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Hello, and welcome to Xcel Energy Third Quarter 2025 Earnings Conference Call. My name is George, and I'll be your coordinator for today's event. Please note, this conference is being recorded. I'd like to call you over now to Roopesh Aggarwal, Vice President, Investor Relations, to begin today's conference. Please go ahead, sir.
Thank you, George, and good morning. Welcome to Xcel Energy's Third Quarter 2025 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 third quarter 2025 results and highlights, share recent business and regulatory updates, update our 5-year capital and financing plan, and provide updated 2025 assumptions and 2026 guidance. 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. In the third quarter of 2025, Xcel Energy recorded a charge of $290 million or $0.36 per share, reflecting the settlement in principle reached with plaintiffs in the Marshall wildfire. Given the nonrecurring nature of this item, it has been excluded from third quarter and year-to-date ongoing earnings. As a result, our GAAP earnings for the third quarter of 2025 were $0.88 per share, while our ongoing earnings which exclude this nonrecurring charge, were $1.24 per share. All further references to earnings, drivers and variances in our discussion today will refer to ongoing earnings. For more information on this, please see the disclosure in our earnings release. I will now turn the call over to Bob.
Thank you, Roopesh, and good morning, everybody. In the third quarter of 2025, Xcel Energy continued our commitment to our customers, our investors and our communities to make energy work better. During the quarter, we delivered solid earnings of $1.24 per share. We invested over $3 billion and $8 billion year-to-date in resilient and reliable energy infrastructure for our customers. We reached a comprehensive and constructive settlement with plaintiffs in the Marshall wildfire that helped our customers and our communities to move forward. And we accelerated our wildfire risk reduction efforts to protect our communities from volatile weather. Based on our results through the third quarter, we are reaffirming our earnings guidance for 2025 and remain confident in our ability to deliver on earnings guidance for the 21st year in a row, one of the best track records in the industry. As per our usual Q3 rhythm, today, we are introducing our updated 5-year infrastructure investment plan designed to serve increased energy demand, make needed investments to strengthen our transmission and distribution systems, provide a cleaner and more sustainable energy portfolio and to keep energy safe, reliable and affordable for all of our customers.
In total, we expect this plan to deliver 7,500 megawatts of zero-carbon renewable generation, 3,000 megawatts of natural gas-fired generation and almost 2,000 megawatts of energy storage to ensure system reliability, 1,500 new high-voltage transmission line miles to support demand growth in regional delivery and approximately $5 billion of investment in our distribution and transmission systems to improve resiliency and reduce future risk from wildfires. We're able to accomplish this plan because we have one of the best utility, development and supply chain teams in the industry. And in combination with our strong balance sheet, we can deliver infrastructure timely and affordably for our customers. In connection with this forecast, we have safe harbored all renewable and storage projects in our base capital plan and expect the same for the projects in our incremental plan to ensure that we can capture available tax credits and help keep customers' bills low natural gas CTs on order, which will provide over 4 gigawatts of natural gas generation to help ensure reliability and affordability.
Our ability to deliver infrastructure with excellence in our strategic geographic advantage allows our customers to benefit from some of the lowest energy bills in the country. Over the past 5 years, our residential electric and natural gas bills have been 28% and 12% below the national average, respectively. Our residential electric customers in Colorado have the lowest share of wallet out of all 50 states. And the average residential bills in our other states occupy 5 of the next 11 spots. Since 2014, our residential electric and natural gas bill growth has been well under the rate of inflation. In fact, a typical residential Xcel Energy electric and natural gas bill is 14% and 20% lower than it was in 2014 when adjusted for inflation. Our Steel For Fuel program has saved customers nearly $6 billion through 2025. And our one Xcel Energy Way Continuous Improvement Program has realized over $1 billion in cumulative savings since 2020, while improving customer and operating outcomes.
