Zacks_Analysts' Blog : Xcel Energy Files for Rate Hike - Analyst Blog

With an intention to recover costs, Xcel Energy (XEL) filed an application to the Colorado Public Utilities Commission (“CPUC”) to increase electricity rates. The rates if approved in toto will result in a hike amounting to $141.9 million and will cover all expenses incurred as well as incremental taxes.

The rate if approved will increase the monthly bill of a typical residential customer by $4.01 or 6% from the current level. However, in another filing, Xcel Energy had asked for a reduction in the consumer bill, as the company wants to pass on the savings from the cost of purchasing power from other providers to its customers. The net increase, after adjustments on monthly bill of a typical customer, is pegged at 4%.

Any upward revision in electricity rates impacts all and puts an additional burden on the monthly budgets of the consumers. So, the commission takes time, holds public hearings and judges all conceivable factors before allowing rate hikes.

Regulated companies like Xcel Energy have to work within the regulatory framework, pay taxes and incur infrastructure investment to ensure not only safe generation but the proper transmission of the same to customers. Since the last revision in electric rates in Colorado, the company has already invested $750 million in the development of its operation in the state to service its customers better.

To safeguard its transmission systems, Xcel Energy incurred costs for removal of dead trees killed by pine beetles near its transmission lines and made payment for property taxes due to upgrades to its transmission and distribution systems. The company also incurred costs for maintenance of its distribution system since 2008, in addition to payments made to reduce air pollution under the state Clean Air Clean Jobs Act.

We believe a reasonable rate increase is the only way to allow utility operators to recover increased fuel costs, fees, taxes and costs based on location. Customers in return get safer and more secure supply of electricity.

Xcel Energy currently retains a Zacks # 2 Rank, which translates into a short-term Buy rating. The company competes with American Electric Power Co. (AEP).

Based in Minneapolis, Minnesota, Xcel Energy is a U.S. electricity and natural gas company, with operations in eight Western and Midwestern states.