Prepared remarks
Hello, and welcome to Xcel Energy First Quarter 2025 Earnings Conference Call. My name is Melissa, and I will be your coordinator for today's event. Please note that this conference is being recorded and during the call, your lines will be on listen-only. However, you will have the opportunity to ask questions at the end of the presentation. I will now turn the call over to Roopesh Aggarwal, Vice President, Investor Relations. Please go ahead.
Good morning, and welcome to Xcel Energy's 2025 first quarter earnings call. Joining me today are Bob Frenzel, Chairman, President and Chief Executive Officer; and 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 your questions if needed. This morning, we will review our 2025 first quarter results and highlights, provide updated 2025 assumptions, and share recent business and regulatory updates. Slides that accompany today's call are available on our website. Some 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 SEC filings. Today, we will discuss certain metrics that are non-GAAP measures. Information on the comparable GAAP measures and reconciliations are included in our earnings release. I will now turn the call over to Bob.
Thanks, Roopesh, and good morning, everybody. At Xcel Energy, we know that economic growth and the prosperity of our communities and country depends on our ability to deliver energy to our customers when and where they need it, while keeping their bills as low as possible. This commitment to our communities and customers is demonstrated in our results this morning. In the first quarter of 2025, Xcel Energy delivered earnings of $0.84 per share, invested $2.3 billion in resilient and reliable energy infrastructure for our customers, and accelerated our wildfire risk reduction efforts to enable safer and more resilient communities. Brian will provide more details in a minute. But based on our results for the first quarter, we remain confident in our ability to deliver on our earnings guidance for the 21st year in a row, one of the best track records in the industry. As you can imagine, over the past several months, we've been engaging at the federal level with legislators and administration officials as executive orders, trade and tariff actions, and pending legislation will likely have impacts on future energy infrastructure.
Not surprising to anyone on this call, we're in an unprecedented period of electric demand growth and believe that we need a broad scope of energy resources to meet those needs. We see increased electric demand from the oil and gas sector. We see demand from residential customer growth, EV adoption, and beneficial electrification across our service territories. We see demand from data centers in Texas, Colorado, Wisconsin, and Minnesota. And in the medium term, we expect to see continued trends towards electrification as well as re-onshoring as a potential outcome of federal actions. The infrastructure to serve this demand growth needs to be thoughtfully planned as well. We and many in our industry have been advocating in D.C. for policies that allow for cost-effective and rapid adoption of new energy resources. That includes preservation of technology-neutral tax credits for wind, solar, storage, and nuclear, their associated transferability provisions, and various loan and grant programs.
That includes advocating for siting, permitting, and other federal actions that would allow for more rapid construction of the assets needed to serve this growing demand, and that includes advocating for federal actions that can mitigate the potential for wildfires and their associated financial impacts. Additionally, we're paying close attention to ongoing tariffs and other recent federal actions. As you are all aware, this remains a highly fluid situation, potentially positively changing as recently as yesterday. On the tariff front, we believe that our base capital plan remains intact and that the impacts are both modest and manageable. While we're still evaluating, we estimate that roughly 40% to 45% of our capital expenditures are material-based, with the balance being labor, permitting, and other items, and of this percentage, a majority is domestically sourced. There are some notable exceptions, though.
In particular, our industry has exposure to Chinese tariffs related to battery storage. In our base capital plan, we only have one significant battery project, which we continue to work to mitigate any risks, but in our longer-term plans, we see a need for more battery and other related energy storage assets. Based on these recent tariff actions, we expect a relatively rapid evolution of the battery supply chain similar to what we've experienced in solar panels over the last three to four years. We estimate that our total tariff exposure on our $45 billion base capital plan for 2025 to 2029 is approximately 2% to 3%, and that's before we work through any incremental vendor mitigation actions. We remain confident in our ability to navigate this evolving environment and keep delivering for our customers and investors. We see incredible energy demand needs across the country. In total, Xcel Energy anticipates that we will need to deliver between 15,000 and 29,000 megawatts of new generation by year-end 2031 to serve our customers and communities.
During the first quarter, we continue to make progress with our various commissions on these needs, which also helped give line of sight to our $10 billion plus incremental investment pipeline. In February, the Minnesota PUC approved our integrated resource plan settlement for nearly 5,000 megawatts of generation. Included are 720 megawatts of company-owned natural gas generation and battery storage, and approximately 2,800 megawatts of wind generation which will reuse the transmission interconnect from our Sherco facility. RFPs for resources that make up the balance of the IRP will work their way through regulatory processes in 2025 and 2026, details of which are included in our disclosures and in the attached presentation. In Texas and Mexico, our teams continue to evaluate proposals for generation to meet growing demand. As a reminder, we're seeking 5,000 to 10,000 megawatts through a competitive RFP process including projects being proposed by the company.
We're encouraged by the early results and plan to make a recommended filing in Q2. And in Colorado, we continue to make progress with our energy resource plan filing that we made in October of last year. We're recommending the addition of 5,000 to 14,000 megawatts of new generation to meet projected sales growth of 3% to 7% per year. The commission decision is expected in the fall of this year. As part of these resource planning processes, I've been asked to comment on the impacts of recent executive orders on coal plants. Our generation retirement strategy is the product of a long-term planning process with state commissions and other stakeholders that seeks to balance energy demand with long-term assets that we need for our customers. With access to some of the country's best wind and solar resources as well as incremental natural gas generation, we've demonstrated that we can retire these inefficient and aging coal plants while ensuring reliability and keeping customer bills low.
Continued evaluations of the executive orders and work with federal and state agencies as well as our communities and customers on any next steps. Alongside our access to some of the country's lowest-cost renewable resources, our thoughtful investments and focus on continuous improvement have helped keep our residential electric bill growth below the rate of inflation for the past decade and among the lowest in the country. As we continue to grow, the technology-neutral and nuclear PTCs have also proven to be a critical tool for customer affordability. Since 2018, Xcel Energy customers have saved over $5 billion in avoided fuel costs and PTCs from wind generation, and this year our Upper Midwest customers will see an additional benefit of nearly $250 million on their bills from nuclear production tax credits. We continue to actively engage with elected officials in the U.S. House and Senate, and key agencies such as the DOE, to reinforce the critical importance that these incentives play in keeping bills low for our residential and business customers.
We believe that policymakers are aligned in the belief that lowering energy costs for Americans is a key policy objective. We continue to remind them these incentives play an important role in helping us meet that objective. Xcel Energy also continues to make significant progress to protect our customers and communities and systems from the threats of extreme weather. On the regulatory front in Colorado, we reached a constructive settlement on our updated $1.9 billion wildfire mitigation plan, including a securitization mechanism to manage customer bill impact. In Texas, we also reached a constructive settlement on our $500 million system resiliency plan. We expect commission decisions in both proceedings by the third quarter of 2025 and we'll continue to prioritize these investments to improve resiliency and reduce risk on our systems. And on the policy front, we've seen progress with several pieces of constructive wildfire legislation.
In Texas, legislation was introduced whereby material compliance with an approved wildfire mitigation plan provides an affirmative defense to civil liability related to wildfire damage. In North Dakota, legislation that provides a utility similar protection was passed by both chambers and awaits the Governor's signature. We believe these bills could also serve as frameworks in our other states for future legislation. Looking forward, our focus for 2025 remains unchanged. Xcel Energy is working to deliver on our earnings for the 21st year in a row, to capture the unprecedented opportunities for growth we laid out in our capital plans, to deliver on our incremental capital opportunities backlog, advance our clean energy leadership and raise the bar on delivering a compelling experience for our customers in order to make energy work better for them and the communities we serve. With that, let me turn it over to Brian.
Thanks, Bob, and good morning, everyone. Starting with our financial results, Xcel Energy had earnings of $0.84 per share for the first quarter of 2025, compared to earnings of $0.88 per share in the first quarter of 2024. The most significant earnings drivers for the quarter include the following: electric and natural gas sales growth and regulatory outcomes increased earnings by $0.21 per share and other items combined to increase earnings by $0.01 per share. Offsetting these positive drivers, higher O&M expenses decreased earnings by $0.11 per share. Higher depreciation and amortization reflecting our capital investment programs decreased earnings by $0.09 per share and higher interest expense decreased earnings by $0.06 per share. Now let me comment quickly in more detail on O&M expenses for the first quarter, which totaled $686 million or $81 million higher than in 2024. We expected O&M expenses to be front-loaded this year with the increase due to known items such as higher nuclear outage amortization costs, increased insurance premiums, benefit costs, and the impact of a 2024 gain on land sale.
Some of the increased wildfire-related expenses are subject to regulatory decisions later this year. These results are in line with our year-to-date O&M expense budget, and we reaffirm our full-year guidance of a 3% increase in O&M expenses relative to 2024. Turning to sales, first-quarter weather and leap year adjusted electric sales increased 2%, driven by growth across most operating companies and customer segments. For 2025, we continue to expect full-year weather-adjusted electric sales to increase 3%. As the current tariff and economic outlook evolves, we will continue to monitor any potential impacts to our sales outlook. Shifting to rate case activity, in Wisconsin, we filed our 2026 to 2027 electric and natural gas rate cases requesting a total revenue increase of $151 million and $24 million respectively over two years. That's based on a forward test year, a 10% ROE, and an equity ratio of 53.5%.
