Richard Kolkmann, Managing Director of IR Benjamin Fowke, Chief Financial Officer and VP

Paul Debbas, Value Line Greg Gordon, Citigroup Paul Ridzon, KeyBanc Nathan Judge, Atlantic Equities Charles Fishman, A.G. Edwards Elizabeth Parrella, Merrill Lynch Dan Jenkins, State of Wisconsin Investment Board Steven Wang, Citadel Investment Group Ashar Khan, SAC Capital

Thank you, Michael. And welcome to Xcel Energy's First Quarter 2006 Earnings Conference Call.

I'm Dick Kolkmann, Managing Director of Investor Relations, and with me is Ben Fowke, Vice President and Chief Financial Officer 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'll turn the call over to Ben.

Thanks, Dick. And welcome everyone.

I'm pleased to report that we had a strong first quarter, which gives us a nice jump on the year. Xcel Energy recorded earnings from continuing operations of $0.36 per share for the first quarter of 2006.

This compares with $0.30 per share for the first quarter of 2005. Total earnings for the first quarter 2006 were $0.36 per share compared with $0.29 per share for 2005.

I'm also happy to say there was very little activity to discuss related to discontinued operations. Our utility operations provided earnings of $0.38 per share for the first quarter 2006, compared with $0.32 per share for 2005.

Our utility earnings increased by $0.06 per share, largely due to higher electric margin which increased earnings by $0.09 per share; higher short-term wholesale margins, which increased earnings by $0.01 per share; and other items that together increased earnings by about $0.03 per share. These positive factors were partially offset by higher utility O&M expenses, which decreased earnings by $0.05 per share, and higher depreciation expense, which decreased earnings by $0.02 per share.

Our holding company costs and other results reduced earnings by approximately $0.02 per share for the first quarter 2006, which was comparable to a loss of $0.02 per share recorded last year. These costs are largely financing costs at the holding company.

That summarizes our first quarter 2006 results. Now let's look into the details.

Our base electric utility margins increased by $67 million, or $0.09 per share for the quarter, largely driven by rate increases and sales growth. Electric margin increased by $36 million for various rate increases.

This includes $25 million from the in-home rate increase in Minnesota, 9 million for the implementation of the MERP Rider, and 2 million for an electric rate increase in Wisconsin. Clearly, we are starting to see the financial benefits of our 'build the core' strategy.

We also experienced solid sales growth during the quarter, which on a weather-adjusted basis grew at 3%, increasing electric margin by $20 million. It's important to note that sales in the first quarter of 2005 were at lower levels, so we don't think it's appropriate to extrapolate this growth rate to an annual level.

We continue to feel that our annual weather-adjusted sales growth will be in the range of 1.3% to 1.7%. These positive developments offset the unfavorable impact of warmer than normal temperatures during the quarter, which reduced electric utility margins by $6 million compared to last year.

Short-term wholesale and trading margins were also positive factors. We recorded margins of $25 million for the quarter, which was an increase of $10 million compared with last year.

The increase was driven by strong commodity trading margins, which largely reflect price differentials between the east and the west, which we took advantage of, and a few structured transactions that we initiated during the quarter. These transactions were opportunistic, with no guarantee that they will be repeated.

Our primary focus is maximizing our generation portfolio to benefit our retail customers. We haven't changed our philosophy or our risk profile, but we will take advantage of opportunities when they occur.

Turning to operating expenses, our first quarter O&M expenses increased $33 million or 8%, largely driven by increases in bad debt expenses and employee benefit costs. This was in line with our expectations for the quarter.

On a percentage basis, the increase for the quarter was higher than our annual guidance. This is not indicative of a trend.

As you're probably aware, quarterly O&M expenses can vary significantly. For example, during the quarter, we accrued $19 million for bad debt expense, but this does not represent a quarterly run rate.

As we continue to improve our collection processes, we expect our bad debt accruals to be approximately $36 million for the full year. Based on our most current projection, we continue to believe our 2006 O&M expenses should increase 3% to 4% over 2005 level.

Our first quarter depreciation expense increased $11 million, or 5.7%, largely driven by increased capital spending and changes in decommissioning accruals. For 2006, our decommissioning accruals are now set at $44 million, which reflects recent regulatory decisions in both Minnesota and Wisconsin.

While this is lower than our original projection of $80 million, it still represents an increase over 2005 accruals, which were $23 million. We are recovering the increase in rates, so the changes in accrual levels had no impact on earnings or cash flows.

