- VP and CFO

Good morning ladies and gentlemen. Thank you for standing by and welcome to the Xcel Energy Second Quarter 2008 Earnings Conference Call. During today's presentation all parties will be in a listen-only mode. Following the presentation the conference will be open for questions. [Operator Instructions]. This conference call is being recorded today, Thursday, July 31st of 2008. I would now like to turn the conference over to Paul Johnson, Managing Director of Investor Relations and Assistant Treasurer. Please go ahead sir.

Thank you and welcome to Xcel Energy's second quarter 2008 earnings release conference call. I am Paul Johnson, Managing Director of Investor Relations and Assistant Treasurer. With me is Ben Fowke, Vice President and CFO of Xcel Energy and several others who can answer your questions. Today we plan to cover our second quarter results and provide a general business update. Please note that there are slides that accompany this conference call, which are available on our web page. Let me remind you that some of the comments that we may make may contain forward-looking information. Significant factors that could cause results to differ from those anticipated are described in our earnings release and our filing with the SEC. Today's discussion will focus on ongoing results, which we believe represents fundamental earnings call of Xcel Energy. Please refer to our earnings release for a reconciliation of non-GAAP earnings. Before I turn the call over to Ben, I will cover up overall results and how we calculate ongoing earnings. Second quarter 2008 GAAP earnings were $106 million or $0.24 per share compared to $69 million for $0.15 per share in 2007. As you may recall, in 2007 we reached a settlement resolving our dispute with the IRS regarding our COLI program. Our 2008 second quarter earning results do not include any material impacts from the discontinued COLI program. However, our 2007 second quarter GAAP earnings include a loss of $0.11 per share associated with the resolution of this dispute. This morning's discussion will focus on ongoing earnings, which excludes the impact of COLI from our results. Ongoing earnings for the second quarter of 2008 were $0.24 per share versus $0.27 per share for last year. With that I will turn the call over to Ben. Benjamin G.S. Fowke III - Vice…

Thank you, sir. [Operator Instructions]. One moment please for the first question. Our first question comes from the line of Paul Ridzon with KeyBanc. Please go ahead. Benjamin G.S. Fowke III - Vice President and Chief Financial Officer Hi Paul.

Mr. Ridzon your line is open. Please go ahead.

I'm sorry. I was on mute. I had a question on smoothing out the nuke refuel costs? Benjamin G.S. Fowke III - Vice President and Chief Financial Officer Yes.

When do you expect that decision, is that an '08 issue to watch? Benjamin G.S. Fowke III - Vice President and Chief Financial Officer Yes. We expect a decision in September. Assuming we are successful that will reduce O&M within the Minnesota jurisdiction by about $25 million. So, that's why Paul, we are optimistic about the outcome and that should get us right back in line with our annual O&M guidance.

So, your guidance continues upon getting that regulatory approval? Benjamin G.S. Fowke III - Vice President and Chief Financial Officer It was... we would assume successful outcome of that approval when we developed a 2% to 3% guidance range last year.

Okay, thank you.

Thank you. The next question comes from the line of Dave Parker with Robert W. Baird. Please go ahead. Benjamin G.S. Fowke III - Vice President and Chief Financial Officer Hi, Dave.

Hi, good morning. Just a question on what you term sort of the shift or the rate design issue. Could you provide a little more color on that? Benjamin G.S. Fowke III - Vice President and Chief Financial Officer Yes. There is a couple of things that are happening Dave. I mean as I mentioned, we have seen I think pretty strong sales growth; break it down to a couple of different ways. In Colorado, we're actually seeing pretty good growth in both residential and the C&I plans. And SPS it’s primarily a large C&I, at NSP-Minnesota, quite a bit of a decline from what we have expected coming into the year. Now, within those classes, we're seeing far more sales from C&I than residential and C&I has a lower unit margin contribution associated with it. In addition, within the C&I class, we're actually seeing more sales come from larger C&I customers, basically energy services customers, then some of the smaller C&I classes. So, they also have a smaller margin contribution per Kwh sale. The rate design issues that I referred to, have to do with the fact that we did implement new rates in Colorado and SPS and we shifted around some of the components of demand and energy in Colorado. And in SPS we actually implemented seasonal rates that we implemented last year. So, you have lower winter rates and higher summer rates. So we're seeing some of the effects of that. Overall Dave, while this was obviously something that happened within the quarter and something we will monitor going-forward, we don't necessary think this is a trend at all. And in fact, we're pretty pleased that, our economies are showing a resiliency that they seem to have as evidenced by overall sales coming in strong.

Yes. Have you bet... mostly for explaining sales of across all customer classes. Is it your C&I... the sales pick up is that because you... of just... I think you mentioned earlier maybe the E&P segments going well obviously at Texas but AT other places as well? Benjamin G.S. Fowke III - Vice President and Chief Financial Officer Yes, very much Texas but also in Colorado, which is... having a resurge in and is becoming an energy state now in oil and gas, but also the commodity side with mining. So we're seeing a lot of that and even the residential side in Colorado is coming through okay. It is bit flat up here Dave in Minnesota and Wisconsin.

Okay. Thank you very much. Benjamin G.S. Fowke III - Vice President and Chief Financial Officer Thank you.

Thank you. Your next question comes from the line of Anne Paul [ph] with Alliance Bernstein. Please go ahead. Benjamin G.S. Fowke III - Vice President and Chief Financial Officer Hi Anne.

