埃克西爾能源 (XEL) 2005 Q3 法說會逐字稿

Good morning. My name is Dennis and I will be your conference facilitator. At this time, I would like to welcome everyone to the Xcel Energy third quarter 2005 earnings conference call. [OPERATOR INSTRUCTIONS].

I will now turn the call over to Mr. Richard Kolkmann, Managing Director, Investors Relations. Please go ahead, sir.

Thanks, Dennis and I would like to welcome all of to you Xcel Energy's third quarter 2005 earnings release conference call. With me today is Ben Fowke, Vice President and CFO of Xcel Energy. We also have several others here to help provide answers to your questions.

Some of the comments that will be made contain forward-looking information, significant factors that could cause results to differ from those anticipated are described in our earnings release and Xcel Energy filings with the Securities and Exchange Commission. Now I will turn the call over to Ben.

Thanks, Dick and welcome everyone. On today's call, I'm going to provide an explanation of our quarterly results, our outlook for the rest of year, our 2006 guidance and finally an update on our construction program in COLI.

Starting with our results for the quarter, I'm pleased to report that Xcel Energy recorded earnings from continuing operations of $0.47 per share for the third quarter of 2005, compared with $0.40 per share for 2004. Total earnings for the third quarter 2005 were $0.47 per share, compared with $0.12 per share for 2004. As a reminder, we recorded a loss of $0.28 per share in the third quarter of 2004, largely due to an asset impairment charge related to our Seren investment.

As you know, the core of our company is our utilities subsidiaries, which provided earnings of $0.46 per share for the third quarter 2005, compared with $0.41 per share for 2004. Utility earnings increased by $0.05 per share, largely due to higher electric utility margins which increased earnings by $0.10 per share and income tax benefits, which increased earnings by about $0.03 per share. These favorable results were partially offset by lower short-term wholesale and trading margins, higher utility O & M expenses, higher depreciation expense, and various other items. Each of these items decreased earnings by $0.02 per share individually, or $0.08 per share in total.

Our holding company costs and results of other non-regulated companies provided earnings of $0.01 per share for the third quarter of 2005, compared with a loss of $0.01 per share last year. The change is primarily due to temporary timing differences related to accounting for income taxes under GAAP and our own reporting guidance. That summarizes our third quarter results. Now let's look into the details of the quarter.

Starting at the top of the income statement, our base electric utility margins increased by $70 million for the quarter, largely driven by warm summer temperatures and weather-adjusted sales growth. In the third quarter of 2005, we benefited from temperatures in most of our major jurisdictions that were warmer than normal and significantly warmer than last year.

In Minnesota, temperatures humidity degree days were 26% above normal and 49% above 2004. In Colorado, cooling degree days were 29% above normal and 86% above 2004. And finally, in the Texas Panhandle, cooling degree days were 2% above normal, and 23% above 2004. As a result, favorable weather increased electric utility margins by $53 million, or 8 cents per share.

In addition to favorable weather conditions, weather adjusted retail electric sales grew at 1.4%, increasing electric margin by $11 million. On a year-to-date basis, our weather-adjusted retail electric sales also increased by 1.4%. This is below our expectations for the year, and we have revised our year-end electric sales growth guidance range downward to 1.3 to 1.6%. We think the lower sales growth is a result of economic conditions and higher fuel prices. For more information on electric margins, please refer to our earnings release.

Turning to operating expenses, our third quarter 2005, O & M expenses were $22 million higher than last year. The increase in O & M expenses was largely driven by higher benefit costs, accruals for various legal settlements and inventory adjustments. Overall, our year-to-date O & M expenses are about 6.5% higher than last year. When we experienced hot weather during the summer, we took the opportunity to increase our O & M expense levels to ensure that our operating system was in good shape. Compared with our original plans, we now expect our annual O & M spending to increase at our energy supply business unit.

In addition we also expect bad debt accruals to increase. We believe the increase in bad debt expense reflects a slowdown in the economy and the recent change in bankruptcy laws. Finally we recently made a donation to help our customers manage high-energy bills. As a result, I now expect our annual 2005 O & M expenses to increase to approximately by 5% compared with last year.