Well, that covers 2006 first quarter results. Next, I'd like to spend a few minutes on some recent regulatory development.

In November, 2005, NSP-Minnesota requested an electric rate increase of $168 million based on an ROE of 11% and a forecasted test year with a projected equity ratio of almost 52%, and projected rate base of $3.2 billion. At the end of March, we filed rebuttal testimony, and adjusted our rate increase to $156 million, largely due to a reduction in decommissioning accruals.

The change in decommissioning accruals is based on a recent Commission ruling and will not impact earnings or cash flow. On April 13th, various interveners filed rebuttal testimony.

The Department of Commerce recommended a 2006 rate increase of $110 million, based on a 10.64% return on equity. Their testimony included a recommendation to reduce our rate request by $22 million for projected short-term wholesale and trading margins.

They also recommended a $20 million revenue reduction in 2007, because the Flint Hills refinery is returning to our system as a customer. The testimony from the office of the attorney general focused on refunding a portion of the NRG tax benefit to customers.

Clearly, this represents inconsistent regulatory treatment, since the customers never bore the losses associated with NRG, and therefore should not receive the benefit. We expect the Minnesota Commission to continue to uphold the time-tested compact of separating the cost and benefits of the regulated company from the non-regulated company.

This week, we reached an agreement regarding short-term, wholesale, and trading margins with most interveners. While the Department of Commerce is not a party to the agreement, they have indicated that they do not object to the settlement.

The agreement is structured so that all short-term, wholesale, and trading margins will flow through the fuel costs adjustment, rather than a base rate credit. The terms of the agreement include the following: 100% of asset-based margins would be refunded to customers; spin sale margins would be shared, with 80% refunded to customers, and 20% remaining with shareholders; non-asset based margins, or proprietary trading margins, would be shared with 25% refunded to the customers, and 75% remaining with the shareholders.

We think this is a reasonable agreement. We'd like to have retained a larger percentage of potential short-term margins for our shareholders; however, this agreement eliminates the downside risk of base rates being lowered for a projected amount of short-term wholesale margins, which may or may not occur.

While we gave up most of the upside, we still preserve some potential upside for proprietary trading and spin sales. All in all, this agreement reduces the volatility of our earnings and lowers our risk profile.

A final decision on the entire case is expected in the third quarter. In April 2006, we also requested to increase electric rates in Colorado by $210 million, effective in 2007.

The request is based on an 11% ROE, an equity ratio of almost 60%, and a rate base of $3.4 billion. We recently filed our 2005 electric earnings test in Colorado.

As indicated in our filing, PSCo earned 8.5% in 2005 compared with the current authorized ROE of 10.75%. This represented a revenue deficiency of $64 million.

Our rate filing will help address this deficiency in 2007. While the case is based on a 2005 historic test year, the filing is adjusted for known and measurable changes.

A decision is expected by the end of the year with final rates in effect in early 2007. That's an update on our regulatory developments.

We believe our regulators will provide us with reasonable recovery and that's reflected in our guidance range. Recent constructive results, along with past rulings, are evidence of a reasonable regulatory treatment and give us confidence that we're pursuing the right strategy.

So with that, I'll wrap things up. We're off to a good start with solid first quarter results.

We've filed our Colorado electric rate case. We've reached a settlement with various interveners on short-term margins and continue to make progress in our Minnesota electric rate case.

Last Friday, we had a groundbreaking ceremony at the High Bridge plant in St. Paul to kick-off the construction of a new combined cycle natural gas plant at the site, the second plant covered under the Minnesota Emissions Reduction Project, or MERP.

And after two years of negotiations, we recently reached a new 20-year franchise agreement with the City of Denver; and finally, we continue to believe that we can deliver on our 2006 earnings range of $1.25 to $1.35 per share from continuing operations. Let's open it up for questions.

Hi. This is Paul Debbas.

What financing or refinancing plans do you have for this year?

Total financings will be in the order of $1.2 billion, $1.3 billion. Most of that's refinancing will probably add an incremental debt of about $300 million.

Hey, Greg.

Good morning, guys. Well, I feel very constrained here with one question, so I'll have to use my best one.

Can you give us a little bit of context on the settlement on wholesale margins, and the way maybe to help us doing that is look at your last year's wholesale margins, and maybe explain to us how those would have been adjusted up or down if this settlement had been applied to the wholesale margins you earned last year?

Well, a couple of things, Greg. First of all, we would have had a significant revenue increase as part of this settlement.