Our industry-leading demand side management programs have saved enough energy to avoid building 30 average-sized power plants. And as customers continue to electrify transportation in other parts of their lives, they can further reduce their overall monthly energy costs with lower electric rates. We also continue to support critical programs to help our customers who may need assistance with their energy bills. Since 2024, Xcel Energy has connected over 200,000 customers with almost $300 million in financial resources. We're also exploring new opportunities to help even more customers across our jurisdictions, including proposals in our current Minnesota, Wisconsin and upcoming Colorado rate cases. Moving to the topic of artificial intelligence, opportunities for Xcel Energy go well beyond our ability to power data centers. Of course, our load interconnection queue continues to grow even as we move some of our backlog into the contracted category.
But across Xcel Energy, we are in the early stages of using AI in the business to bend the cost curve and to provide improvements in both customer satisfaction and operational outcomes. We're harnessing AI to empower our people, accelerate innovation and build a smarter, more resilient energy future for our customers and communities. Automated analysis across our diverse enterprise data sources is delivering actionable insights that strengthen security, improve operations and planning and drive process improvement. We're bridging knowledge gaps in empowering faster, more informed decision-making across the organization. And we're leveraging AI built by others to advance our business, including high-resolution imagery to transform how we inspect and maintain our distribution infrastructure. Through drone-based data collection and automated image analysis, AI-enabled processes can identify defects and assess risks and enable our teams to prioritize maintenance with greater speed and accuracy.
And with wildfire mitigation, AI is transforming our risk models. By leveraging internal models and tools, we significantly improved our model coverage and accuracy as well as reduced analytical times to a fraction. This means faster, more reliable risk assessments protecting communities and infrastructure in real-time. AI is truly an engine that's driving enterprise-wide innovation and transformation in Xcel Energy, making energy work better for our employees, our customers and our communities. Moving to Marshall. On September 23, Xcel Energy, Qwest Corporation and Teleport Communications America reached settlement agreements in principle that resolve all claims asserted by the subrogation insurers, the public entity plaintiffs and individual plaintiffs. And while Xcel Energy does not admit any fault or wrongdoing and disputes that our equipment caused the second ignition, we believe this provides a positive outcome for our communities and our investors.
Looking forward, Xcel Energy continues to make significant progress to mitigate risk from wildfires and extreme weather with public-facing wildfire mitigation plans in each of our states. This includes investments in situational awareness tools like weather stations and Pano AI cameras, advanced meteorology, fire science and AI-enabled risk modeling tools, hardening our systems, deploying advanced wildfire safety operations and PSPS capabilities and taking operational actions, including daily stand-ups to address the threat from extreme weather across every part of our system and taking proactive actions as appropriate. Finally, each September, Xcel Energy employees and community members come together to honor the spirit of service. This year marked the 15th annual day of service for Xcel Energy with nearly 3,000 volunteers from across the company and the communities we serve coming together to support local nonprofit organizations.
Together, volunteers dedicated almost 9,000 hours of service across more than 100 projects. This is one of my favorite days of the year and it exemplifies the spirit and dedication of our employees and partners who show up every day to provide safe, clean, reliable and affordable energy to our customers and our communities. With that, I'll turn it over to Brian.
Thanks, Bob, and good morning, everyone. Starting with our financial results, Xcel Energy delivered earnings of $1.24 per share for the third quarter of 2025 compared to earnings of $1.25 per share in the third quarter of 2024. The most significant earnings drivers for the quarter include the following: Regulatory outcomes in electric and natural gas sales growth increased earnings by $0.18 and higher AFUDC increased earnings by $0.08. Offsetting these positive drivers, higher financing costs decreased earnings by $0.15, reflecting the funding of our infrastructure investments and our financial discipline of maintaining a strong balance sheet. Higher depreciation and amortization decreased earnings by $0.09, driven by increased system investments and the higher O&M expenses decreased earnings by $0.05. Turning to sales. Weather normalized and leap year adjusted electric sales increased 2.5% through the third quarter of 2025, driven by strong residential sales growth across all OpCos and increased C&I load in SPS and PSCo.
