Xcel Energy Inc. executives say they have set aside $215 million to cover the losses they say they’re likely to incur as a result of the Smokehouse Creek Fire that burned more than 1 million across in Texas’ Panhandle and adjacent areas in late February and early March.
Shortly after the Smokehouse Creek blaze started, a law firm asked Xcel to preserve a fallen pole belonging to its Southwestern Public Service Co. unit. Soon after, utility leaders said it was likely that that pole helped start the fire but denied that Xcel had been negligent in maintaining its equipment. (A Texas A&M Forest Service incident report says the failure of another SPS pole caused another fire that merged into the Smokehouse Creek blaze.) About 15 plaintiffs have since filed suit against SPS and other Xcel entities to be compensated for losses of their homes and farms.
In announcing the $215 million pre-tax to Xcel’s first-quarter earnings, Chairman, President and CEO Bob Frenzel and his team said that figure doesn’t include possible government fines, potential punitive damages or other damage claims (to infrastructure and trees, among other things) that the company may end up facing. They also noted that the $215 million is likely to be the floor of a range for which they can’t yet quantify the upper end.
“I’ve been to the Panhandle and I’ve witnessed the impacted areas,” Frenzel said on a conference call April 25. “I can speak for the entire Xcel Energy team when I say that we are saddened by the losses and we will stand with the Panhandle community as we recover, rebuild and renew that area as we have for over 100 years.”
Frenzel and CFO Brian Van Abel told analysts and investors last week that Xcel has $500 million of wildfire insurance coverage, adding that they can’t say when SPS might be able to recover the $215 million now set aside as well as possible future losses. Van Abel noted that Texas has no cap on noneconomic damages but that punitive damages are capped at two times economic damages plus up to $750,000 in noneconomic damages.
The company last month set up claims process for people who have incurred property or livestock loss in the Smokehouse Creek fire. Nearly 50 people have filed claims and Van Abel said “a couple” of cases have already been settled.
Shares of Xcel (Ticker: XEL) fell slightly on the earnings news and commentary April 25 and were changing hands around $54.30 midday April 26. They are down about 10% over the past six months—mostly because of a drop in the wake of the Texas wildfire news—which has shrunk its market capitalization to about $30 billion.
