion hydrogen hub program. In December, we received favorable notice from the DOE for our concepts, and we're encouraged to submit full applications in April. In addition, our pink hydrogen pro-production pilot at our Prairie Island Nuclear Generating Station is expected to be operational this year.
Finally, we expect to bring forward opportunities this year to utilize clean fuels and green hydrogen blending at both our gas-fired generation stations and in our gas networks for home and building heating. As we continue to utilize innovative technologies to decarbonize our business, we are well-positioned to take advantage of potentially significant hydrogen capital investment opportunities in the future. As the penetration of renewable assets in our states increases, we're also interested in pursuing advanced storage opportunities to balance our electric system needs. Today, we're excited to announce a new partnership with Form Energy to develop two long-duration energy storage pilot projects. Form Energy's 100-hour battery technology could be a critical component to our decarbonization strategy, providing the resiliency and reliability that we need on the system to support our significant renewable portfolio.
We plan to deploy a 10-megawatt multi-day storage system at a retiring coal plant in both Minnesota and Colorado. These projects are expected to be online as early as 2025. As we wrap up, I want to thank the thousands of employees who worked in below Zero temperatures and sustained high winds and several feet of wet, heavy snow to keep the lights on and the houses warm during our recent winter storms. Your efforts exemplify our company values of connected, committed, trustworthy, and safe. I believe that our dedicated employees and partners are what distinguishes Xcel Energy with our customers. With that, I'll turn it over to Brian.
Thanks, Bob, and good morning, all. We had another strong year, recording earnings of $3.17 per share for 2022, compared with $2.96 per share in 2021. This represents EPS growth of 7.1%, slightly above our long-term growth rate target of 5%-7%. The most significant earnings drivers for the year included the following. Higher electric and natural gas margins increased earnings by $1.05 per share, primarily driven by regulatory outcomes and riders to recover capital investments. In addition, a lower effective tax rate increased earnings by $0.15 per share. Keep in mind, Production Tax Credits lower the ETR. PTCs are flowed back to customers through lower electric margin are largely earnings neutral.
Offsetting these positive drivers were increased depreciation expense, which reduced earnings by $0.40 per share, reflecting our capital investment program. Higher O&M expense, which decreased earnings by $0.24 per share. Higher interest expense and other taxes, primarily property taxes, decreased earnings by $0.23 per share. Other items combined to reduce earnings by $0.12 per share. Turning to sales, our weather-adjusted electric sales increased by 1.8%, largely due to higher C&I sales driven by strong economic activity in our service territories. We anticipate a modest slowing of our sales with growth of 1% in 2023. Shifting to expense, O&M expenses increased $170 million for the year, driven by costs related to technology and customer programs, storms, vegetation management, inflation, and additional actions due to weather.
We also invested in our employees to ensure we retained our top talent. While we expect inflationary pressures to remain, we continue to focus on our continuous improvement programs, which we expect to drive increased productivity and efficiency. As a result, we anticipate O&M expenses will decline approximately 2% in 2023. We've made progress on a number of regulatory proceedings. In the Minnesota Natural Gas Rate Case, the ALJ recommended the commission approve our settlement, which reflects a rate increase of $21 million, an ROE of 9.57%, an equity ratio of 52.5%, a decoupling mechanism, and a property tax tracker. We anticipate a commission decision later this year. In the Minnesota Electric Rate Case, the commission accepted our proposal to reduce our requests for MISO capacity revenue and establish a tracker.
Hearings were completed in December. We continue to meet with parties to see if we can reach a constructive settlement. However, we have a strong case and are comfortable with a fully litigated outcome absent a settlement. We anticipate a commission decision later in 2023. In November of 2022, we filed an electric rate case in Colorado seeking a net increase of $262 million based on an ROE of 10.25%, an equity ratio of 55.7%, and a 2023 forward test year. We anticipate a commission decision and implementation of final rates in the third quarter.
We also filed a New Mexico electric rate case seeking a rate increase of $78 million based on an ROE of 10.75%, equity ratio of 54.7%, a forecast test year in the early retirement of the Tolk coal plant. We anticipate a commission decision and implementation of final rates in the fourth quarter. As far as future filings, we plan to file a Texas rate case later in the quarter in Wisconsin in the second quarter. As we have discussed in the past, the Inflation Reduction Act provides significant customer benefits. Key elements include the following: Tax credit transferability will provide $1.8 billion of liquidity, increasing cash flow, and reducing equity needs. We've met with companies in our service territory and expect to enter into bilateral tax credit sale contracts later this year.
Our FFO to debt metrics improved by 100 basis points during the forecast time period. The solar PTC and tax credit transferability improve the competitiveness of our renewable bids. We anticipate pricing will decline on solar projects by 25%-40% and wind projects by 50%-60% due of the new and extended tax credits, which is great for our customers as we embark on this clean energy transition. Finally, we don't anticipate any material impact from AMT as a result of MACRS depreciation and existing tax credits on our balance sheet. We're reaffirming our 2023 earnings guidance range of $3.30-$3.40 per share, which is consistent with our long-term EPS growth objective of 5%-7%.
We have updated our key assumptions to reflect the actual year-end results, which are detailed in our earnings release. I'll wrap up with a quick summary. We had a strong operational and financial year in 2022. We delivered 2022 earnings within our guidance range, the 18th consecutive year, and increased our dividend for the 19th consecutive year. We received approval of our resource plans in Colorado and Minnesota, which will result in approximately 10,000 megawatts of new renewables. The Inflation Reduction Act was passed with significant benefits for our customers and the company. We are reaffirming 2023 guidance consistent with our long-term earnings growth rate. We remain confident we can continue to deliver long-term earnings and dividend growth within the upper half of our 5%-7% objective range as we lead the clean energy transition and keep bills low for our customers.
This concludes our prepared remarks. Operator, we will now take questions.
Thank you much, sir. As a reminder to the participants, if you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is not turned up on in order to allow signals to reach your equipment. Again, please press star one to ask a question. We'll pause just a moment to give everybody a chance to signal.
You can hear me, right? Yep. Okay.
First question is coming from Mr. Nicholas Campanella, calling from Credit Suisse. Please go ahead. Your line is open, sir.
Hey, good morning, everyone.
Good morning, Nick.
Hey, thanks for taking the question. I guess just on the O&M and the 23 guide, that really stuck out to us and I heard some of your comments in the prepared remarks just talking about continuous improvement. Can you maybe just give us a little bit more on what levers you're pulling that's leading to that O&M reduction? Is this, you know, more one time in nature to 2023 or sustainable through the plan? Thank you.
Hey, Nick. Yeah, good question. Let me make a couple points on it. One is a little bit of a function of where actuals in 2022 ended up in terms of updating our 2023 O&M guidance. You know, we're really proud of the continuous improvement efforts that we've had underway, and they've been underway for a long time. You know, from 2014 to 2021, we kept O&M flat, and that's something I'm really proud of our employees for doing, and a really good benefit to our customers. We did have inflationary pressures in 2022, but also took actions given the good weather year to reinvest in 2022 in the system and in our employees. As I think about 2023, you know, a couple things.
One is, you know, we're investing a lot in technology, and how do we make us more efficient in our plants. We have something called the Digital Operations Factory, which is really using AI in our plants to move from more reactive to productive maintenance. We're investing significantly in, call it, real-time scheduling and other opportunities to use AI. We also are starting to get on a treadmill of shutting down our coal plants. We have about a coal unit a year that will start to shut down, which provides us with a tailwind as we think not only in 2023, but through basically the end of this decade, in terms of as we lead this clean energy transition. We also do see some abatement of, call it, the high diesel costs.
We had a storm year that was above normal in 2022. For example, we had quintuple the number of storm days in December. There are some things that happened in 2022 that won't happen in 2023 that should help us achieve it. A long answer, but a lot there to unpack and hopefully that helped provide some color on it.
Yeah. That's great. Thank you so much. That's helpful. On the Minnesota Electric case, you know, it sounds like you're confident in taking this the full distance to an order. I just wanted to be clear, is the settlement more unlikely at this point? How should we kind of be thinking about that, you know, taking into consideration where we are in the docket today?
Hey, Nick. It's Bob. Thanks for the question. As we said in the prepared remarks, you know, we filed this case over a year ago. We've probably been actively working with parties since the September timeframe. You know, we've reduced our total initial ask dramatically, through extension of asset lives, through the MISO capacity revenues, and for bringing down the actual sales that we experienced in the state. We think that, you know, reduced revenue ask is really a tailwind for us in the case. There's probably some pretty decent recent decisions in Minnesota. You saw the Minnesota Power case the other day in our gas
Settlement that Brian mentioned in his prepared remarks or data points that we feel confident in taking this, as you say, all the way. You know, we're always open to engaging with all the parties, and if there's an opportunity to move forward with a settlement, we would certainly think to do so.
Thanks a lot. I'll get back in the queue. Have a great day.
Thank you much, sir. We'll now go to David Arcaro calling from Morgan Stanley. Please go ahead.
Thanks so much for taking my question. I was wondering if you might be able to give any kind of preview or what we could expect from the Clean Heat Plan filing later this year in Colorado, whether there might be potential CapEx investments, additions to the plan, and what new technologies and opportunities there might be to invest there?
Hey, David, it's Bob. That's a great question. It's really an opportunity for us, I think, to share and align our vision for a net zero future on the gas business, with our commissions in a more formal way. I'm not certain that I would expect to see a significant amount of sort of new investment opportunities as part of that process, but really an opportunity to align on, you know, our multipronged strategy to decarbonize the gas business. As I think about it, you know, we're working with upstream providers to reduce methane on the purchase gas that we buy for our customers. We're working on our own system. We have been for over the past decade in methane leak reduction.
We've done a terrific job there, but there's always more to work to tighten up our own system. We work on, you know, customer programs that encourage energy efficiency, that encourage, maybe fuel switching and beneficial electrification. I think the big opportunity from an investment perspective is really, the comments I made around, you know, clean fuel, in my prepared remarks. We are working with multiple parties in the Colorado jurisdiction on a Western Inter-State Hydrogen Hub. We think it's a really attractive project. A multi-state MOU has been signed with several of the Western states and the governors, and all the energy offices of those states are working together.
I think clean fuel is a real opportunity for us and for our customers, to advance the clean energy transition and to help us realize a net zero future in the gas business.
Yeah, Dave, I'll just add a couple points to that. One is we don't have anything in our current five-year plan related to hydrogen investment opportunities. To the point of if there's an opportunity to pull that forward and move faster on hydrogen, absolutely an upside opportunity as we think about it over the next five years. Also a lot of, call it, industry discussion about natural gas commodity costs and the volatility. You know, we think longer term, you know, us owning renewables and creating green hydrogen, blending it into the LDC creates more price certainty for our customers. It takes that volatility out. I think that's a longer-term opportunity and benefit as we think about how do we help our natural gas customers and improve the certainty of our overall bills.
Just, you know, broadly, I mentioned this in my prepared remarks, but it's probably worth saying again, which is, you know, we're benefited by the geography that we sit in, having great access to low-cost wind and low-cost solar. Not only should we be able to do this for our customers beneficially, but you're looking at the opportunity of making the Rocky Mountain region or the Upper Midwest regions, you know, energy export centers where we're creating a product that can be broadly transmitted to the rest of the country, whether that's electricity via wire or whether that's green hydrogen via pipe or trucking. You know, we should be a destination for those installations, which over time should help economic development in our states, and add to employment backlogs as well.
That's really helpful color. Thanks for, thanks for that. A lot of initiatives, it sounds like related to that program, that you'll be rolling out. Separately on the announcement with Form Energy and long-duration storage, it's nice to see that, crystallizing here. I was wondering if you might have a sense for how much long-duration storage might make sense on your system over time. Is there a certain number of megawatts or a proportion relative to your generation fleet that might make sense? Wondering, how you might see this scale up, to the extent these initial projects are successful and make it through the regulatory process?
