Key State and Local Elections Could Impact 3 Utilities

State and local elections on Nov. 3 will have important implications for utilities such as Xcel Energy XEL, Pinnacle West PNW , and Southern Company SO. We are reaffirming our fair value estimates and moat ratings.

Xcel Energy always faces political and regulatory action in its eight-state service territory. The status quo should support most of its five-year, $22.6 billion investment plan and our 6% annual growth rate. But if Democrats use state and federal power to push clean energy, Xcel's growth could reach the high end of management's 5%-7% target.

In Minnesota, Xcel's largest service territory, Democrats only need to flip two state Senate seats to accelerate a 100% renewable energy standard proposal that Republicans have stalled. This could expand Xcel's five-year $8.4 billion investment plan in the state.

Pinnacle West faces a difficult path in Arizona, an historically challenging jurisdiction. Three of the five state commissioners are up for reelection ahead of rate case hearings set to start in December. The election likely will influence the outcome if hearings drag into 2021. The election might also influence a proposed 100% carbon-reduction standard by 2050 if the current commission don't rule by year-end.

Southern's new nuclear plant in Georgia is on pace to hit its 2021 and 2022 in-service dates, albeit five years behind schedule and at double the cost. The all-Republican Public Service Commission has supported the $20 billion project throughout. But with Democrats challenging for two open PSC seats, Southern might face pushback for further delays.

Xcel's next rate increase in New Mexico might depend on the outcome of the state's Constitutional Amendment 1 vote. If approved, the state commission would change from five elected commissioners to three governor-appointed commissioners, like in most states, in 2023. Xcel implemented new rates in May.

A vote in Boulder, Colorado, might save Xcel from municipalization but lock it into tough clean energy targets.

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