Xcel Energy said it expects to incur a financial loss from Texas wildfires that could have a “material adverse effect” on the company’s bottom line.
The Minneapolis-based company has acknowledged distribution poles belonging to its Southwest Public Service Co. subsidiary sparked the February Smokehouse Creek fire in the Texas Panhandle north of Amarillo. The fire, the largest in state history, consumed more than 1 million acres before being contained.
“I’ve been to the Panhandle, and I’ve witnessed the impacted areas,” Xcel CEO Bob Frenzel told financial analysts April 25 during the company’s first-quarter earnings call. “I can speak for the entire Xcel Energy team when I say that we are saddened by the losses and we will stand with the Panhandle community as we recover, rebuild and renew that area as we have for over 100 years.”
Xcel has disputed claims that it acted negligently in maintaining and operating its infrastructure. It faces 15 lawsuits from the fire and is processing the 46 loss claims it has received. The company recorded a pretax charge of $215 million to cover losses before insurance.
But if the company is liable and must pay damages, the amount could exceed insurance coverage of roughly $500 million for 2024 wildfire losses and “could have a material adverse effect on our financial condition, results of operations or cash flows.”
The Texas House of Representatives created an investigative committee on the wildfires and has held several public hearings. It plans to issue a report in early May.
Frenzel said the $215 million loss is a preliminary estimate that reflects the low end of a range and is subject to change. He said Xcel is responding to the wildfire risk by accelerating pole inspections and cutting power to lines during dangerous weather, among other measures.
“Like all utilities, we are experiencing profound changes in weather- and climate-related impacts on our operations,” Frenzel said. “As a result, we must continue to evolve our operations for these unparalleled dynamics.”
Xcel reported earnings of $488 million ($0.88/share) for the first quarter, compared with $418 million ($0.76/share) in the same period last year. The company said the results reflected increased infrastructure investment recovery and lower operations and maintenance expenses, partially offset by increased interest charges and depreciation.