Yeah. Thanks, David. You know, as we go through resource plans with each of our states, you know, we find that we have a, an increasing need for as we have higher penetration of renewables, an increasing need for what we'll call dispatchable energy resources. Historically, those would've been, you know, combustion turbines. Maybe they're fired with a clean fuel like hydrogen or, synthetic natural gas. Over time, as long-duration storage might become more feasible and cost-effective, you can see long-duration storage being a part of that solution. I think if I were to add up, and I'm gonna do this math on the fly, but we have several thousand megawatts in our resource plans for, you know, firm dispatchable generation.
If we had an asset, you know lithium-ion batteries are interesting, and they have a utilization for our systems, but so does long-duration storage. You know, these are 20-megawatt projects. You know, there's probably several hundred in our resource plans that could be realizable within the next five to 10 years, if the technology proves out.
I would just add to that, you know, we're really excited about this technology. It shows that we're leading and really demonstrating that we're on the forefront of this clean energy transition. You know, we've always talked about we know how to get to our 2030 goals of 80+% carbon reduction. This is really about taking that last 15%-20% out of the stack and providing one of the solutions. If you think about that, and when you look at our kind of resource mix in 2030, you can kind of start to size, you know, what do we need to do beyond that in terms of storage capabilities that will be, you know, one of the solutions.
Great. Thanks again. Appreciate all the color.
Thank you much, sir. We'll now go to Jeremy Tonet calling from JPMorgan. Please go ahead.
Hi. Good morning. It's actually Richard Sundling on for Jeremy. Thank you for the time today.
Great to have you, Rich.
Thanks. Maybe starting with changes to 2023 drivers. I know we hit O&M already, but just curious if you can kind of parse the full range of what are effectively true ups for 20 22 actuals versus new expectations for 2023. You know, are any of these changes you're putting you kind of higher or lower within the guidance range at this point in time?
You know, just right off the start, right, you know, we still feel, you know, midpoint of the guidance range early in the year is where we expect to be. In terms of, you know, specific changes, right, gas sales is up a little bit, but that's really a function of where we landed on the year-end. Really gas sales for us, 1% is less than $5 million in terms of a change. The increase in the rider revenue, that's a function of we had a good wind and PTC year in 2022, so that's relatively earnings neutral. We do see a little bit of benefit in depreciation and interest expense is lower. Let's see.
The forecasted rates for 2023 are lower than in Q3, but overall, we look at it as relatively neutral as we think about the puts and takes and still, you know, targeting midpoint of the guidance range and, you know, looking forward to having the discussion 12 months from now, and our goal is to deliver for the 19th straight year.
Great. Thanks for the color there. Then turning back to Colorado and a lot of their focus on the gas system planning side. You addressed this a little bit from the Clean Heat Plan perspective, but I'm curious for your higher level thoughts on how this might impact your electric operations in the state as well.
Hey, Rich. It's Bob. You know, look, I did mention as part of our Clean Heat Plan and our long-term strategy for decarbonizing on behalf of our customers that we do expect, you know, some amount of beneficial electrification to happen, whether that's water heaters or cooking or home heating. You know, we believe that the asset value of the distribution system is incredibly valuable for our customers and has the ability to deliver a significant amount of energy on the coldest days in Colorado. You know, our design temperature that we plan for in Colorado is -30. It's still a very cold weather climate, has a need for very efficient delivery system, which we believe the pipeline system is there.
I do think that we can put, you know, as part of our strategy is to look at, you know, clean fuels and green hydrogen and synthetic natural gas and the opportunities that presents for our customers, to realize, you know, a good product at an affordable price, that's also sustainable, is important. Electrically, I mean, you know, with EVs and beneficial electrification, you know, as we think about the future of our electric business in Colorado, there's probably growth there that's driven by both of those aspects.
Got it. Very clear on both sides. Thank you for the time today.
You bet.
Thank you, sir. We'll now move to Julien Dumoulin-Smith of Bank of America. Please go ahead.
Hey. Good, good morning, team. Thanks for the time and the opportunity. Nicely done. Perhaps just on.
Hi, Julien.
Hey. Hey, guys. Just first on bills. I just want to understand a little bit on the trajectory of bills. Can you talk a little bit on what the rate increases are on customers for this winter, especially on the gas side? Also just given the cresting that we've seen in some of the commodity prices here, how is that setting itself up to ultimately get reflected to back to your customers if you think about the cadence of your hedging programs?