We are evaluating filing electric and natural gas rate cases in Colorado and an electric rate case in New Mexico later this year. Moving to data centers, we are making solid progress on our high probability pipeline and remain on track to meet our goal of contracting our total base plan by this fall. Xcel Energy continues to receive requests for new data centers in its service territories. We are managing a robust pipeline and remain committed to our data center contract principles, ensuring new contracts maximize benefits to all customers and protect Xcel Energy from stranded asset risk. We also continue to make strong progress in the Smokehouse Creek wildfire claims process. We've resolved 151 of the 225 submitted claims, which we continue to view as constructive. We have committed $113 million in settlement agreements of which $79 million have been paid through Q1. Based on current information and settlement activity, we have updated the low end of our estimated liability to $290 million, which remains well below our insurance of $500 million, as we described in our earnings disclosure.
As part of the increase, we have resettlements related to some previously excluded categories such as compensation for railroad claims and settled claims related to tree damage. We've also updated our disclosures in Marshall, in particular, as it relates to two new causation theories introduced by plaintiffs in expert reports that were submitted in the first quarter of 2025. We remain in expert discovery until mid-July and are preparing for a trial in late September. Moving to guidance, we remain confident and reaffirm our ability to deliver earnings within our $3.75 to $3.85 guidance range for the year. Updates to key assumptions are included in our slides and earnings release. With that, I will wrap up with a quick summary. Xcel Energy posted first quarter 2025 earnings of $0.84 per share. We continue to lead the clean energy transition while ensuring safe, clean, and reliable service and keeping customer bills as low as possible.
We are focused on reducing operating risk in our system from extreme weather. We reached settlements with our Texas and Colorado resiliency and wildfire mitigation plans to see progress on constructive legislation in Texas and North Dakota. We have strong line of sight with our $10 plus billion investment pipeline with approval for at least 5,000 megawatts of generation resources in Minnesota and awards for $3 billion to $4 billion of transmission in MISO and SPP. We continue to maintain a strong balance sheet and credit metrics using a balance of debt and equity to fund accretive growth. And finally, we reaffirm our 2025 EPS guidance of $3.75 to $3.85. This concludes our prepared remarks. Operator, we will now take questions.
Questions and answers
Thank you. Our first question is from Nicholas Campanella from Barclays. Please go ahead.
Hey, thanks so much for taking the questions.
Hey, morning, Nick.
I wanted to ask, I appreciate all your comments in the prepared remarks. You are a significant beneficiary of transferability. We are currently working through budget reconciliations. If there is any scenario where the tax credits expire sooner within your five-year plan, how do you assess the impact on cash flow considering there might be a positive contribution to the rate base as well? Do you still anticipate some form of actual cash impact, and could you explain how the plan could accommodate that?
Hey Nick, it's Bob. And I'll start, and then I'll give Brian some time to get to some of the details. But there's been a lot of conversation around transferability in general, at least in the investor community, not actually a lot in D.C. and I've spent a lot of time there. Transferability was architected as part of the IRA. We think it's explicitly linked to the credit program themselves. We know there's a lot of support as evidenced by letters that Congress and the Senate have written to their respective Finance and Ways and Means Committees around support for continuation of the credits in some fashion and form. And by that measure, we think the transferability continues along with those credits. So as I sit here today, I think very positively about the credits that come from our legacy projects, projects that are in service, projects that we've safe harbored, and then depending on where the credits go in general, I think the transferability stays aligned with those credit profiles over time. But maybe I'll let Brian comment a little bit on some of the details you asked on rate base and/or cash flow implications.
Yes, Nick, I’ll address this in two parts, and feel free to ask more questions if I don’t cover exactly what you’re looking for. There has been considerable discussion about the bill introduced by Representative Fedorchak, but when we examine what the bill entails, it does not affect the transferability of any projects currently in service, nor does it impact the transferability of projects that would have qualified under last year’s tax credits. So, looking at what we qualified last year, we are in a strong position through 2028, taking into account the four-year Safe Harbor for those projects. We anticipate that these will have their credits and transferability intact. The bill from Fedorchak would only have an impact starting in 2029, and as it stands, there would be a 20% credit in that year. We are not supporting this bill due to its considerable long-term impacts on customers. However, from the standpoint of transferability and our cash flow, we feel confident in how it relates to previous wind farms and the projects that would have benefited from last year’s safe harbor.
Now, regarding your question about what would happen if transferability were eliminated for all projects, even those currently in service or future ones, we don’t believe this will happen, as Bob mentioned. Congress typically does not overturn business decisions because they understand the importance of stability for businesses. If such a scenario did occur, it would lead to an increase in our rate base due to decreased tax efficiency, impacting our cash flow. In that case, we might need to issue some equity to address the financial consequences. However, in the long run, this would primarily affect the timing of cash flows, pushing them further into the future. There are other options we could consider, such as tax equity within the regulated environment. One intriguing approach we utilize in one of our jurisdictions allows for the flow of Production Tax Credits back using a different method.
