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Operations

Operational excellence is one of Xcel Energy’s seven strategic priorities as we grow our business. It’s our commitment to operating a safe, reliable, competitive energy company that customers prefer as their energy provider. We’re focused on maintaining the highest service quality possible, while making smart investments in our infrastructure, processes and workforce.

For us, operational excellence is a journey. Our journey began four years ago when we decided to operate our Energy Supply business area from a centralized rather than plant-by-plant approach. We analyzed the industry for best practices and technologies, then began implementing some of the ideas we gathered. The results have been powerful.

In the last few years, we have reduced unplanned outages by 40 percent while reducing the growth rate from 4 to 1 percent for Energy Supply related operating and maintenance costs. Through a more centralized approach to operations, automation and simplification of numerous processes, and the use of modern technologies, we’ve begun to show that it’s possible to reduce costs while delivering very strong operations performance.

We want to be an industry leader in performance and cost. We are implementing long-term process improvements across the entire operations organization. Our goal is to keep the growth rate below 2 percent for operating and maintenance costs over the next five years—a range that will make us a top-quartile performer within the industry.

Running our business well involves managing complex capital investment projects, as well as day-to-day operations. Thanks to our strong project management capabilities, we’ve been able to complete large-scale capital projects at costs lower than the industry average. In 2013, a fourth unit was added to Jones Generating Plant in Texas to meet growing electric demand in the region. We completed this natural gas-fueled combustion turbine project about a month ahead of schedule and at a cost of $423 per kilowatt (at ISO condition), substantially below the market cost of $500-600 per kilowatt. The Clean Air-Clean Jobs project—an effort to modernize the company’s aging coal-fueled fleet in Colorado by retiring, converting and retrofitting plants—is currently on time and on budget, as are our multi-year efforts to replace major natural gas pipelines in Colorado and downtown St. Paul, Minn.

We invested more than $1 billion in electric transmission projects in 2013, and we did so while spending an average of $1.72 million per mile compared with the industry average of $2.1 million. Xcel Energy is a major transmission presence in the United States and a proven transmission performer. In anticipation of new Federal Energy Regulatory Commission (FERC) regulations, we’re planning to establish a standalone transmission investment structure or “transco” in 2014 that will enable us to build new transmission competitively in the coming years. A transco will provide added financial flexibility and improve our ability to create partnerships for exploring transmission development opportunities.

We made significant capital investments in our nuclear fleet in 2013 in order to take safety and reliability to new heights at these facilities. Due to project scope changes, delays in licensing and installation complexities, these projects came in above budget; however, our nuclear operations and maintenance costs will significantly decrease now that these important projects are complete. Major equipment was replaced at both Monticello and Prairie Island—Monticello is now essentially a new facility—and the improvements will enable both facilities to operate effectively over the next two decades.

We will invest $14 billion in capital projects over the next five years. Our projects are carefully selected to provide the greatest value in terms of customer demand and public safety. Staying aligned with our regulators and policymakers is a very important part of this process. We don’t build just for the sake of building. By looking at the big picture, we can invest in a stronger, more resilient energy grid, and we’re well positioned to take advantage of growth opportunities.

Capital Expenditure
Capital Expenditure