Public Service Co. of Colorado

The stable rating outlook on Public Service Co. of Colorado (PSCo) reflects that of parent Xcel Energy Inc. (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

...We expect negative cash flow stemming from the revised corporate tax code in 2019.The lower corporate tax rate reduced revenue requirements for the utility and lowered customer rates. As a result, operating cash flow declined in 2019, weakening the company's credit measures, offset by rate-case approvals and cash inflows through other regulatory mechanisms. The company's higher capital spending will weaken credit measures. We expect credit measures to decline slightly in the coming years from higher capital spending and dividends, but measures will likely remain in the current range of the financial risk profile....

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