Rather than distributing PTCs over the standard 10-year period, in this jurisdiction, we distribute them over the entire life of a project. For instance, for a wind farm with a 30-year lifespan, we would flow them back over 30 years. This strategy enhances our short-term cash flow, lowers tax efficiency, and offers a more stable impact on customer bills. There are definitely strategies we consider internally that may not be widely understood. As I mentioned, while we don’t expect the scenario of losing transferability to materialize, we do have plans in place if it were to occur.
That's really helpful color. I appreciate that. Thank you. Just one quick question, just the broader kind of tariff outlook and how it's affecting economic development in your service territory. Your C&I sales that you guys put up on a weather-adjusted basis still seem strong. I know that's at the end of March. Maybe you can kind of comment on how activity has changed in the service territory at all in real-time. And clearly, you're kind of reaffirming your load outlook here. So it seems like you're comfortable. But yes, maybe just a few more details there. Thanks.
Yes. Hey Nick, let me start. Look, definitely the sentiment meter has changed over the last 45 days. I don't think we've seen a lot of change in actual activity yet either on the consumer or the C&I side. But what you see in here in this earnings season from a lot of people who've already announced, whether it's banks or industrial manufacturers, there's a thoughtfulness around deploying capital right now, a thoughtfulness about the uncertainty of the regime that we sit in. And there is a lot of conversation and maybe sparked over the last couple, two or three days around how quickly could this environment change as well? We saw it hit very quickly. We've seen some peel back already. You've seen the market respond to that already. And so we use the word in our prepared remarks of dynamic or fluid. And I continue to believe that we don't see a lot of impacts right now in the customer. But we're cautiously optimistic that we work through this through the balance of the year. And obviously, we've reiterated our guidance and sales forecast accordingly.
Yes, Nick, I can just provide a little bit extra color on that too. Obviously, one of the areas when you think about where the price of oil has gone, we serve the Delaware Basin, the most prolific basin. But we've been in contact with our large oil and gas customers in terms of expectations there, and they haven't changed. A little bit of feedback we got, though, is they're watching tariffs and how that could impact their business. But so far, we haven't seen that impact on us. Our sales to that mining and transportation sector were up 9% year-over-year, specifically down in SPS. So still seeing it there. One area we saw a little bit of weakness in March was just in Colorado on the small C&I sales. But again, one month doesn't make a trend. So just something that we're watching. But overall, right now we sit here feeling comfortable with reaffirming our 3% sales growth for the year.
Thank you. Our next question is from Julien Dumoulin-Smith from Jefferies. Please go ahead.
Hey, good morning, team. Thank you guys very much, appreciate it. Look, if I can follow up on Nick's question, it's really been a focus from a lot of folks on this transferability stuff. Just to go back to the, should we say alternative that you were talking to a second ago about the 30-year flow back? I mean, would that suffice in most of your cases? I get everything is discrete and specific, but do you see that sort of meaningfully offsetting the equity risk scenario here that could emerge from going back to, shall we say, the prior regime? I just want to make sure I understand kind of the total impact of what you're contemplating there, as well as just to clarify your specific docs, I know there's several different credits here and the eligibility for various credits to qualify for transparency, it could be bifurcated, it seems like. You can speak to that a little bit too.
Yes, Julien, I want to emphasize that we do not anticipate the transferability of credits to disappear, especially for active projects and those already safeguarded under the previous rules, particularly as we transition from the old system to tech-neutral this year. An alternative approach significantly lessens our equity impact, and it's essential to consider how we finance this. Additionally, tax inefficiencies lead to an increase in the rate base. As we evaluate this fallback mechanism, we will certainly collaborate with our regulators for approval. We believe this is a sound option for managing some of the credit challenges. Moreover, our strong balance sheet is a crucial asset for handling these impacts, which primarily involve timing concerning when we can benefit from this. Overall, I aimed to shed light on a scenario that many investors may not fully grasp, highlighting the alternatives available that can benefit both customers and the company.
Regarding your question about different treatment for credits, the Fedorchak bill specifically targeted wind and solar without affecting storage or nuclear credits. However, we see this as a signal of broad bipartisan support, as demonstrated by the House letter with 21 Republican signatories and the Senate letter with four Republican senators. There is recognition of the economic value these credits bring, supported by studies indicating that the IRA could generate over 14 million jobs in the next decade. This encapsulates my perspective on the overall situation, with transferability being a critical element.
Excellent guys. Hey, thank you for the details. Just following up here, nicely done. But can you provide some further elaboration on what's in this Colorado wildfire mitigation plan settlement agreement? It seems like there's some good stuff in there. But just want to speak to that a little bit more. If you can elaborate on what exactly is in that sort of plan.
Yes, thanks Julien, I can handle that. Yes, overall, a very constructive settlement with a unanimous settlement with all the parties in that wildfire mitigation plan. Again, if you remember, that's a three-year plan, $1.9 billion split between $1.6 billion of capital and $300 million of O&M. And how we think about it is it's a win-win from all sides, as we get constructive cost recovery here in the near-term. We also get an extension of our insurance deferral that we had a one year extension that expired in October. So we have an extension of that excess liability insurance deferral. But we also agreed to secure $1.2 billion of spend through securitization by 2029. And that's really a helpful way to manage overall customer affordability. So when we look at this total package, we think it's a really good outcome to reach a unanimous settlement with a number of parties in that proceeding was a good outcome. And we look forward to having the hearing in front of the commission here, I think within a month.
Excellent. Thank you guys. See you soon.
Thank you. Our next question is from Carly Davenport with Goldman Sachs. Please go ahead.
Hey, good morning. Thanks for taking the questions. Maybe just to start on your comments on the tariff exposure that 2% to 3% on the capital plan, could you just talk a little bit about the process or the timeline over which you'd expect to have those discussions with vendors and any sense of where you think that exposure could potentially go post having those discussions?
Yes. Hey Carly, good morning. I can take that one. Some of these discussions have already happened. When you think about certain project-specific contracts that we're working on, whether it's renewable projects, storage projects, I think about that 2% to 3% being absolutely manageable. When you think about that's a five-year time period, so the conversations have started working through specific ones but also working with various suppliers in terms of how much do they absorb, what happens there. But we also are already looking at how do you diversify from a supply base. So I'll give you a recent example. We recently signed an agreement for substation power transformers. This is, I believe, last week that we signed it. This is where scale and scope comes in. So we signed an agreement with nine different suppliers, five U.S. domestic manufacturers, and four global manufacturers to give us that kind of ability to source where we think it is most effective for our customers.
So I would say these discussions have been going on and not only just recently, but there was an expectation that tariffs were coming. When the election happened back in November, we expected tariffs. We included tariff impacts into the bids we made in our RFP down in SPS in January. So I wouldn't view it as conversations have just started, but it's now as we understand where they are, then it's how do you navigate.
Got it. Appreciate that, that's helpful. And then maybe just a quick follow-up on the liability related to Smokehouse Creek going up to 290. I think you had highlighted in the prepared remarks inclusion of some previously excluded verticals. But just curious if there's anything else that you see at this point that could pose risk to that number continuing to move higher or you guys still feel good about wherever that number goes relative to the insurance coverage.
Yes. I'll give you a little bit more color. No, the way I think about it is we're making really good progress on the overall claims. If you look at the details, we've settled 151 of the claims that come through our process. So we've settled more than we took in Q1. So making progress in terms of closing that from our internal claims process. We also have 25 lawsuits filed against us. What I didn't say in the opening remarks is we've settled or dismissed five of those already. So we've turned to settling the represented claims. And as you said in your question, and as I said in my opening remarks, we've now had settlements with the railroad entities, which was not in our low-end accrual before we settled with the utility entity that was not in our low-end accrual. And we have made some settlements for tree damages, and so we've included the settlement payments in our $290 million accrual. There's also one other large claim that we've gone through the discovery process and included in our accrual. So from that perspective, again, it is following accounting guidance. It's a low-end accrual and you can see what we excluded in our disclosures. But overall, I was pointing to people that we have approximately $500 million of insurance coverage and we are well under that policy limit as we sit here today, and we'll continue to make progress over the balance of the year on these claims.
Great. Great to see the progress there. Thanks so much for all the color.
Thank you. Our next question is from Durgesh Chopra with Evercore ISI. Please go ahead.
Hey team, good morning. Thank you for taking my questions. I actually just have one. All of the questions have been asked. Just any updated thoughts on the Marshall Fire, any conversations with stakeholders as we're approaching trial here this fall? Anything new there? Thank you.
Hey Durgesh, yes, I think just as I noted in my prepared remarks that in the plaintiff's expert reports, we received two new causation theories, one related to a partially unattached piece of telecom equipment making contact with our line and the other one, that being an unidentified flying object making contact with our line. So four theories in total. When you look at the Sheriff's report, the Boulder Sheriff's report, which had the ignition being our first line and then the underground coal seam. So that's where we are, I think a little bit of discussions just from a process perspective. We have a mediation process in this case that's standard for trials such as this; the deadline for mediation is May 29. So we'll work through that process. But as we sit here today and as we said before, we're diligently preparing ourselves for trial, which starts September 26.
Awesome. Thanks, Brian.
Yes. Hey, Durgesh, just one thing I'd add on there that I think is important is that we believe our indemnity agreements on our pole attachments are strong. As we think about the causation theories that have been proposed, that's just an important one to think through.