Yeah. Hey, Julien. Good question. We think about, you know, I'll talk a little bit about both sides of the business because we think about on the electric side, really well positioned from an overall customer bill perspective. You know, we're call it 85% electric. If you just look at our income statement and the cost of goods sold and fuel impacts on the electric side is modest, given the inflationary environment we've, we saw in 2022. Bob talked about it, right? It's really our wind build out that we've always talked about being a hedge for rising commodity costs, and that's played out in 2022 and really good to see from a customer bill perspective.
Also, you know, we went into the year being, you know, on a national average more than 20% lower on residential customer bills. Good place and a good place to be on the electric side. Obviously on the natural gas LDC side, you know, you have a lot fewer levers and a lot fewer offsets. You saw some of the headlines of 40%-50% of bill impacts for our customers. Obviously, we, you know, we do not like to see any sort of bill impacts of that magnitude, but you're absolutely right that that is starting to subside with where natural gas prices are going.
If you caught it, in the past 2 months, we've twice updated our gas commodity clause in Colorado, which lowered the commodity portion of the customer's bills by about 30%.
That they'll start to feel in Q1 relative to Q4, because we were actually gonna be over collected. We proactively did that, and the commission was appreciative of that. We're certainly taking every opportunity we can to make sure that we have reflecting the lower commodity costs in our customers. That's really where we see. I think longer term, we feel really good about delivering bills at the level of inflation as we think about 2030 and beyond and what the IRA is doing for us and for our customers. We feel good both near term and longer term as we think about it.
Hey, Julien. Look, it's Bob. I'll agree with everything Brian said and add, if you look at the long arc of history and look forward over the last 10 years and into the next 10 years, I think that comment around bills at or below the inflation level is consistent on the electric and gas side. This has been a tough year on the gas side. We're empathetic, and we worked hard with the federal government to enable record amounts of LIHEAP, and then actively getting that into the people's hands that need it the most. Longer term, clean energy transition, I think we can do this, as we said, because we're strategically advantaged in our position. We can do this very cost effectively across the country.
We have a good starting point in total bills and what our customers feel, 20% below the national average or more, in our residential electric, areas. Our gas business, I think you highlighted this in one of your reports, is one of the top two or three lowest, gas businesses in the country. A good starting point, but doesn't mean we don't have work to do. Obviously, we're always empathetic to our customers who are feeling bill increases at the grocery store, at the fuel pump, at rent and mortgage payments and everything else. Thanks for the opportunity to talk about it.
Yeah, absolutely. You bet. Hey, listen, just going back to one of the questions from earlier. On the settlement conversation versus fully litigated cases, obviously, the current backdrop isn't ideal for having rating fees altogether. Can you talk a little bit about expectations to be able to settle cases, broadly speaking here? I mean, to what extent could Minnesota be an isolated data point in the current instance, given the current fact pattern? Or are you seeing challenges more broadly here? Again, without pointing fingers at specific states necessarily.
Well, I'll start, Julien, and Brian can add on if he's got anything to add. I think generally we look for settlements. I think we're encouraged to look for settlements. I even think as you look at some of the recent data points in Minnesota, the commission's looking for settlements. With that as backdrop, you know, maybe this case is isolated, maybe we still have a path to reach a settlement with the parties. I think we're being encouraged to do so. I think broadly speaking, that's the case for most of our jurisdictions and most of our staff. We need to make sure that we are delivering for our customers operationally. We're delivering for our customers in reliability.
We also need to make sure that we keep a financially healthy utility. You know, credit metrics are really important. Preserving credit metrics in our operating companies is critical as we seek to raise capital cost advantageously and to deliver on the capital investment profile that we know we need to do. I think there, therein is where the, the debate happens. Again, I think we've got a long track record of settling. I would take your comment as encouraging to think that we're gonna continue to settle cases going forward.
Yeah, absolutely understood. All right, great. Thank you, guys. Appreciate it.
Thank you, sir.
We'll now take questions from Travis Miller calling from Morningstar. Please go ahead, sir.
Hi, everyone. Thank you.
