Xcel Energy 2001 Annual Report Download - page 6

As Xcel Energy strives to maximize the value of NRG, the company also is working
to manage other assets to their full potential. In response to a FERC order requiring
utilities to separate the management and operation of their transmission assets
from the rest of their businesses, we filed a request with federal regulators to create
an independent transmission company called TRANSLink Transmission Co.
We are proposing to combine our transmission system with those of five other
utilities into a single, coordinated system.
Under the proposal, pending before the FERC, Xcel Energy would continue to
own its existing transmission system, but would enter into a 10-year agreement
with TRANSLink to operate the system. A for-profit, independent company will
provide greater value for you, generate annual operating savings, encourage new
transmission investment and improve the efficiency and reliability of the system.
Considerable room exists in the industry for consolidation, which will result in
lower costs and better service. Right now, Xcel Energy employs a “plug-and-play”
strategy. The company is working diligently to standardize practices and systems so
it has the flexibility needed to take advantage of anticipated consolidation in the
industry. If an opportunity presents itself that increases shareholder value, Xcel
Energy will be ready to act quickly.
Xcel Energy’s game plan for the future reflects the same approach: maximizing
existing assets, while preparing for future opportunities.
The first component of the plan is to grow our energy supply business. When
Xcel Energy completed the repowering of Fort St. Vrain, the company increased
the plant’s capacity by more than 400 megawatts, which is equivalent to adding
a medium-sized power plant. This year, a similar repowering will be completed at
the Black Dog coal-fired facility. Crews will replace two coal-fired units with a
natural gas combined-cycle system, boosting the plant’s output by more than
100 megawatts.
Xcel Energy also will evaluate adding generating assets within its geographic
area or seek strategic partners for development and investment. In the past year,
legislation was passed in Colorado and Minnesota that improved procedures for
siting new plants and transmission lines to ensure a reliable source of energy in
the future.
As Xcel Energy grows its energy supply capacity, it is aligning other parts of the
business to support that strategy and exiting non-strategic businesses. A good
example was the sale in 2001 of its ownership in Yorkshire Power, a distribution
and supply company in the United Kingdom. Although Yorkshire is an excellent
company, it was no longer compatible with our strategy. We continue to evaluate
each of our smaller businesses to determine their strategic fit in the Xcel Energy
business portfolio.
Xcel Energy also is working to implement a regulatory model across its service
territory that will better reward operational excellence. Often referred to as
performance-based regulation (PBR), the system allows utilities to retain more
earnings if they exceed certain performance standards. The company has been
TRANSLINK, OUR PROPOSED
INDEPENDENT TRANSMISSION
COMPANY, WILL INCLUDE 29,000
MILES OF TRANSMISSION LINE
AND SERVE 6.9 MILLION CUS-
TOMERS IN 14 STATES, MAKING
IT ONE OF THE LARGEST TRANS-
MISSION COMPANIES IN THE
NATION. IT WILL LINK TO 35,000
MEGAWATTS OF GENERATING
POWER.