Xcel Energy 2006 Annual Report Download - page 112

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The WDNR and NSP-Wisconsin have each developed several estimates of the ultimate cost to remediate the Ashland site. The
estimates vary significantly, between $4 million and $93 million, because different methods of remediation and different results are
assumed in each. The EPA and WDNR have not yet selected the method of remediation to use at the site. Until the EPA and the
WDNR select a remediation strategy for the entire site and determine NSP-Wisconsin’s level of responsibility, NSP-Wisconsin’s
liability for the cost of remediating the Ashland site is not determinable. NSP-Wisconsin has recorded a liability of $25.0 million for
its potential liability for remediating the Ashland site and for external legal and consultant costs. Since NSP-Wisconsin cannot
currently estimate the cost of remediating the Ashland site, that portion of the recorded liability related to remediation is based upon
the minimum of the estimated range of remediation costs, using information available to date and reasonably effective remedial
methods.
On Oct. 19, 2004, the WDNR filed a lawsuit in Wisconsin state court for reimbursement of past oversight costs incurred at the
Ashland site between 1994 and March 2003 in the approximate amount of $1.4 million. The lawsuit has been stayed. NSP-Wisconsin
has recorded an estimate of its potential liability. All costs paid to the WDNR are expected to be recoverable in rates.
In addition to potential liability for remediation and WDNR oversight costs, NSP-Wisconsin may also have liability for natural
resource damages (NRDA) at the Ashland site. NSP-Wisconsin has indicated to the relevant natural resource trustees its interest in
engaging in discussions concerning the assessment of natural resources injuries and in proposing various restoration projects in an
effort to fully and finally resolve all NRDA claims. NSP-Wisconsin is not able to estimate its potential exposure for natural resource
damages at the site, but has recorded an estimate of its potential liability based upon the minimum of its estimated range of potential
exposure.
NSP-Wisconsin has deferred, as a regulatory asset, the costs accrued for the Ashland site based upon an expectation that the PSCW
will continue to allow NSP-Wisconsin to recover payments for MGP-related environmental remediation from its customers. The
PSCW has consistently authorized recovery in NSP-Wisconsin rates of all remediation costs incurred at the Ashland site, and has
authorized recovery of similar remediation costs for other Wisconsin utilities. External MGP remediation costs are subject to deferral
in the Wisconsin retail jurisdiction and are reviewed for prudence as part of the Wisconsin biennial retail rate case process.
In addition, in 2003, the Wisconsin Supreme Court rendered a ruling that reopens the possibility that NSP-Wisconsin may be able to
recover a portion of the remediation costs from its insurance carriers. Any insurance proceeds received by NSP-Wisconsin will
operate as a credit to ratepayers.
Fort Collins Manufactured Gas Plant Site — Prior to 1926, Poudre Valley Gas Co., a predecessor of PSCo, operated an MGP in Fort
Collins, Colo., not far from the Cache la Poudre River. In 1926, after acquiring the Poudre Valley Gas Co., PSCo shut down the MGP
site and has sold most of the property. An oily substance similar to MGP byproducts was discovered in the Cache la Poudre River. On
Nov. 10, 2004, PSCo entered into an agreement with the EPA, the city of Fort Collins and Schrader Oil Co., under which PSCo
performed remediation and monitoring work. PSCo has substantially completed work at the site, with the exception of ongoing
maintenance and monitoring. In May 2005, PSCo filed a natural gas rate case with the CPUC requesting recovery of cleanup costs at
the Fort Collins MGP site spent through March 2005, which amounted to $6.2 million, to be amortized over four years. PSCo reached
a settlement agreement with the parties in the case. The CPUC approved the settlement agreement on Jan. 19, 2006 and the final order
became effective on Feb. 3, 2006, with rates effective Feb. 6, 2006. In November 2006, PSCo filed a natural gas rate case with the
CPUC requesting recovery of additional clean-up costs at the Fort Collins MGP site spent through September 2006, plus unrecovered
amounts previously authorized from the last rate case, which amounted to $10.8 million to be amortized over four years. The total
amount PSCo is requesting be recovered from customers is $13.1 million.
In April 2005, PSCo brought a contribution action against Schrader Oil Co. and related parties alleging Schrader Oil Co. released
hazardous substances into the environment and these releases caused MGP byproducts to migrate to the Cache La Poudre River,
thereby substantially increasing the scope and cost of remediation. PSCo requested damages, including a portion of the costs PSCo
incurred to investigate and remove contaminated sediments from the Cache la Poudre River. On Dec. 14, 2005, the court denied
Schrader’s request to dismiss the PSCo suit. On Jan. 3, 2006, Schrader filed a response to the PSCo complaint and a counterclaim
against PSCo for its response costs under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA)
and under the Resource Conservation and Recovery Act (RCRA). Schrader has alleged as part of its counterclaim an “imminent and
substantial endangerment” of its property as defined by RCRA. In September 2006, PSCo filed a Motion For Partial Summary
Judgment to dismiss Schrader’s RCRA claim. PSCo believes the allegations with respect to PSCo are without merit and will
vigorously defend itself.
Third Party and Other Environmental Site Remediation
Asbestos Removal — Some of our facilities contain asbestos. Most asbestos will remain undisturbed until the facilities that contain it
are demolished or renovated. Xcel Energy has recorded an estimate for final removal of the asbestos as an asset retirement obligation.
See additional discussion of asset retirement obligations in Note 14. It may be necessary to remove some asbestos to perform
maintenance or make improvements to other equipment. The cost of removing asbestos as part of other work is immaterial and is
recorded as incurred as operating expenses for maintenance projects, capital expenditures for construction projects or removal costs
for demolition projects.