Thank you. Our next question is from Jeremy Tonet with J.P. Morgan. Please go ahead.
Hi, good morning.
Hey Jeremy, how are you?
Good, good, thanks. Just want to, I guess, start off, could you elaborate on potential regulatory treatment of wildfire related O&M expense and are you expecting to recover some of these costs and what type of -- what kind of assumptions underpin your guidance at this point?
Hey, Jeremy, I think underpinning our guidance as such is always constructive regulatory treatment. I'll kind of hit on a couple. One, we talked about the Colorado Wildfire Mitigation Plan. Now that's a unanimous settlement, still awaiting commission hearing and approval. But that includes concurrent recovery for our O&M expenses related to our wildfire investments. And so that, as I said, is a very good constructive outcome in awaiting the decision by the commission there. We have filed regulatory deferrals for our insurance premiums in Wisconsin, Texas, and New Mexico. And so we expect decisions there probably Q2, Q3 timeframe on those three filings. And then in Minnesota, that would just be part of our rate case. We've included our wildfire O&M expenses and investments in the rate case, which has a forecast year for 2025. And that decision will play out in that proceeding a little bit longer dated. But overall, we do assume constructive regulatory outcomes overall just as part of general guidance assumptions year in and year out.
Got it. Thank you. Pivoting back towards data centers, it seems like a lot of the pipeline has been in Minnesota, but I'd like to understand how you see things developing across other service territories, particularly in Colorado. Is there potential for broadening this?
Yes, I think, as we've spoken about this, the last few calls we talk about, you're absolutely right. You've heard us talk about the opportunities in Minnesota and the interest we've seen there. We've seen it expand beyond Minnesota as you allude to. One, we already have a data center in construction in Colorado. That was one of our signed contracts. And the three contracts we're working on right now is what I talked about in my opening remarks that we expect to have signed by this fall. One is in Colorado. We also worked on what we call a large load cluster study in Colorado, and you look at looking at a called this colocation area near the Denver Airport in Aurora, which was not only some data center customers but also a large industrial customer and a large distribution center. So gaining interest in Colorado. But we also have a lot of interest in Wisconsin too. So as we think about it, we have signed agreements in three different states today.
And then we also have the three agreements that we're working on, one in Wisconsin, one in Minnesota, one in Colorado. So it's helpful to kind of see that interest across our states. And we're also seeing growing interest in the Dakotas. There was a land sale last year in South Dakota to a data center. So we continue to receive inbound inquiries and have a strong pipeline. So our goal is to execute on fulfilling that kind of what we call high probability pipeline by this fall for our investors and really for our customers. When we look at the benefit it creates for our customers and maintaining affordability.
Yes. I'd add in the Southwest as well, we filed AQ studies with the Southwest Power Pool for thousands of megawatts of data center inquiries down there. A little bit further back in our probability pipeline for data centers. But we're still seeing lots of interest down there. Think about it, our SPFC and I-tariff is one of the lowest in the country and has attracted some attention as well.
Got it. That's helpful there. And just want to go back to Colorado if I could one last one. How do you think about pacing a high Colorado investment against high sales growth as you've outlined there? Do you see any periods of relatively elevated bill inflation as investments come in ahead of load? Just wondering, stakeholder feedback on bill inflation in Colorado?
Yes. I mean we have a significant investment plan in Colorado and I think we are very focused on affordability. Maybe I started from a little bit higher level is if we look at our customer bills in Colorado on the electric perspective, they're the second lowest in the nation from an affordability perspective as a share of wallet. And then when you looked at the combined electric and gas, it's lowest in the nation from an affordability perspective. So we're in a really good place in Colorado from an affordability perspective. Significant investments, certainly, working with the commission, that's an avenue of additional requests we made in our current resource plan in terms of providing the longer-term affordability looks. So working closely with our commission and stakeholders on that and that's also part of the wildfire mitigation plan that we just settled here in terms of looking at securitization, some of these unique investments we're making to protect our customers and communities. So certainly, top of mind, like you said, it could be a little bit elevated, call customer bills here in the near term as we work to get that load online later, call it, in the five years but certainly something we'll work with our commission and stakeholders on managing that affordability.
The other lens of this is we talked in our prepared remarks about $5 billion across all of Xcel Energy on savings from wind energy and tax credits. Colorado sits in one of the windiest and sunniest parts of the country. We have the ability to make an energy transition there very cost-effectively. Our forecast for Colorado was to be more than 80% carbon reduced by the end of this decade, tapping into those great resources. We think that footprint allows us to be very attractive in economic developments as well. And when you think about low-cost energy and the attraction to bring economic development, whether it's data centers, whether it's the oil and gas load in the DJ Basin, or whether it's new onshoring and reshoring, we think Colorado is a great home for economic development. And as we all know, more sales are beneficial to the broad customer base. So our continued focus on bringing businesses to Colorado while minimizing the bill impacts from an energy transition and from a growth perspective is a real focus for the company.