Depreciation expense for the third quarter of 2005 was $13 million higher than 2004 levels. This is a continuation of a trend that we expected for the year. The increase is due to growth associated with normal system expansion and incremental depreciation for several large projects, including a new steam generator at Prairie Island and a new billing system. We expect recovery of these investments in future rate filings.

During the quarter, we recognized approximately $11 million of income tax benefits, largely associated with prior periods. The benefits consisted primarily of research tax credits and a net operating loss carry back. As a result of these benefits, we have modified our effective tax rate assumptions to a range of 25% to 27% for 2005. That covers our earnings results for the quarter.

Let me touch upon our year-end outlook. While we have modified some of our individual assumptions as detailed in our earnings release, our 2005 guidance range from earnings from continuing operations, remains at $1.18, to $1.28 per share. Through the first nine months we have benefited from warm weather and tax benefits, but these positive variations have been offset by higher O & M expense and lower sales growth. Based on the year-to-date results and our projections for the last quarter, we are narrowed the a range and expect to end up in the lower half of our guidance range.

Let's look ahead to next year. We are initiating our 2006 guidance range for earnings from continuing operations at $1.25, to $1.35 per share. Our 2006 assumptions are detailed in our earnings release.

I'm going to spend a bit of time on two assumptions that are the most difficult to handicap. The realized revenue from our rate filings and the potential impact of high fuel costs. In 2005, we have or will file several rate cases as part of our regulatory strategy.

In May, we filed a natural gas rate case in Colorado, requesting a $34 million rate increase, based on a return of equity of 11%. In June, we filed an electric and natural gas rate case in Wisconsin, requesting an electric rate increase of $53 million, and a gas rate increase of $8 million, based on a return of equity of 11.9%. Next week, we will file an electric rate case in Minnesota. Finally, later in November, we will file an electric rate case in North Dakota.

As far as the timing of the rate cases, we expect a final decision in Colorado and Wisconsin cases at the end of this year, or the beginning of next year, with final rates in effect in early 2006. In both Minnesota and North Dakota, we will implement interim rates subject to a refund which will be effective 60 days after the filing. We expect a final decision in both Minnesota and North Dakota in the summer of 2006.

Now I know you have lots of questions about the Minnesota rate case. Since we haven't filed the case yet, I can't provide too much detail. After the filing is made, we will provide you with more details at the EEI meeting in early November. There are a couple things I can tell you. Overall, we expect to increase rates 7 to 9%. Approximately 61 million of the request is for decommissioning accruals; however, we are going to present various proposals to extend the collection period, which may lower the revenue requirements and the decommissioning accruals but will have no impact on earnings or cash flow.

We are also looking at a different design to short-term wholesale margins, which would incorporate a sharing approach. This would provide us with an incentive and allow the ratepayers to share in the upside potential. We are requesting an 11% return on equity.

Any time you file a rate case, there are regulatory risks. Clearly we are concerned about the high impact -- the impact of high fuel prices on our customers; however, there are several key points to our case. We have increased investments to meet expanding customer needs and improve reliability. We have competitive rates, which are the result of careful cost management and two mergers, which allowed us to reduce our costs and avoid filing rate cases. Finally, we are environmentally responsible, and lead the industry in developing renewables, promoting energy efficiency and reducing emissions.

Our strategy is to file reasonable rate cases and get recovery of legitimate investments and expenses. We believe that our commission will provide us with reasonable recovery and it's important to note in our guidance range that we assume the reasonable rate recovery.

Another area of uncertainty is the impact of high fuel prices on our business. As you can see in our 2006 assumptions, we are projecting weather-adjusted electric retail sales growth of 1.3 to 1.7%. This is lower than our historic growth rate, and reflects our estimate of the impact of higher fuel costs on sales. We think this is a reasonable assumption, but it's very difficult to determine what impact 13 to $14 natural gas prices will have on customer usage. We will be closely monitoring this situation.

In addition, we expected higher fuel prices will increase working capital. We are in the process of expanding our credit facilities by $275 million to enhance our liquidity position. Increases in working capital will have some impact on our interest expense. Finally, higher fuel costs will potentially impact our bad debt expense. We have seen some impact in 2005, and we think our 2006 budget captures the potential exposure, but current prices are beyond historic levels and may provide our projections inaccurate.