During the third quarter, we also energized Meta's new data center in Minnesota that will continue to scale in the coming years. In turn, for the full year 2025, we continue to forecast 3% weather-normalized electric sales growth. In the third quarter, O&M expenses increased $37 million relative to 2024. This increase was largely driven by a $25 million increase in health and benefit costs for the quarter. For full year 2025, we now forecast that O&M expenses will increase 5%. Shifting to RFP and rate case activity. In Colorado, in partnership with Colorado Energy Office, UCA and commission staff, we issued a near-term procurement for 4,000 megawatts of renewable resources and 500 megawatts of thermal and firm dispatchable resources. This RFP is intended to accelerate the deployment of a portion of our Colorado IRP to capture production tax credits before they sunset. Bids were received this month, and we expect to file a recommendation in December 2025 with the commission decision by February of 2026.
In SPS, we issued an all-source RFP to meet an 870-megawatt accredited capacity need. This represents 1,500 to 3,000 megawatts of nameplate capacity that will be online by 2032. Bids are due in January 2026 with an expected portfolio announcement by June 2026. In October, the Wisconsin commission verbally approved NSPW's $725 million acquisition of the 375-megawatt Elk Creek solar storage project. Tomorrow, we expect to file a natural gas rate case in Minnesota requesting a $63 million total revenue increase based on a 10.65% ROE and a 52.5% equity ratio. Interim rates of $51 million will also be requested effective January 1, 2026. Regarding future cases, we expect to file a Colorado Electric and Natural Gas and New Mexico electric rate case later this year. Moving to data centers. We remain on track to contract the remainder of our original 2 gigawatt base plan by the end of the year. In addition, we have updated our total base plan to include approximately 3 gigawatts of data center capacity.
Additional projects included in the base case, we consider high probability and expect to be contracted by 2026. This will drive 3% of the 5% assumed annual sales growth in our 2026 to 2030 capital plan. We also continue to make strong progress on the Small Coast Creek wildfire claims process. We've resolved 212 of the 254 submitted claims, and we have settled or dismissed 21 of 34 lawsuits. We've updated the low end of our estimated liability to $410 million. We have made significant progress in the third quarter with the resolution of the 3 largest claims by acreage. We have committed $360 million in settlement agreements. So considering the low end estimated liability of $410 million, we're estimating approximately $50 million more on top of the $360 million that has been committed based on our current information. As a reminder, we have approximately $500 million of insurance coverage.
Shifting to our investment plan. Today, we are providing an updated $60 billion 5-year capital expenditure forecast, which reflects annualized rate base growth of approximately 11%. These investments are critical to serving growing electric demand, meet clean energy goals and ensure safety and reliability of our system. We also have an additional pipeline of investments to our $60 billion plan, specifically from our recent RFPs across jurisdictions, incremental data center load, and transmission projects from future MISO and SPP tranches. We're excited about our growth opportunities and will continue to finance accretive growth in a balanced manner. This year, we have issued or contracted approximately $3 billion of equity and equity-related content between our ATM program and our 2025 hybrid financing. Our updated '26 through 2030 capital plan reflects an additional $23 billion of debt and $7 billion of equity content.
We anticipate that any incremental capital investments would be funded by approximately 40% equity content and 60% debt. We continue to maintain a balanced financing strategy, which includes a mix of debt and equity to fund accretive growth while maintaining a strong balance sheet and credit metrics. Moving to earnings. We're reaffirming our 2025 ongoing earnings guidance range of $3.75 to $3.85 per share. We're also initiating our 2026 earnings guidance range of $4.04 to $4.16 per share, which reflects approximately a midpoint of 8% growth from the midpoint of our 2025 guidance. Key assumptions are detailed in our earnings release. We are updating our long-term EPS growth objective to 6% to 8% plus with expectations to deliver 9% growth on average through 2030. This update reflects our significant investment needs to serve our customers and drive state policies along with confidence in our financial outlook.
We are maintaining our dividend growth objective of 4% to 6% with the expectation to be at the low end of the range. Over our '26 to 2030 forecast period, we expect our dividend payout ratio will trend towards the bottom end of our updated payout ratio range of 45% to 55%, which allows greater financial flexibility and dry powder for the future. With that, I'll wrap up with a quick summary. We continue to lead the clean energy transition, ensuring safe, clean and reliable service and keeping customer bills as low as possible. We announced an updated 5-year capital investment program that provides strong, transparent rate base growth and significant customer value. We reached a constructive settlement in the Marshall wildfire and continue to make investments to reduce risk to our system and communities from extreme weather. Our customers have and will continue to enjoy some of the lowest bills in the country with our investment plan.
