Xcel Energy 2005 Annual Report Download - page 71

expiration dates through the year 2033. In general, these contracts provide for capacity payments, subject to meeting certain contract obligations,
and energy payments based on actual power taken under the contracts. Certain contractual payment obligations are adjusted based on
indexes. However, the effects of price adjustments are mitigated through cost-of-energy rate adjustment mechanisms.
At Dec. 31, 2005, the estimated future payments for capacity that the utility subsidiaries of Xcel Energy are obligated to purchase, subject to
availability, are as follows:
(Thousands of dollars)
2006 $ 564,669
2007 579,333
2008 592,655
2009 574,145
2010 555,228
2011 and thereafter 3,439,683
Total $6,305,713
ENVIRONMENTAL CONTINGENCIES
Xcel Energy and its subsidiaries have been, or are currently involved with, the cleanup of contamination from certain hazardous substances
at several sites. In many situations, the subsidiary involved is pursuing or intends to pursue insurance claims and believes it will recover
some portion of these costs through such claims. Additionally, where applicable, the subsidiary involved is pursuing, or intends to pursue,
recovery from other potentially responsible parties and through the rate regulatory process. New and changing federal and state environmental
mandates can also create added financial liabilities for Xcel Energy and its subsidiaries, which are normally recovered through the rate
regulatory process. To the extent any costs are not recovered through the options listed above, Xcel Energy would be required to recognize
an expense for such unrecoverable amounts in its Consolidated Financial Statements.
Site Remediation Xcel Energy must pay all or a portion of the cost to remediate sites where past activities of its subsidiaries and some other
parties have caused environmental contamination. Environmental contingencies could arise from various situations, including the following
categories of sites:
– The site of a former federal uranium enrichment facility;
– Sites of former manufactured gas plants (MGPs) operated by Xcel Energy subsidiaries or predecessors; and
– Third-party sites, such as landfills, to which Xcel Energy is alleged to be a potentially responsible party (PRP) that sent hazardous materials
and wastes.
Xcel Energy records a liability when enough information is obtained to develop an estimate of the cost of environmental remediation and
revises the estimate as information is received. The estimated remediation cost may vary materially.
To estimate the cost to remediate these sites, assumptions are made when facts are not fully known. For instance, assumptions may be
made about the nature and extent of site contamination, the extent of required cleanup efforts, costs of alternative cleanup methods and
pollution-control technologies, the period over which remediation will be performed and paid for, changes in environmental remediation
and pollution-control requirements, the potential effect of technological improvements, the number and financial strength of other PRPs and
the identification of new environmental cleanup sites.
Estimates are revised as facts become known. At Dec. 31, 2005, the liability for the cost of remediating these sites was estimated to be
$27.8 million, of which $8.8 million was considered to be a current liability. Some of the cost of remediation may be recovered from:
– Insurance coverage;
– Other parties that have contributed to the contamination; and
– Customers.
Neither the total remediation cost nor the final method of cost allocation among all PRPs of the unremediated sites has been determined.
Estimates have been recorded for Xcel Energy’s future costs for these sites.
Federal Uranium Enrichment Facility
Approximately $0.5 million of the long-term liability and $4.8 million of the current liability relate to a DOE assessment to NSP-Minnesota
and PSCo for decommissioning a federal uranium enrichment facility. These environmental liabilities do not include accruals recorded and
collected from customers in rates for future nuclear fuel disposal costs or decommissioning costs related to NSP-Minnesota’s nuclear generating
plants. See Note 15 to the Consolidated Financial Statements for further discussion of nuclear obligations.
Manufactured Gas Plant Sites
Ashland Manufactured Gas Plant Site NSP-Wisconsin was named a PRP for creosote and coal tar contamination at a site in Ashland,
Wis. The Ashland site includes property owned by NSP-Wisconsin, which was previously an MGP facility, and two other properties: an adjacent
city lakeshore park area, on which an unaffiliated third party previously operated a sawmill, and an area of Lake Superior’s Chequemegon
Bay adjoining the park.
As an interim action, NSP-Wisconsin proposed, and the Wisconsin Department of Natural Resources (WDNR) approved, a coal tar removal
and groundwater treatment system for one area of concern at the site for which NSP-Wisconsin has accepted responsibility. The groundwater
treatment system began operating in the fall of 2000. In 2002, NSP-Wisconsin installed additional monitoring wells in the deep aquifer under
XCEL ENERGY 2005 ANNUAL REPORT 69
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS