Xcel Energy 2005 Annual Report Download - page 77

Nuclear Insurance NSP-Minnesota’s public liability for claims resulting from any nuclear incident is limited to $10.8 billion under the 1988
Price-Anderson amendment to the Atomic Energy Act of 1954. NSP-Minnesota has secured $300 million of coverage for its public liability
exposure with a pool of insurance companies. The remaining $10.5 billion of exposure is funded by the Secondary Financial Protection
Program, available from assessments by the federal government in case of a nuclear accident. NSP-Minnesota is subject to assessments of
up to $100.6 million for each of its three licensed reactors, to be applied for public liability arising from a nuclear incident at any licensed
nuclear facility in the United States. The maximum funding requirement is $15 million per reactor during any one year.
NSP-Minnesota purchases insurance for property damage and site decontamination cleanup costs from Nuclear Electric Insurance Ltd. (NEIL).
The coverage limits are $2.1 billion for each of NSP-Minnesota’s two nuclear plant sites. NEIL also provides business interruption insurance
coverage, including the cost of replacement power obtained during certain prolonged accidental outages of nuclear generating units. Premiums
are expensed over the policy term. All companies insured with NEIL are subject to retroactive premium adjustments if losses exceed accumulated
reserve funds. Capital has been accumulated in the reserve funds of NEIL to the extent that NSP-Minnesota would have no exposure for
retroactive premium assessments in case of a single incident under the business interruption and the property damage insurance coverage.
However, in each calendar year, NSP-Minnesota could be subject to maximum assessments of approximately $14.8 million for business
interruption insurance and $26.5 million for property damage insurance if losses exceed accumulated reserve funds.
LEGAL CONTINGENCIES
In the normal course of business, Xcel Energy is subject to claims and litigation arising from prior and current operations. Xcel Energy is
actively defending these matters and has recorded a reasonable liability related to the probable cost of settlement or other disposition when
it can be reasonably estimated. The ultimate outcome of these matters cannot presently be determined. Accordingly, the ultimate resolution
of these matters could have a material adverse effect on Xcel Energy’s financial position and results of operations.
Bender et al. vs. Xcel Energy On July 2, 2004, five former NRG officers filed a lawsuit against Xcel Energy in the U.S. District Court for the
District of Minnesota. The lawsuit alleges, among other things, that Xcel Energy violated the Employee Retirement Income Security Act of 1974
(ERISA) by refusing to make certain deferred compensation payments to the plaintiffs. The complaint also alleges interference with ERISA
benefits, breach of contract related to the nonpayment of certain stock options and unjust enrichment. The complaint alleges damages of
approximately $6 million. Xcel Energy believes the suit is without merit. On Jan. 19, 2005, Xcel Energy filed a motion for summary judgment.
On July 26, 2005, the court issued an order granting Xcel Energy’s motion for summary judgment in part with respect to claims for interference
with ERISA benefits, breach of contract for nonpayment of stock options and unjust enrichment. The court denied Xcel Energy’s motion in part
with respect to the allegations of nonpayment of deferred compensation benefits. Plaintiffs and Xcel Energy have filed additional cross motions
for summary judgment, with oral arguments presented on Feb. 24, 2006. The court has also ordered this lawsuit to be trial-ready by Feb. 1, 2006.
Carbon Dioxide Emissions Lawsuit On July 21, 2004, the attorneys general of eight states and New York City, as well as several
environmental groups, filed lawsuits in U.S. District Court for the Southern District of New York against five utilities, including Xcel Energy,
to force reductions in carbon dioxide (CO2) emissions. The other utilities include American Electric Power Co., Southern Co., Cinergy Corp. and
Tennessee Valley Authority. CO2is emitted whenever fossil fuel is combusted, such as in automobiles, industrial operations and coal- or
gas-fired power plants. The lawsuits allege that CO2emitted by each company is a public nuisance as defined under state and federal
common law because it has contributed to global warming. The lawsuits do not demand monetary damages. Instead, the lawsuits ask the
court to order each utility to cap and reduce its CO2emissions. In October 2004, Xcel Energy and four other utility companies filed a motion
to dismiss the lawsuit, contending, among other reasons, that the lawsuit is an attempt to usurp the policy-setting role of the U.S. Congress
and the president. On Sept. 19, 2005, the judge granted the defendants’ motion to dismiss on constitutional grounds. Plaintiffs have filed a
notice of appeal.
Department of Labor Audit In 2001, Xcel Energy received notice from the Department of Labor (DOL) Employee Benefit Security
Administration that it intended to audit the Xcel Energy pension plan. After multiple on-site meetings and interviews with Xcel Energy
personnel, the DOL indicated on Sept. 18, 2003, that it is prepared to take the position that Xcel Energy, as plan sponsor and through its
delegate, the Pension Trust Administration Committee, breached its fiduciary duties under ERISA with respect to certain investments made
in limited partnerships and hedge funds in 1997 and 1998. The DOL has offered to conclude the audit if Xcel Energy is willing to contribute
to the plan the full amount of losses from the questioned investments, or approximately $7 million. On July 19, 2004, Xcel Energy formally
responded with a letter to the DOL that asserted no fiduciary violations have occurred and extended an offer to meet to discuss the matter
further. In 2005, the DOL submitted two additional requests for information related to the investigation and has not indicated that they are
prepared to close the file, or in the alternative, to assert charges against Xcel Energy or the pension plan.
Texas-Ohio Energy, Inc. vs. Centerpoint Energy et al. On Nov. 19, 2003, a class action complaint filed in the U.S. District Court for the
Eastern District of California by Texas-Ohio Energy, Inc. was served on Xcel Energy naming e prime as a defendant. The lawsuit, filed on behalf
of a purported class of large wholesale natural gas purchasers, alleges that e prime falsely reported natural gas trades to market trade
publications in an effort to artificially raise natural gas prices in California. The case has been conditionally transferred by the Multi-District
Litigation (MDL) Panel to U.S. District Judge Pro, in Nevada, who is the judge assigned to western area wholesale natural gas marketing
litigation. In an order entered April 8, 2005, Judge Pro granted the defendants’ motion to dismiss based on the filed rate doctrine. On
May 9, 2005, plaintiffs filed an appeal of this decision to the 9th Circuit Court of Appeals.
Cornerstone Propane Partners, L.P. et al. vs. e prime inc. et al. On Feb. 2, 2004, a purported class action complaint was filed in the
U.S. District Court for the Southern District of New York against e prime and three other defendants by Cornerstone Propane Partners, L.P.,
Robert Calle Gracey and Dominick Viola on behalf of a class who purchased or sold one or more New York Mercantile Exchange natural gas
futures and/or options contracts during the period from Jan. 1, 2000, to Dec. 31, 2002. The complaint alleges that defendants manipulated the
price of natural gas futures and options and/or the price of natural gas underlying those contracts in violation of the Commodities Exchange
Act. In February 2004, the plaintiff requested that this action be consolidated with a similar suit involving Reliant Energy Services. In February
XCEL ENERGY 2005 ANNUAL REPORT 75
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS