Xcel Energy 2007 Annual Report Download - page 88

XCEL ENERGY INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Business and System of Accounts — Xcel Energy’s utility subsidiaries are engaged principally in the generation, purchase,
transmission, distribution and sale of electricity and in the purchase, transportation, distribution and sale of natural gas.
The utility subsidiaries are subject to regulation by the FERC and state utility commissions. All of the utility
companies’ accounting records conform to the FERC uniform system of accounts or to systems required by various
state regulatory commissions, which are the same in all material respects.
Principles of Consolidation — In 2007, Xcel Energy continuing operations included the activity of four utility
subsidiaries that serve electric and natural gas customers in 8 states. These utility subsidiaries are NSP-Minnesota,
NSP-Wisconsin, PSCo and SPS. These utilities serve customers in portions of Colorado, Michigan, Minnesota, New
Mexico, North Dakota, South Dakota, Texas and Wisconsin. Along with WGI, an interstate natural gas pipeline, and
WYCO, a natural gas pipeline and storage company in Colorado, these companies comprise our continuing regulated
utility operations.
Xcel Energy’s nonregulated subsidiary in continuing operations is Eloigne (investments in rental housing projects that
qualify for low-income housing reported tax credits). Xcel Energy owns the following additional direct subsidiaries,
some of which are intermediate holding companies with additional subsidiaries: Xcel Energy Wholesale Energy
Group Inc., Xcel Energy Markets Holdings Inc., Xcel Energy Ventures Inc., Xcel Energy Retail Holdings Inc., Xcel
Energy Communications Group Inc., Xcel Energy WYCO Inc. and Xcel Energy O&M Services Inc. Xcel Energy and
its subsidiaries collectively are referred to as Xcel Energy.
Xcel Energy in the past had several other subsidiaries, which were sold or divested. For more information, see Note 3 to
the consolidated financial statements.
During 2007, Xcel Energy became the sole remaining partner of NMC. This is the result of two of the remaining three
partners leaving NMC during 2007. As a result, both companies were required to pay an exit fee and surrender their
equity interest in NMC. Xcel Energy owns 100 percent of the equity and has a controlling interest.
Xcel Energy uses the equity method of accounting for its investments in partnerships, joint ventures and certain projects
for which it does not have a controlling financial interest. Under this method, a proportionate share of pretax income is
recorded as equity earnings from investments in affiliates. In the consolidation process, all intercompany transactions
and balances are eliminated. Xcel Energy has investments in several plants and transmission facilities jointly owned with
other utilities. These projects are accounted for on a proportionate consolidation basis, consistent with industry practice.
See Note 6 to the consolidated financial statements.
Revenue Recognition — Revenues related to the sale of energy are generally recorded when service is rendered or energy
is delivered to customers. However, the determination of the energy sales to individual customers is based on the
reading of their meter, which occurs on a systematic basis throughout the month. At the end of each month, amounts
of energy delivered to customers since the date of the last meter reading are estimated and the corresponding unbilled
revenue is estimated.
Xcel Energy’s utility subsidiaries have various rate-adjustment mechanisms in place that currently provide for the
recovery of purchased natural gas and electric fuel and purchased energy costs. These cost-adjustment tariffs may
increase or decrease the level of costs recovered through base rates and are revised periodically, for any difference
between the total amount collected under the clauses and the recoverable costs incurred. Where applicable under
governing state regulatory commission rate orders, fuel costs over-recoveries (the excess of fuel revenue billed to
customers over fuel costs incurred) are deferred as current regulatory liabilities and under-recoveries (the excess of fuel
costs incurred over fuel revenues billed to customers) are deferred as current regulatory assets. In addition, Xcel Energy
presents its revenue net of any excise or other fiduciary-type taxes or fees. A summary of significant rate-adjustment
mechanisms follows:
• NSP-Minnesota’s rates include a cost-of-fuel-and-purchased-energy and a cost-of-gas recovery mechanism allowing
recovery of the respective costs, which are trued-up on a two-month and annual basis, respectively.
The electric cost-of-fuel-and-purchased-energy mechanism also provides a sharing among shareholders and
customers of certain margins on short-term wholesale sales and commodity trading.
• NSP-Wisconsin’s rates include a cost-of-gas adjustment clause for purchased natural gas, but not for purchased
electric energy or electric fuel. In Wisconsin, requests can be made for recovery of those electric costs
78