Overall, I think we have done a good job of capturing the impact of regulatory risk and higher fuel prices on our budget. I'm very comfortable with our guidance range but we are aware of the potential sensitivities. In addition to our 2006 earnings guidance, we have also updated our five-year capital expenditure forecast outlook, as detailed in the earnings release.

The forecast is not materially different from what you have seen in the past; however, we will continue to look at additional opportunities to invest in our utility business, particularly in the later years of our forecast. We will work very hard to obtain regulatory and legislative support necessary to make those investments attractive to our investors. If the past is any indication, for example, projects like Merck and Comanche 3, we will be successful.

Next, I would like to provide you with an update on our major construction projects in COLI. We continue to make outstanding progress on the development of our new coal plant in Colorado. Permitting for construction of Comanche 3 is now complete. All environmental permits are in hand. Water rights have been obtained, county road access has been authorized and an annexation agreement with the City of Pueblo has been approved.

Additionally a permit for ash disposal site was granted. And building permit applications will submitted as the project proceeds. In terms of project construction, oiler, turbine, air quality control systems, site development and stack contracts have been awarded, and the costs are in line with our expectations. At the site, the evaporation pond removal is complete, the stack foundation work has begun, and the site development contractor has begun preparing the site for construction. We expect to have the formal ground breaking ceremony later this year.

We have also made good progress on the Merc project. We broke ground for the King plant rehabilitation project in April of this year. Details design work is nearly 70% complete, and approximately 90% of the contracts for equipment supply and construction have been placed.

A large use of the long lead components like boiler, turbine and pollution control have been designed and are well into manufacturing. The pilings, foundation and slabs for the new pollution control equipment and cooling towers will be completed by year end. I'm happy to report that both projects remain on track and within our cost expectations.

So now let me touch on everybody's favorite topic, our company-owned life insurance program known as COLI. As I mentioned in the past, there are two issues related to COLI, the first and most significant issue is the actual IRS dispute. The second issue is the potential accounting pronouncement from the FASB which affects accounting recognition, but not actual cash flows.

I will start with the IRS dispute. In October, the district court denied our motion for summary judgment in the IRS dispute. The court also denied the IRS motion for summary judgment, which asserted that PSCo had no insurable interest in the lives of its employees. The court did grant partial summary judgment to us, affirming that we had an insurable interest in the lives of our employees.

A ruling and summary judgment is issued if there are no disputed issues of material fact. Generally speaking, it is difficult to prevail on a motion for summary judgment, so the denial of our motion is understandable. In this situation, the court decided that it would need a full hearing to determine the case, because questions of fact remain.

We are pleased that the court affirmed that we have an insurable interest in the lives of our employees, litigation is currently proceeding with discovery and with the trial to be held sometime after 2006. We do not have a specific date yet for the beginning of the trial. Because the decision reached following that trial can be appealed, it may be another two to three years before the litigation is finally concluded. In any event, we believe our case has strong merits and we feel confident about our facts and circumstances.

Now, let me touch on the FASB issue. In September, the common period expired on the FASB exposure draft on accounting for uncertain tax positions. There are more are than 100 comment letters submitted and many letters indicated significant opposition to the new rules. The FASB has since announced that the effective date of the potential new rules has been delayed until at least the first quarter of 2006.

At this point, we believe there's considerable uncertainty about the FASB's eventual decision on this issue. They could revise rules, continue to delay the project, issue a completely new exposure draft or abandon the project. As a result, we will continue to record the tax benefits of COLI in our actual results and we'll continue to include the tax benefits in our guidance range.

So with that, I will wrap things up. Overall, it was a good quarter. We are on track to meet our 2005 guidance, and our 2006 guidance represents excellent growth prospects. We have a solid strategy , one that works for us. Our build to core strategy is not changing, it is easy to understand, and it is low risk. Invest in our utility business, earn original return on that investment.

We continue to balance and align the interests and the needs of our customers, the environment and our shareholders. Like any plan, it has its challenges, and the high-priced fuel environment will require Xcel Energy and its stakeholders to be forward looking.

We have developed an action plan which we shared with the public recently. Part of the plan includes donations of $5 million to the Salvation Army's Heat Share program, and other local programs in our service territories. We have also made significant investments in our utilities to improve reliability, increase capacity and reduce emissions.

Clearly this increased investment is driving the case for rate cases over the next few years. Fair regulatory treatment will ensure that we can continue to make long-term investments that will benefit our customers. We recognize that it's important to be customer focused. Our view is that if we take care of our customers, our shareholders will benefit. So with that, let's open the lines up for questions.

[OPERATOR INSTRUCTIONS]. Your first question comes from the line of Daniele Seitz with Maxcor Financial.

Hi, Daniele.

Hi. I was just was wondering, you obviously are anticipating not so great earnings in the fourth quarter. Is this mostly stemming from how your O & M or there are other issues like tax rates and things like that?

Well, part of it is when you compare it to where we were in the fourth quarter of 2004, we have recognized $0.08 in tax benefits. We don't anticipate doing that in this last quarter of 2005. O & M trends will roughly continue at the levels we have seen. Short term wholesale margins will be less than what we saw last year. All of those things contribute to our estimate that will be in the lower half of earnings guidance range, Daniele.

Okay. Just one quick one, you mentioned that you are going to offer a sharing mechanism for wholesale sales. Could you tell us what is a normal contribution to earnings for wholesale sales? That you are going to be offering as sharing?.

Are you asking what wholesale margins contribute to earnings this year?

Yes. And -- well, since it's only relates to one jurisdiction, I thought that's what you are going to be offering.

Well, we have the overall earnings in the press release, Daniele, and for the full nine months, it's roughly around $60 million. The lion's share of that is related to the NSP territories. So the sharing mechanism will -- will greatly affect the lion's share of those margins.

Your next question comes from the line of Ashar Khan of SAC Capital.

Good morning, Ben.

Hi, Ashar.

Ben, this is in reference to '06 and if you can just help me out with my analysis, I might have something -- if there's a rationale behind it. As I look at it, in your assumptions, we are expecting a shortfall from the short-term wholesale is 15 to 30, so if I take the midpoint, 22 million or so. And then 40 million in higher depreciation if I'm right, if you take out the 60 million. So that's about 62 million.

And then there's about 10 to 15 million of higher interest expense that gets to you 75 million and then, of course, negate the AFUDC by 10, so back to kind of like the 60, 65. So if I'm saying to myself and I know Merc added and all that That if I'm saying to myself that the rate cases have to contribute something in the 80 to 90 million dollar revenue line item, for next year, all the rate cases combined, am I in the right ballpark, or am I missing something? You know, for the earnings to show up higher. I just wanted to see if I'm doing something wrong in my math from what you have provided.

Well, the cost increases you talked about, many of those costs will be included. The increases will be included in the rate case filings, I think you picked up on that. I think Ashar, at this point I didn't want to handicap what is in our guidance range. I don't think that's what we should be doing while we're in the middle of rate cases. I suggest that what you do, is you should look at where we have been earning on a -- we have that in some of our investors relations material and one of the appendixes. And just draw your own conclusions based upon the ROEs that we are requesting.

[OPERATOR INSTRUCTIONS]. Your next question is from the line of Paul Patterson with Glenrock Associates.

Hi, guys. Just a quick question on taxes. What is your expected effective tax rate for 2006, and I'm sorry if I somehow forgotten about this research tax pay if you could just explain how much that is and what that is related to?

Well, to answer the first part of your question, the assumption that the -- the effective tax rate will be 27 to 29%, Paul, the research and the experimentation tax credits are credits based upon a portion of the capital you spend on qualified capital expenditures. It can range from planned improvements to in some cases, even software. It really just depends, but it's a fairly elaborate process to -- to quantify the amount you spent and then you get a piece of that through the crediting process. Those research and experimentation credits that we picked up in the third quarter equalled about 3.3 million, and they related to the '03 and '04 calendar years.

Your next question comes from the line of Elizabeth Parrella with Merrill Lynch.

Yes, thank you. Just continuing the discussion on the tax credits, you also mentioned the NOL carry backs.

Yes.

Does that account for the other, I guess it would be $7.7 million? Could you go into that a little bit?

It accounts for, i think the exact number, Elizabeth, is $6.6 million and that, typically, you could only -- you can only carry back losses two years, but there are some exclusions for expenditures made that are nuclear related that allow to you carry it back up to ten years. We did the work this year and we were able to take the deduction and hence the $6.6 million I mentioned.

Okay. And just a quick follow-up on that. Or -- did all the tax credits, are they all at the utility? You mentioned there's this benefit or timing difference at the parent, which accounted for the positive swing at the parent. Is any of it showing up at the parent company or is that something else that's going on there.

No, I think most of that -- I think all of it -- of the$0.03 that I referred to is at the operating utilities. What's happening at the holding company is the interim tax accounting that we -- we did it to make sure that our effective tax rate for the quarter and the nine months approximates where we think we will be for the full year.

Your next question come is from the line of David Frank with Pequot Capital.

Good morning. Ben, could you remind me again, if the FASB rule is implemented beyond certain tax issues, if it was implemented today, would you meet the probability threshold, or is it likely that you would not meet the probability threshold?

Well, I mean, again, I don't know what's -- where the FASB is ultimately going to come out because of the amount of opposition we saw but, if we were talking about this last quarter, I would have told you that it was unlikely that we would meet the FASB standard as the exposure draft discussed, and what that meant, David, is we would not be able to record tax benefits going forward and that you would have to reverse out the benefits you recognized previously.

You basically need a should opinion from a law firm, in our understanding, of what the exposure draft suggested, and you probably know, getting a should opinion from a law firm is extremely difficult. But, again, there was more than 100 -- I think the number was like 110 comments on this exposure draft. They were almost all opposing the exposure draft. I think we'll see some significant changes but, we'll have to wait and see.

You have a follow-up question from the line of Ashar Khan with SAC Capital.

Ben, why the Merc -- if I'm looking at your new numbers, the significant changes been in the Merck spending that's going down '06 versus your previous number at least from the Merrill Lynch conference page I have. Can you -- can you tell me why that difference occurred is happening?

Some of it is timing, Ashar. I would have to look at some of the details. You know, we were able to actually buy some secondary markets and that sort of thing that might have helped that. But the -- the bottom line is most of that will just be timing.

Your next question is from the line of John Hanson with Imperium.

Good morning.

Hi.

Yes. Could you comment a bit about the -- the coal rail supply situation as you are going into winter and the wholesale power market situation out your way?

Let me answer the first part of your question. You know, since May -- and that's really when these rail problems surfaced for us -- we have been receiving our nominations probably at the 80 to 85% level. So we have been mitigating the -- the reduced deliveries within our operating plants, switching fuels where possible, doing some other things to make sure our coal piles are acceptable levels. Those levels are currently across the system, they average in the low to mid-20s.

We ultimately would like to see that being the 30-day level. Now, as you go into the fall, we typically take down some of our coal plants for routine maintenance. That should give us an opportunity to increase those coal levels to the 30-day level where we typically like them to be. But we're going to keep watching it. It can change week-to-week, and overall, it's been at that 80 to 85% delivery level, as I mentioned. The second part of your question was -- was wholesale margins? Are you still there, John?

[OPERATOR INSTRUCTIONS].

It has to do with the power prices and the given coal and gas situation, just what is the general markets on power that may be selling into that.

I think, you know the notion on the amount of power prices has increased this year. We actually think it will increase next year, but we have seen a compression on the sparks spreads which is probably more important.

We see -- again, we make most of our margins in the Miso region. And we have seen with the new market rules, the evolving cost allocations, with the compressed spark spreads we see a decline in margins next year and for the balance of this year. Does that answer your question, John?

Your next question comes from the line of Reza Hatefi with Zimmer Lucas Partners.

Hi, Reza.

