Xcel Energy saves $1.5 billion in Google data center deal

Xcel Energy struck an electric service agreement with Google that will save Minnesota ratepayers as much as $1.5 billion over 15 years.

"Our data center agreement in the Upper Midwest with Google in the quarter sets a high bar for ongoing community development and investment for data centers — protecting residential bills, advancing sustainability goals, and preserving precious water resources in the local community," Chief Executive Officer Bob Frenzel said on the Q1 earnings call.

Under the deal, Google funds all infrastructure costs for its 750-megawatt Minnesota campus, including new wind, solar and large-scale battery generation, while paying full transmission rates without economic development discounts. Residential and small-business customers are projected to save about $1.10 billion over the life of the agreement, with residential transmission costs falling 1 percent to 2 percent over 15 years. The arrangement includes a proposed Clean Energy Accelerator Charge covering 1,900 MW of clean energy resources, with Xcel partnering with privately held Form Energy to build what the companies called the largest long-duration energy storage project as part of the package.

The agreement inverts the traditional model where a large industrial customer's arrival pushes utility bills higher for existing ratepayers. Xcel grows its rate base without the political backlash that comes when residential customers subsidize a hyperscaler. The Minnesota Public Utilities Commission still must approve the Clean Energy Accelerator Charge.

Xcel raised its five-year capital plan 33 percent to $60 billion, funded by $30.2 billion from cash from operations, $22.8 billion in new debt and $7 billion in equity issuances. The allocation targets the assets data centers require: $15.4 billion for electric transmission, $13.9 billion for renewables, $13.7 billion for distribution and $9.5 billion for generation.

The demand signal is visible in the income statement. Q1 2026 ongoing earnings per share came in at 91 cents versus 84 cents a year earlier, on revenue of $4.021 billion. Weather-normalized commercial and industrial sales grew 4.3 percent, while Southwestern Public Service C&I sales rose 10.8 percent, driven by Permian Basin oil and gas activity. Management reaffirmed 2026 guidance of $4.04 to $4.16 and a long-term EPS growth target of 6 percent to 8 percent off a $3.80 base.

XEL trades around $77.77, up 17 percent over the past year, at a forward price-to-earnings ratio near 19 with a 2.96 percent dividend yield. The analyst consensus target sits at $91.39.

For Google parent Alphabet, the deal locks in clean power on terms regulators and local communities will accept. Q1 2026 capital expenditure hit $35.67 billion, with full-year guidance of $175 billion to $185 billion. Google Cloud revenue grew 63 percent year over year to $20.03 billion, with backlog approaching $460 billion. Every quarter spent fighting siting battles is a quarter Nvidia chips sit idle instead of training Gemini models.

Frenzel hinted more deals are coming. "Our partnership with Google took a strong step forward in the quarter, and we look forward to advancing more projects in the near future," he said. If this template gets replicated across Colorado, Texas and the other six states Xcel serves, the $60 billion capital plan becomes just the floor. For utility investors seeking AI exposure without paying Nvidia multiples, that is the trade worth watching.

This article is for informational purposes only and does not constitute investment advice.