We maintain a strong balance sheet and credit metrics using a balance of debt and equity to fund accretive growth. We reaffirm our 2025 EPS guidance of $3.75 to $3.85 and have initiated 2026 EPS guidance of $4.04 to $4.16, which reflects a midpoint of 8% growth from the midpoint of our 2025 guidance. And finally, we expect to deliver 9% EPS growth on average through 2030. This concludes our prepared remarks. Operator, we will now take questions.
分析師問答
And our first question is coming from Nicholas Campanella from Barclays.
Just wanted to be clear, '26 at the midpoint, you did about 8%, and I hear you on the 9% through 2030. Does that start beyond '26? Or is that how you're kind of viewing this year?
Nick, I'll take that. No, that includes 2026, so 9% over the next 5 years, inclusive of '26 guidance. So that 9% would be based off the midpoint of this year, so $380 million.
Okay. Great. I appreciate that. And then just one other clarification, $7 billion of equity in the plan. I know you talked about $1.3 billion already priced forward. Is that kind of net against that $7 billion? Or is it still $7 billion from here on out?
No. I think of it as we are looking at $7 billion from this point forward with our new plan for 2026 to 2030. If you compare what we accomplished this year to last year's plan, which included $4.5 billion, and consider those two aspects, we are on track with our messaging regarding incremental capital that generates about 40% additional equity content. I feel very confident about our equity content plans and our ability to maintain our credit metrics while executing the $60 billion investment plan.
Our next question is coming from Steven Fleishman calling from Wolfe Research.
So first, regarding the profile of the growth rate, when you examine the CapEx plan and the rate base growth, it is largely front-end loaded, and then CapEx decreases significantly in '29 and '30. Many other companies tend to do the opposite, starting lower and then ramping up. Could you elaborate on this? Is it largely due to uncertainties surrounding some of the RFPs and other factors in '29 and '30?
Yes, Steve, I can address that. I believe you are correct in noting that we are typically cautious about what we include in the capital plan and our SPS portfolio production related to the projects approved by our Minnesota Commission in the first quarter of this year. We are currently in the early stages of launching RFPs with Colorado SPS for 2029 and 2030. This initiative falls into our additional pipeline, and as we progress through the process into next year and beyond, we anticipate opportunities to address both generation needs for customer load growth and transmission requirements that we expect to emerge from SPP in the near future. The next batch of SPP should become clearer in the fourth quarter, along with our longer-term outlook on MISO Tranche 2.
Okay. I know you've previously provided some rough estimates of spending in potential upside scenarios. Is there anything you can share about the possible capital and upside case that isn't included here?
Yes. I would say the slide we have in our deck here for today, that's going to be a range of 6,000 to 9,000 total megawatts, we think out of those RFPs plus some transmission. We've always guided people to be competitive in our generation processes and winning about half of that plus that transmission. So I see a $10 billion-plus sitting in that pipeline, not all will be in 2030. Some of those generation processes run through '31, '32, but really good opportunity as we look at the low growth and the transmission needs in our system.
Yes, Steve, I think you're right about the trend. The earnings will generally align with our capital investment plan, although there will be some delay due to financing costs. We also plan to enhance the latter part of our strategy by exploring additional opportunities mentioned by Brian.
Next question will be coming from Jeremy Tonet of JPMorgan. It appears that he has just moved. We'll go to Carly Davenport. Okay, Carly, same thing. We'll go to Julien Dumoulin of Jefferies.
Can you guys hear me?
Yes, sir.
All right. Awesome, guys. Well done. Seriously. Look, if I can, just going back to where you left off with Steve, I'll just see it this way. Of those different points that you raised here, what are the more substantive pieces? I mean, it seems like the SPP element could be more substantive that seems more front-loaded a; and then b, the acceleration of some of these renewable procurements in light of tax credit expirations could be more substantive and lumpy and don't seem to be in there. But again, you tell me what are the bigger pieces that are not yet in that 60%. Again, you've laid out a whole bunch of them. I'm just curious which one moves the needle more as best you see it initially.
