TWST: As the economy is starting to recover, what kind of increased demand do you see for energy in the markets that Xcel Energy serves?

Mr. Fowke: We are seeing some pickup in the industrial and large commercial and industrial, C&I, customers as the economy recovers. The pickup to date has been minor and has been more than offset by flat residential and smaller C&I sales. So residential and C&I have been flat. Now, we know that our demand-side management and conservation programs that we offer our customers had reduced 2011 sales by about eight-tenths of 1%, and looking forward we are optimistic that the oil and gas industries that we serve, primarily in Texas, will continue to grow and drive sales. We're even forecasting growth in places like Wisconsin, where mining operations for frack sand, copper and taconite are expected to contribute to our growth in the future.

Now, we can't be sure that what we're seeing in residential, those flat sales, what's going to happen with that in the future. Historically, residential pretty much tracked GDP growth. We really need to watch that trend as we go forward to see if there is starting to be a disconnect between the historical trend. And by the way, that's not exclusive to Xcel. I think if you listen to what's taken place in the earnings calls from our peer groups, we're all looking at some of the same issue.

TWST: On the most recent earnings call, you said Xcel Energy intends to reduce its O&M expenses. Would you give us some insight on how the company will accomplish that and what's the amount you expect to cut over what period?

Mr. Fowke: Just to put in perspective, our original guidance assumed that O&M would increase by 3% to 4% in 2012. We've now revised that projection to say that it will increase between 1% to 3%. So we'll achieve that starting now by beginning to tighten our belts and by reducing some discretionary items like deferring merit increases and reducing incentive accruals. Now, depending on regulatory outcomes that will occur later this year, we may need to make some additional reductions in some infrastructure spend, which you could do on a single-year basis without impacting operations, but would generally not be sustainable longer term without potentially impacting our operational goals. So we have those contingency plans in place and are ready to go pending regulatory outcomes.

Now, I think more importantly, longer term, we are looking to change and simplify our process and really introduce some technologies that we believe should reduce costs while improving operations. And we've had some successes already in our company over the last few years in doing that and we want to start rolling that out to larger and other parts of our organization.

TWST: What's an example of the way Xcel has been able to use technology to reduce company costs?

Mr. Fowke: We've used technology in our customer care units, the call centers, to better data-mine billing payments, and basically, delinquent accounts and things like that, which is a better use of technology and also an expanded model of IVR technology. So the byproduct of that is we're serving our customers better, we're giving them quicker responses, better responses and customer satisfaction has gone up.
Our bad debt is - in this soft economy - it's actually gone down as a percentage of sales. Days sales outstanding has been reduced and the great thing about it is our overall O&M expense that we have within our customer care units actually has gone down. So it's kind of hitting on all three cylinders, better quality, lower expenses and lower O&M.

TWST: What are the most significant outstanding regulatory or legislative issues that may impact the company? And would you briefly address the recent Colorado commission denial for rate increase and any recently settled rate increases?

Mr. Fowke: Clearly, how the Colorado rate case is decided later this year will have a significant impact on our overall financial performance this year. And to your question, the Colorado commission's decision to deny our request for an interim rate increase of $100 million does pose a challenge for us as we start the year - it's part of the headwinds that we face this year. But I don't believe the recent setback is indicative of an erosion in the regulatory compact, and let me explain. While the Colorado commission did not authorize interim rates, it did approve an accounting order that will allow us to establish a regulatory asset to offset the impact of the expiration of the Black Hills contract. This decision represents about a $0.02 per share mitigation, I suppose, to our projected 2012 earnings. So it's helpful. It's not as much as we wanted, and I also think it's a good sign that the regulatory compact will remain constructive in Colorado.

Now, outside of Colorado, we have settlement agreements pending approval by the commission in both Minnesota and North Dakota, and our assumption is that when those orders come out, they will be consistent with the settlement agreement. We also have a pending rate case in South Dakota, and we anticipate hearing from the commission in the first half of 2012. So those will obviously on a cumulative basis have a big impact on the financial performance. And then, looking ahead, we do intend to follow 2013 Wisconsin electric and gas case and 2013 Minnesota electric case.

TWST: What would you say is the most significant challenge Xcel is facing or will face in 2012? What strategies do you and the company's management team have in place to deal with that challenge?

Mr. Fowke: I've got to tell you that the challenge that we face this year is a challenge that I think we've faced and met successfully in past years - that's really fulfilling our mission of providing our customers with reliable, safe, clean energy, and doing so at a reasonable cost. That has and will keep us very occupied, and we need to make sure that we make the right investments that will benefit our customers for years to come. We need to make those investments with the future in mind - and we need to do it despite the volatile times that we're in because I really don't believe we have the option of not investing in our infrastructure. Now, that's macro.

