Xcel Energy is an electric and gas utility. The business serves 3.7 million electric customers and 2.1 million natural gas customers in eight states. Despite the relatively large customer base, natural gas only accounted for 14% of total revenue in 2020. Therefore, I’ll refer to the company as an electric utility throughout this report.

It segments operations into four operating companies.

Although it has become trendy to think utilities are greedy, for-profit corporations with no regard for the public good, the reality is quite a bit different. Almost all utilities in the United States are highly regulated. They’re granted monopoly or near-monopoly status in defined geographic territories in exchange for maintaining water, electric, natural gas, or other infrastructure for the public good.

Regulated utilities cannot set or raise prices. Instead, they submit requests to regional regulators on a multi-year frequency detailing investments made in their territory. Regulators then decide if a rate adjustment is warranted.

If utilities cannot raise prices, then how do they stay in business? The compromise between public and private interests is called the rate case.

A rate case is the calculation used to determine prices. Regulators multiply the value of a company’s utility-related assets, called a rate base, by the legally-determined allowed rate of return. That number is added to certain qualified expenses such as maintenance and fuel. The calculated number is the revenue requirement for a utility to capture expenses and earn a return.