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Xcel Energy Inc (NASDAQ:XEL)
Q4 2019 Earnings Call
Jan 30, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Xcel Energy Year End 2019 Earnings Call. Today's conference is being recorded. Questions will only be taken from institutional investors. Reporters can contact media relations with inquiries. Individual investors and others can reach out to Investor Relations.

At this time, I would like to turn the conference over to Paul Johnson, Vice President of Investor Relations. Please go ahead.

Paul Johnson -- Vice President, Investor Relations

Good morning, and welcome to Xcel Energy's 2019 fourth quarter earnings conference call. Joining me today are Ben Fowke, Chairman, President and Chief Executive Officer; and Bob Frenzel, Executive Vice President and Chief Financial Officer. In addition, we have other members of the management team available to answer your questions.

Today, we will discuss and review our 2019 results, update you on financial plans and objectives, share recent business and regulatory developments. Slides that accompany today's call are available on our website.

As a reminder, some of the comments during today's conference 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 filings with the SEC. On today's call, we will discuss certain metrics that are non-GAAP measures, including ongoing earnings in electric and natural gas margins. Information on the comparable GAAP measures and reconciliations are included in our earnings release.

I'll now turn the call over to Ben.

Ben Fowke -- Chairman, President and Chief Executive Officer

Well, thank you, Paul, and good morning, everyone. 2019 was an excellent year with a long and impressive list of accomplishments. Let me share a few. We delivered EPS of $2.64 in 2019, which is the 15th consecutive year of meeting or exceeding our earnings guidance.

We raised our annual divided by $0.10 per share, which is the 16th straight year we've increased our dividend. Our stock hit an all-time high of $66.05 in September and subsequently hit all-time new high of $67.69 this week. We achieved a total shareholder return of just over 32%. Our O&M declined almost 1% even while making incremental investments in our system. The Minnesota Commission approved our purchase of a Longroad Wind asset, and finally we resolved multiple rate cases.

We also had a strong year operationally. We continue to achieve important milestones in our nation-leading wind expansion program with the completion of our Foxtail, Lake Benton and Hale projects. These three projects represent over 700 megawatts and were completed under budget. In addition, we have almost 2,000 megawatts of wind projects under construction, which are expected to be completed in 2020. We're very excited to continue our clean energy transition, which will result in significant customer savings and carbon reductions.

Our nuclear team continues to make great strides in transforming performance, while reducing cost. The fleet achieved the capacity factor of 92.6% in 2019 even with two refueling outages. We have one of the top performing nuclear fleets in the country as rated by the NRC and INPO. And in addition to strong performance, we have continued to lower our cost structure with O&M costs declining a little over 2% in 2019, and this is the fourth straight year of declining O&M in our nuclear operations. I'm extremely proud of the effort and results of our nuclear employees and their leadership in our industry.

Moving to the wire side of our business, our advanced grid efforts have progressed well and will enable increased reliability and security, faster storm restoration, better efficiency and new offerings for our customers. In 2019, we implemented foundational software and completed our initial meter deployment in Colorado as planned with full scale implementation to follow. In November, we requested approval to expand our advanced grid program to benefit our Minnesota customers, and we expect a commission decision later this year.

Beyond our strong financial and operational performance, I'm also very proud of our ESG leadership. In 2009, we estimate we've reduced carbon emissions by more than 40% from 2005 levels, and we remain on track to achieve an 80% carbon reduction by 2030. In recognition of our carbon-free vision, S&P Global gave us their Award of Excellence. And we continue to proactively mitigate the impacts of our clean energy transition on our employees and our communities. We provided assistance to impacted employees, offering retraining and relocation opportunities, and we're levering natural attrition.

As a result, we've managed to transition with no layoffs from coal plant retirements. We've also partnered with our communities impacted by the closing of coal plants to build new generation at existing sites. And we've worked hard to attract new businesses to those communities as well. In Minnesota, there's continued progress to build a Google data center and relocate a metal recycling plant next to our closing charcoal coal plant. In Colorado, we've worked to develop a solar solution to retain a steel mill, which is our largest customer and a major employer in Pueblo, where we are closing two coal units.

Now these collaborative economic development efforts will help sustain local economies in terms of both jobs and tax base. And our results have been recognized by others. We were named as one of Fortune magazine's Most Admired Companies for the seventh consecutive year, one of Corporate Responsibility Magazine's 100 Best Corporate Citizens, and among Newsweek's Most Responsible Companies. We earned another perfect score on the Human Rights Campaign's Corporate Equality Index and remain among the best places to work for LGBTQ Equality.

