Xcel Energy 2006 Annual Report Download - page 107

97
measures. PSCo did not achieve the 2005 performance targets for the electric service unavailability measure creating a bill credit
obligation of $13.6 million. Additionally, in accordance with a prior agreement, PSCo invested an additional $11 million in 2006
toward improving reliability. As a result, PSCo will not be required to pay any bill credits that may be owed for 2006 performance
results for electric service unavailability. The maximum potential bill credit obligation for 2006 related to permanent natural gas leak
repair and natural gas meter reading errors is approximately $1.6 million. PSCo does not anticipate any bill credits will be due
customers based on the 2006 performance targets.
SPS
Pending and Recently Concluded Regulatory Proceedings — FERC
Wholesale Rate Complaints — In November 2004, Golden Spread Electric, Lyntegar Electric, Farmer’s Electric, Lea County
Electric, Central Valley Electric and Roosevelt County Electric, wholesale cooperative customers of SPS, filed a rate complaint at the
FERC. The complaint alleged that SPS’ rates for wholesale service were excessive and that SPS had incorrectly calculated monthly
fuel cost adjustments using the FCAC provisions contained in SPS’ wholesale rate schedules. Among other things, the complainants
asserted that SPS was not properly calculating the fuel costs that are eligible for FCAC recovery to reflect fuel costs recovered from
certain wholesale sales to other utilities, and that SPS had inappropriately allocated average fuel and purchased power costs to other of
SPS’ wholesale customers, effectively raising the fuel costs charges to complainants. Cap Rock Energy Corporation (Cap Rock),
another full-requirements customer, Public Service Company of New Mexico (PNM) and Occidental Permian Ltd. and Occidental
Power Marketing, L.P. (Occidental) intervened in the proceeding.
On May 24, 2006, a FERC ALJ issued an initial recommended decision in the proceeding. The FERC will review the initial
recommendation and issue a final order. SPS and others have filed exceptions to the ALJ’s initial recommendation. FERC’s order may
or may not follow any of the ALJ’s recommendation. In the recommended decision, the ALJ found that SPS should recalculate its
FCAC billings for the period beginning Jan. 1, 1999, to reduce the fuel and purchased power costs recovered from the complaining
customers by allocating incremental fuel costs incurred by SPS in making wholesale sales of system firm capacity and associated
energy to other firm customers at market-based rates during this period based on the view that such sales should be treated as
opportunity sales.
SPS believes the ALJ erred on significant and material issues that contradict FERC policy or rules of law. Specifically, SPS believes,
based on FERC rules and precedent, that it has appropriately applied its FCAC tariff to the proper classes of customers. These market-
based sales were of a long-term duration under FERC precedent and were made from SPS’ entire system. Accordingly, SPS believes
that the ALJ erred in concluding that these transactions were opportunity sales, which require the assignment of incremental costs.
The FERC has approved system average cost allocation treatment in previous filings by SPS for sales having similar service
characteristics and previously accepted for filing certain of the challenged agreements with average fuel cost pricing.
Moreover, SPS believes that the ALJ’s recommendation constituted a violation of the Filed Rate Doctrine in that it effectively results
in a retroactive amendment to the SPS FERC-approved FCAC tariff provisions. Under existing regulations, the FERC may modify a
previously approved FCAC on a prospective basis. Accordingly, SPS believes it has applied its FCAC correctly and has sought review
of the recommended decision by the FERC by filing a brief on the exceptions.
SPS has evaluated all sales made from Jan. 1, 1999, to Dec. 31, 2005. While SPS believes it should ultimately prevail in this
proceeding, SPS has accrued approximately $7 million, related to both the base-rate and fuel items. However, if the FERC were to
adopt the majority of the ALJ’s recommendations, SPS’ refund exposure could be approximately $50 million. FERC action is
pending.
On Sept. 15, 2005, PNM filed a separate complaint at the FERC in which it contended that its demand charge under an existing
interruptible power supply contract with SPS is excessive and that SPS has overcharged PNM for fuel costs under three separate
agreements through erroneous FCAC calculations. PNM’s arguments were consistent with those that it made as an intervenor in the
cooperatives’ complaint case. In July 2006, SPS and PNM reached a settlement in principle and a settlement agreement was filed for
approval on Sept. 19, 2006. As a consequence, SPS has accrued approximately $1.3 million to settle all related base rate issues for this
complaint. Several intervenors have protested the settlement. The settlement is pending.
Wholesale Power Base Rate Application — On Dec. 1, 2005, SPS filed for a $2.5 million increase in wholesale power rates to certain
electric cooperatives. On Jan. 31, 2006, the FERC conditionally accepted the proposed rates for filing, and the $2.5 million power rate
increase became effective on July 1, 2006, subject to refund. The FERC also set the rate increase request for hearing and settlement
judge procedures. The case is presently in the settlement judge procedures and an agreement in principle has been reached for base
rates for the full-requirements customers and PNM. One other wholesale customer has not settled, however. On Sept. 7, 2006, the
offer of settlement with respect to the full-requirements customer was filed for approval and on Sept. 19, 2006, the offer of settlement
with respect to PNM was filed for approval. Hearings have been scheduled for April 2007 for the base rates applicable to the
remaining non-settling wholesale customer.