Xcel Energy 2007 Annual Report Download - page 66

Capital Expenditure Regulation — Xcel Energy’s utility subsidiaries make substantial investments in plant additions to
build and upgrade power plants, and expand and maintain the reliability of the energy transmission and distribution
systems. In addition to filing for increases in base rates charged to customers to recover the costs associated with such
investments, the CPUC and MPUC approved proposals to recover, through a rate rider, costs to upgrade generation
plants and lower emissions, and increased transmission. These rate riders are expected to provide significant cash flows
to enable recovery of costs incurred on a timely basis. For wholesale electric transmission services, Xcel Energy has,
consistent with FERC policy, implemented or proposed to establish formula rates for each of the utility subsidiaries that
will provide annual rate increases as transmission investments increase in a manner similar to the rate riders.
Environmental Matters
Environmental costs include payments for nuclear plant decommissioning, storage and ultimate disposal of spent
nuclear fuel, disposal of hazardous materials and waste, remediation of contaminated sites and monitoring of discharges
to the environment. A trend of greater environmental awareness and increasingly stringent regulation has caused, and
may continue to cause, higher operating expenses and capital expenditures for environmental compliance.
In addition to nuclear decommissioning and spent nuclear fuel disposal expenses, costs charged to operating expenses
for environmental monitoring and disposal of hazardous materials and waste were approximately:
• $173 million in 2007;
• $152 million in 2006; and
• $147 million in 2005.
Xcel Energy expects to expense an average of approximately $201 million per year from 2008 through 2012 for similar
costs. However, the precise timing and amount of environmental costs, including those for site remediation and disposal
of hazardous materials, are currently unknown. Additionally, the extent to which environmental costs will be included
in and recovered through rates is not certain.
Capital expenditures for environmental improvements at regulated facilities were approximately:
• $438.6 million in 2007;
• $571.2 million in 2006; and
• $327.7 million in 2005.
Xcel Energy expects to incur approximately $455 million in capital expenditures for compliance with environmental
regulations and environmental improvements in 2008, and approximately $269 million of related expenditures from
2009 through 2012. Included in these amounts are expenditures to reduce emissions of generating plants in Minnesota
and Colorado.
• Approximately $101 million and $14 million of these expenditures, respectively, are related to modifications to
reduce the emissions of NSP-Minnesota’s generating plants pursuant to the MERP.
• Expected expenditures related to environmental modifications on Comanche Units 1 and 2 are approximately
$156 million in 2008 and $38 million from 2009 through 2012.
• The remaining expected capital expenditures relate to various other environmental projects.
• In addition, NSP-Minnesota has proposed a $1.1 billion upgrade at the Sherco coal-fired power plant. The
project will increase capacity and reduce emissions. The MPUC is expected to rule on the project in 2008. If
approved, construction would start in late 2008 and be completed in 2012.
See Note 15 to the consolidated financial statements for further discussion of Xcel Energy’s environmental
contingencies.
Generating facilities throughout the Xcel Energy territory are subject to state-only mercury reduction requirements. In
Minnesota mercury emissions from A.S. King and Sherburne County generating facilities will be regulated by the
Minnesota Mercury Legislation, and in Colorado, seven units are subject to a mercury emissions rule passed by the
Colorado Air Quality Control Commission. These facilities, as well as other generating units, were also subject to
regulation under the federal CAMR; however, the D.C. Circuit Court of Appeals vacated this rule on Feb. 8, 2008.
The EPA requires states to develop implementation plans to comply with the BART/Regional Haze Rules by December
2007. At this time, MPCA is not requiring any BART specific controls that go beyond controls required for CAIR
compliance. In response to the BART regulations promulgated by the Colorado Air Quality Control Commission,
PSCo submitted its BART alternatives analysis, which had been approved by the CAPCD, as well as the Colorado Air
Quality Control Commission during a public hearing in December 2007. CAPCD’s BART determinations and
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