In addition, various publications continue to recognize our strong leadership as a veteran employer. All of this adds up to an outstanding ESG record, which is becoming increasingly important to investors. So I'm really pleased with our accomplishments and, looking forward, I'm excited about the opportunities we have in 2020 and beyond. We will continue executing on our multi-state wind investment program, which will provide clean affordable energy to our customers. Longer-term, we'll add more universal solar storage and firm capacity to our system as part of our plan to reduce carbon emissions by 80% by 2030. We'll deliver on our planned transmission projects while collaborating with others to solve congestion issues over the next decade. This work is critical to maintaining reliability as more renewables are added to the system, and it also creates significant investment opportunities well into the future.

Implementation of our Advanced Grid program will also keep the grid reliable, secure and efficient and allow for the integration of more renewables, while enabling new offerings for our customers. We will continue working with our customers, policymakers and other stakeholders to build nation-leading EV programs, which will improve the customer experience and reduce emissions across the transportation sector.

So with that, let me turn the call over to Bob, who'll provide more detail on our financial results and outlook as well as a regulatory update. Bob?

Robert Frenzel -- Executive Vice President and Chief Financial Officer

Thanks, Ben, and good morning, everyone. My comments today will focus on full year 2019 results. For details on our fourth quarter results, please see our earnings release.

We achieved another year of strong operational and financial results. We delivered 2019 ongoing earnings of $2.64 per share, which is a 6.9% increase compared with $2.47 per share in 2018. This result represents the top end of our original guidance range of $2.55 to $2.65 per share. Similar to last year, weather was a positive factor contributing almost $0.07 per share compared to normal. However, we also incurred additional O&M expense, including approximately $0.03 per share due to storms, partially offsetting the weather benefit.

The most significant earnings drivers for the year include higher electric and natural gas margins, which increased earnings by $0.37 per share, including rate increases in riders to recover capital investments. Lower O&M expenses increased earnings by $0.02 per share, and our lower effective tax rate increased earnings by $0.15 per share. However, the majority of the lower EPR is due to an increase in production tax credits, which flow back to customers through electric margin and tax reform impacts, both of which are largely earnings neutral. Offsetting these positive drivers were increased depreciation and interest expense reflecting our capital investment program, which reduced earnings by $0.29 per share, and lower AFUDC, due to project timing, decreased earnings by $0.08 per share.

Turning to sales, our weather-adjusted electric sales declined by 0.3% in 2019. We saw positive residential sales across almost all of our jurisdictions with continued customer growth, partially offset by lower use per customer. And in the C&I space, we experienced discrete declines in certain large customer usage due to co-generation and lower frac sand mining sales, which cause sales to be unfavorable. Weather adjusted natural gas sales increased 2.7% in 2019 as a result of strong customer growth and higher use per customer, partially offset by the declines in the frac sand mining demand in Wisconsin. For 2020, we anticipate electric and natural gas sales growth of approximately 1%, which includes the impact of leap year.

Turning to expenses, O&M costs were almost 1% lower than last year, driven by continued efficiency gains in transmission and in our fossil and nuclear generation fleet, partially offset by unexpected storm costs and incremental spending on strategic areas to enhance the customer experience and further reduce risk in our operations. We remain committed to improving operating efficiency and taking costs out of the business for the benefit of our customers as we have for the past five years.

And as a result, our consolidated base O&M forecast is essentially flat. However, we do expect incremental O&M from adding new wind generation in 2020 and 2021, which is largely rider recoverable, as well as continuing to invest in strategic areas of cybersecurity, wildfire mitigation and enhancing the customer experience. As a result, we expect total O&M expense will increase approximately 1% to 2% in 2020.

Next, let me provide a quick regulatory update. In December, the Minnesota Commission approved our rate case stay out proposal, including the extension of the sales, capital and property tax true up mechanisms, along with the deferral of increases in nuclear decommissioning costs. We view this as a constructive outcome as it will allow us to concentrate on other strategic Minnesota activities, including our integrated resource plan, our Advanced Grid initiative and electric vehicle expansion efforts.

In January, the Minnesota Commission approved our affiliate filing for the Mankato natural gas plant and the assumption of the existing PPA. We closed on the acquisition earlier this month and believe the Mankato asset will bring substantial value and reliability to the upper Midwest system and to our customers, especially as we retire additional coal plants.

As we discussed in the past, we anticipate this asset will generate utility-like returns over its life. However, we expect the non-regulated returns will be slightly lower in the near-term and more robust toward the back end of the forecast. We continue to progress -- we continue to progress on our PPA acquisition strategy, and we are working with stakeholders to improve the process to ensure better regulatory alignment. We do not expect to propose future asset acquisitions into the unregulated company.

Moving to Colorado, the commission held deliberations in our electric rate case in December and verbally approved an ROE of 9.3% at current test year ended August 2019, and an equity ratio of 55.6% along with other decisions. We view this report for a strong capital structure and progress in improving more current test year as positives, particularly for the credit support that they provide.