Julien, I’ll start and then Brian can add. A significant portion of the SPP and RFP is included in our base capital plan. There is an additional RFP for SPP capacity and energy that is not part of the plan. Regarding Colorado generation, we currently have two RFPs under review by the commission. One is a near-term procurement portfolio intended to leverage renewable credits, which is projected to be a 4.5 gigawatt plan. The second is the just transition solicitation, which has been ongoing with the commission and is expected to go through some adjudication later this year or early next year, involving a generation need of between 4 and 15 gigawatts. There is some overlap in timing between the NTP and the JTS, so I wouldn’t count those as separate additions. However, there is a significant portion of Colorado generation anticipated to come online in the 2028 to 2030 timeframe that is not included in our base capital plan.
Additionally, there are several smaller RFPs in the upper Midwest for generation not included in our base plan either. Regarding transmission, we have ITP and MISO 2.1 included, though they are longer-term capital plans with longer timelines for spending that will extend into the early 2030s. There are also upcoming ITPs and MISO LRTPs that are not incorporated in this plan. I believe Colorado generation will likely be the main driver of back-end investments in this five-year plan, with unannounced transmission from the SPP and ITP process being the second most significant factor. Brian, do you have anything to add?
Yes, we're actively engaging with our stakeholders in Colorado to speed up the procurement of renewable resources, especially with the tax credit deadline approaching in 2030. We expect to gain clarity on this portfolio in December, with a commission decision anticipated in the first quarter. We have received a strong set of bids and are evaluating them. In addition, we are exploring long-term opportunities related to data centers and collaborating with our state stakeholders to foster economic development and manage growth. This could lead to increased demand for generation and transmission in the future, which is a significant potential opportunity for the industry.
Excellent. Let me ask you this way. Regarding the 6% to 8% growth compared to the 9% you're presenting, is the idea that the 9% reflects the current situation while the 6% to 8% is intended to account for potential future adjustments or variations that might arise over the next couple of years?
Yes. Julien, we think about it this way, the 6% to 8%. Well, the 6% to 8% is what would you think about a long-term view on EPS growth when you balance the investment needs of our system, the low growth we're seeing on opportunities and also affordability. But when we look at our current 5-year plan and the $60 billion of infrastructure projects for our customers, serving the low growth and the needs of our system, derisking our communities. That plus really represents the 9% that we see over the next 5 years. If that helps us differentiate in terms of how we're thinking about it.
Next question comes from Carly Davenport of Goldman Sachs.
Maybe just on the load growth outlook, looks like continued strength in SPS, which is great to see. And then a couple of the other OpCos shifting a bit lower from the prior plan. So could you just talk a little bit about what's driving those moving pieces on load growth across the regions?
Yes. When we examine the situation, SPS remains strong in our oil and gas sector, which has been consistent for years. This year in New Mexico, we expect to see significant growth in the large commercial and industrial sector, particularly driven by electrification in that region. Additionally, Fermi America is operating in Texas and New Mexico, presenting some opportunities we've previously discussed. We're also observing shifts in the timing of data center developments. Overall, our sales growth across all operating companies is around 4% to 5%, with SPS achieving 8%. We are excited about the mixed opportunities in our data center projects across our service areas, particularly in Minnesota, Colorado, Texas, and New Mexico. It's worth noting that the 5% sales growth we mentioned is not solely from data centers; only 3% of it comes from that sector. The SPS oil and gas electrification contributes 1.5% to that growth, while residential customer growth, including electrification on that side, accounts for about 0.5%. This represents a diversified growth approach, which is crucial as we look ahead.
Great. That's really clear. And then maybe just a follow-up on kind of the financing and the balance sheet. Seems like you're targeting kind of now 16% to 17% FFO to debt targets. I guess can you just talk about sort of the comfort level there with the cushion versus downgrade threshold levels? And how confident you are in the path to kind of squarely getting back to that 17% level on a longer-term basis?