Good morning, how are you? Could you expand a little bit on your O & M increases? I guess you are guiding 3 to 4%. I missed what the reasons were and I guess you kind of mentioned that they are going to -- these increases are going to be somewhat offset by the coming rate cases and what you are going to ask for them. I guess one concern I have is how would it be effective with -- with the timing of the test years and so forth. I guess Minnesota is forward test year and Colorado has it get historic, but that will be in '06. So in effect you would kind of take care of the high increases you will see in '06.

Well, you are right, Minnesota is a forward test year. North Dakota is a forward test year. Wisconsin is forward test year. Colorado is historically an historic test year. We are looking at the potential when we file in the spring of this year, to look forward or to at least use a lot of knowns or measurables.

So you potentially do have a good portion of those increased expenses are picked up through the rate filings that I mentioned. If you stick with an historical test year, and you can get some known immeasurables, the vast majority of those expenses get picked up.

If you get more of an historical approach, then there's some slippage there.

Now, can you -- is this also going to be sort of an ongoing O & M rate or going into like '07, '08, how should we think about O & M growth?

Well, some of these that are pushing our expenses up are things like pension, medical, post-retiree benefits, those things don't turn around on a dime. We will continue to look at our programs and look for opportunities to reduce those costs, but I don't see a silver bullet for those kinds of expenses. I think if you -- our expenses have increased in the last few years.

But I think if you put it in perspective, we still compare very favorably to our peers. Our overall energy prices have, again, are also very favorable to our peers. So, you know, we have been investing not only in capital, and you have seen that and that was part of the build of the core strategy but it's necessary to make sure that we are running a good reliable, efficient system, and, you know, we are going to get, hopefully good rate relief on that and I anticipate that we will, and that's just part of running, I think, a good system but that doesn't mean we don't look for cost takeout opportunities, regularly.

Your next question comes from the line of Elizabeth Parrella with Merrill Lynch.

Yes. Just following up on your fourth quarter comments. I know you mentioned higher O & M expenses it just seems even notwithstanding a big tax benefit contribution last year, you did have mild weather last year. You had a refueling outage, you had the accruals of the FTS fuel case. It just seems like you are looking for a fairly significant decline kind of embedded in your guidance comments. I'm just wondering if there's anything else that we ought to be thinking about in terms of the fourth quarter number.

I don't think anything I haven't mentioned. O & M. We will continue to see pressure there. We talked about some of the reasons. I mentioned the charitable contribution of $5 million we made, some of the increases in O & M expenses related to bad debt and legal accruals and that sort of thing.

Depreciation continues to tick up. We do anticipate the short-term margins will be low in this last quarter. And, again, Elizabeth, I know you have mentioned it, but we won't have the tax benefits in the fourth quarter of this year that we enjoyed last year. So I think that makes the -- that was the reason why we said we would end up in the lower half of our range.

Okay. If I could ask just one other question. Sure. On the TRB situation, other than the fact that it might have cost you some opportunities on the short term wholesale side, was there any financial impact in the quarter in terms of fuel expense, et cetera?

Well -- indirection, Elizabeth, and working capital needs but the fuel -- the fuel expenses, as you know, we have good recovery mechanisms for that. It probably has also impacted to some degree our ability to earn at the upper limit our ECA mechanism in Colorado.

Your next question comes from the line of Greg Orrill with Lehman Brothers.

Thanks very much. Coming back to the bad debt expense issue, I was just wondering if you might be able to talk a little bit more about what you are assuming for '06, where in particular it might be hurting you, and if there's any regulatory relief?

The fact that we have forward tests here creates the possible for regulatory relief in our bed debt expense. We, at this point, think that bad debt expense, the upward trend that we saw this year, and the levels we saw this year will probably be about the levels we see next year as well.

I think specifically, if you look at where we've seen some issues this year in Colorado, there -- I think of all of our territories, that's probably the territory that has seen the most economic slowdown. You see that in some of the sales growth, the sales growth there as been relatively flat for the year.

But the other thing that -- that's happened across all of our- territories is I think you have seen an acceleration of bankruptcy filing as people got ahead of the new bankruptcy laws and have filed. So that should be -- that should be behind us, as we end this year. So all of those things considered, we will continue to be in a high fuel environment, and I think bad debt expense will be at the levels that we saw this year.