But we're disappointed in the low ROE, which does not reflect our outstanding operational performance and leadership on the clean energy transition. We are waiting on a written commission order, which we need to calculate the final revenue impacts. However, we expect to seek reconsideration on certain issues. We expect new rates to be effective in February 2020. We also have electric rate cases in New Mexico and Texas. In New Mexico, we recently reached a constructive settlement that reflects a rate increase of approximately $31 million, an ROE of 9.45%, an equity ratio of 54.8% and an acceleration in depreciation in the top coal plant to reflect an early retirement. Hearings are scheduled in February with the commission decision to follow.

In Texas, we're seeking an increase of $136 million based on a historic test year, an equity ratio of 54.7% and an ROE of 10.35%. The request largely reflects investment for the Hale Wind project as well as other capital to support strong regional growth. Intervener testimony will be filed in February. And as in the past, we'll work to see if we can reach a settlement with the various parties. We anticipate a commission decision in the second quarter of 2020.

We're planning to file several cases next year. In February, we will file a natural gas rate case in Colorado with new rates expected to be effective in November. We'll also consider filing a Colorado electric case in the summer. We intend to file a Minnesota electric case in November. And finally, we'll likely file rate cases in both Texas and New Mexico to recover the costs for the Sagamore Wind project in the first quarter of 2021. With a strong year behind us, we are reaffirming our 2020 earnings guidance range of $2.73 to $2.83 per share, which is consistent with the long-term EPS growth objective of 5% to 7%.

With that, I'll wrap up. In summary, 2019 was another great year for Xcel Energy. We delivered earnings within or above our guidance range for the 15th consecutive year. We increased our dividend for the 16th straight year. We issued $750 million of equity, representing the majority of our equity needs over the next five years. Our stock hit an all-time high in September and more recently in January. We achieved a total shareholder return of just over 32%, eclipsing that TSR of the S&P 500 for yet another year.

The Minnesota Commission approved our acquisition of the long road assets into rate base, and we put in service three wind projects, largely on time and under budget. We resolved multiple rate cases and we continue to demonstrate leadership in environmental, social and governance arenas. We remain well positioned to deliver on our 2020 earnings guidance range and our long-term earnings and dividend growth objectives of 5% to 7%.

This concludes our prepared remarks. Operator, we'll now take questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We'll take our first question from Greg Gordon of Evercore ISI.

Ben Fowke -- Chairman, President and Chief Executive Officer

Good morning, Greg.

Greg Gordon -- Evercore ISI -- Analyst

Thanks. Good morning, everybody.

Robert Frenzel -- Executive Vice President and Chief Financial Officer

Hey, Greg.

Greg Gordon -- Evercore ISI -- Analyst

So, it doesn't look like there were any real substantive changes to your medium to long-term outlook from your last disclosures. Your capex budget is the same, but you did slightly tweak some of your guidance drivers for '20, including a modest reduction in expected O&M growth. Yes, I'm wondering as you look this year and then you look out over like a five-year planning horizon, you guys have done a great job as you say it bending the cost curve and controlling costs to reduce regulatory lag. And we're just wondering, yeah, in general, I wonder about the industry, but also specifically with regard to Xcel, as you circle back around and look at your organization, how much leaner do you think you can get given improvements in technology and the cost of deploying renewables, etc?

Robert Frenzel -- Executive Vice President and Chief Financial Officer

Thanks, Greg. It's Bob. It's a great question. As we give guidance, we do expect modest increases in O&M over the next year or two as we bring the wind on to the system and we spend some money in very strategic areas like cyber and wildfire risk mitigation. Over the longer term, we expect to keep O&M flat probably beyond the '21 period. And that includes substantial cost curve bending as we absorb increases in salaries and bargaining unit increases and increases from suppliers looking for upticks in our contracts and things like that. So it's a continuous effort, but I think the guidance for us is flat in '22 and beyond to what is '21.

Greg Gordon -- Evercore ISI -- Analyst

Great. Second and last question, I think, tomorrow we're expecting unless things have changed rate decisions in Texas for two of your competitors, CenterPoint than AEP. I know that you've got a pending case in that -- where a decision is not expected until later this year. There has been concern about regulatory risk both lower equity ratios and lower ROEs in that state. CentrePoint looks like they're coming out a little bit better than where they otherwise would have landed, but it's still not a great outcome relative to industry average. How do you think you guys differentiate?

