Good day, ladies and gentlemen, and welcome to today's Xcel Energy Year End 2022 Earnings Conference Call. For your information, today's conference is being recorded. Questions will be taken from institutional investors, reporters can contact media relations with inquiries and individual investors and others can reach out to Investor Relations. At this time, I’d like to turn the conference over to your host today, Mr. Paul Johnson, Vice President, Investor Relations and Treasurer. Please go ahead, sir.

Good morning, and welcome to Xcel Energy's 2022 fourth quarter earnings call. Joining me today are Bob Frenzel, Chairman, President and Chief Executive Officer; 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 questions if needed. This morning we will review our 2022 results and highlights and share recent business developments and regulatory developments. Slides that accompany today's call are available on our website. As a reminder, some of our 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 our SEC filings. Today, we will also discuss certain metrics that are non-GAAP measures. Information on the comparable GAAP measures and reconciliations are included in our earnings release. I'll now turn the call over to Bob Frenzel.

Thanks Paul, and good morning, everyone, and welcome to our fourth quarter call. We had another very successful year at Xcel Energy, continuing to execute on our strategy while delivering strong financial and operational performance. For our investors, we delivered EPS of $3.17 representing the 18th consecutive year of meeting or exceeding our initial earnings guidance. In February, we raised our annual dividend for the 19th straight year increasing at $0.12 per share or 6.6%. More recently, in November, we extended our long-term investment plan which features a 10-year capital outlook with an approximate 7% rate base growth. We ranked in the top quartile in customer reliability or CAIDI and our residential electric bills are more than 20% below the national average. Amidst the backdrop of significant commodity increases this year, Xcel Energy's 4,500 megawatts of owned wind farms continue to be an industry leader in net capacity factor performance, generating approximately $1 billion of fuel-related customer savings in 2022 and almost $3 billion since 2017. Our nuclear fleet remains the top-performing fleet in the country and achieved a capacity factor of 96% last year. We had an active regulatory year and resolved multiple rate cases and Uri storm cost recovery proceedings. The commissions in Minnesota and Colorado approved resource plans that will add nearly 10,000 megawatts of utility scale renewables to our systems through this decade. The Minnesota Commission approved our 460 megawatt Sherco Solar project. The Colorado Commission approved our $2 billion Power Pathway transmission project and MISO awarded us $1.2 billion of transmission projects and we accelerated our timeline for transitioning out of coal and now expect to be coal free by the end of 2030, all of which contribute to our leadership in clean energy transition for our customers. We continue to lead in carbon reduction as well. In 2022, our estimated carbon emissions were approximately 52% below 2005 levels and we remain on track to achieve 80% carbon reduction across the company by 2030. The passage of the Inflation Reduction Act will reduce the cost of renewables for our customers, improve cash flow and credit metrics for the company and enhance the competitiveness of our renewable offerings. We continue to execute on our electric vehicle vision, implementing multiple new programs for our customers. We also filed comprehensive transportation plans in Minnesota and Wisconsin that are pending commission approval. We've advanced our ESG leadership and have been recognized by multiple entities, including an upgraded rating by MSCI from AA to AAA. Finally, we were named among the world's most ethical, admired, and responsible companies and recognized for being the best veteran employer as well as for our disability inclusion in the workplace. I'm really proud to lead a team that can deliver on operational, financial, environmental, and diversity goals, all simultaneously. Looking ahead, we're well-positioned for sustainable organic growth over the next decade, including affordable renewable additions in our resource plans, the transmission needed to enable those carbon-free resources, and responsible community transitions as we retire our coal plants. We've recently issued requests for proposals in Minnesota, Colorado, and at SPS seeking approximately 6,000 megawatts of new renewable generation, a portion of the 10,000 megawatts that have been approved in our jurisdiction. We'll submit our recommended portfolios of generation assets to our commissions by the middle of this year and anticipate decisions in the second half of this year. We also expect to issue additional RFPs in Minnesota and Colorado this year and next year for the remainder of our approved needs. As we've discussed in the past, we believe that we have a geographical advantage in the clean energy transition due to the strong wind and solar resources in our service territory. This access to low-cost renewable energy should also give us further advantage in developing green hydrogen and other clean fuel projects, which are becoming more feasible as a result of federal support from the Infrastructure and Jobs Act and the IRA. Late last year, we submitted hydrogen hub concept papers for both the Rocky Mountain and Upper Midwest regions to the Department of Energy to compete for awards from the $8 billion hydrogen hub program. In December, we received favorable notice from the DOE for our concepts and we're encouraged to submit full applications in April. Additionally, our pink hydrogen production pilot at our Prairie Island nuclear generating station is expected to be operational this year. Finally, we expect to bring forward opportunities this year to utilize clean fuels and green hydrogen blending at both our gas-fired generation stations and in our gas networks for home and building heating. As we continue to utilize innovative technologies to decarbonize our business, we are well-positioned to take advantage of potentially significant hydrogen capital investment opportunities in the future. As the penetration of renewable assets in our states increases, we're also interested in pursuing advanced storage opportunities to balance our electric system needs. Today, we're excited to announce a new partnership with Form Energy to develop two long-duration energy storage pilot projects. Form Energy's 100-hour battery technology could be a critical component of our decarbonization strategy providing the resiliency and reliability that we need on the system to support our significant renewable portfolio. We plan to deploy a 10 megawatt multi-day storage system at a retiring coal plant in both Minnesota and Colorado. These projects are expected to be online as early as 2025. As we wrap up, I want to thank the thousands of employees who worked in below-zero temperatures, sustained high winds and several feet of wet, heavy snow to keep the lights on and the houses warm during our recent winter storms. Your efforts exemplify our company values of being connected, committed, trustworthy, and safe. I believe that our dedicated employees and partners are what distinguish Xcel Energy with our customers. With that, I'll turn it over to Brian.

