Public Service Company of Colorado

10/30/2025 | Press release | Distributed by Public on 10/30/2025 12:18

Quarterly Report for Quarter Ending 9/30/2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Discussion of financial condition and liquidity for PSCo is omitted per conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q for wholly owned subsidiaries. It is replaced with management's narrative analysis of the results of operations set forth in General Instruction H(2)(a) of Form 10-Q for wholly owned subsidiaries (reduced disclosure format).
Non-GAAP Financial Measures
The following discussion includes financial information prepared in accordance with GAAP, as well as certain non-GAAP financial measures such as ongoing earnings. Generally, a non-GAAP financial measure is a measure of a company's financial performance, financial position or cash flows that adjusts measures calculated and presented in accordance with GAAP.
PSCo's management uses non-GAAP measures for financial planning and analysis, for reporting of results to the Board of Directors, in determining performance-based compensation and communicating its earnings outlook to analysts and investors. Non-GAAP financial measures are intended to supplement investors' understanding of our performance and should not be considered alternatives for financial measures presented in accordance with GAAP. These measures are discussed in more detail below and may not be comparable to other companies' similarly titled non-GAAP financial measures.
Earnings Adjusted for Certain Items (Ongoing Earnings)
Ongoing earnings reflect adjustments to GAAP earnings (net income) for certain items.
We use this non-GAAP financial measure to evaluate and provide details of PSCo's core earnings and underlying performance. For instance, to present ongoing earnings, we may adjust the related GAAP amounts for certain items that are non-recurring in nature. We believe this measurement is useful to investors to evaluate the actual and projected financial performance and contribution of our subsidiaries. This non-GAAP financial measure should not be considered as an alternative to measures calculated and reported in accordance with GAAP.
The following table provides a reconciliation of GAAP earnings (net income) to ongoing earnings:
Three Months Ended Sept. 30 Nine Months Ended Sept. 30
(Millions of Dollars) 2025 2024 2025 2024
GAAP net income $ 48 $ 256 $ 462 $ 594
Marshall Wildfire litigation 287 - 287 -
Less: tax effect of adjustment (74) - (74) -
Ongoing earnings $ 261 $ 256 $ 675 $ 594
Marshall Wildfire Litigation -In the third quarter of 2025, PSCo recognized a non-recurring $287 million charge as a result of a settlement reached with the plaintiffs in the Marshall Wildfire litigation.
Results of Operations
PSCo's GAAP net income was $462 million for the nine months ended Sept. 30, 2025 compared with $594 million for the prior year. Ongoing net income was $675 million for the nine months ended Sept. 30, 2025 compared with $594 million for the prior year. The change in ongoing earnings was driven by higher recovery of electric and natural gas infrastructure investments, which was partially offset by increased depreciation and interest charges.
Electric Revenues
Electric revenues are impacted by fluctuations in the price of natural gas and coal, regulatory outcomes, market prices and seasonality. In addition, electric customers receive a credit for PTCs generated, which reduce electric revenue and income taxes.
(Millions of Dollars) Nine Months Ended Sept. 30, 2025 vs. 2024
Non-fuel riders $ 88
Sales and demand 28
Conservation and demand side management (offset in expense) 20
Recovery of higher cost of electric fuel and purchased power 17
Transmission revenues 15
Estimated impact of weather (41)
Other, net 36
Total increase $ 163
Natural Gas Revenues
Natural gas revenues vary with changing sales, the cost of natural gas and regulatory outcomes.
(Millions of Dollars) Nine Months Ended Sept. 30, 2025 vs. 2024
Regulatory rate outcome $ 86
Conservation revenue (offset in expense) 20
Estimated impact of weather 12
Recovery of lower cost of natural gas (63)
Other, net (7)
Total increase $ 48
Electric Fuel and Purchased Power - Expenses incurred for electric fuel and purchased power are impacted by fluctuations in market prices of natural gas and coal, as well as seasonality. These incurred expenses are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are largely offset in operating revenues and have minimal earnings impact.
Electric fuel and purchased power expenses increased $44 million year-to-date. The increase was primarily due to increased commodity pricing, partially offset by timing of fuel recovery mechanisms and decreased volumes.
Cost of Natural Gas Sold and Transported - Expenses incurred for the cost of natural gas sold are impacted by market prices and seasonality. These costs are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are largely offset in operating revenues and have minimal earnings impact.
