Xcel Energy 2006 Annual Report Download - page 106

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NSP-Wisconsin is unknown at this time but could be material. NSP-Wisconsin currently anticipates that the ultimate decision on the
amount of costs to be recovered in rates could be delayed until its next general rate case to be filed on June 1, 2007.
As of Dec. 31, 2006 NSP-Wisconsin has deferred a total of approximately $11.2 million of MISO Day 2 costs.
2006 General Rate Case — In 2005, NSP-Wisconsin, requested an electric revenue increase of $58.3 million and a natural gas
revenue increase of $8.1 million, based on a 2006 test year, an 11.9 percent return on equity and a common equity ratio of 56.32
percent. On Jan. 5, 2006, the PSCW approved an electric revenue increase of $43.4 million and a natural gas revenue increase of $3.9
million, based on an 11.0 percent return on equity and a 54-percent common equity ratio target. The new rates were effective Jan. 9,
2006. The order also prohibits NSP-Wisconsin from paying dividends above $42.7 million, if its actual calendar year average common
equity ratio is or will fall below 54.03 percent. It also imposes an asymmetrical electric fuel clause bandwidth of positive 2 percent to
negative 0.5 percent outside of which NSP-Wisconsin would be permitted to request or be required to change rates.
2006 Fuel Cost Recovery — Fuel costs for the Wisconsin retail jurisdiction in 2006 were $14.4 million, or 9.7 percent lower than the
fuel-related component of base electric rates authorized in the 2006 general rate case. Under the provisions of the Wisconsin Fuel
Rules and a May 4, 2006 order from the PSCW, NSP-Wisconsin is required to refund, with interest, that portion of the over-recovery
that occurred subsequent to the May 4 order. Accordingly, NSP-Wisconsin established a $10.1 million fuel refund provision during
2006. On Jan. 30, 2007, NSP-Wisconsin filed its 2006 year-end fuel cost recovery report and a proposed refund plan with the PSCW.
On Feb. 8, 2007, the PSCW approved the refund and NSP-Wisconsin began crediting customers Feb. 15, 2007.
2007 Fuel Cost Recovery — On Aug. 4, 2006, NSP-Wisconsin filed an application to reset the 2007 fuel base and monitoring range,
and to increase electric base rates for 2007 by $22.7 million, or 5.0 percent, on an annual basis. The requested increase was driven
primarily by higher renewable energy purchases and increases in coal commodity and transportation costs. On Dec. 22, 2006 the
PSCW issued an order approving an electric rate increase of $13.8 million, reflecting decreases in natural gas and purchased power
costs on an annual basis, and authorized the return to a symmetrical fuel clause bandwidth of plus or minus 2 percent. New rates
became effective Jan. 1, 2007.
Fuel Cost Recovery Rulemaking — On June 22, 2006, the PSCW opened a rulemaking docket to address potential revisions to the
electric fuel cost recovery rules. Wisconsin statutes prohibit the use of automatic adjustment clauses by large investor-owned electric
public utilities. Instead, the statutes authorize the PSCW to approve, after a hearing, a rate increase for these utilities to allow for the
recovery of costs caused by an emergency or extraordinary increase in the cost of fuel. In opening this rulemaking, the PSCW
recognized the increased volatility of fuel costs, citing events such as the implementation of the MISO Day 2 Market, increased
demand on some fuels, increased transportation costs of some fuels, and the effects of hurricanes on the availability of some fuels. On
Sept. 7, 2006, Wisconsin’s large investor-owned utilities, including NSP-Wisconsin, jointly filed proposed revisions to the rules. The
utilities’ proposal incorporates a plan year forecast and an after-the-fact reconciliation to eliminate regulatory lag, and ensure recovery
of prudently incurred costs. On Nov. 3, 2006, a coalition of customer and intervenor groups submitted a counter proposal that included
only minor revisions to the existing rules. At this time it is not certain what, if any, changes to the existing rules will be recommended
by the PSCW.
PSCo
Pending and Recently Concluded Regulatory Proceedings — CPUC
Electric Rate Case — In April 2006, PSCo filed with the CPUC to increase electricity rates by $208 million annually, beginning
Jan. 1, 2007. The request was based on two components, including an increase in base rate revenues of $178 million and an estimated
$30 million increase in PCCA revenue. The base rate request was based on a return on equity of 11 percent, an equity ratio of 59.9
percent and an electric rate base of $3.4 billion. No interim rate increase was implemented. The PCCA request was based on 2007
projected costs.
On Oct. 20, 2006, PSCo entered into a comprehensive settlement agreement with several of the parties to the case. On Nov. 20, 2006,
the CPUC issued a written order approving the settlement with new rates effective Jan. 1, 2007. The settlement provides for an
increase in base rates of $107 million, based on a 10.50 percent return on equity, an estimated $39.4 million in PCCA revenue and an
estimated $4.6 million in ECA revenue to recover certain WindSource program costs for a total increase of $151 million. In addition,
PSCo is permitted an incentive for its performance on achieving fuel and purchased energy savings as well as for its generation based
wholesale margins.
Natural Gas Rate Case — On Dec. 1, 2006, PSCo filed with the CPUC a request to increase natural gas rates that would increase
annual revenues by $41.5 million, representing an overall increase of 2.96 percent. The request is based on a requested capital
structure of 60.17 percent common equity, a return on common equity of 11 percent and a rate base of approximately $1.1 billion. It is
anticipated that new rates will become effective in the third quarter of 2007.
Quality of Service Plan — The PSCo QSP provides for bill credits to Colorado retail customers, if PSCo does not achieve certain
operational performance targets. During the second quarter of 2006, PSCo filed its calendar year 2005 operating performance results
for electric service unavailability, phone response time, customer complaints, accurate meter reading and natural gas leak repair time