Thanks, Bob. Good morning, all. We had another strong year recording earnings of $3.17 per share for 2022 compared with $2.96 per share in 2021. This represents EPS growth of 7.1%, slightly above our long-term growth rate target of 5% to 7%. The most significant earnings drivers for the year included the following; higher electric and natural gas margins increased earnings by $1.05 per share, primarily driven by regulatory outcomes and riders to recover capital investments. In addition, a lower effective tax rate increased earnings by $0.15 per share, but keep in mind that production tax credits lowered the effective tax rate. PTCs are flowed back to customers through lower electric margin and are largely earnings neutral. Offsetting these positive drivers were increased depreciation expense which reduced earnings by $0.40 per share reflecting our capital investment program, higher O&M expense which decreased earnings by $0.24 per share, higher interest expense and other taxes, primarily property taxes, decreased earnings by $0.23 per share, and other items combined to reduce earnings by $0.12 per share. Turning to sales, our weather-adjusted electric sales increased by 1.8%, largely due to higher commercial and industrial sales driven by strong economic activity in our service territories. We anticipate a modest slowing of our sales with growth of 1% in 2023. Shifting to expenses, O&M expenses increased by $170 million for the year, driven by costs related to technology and customer programs, storms, vegetation management inflation, and additional actions due to weather. We also invested in our employees to ensure we retained our top talent. While we expect inflationary pressures to remain, we continue to focus on our continuous improvement programs, which we expect to drive increased productivity and efficiency. As a result, we anticipate O&M expenses will decline approximately 2% in 2023. We’ve made progress on a number of regulatory proceedings. In the Minnesota Natural Gas rate case, the ALJ recommended the commission approve our settlement which reflects a rate increase of $21 million, an ROE of 9.57%, an equity ratio of 52.5%, a decoupling mechanism, and a property tax tracker. We anticipate the commission decision later this year. In the Minnesota electric rate case, the commission accepted our proposal to reduce our request for MISO capacity revenue and established a tracker. Hearings were completed in December and we continue to meet with the parties to see if we can reach a constructive settlement. However, we have a strong case and are comfortable with a fully litigated outcome absent this settlement. We anticipate a commission decision later in 2023. In November of 2022, we filed an electric rate case in Colorado seeking a net increase of $262 million based on an ROE of 10.25%, an equity ratio of 55.7%, in the 2023 forward test year. We anticipate a commission decision and implementation of final rates in the third quarter. We also filed a New Mexico electric rate case seeking a rate increase of $78 million based on an ROE of 10.75%, an equity ratio of 54.7%, the forecast test year, and the early retirement of the total coal plant. We anticipate a commission decision and implementation of final rates in the fourth quarter. As far as future filings, we plan to file our Texas rate case later in the quarter and Wisconsin in the second quarter. As we have discussed in the past, the Inflation Reduction Act provides significant customer benefits. Key elements include the following; tax credit transferability will provide $1.8 billion of liquidity increasing cash flow and reducing equity needs. We've met with companies in our service territory and expect to enter into bilateral tax credit sale contracts later this year. Our funds from operations to debt metrics improved by 100 basis points during the forecast time period. The solar PTC and tax credit transferability improved the competitiveness of our renewable bids and we anticipate pricing will decline on solar projects by 25% to 40% and wind projects by 50% to 60% due to the new and extended tax credits, which is great for our customers as we embark on this clean energy transition. Finally, we don't anticipate any material impact from the alternative minimum tax as a result of modified accelerated cost recovery and existing tax credits on our balance sheet. We are reaffirming our 2023 earnings guidance range of $3.30 to $3.40 per share, which is consistent with our long-term EPS growth objective of 5% to 7%. We have updated our key assumptions to reflect actual year-end results which are detailed in our earnings release. With that, I'll wrap up with a quick summary. We had a strong operational and financial year in 2022. We delivered 2022 earnings within our guidance range, the 18th consecutive year and increased our dividend for the 19th consecutive year. We received approval of our resource plans in Colorado and Minnesota, which will result in approximately 10,000 megawatts of new renewables. The Inflation Reduction Act has passed significant benefits for our customers and the company. We are reaffirming 2023 guidance, consistent with our long-term earnings growth rate. We remain confident we can continue to deliver long-term earnings and dividend growth within the upper half of our 5% to 7% objective range as we lead the clean energy transition and keep bills low for our customers. This concludes our prepared remarks. Operator, we will now take questions.