Natural gas sold and transported decreased $73 million year-to-date. The decrease was primarily due to timing of fuel recovery mechanisms, partially offset by increased commodity prices and volumes.
Non-Fuel Operating Expenses and Other Items
Depreciation and Amortization -Depreciation and amortization expense increased $79 million year-to-date. The increase was primarily due to system investment.
Interest Charges - Interest charges increased $35 million year-to-date, largely due to increased long-term debt levels and higher interest rates.
AFUDC, Equity and Debt - AFUDC increased $66 million year-to-date, largely due to system investment.
Public Utility Regulation and Other
The FERC and state and local regulatory commissions regulate PSCo. PSCo is subject to rate regulation by state utility regulatory agencies, which have jurisdiction with respect to the rates of electric and natural gas distribution companies in Colorado.
Rates are designed to recover plant investment, operating costs and an allowed return on investment. PSCo requests changes in utility rates through commission filings. Changes in operating costs can affect PSCo's financial results, depending on the timing of rate cases and implementation of final rates. Other factors affecting rate filings are new investments, sales, conservation and demand side management efforts, and the cost of capital.
In addition, the regulatory commissions authorize the ROE, capital structure and depreciation rates in rate proceedings. Decisions by these regulators can significantly impact PSCo's results of operations.
Except to the extent noted below, the circumstances set forth in Public Utility Regulation included in Item 7 of PSCo's Annual Report on Form 10-Kfor the year ended Dec. 31, 2024, appropriately represent, in all material respects, the current status of public utility regulation and are incorporated herein by reference.
Pending and Recently Concluded Regulatory Proceedings
Colorado Natural Gas Rate Case - In January 2024, PSCo, filed a request with the CPUC seeking an increase to retail natural gas rates of $171 million (9.5%). The request was based on a 10.25% ROE, an equity ratio of 55%, a 2023 test year and a $4.2 billion year-end rate base.
In October 2024, as modified on ARRR in January 2025, the CPUC issued an order including the following key decisions:
•Use of a historic 2023 test year, with a 13-month average rate base.
•Weighted-average cost of capital of 7.0%, based on an ROE range of 9.2%-9.5% and an equity ratio range of 52%-55%.
•Acceleration of $15 million per year of depreciation expense (incremental to PSCo's original rate request), to potentially be held in an external trust for future decommissioning costs.
•Modifications to recoverability of certain operating expenses.
•Denial of PSCo's decoupling proposal.
PSCo placed new rates into effect in November, as modified on ARRR in February 2025, with an annual revenue increase of approximately $125 million, inclusive of $15 million of accelerated depreciation. In May 2025, PSCo filed an appeal with the Denver District Court seeking review of the CPUC's decisions related to recovery of certain operating expenses, cost of capital and capital structure, and the treatment of gas storage inventory costs. Briefing will be completed in the fourth quarter of 2025.
Colorado Resource Plan - In December 2023, the CPUC approved a portfolio of 5,835 MW, which includes approximately 3,100 MW of company owned resources and 2,700 MW of PPAs.
In September 2024, PSCo filed a proposed framework for CPUC review of pricing adjustments for both company-owned and PPA resources to enable delivery of the approved portfolio in light of supply chain and geopolitical developments. In January 2025, the CPUC issued a decision granting limited potential pricing relief including potential tariff impacts, subject to evaluation in future CPCN proceedings for company owned projects. In September 2025, the CPUC authorized the process for company-owned and PPA resources to seek up to 15% relief for tariff impacts to projects. Relief requests are due by Dec. 31, 2025 or 18 months prior to COD. The CPUC will ultimately review and approve/deny requests.
PSCo has filed all generation CPCNs associated with company-owned generation from the Colorado Energy Plan and expects to continue filing transmission CPCNs throughout 2025 and 2026.
2024 Colorado Electric Resource Plan - In October 2024, PSCo filed its electric resource plan with the CPUC. The filing reflects the expected growth on the system, the generation resources needed to meet the projected growth and the future evaluation of competitive bids for new generation resources.
•The plan reflects a base sales forecast with 7% compound annual sales growth through 2031.
•The plan also presents a low sales forecast with a 3% compound annual sales growth through 2031.
