Xcel Energy 2004 Annual Report Download - page 84

NOTES to CONSOLIDATED FINANCIAL STATEMENTS
Xcel Energy Annual Report 2004
82
At Dec. 31, 2004, NSP-Minnesota had recorded and recovered in rates cumulative decommissioning accruals of $768 million. The following table
summarizes the funded status of NSP-Minnesota’s decommissioning obligation based on approved regulatory recovery parameters. These amounts
are not those recorded in the financial statements for the asset retirement obligation in accordance with SFAS No. 143.
(Thousands of dollars) 2004
Estimated decommissioning cost obligation from most recently approved study (2002 dollars) $1,716,618
Effect of escalating costs to 2004 dollars (at 4.19 percent per year) 146,866
Estimated decommissioning cost obligation in current dollars 1,863,484
Effect of escalating costs to payment date (at 4.19 percent per year) 1,929,881
Estimated future decommissioning costs (undiscounted) 3,793,365
Effect of discounting obligation (using risk-free interest rate) (2,139,561)
Discounted decommissioning cost obligation 1,653,804
Assets held in external decommissioning trust 918,442
Discounted decommissioning obligation in excess of assets currently held in external trust $ 735,362
Decommissioning expenses recognized include the following components:
(Thousands of dollars) 2004 2003 2002
Annual decommissioning cost accrual reported as depreciation expense:
Externally funded $80,582 $80,582 $51,433
Internally funded (including interest costs) (53,307) (35,906) (18,797)
Interest cost on externally funded decommissioning obligation (19,026) (14,952) (32)
Earnings from external trust funds 19,026 14,952 32
Net decommissioning accruals recorded $27,275 $44,676 $32,636
Decommissioning and interest accruals are included with Regulatory Liabilities on the Consolidated Balance Sheet. Interest costs and trust earnings
associated with externally funded obligations are reported in Other Nonoperating Income on the Consolidated Statement of Operations.
Negative accruals for internally funded portions in 2002, 2003 and 2004 reflect the impacts of the 1999 and 2002 decommissioning studies, which
have approved an assumption of 100-percent external funding of future costs. Previous studies assumed a portion was funded internally; beginning in
2000, accruals are reversing the previously accrued internal portion and increasing the external portion prospectively.
Asset Retirement Obligations Xcel Energy records future plant decommissioning obligations as a liability at fair value with a corresponding increase to
the carrying values of the related long-lived assets. This liability will be increased over time by applying the interest method of accretion to the liability,
and the capitalized costs will be depreciated over the useful life of the related long-lived assets. The recording of the obligations has no income statement
impact due to the deferral of the adjustments through the establishment of a regulatory asset pursuant to SFAS No. 71.
Asset retirement obligations have been recorded for the decommissioning of two NSP-Minnesota nuclear generating plants, the Monticello plant and
the Prairie Island plant. A liability also has been recorded for the decommissioning of an NSP-Minnesota steam production plant, the Pathfinder plant.
Monticello began operation in 1971 and is licensed to operate until 2010. Prairie Island units 1 and 2 began operation in 1973 and 1974, respectively,
and are licensed to operate until 2013 and 2014, respectively. Pathfinder operated as a steam production peaking facility from 1969 until its retirement.
A reconciliation of the beginning and ending aggregate carrying amounts of NSP-Minnesota’s asset retirement obligations is shown in the table below for
the 12 months ended Dec. 31, 2004:
Beginning Revisions Ending
Balance Liabilities Liabilities to Prior Balance
(Thousands of dollars) Jan. 1, 2004 Incurred Settled Accretion Estimates Dec. 31, 2004
Steam plant retirement $ 2,860 $ – $ – $ 142 $ – $ 3,002
Nuclear plant decommissioning 1,021,669 – – 66,418 – 1,088,087
Total liability $1,024,529 $ – $ – $66,560 $ – $1,091,089
The fair value of NSP-Minnesota assets legally restricted for purposes of settling the nuclear asset retirement obligations is $986 million as of Dec. 31, 2004,
including external nuclear decommissioning investment funds and internally funded amounts.