Xcel Energy 2007 Annual Report Download - page 138

mature in one to 20 years and common stock of public companies. NSP-Minnesota plans to reinvest matured securities
until decommissioning begins.
Consistent with cost recovery in utility customer rates, NSP-Minnesota records annual decommissioning accruals based
on periodic site-specific cost studies and a presumed level of dedicated funding. Cost studies quantify decommissioning
costs in current dollars. Current authorized funding presumes that costs will escalate in the future at a rate of
3.61 percent per year. The total estimated decommissioning costs that will ultimately be paid, net of income earned by
external trust funds, is currently being accrued using an annuity approach over the approved plant-recovery period. This
annuity approach uses an assumed rate of return on funding, which is currently 5.40 percent, net of tax, for external
funding. The net unrealized gain on nuclear decommissioning investments is deferred as a regulatory liability based on
the assumed offsetting against decommissioning costs in current ratemaking treatment.
In 2006, the Nuclear Decommissioning Trust (NDT) fund also recorded the sale of certain investments in the
non-qualified fund and the reinvestment of the proceeds into the qualified fund. The sale and reinvestment, along with
the transfer of securities was part of a transaction intended to consolidate trust fund accounts into an income tax
advantaged fund, resulting from the Energy Act. The transfer of funds was completed in the fourth quarter of 2006.
At Dec. 31, 2007, NSP-Minnesota had recorded and recovered in rates cumulative decommissioning expense of
$1.2 billion. The following table summarizes the funded status of NSP-Minnesota’s decommissioning obligation based
on approved regulatory recovery parameters. Xcel Energy believes future decommissioning cost expense will continue to
be recovered in customer rates. These amounts are not those recorded in the financial statements for the ARO in
accordance with SFAS No. 143.
2007 2006
(Thousands of Dollars)
Estimated decommissioning cost obligation from most recently approved study (2005 dollars) .... $1,683,750 $ 1,683,750
Effect of escalating costs to 2007 and 2006 dollars (3.61 percent per year) ............... 123,761 60,783
Estimated decommissioning cost obligation in current dollars ....................... 1,807,511 1,744,533
Effect of escalating costs to payment date (3.61 percent per year) .................... 1,319,315 1,382,293
Estimated future decommissioning costs (undiscounted) .......................... 3,126,826 3,126,826
Effect of discounting obligation (using risk-free interest rate) ....................... (1,502,030) (1,675,114)
Discounted decommissioning cost obligation ................................ 1,624,796 1,451,712
Assets held in external decommissioning trust ................................ 1,317,564 1,200,688
Discounted decommissioning obligation in excess of assets currently held in external trust ...... $ 307,232 $ 251,024
Decommissioning expenses recognized include the following components:
2007 2006 2005
(Thousands of Dollars)
Annual decommissioning cost expense reported as depreciation expense:
Externally funded ................................... $43,392 $48,069 $ 80,582
Internally funded (including interest costs) ..................... (759) (5,046) (57,561)
Net decommissioning expense recorded ........................ $42,633 $43,023 $ 23,021
Reductions to expense for internally-funded portions in 2007, 2006 and 2005 are a direct result of the 2005
decommissioning study jurisdictional allocation and 100 percent external funding approval, effectively unwinding the
remaining internal fund over the remaining operating life of the unit. The 2005 nuclear decommissioning filing
approved in 2006 has been used for the regulatory presentation and all the updated parameters were used for 2005.
The change in estimated decommission obligations was calculated using a life extension cost estimate for Monticello.
17. Regulatory Assets and Liabilities
Xcel Energy’s regulated businesses prepare its consolidated financial statements in accordance with the provisions of
SFAS No. 71, as discussed in Note 1 to the consolidated financial statements. Under SFAS No. 71, regulatory assets
and liabilities can be created for amounts that regulators may allow to be collected, or may require to be paid back to
customers in future electric and natural gas rates. Any portion of Xcel Energy’s business that is not regulated cannot use
SFAS No. 71 accounting. If changes in the utility industry or the business of Xcel Energy no longer allow for the
application of SFAS No. 71 under GAAP, Xcel Energy would be required to recognize the write-off of regulatory assets
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