•The resource plan includes forecasted need of 5-14 GW of new generation capacity through 2031, including renewables and firm dispatchable resources to meet the two different scenarios. The acquisitions of generation resources will be determined through a competitive solicitation after the CPUC determines the portfolio. The table below summarizes two of the proposed portfolios based on the different sales scenarios:
(Megawatts) Base Plan Low Load
Wind 7,250 2,800
Solar 3,077 1,200
Natural gas combustion turbine 1,575 1,400
Storage (long duration) 1,600 -
Other storage 450 -
Total 13,952 5,400
A hearing was held in June 2025 and a CPUC decision on the resource need is expected in the fourth quarter of 2025 with the competitive solicitation for resource additions expected in early 2026.
Near-Term Procurement - In August 2025, PSCo filed a joint motion with state agencies to initiate a "fast-tracked" solution for tax-advantaged new generation resources. The CPUC approved the request in September 2025 with bids submitted in October 2025. The procurement seeks to accelerate development of up to 4,000 MW of clean energy resources, 200 MW of firm, dispatchable resources, and up to 300 MW of other dispatchable resources. A recommended portfolio of resources will be filed December 2025 and a decision is expected in February 2026.
Wildfire Mitigation Plan - In June 2024, PSCo filed an updated WMP and request for recovery of costs covering the years 2025 to 2027 with the CPUC. The estimated total cost for this plan is approximately $1.9 billion.
The WMP integrates industry experience; incorporates evolving risk assessment methodologies; adds new technology; and expands the scope, pace and scale of our work to reduce wildfire risk in a comprehensive and efficient manner.
In April 2025, PSCo filed with the CPUC a comprehensive and unanimous settlement. Key terms include:
•Approval of the updated WMP, including scope of mitigation activities and the Public Safety Power Shutoffs plan, with certain modifications.
•Cost recovery of proposed investments through a Wildfire Mitigation Adjustment rider and recovery of transmission investments through the Transmission Cost Adjustment rider.
•PSCo agrees to request approval to pursue securitization of an estimated $1.2 billion of proposed WMP investments, with a target to complete the transaction by Jan. 1, 2029.
•Extension of the excess liability insurance deferral, with a cap of $50 million after PSCo's current policy year, which ends October 2025.
In August 2025, the CPUC issued a written approval of the settlement agreement.
Colorado Senate Bill 23-291- In May 2023, Colorado Senate Bill 23-291 was signed into law. The legislation included a number of topics including for the CPUC to adopt rules to establish fuel cost mechanisms to align the financial incentives of a utility with the interests of the utility's customers.
In December 2024, the CPUC adopted final rules applicable to PSCo's natural gas utility that would assign to the Company four percent of the change in the price per MMbtu of natural gas compared to the three-year average, subject to rolling 12-month cap based on a percentage of rate base, currently estimated at $7 million. PSCo made a filing in June 2025 to implement the mechanism with a CPUC decision expected in late 2025 or early 2026.
In December 2024, the CPUC also adopted rules for electric utilities but did not adopt a specific PIM framework, which will be further considered through additional proceedings expected to commence in the fourth quarter of 2025.
Other
Supply Chain
PSCo's ability to meet customer energy requirements and growing customer demand, respond to storm-related disruptions, and execute our capital expenditure program are dependent on maintaining an efficient supply chain.
Large global demand for energy-related infrastructure has stretched equipment supply chains, extended delivery dates and increased prices for items like combustion turbines, transformers and other large electrical equipment. The labor market for skilled engineering and construction resources to build renewables and gas generation has also been strained, impacting cost and availability.
In addition, manufacturing processes have experienced disruptions related to the scarcity of certain raw materials and interruptions in production and shipping. The impact of inflationary pressures, geopolitical events and federal policies have exacerbated the situation. PSCo continues to monitor the situation as it remains fluid and seeks to mitigate the impacts by securing alternative suppliers and key vendor partners, increasing procurement lead times, modifying design standards, and adjusting the timing of work.
Tariffs, Trade Complaints and Federal Actions
Several trade cases related to anti-dumping and countervailing duty investigations are ongoing and we continue to monitor the potential impacts of these cases.
In 2025, several executive orders have been issued imposing new global and country-specific tariffs on many imports, which may impact our procurement and development activities. Additionally, executive orders and actions from government agencies may impact the permitting of wind and solar facilities and the retirement of coal facilities.
PSCo continues to assess the impacts of these tariffs, executive orders, trade complaints and federal policies on its business, including company owned projects and PPAs. PSCo may seek regulatory relief, if required.
