Xcel Energy 2008 Annual Report Download - page 131

true-up to remove the commodity cost for the under recovered gas due to the rebilling process and indicated willingness
to work with NDPSC staff on a service quality credit for customers experiencing a module failure.
On Dec. 19, 2008, NSP-Minnesota met with MPUC staff, the OES and MOAG and in January 2009 filed its
response to the questions with the MPUC. NSP-Minnesota indicated a willingness to work with parties to develop a
remedy for the current situation, and to develop prospective service quality standards to address this and other concerns
around billing accuracy. NSP-Minnesota has determined that a number of AMR modules designed for commercial
customers are defective and as a result is broadening efforts to evaluate the performance of both gas and electric AMR
modules.
Annual Review of Remaining Lives — On Oct. 8, 2008, the MPUC approved NSP-Minnesota’s service lives, salvage
rates and resulting depreciation rates for its electric and gas production facilities as well as the depreciation study for
other gas and electric assets, effective Jan. 1, 2008. The net impact resulted in a reduction to depreciation expense of
$5.6 million recognized in the third quarter, or $7.5 million on an annual basis.
Other
Nuclear Refueling Outage Costs — In November 2007, NSP-Minnesota requested a change in the recovery method for
costs associated with refueling outages at its nuclear plants. The request sought approval to amortize refueling outage
costs over the period between refueling outages to better match revenues and expenses. This request would have reduced
2008 expenses for the NSP-Minnesota jurisdiction by approximately $25 million due to deferral and amortization over
an 18-month period versus expensed as incurred.
On Sept. 16, 2008, the MPUC authorized NSP-Minnesota to use a deferral and amortization method for the nuclear
refueling operating and maintenance costs effective Jan. 1, 2008. The ruling reduced operating and maintenance
expenses, but also resulted in revenue deferrals. The net result is a positive adjustment to year-end earnings of
approximately $21 million.
Pending and Recently Concluded Regulatory Proceedings — NDPSC and SDPUC
NSP-Minnesota North Dakota Electric Rate Case — In December 2007, NSP-Minnesota filed a request with the
NDPSC to increase North Dakota retail electric rates by $20.5 million, which would be an $18.2 million impact to
NSP-Minnesota due to the transfer of certain costs and revenues between base rates and the fuel cost recovery
mechanism. The request was based on an 11.50 percent ROE, an equity ratio of 51.77 percent, and a rate base of
approximately $242 million. Interim rates of $17.2 million became effective in February 2008.
The NDPSC approved a settlement agreement on Dec. 31, 2008, which calls for a base rate increase of $12.8 million,
based on an authorized ROE of 10.75 percent. Key terms of the settlement are listed below:
• Adjustments in depreciation expenses related to service life changes for generation plants and removal rates for
transmission and distribution plant, resulting in a $2.5 million decrease in the revenue deficiency.
• Sharing of wholesale margins, refunding to customers 85 percent of asset-based wholesale margins and
50 percent of non-asset-based margins through the fuel clause. Test year wholesale margins to be shared with
customers are estimated to be $1.9 million.
• An electric rate moratorium, under which NSP-Minnesota agreed to not implement an increase in electric rates
until Jan. 1, 2011.
• Sharing any earnings in excess of the authorized 10.75 percent ROE, providing customers 50 percent of any
earnings above 10.75 percent and 75 percent of any earnings above 11.25 percent.
• The settlement outlines a process for more NDPSC involvement in NSP-Minnesota’s resource planning process.
In addition to approving the settlement, the NDPSC terminated a 2005 filing regarding recovery of MISO Day 2
market charges, thus approving FCA recovery of all MISO Day 2 charges through the FCA retroactively and
prospectively. Based on the final order, there will be an estimated interim rate refund of $6.3 million, which will be
refunded back to customers by June 1, 2009. This refund was accrued for in 2008 and will have no impact on 2009
results. Final rates will be implemented for service on and after March 1, 2009.
Nuclear Refueling Outage Costs — In late 2007, NSP-Minnesota filed with both the NDPSC and SDPUC a request
asking for a change in the recovery method for costs associated with refueling outages at its nuclear plants. The request
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