Yes, Carly. I believe we have not altered our long-term perspective on our credit metrics at the 17% level. It remains unchanged. Maintaining a strong balance sheet and healthy credit metrics is crucial. As we project our spending for the next few years, we expect to grow into that 17%. Therefore, we have structured our equity plan and content plan to return to that 17% later in this forecast, which reflects our long-term view. From a credit standpoint, that has not fundamentally changed. We are focused on maintaining our balance sheet and protecting our metrics. However, with elevated capital expenditures in the coming years, there is some pressure.
Next question will be coming from Jeremy Tonet of JPMorgan.
I just want to step into equipment availability a little bit more, if I could, such as transformers, transmission, 2 CGPs and components there. Just wondering if you could frame for us how long the queues are there? And I guess, how you see aligning that with new data center interest or contracts?
Yes. Great question, very timely and very strategic. I said in my prepared remarks, I'm really proud of the team here at Xcel Energy. I think we have the best team working on this. We have been very, very progressive in terms of securing the assets that we need to build the infrastructure that sits in front of us. You're absolutely right. Lead times have elongated, and I'll let Brian comment on any particular components. But we think that given our scale, our scope and our approach to our major vendors, that we have access to inventory and supplies maybe that others don't have. We've taken a very progressive shift in how we work with our vendors, making sure that they see our entirety of our capital plan, they can plan for the work that they do with us. We find out who's best able to serve us both on the services side as well as the equipment side, and we backward integrate them into our capital plan in a way that is both we protect ourselves from pricing side as well as we get certainty of equipment and certainty of labor in a pretty tight market. That's been the strategic focus for the team for a year or two as we saw the market start to tighten, particularly with data center build. And maybe I'll let Brian just comment on what we're seeing in turbines and transformers and things like that.
Yes, I think it's clear where the turbine market is headed in the next four years. As Bob mentioned, we've prepared by ordering 19 turbines, leveraging our scale to secure a substantial amount of equipment that we know we will utilize within our system, despite the low growth we're experiencing. Additionally, we've considered large-scale transformers, specifically 345 kV units, which we outsourced a few years ago. It's essential to stay ahead by maintaining strong supplier relationships and addressing potential tariffs and supply chain challenges. We're confident in our position from a supply chain perspective, not only concerning our base plan but also regarding our incremental projects, ensuring compliance with our safe harbor strategy. On the labor side, we are also focused on securing top-tier EPC firms not just for this year or the next, but for our 5-year plan and beyond. Establishing these key partnerships is crucial and sets us apart as we move forward with our plans.
Got it. Very thoughtful process there. And I was just wondering if you might be able to align that a little bit more with the demand growth. It seems like the data center pipeline, as you described in the slides, stepped up quite nicely versus before. And just wondering what you see on the type of discussions and the speed to market world and how this all fits together.
Yes, it's clearly a strategic and timely move as we observe our industry working diligently to enhance efficiency in artificial intelligence and data center development. It's not surprising that we are experiencing strong interest, and our project pipeline is growing. We are successfully transitioning opportunities from high probability to contracted status. Our energy costs are among the most competitive in the nation, and our development team is exceptionally capable. We are currently navigating energy supply agreements and large load tariffs across our states while ensuring that our existing customers are safeguarded against the impact of new large loads. We have outlined our principles concerning cost causation and funding, focusing on protecting our customers should new transmission or generation investments arise. There is a clear benefit to the entire system when bringing in new large loads. Additionally, our strategic geographic advantage, coupled with low energy costs and a high proportion of clean energy in our systems, makes us particularly appealing to data center developers and their end customers. Our commitment to sustainability, reliability, and affordability is pivotal as we engage with data center developers and drive economic development.
Next question will be coming from Anthony Crowdell of Mizuho.
I just have, I guess, 2 super quick cleanups. I think to Steve's question, I think you mentioned about $10 billion of incremental CapEx. That is an addition or would be on top of current 9% EPS growth. Is that accurate?
That is accurate.
Great. And then this one, and I probably should wait for EEI, but just the time is right. You're currently talking 9% growth, but you've kept the guidance at 6% to 8% plus. Just curious on why not readjusting the 6% to messaging that shows all the potential upside that you have? Like it doesn't even seem likely that you hit 6% or even 7% like I'm just curious on the thought process of keeping it 6% to 8% plus.