Continued and/or further policy actions or other restrictions, disruptions in imports from key suppliers, or any new trade complaint could impact viability, timelines and costs of various projects and PPAs.
Tax Law Changes
On July 4, 2025, the President signed into law Public Law No. 119-21 (the "OBBB"). The OBBB modifies certain clean energy tax provisions included in the Inflation Reduction Act. The provisions include:
•Eliminating production and investment tax credits for wind and solar facilities placed in service after 2027, for facilities that begin construction after July 4, 2026.
•The addition of foreign entity of concern rules that apply to projects commencing construction after 2025.
In August 2025, the U.S. Treasury issued further guidance related to the beginning of construction for clean energy projects.
PSCo does not expect these provisions to have an impact on our 2026-2030 base capital plan, as steps have been taken to begin construction under the IRS' safe harbor guidance.
Environmental Regulation
Throughout 2025, the EPA has announced various regulatory actions addressing a wide range of environmental regulations. PSCo will continue to monitor these proposed rules as they move toward final action. Additionally, any other amendments and changes to rules will be evaluated as proposed by EPA.
Clean Air Act
Power Plant Greenhouse Gas Regulations -In April 2024, the EPA published final rules addressing control of CO2emissions from the power sector. The rules regulate new natural gas generating units and emission guidelines for existing coal and certain natural gas generation. The rules create subcategories of coal units based on planned retirement date and subcategories of natural gas combustion turbines and combined cycle units based on utilization. The CO2control requirements vary by subcategory.
Based on current estimates and assumptions, PSCo has determined that due to scheduled plant retirements, there is minimal financial or operational impact associated with these requirements and believes that the cost of these initiatives or replacement generation would be recoverable through rates based on prior state commission practices.
In June 2025, the EPA proposed to repeal these and all other GHG emissions standards for the power sector. In the alternative, the EPA proposed to repeal a narrower subset of the 2024 regulations.
In July 2025, the EPA additionally proposed to repeal the 2009 Endangerment Finding and associated regulations addressing GHG emissions under the Clean Air Act. PSCo will monitor the proposed rules and evaluate the impacts of any final rule.
In September 2025, the EPA proposed to amend the Clean Air Act GHG Reporting Program to scale back reporting and recordkeeping requirements. Under the amended program, PSCo would no longer be required to report GHG emissions to the federal program. PSCo will continue to report GHG emissions as required under state programs. PSCo will monitor the proposed rule and evaluate the impacts of any final rule upon state reporting programs.
Emerging Contaminants of Concern
PFAS are man-made chemicals that are widely used in consumer products and can persist and bio-accumulate in the environment. PSCo does not manufacture PFAS, but because PFAS are so ubiquitous in products and the environment, it may impact our operations.
In June 2024, the EPA finalized a rule that designated certain PFAS as hazardous substances under CERCLA. In July 2024, the EPA finalized another rule that set enforceable drinking water standards for certain PFAS.
Potential costs for these rules and any additional proposed regulations related to PFAS are uncertain and will be determined on a site specific basis where applicable. If costs are incurred, PSCo believes the costs will be recoverable through rates based on prior state commission practices.
Regional Haze - On July 16, 2025, EPA proposed to partially approve and partially disapprove the Colorado SIP implementing the Regional Haze rule in Colorado. The proposal seeks to remove mandatory retirement dates as enforceable provisions in the SIP. For PSCo, this includes the SIP retirement dates for Cherokee Unit 4, Comanche Unit 2, Craig Units 1 and 2, and Hayden Units 1 and 2. The comment period for the proposal has concluded, but the EPA has yet to make a final decision. If adopted, the removal of these retirement dates from the federally approved SIP would only impact federal requirements for retirement of these facilities. Colorado has a state regulation that incorporates these retirements at a state level and would require amendment to modify or remove the retirement dates.
Effluent Limitation Guidelines
In April 2024, the EPA published final rules under the Clean Water Act, setting Effluent Limitations Guidelines and Standards for steam generating coal plants. This rule establishes more stringent wastewater discharge standards for bottom ash transport water, flue-gas desulfurization wastewater, and combustion residuals leachate from steam electric power plants, particularly coal-fired power plants. Based on current estimates and assumptions, PSCo has determined that there is minimal financial or operational impact associated with these requirements and that any costs would be recoverable through rates based on prior state commission practices.
Public Service Company of Colorado published this content on October 30, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on October 30, 2025 at 18:18 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]