First question is from Mr. Nick Campanella with Credit Suisse. Please proceed, your line is open.

Hi, thanks for taking the question. I wanted to ask about the operation and maintenance costs and the guidance for 2023 that stood out to us. I noticed your comments in the prepared remarks about continuous improvement. Could you provide more details on the strategies you're implementing that are contributing to the reduction in these costs? Are these changes primarily one-time adjustments for 2023, or do you expect them to be sustainable throughout the plan? Thank you.

Hi, Nick. That's a great question. I want to highlight a few points. First, our updates to the 2023 O&M guidance are influenced by where our 2022 actuals ended up. We're very proud of the continuous improvement efforts we've implemented over time. From 2014 to 2021, we managed to keep O&M flat, which reflects well on our employees and benefits our customers. While we faced inflationary pressures in 2022, we also reinvested back into the system and our workforce, particularly because of the favorable weather conditions. Looking ahead to 2023, we're focusing on investing in technology to enhance efficiency in our plants. We're incorporating digital operations and AI to shift from reactive to proactive maintenance. Additionally, we’re beginning a significant shutdown of our coal plants this year, which will support us through the end of this decade as we transition to clean energy. We've also seen some relief from high diesel costs. The storm activity in 2022 was much higher than normal, for instance, we experienced five times the usual number of storm days in December, but we don't anticipate a repeat of that in 2023, which should assist us. That's a lengthy response, but I hope it clarifies things for you.

Yes, that's great. Thank you so much. That's helpful. And on the Minnesota Electric case, it sounds like you're confident in taking this the full distance to an order. But I just wanted to be clear, is the settlement more unlikely at this point and how should we be thinking about that taking into consideration, where we are in the docket today?

Nick, it's Bob, thanks for the question. And as we said in the prepared remarks, we filed this case over a year ago, and we’ve been actively working with the parties since the September timeframe. We've reduced our initial ask dramatically through extension of asset lives, through the MISO capacity revenues, and for bringing down the actual sales that we experienced in the state. So we think that reduced revenue ask is really a tailwind for us in the case. There are probably some pretty decent recent decisions in Minnesota, like the Minnesota Power case the other day and our gas settlement that Brian mentioned in his prepared remarks are data points that we feel confident in taking this, as you say, all the way, but we're always open to engaging with all the parties and if there is an opportunity to move forward with a settlement, we would certainly think to do so.

Thank you very much, sir. We now go to David Arcaro calling from Morgan Stanley. Please go ahead.

