Xcel will increase capital spending by $11B over next five years, ask Minnesota regulators for 13.2% rate increase

Xcel Energy says it needs to increase spending on infrastructure by $11 billion over the next five years to address a confluence of challenges simultaneously crashing into the electricity industry, from a big ramp-up in energy-hungry data centers to the switch to clean energy and damage from large storms and wildfires.

Just last year, Minneapolis-based Xcel said it would spend $34 billion from 2025 to 2030. But Thursday, it said it needed $45 billion to keep up with the demands on its services — nearly 30% of which would be spent in Minnesota and the Dakotas.

The company also said Thursday it plans Friday to file a new Minnesota electricity rate case with Minnesota regulators to help pay for investments in the state over the next couple of years. Xcel will ask for an increase of $491 million over two years — a 9.6% jump in 2025 and a 3.6% increase in 2026. Bill increases, Xcel said, would be less than that percentage because the utility plans to pass on savings from federal tax credits for its nuclear power generation.

“We as a company, we as an industry, are probably going to have to invest at a greater speed than we’ve done in the past to keep up with reliability and safe service for our customer base,” Bob Frenzel, Xcel’s CEO, said in an interview. “Our customers are demanding speed and scale. The climate demands speed and scale.”

Xcel’s latest capital spending plans calls for big investments in its aging electricity grid. Roughly 63% of spending over the next five years will fund upgrades and additions meant to modernize and harden Xcel’s transmission and distribution system. That will help Xcel move wind and solar power across great distances, and protect against severe weather and wildfires and what the company described as national security issues.

Xcel’s territory touches eight states, including Texas and Colorado, which have seen devastating wildfires in recent years that led to lawsuits against the company.

The capital spending plan was announced along with the release of Xcel’s third quarter earnings report Thursday.

Xcel also Thursday announced its profit forecast for 2025, estimating full-year earnings of $3.75 to $3.85. The company’s stock closed Thursday at $66.81, up nearly 6%.

Xcel’s investment plan includes the company’s share of transmission lines under development by a host of electric utilities across the Midwest under the direction of the regional grid operator. Those projects will cost at least $10 billion.

Frenzel said investments will be financed primarily by “internally generated cash flow,” but Xcel will also need to seek an unprecedented amount of capital investment by raising debt and equity from third parties.

He said Xcel has secured nearly $500 million in government incentives over the last five years and will ask for another $300 million this year to offset the cost of infrastructure.

Xcel said Thursday it expects electricity sales to grow at compound annual rate of 5% between 2024 to 2029 — and about half of that new demand is expected to come from data centers.

Last year, state utilities regulators approved Xcel electricity contracts with Meta Platforms for a $700 million data center project in Rosemount. Earlier this year, Xcel sold 295 acres near Becker to Microsoft for another planned center.

Xcel also completed a land sale in Minnesota “to a new data center customer” in October and is in the “final stages” of signing a supply contract for the project, Frenzel said on the conference call. Xcel declined to comment further.

Regulatory filings show that in April, Xcel also closed on the sale of 348 acres in Becker to Elk River Technologies, another data center project. Elk River Technologies appears to be a company created by a larger tech company specifically for a data center. Xcel declined to elaborate on that project.

Data centers are electricity hogs: a 1,000-megawatt data center is equivalent to the power demands of 1 million residential customers. Xcel’s massive coal plant in Becker is capable of generating roughly 1,540 megawatts.

Data centers have caused consternation among some environmentalists who fear they will result in utilities building more fossil fuel-powered plants, or just building more power infrastructure in general that will increase bills.

Xcel says its access to wind and solar are attractive for tech companies with clean energy goals and big electricity needs.

Xcel’s investment plan doesn’t include any major new or previously unannounced projects in Minnesota. The company is currently pitching a long-range plan to state utility regulators that includes a tremendous amount of wind, solar and batteries, plus a gas plant. The company will retire its coal fleet in Minnesota and the rest of its territory by 2030.