Thank you. Our next question is from David Arcaro with Morgan Stanley. Please go ahead.
Hey, thanks so much. Good morning.
Good morning, David.
I wanted to clarify the 2% to 3% total tariff impact on your investment plans. Does that include all renewable investments as well? Specifically, how does it relate to the recent AD CVD ruling and the potential increased costs in the solar supply chain?
Good morning, David. Yes, the 2% to 3% figure is primarily focused on our $45 billion capital plan. When we look at it over a five-year period, it appears very modest and manageable. Regarding the recent AD CVD ruling from the Commerce Department, we do not anticipate any impacts from that. We believe we communicated well throughout the investigation, and we've taken measures with our suppliers to mitigate any potential effects. Looking ahead, we're confident in how we're managing tariff impacts on both the wind and solar sides through our agreements with our OEMs.
Got it. Perfect. I'm just curious about the data center aspect. It seems like your long-term data center target or pipeline level hasn't changed compared to the previous quarter. However, it appears there has been some activity in the earlier stage pipeline. Is that the correct way to view it, with additional gigawatts entering the earlier phases? Also, what is the schedule for updating the more concrete pipeline forecast?
Hey David, I don’t think we’ve seen much change in the timing of pulling things earlier. We’ve made good progress with the three we’re working on to sign, with one in each of our states: Colorado, Minnesota, and Wisconsin. The timing hasn’t necessarily changed for those. If we sign contracts for those three customers today, they will be reflected a bit backdated in our five-year forecast. Overall, our pipeline hasn’t changed; we don’t expect to update that 8,900 until Q3, and we will stick to our normal five-year sales cycle. The timing remains consistent with what we expect to achieve within the next five years.
Yes, got it. Okay, great. I appreciate it. Thanks so much.
Thank you. Our next question is from Anthony Crowdell with Mizuho. Please go ahead.
Good morning, team. It's really nice to call Investor Relations and not hear Sandman in the background.
He's probably listening, Anthony.
I know. I know. I know. I know. So how to make fun of them. Just one clarification, one question. I think it was to Durgesh's question earlier, on a new cause related to the Marshall Fire. I just apologize if I heard correctly, is a plaintiff claiming the cause of the fire was a UFO hitting your wire and the wire fell and caused the fire?
There are two theories presented by the plaintiff’s experts in their reports. One theory suggests that an unidentified flying object or something hit our lines, but our lines did not fall to the ground. We had one line detach from the insulator, but we did not have any down power lines; that was the theory they proposed. The other theory was that a piece of partially unattached telecom equipment struck our line. These are the two theories, and you’re right regarding how I described it in the initial part.
Got it. Okay. I wanted to follow up on the coal plant retirements that Bob mentioned earlier. You mentioned there has been years of planning involved. I believe you might have one or two plant retirements scheduled for this year, possibly Comanche. Can you confirm if those are still on track and provide any additional details?
Yes. So the way I think about it is we probably have a coal plant a year through the balance of the decade. This year is the second unit at Comanche. I think the unit, Anthony, is probably 60 years old, 50 to 60 years old. And so our expectation is at the end of the year that, that unit shuts down along with its sister unit, which shut down two years ago. And that's the plan, and we're working towards that. And when you think about the renewable build-out in the Colorado Power Pathway that is underway in the state right now, that's the reliability replacement for that unit that is retiring at the end of this year. So we work with our states for years, including sometimes almost decades on the transition plans. We've been incredibly successful in maintaining reliability. As Brian commented on, in particular, Colorado, one of the lowest electric bills in the country, while we've done a significant transition away from coal in that state. And we expect that to continue.
Great. Thanks so much. Appreciate you taking my questions.
Thank you. Our next question is from Ryan Levine with Citi. Please go ahead.
Good morning. What impact do you see from the potential new Texas legislation related to wildfires in terms of its impact to your mitigation plans and the future in Texas?
Ryan, can you be a little bit more specific which piece of legislation that you're talking about because there are several pieces of legislation that are out there?
Yes. So there's a few bills being proposed by Congressman from your service territory around different ways to reduce risk to your service territory related to both private E&P land in terms of whose jurisdiction would be under and then a few others around mitigation plans. I don't know if that had any implications for CapEx or risk reduction for the company.
Yes. Let me begin, and then Brian can share his thoughts. We are very optimistic about our system resiliency plan and the discussions we've had with stakeholders in Texas. The unanimous settlement on this program will enable us to invest in important hardening measures in the state. There are two pieces of legislation I'd like to address. One concerns pole inspection programs and establishing more comprehensive state laws around them. We generally support pole inspections and the compliance reporting associated with those programs. These inspections are typically classified as operating expenses that are processed through regular rate cases, so I don't believe they will significantly affect our capital expenditures. The second piece pertains to wildfire liability, which presents an opportunity to establish a wildfire management program. If implemented correctly, this would provide an affirmative defense against civil lawsuits related to liability. We believe that both pieces of legislation could be beneficial. However, I don’t expect them to lead to substantial investment, as most of that is occurring through our system resiliency plan, which is currently under a unanimous settlement and awaiting commission approval later this year.