Specifically the 2012, we will be closely monitoring the Cross-State Air Pollution Rule or CSAPR rule. We were very encouraged that the D.C. circuit court suspended the order on CSAPR late last year. And that's really good news for our customers, particularly in Texas. The inclusion of Texas under the CSAPR rule creates significant issues for Southwestern Public Service, SPS, one of our four operating companies. We had limited options to comply by 2012. So our plan was really to alter the dispatch of plants by simultaneously reducing the output of coal plants, while increasing the energy output of natural gas plants. By getting the stay, that allows us to defer the rules, significant cost increases and the potential liability problems that we might have faced otherwise and certainly would have impacted our customers negatively in SPS. And we are hopeful that when the decision from the court comes out later this year that it will allow us to comply in a more reasonable, cost-effective manner.

One final note on that, our five-year capital forecast includes about $470 million for compliance with CSAPR at SPS. So clearly, depending upon the court's decision, the timing and the amount on that spend could change significantly, but we are not going to revise our forecast until there is more clarity from the court on what the rule is going to like.

TWST: In Xcel's five-year capital project forecast, are there any particular projects that you believe would be of particular interest to investors?

Mr. Fowke: Yes, we do. Our five-year forecast includes about $13.4 billion of investment across our systems. So we continue to invest in our infrastructure, and there are some real key projects. One of them is compliance with the Clean Air - Clean Jobs Act in Colorado. We're going to invest approximately $900 million to retire, retrofit and repower several aging coal-fired plants in the greater Denver area. The second project is our transmissions spend. Transmission spend makes up about 28% of our capex budget, or about $3.8 billion, and we have major transmission projects underway in all of our jurisdictions. That will be a big driver of growth in the next five years.

Another significant project in our pipeline is the life extension and plant uprate of our Monticello nuclear plant. Nuclear power contributes about 30% of the power in the NSP system. So being able to extend the life of those units and increase their output is an important component of our energy mix in Minnesota and NSP. And that project is a $600 million spend in the next five years. And then, we just talked about the $470 million of spend for CSAPR compliance. So those are some pretty big items that make up that $13.4 billion.

TWST: My next question is about Xcel's efforts toward conservation and sustainable energy. You touched on some projects. Is there anything else the company is doing to that end you would tell us about?

Mr. Fowke: I think these are areas where we really are a leader. We currently have our 4,000 megawatts of wind on our system. So that makes us the number one utility wind provider in the nation. We've also historically been a leader in conservation. We began offering programs in Minnesota over 20 years ago - and last year our customers saved over 800 gigawatt hours of energy. So the programs have worked extremely well. Customers like the programs. They want choices, and we are giving them a variety of energy-efficiency and voluntary green-energy programs to choose from. Our Windsource program, which is a voluntary program - I also believe this is the largest in the nation as well. So we are proud of that and our customers are pleased with it just as importantly.

Really, just stepping back, being proactive with the environment has really become a part of who we are at Xcel. We really believe it's positioned us very well to meet the environmental challenges the industry faces and to do so at a cost that's going to be far less than if we had waited until the last minute to comply.

TWST: What are the top three strategic goals the investment community can look for Xcel to either accomplish or make progress toward this year?

Mr. Fowke: Top three goals are really the three interrelated components of our growth strategy, and that's good, strong stakeholder alignment combined with constructive regulatory environment, combined with a large pipeline of quality projects to invest in our infrastructure, providing value to customers. Put all those three components together, and it helps us to deliver a 10% total shareholder return. We do that through EPS growth, which we anticipate will be 5% to 7%, and we do that through dividend growth, which we anticipate will be 2% to 4%. So that's what we seek to give the investment community and that's what we work hard to do everyday.

TWST: For an investor who wants to have exposure to traditional utilities, why should he or she choose Xcel over other similar companies?

Mr. Fowke: I think it starts with risk adjusting our value proposition that we just talked about, that 10% total return. And when you do that risk adjustment - I mean, the investor should look at our balanced energy mix, our geographic diversity, the proactive things we've done on the environment and how well that positions us in the future. The strong regulatory compact we have across multiple jurisdictions, the track record we've developed of consistent financial performance, and then basically, the earnings and dividend growth that we offer and the strong balance sheet that we have. The dividend is sustainable, and again, the pipeline of investment opportunities that we have is very transparent and easy to understand when it comes to looking at our future growth opportunity.

TWST: Thank you. (MES)

Benjamin G.S. Fowke III

Chairman, President & CEO

Xcel Energy Inc. (XEL)

414 Nicollet Mall

Minneapolis, MN 55401

(612) 330-5500

(800) 895-2895 - FAX

www.xcelenergy.com