Yes, Anthony, we consider various viewpoints as we determine the right long-term strategy. When I mention long-term, I'm referring to the 6% to 8% range, which extends beyond the next five years, and involves balancing affordability with other factors. We view the plus as a way to communicate the significant infrastructure needs we have for our customers over the next five years. However, beyond 2030, we will continue to assess our position. Regarding your first question, we mentioned $10 billion plus, but some of that amount may extend beyond this five-year timeline, particularly concerning generation procurement and MISO transmission, which will have longer timelines. Overall, we are excited about our opportunities for the next five years and beyond.
Next question will be coming from Sophie Karp calling from KeyBanc.
Congrats on the strong, I guess, guidance revision guys. A couple of questions for me. So maybe if you could talk a little bit about the trends in SPS. I know you continue to flag the electrification of Permian as one of the drivers of the volume growth there. With the oil prices like being kind of where they are, is there any reason to be concerned about that trend at all at this point?
Sophie, it's Bob. I think the growth you see in the Permian is probably a function of 2 things. One is continued strength in mining in the Permian Basin. So just more wells, more infrastructure, more fields being open. The second is the trend towards electrification of those fields and of existing fields. So I think there's 2 big drivers out there. When I talk to our largest customers down in the Permian and the Delaware Basins, this continues to be their lowest cost resource around the globe. And so I think even when you start to see oil and gas prices fluctuate, I think these properties in the Southwest are still varying the money for them, and they'll continue to see mining and mining growth down in the Southwest. So I don't have a lot of concern about that load growth profile. And then as we talked about the data centers, that low growth profile, we feel very confident in and see opportunity to add to it.
Got it. That's pretty clear. Regarding the shift towards renewables compared to gas, your focus on accelerating renewable energy to take advantage of tax credits is evident. Meanwhile, many of your competitors are leaning towards gas, stating that additional gas capacity will be necessary to support data center demand. My question is whether we should expect this same trend to emerge in your service areas, or do you believe that the appeal of renewables is strong enough for you to continue prioritizing them over more flexible energy sources?
Yes, there are definitely a couple of important themes. As I mentioned in my prepared comments, we are located in one of the most favorable regions for both wind and solar resources. This allows us to deliver real benefits to our customers by continuing to invest in these natural resources, especially while tax credits make them more affordable. Additionally, we will be integrating 4.5 gigawatts of natural gas capacity into our plans over the next five years, along with over 5 gigawatts of energy storage. This means we are reinforcing our wind and solar initiatives with competitively priced backup energy, ensuring that we remain reliable, affordable, and sustainable for our customers, which is the core of our business strategy.
Next question will be coming from Steven D’Ambrisi from RBC Capital Markets.
I just had a quick one. Just had a quick one. I appreciate the color on the 9% because one of the things, I guess, I was scratching my head out and I was hoping to get a little color on was clearly '29 rate base moves up something in the order of 20-plus percent. And so if you run the midpoint of your EPS guidance out, now at 9% versus where you were previously in the plan. It implies a pretty significant compression in earned ROEs, implied earned ROEs. Now obviously, you're spending a lot more capital and spending it quicker. So that kind of makes sense to me, but you do have pretty good mechanisms. So can you talk about any embedded conservatism that's in the plan around assumed earned ROEs that you would get given the significant increase in rate base?
Steve, yes, I can answer that question for you. And I think that's really why I want to provide some color with 11% rate base growth that we expect, 9% earnings growth over the next 5 years to really highlight that we don't expect significant compression in ROEs by any means that we see. If you think we've talked about some of the rate cases that we have come up in terms of driving some ROE improvement because we've delayed some rate cases for some reasons. And so when I think about it, it's really we've always talked about when you get to this kind of high growth, we're at 11% rate base growth, significant CapEx comes with financing needs that you would see about a 200 basis points delta between your rate base profit and your earnings growth over a 5-year period. And so I think we wanted to just highlight that, that it's as we move through the next few years, our financing is lined up with kind of our CapEx spend and we're working through some regulatory proceedings over the next couple of years.