Ben Fowke -- Chairman, President and Chief Executive Officer

Well. Hi, Greg, it's Ben. I think historically there has been a lot of differences in the pure T&D utility with no customers in ERCOT, like CenterPoint, and a vertically integrated company like SPS outside of ERCOT. And you see that, we've been in front of the regulator numerous times in the last five years and the equity ratios are what they are as well as the ROE. So, I think the more relevant case that I look to as I think about how Texas might get resolved is actually the settlement we had in New Mexico. As you know, Greg, many of the same interveners in Mexico -- excuse me -- are going be the same ones in Texas. So, we'll obviously look at those cases, but we're cautiously optimistic that we'll have some opportunities to potentially settle the Texas case in the March timeframe of this year.

Greg Gordon -- Evercore ISI -- Analyst

Fantastic. Thank you, guys.

Operator

Thank you. We'll take our next question from Insoo Kim, Goldman Sachs.

Insoo Kim -- Goldman Sachs -- Analyst

Thank you. My first question is on the -- good morning -- on the 2020 outlook for whether-adjusted low growth. Thank you for the color that you gave on what impacted especially on the electric side, whether it just a load, as you look out toward this year and just having gone through just a month of this year. Does it still give you confidence that you could achieve the 1% increase in load, including the leap year impact?

Robert Frenzel -- Executive Vice President and Chief Financial Officer

Yeah. Insoo, it's Bob. Thanks for the question, and I appreciate you are on the call. I think our sales forecast is reasonably conservative. We did have some discrete declines in our large C&I customers in 2019 that we don't expect to continue in '20. And underlying those discrete items, we do have strong customer growth, which is slightly moderated by use per customer. But I think our forecast is as expected, and we don't expect to adjust that from guidance.

Insoo Kim -- Goldman Sachs -- Analyst

Got it. Thank you. And my second question. In Minnesota, with the ongoing discussions on the Clean Energy First potential legislation, how did those -- how did the latest discussions fit in with your overall timing and shape of fleet transformation that you've laid on the RP? And do see -- and if there are changes do you see potential opportunities or challenges relative to their original plan?

Ben Fowke -- Chairman, President and Chief Executive Officer

Well, it's a really good question. I think Clean Energy First basically clarifies what we're already planning to do. And so, this would be the second time that it was -- the state is looking to legislate that Clean Energy First, legislation, and I think there will be some opportunities that come out of it. For us, it's important that we make sure we do this in the most efficient way possible. We recognized the very strong importance of our nuclear energy. And we recognize the fact that as we close and shut coal plants on a voluntary basis to achieve that 80% carbon reduction that our investors have some opportunities to be rewarded as well. So, we'll see where it goes. We're going to move forward. We're plowing our IRP plan. And that's -- as you know, that's we filed it rather and that will be discussed throughout the year. And it's -- I think it's pretty extraordinary plan, which has a lot of renewables, some gas at the continuation of our nuclear plants. So, I think we are well positioned.

Insoo Kim -- Goldman Sachs -- Analyst

Got it. Thank you very much.

Operator

Thank you. We'll take our next question from Julien Dumoulin-Smith of Bank of America.

Ben Fowke -- Chairman, President and Chief Executive Officer

Hey, Julien

Julien Dumoulin-Smith -- Bank of America -- Analyst

Hey. Can you hear me?

Ben Fowke -- Chairman, President and Chief Executive Officer

Yeah. Good morning.

Robert Frenzel -- Executive Vice President and Chief Financial Officer

We can hear you.

Julien Dumoulin-Smith -- Bank of America -- Analyst

Hey, good morning. Thank you for the time. So perhaps just to follow up a little bit on the tax extenders bill and some of the developments on the PTC. I know you guys are always vocal about your opportunities in the wind side. Can you elaborate your latest thinking on repowering specifically, given the extension? And I know it's a little early, but just altogether how do you think about the repowering opportunity and the PPA buyout strategy at large given the extension?

Ben Fowke -- Chairman, President and Chief Executive Officer

Well, I think it's helpful. I mean that's the short answer. The 60% PTC expansion allows you to lock in technology through 2024 with a 60% PTC, so I think that will potentially create some more opportunities to your point for repowering, Julien. As you know, we don't have those opportunities embedded in our forecast, but we are certainly going to be looking for those opportunities.

Julien Dumoulin-Smith -- Bank of America -- Analyst

Got it. Excellent. And then, as you think toward the rate case in Minnesota, do you want to give any kind of premise as to how you think about that again obviously being pushed out, but at any premise you think about in setting expectations going forward in that case specifically, I know you just alluded to some potentially on the last question here, but maybe just to start to open up that conversation?

Ben Fowke -- Chairman, President and Chief Executive Officer

Well, I mean, we pushed it out a year and I think the terms were constructive. We -- unless we can figure out a way to push it out another year, we'll file in November with interim rates to go into effect in January of like I said would be '21. So I don't really have much more details than that. We were pleased to work with the staff and stay out. I think that allows us to focus on the resource plan. And it's nice to be able to take a little burden off the staff too, as they've got quite a workload. So, could we stay out another year? Well, I don't know. But I guess I can't add much more color than that, Julien, that's where we are.