Thanks so much for taking my questions. I was wondering if you might be able to give any preview of what we could expect from the Clean Heat Plan filing later this year in Colorado, whether there might be potential CapEx investments additions to the plan and what new technologies and opportunities that might be to invest there?

Hi, David, it's Bob. That's a great question. Look, we're excited about the Clean Heat Plan opportunity; it's really an opportunity for us, I think, to share and align our vision for a net-zero future on the gas business with our commissions in a more formal way. I'm not certain that I would expect to see a significant amount of sort of new investment opportunities as part of that process, but really an opportunity to align on our multipronged strategy to decarbonize the gas business. As I think about it, we're working with upstream providers to reduce methane on the purchased gas that we buy for our customers. We're working on our system; we have been for over the past decade in methane leak reduction. We've done a terrific job there, but there is always more work to tighten up our own system. We also work on customer programs that encourage energy efficiency and potentially beneficial electrification. The big opportunity from an investment perspective is really the comments I made around clean fuel in my prepared remarks. We are working with multiple parties in the Colorado jurisdiction on a Rocky Mountain hydrogen hub; we think it's a really attractive project. A multistate MOU has been signed with several of the western states and the governors and all the energy offices of those states are working together. Clean fuel's a real opportunity for us and for our customers to advance the clean energy transition and to help us realize a net-zero future in the gas business.

Yes, David, and I'd just add a couple of points there. One is, we don't have anything in our current five-year plan related to hydrogen investment opportunities. So to the point, if there's an opportunity to pull that forward and move faster on hydrogen, absolutely an upside opportunity as we think about it over the next five years. There's also a lot of industry discussion about natural gas commodity cost and the volatility; we think longer-term, owning renewables and creating green hydrogen blending it into the local distribution creates more price certainty for our customers and takes that volatility out. So I think that's a longer-term opportunity and benefit as we consider how to help our natural gas customers improve the certainty of their overall bills.

Just broadly, and I mentioned this in my prepared remarks, it’s worth saying again that we are benefited by the geography that we sit in; having great access to low-cost wind and low-cost solar. Not only should we be able to deliver this for our customers beneficially, but we're looking at the opportunity of making the Rocky Mountain region or the upper Midwest regions, energy export centers where we're creating a product that can be broadly transmitted to the rest of the country, whether that's electricity via wire or whether that's green hydrogen via pipe or trucking; we should be a destination for those installations, which over time should help economic development in our states and add to employment backlogs as well.

That's really helpful color. Thanks for that, a lot of initiatives, it sounds like related to that program that you'll be rolling out. And then separately on the announcement with Form Energy and long-duration storage, it's nice to see that crystallizing here. I was wondering if you might have a sense for how much long-duration storage might make sense on your system over time? Is there a certain number of megawatts or a proportion relative to your generation fleet that might make sense? Wondering how you might see the scaling up to the extent these initial projects are successful and make it through the regulatory process?

Yes, thanks, David. As we go through resource plans with each of our states, we find that we have increasing need as we have higher penetration of renewables, and increasing need for, what we'll call, dispatchable energy resources. Historically, those would have been combustion turbines; maybe they are fired with a clean fuel like hydrogen or synthetic natural gas. Over time, as long-duration storage potentially becomes more feasible and cost-effective, you can see that long-duration storage being a part of that solution. If I were to add up and I'm going to do this math on the fly, we have several thousand megawatts in our resource plans for firm dispatchable generation. If we had an asset like lithium-ion batteries, which are interesting and have a utility for our systems, long-duration storage also plays a role. These are 20 megawatt projects and there are probably several hundreds in our resource plans that could be realizable within the next five to ten years if the technology proves out.

Yes, and I would just add to that, we're really excited about this technology; it shows that we're leading and really demonstrating that we're on the forefront of this clean energy transition. We've always talked about how we know how to get to our 2030 goals of 80% plus carbon reduction, so this is really about taking that last 15% to 20% out of the stack and providing one of the solutions. If you think about that and when you look at our resource mix in 2030, you can start to size what we need to do beyond that in terms of storage capabilities; this will be one of the solutions.

Thank you so much, sir. We now go to Jeremy Tonet from JPMorgan. Please go ahead.

Hi, good morning. It's actually Rich calling on for Jeremy. Thank you for the time today. Maybe starting with changes to one of your drivers. I know we hit O&M already but just curious if you can parse the full range of what are effectively true-ups for '22 actuals versus new expectations for '23. Are any of these changes you're putting in higher or lower within the guidance range at this point in time?

