Xcel Energy beat analyst expectations with first-quarter profits that rose more than 16%, a jump the company said was partly thanks to lower labor costs.

That boost could be short-lived, though, as Xcel is facing potentially hundreds of millions in costs for its role in igniting a wildfire in Texas that burned more than a million acres.

Xcel said it's probable it will lose $215 million before insurance and recorded a pre-tax charge on that amount this quarter. 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 A&M Forest Service said Xcel power lines were a cause of the Smokehouse Creek Fire when wooden utility poles failed. Xcel has denied it was negligent in maintaining and operating its infrastructure and said it's still investigating other potential ignitions for the fire, which the Texas Legislature is also investigating.

Xcel said it's facing 15 lawsuits from the Smokehouse Creek Fire. People have also filed about 46 claims for losses with Xcel related to the wildfire.

CEO Bob Frenzel said during a call with analysts Xcel is taking near-term action to respond to wildfire risk, such as accelerating pole inspections and cutting power to lines during dangerous weather. The company also expects to file wildfire mitigation plans that could include managing vegetation to reduce risk and burying infrastructure to keep it safe from wind.

"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, which is up from $418 million a year ago. Xcel attributed the increase to more money recouped from infrastructure spending as well as lower costs from labor and benefits. In January, the Minneapolis-based utility said about 400 nonbargaining employees retired under a voluntary program in 2023, and the utility cut another 150 nonunion jobs.

Adjusted earnings came in at $0.88 per share, compared with $0.76 per share from the same period in 2023. That beat analysts' expectations by 10 cents a share, though revenue was lower than expected, down to $3.65 billion from $4.08 billion in 2023.

Xcel's stock price finished down 32 cents Thursday at $55.01.

On the call with analysts, Frenzel said the potential Microsoft data center near Xcel's large coal plant in Sherburne County would be one of the company's largest. He said the grid would power that project, meaning it wouldn't have a dedicated energy source but would benefit from Xcel's system that is moving to rely on carbon-free electricity.

Frenzel said Xcel is working to attract more data centers in all of its markets.

"With several additional opportunities in the pipeline, we expect data centers to drive further growth for the foreseeable future," Frenzel said. "We've got both access to water, transmission infrastructure, land and energy and clean energy that they find attractive."

Xcel is the largest electric utility in Minnesota and is the second-largest natural gas supplier. The company's largest markets are Colorado and Minnesota, but it also serves in the Dakotas, Texas, New Mexico, Wisconsin and a small part of Michigan's Upper Peninsula.

Xcel kept its annual profit forecast for 2024 at $3.50 to $3.60 per share. The company's fourth-quarter profits were up more than 7%, but costs from hundreds of retirements and job cuts suppressed that total a bit.