Xcel Energy Inc. plans to create a transmission subsidiary to build some new high-voltage lines, executives told analysts at an investor conference investor in New York on Wednesday.
Stand-alone transmission companies are becoming more common in the electric utility industry because the federal government has encouraged them as a way to boost competition and reduce costs on big multistate power line projects.
"The main purpose is to give us some financial flexibility," said Teresa Mogensen, Xcel's vice president for transmission.
Xcel, based in Minneapolis, traditionally has built power lines on its own or in partnership with other utilities. But it plans to create a stand-alone transmission company in 2014 as a potential vehicle to develop $650 million in power lines in and near its Texas and New Mexico service areas.
Xcel projected overall 2014 capital expenditures of $2.9 billion and five-year capital expenditures of $14.1 billion. Transmission investments are expected to be nearly $1 billion in each of the next three years, Mogensen said.
Regulated by federal government
Electric utilities like Xcel that deliver power to homes and businesses are local monopolies whose investments and rates are closely regulated by state utility commissions.
But a new class of utility — focused solely on transmission lines — has emerged to compete for multi-state transmission projects. The financial terms of these projects typically are regulated by a federal agency rather than state utility commissions.
The Federal Energy Regulatory Commission, which has promoted more competition in multi-state transmission projects, has for several years allowed utilities higher rates of return compared with levels typically approved by state regulators for such investments. That's one reason creating a stand-alone transmission company can be an attractive business proposition for utilities.