To shareholders of Xcel Energy, we offer our congratulations on blowout earnings in the fourth quarter of 2014 announced Thursday and an annual dividend yield of more than 3 percent — much better than the rest of us are getting at the bank!
To everybody else, we offer Xcel’s latest earnings report as a reminder of what it does, which is to make Colorado its favorite cash cow. Northern States Power, its Minnesota subsidiary, is a larger operation than Public Service Co., its Colorado sub, by most any measure. Peak demand energy use at its Minnesota operation was 42 percent higher than at its Colorado operation in 2012, employee head count 36 percent higher and projected capital expenditures from 2013-2017 are 19 percent higher.
And yet, remarkably, it is the smaller Colorado operation that consistently contributes a higher proportion of Xcel’s profits — 49 percent of net earnings in 2012 compared to 38 percent from the Minnesota operation.
Why is this? Well, perhaps because Colorado regulators are so sympathetic to Xcel’s need to keep its shareholders happy. In its 2015 rate case, the staff of the Colorado Public Utilities Commission initially recommended a reduction in Xcel revenues of $76.8 million over three years, perhaps anticipating the blowout profits it would report for 2014. The Office of Consumer Counsel — the folks representing ratepayers — recommended a reduction of $88.8 million.
Xcel’s Colorado subsidiary responded to these recommendations by reducing its requested increase to $107 million, less than half what it sought originally. This allowed regulators who advocated a decrease to declare victory when they negotiated a compromise promising the investor-owned monopoly an increase of $53.3 million, a $1.57 hike on the average monthly bill. In other words, the company’s exorbitant original request allowed it to negotiate a recommended decrease into another increase. The commissioners are expected to approve this deal next month.
This is really good news for Xcel when you consider that it just blew away estimates of its 2014 revenues and profits. Xcel took in $310 million more in revenue than the analysts who follow the company had modeled. Its fourth-quarter profit was 30 percent higher than a year ago and 15 percent higher than analysts expected on a rate base that will grow again in Colorado in 2015.
So congratulations once again to Xcel and its shareholders. They clearly have the political process in Colorado well in hand. But if you’re wondering about the city of Boulder’s reluctance to leave the fate of its municipalization initiative in the hands of the PUC, perhaps the rate process will help you understand why. It certainly helps us understand why.
— Dave Krieger, for the editorial board. Email kriegerd@dailycamera.com. Twitter @DaveKrieger
