Xcel Energy 2007 Annual Report Download - page 128

similar to MGP byproducts was discovered in the Cache la Poudre River. In November 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. In January 2006, the CPUC approved the settlement
agreement and rates were 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. In June 2007, PSCo entered into a
settlement agreement that included recovery of the full $10.8 million, but with a five year amortization period. The
CPUC approved the agreement on June 18, 2007. The total amount to be recovered from customers is $13.1 million.
Estimated future project costs, based upon an assumed 30-year system operating life, including EPA oversight costs, are
approximately $3.9 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. In December 2005, the court denied Schrader’s request to dismiss the PSCo suit. Schrader thereafter 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 alleged as part of its counterclaim an ‘‘imminent and substantial endangerment’’ of its
property as defined by RCRA. PSCo filed a motion for partial summary judgment to dismiss Schrader’s RCRA claim.
In October 2007, the court granted PSCo’s motion for partial summary judgment and dismissed Schrader’s RCRA
claim. Schrader also filed a motion for summary judgment seeking to dismiss PSCo’s CERCLA claim. PSCo believes
this motion is without merit and will vigorously defend its claim. Any costs recovered from Schrader are expected to
operate as a credit to ratepayers.
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 ARO.
See additional discussion of AROs in Note 15 in the consolidated financial statements included below. 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.
Cunningham and Maddox Station Groundwater — Cunningham Station is a natural gas-fired power plant constructed
in the 1960s by SPS and has 28 water wells installed on its water rights. The well field provides boiler makeup, cooling
and potable water. Following an acid release in 2002, groundwater samples revealed elevated concentrations of inorganic
salt compounds not related to the release. The contamination was identified in wells located near the plant buildings
and the source of contamination is thought to be leakage from ponds that receive blow down water from the plant.
In response to a request by the New Mexico Environment Department (NMED), SPS prepared a corrective action plan
to address the groundwater contamination. Under the plan submitted to the NMED, SPS agreed to control leakage
from the plant blow down ponds through construction of a new lined pond, additional irrigation areas to minimize
percolation and installation of additional wells to monitor groundwater quality. In June 2005, NMED issued a letter
approving the corrective action plan. The action plan was subject to continued compliance with New Mexico
regulations and oversight by the NMED. The Cunningham wastewater management project has been completed at a
final cost of $3.5 million. Upon completion of the project, NMED finalized the wastewater permit. SPS began the
implementation of a similar process at the Maddox Station in 2007. The permitting process for Maddox Station has
begun and is estimated to cost approximately $1.3 million through 2008 and will be capitalized or expensed as
incurred.
Other Environmental Requirements
CAIR — In March 2005, the EPA issued the CAIR to further regulate SO2 and NOx emissions. The objective of
CAIR is to cap emissions of SO2 and NOx in the eastern United States, including Minnesota, Texas and Wisconsin,
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