Hi, good morning. Good afternoon actually. Two questions I have on the income statement you have a conservation demand [ph] by management expenses, was about 44% in the quarter. Can you kind of go through what's in it and then what kind of trend do you see going forward? And the second question has to do with your accounts receivable and bad debts, can you clarify how bad it is, since you have some headline news about shutting off some of the services? Benjamin G.S. Fowke III - Vice President and Chief Financial Officer Let's... Okay, let's address the first one, demand side management and the various conservation programs we have. We are implementing state policy we have always been, I think on the forefront of demand side management we're stepping that up Anne. As our states have asked us to do, those… the expenses, the same for Saver Switches and various interruptible programs and all the other things you do to conserve energy, which we think are very important, those expenses are increasing, we get very timely recovery of those as well. So if you look at the margin table you'll see some increases in what we are picking up in margin as a result of those programs. So that's... I hope the explanation you were looking for on the conservation programs. Turning to accounts receivable on bad debt, we are... well you've read those headlines. The reality is our bad debt is tracking just like it has been over the last couple of years. So there has been some shut offs, etcetera but bad debts... we are forecasting bad debt to be right on top of where it was in '07, which is about where it was in '06. And I take that as a sign of just how much more disciplined we have become in our collection processes in our rate design. And you may remember that in Colorado, we didn't have a late fee until the last rate case for residential customers. So all of those things combined I think are preventing the bad debt from rising out of control.

Thank you. Benjamin G.S. Fowke III - Vice President and Chief Financial Officer Thank you.

Thank you. Next question comes from the line of Ashar Khan with SAC Capital. Please go ahead. Benjamin G.S. Fowke III - Vice President and Chief Financial Officer Hi, Ashar.

Hi, how are you doing? If I understood correctly you said, if you get this ruling on the O&M you would be able to reverse certain expenses am I right if I understand it correctly? Benjamin G.S. Fowke III - Vice President and Chief Financial Officer Yes, I mean what we are looking to do is amortize those refueling cost over the full refueling period. Typically 18 months, it depends on the plan. This is a year that you recall that we have two outages versus last year we had one. The filing itself ask for that accounting change, which we think, is a best practice to be effective at the beginning of the year and we have filed this quite some time ago. It's a bit backed up because of the number of dockets that the staff is working through. If we are successful that should reduce O&M expense by about $25 million, or roughly Ashar one refueling outage cost, typically.

Okay. And so if it comes in September, you book it in the third quarter. Correct? Benjamin G.S. Fowke III - Vice President and Chief Financial Officer That's correct.

And if it is after September, it will get booked in the fourth quarter? Benjamin G.S. Fowke III - Vice President and Chief Financial Officer It will get booked in the fourth quarter and again we are asking for treatment effect at the beginning of the year.

And what is the plan with the Colorado rate case, the timing and the test year? Benjamin G.S. Fowke III - Vice President and Chief Financial Officer Well it'll be a forward test year, at the timing of that we are still working through, as we make sure that the filing incorporates [inaudible] and when that is anticipated to come online. So, we're working through some of the filed details there but we will be filing a rate case in Colorado I think it'll be subject to the things that I just described.

Okay. But this year or no? Benjamin G.S. Fowke III - Vice President and Chief Financial Officer It should be this year, if possibly very beginning of the next year and again Ashar that would be I'm sure that would be basically our assessment of what make sense to incorporate the various projects that are coming in the service during that timeframe.

Okay. And then, could you just talk... could give you some ROE information on the different subs. What they're earning right now on an LTM basis? Benjamin G.S. Fowke III - Vice President and Chief Financial Officer I would say that, by and large most of the SPS continues to struggle as you might imagine, Colorado and Minnesota are probably slightly under earning based upon their authorized returns. Wisconsin is in a similar situation. So, did I give you a little bit of color Ashar.

Yes, that's fine. That's fine. Thank you.

[Operator Instructions]. Our next question comes from the line of Daniel Shites with Shites Research [ph]. Please go ahead. Benjamin G.S. Fowke III - Vice President and Chief Financial Officer Hi Daniel.

Hi. I just was wondering if from the hearings that has been taking place regarding resource plans in both states, is there anything that would assume some changes in your… potential changes in your CapEx scheduler or most of it is pretty much in line so far? Benjamin G.S. Fowke III - Vice President and Chief Financial Officer I would say probably most of it's in line Daniel. I mean, you recall that when we issued our CapEx forecast last year, we had a pretty large amount of CapEx and what we call potential. And if I recall right it was, I think anywhere between $800 million to $1.4 billion, depending upon how these resource plans come out, what opportunities we find it to invest, what the Commission decide they would like us to invest in versus continue to purchase. We're working through those, a little too early to tell but, I mean, again I think we'll get outcomes that allow us to make the kind of investment we want to make. We have a 500 megawatt RFP out here in Minnesota for basic return key vendors, those bids we've been very happy with the quality of the bids we have seen and we think that will give us some good opportunities but, stay tuned we'll [inaudible] year.

Thank you. Benjamin G.S. Fowke III - Vice President and Chief Financial Officer Okay.

Thank you and management, I'm seeing that there are no further questions. I'll turn it back to you for closing comments. Benjamin G.S. Fowke III - Vice President and Chief Financial Officer Well, I appreciate your questions and your interest and if you have any more follow-up questions as always contact Paul Johnson, or the rest of the IR team and I look forward to seeing you soon in the various conferences we all attend. Thank you.

Ladies and gentlemen, that will conclude the Xcel Energy's second quarter 2008 earnings conference call. We do thank you again for your participation and at this time you may disconnect. Have a nice day.