I'll just read up to start, we're still feeling our midpoint of the guidance range, early in the year is where we expect to be and in terms of specific changes, gas sales is up a little bit, but that's really a function of where we landed on the year-end and really, gas sales for us at 1% is less than $5 million in terms of a change. The increase in the rider revenue is a function of us having a good wind and PTC year in 2022, so that's relatively earnings neutral. We do see a little bit of a benefit from depreciation and interest expenses being lower. The forecasted rates for 2023 are lower than in Q3. But overall, we look at it as relatively neutral as we think about the puts and takes, and so we're now targeting the midpoint of the guidance range. We're looking forward to having a discussion 12 months from now, and our goal is to deliver for the 19th straight year.

Great, thanks for the color there. And then turning back to Colorado and a lot of their focus on the gas system planning side that you addressed this a little bit from the Clean Heat Plan perspective. I'm curious for your higher-level thoughts on how this might impact your electric operations in the state as well?

Hi, Rich, it's Bob. I mentioned in our Clean Heat Plan that we expect some beneficial electrification to occur, such as with water heaters, cooking, and home heating. We believe the asset value of the distribution system is extremely important for our customers and can provide significant energy even during Colorado's coldest days. Our design temperature for Colorado is minus 30, indicating the need for a highly efficient delivery system, which we believe our pipeline system can provide. As part of our strategy, we also plan to explore clean fuels, green hydrogen, and synthetic natural gas, which can offer our customers a viable product at an affordable and sustainable price. Looking ahead, we anticipate growth in our electric business in Colorado driven by both electric vehicles and beneficial electrification.

Thank you very much, sir. We'll now move to Julien Dumoulin-Smith of Bank of America. Please go ahead.

Hi, good morning, team. Thank you for the time and the opportunity, well done. Brian, regarding bills, I would like to understand the trajectory of bills. Can you discuss what the rate increases will be for customers this winter, particularly for gas? Additionally, considering the recent peaks in some commodity prices, how will this influence your customers, especially in terms of your hedging programs?

Yes, hi, Julien. That’s a good question. We will address both sides of the business as we are well positioned regarding overall customer billing. We are about 85% electric, and looking at our income statement and the cost of goods sold, the impact of fuel on the electric side has been modest despite the inflationary environment we faced in 2022. Bob mentioned that our wind build-out has served as a hedge against rising commodity costs, and that has been evident in 2022. We are also pleased to report that we are above the national average and over 20% lower in residential customers’ per-bill charges. This puts us in a strong position on the electric side. However, on the natural gas LDC side, we have fewer levers and assets. There have been reports of bill impacts for our customers reaching 40% to 50%, which is concerning to us. Fortunately, that is beginning to ease as natural gas prices are declining. Recently, we updated our gas commodity clause in Colorado twice over the last two months, which resulted in a roughly 30% reduction in the commodity portion of customers' bills. This change will be felt in Q1 compared to Q4, as we anticipate being over collected. The commission appreciated our proactive approach to this adjustment. We are making every effort to ensure our customers benefit from lower commodity costs. Looking ahead, we are optimistic about being able to keep bills in line with inflation as we plan for 2030 and beyond, especially with the support of the IRA for us and our customers. We are feeling confident about both the near-term and long-term outlook.

Hi, Julien. I agree with everything Brian said and would like to add that if you examine the long-term history and consider the past 10 years and the next 10 years, the comment about bills being at or below the inflation level is consistent for both electric and gas. This year has been particularly challenging for gas, and we have worked closely with the federal government to implement record amounts of emergency assistance programs, ensuring these resources reach those who need them most. Looking ahead, through the clean-energy transition, we believe we can achieve this due to our strategically advantageous position, allowing us to operate cost-effectively across the country. Additionally, we have a solid starting point with total bills significantly below the national average, particularly in our residential electric areas. Our gas business is among the top two or three lowest in the country, as you noted in one of your reports. While this is a good starting point, we recognize that there is still work to be done. We remain sensitive to our customers who are facing increases in their bills for groceries, fuel, rent, mortgage payments, and other expenses. Thank you for the opportunity to discuss this.