Most of those margins that came off of the generation stack other than the spin sales would have been flowed back to the customers. We would have kept 75% of the proprietary margins.

So you're looking at $74 million of short-term margins other than spin sales, that would have flowed back to the customers. Greg, therein lies why I think this settlement was a reasonable settlement.

We've had strong short-term margins coming out of Minnesota over the last couple of years. The downside risk of that is, we could have got into a situation where our revenue request was reduced by either a high year or an average or any other scenario, and the danger to that is that we wouldn't be able to produce those margins going forward.

And in fact, if you look at our forward projections, we don't think that we're going to have those kinds of short-term margins in the future. So and in part it's because we have the conversion of two coal plants, increased sales or increased retail need.

So we eliminated what I think is some significant downside risk, while still keeping some upside. Did I answer your question, Greg?

Yes. I think so.

I mean, basically what you're doing here is you're agreeing to share out the volatile portion of the earnings and hopefully replacing that with a stable base revenue.

Yeah. In exchange -- in exchange for having to live up to a big credit, which we may or may not hit, we're assuming in our revenue request we get zero short-term margins and then we share from that -- from each dollar that we actually get.

And what was your actual projected -- have you disclosed a projection what you were expecting to earn before sharing this year versus last year?

What we were anticipating, the Minnesota portion of short-term margins would be this year was $16 million.

Okay, so that's built into your current earnings guidance range so that's a fairly small impact?

Yeah. It actually was built into the interim rating request that we had.

Great. Okay.

Thanks, guys. I'll follow up offline.

As a reduction, I should add, Greg.

Okay.

Hi, Paul.

Good morning. Just one thing in the release, a big chunk of the incremental benefit was kind of classed as other and tax issues.

Could you give more flavor what that is and a sense of whether that's a timing issue that could be given back later in the year?

$4 million of it, or $0.01 related to the conclusion of our 2002 to 2003 audit cycle. We successfully concluded that and we’re able to release reserves associated with that.

And we did then have some accounting adjustments under APB 28 which just basically adjusts your effective tax rate for what you think your full year effective tax rate's going to be. And that was about $3 million.

Okay. Thank you very much.

Hi, Nathan.

Good morning. Just a quick question on the Colorado rate case.

Do you have any further details as far as timing is concerned on that? Or is what you have in the press release as far as hearing by yearend about the --?

Yes. The press release, Nathan, has the most up-to-date information.

Are you giving any guidance as far as the earnings impact that could be related to that rate increase request?

Well, there really isn't any impact in '06 because we don't anticipate that the rates would be in place until early part of '07.

Okay. Just in '07, what would you potentially see?

Well, just like this year, when we put out guidance, we'll assume we get reasonable regulatory treatment.

Okay. Fair enough.

Could you give us an update on your construction schedules, and how construction on some of your big plants that you're building right now are going?

The schedules are going very well. As I mentioned in my prepared remarks, we broke ground at the High Bridge plant, which is the second plant of the three plant MERP project.

Comanche 3 is going very well. We have a little over two-thirds of both of those projects now contracted out.

And what we have seen, Nathan, is on the MERP project, a little bit of cost over runs, about 5% of the overall spend which I think in this rising commodity and services market is pretty good. So we're comfortable with that, things are going really well with the project, both of them.

And we're happy we're able to get the permitting done at Comanche 3 so quickly and get started on that project. I really think it was a good decision to settle and get things moving.

Okay. And then just lastly, could you give us an update on your coal supply, if you are -- how you are as far as current supply and what you're seeing as far as future supply?

We are -- we're seeing for the first part of this year deliveries have been about 90% of what we've asked for through nominations. So that's a little bit of an improvement.

As a result, that combined with the new aluminum rail cars that we're beginning to receive in Colorado have helped boost inventory somewhat throughout the system. I think we're averaging 26 days now.

That so the breakout varies by jurisdiction and by plant. But we're seeing a little bit of an improvement, Nathan.

But as I mentioned on the last earnings call, we don't think this situation's going to go away anytime soon. I think it's fundamentally a supply and demand and infrastructure issue.

So we're continuing to watch it. As I -- and we are still planning, if need be, to mitigate, to make sure we have enough coal for our summer electrical needs, but a little bit of a pickup there, and again, I think a lot of that's the additional rail sets and rail cars that we have.

Thank you very much for those comments.

You're welcome.

Hey, Charles.