Julien Dumoulin-Smith -- Bank of America -- Analyst

That is fair. All right. Excellent. Thank you, guys.

Operator

Thank you. We'll take our next question from Travis Miller of Morningstar.

Travis Miller -- Morningstar -- Analyst

Thank you. Good morning.

Ben Fowke -- Chairman, President and Chief Executive Officer

Good morning, Travis.

Travis Miller -- Morningstar -- Analyst

Hi. As you're looking in the industry, obviously you're quite active both solar and wind, 2020 and 2021 as you're negotiating contracts both regulated and possibly the PPAs outside of those, what are you seeing just in terms of cost comparisons, where costs are going both wind and solar or are they still going down or they're changing terms, I just wonder if you could characterize what you're seeing going 2020 and 2021 in wind and solar?

Robert Frenzel -- Executive Vice President and Chief Financial Officer

Well, I think you're still seeing the technology's fall in price. The -- you then have to match that up with the -- where we are with PTCs and ITC's. But as we just talked about that 60% extension I think is going to be helpful. Without that 60% PTC extension, Travis, I would have told you that perhaps we'll see some bump up in wind and we still might, which is why I'm really pleased we locked down 100%. I think that's a no regrets strategy in every sense of the word. But I think that technology is still going to compete head on with fossil alternatives even in a low natural gas environment.

Of course, the key that I think is important to that is that we will put more renewables on the big grid that we're all connected to than anybody else, but we're going to need more than just renewables and battery storage. Renewables will be our biggest source of energy by the mid-'20s. But as you see in our IRP in Minnesota, we'll address this in Colorado next year, we're also going to need to back up that wind with natural gas and then ultimately we're going to need to start developing technologies -- carbon-free dispatchable technologies that will allow us to achieve our goal of a 0% carbon system by 2050. So maybe that's a little bit long winded, but I thought I'd throw that out there for you, Travis. That's the plan. I will also...

Travis Miller -- Morningstar -- Analyst

Yeah. Don't...

Robert Frenzel -- Executive Vice President and Chief Financial Officer

Our industry is really, really stepping up to the challenge of carbon reduction. I mean, we're proud to have been the first to establish the goal. But if you go down the line and add up what utilities are doing, it is really significant. And I'm quite proud of this industry.

Ben Fowke -- Chairman, President and Chief Executive Officer

I'll add up real quick. Our year-over-year fuel cost decline was about $325 million. And while half of that was just lower commodity prices, natural gas and coal, the rest of that is our Steel for Fuel program coming home to roost to the benefit of our customers. And while we are investing steel in the ground and have capital cases for recovery, you're seeing the real benefit on the fuel line. And that does attribute -- that does accrete to the customers and that provides some headroom in the bill for us for continued investment in the distribution and transmission grids, which we know we need.

Travis Miller -- Morningstar -- Analyst

Yeah, great. Thank you. And then, did I hear you correctly, you do not plan on any unregulated renewable energy acquisitions, but you would possibly keep doing the PPA-type acquisitions, just to make sure there is not a change there from what you said?

Ben Fowke -- Chairman, President and Chief Executive Officer

Our goal is to look for PPA buyout opportunities or repowering opportunities with the benefits flowing to the customers. So that means putting them in regulated operations and into rate base. That's always been the plan. Of course, we offer that as well for a gas fired plant in Mankato, and commission decided the benefits which were primarily back-end loaded weren't sufficient enough to go forward. So we made the decision that we would -- the asset was important enough and we thought -- valuable enough that we would hold it in our portfolio, but as a non-reg selling into the utility under long-term power purchase agreement. But I try to say you that more is an anomaly than anything else and I would challenge anybody to find a utility that is more focused and has more of their growth -- 100% of their growth coming from regulated operations. There's nobody that's more pure play and vertically integrated than Xcel Energy, and that's the way we mean to keep it.

Travis Miller -- Morningstar -- Analyst

Okay, great. Thank you very much.

Operator

Thank you. We'll take our next question from Ali Agha of SunTrust Robinson Humphrey.

Ben Fowke -- Chairman, President and Chief Executive Officer

Hey, Ali.

Ali Agha -- SunTrust Robinson Humphrey -- Analyst

Thank you. Hi, good morning. First question, in 2019, as you noted in the slides, at the OpCo level you earned a 9.06% ROE. Can you just remind us what earned ROE is embedded in your 2020 guidance at the OpCo level?