Yes, absolutely. You bet. Hi listen, just going back to one of the questions from earlier. On the settlement conversations versus fully litigated cases, obviously with curve backdrop, it's an ideal for having rate increases altogether. Can you talk a little bit about expectations on whether we will settle cases broadly speaking here, to what extent could Minnesota be an isolated data point in the current instance, given the current fact pattern, or are you seeing challenges more broadly, here again without pointing fingers at specific statements necessarily?

Well, I'll start Julien, and Brian can add if he's got anything to add. I think generally, we look for settlements. I think we're encouraged to look for settlements. I think as you look at some of the recent data points in Minnesota, the commission is looking for settlement. With that as backdrop, maybe this case is isolated; we saw the path to reach a settlement with the parties, and I think we're being encouraged to do so. I think broadly speaking that's the case for most of our jurisdictions, and most of our staff; we need to ensure that we're delivering for our customers operationally, we're delivering for reliability for our customers, but we also need to make sure that we keep a financially healthy utility. Credit metrics are very important; preserving credit metrics in our operating companies is critical as we seek to raise capital cost advantageous to deliver on our capital investment profile that we know we need to do. So, I think there is where the debate happens and again I think we've got a long track record of settling, so I would take your comment as encouraging to think that we're going to continue to settle cases going forward.

Thank you very much, sir. We'll now take questions from Travis Miller calling from Morningstar. Please go ahead, sir.

Obviously, you had a good year with the C&I demand; wondering what's your outlook in that 1% total sales for C&I? Do we see another big year or does that moderate a bit?

Hi, Travis. Yes, I can take that one. No, I think we continue to see similar to what we saw in 2022 where strong growth in the C&I is anticipated. If I parse it out, we expect about a 2% increase in C&I for 2023 and about a 1% decline in residential rates, which continues to decline from the COVID levels that we saw. C&I shows particularly good growth in SPS and I think just under the 2022 sales; when you look at the C&I numbers, you see that Colorado C&I is negative, but if you adjust that, we helped a large customer installed 240 megawatts solar farm to ensure those jobs stayed in Colorado. If you made that adjustment, Colorado C&I would actually have been a plus 2% for the year. So strong economic activity in C&I growth across all of our service territories is expected to remain, albeit with a little bit of slowing in 2023.

Okay, great. And then a follow-up to the hydrogen hub discussion, I think if I heard you correctly, April was the next point in which you file some more information. At what point is it there or is it later on where you get start getting a sense for given your proposal of non-approval that a proposal for CapEx potential spending?

Yes, Travis, I believe we are still in the early stages with the departments. April will be the next filing date for what I refer to as full plans. The Department of Energy is expected to be reviewing around two dozen proposals. It will take them some time to evaluate and select grants, and I would estimate that four to six of those will move forward. We find both of our projects to be very compelling and they offer significant regional benefits from various sources and users, which is likely a key factor the department will consider. If I had to guess, I would say we won't have clarity on those April applications until at least the end of next year, possibly even longer.

Yes, but expect us that's the hydrogen hub concept which we're very interested in and I think we have a great opportunity to be significant participants. But also expect us to move forward with hydrogen pilots and opportunities on both the electric side and the gas side as we think about working through our Clean Heat Plan in Colorado, our Natural Gas Innovation Act in Minnesota, and then also on the electric side as we think about how to decarbonize the last 15% to 20% in our stack.

Sure, okay. End of next year being 2024?

Correct.

Okay. And then just real quick on that, how many partners are in those two proposals, Rocky Mountain, Midwest proposals?

I think we'll get back to the specific number, Travis, but I'm going to guess it's in the five to ten in each region.

Okay, just looking for a rough number. Okay, very good. That's all I had. Thanks.

Appreciate it.

Thank you very much, sir. We'll now take questions from Mr. Paul Patterson from Glenrock Associates. Please go ahead. Your line is open.

I understand your concerns about the Minnesota regulatory environment, as I've been hearing similar feedback. However, I was somewhat surprised by the reports indicating that the state goal is set to be 5% below the national average. I recall that some industrials made a filing suggesting that the rates might be at risk of aligning with that policy. Could you clarify what the state policy goal is? Additionally, in relation to Julien's question, how do you perceive the performance trends moving forward, especially considering the changes and fluctuations in fuel prices? I'm just trying to get a better understanding of the situation, as I'm not fully informed on the details being discussed.