Good morning. Will the 5% overrun on the MERP project that you talked about cause you to fall outside of the dead zone of that ROE band?

In other words, so you would be -- it would trigger a lower ROE on that project pursuant to the settlement?

It could, Charles. I mean, those plants -- the way that works is each one of those three plants are basically three little mini rate cases.

So you could make it up by going under one and over the other. On a composite basis and assuming we -- and we obviously are going to try very hard to get it back on track, but at the current projection levels, the overall 10.86 ROE on a combined basis would probably slip maybe 20 basis points.

So 10.66?

Yeah.

Okay. Thank you.

Hey, Elizabeth.

Thank you. A couple of questions.

On the slightly higher interest expense that you're looking for now, is that attributable to a somewhat higher debt balance? I know you indicated you'd be up about $300 million.

Is that a little bit higher or is it an interest rate issue?

It's really two things, Elizabeth. The first is the interest rate issue.

Rates are a little bit higher than what we had forecasted coming into the year. That's the first piece.

The second piece is, we've changed our financing plan a little bit so that when we do finance, Elizabeth, we're going to take advantage of the long end of the curve. We think that's the more attractive bend of the curve.

It's marginally a little more expensive, but again, we think that's the place to be given the flatness of the curve. So those two things are really driving that change in our interest expense forecast.

So it sounds like the 300 million of incremental borrowing is still pretty consistent with what you have been thinking before?

Yes.

And is cash flow still on track with your expectations for the year?

Yes, it is. Cash from operations for the first three months were 700 million, and that was -- that was pretty good for us.

And so everything's still on track there.

Okay. And just one quick question another area, back to the short-term wholesale settlement issue.

In terms of the 30 to 50 million that's embedded in your '06 guidance, I realize you had assumed that you'd be giving 16 million -- a 16 million credit back to customers, which you now won't have to do, but did that 30 to 50 million kind of assume the 50:50 sharing that you had put in your original rate filing?

In theory it does, Elizabeth, but that $30 to $50 million, well let me step back. When we developed that forecast, we then looked at what portion of that $30 to $50 million was related to the NSP Min jurisdiction.

That portion was $16 million. That was the NSP portion of that budget as it related to short-term margins off that generation stack.

That was that – that 16 million was then a reduction in our annual request versus our interim rate of request. So we would have to earn more than $16 million to start accruing 50:50 based upon our original proposal.

So what that means, Elizabeth, is the rest of that number was coming from different jurisdictions or was coming from proprietary margins.

And the piece that's coming from proprietary that would essentially relate to the NSP Minnesota, you're now going to only keep, you have to share 25%, so that would be sort of some area of exposure to the guidance. Is that the right way to think about it?

Well, two things. One, the Commission still has to approve that settlement, and we'll know that towards the end of the summer.

Then you have to adjust it for spin sales and a few other things. So you could see some tweaking around the edges on that, Elizabeth, but I don't think it'd be a big number.

Okay, thank you.

Hi, Dan.

Hi. I noticed it looks like your commercial and industrial sales were up about 3.5% and 3.6% normalized.

Do you expect that rate to continue as a pretty strong economic activity in your service territories, or what's driving that?

Well, we had seen some pickup in the economic activity, particularly in Colorado. But, Dan, not enough for us at this point to change our full-year guidance, which is 1.3% to 1.7% pickup in sales growth rate.

A couple of things to think about. One quarter does not make a year.

I mean, I say that about a lot of line items on the income statement. The other thing to keep in mind is that if you look at the comparable quarter, the first quarter 2005, that was a pretty flat quarter for us.

So again, I think we're seeing some nice economies and pickup in Colorado. Minnesota, Wisconsin have been strong over the last couple years, seeing some pick-up in the commercial and industrial side in Texas with our SPS territory, but not enough to change our guidance range at this point for sales.

Okay. On your debt, you mentioned that you need about 1.2 to 1.3 billion.

Do you have like a timeframe on when you might be coming to market to get that financing?

Yeah. In the next quarter we are looking at doing a refinancing at NSP Minnesota and potentially a financing at the holding company to term out some commercial paper.

Okay. And have you spoken at all with the rating agencies about, particularly, S&P since they are still at kind of mid BBB and about potentially moving those ratings up?

Yeah. We've had our meetings with all three of the agencies, and I think they went very well.

And they're quite aware of our financing plans.

Okay. Thanks.

Greg, I thought you were only going to ask one question.

Yeah, I can't help myself. Sorry.