Hey, Travis.
Obviously had a good year with the C&I demands. Wondering what's your outlook in that 1% total sales for C&I? We see another big year, or does that moderate a bit?
Hey, hey, Travis. Yeah, I can take that one. I think we continue to see similar what we saw in 2022, where strong growth in the C&I. If I parse it out, we have what we're expecting is about 2% up in C&I for 2023 and about a 1% decline in residential, where a continued kinda decline from the COVID levels that we saw the increase in residential. C&I, particularly good growth in SPS. I think just on the 2022 sales, when you look at the C&I numbers, you see that Colorado C&I is negative. If you actually make an adjustment, we helped a large customer install a 240 megawatt solar farm to ensure that they stayed in Colorado, ensure those jobs stayed in Colorado.
if you made that adjustment, Colorado C&I would actually been +2% for the year. strong economic activity and C&I growth across all of our service territories. We expect that, you know, albeit a little bit of slowing in 2023, but to remain there.
Okay, great. A follow-up to the Hydrogen Hub discussion. I think if I heard you correctly, April was kinda the next point at which you file some more information. At what point? Is it there, or is it later on where you get to start getting a sense for even your proposal, if not approval, but a proposal for CapEx potential spending?
Travis, I think it's early innings with the department. You know, April's the next filing date for, I'll call it, full plans. I think the Department of Energy is looking at probably around two dozen. It's gonna take them a while to parse through that and award grants for the, I'm gonna guess, four to six that move forward from that perspective. We think both of our projects are incredibly interesting, provide lots of regional benefits from
From multiple sources and multiple users, which I think is a criteria that the Department's gonna look at. If you're gonna ask me to guess, I'd say it's at least end of next year before we get any clarity on those April applications, potentially longer.
Expect us, you know. That's the hydrogen hub concepts of which, you know, very interested in, I think we have a great opportunity to be significant participants. Also expect us to move forward with hydrogen pilots and opportunities both on the electric side and the gas side as we think about working through our Clean Heat Plan in Colorado, our Natural Gas Innovation Act in Minnesota, also on the electric side as we think about how do we decarbonize that last 15%-20% in our stack.
Sure. Okay.
End of next year being 2024?
Correct.
Okay. Just real quick on that. How many partners are in those two proposals, the Rocky Mountain and the Midwest proposals?
You know,
Roughly, I mean.
I'll need to get back to the specific number, Travis, but I'm gonna guess it's in the five to 10 in each region. Okay. I'm just looking for a rough number.
Okay. Very good. That's all I had. Thanks.
Appreciate it.
Thank you much, sir. We'll now take questions from Mr. Paul Patterson from Glenrock Associates. Please go ahead. Your line is open.
Hey, good morning.
Hey, Paul.
Can you hear me?
Hey.
Yep.
I hear you on the Minnesota regulatory environment. It's pretty much what I've been hearing. One thing that I was a little surprised by, or I just, you know, it's hard to keep track of everything. There was some articles about a some sort of state goal being below the national average by 5%. I think industrials made a filing about this or have been saying that, you know, that the rates are in danger of or what have you, of not being in line with that policy. I was just wondering, could you just refresh my memory about what this state policy goal is?
Sort of following up on Julien's question, you know, the just sort of the trajectory how you see you guys' performance within that thing going forward because we have changes in gas, you know, moderation of fuel prices and stuff going forward. Just there are a lot of moving pieces, I guess. I'm just sort of wondering if you could. Frankly, I just, I'm just not up to speed on the law that they're talking about.
Hi, Paul. This is Chris Clark. I'm the president of our Minnesota company. Yes, there is a goal in statute that seeks to have our prices for our commercial and industrial class be within 95% of the national average. I think the starting point here is really that we provide our customers a great value, and I think the look that got some attention is simply a look at the rate. If you actually look at our total bills for our C&I class, you'll see that over a 10-year period, they've been relatively flat. That's because the EIA data that gets pulled for rates is only one component of the bill.
