Xcel Energy 2007 Annual Report Download - page 118

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2007 Electric Fuel Cost Recovery — In August 2007, NSP-Wisconsin filed an application with the PSCW requesting
authorization to implement an electric fuel surcharge under the provisions of the Wisconsin fuel rules. The application
requested authority to increase electric rates by $5.9 million or 1.3 percent on an annual basis. In October 2007, the
PSCW issued an order approving an interim rate surcharge at the requested level, subject to refund. The interim rate
surcharge became effective Oct. 15, 2007 and was terminated upon implementation of new base electric rates on Jan. 9,
2008. During the time period it was in effect, the surcharge generated approximately $1.3 million in additional
revenue. Despite the additional surcharge revenue, NSP-Wisconsin’s actual fuel costs for 2007 were approximately
$11.9 million higher than fuel revenues recovered in rates. Factors contributing to the 2007 under recovery include the
inherent limitations of the Wisconsin fuel rules, the PSCW’s decision to set the initial 2007 fuel cost recovery factor at
a lower level than requested by NSP-Wisconsin, and actual costs for the second half of 2007 that were higher than the
level assumed in the forecast upon which the interim surcharge was based.
The PSCW is expected to review NSP-Wisconsin’s actual 2007 fuel costs in the first quarter of 2008 to determine
whether any refund of interim rates is necessary. Because actual 2007 fuel costs exceeded the amount recovered in rates,
NSP-Wisconsin does not anticipate any refund will be required.
Fuel Cost Recovery Rulemaking — In June 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. 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 August 2007, the PSCW staff issued its draft revisions to the fuel rules and requested comments. The draft rules are
based largely on the original proposal submitted by the joint utilities, but incorporate the modifications requested by
the PSCW. The proposed rules incorporate a plan year fuel cost forecast, deferred accounting for differences between
actual and forecast costs (if the difference is greater than 2 percent), and an after the fact reconciliation proceeding to
allow the opportunity to recover or refund the deferred balance. The PSCW did not take any official action on this
rulemaking in 2007.
PSCo
Pending and Recently Concluded Regulatory Proceedings — CPUC
Base Rate
Natural Gas Rate Case — In December 2006, PSCo filed with the CPUC, a request to increase natural gas rates by
$41.9 million, or 2.96 percent. The request assumed a common equity ratio of 60.17 percent, an ROE of 11 percent
and a rate base of approximately $1.1 billion.
In July 2007, the CPUC approved with modifications a comprehensive settlement between PSCo, the CPUC staff, the
OCC and Seminole Energy Services, LLC, providing for, among other things, the following:
• An annual revenue increase of $32.3 million, based on a 10.25 percent ROE and a 60.17 percent equity ratio.
• A modification to the partial decoupling mechanism to allow PSCo recovery of additional revenues in future
years to compensate for the portion of the decline in weather normalized residential use per customer that
exceeds the first 1.3 percent in annual decline in use (to be reflective of 50 percent of the historic average annual
decline in use).
Final rates were implemented effective July 30, 2007. Under the provisions of this settlement, PSCo will be filing its
Phase II (cost allocation and rate design) on or before March 31, 2008, to spread among PSCo’s customer classes the
settled revenue requirement from this case.
Electric, Purchased Gas and Resource Adjustment Clauses
Transmission Cost Adjustment Rider — In September 2007, PSCo filed with the CPUC a request to implement a
transmission cost adjustment rider (TCA), which would recover approximately $18.2 million in 2008. This filing is
pursuant to recently enacted legislation which entitled public utilities to recover, through a separate rate adjustment
clause, the costs that it prudently incurs in planning, developing, and completing the construction or expansion of
transmission. This legislation further encourages utilities to invest in transmission facilities by allowing the recovery of
the total balance of construction work in progress related to those transmission investments at PSCo’s weighted average
cost of capital including its most recently authorized rate of ROE. The CPUC staff and certain other parties challenged
the scope of PSCo’s requested cost recovery under the rider during 2008.
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