Hi, Paul, this is Chris Clark. Yes, there is a goal in statute that seeks to have our prices for our commercial and industrial class be within 95% of the national average. I think the starting point here is really that we provide our customers a great value, and I think the look that got some attention is simply a look at the rate. But if you actually look at our total bills for our C&I class, you'll see that over a 10-year period, they've been relatively flat. The EIA data that gets pulled for rates is only one component of the bill. When we look at what we achieved for our C&I class, if you take into account the conservation programs that have been really nation-leading here in Minnesota and other credits that those customers have done to be successful, you'll see that our C&I class rates are competitive, and in fact, we do a great job of attracting new business to our state. It's important when we look at the picture of how we're doing with our C&I rates and really take that into account. As Brian and Bob have said, when we look at the plans for our clean energy transition, we're confident we can deliver those results in line or less than CPI. Over the long-term, we've shown that we can continue to be a successful company navigating this while keeping rates affordable for our customers and delivering great value.

Okay, that was a great answer. My second question is about the iron battery deployment. I apologize if this has already been discussed, but will you own these batteries, and what will their cost be? Could you provide a bit more detail on the economics related to these two projects?

Yes, good question. No, we haven't disclosed the cost of these batteries yet. We haven't made the regulatory filings yet, and we are looking forward to having discussions with our stakeholders and the commission. We certainly will do O&M; we think they are a valuable grid asset and it's important for us to own them as we think about how do we start to deploy these new technologies as we look to decarbonize and get to 100% carbon-free. With any new technology, the cost is more expensive, but this is a 100-hour battery, and we don't see other solutions out there that are viable. It also uses iron oxide; if you think about rare metals, this is something that's readily available as we think about supply chains and what's the ability to scale. Overall, we're pretty excited about this. It demonstrates our leadership as an innovative clean tech company, and we're excited to work with our commissions. More to come in terms of disclosing the cost.

Okay, great. Just any idea when you guys might make a regulatory filing roughly speaking?

Later this year; it will be this year.

Okay. I mean, you guys are deploying in 2025, right?

Yes.

Thank you so much, sir. Our next question is coming from Mr. Anthony Crowdell of Mizuho. Please go ahead, sir.

Thanks for squeezing me in here. Just hopefully two quick ones. I guess when you look at the four major rate filings you guys have, they're all asking for a forward test year. When we look at 2023 and beyond, what do you think is a reasonable assumption for structural lag? Can that be reduced from say 90 to a 100 basis points to maybe 50, 60?

Hi, Anthony, good question. As we think about it from an earned ROE perspective, that's always been a goal of ours. We had a goal in 2015 to hold it from 100 to 50 bps, and we've been successful. In 2018 and '19, and then had some COVID hit and we scaled back on regulatory filings. I think as we look forward, our goal is to close that. We had some success from 2021 to 2022, albeit modest about 15 bps. Our goal is to continue to focus on closing that and probably that 50 basis point range is a good goal as we think about it going forward; it's something that we're always working on improving the regulatory constructs to provide the benefit of price to our customers, I think it's really important and something we will continue to work through.

Great. And just one follow-up on top of Julien's question. I think Bob had mentioned you preferred the settlement route, and not just specific to Minnesota, but just in general. It seems like lately some commissions may be tinkering with settlements, if I use that term; it seems to be turning at a greater frequency. Does that give you pause on achieving your settlements?

Hi, Anthony, it's Bob. Great to see your name in the inbox today. No, it doesn't give me pause. Look, I think we've had a long history here. We continue to work proactively with the staff and commission. Sometimes we go before ALJs; there are always things that are around the edges that are important. Generally speaking, settlements are encouraged, and commissions understand that they want to encourage settlements that need to be respected in their entirety without tinkering. I think you've seen some commentary in some of the jurisdictions that you might have been thinking about to that effect.

Thank you so much, sir. And as it appears to have no further questions, Brian, I'd like to turn the conference back over to you for any additional or closing remarks. Thank you.

Yes, thank you all for participating in our earnings call this morning. Please contact our Investor Relations team with any follow-up questions.

Thank you so much, sir. Ladies and gentlemen, that will conclude today's conference. Thank you for your attendance and you may now disconnect.