Robert Frenzel -- Executive Vice President and Chief Financial Officer

Yeah. Ali, its Bob. Our weighted average regulated ROE is about 9.4% across all of our jurisdictions and we still have approximately 50 basis points of leakage and lag in that. So high-8%s is probably a good number right now.

Ali Agha -- SunTrust Robinson Humphrey -- Analyst

Bob, you'd expect a little bit of leakage or a reduction from what '19 ended up earning?

Robert Frenzel -- Executive Vice President and Chief Financial Officer

I do mostly driven by a lower ROE in Colorado electric case. We're still working on trying to close that ROE gap, and we think we have some opportunity over the longer term to do that.

Ben Fowke -- Chairman, President and Chief Executive Officer

Ali, I think it's important to note though that we are -- I will tell you, we are disappointed in the ROE we received in Colorado. But as Bob mentioned, there were some positive things there too. But as you -- as we're into the end of January and we see the puts and takes that we've had so far, I would tell you that we're solidly positioned to be in the middle of our earnings guidance range.

Ali Agha -- SunTrust Robinson Humphrey -- Analyst

Okay. And secondly, I know your current 2020 through 2024 capex five year is roughly around $22 billion. And Ben, you alluded to looking at additional opportunities, whether it's renewables, etc, if they do arise. Just from a constrained perspective, in terms of whether it's a rate case, I mean rate impact of customers or balance sheet, etc, how much can you stretch that $22 billion if there were opportunities or do you not see any constraints if the right opportunities are there.

Robert Frenzel -- Executive Vice President and Chief Financial Officer

All right. The right opportunities are there. There are no constraints, and we're focused on capex that helps reduce total bills for our customers. And where we can find those opportunities and if it's a PPA buyout, well that's great. If it's trading O&M for capital, that's great. If it's more Steel for Fuel that saves customer's money on their fuel bill more than offsets the capital cost and the associated return, that's great. We're always going to be looking for that. And longer-term, I think we're in the early days of beneficial electrification and saving customers' money on their total energy bill with EVs and other opportunities. So, I'm excited about the capital opportunities we have to invest. And I think we've demonstrated we can grow our regulated rate base. Again that's a 100% of where we get our earnings from, and keep our bills flat for our customers.

Ali Agha -- SunTrust Robinson Humphrey -- Analyst

Okay. And last question again, a quick reminder, when you look at this 5% to 7% growth rate target that you laid out, can you remind us -- as you stand here today and you look at the opportunities in the capex, are you comfortable in the upper half of that range, the higher end of that range, can you just remind us where you stand on looking at that growth rate from where we are today?

Ben Fowke -- Chairman, President and Chief Executive Officer

Yeah. I think, we're positioned to be on the upper part of the range. I mean...

Ali Agha -- SunTrust Robinson Humphrey -- Analyst

Upper part of the range?

Ben Fowke -- Chairman, President and Chief Executive Officer

Yeah. Bob, I don't know if you have anything to add?

Robert Frenzel -- Executive Vice President and Chief Financial Officer

I agree with that.

Ali Agha -- SunTrust Robinson Humphrey -- Analyst

So higher end is the way we should think about it?

Ben Fowke -- Chairman, President and Chief Executive Officer

Yeah.

Ali Agha -- SunTrust Robinson Humphrey -- Analyst

I see. Thank you.

Ben Fowke -- Chairman, President and Chief Executive Officer

Thanks, Ali.

Operator

Thank you. We'll take our next question from Sophie Karp of KeyBanc.

Sophie Karp -- KeyBanc Capital Markets -- Analyst

Hi, good morning, and thank you for taking my question. Most of the topics have been discussed, I guess, but I just wanted to circle back on Colorado.

Ben Fowke -- Chairman, President and Chief Executive Officer

Sophie, a lot of background noise, we can hardly hear you.

Sophie Karp -- KeyBanc Capital Markets -- Analyst

Can you hear me now?

Ben Fowke -- Chairman, President and Chief Executive Officer

Much better.

Sophie Karp -- KeyBanc Capital Markets -- Analyst

Oh, sorry about that. So most of the topics have been discussed, but I just want to circle back quickly on Colorado. Could you discuss where kind of the regulatory environment in this space is going directionally? I guess, with the disappointing rate decision and the initiative of -- in Boulder, like would it be fair to say overall it's -- it's more difficult maybe or is it not a fair statement? Thank you.

Ben Fowke -- Chairman, President and Chief Executive Officer

No, I don't, I wouldn't categorize it that way. Boulder's been -- we've been talking about Boulder for 10 years now and probably be talking about at least for another 5 years, and that's more centric I think to Boulder and we continue to, I think, do quite well on a legal basis there with supportive commission decisions as well. As far as the regulatory environment in Colorado, yeah, I mentioned, Bob and I both, that were disappointing in 9.3% ROE. We think we're one of the best performing utilities in the nation and that ROE quite frankly doesn't reflect that. So likely look for reconsideration on that. But longer-term, Sophie, I believe that what we're doing and what we're doing was codified in the law last legislative session, we're highly aligned with what our customers and our stakeholders want to see in Colorado. And when I think about how you achieve long-term success, that's exactly how you do it aligned with stakeholders and then execute on a clear spaces. And that is what Xcel is doing, and I think that bodes well for future success.

Sophie Karp -- KeyBanc Capital Markets -- Analyst

Terrific, thank you.

Operator

Thank you. We'll take our next question from Andrew Levi of ExodusPoint.

Ben Fowke -- Chairman, President and Chief Executive Officer

Andy, how are you' doing?

Andrew Levi -- ExodusPoint -- Analyst

Hey, guys. Good. I want to ask you about the growth rate. I guess...

Ben Fowke -- Chairman, President and Chief Executive Officer

Disappointing, Andy.

Robert Frenzel -- Executive Vice President and Chief Financial Officer

That's a dividend.

Andrew Levi -- ExodusPoint -- Analyst

Then I just wanted really to get your thoughts on this. Obviously you've mentioned ESG and that kind of taking out a big role kind of the industry as far as how people are investing. But I guess another part that didn't been talked about relative to ESG natural gas. And whether it's -- as in the LDC, whether it's midstream, whether it's fracking, whether it's even using it in your power plant as the fuel. Ben, I just wanted to get your thoughts just on natural gas as a commodity and whether you think it's clean or dirty or -- and then in the context of ESG if you kind of agree with some people's view that it's a dirty fuel?

Ben Fowke -- Chairman, President and Chief Executive Officer

Yeah. Well, Andy, I think that is a very good question. It's a challenging question, because we're going to need natural gas to achieve that 80% carbon reduction that I mentioned and you know early action is pretty darn important in addressing the risk of climate change. So, we're going to get pushed back on natural gas, but I think the key is to make sure that people understand you shouldn't make perfection be the enemy of a great plan. And we're moving away from coal completely here in the upper Midwest. That's the plan. We're going to need gas to back it up. We had -- this time last year, we were in a polar vortex. Reliability is critical, so I think we've got a really pragmatic plan. Our challenge as an industry, Andy, is going to be making sure that people see that you know 2050 is a long way away. We're going to need different types of innovation. We'll put as much renewables and battery storage on the grid, but experts tell us that the big grid that we're all connected to does get saturated by depending on where you are in the country between 50% and 70%. That's amazing. You know that's the big grid, but that's where we're going -- but after that we're going to need things to back it up, and that's when new technologies.

So, as part of the leadership of EI, that's a message I want to get out there. Now as far as the LDC goes and as far as using natural gas, I think our industry needs to be more demanding of upstream methane emissions, I think that's really important and we can do something about that. We need to double down on energy efficiency on the gas side. And then ultimately I think we need to look at potentially using renewable gas or hydrogen made out of carbon-free energy and other things and start blending that in the resource mix. I will also tell you that here in the upper Midwest heat pumps and things like that are pretty tough to make work. At least with today's technology so, we got to keep customers warm. So it's a challenging issue but I think with the right messaging and demonstrating, we've got a great plan. I think we can persevere.

Andrew Levi -- ExodusPoint -- Analyst

Thank you Ben. That was actually a great answer. Thank you.

Ben Fowke -- Chairman, President and Chief Executive Officer

Thank you.

Operator

Thank you. We'll take our next question from Paul Patterson of Glenrock Associates.

Paul Patterson -- Glenrock Associates -- Analyst

Hey good morning. How are you doing?

Ben Fowke -- Chairman, President and Chief Executive Officer

Hey, Paul.

Robert Frenzel -- Executive Vice President and Chief Financial Officer

Hey, Paul.

Paul Patterson -- Glenrock Associates -- Analyst

Just really quickly on Ali Agha's questions. I just want to follow-up, are you guys indicating that you in general just to make sure I understand this a bit, you don't expect any rate increases when everything is factored into fuel and everything else with respect to your regulatory objectives or your capex objectives

Robert Frenzel -- Executive Vice President and Chief Financial Officer

No, Paul, I hope I didn't give that impression. I mean, our goal is to keep our total bills to customers at or below the CPI index. And if you look back on some of our -- and like in our investor deck, you can see that we've done that over the last five years. Now what -- the other -- you will see increases as well in the kWh rate. But remember that's only one component of a total bill.

So we're really focused on keeping bills again, CPI or less as we go through this timeframe. And our analysis says we can with the right deployment of technology and support of public policy. That's really important because you can also make it much more expensive than it needs to be.

And that's where we are.