Thank you. You have a follow-up question from the line of Ashar Khan of S.AC capital.

Ben, how should we look if weather had been normal this year, what earnings would have been. I know you said that weather helped about $0.04 above normal, but you also said that you did much more O & M because of the thing. So could you just mention what would have been the earnings if you had a normal summer?

Well, Ashar, we manage the business with all the component parts. So when you have favorable weather, you do look for opportunities to spend money where it's needed and it -- as I mentioned on the call, our plants can use the O & M. They have been run hard.

We want to make sure -- they produced wonderfully over the last several years. And we want to make sure that they continue to perform that way in the future. So I would say roughly we spent between the plant and some other investments in ox & M around our system, probably $0.02 to $0.03 of additional O & M this year that perhaps we wouldn't have spent if we hadn't had favorable weather.

Okay. And then can I just follow up, if I have my numbers right, the short-term wholesales and all of that are running right now for the nine months $36 million less from last year and your projection is $40 to $50 million for the full year so it's expected another $9 or $10 million shortfall in the fourth quarter; is that correct?

I think that's the way that numbers add up and basically I think short-term wholesale margins have been behaving about how we expected coming into the year.

Your next question is from Daniele Seitz with Maxcor Financial.

Just a short question here. The TRB situation, could you give us a sense of when does it ever end and is there some progress report that you get on that?

Well, we -- we stay in very close contact with the -- the railroads. I mean, it's very important to us. They continue to repair the rail beds and the line, Daniele, and we're entering the summer season here and -- or rather the winter season. And so some of that repair work will cease.

I think we're probably going to be looking at some kind of reduced delivery into next year, perhaps, as late as the second quarter of 2006, but, again, we're just -- we're going to -- we're going to mitigate and monitor it and we'll make sure that we have adequate coal to run our plants.

Today's final question will come from the line of David Frank with Pequot Capital.

Yes, Ben, I wanted to ask you if you have heard any more comments out of Representative Frangas, is there any risk in Colorado, you think of a political backlash or was that just some opportune advertise comments --

David, you are coming in and out. Could you just repeat the question one more time?

Yes, was asking about -- I was asking about risks for political backlash in Colorado. I think across the country we are seeing a lot of politicians comment or opine or rising energy rates. I think specifically, there was a representative in your region, Jerry Frangas would made some comments earlier this month, or last month, are there any politicians getting involved in this process, or --

Well when fuel rises, I think you are always going to increase the political and the media scrutiny and activity. I don't think you can have a build to core strategy if you are not comfortable with your commissions -- that your commissions are what will ultimately set the rate that need to attract the capital. If we didn't think they were going to make the right decisions and we think they will.

Overall, I think the -- the politics in our service territories have been very supportive of our strategy. If you look at some of the things we have accomplished and I know you have heard me talk about it repeatedly, but, getting debt -- imputed debt recognized in Colorado, getting rider recovery in Merc, getting transmission legislation in Minnesota, those are really positive things that say that, you know, we have forward looking commissioners and legislators. So you are going to have noise.

And you are going to have people coming out of the woodwork, but we -- we think we are in a good environment and from our perspective too, I think we have done some of the right things by helping out some of those customers that are -- that we know will be hurt the most in this coming heating season by making some of those charitable contributions I have referred to.

At this time, there are no further questions. Do you have any closing remarks?

I do. First, I want to thank you all for participating in our earnings call this morning. I look forward to meeting with many of you at EEI in early November.

We are hosting an analyst meeting in New York City on November 29th. At the meeting, we plan to review the 2006 operating plans, and update you on our Minnesota rate case and other regulatory initiatives. We hope to see you there. If you have any follow-up questions in the meantime, Dick Colton and Paul Johnson will be available to take your calls. Thank you for your participation today.

Thank you for participating in this morning's Xcel Energy 2005 conference call. This will be available for replay beginning at 1 p.m. eastern time through 11:59 p.m. eastern time on Saturday, October 29, 2005. The conference ID number for the replay is 9828840. Again, the conference ID number for the replay is 9828840. The number to dial for the replay is 1-800-642-1687, or 706-645-9291. This concludes today's conference. You may now disconnect.