Xcel Energy Inc.

Our rating outlook on Xcel and its subsidiaries is stable. 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 16%-17% and assumes the company will fund its capital investments in a balanced manner to support its capital structure. We could lower the rating on Xcel if: Its financial ratios weaken and consistently reflect adjusted FFO to debt of or below 15%. This would most likely occur if rate-case outcomes are weaker than expected and capital spending materially rises. We could raise the raise the rating if: Xcel

...Regulatory diversity allows for timely recovery of operating costs. In the eight jurisdictions in which Xcel Energy Inc. (Xcel) operates, most provide for forward test years, fuel-recovery mechanisms, and interim rates. Jurisdictions that allow for multiyear rate plans and credit-supportive cost recovery account for 80% of Xcel's EBITDA. Xcel's large customer base helps mitigate economic fluctuations on cash flow. Xcel serves about 5.5 million customers (3.5 million electric and 2 million gas) in eight states. The majority of customers are residential and commercial, contributing to stable cash flows. A February 2021 winter storm affected Xcel and its subsidiaries' service territories, resulting in a modest weakening in financial credit measures. During the winter storm, Xcel, through all its subsidiaries, incurred about $965 million in fuel expenses due to the extraordinary increases in the prices of natural gas and purchased power costs. Xcel has deferred these costs and proposes to recover...

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