Paul Patterson -- Glenrock Associates -- Analyst

Okay. And is there any thought of that maybe going to serve a PBR sort of a CPI minus X or something like that if that's sort of the objective maybe and maybe not have all these sort of rate cases and rate proceedings?

Ben Fowke -- Chairman, President and Chief Executive Officer

You mean like change the regulatory compact for something around that.

Paul Patterson -- Glenrock Associates -- Analyst

[Indecipherable] regulatory compact so much as just the regulatory. I mean you guys are going in all the time for rate increases or rate cases if you follow me and they're kind of -- they're -- you're seeing them more about than I do. They can be kind of technical. And what have you in some places around, in some jurisdictions internationally you have something like a CPI minus X -- CPI-X where basically this sort of performance based rate making sort of thing where your rates do, where inflation is taken into account in terms of where your rates are set periodically.

Ben Fowke -- Chairman, President and Chief Executive Officer

Yeah.

Paul Patterson -- Glenrock Associates -- Analyst

I don't know. I just was wondering if there is any thought about something like that or...

Ben Fowke -- Chairman, President and Chief Executive Officer

No, I mean, we're always open to new ideas. But I think you have to be pretty cautious when you start addressing those sorts of things, Paul. And we do file a number of cases and we spend a lot of time on calls like this talking about it. But we've got a great track record of managing that. And we got, I think, a very good track record of aligning with policy makers which again on a long-term basis gets you where you need to be. So, my experience some of those mechanisms aren't necessarily good for the companies that have done -- that have those in place. They can be, but they can also be harmful as well. So... Sure. Sure. I was just wondering if there is any thought about that. That's all. I just hearing and I just thought to ask you that, that's all.

Robert Frenzel -- Executive Vice President and Chief Financial Officer

Yeah. Performance based rate making is great, but sometimes it's not symmetrical, I guess. So that's -- so we're pretty pragmatic about that.

Paul Patterson -- Glenrock Associates -- Analyst

Absolutely. And then, in terms of -- there has been some questions about as you know coal and coal dispatch and you guys major filing in December in Minnesota. I'm just wondering if going forward you see additional activity in that or anything that you guys are looking at in terms of coal plant retirement or any sort of flexibility that might be worked into in terms of potential additional savings that might be enhanced by -- I know you guys are looking at all the time, but in terms of coal plant retirements or dispatch changes that might also drive savings for customers or for you. How should we think about that? I mean, is there anything -- other than what you guys have been doing for some time now, is there any additional sort of things on the horizon?

Ben Fowke -- Chairman, President and Chief Executive Officer

Well, I mean, first of all, thank you for recognizing what we do with our coal plants up here. I think -- I mean I think that working with the commission here, I thought that was a great example of partnership. And moving from must run to economic dispatch, I think that was a positive first step. The commission is very interested in understanding how a pause in coal dispatch could work as we start to ready for the day when we don't have any coal in the upper Midwest. So I think it's -- the Midwestern way to kind of be pragmatic about how we approach this going forward. And to your point Paul I think there are opportunities across our system to look at how we dispatch our coal plants particularly when you look at the variable costs of things like steel for fuel and renewable energy. So we're definitely looking at that down in the SPS region. We've got some water issues that we need to address, and that could be solved with some seasonal dispatch. So, again, with economics in mind, so -- yeah, it does look for us -- to look for more opportunities like we're doing here in the upper Midwest.

Paul Patterson -- Glenrock Associates -- Analyst

Okay, great. Thanks a lot.

Ben Fowke -- Chairman, President and Chief Executive Officer

All right. Thank you.

Operator

Thank you. We have no further questions in queue, I'll turn it back to Bob Frenzel for closing remarks.

Robert Frenzel -- Executive Vice President and Chief Financial Officer

Well, thanks everyone for participating in our call this morning. We look forward to seeing you out on the road this quarter. Please contact our Investor Relations teams with any follow-up questions.

Ben Fowke -- Chairman, President and Chief Executive Officer

Thank you.

Operator

[Operator Closing Remarks]

Duration: 46 minutes

Call participants:

Paul Johnson -- Vice President, Investor Relations

Ben Fowke -- Chairman, President and Chief Executive Officer

Robert Frenzel -- Executive Vice President and Chief Financial Officer

Greg Gordon -- Evercore ISI -- Analyst

Insoo Kim -- Goldman Sachs -- Analyst

Julien Dumoulin-Smith -- Bank of America -- Analyst

Travis Miller -- Morningstar -- Analyst

Ali Agha -- SunTrust Robinson Humphrey -- Analyst

Sophie Karp -- KeyBanc Capital Markets -- Analyst

Andrew Levi -- ExodusPoint -- Analyst

Paul Patterson -- Glenrock Associates -- Analyst

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