Public Service Co. Of Colorado

The stable rating outlook on PSCo reflects that of parent Xcel. We base the outlook on our expectation that Xcel's management will continue to reach constructive regulatory outcomes to avoid any significant rise in business risk for the regulated utilities. Specifically, our base-case forecast includes adjusted funds from operations (FFO) to debt of about 16% and assumes the company will continue to fund its capital investments in a balanced manner to support its capital structure. We could lower the rating on Xcel and its subsidiaries, including PSCo, if Xcel's financial ratios weaken and consistently reflect adjusted FFO to debt at or below 15%. This would most likely occur if rate-case outcomes are weaker than we currently expect and capital spending

...Key strengths Key risks Low-risk, vertically integrated, fully rate-regulated electric and gas utility. Although declining, material amount (70%) of coal and gas-fired generation. Cost recovery through the regulatory process. Sizable capital spending for transmission and distribution infrastructure and natural gas infrastructure. A large customer base roughly equally spread over electric and gas customers. Negative discretionary cash flow, indicating external funding needs. Low-cost generation fleet with a generation mix of natural gas, coal, and renewables....

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