Yes. And Ryan, there are two more pieces I can touch on. Yes, there is some legislation that is really directed to the oil and gas lines. And then there's other legislation that we certainly support is more around Texas improving their state firefighting capabilities. That's around funding for firefighting aircraft, funding for rural volunteer firefighting departments, new emergency management facilities, things like that, which we certainly support. But overall, if I think about our system resiliency plan and the investments we're making, whether it's in Texas, New Mexico, Colorado, Minnesota, it's all about protecting our customers and communities. And that's how we think about the plan that we put forth is really protecting them in this legislation; we don't see it having an impact on how we think about the risk and how we protect our customers in terms of the investments we're making.
Thanks. And then in terms of tax credit transferability, have you discussed or previewed the credit implications for different transferability iterations with the rating agencies and how they may view the implications as it's more of an industry-wide issue? Any color you could share around how different decisions may be interpreted from your credit metrics?
Ryan, our annual meeting with the agencies is in September. We believe that the chance of anything related to transferability or having tax credits without transferability is very low. If something does occur, we would definitely have a discussion with them. Overall, our conversations in September were positive, but they did not focus on this, which we consider a low probability outcome.
Okay. Appreciate the time.
Thank you. Our next question is from Travis Miller with Morningstar. Please go ahead.
Thank you. Good morning, everyone.
Hey, Travis.
Ryan teed up a little bit on Texas. That was my question. But on a little different perspective here. Obviously, a lot of headlines, a lot of talk about the power generation side. And given your different regulatory framework, I'd say outside of ERCOT, what's your take in terms of as there's more uncertainty around the rest of the state? Does that either impact you? Does it give you an advantage of attracting demands? Any kind of implications there, as there's more and more uncertainty on the power generation side, demand forecasting outside of your area in Texas, if that makes sense.
Yes. I believe we have a substantial amount of demand already, as Bob mentioned regarding the AQ studies. This is somewhat related to the request for proposal we currently have underway. The RFP indicates a need for between 5,000 and 10,000 megawatts of new generation capacity, with the upper end aimed specifically at serving our oil and gas customers due to the demand we are experiencing there. From our viewpoint, we have considerable demand even without factoring in the developments in other regions of Texas. Our primary focus is on meeting the needs of our existing customers and the potential data center demand we are observing. Thus, we already see strong demand even before considering the influences from other parts of Texas or the interest of entities wishing to establish themselves in the SPP territory.
And just to clarify, I don't know if your question was directed at the risk aspect. The interconnectivity between ERCOT and the Southwest Power Pool is quite minimal and occurs through the D.C. tie. Therefore, I would say there is no operational contagion risk between those two systems.
Okay. Yes, that's helpful. Anything in the state legislation that's going on, again, outside of what you were discussing earlier with system resiliency and wildfire, anything in those other bills out there that would impact you directly at all, again, kind of the power generation focused stuff.
Yes. So I did talk about wildfire legislation in Texas. We also had similar legislation in North Dakota as well, which we were buoyed by. I think the only thing I'd comment on really that's broad on the generation side is really the continued trend and support for nuclear more broadly across the country and in our states; we've gotten nuclear siting legislation in both Wisconsin and North Dakota. And then in Colorado, they changed the law to recognize that nuclear accounts as a clean energy resource under their calculations for carbon-free generation. So not surprising, there's been a national trend towards nuclear as a preferred form of generation. We think it's years out into the next decade before nuclear becomes certainly, SMRs become likely across the country. But with data center loads and other large load growth across the country, you could see folks looking at even large-scale nuclear facilities again, to serve some of this big load.
Okay. Great. Well, Sanjee, part of that real quick. Texas policy in terms of nuclear, do you have a stance either way?
Yes. So look, Texas has been broadly supportive of nuclear. I mean I think they want a big piece of the nuclear supply chain and whether it's from R&D or manufacturing of large components to wholesale manufacturing of SMRs to the implementation onto the grid. So as a state, Texas has been pro nuclear for a host of reasons. And of course, we would support that as well.
Okay, great. Thanks so much for the time.
Thanks, Travis.
Thank you. As we have no further questions, I would like to turn the call back over to CFO, Brian Van Abel, for any closing remarks.
Yes. Thank you all for participating in our earnings call this morning. Please contact our Investor Relations team with any follow-up questions.
Thank you very much. That does conclude today's conference. You may now disconnect.