You start to catch up on that rate base versus EPS growth. But over the 5-year period, we feel really good about where we are that the long-term EPS growth, coupled with our financing plan and maintaining a strong balance sheet is we feel good about that and don't see ROE compression at all. We certainly have conservative ROEs in our plan, but we don't see ROE compression as we sit here today and look at where we are today.
Next question will be coming from Travis Miller calling from Morningstar.
Questions around the transmission spend. Obviously, this has been a big thing for you for many years. But wonder as you ramp that up and think about these large customers, how easy or difficult is it to identify specific customers who might pay for some of this transmission spend, i.e., we see contracts between generation and data centers. Can you think some of this transmission spend essentially off of residential commercial customer bills and identify specific customers to pay for it?
Yes. Great question. First, thanks for recognizing leadership and transmission. I'd like to say that we have been the leading builder of new transmission line miles over the last 15 years when you come from the state of hockey, you got to skate to where the puck is. And we feel like we've built a grid in an infrastructure system that is enabling us to energize data class. When I think about incremental people willing to spend incremental money on transmission, I think our first principle with regard to hooking up data centers is if they require a new transmission line, particularly a lateral, usually they're paying for that 100%, and we put that into sort of a kayak bucket as opposed to net rate base spend, and it's going to be attributable directly to that customer. And when you talk about can you identify those customers. Those customers are knocking on our door freely and willingly to spend the money, particularly on the transmission interconnection to make sure that they can get service as quickly as possible.
So this is really a management of the inbound as opposed to us having to go find people that are willing to do it. I think that's a pretty common approach that the data center developers and the hyperscalers are willing and able to do. We're protecting our customers from the transmission build. And then when you think about the net benefit, if you're taking the entirety of our system cost and adding more megawatts to it. That's a net benefit on a per kilowatt hour rate on the transmission system in totality and a benefit for all customers.
Okay. Okay. So not all of that transmission spend then would go on commercial and residential bills?
The transmission expenses we discussed in our plan are focused on regional and super regional projects. We are working on connecting the MISO and SPP markets, and there are significant regional transmission projects arising from the long-range planning process of MISO that are allocated regionally rather than directly affecting our customers. Similarly, much of the costs associated with our SPP expansion are allocated regionally and do not directly impact retail rates for customers.
Yes. Travis, those are really customer-specific system impact studies to just wherever that customer is locating on the transmission system, the size of that customer, the ramp of that customer. And so those are really specific, hard to put a number on it in a general sense.
Next question will be coming from Alexia Kania calling from BTIG.
I have a question regarding the regulatory aspect. It's encouraging to see the increase in capital expenditures and transmission, but I'm also thinking about your comments related to market share and rates. I'm curious about the nature of your discussions with regulators regarding expectations for rate trends over the next five years. Specifically, how are you balancing revenue requirements and volume growth, and what has been the response to these discussions?
Yes. Great. I think it's really fundamental and foundational for our team here to make sure that we keep our bills for our product as affordable as possible for our customers. So we wake up every day thinking about that. We have to balance that with other desires, reliability, sustainability, resiliency, and safety across our system to make sure that we can meet those needs of our customers as well. I mean you don't have to look any further than Jamaica or Cuba to realize the devastating effect that communities have when our system and our product isn't available. So we are spending time and energy, as you say, with our regulators, with our legislators, making sure that we recognize all of the things that we're bringing to the system and that while affordability is a hugely important piece. We think we start from a very good spot. We think we've been a very good steward of our customers' money over the last decade. We'll continue to be very prudent, very focused on making sure that we can deliver the system that they need and want with the policy objectives that they need and want at a price that is as affordable as possible. So we work through that with each state and each class of customer and making sure that we keep our product very affordable and attractive.
As we have no further questions. For closing remarks, I'll turn the call back over to CFO, Brian Van Abel for closing remarks. Thank you.
Thank you all for participating in our earnings call this morning. Please contact our Investor Relations team for any follow-up questions.
Thank you very much, sir. Ladies and gentlemen, that concludes today's conference. We wish you a very good day. You may now disconnect. Have a good day.