And I apologize if you answered this, because I stepped out of my office briefly. But you had very strong organic growth on a weather-adjusted basis, yet you're telling us not to assume that you're seeing any sort of structural pickup in organic sales growth.

We know that Colorado has got a pretty robust underlying economic backdrop. So what caused the large amount of sort of growth in the first quarter and why shouldn't we be thinking there might be a bias to the upside structurally?

I think the thing you have to keep in mind is the comparable quarter in 2005, which was really flat, if you remember. So we said at that time it was not don't, that's not indicative of a trend.

And I don't think we should get out in front of ourselves when we've got a one good quarter to start off the year. We'll take it, Greg.

And to your point, I think the economic signals are getting strong in Colorado again, so that's good news, but too early to tell.

So these are all weather-adjusted numbers, right?

They are weather-adjusted numbers, and that's not an exact science all the time, either, so, again, I think you need to get a little further into the year before you can call it a trend.

Any structural observation at least on why it would have been zero last year and 3% this year? Were there large customer changes or large residential developments that were built in the interim?

I mean, anyway you can parse through the data and give us some qualitative backdrop here?

Not really. I remember last year, we were talking about the fact that '04 was a leap year.

I don't think that's the data you're talking about. Greg, other than we haven't seen -- we have seen a rather the economic pick-up in Colorado in the last six months that maybe suggests that things are going very well there.

That's about the only thing I could offer. And we do look at that, Greg, and if we start to think that we've got a longer term trend, then we'll change that portion of our assumptions for '06.

Thank you very much.

Thanks.

Hey, Ben. How are you today?

Just a quick question on your commodity trading, the 14 million gross margin. You guys said that you did some structured contracts there.

Was that just a Q1 benefit, or will we see it throughout the next three quarters or so, also a pickup in trading?

Excuse me, Q1 benefit, Steven.

Okay. And so, because in Q1 last year, you had a negative 1 million, so in Q2 to 4 is there anything that you have that residual that rolls through those?

No, I think some of it is still subject to mark to mark, but by and large, you should that's what I mentioned on the call, that you can't count on that being indicative of a trend going forward. It's opportunistic if we can do good deals and keep it in within a very low bar parameter that we have, risk parameter that we have, we'll do it.

But it's not a trend.

Okay great. Thanks.

Hi, good morning. Ben, sorry I missed some of the calls.

This question might be repetitive. Could you just remind us in Colorado what the rate base was in the last Commission decision, and what the equity ratio was?

The equity ratio was around 48%, and I think the rate base was 3 billion, roughly, and now we're at 3.4.

Okay, okay. Thank you.

You're welcome.

Paul.

Thanks, again. A question on the wholesale settlement.

When would that - would that be retroactive to January 1, '06, or would any benefit captured year-to-date kind of, is that safe with shareholders?

It would be retroactive to Jan 1.

And then, probably not a lot of update here, but any IRS action on COLI?

No nothing to report. We did have a mediation hearing several weeks ago and as predicted, we our positions are very much apart.

So unless there's some breakthrough, you can count on us taking it to full court proceeding the beginning of next year.

And what's your best estimate as to what the length of time a fully litigated proceeding would take?

I think the trial itself will take several months. And then whoever loses is certainly going to appeal, and so I think to wrap the whole thing up could be two, maybe even three years.

Okay, thank you.

Hi, again. In your statement, you mentioned the nuclear plant costs were down 13 million because you didn't have an outage compared to last year at Monticello.

I wonder if you could refresh us on what the outage schedule is for the rest of '06?

Well, we're going to have two outages later in the year, so it will be comparable with last year, although last year we had a ten-year inspection outage, which is a bit more expensive. We haven't disclosed at this point when those outages are going to occur in '06, Dan.

Okay. And you also list 5 million of higher plant maintenance costs.

What are those -- what were those for?

5 million I'm sorry, what?

Of higher plant maintenance costs.

Just miscellaneous costs, Dan, making sure that the plants are up to – have the maintenance they need to, I don't really have any specific details around that.

Was that primarily at fossil plants, or was that -- could that have been at nuclear as well?

I think -- does anyone know the exact answer to that? It's primarily the fossil plants, Dan.

Okay, thank you.

Yes. I just want to thank everybody for participating on the call this morning.

I look forward to meeting with many of you in May at the AGA Conference and the Goldman Sachs Conference. And, again, if you have any follow-up questions, Dick Kolkmann and Paul Johnson will be available to take your calls.

Thank you everyone.