Xcel Energy 2007 Annual Report Download - page 71

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and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines
what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of
the business combination. SFAS No. 141R is to be applied prospectively to business combinations for which the
acquisition date is on or after the beginning of an entity’s fiscal year that begins on or after Dec. 15, 2008. Xcel Energy
is evaluating the impact of SFAS No. 141R on its consolidated financial statements for any potential business
combinations subsequent to Jan. 1, 2009.
Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51(SFAS No. 160) — In
December 2007, the FASB issued SFAS No. 160, which establishes accounting and reporting standards that require the
ownership interest in subsidiaries held by parties other than the parent be clearly identified and presented in the
consolidated balance sheets within equity, but separate from the parent’s equity; the amount of consolidated net income
attributable to the parent and the noncontrolling interest be clearly identified and presented on the face of the
consolidated statement of earnings; and changes in a parent’s ownership interest while the parent retains its controlling
financial interest in its subsidiary be accounted for consistently. This statement is effective for fiscal years beginning on
or after Dec. 15, 2008. Xcel Energy is evaluating the impact of SFAS No. 160 on its consolidated financial statements.
Derivatives, Risk Management and Market Risk
In the normal course of business, Xcel Energy and its subsidiaries are exposed to a variety of market risks. Market risk
is the potential loss or gain that may occur as a result of changes in the market or fair value of a particular instrument
or commodity. All financial and commodity-related instruments, including derivatives, are subject to market risk. These
risks, as applicable to Xcel Energy and its subsidiaries, are discussed in further detail later.
Commodity Price Risk — Xcel Energy’s utility subsidiaries are exposed to commodity price risk in their electric and
natural gas operations. Commodity price risk is managed by entering into long- and short-term physical purchase and
sales contracts for electric capacity, energy and energy-related products and for various fuels used in generation and
distribution activities. Commodity price risk is also managed through the use of financial derivative instruments. Xcel
Energy’s risk-management policy allows it to manage commodity price risk within each rate-regulated operation to the
extent such exposure exists.
Short-Term Wholesale and Commodity Trading Risk — Xcel Energy’s utility subsidiaries conduct various short-term
wholesale and commodity trading activities, including the purchase and sale of electric capacity and energy and other
energy-related instruments. Xcel Energy’s risk-management policy allows management to conduct these activities within
guidelines and limitations as approved by its risk management committee, which is made up of management personnel
not directly involved in the activities governed by this policy.
The fair value of the commodity trading contracts at Dec. 31, 2007, were as follows:
(Millions of Dollars)
Fair value of trading contracts outstanding at Jan. 1, 2007 ..................... $ (1.2)
Contracts realized or settled during the year .............................. (14.8)
Fair value of trading contract additions and changes during the year ............... 22.3
Fair value of trading contracts outstanding at Dec. 31, 2007 .................... $ 6.3
At Dec. 31, 2007, the fair values by source for the commodity trading net asset or liability balances were as follows:
Futures/Forwards
Maturity Maturity Total Futures/
Source of Less Than Maturity Maturity Greater Than Forwards Fair
Fair Value 1 Year 1 to 3 Years 4 to 5 Years 5 Years Fair Value
(Thousands of Dollars)
NSP-Minnesota ............... 1 $(2,499) $ — $— $— $(2,499)
2 3,769 980 — — 4,749
PSCo ..................... 1 (657) — — — (657)
2 3,893 701 — — 4,594
SPS* ...................... 1 63———63
2 163 38 — — 201
Total Futures/Forwards Fair Value .... $4,732 $1,719 $— $— $ 6,451
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