I think when you look at what we achieve for our C&I class, you know, if you take into account the conservation programs that have been really nation leading here in Minnesota and other credits, and things that those customers have done to be successful, you'll see that our C&I class rates are competitive. In fact, we do a great job of attracting new business to our state. I think it's important when we look at the picture of how we're doing with our C&I rates, to really take that into account. As Brian and Bob have said, when we look at the plans for our clean energy transition, we're confident that we can deliver those results in line or less than CPI.
I think over the long term, we've shown that we can continue to be a successful company in navigating this, keeping rates affordable for our customers, and delivering great value.
Okay, awesome. A great answer. The second question I have, and I apologize if I missed this. I got just interrupted here. The iron battery deployment, I apologize if you already discussed this, but are you guys gonna own these? What's the cost of them? Could you just give a little bit more flavor of the economics associated with these two projects?
Yeah. You know, good question. No, we haven't disclosed the cost of these batteries yet. We haven't made the regulatory filings yet. We, you know, looking forward to having a discussion with our stakeholders and the commission, but we certainly will own them. We think they're a valuable grid asset, and important to us to own them as we think about how do we start to deploy these new technologies as we look to decarbonize and get to harms and carbon free. Obviously, as with any new technology, the costs are more expensive, but this is a $100 battery that we don't see other solutions out there that are viable. It also, iron oxide, right?
If you think about rare metals, this is something that's readily available, as we think about supply chains and what's the ability to scale. Overall, we're pretty excited about this. I think it demonstrates our leadership, as an innovative clean tech company, and we're excited to work with our commissions. Certainly more to come in terms of disclosing the costs.
Okay, great. Just any idea when you guys might make that regulatory filing, roughly speaking?
Later this year. It'll be this year.
Okay. Well, I mean, you guys are deploying it in 2025, right?
Yep.
Okay. Okay. Okay.
Yeah.
Okay. I'll stay tuned. Thanks so much.
Thank you much, sir. Our next question is coming from Mr. Anthony Crowdell of Mizuho. Please go ahead, sir.
Hey, good morning. Thanks for squeezing me in here. just hopefully, two quick ones. I guess when you look at the four major rate filings you guys have, they're all asking for a forward test year. When we look at 2023 and beyond, what do you think is a reasonable assumption for structural lag? Can that be reduced from, say, 90 to 100 basis points to maybe 50, 60?
Hey, Anthony, good question. As we think about it, from an earned ROE perspective, that's always been a goal of ours, right? We had a goal in 2015 to close it from 100 to 50 basis points, and we were successful. In 2018, 2019, and then had some, you know, COVID hit and we scaled back on regulatory filings. I think as we look forward, our goal is to close that, and we had some success from 2021 to 2022. I'll be modest, about 15 basis points. Our goal is to continue to focus on closing that. Probably that 50 basis point range, as you mentioned, is a good goal as we think about it going forward.
Something that we always focus on improving the regulatory constructs and getting, you know, as we think about either multi-year plans or longer term plans, really providing the benefit of price certainty to our customers, I think is really important. Something we'll continue to work through.
Just one follow-up, on top of Julien's question. I think Bob, you prefer the settlement route and not just specific to Minnesota, but just in general. It seems that lately, some commissions maybe are tinkering with settlements, if I use that term. It seems that that's maybe occurring at a greater frequency. Does that give you pause on achieving a settlement?
Hey, Anthony, it's Bob. Great to see your name in the inbox today. No, it doesn't give me pause. Look, I think we've had a long history here. We continue to work proactively with staffs and commissions and sometimes we go before ALJs. There's always things that are around the edges important. I think generally speaking, you know, settlements are encouraged and I think commissions understand that if they want to encourage settlements, that they need to be respect the entirety of them without tinkering. I think you've seen some commentary in some of the jurisdictions you might have been thinking about to that fact.
Great. Thank you so much, guys. Congrats on the quarter.
Yeah, appreciate it.
Thanks, Anthony.
Thank you very much, sir. As we appear to have no further questions, Brian, I'll turn the conference back over to you for any additional closing remarks. Thank you.
Yeah, thank you all for participating in our earnings call this morning. Please contact our investor relations team with any follow-up questions.
Thank you much, sir. Ladies and gentlemen, that will conclude today's conference. We thank you for your attendance. You may now disconnect.