Xcel Energy 2005 Annual Report Download - page 23

NONREGULATED OPERATING MARGINS
The following table details the changes in nonregulated revenue and margin included in continuing operations:
(Millions of dollars) 2005 2004 2003
Nonregulated and other revenue $74 $75 $134
Nonregulated cost of goods sold (25) (29) (81)
Nonregulated margin $49 $46 $ 53
2004 Comparison to 2003 Nonregulated revenue decreased in 2004, due primarily to the discontinued consolidation of an investment in
an independent power-producing entity that was no longer majority owned.
NON-FUEL OPERATING EXPENSES AND OTHER ITEMS
Other Utility Operating and Maintenance Expenses Other operating and maintenance expenses for 2005 increased by approximately
$87 million, or 5.5 percent, compared with 2004. An outage at the Monticello nuclear plant and higher outage costs at Prairie Island in 2005
increased costs by approximately $26 million. Employee benefit costs were higher in 2005, primarily due to increased pension benefits and
long-term disability costs. Also contributing to the increase were higher uncollectible receivable costs, attributable in part to modifications
to the bankruptcy laws, higher fuel prices and certain changes in the credit and collections process.
Other operating and maintenance expenses for 2004 increased by approximately $21 million, or 1.4 percent, compared with 2003. Of the
increase, $12 million was incurred to assist with the storm damage repair in Florida and was offset by increased revenue. The remaining
increase of $9 million is primarily due to higher electric service reliability costs, higher information technology costs, higher plant-related costs,
higher costs related to a customer billing system conversion and increased costs primarily related to compliance with the Sarbanes-Oxley
Act of 2002. The higher costs were partially offset by lower employee benefit and compensation costs and lower nuclear plant outage costs.
(Millions of dollars) 2005 vs. 2004 2004 vs. 2003
Higher (lower) employee benefit costs $31 $(12)
Higher (lower) nuclear plant outage costs 26 (13)
Higher uncollectible receivable costs 19 2
Higher donations to energy assistance programs 41
Higher mutual aid assistance costs 112
Higher electric service reliability costs 99
Higher (lower) information technology costs (6) 8
Higher (lower) plant-related costs (7) 4
Higher costs related to customer billing system conversion 44
Higher costs to comply with Sarbanes-Oxley Act of 2002 –4
Other 62
Total operating and maintenance expense increase $87 $21
Other Nonregulated Operating and Maintenance Expenses Other nonregulated operating and maintenance expenses decreased
$16 million, or 35.4 percent, in 2005 compared with 2004, primarily due to the accrual of $18 million in 2004 for a settlement agreement
related to shareholder lawsuits.
Other nonregulated operating and maintenance expenses decreased $9 million, or 17.5 percent, in 2004 compared with 2003. This decrease
resulted from the dissolution of Planergy International and the discontinued consolidation of an investment in an independent power-
producing entity that was no longer majority owned after the divestiture of NRG.
Depreciation and Amortization Depreciation and amortization expense for 2005 increased by approximately $61 million, or 8.7 percent,
compared with 2004. The changes were primarily due to the installation of new steam generators at Unit 1 of the Prairie Island nuclear plant
and software system additions, both of which have relatively short depreciable lives compared with other capital additions. The Prairie Island
steam generators are being depreciated over the remaining life of the plant operating license, which expires in 2013. In addition, the Minnesota
Renewable Development Fund and renewable cost-recovery amortization, which is recovered in revenue as a non-fuel rider and does not
have an impact on net income, increased over 2004. The increase was partially offset by the changes in useful lives and net salvage rates
approved by Minnesota regulators in August 2005.
Depreciation and amortization expense for 2004 decreased by $21 million, or 2.9 percent, compared with 2003. The reduction is largely due
to several regulatory decisions. In 2004, as a result of a Minnesota Public Utilities Commission (MPUC) order, NSP-Minnesota modified
its decommissioning expense recognition, which served to reduce decommissioning accruals by approximately $18 million in 2004 compared
with 2003.
In addition, effective July 1, 2003, the Colorado Public Utilities Commission (CPUC) lengthened the depreciable lives of certain electric utility
plant at PSCo as a part of the general Colorado rate case, reducing annual depreciation expense by $20 million. PSCo experienced the full
impact of the annual reduction in 2004, resulting in a decrease in depreciation expense of $10 million for 2004 compared with 2003. These
decreases were partially offset by plant additions.
XCEL ENERGY 2005 ANNUAL REPORT 21
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS