Xcel Energy 2007 Annual Report Download - page 37

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Natural Gas Supply and Costs
NSP-Wisconsin actively seeks natural gas supply, transportation and storage alternatives to yield a diversified portfolio
that provides increased flexibility, decreased interruption and financial risk, and economical rates. In addition,
NSP-Wisconsin conducts natural gas price hedging activity that has been approved by the PSCW. This diversification
involves numerous domestic and Canadian supply sources with varied contract lengths.
The following table summarizes the average delivered cost per MMBtu of natural gas purchased for resale by
NSP-Wisconsin’s regulated retail natural gas distribution business:
2007 .................................................................. $7.56
2006 .................................................................. 8.42
2005 .................................................................. 8.64
The cost of natural gas supply, transportation service and storage service is recovered through various cost recovery
adjustment mechanisms.
NSP-Wisconsin has firm natural gas transportation contracts with several pipelines, which expire in various years from
2008 through 2027.
NSP-Wisconsin has certain natural gas supply, transportation and storage agreements that include obligations for the
purchase and/or delivery of specified volumes of natural gas or to make payments in lieu of delivery. At Dec. 31, 2007,
NSP-Wisconsin was committed to approximately $80 million in such obligations under these contracts.
NSP-Wisconsin purchased firm natural gas supply utilizing short-term agreements from approximately 25 domestic and
Canadian suppliers. This diversity of suppliers and contract lengths allows NSP-Wisconsin to maintain competition
from suppliers and minimize supply costs.
See additional discussion of natural gas costs under Factors Affecting Results of Continuing Operations in
Management’s Discussion and Analysis under Item 7.
PSCo
Public Utility Regulation
Summary of Regulatory Agencies and Areas of Jurisdiction — PSCo is regulated by the CPUC with respect to its
facilities, rates, accounts, services and issuance of securities. PSCo holds a FERC certificate that allows it to transport
natural gas in interstate commerce without PSCo becoming subject to full FERC jurisdiction under the federal Natural
Gas Act.
Purchased Gas and Conservation Cost Recovery Mechanisms — PSCo has two retail adjustment clauses that recover
purchased gas and other resource costs:
•GCA — The GCA mechanism allows PSCo to recover its actual costs of purchased gas, including costs for
upstream pipeline services PSCo incurs to meet the requirements of its local distribution system customers. The
GCA is revised monthly to allow for changes in gas rates.
•DSMCA — PSCo has a low-income energy assistance program. The costs of this energy conservation and
weatherization program for low-income customers are recovered through the gas DSMCA.
Performance-Based Regulation and Quality of Service Requirements — The CPUC established a combined electric and
natural gas quality of service plan. See further discussion under Item 1, Electric Utility Operations.
Capability and Demand
PSCo projects peak day natural gas supply requirements for firm sales and backup transportation, which include
transportation customers contracting for firm supply backup, to be 1,864,044 MMBtu. In addition, firm transportation
customers hold 591,140 MMBtu of capacity for PSCo without supply backup. Total firm delivery obligation for PSCo
is 2,455,184 MMBtu per day. The maximum daily deliveries for PSCo in 2007 for firm and interruptible services were
1,798,030 MMBtu on Jan. 12, 2007.
PSCo purchases natural gas from independent suppliers. These purchases are generally priced based on market indices
that reflect current prices. The natural gas is delivered under natural gas transportation agreements with interstate
pipelines. These agreements provide for firm deliverable pipeline capacity of approximately 1,612,234 MMBtu/day,
which includes 831,866 MMBtu of supplies held under third-party underground storage agreements. In addition, PSCo
operates three company-owned underground storage facilities, which provide about 35,000 MMBtu of natural gas
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