Xcel Energy 2008 Annual Report Download - page 139

Golden Spread Complaint Settlement — In December 2007, SPS reached a settlement with Golden Spread (which now
includes Lyntegar Electric) and Occidental regarding base rate and fuel issues raised in the complaint described above as
well as a subsequent rate proceeding. In December 2007, this comprehensive offer of settlement (the Settlement) was
filed with the FERC. On April 21, 2008, the FERC approved the Settlement with a minor modification to the formula
rate proposed by the FERC and accepted by the parties. The Settlement provides for:
• A $1.25 million payment by SPS to Golden Spread related to resolve a dispute concerning the quantities Golden
Spread was entitled to take under its existing partial requirements agreement for the years 2006 and 2007. The
Settlement caps those quantities for the period 2008 through 2011. SPS is not required to make any fuel refunds
to Golden Spread that were the subject of the Complaint under the terms of the Settlement.
• An extended partial requirements contract at system average cost, with a capacity amount that ramps down over
the period 2012 through 2019 from 500 MW to 200 MW. Golden Spread agreed to hold SPS harmless from
any future adverse regulatory treatment regarding the proposed sale and SPS agreed to contingent payments
ranging from $3 million to a maximum of $12 million, payable in 2012, in the event that there is an adverse
cost assignment decision or a failure to obtain state approvals.
Resolution of base rates in the Complaint without any adjustment to the existing rates for the period January 2005
through June 30, 2006. The Settlement also resolves all base rate issues in SPS’ subsequent proceeding related to the
period July 1, 2006 through Sept. 30, 2008, other than the method to be used to allocate demand related costs and
provided for two sets of agreed-on rates that are dependent on the ultimate resolution of that issue.
For July 1, 2008 and beyond, Golden Spread will be under a formula rate for power supply service. The rate will be
based on actual data the most recent historic year adjusted for known and measurable changes and trued up to the
actual performance in the subsequent calendar year.
Order on Wholesale Rate Complaints — In April 2008, the FERC issued its Order on the Complaint applied to the
remaining non-settling parties. The Order addresses base rate issues for the period from Jan. 1, 2005 through June 30,
2006, for SPS’ full requirements customers who pay traditional cost-based rates and requires certain refunds.
•Base Rates: The FERC determined: (1) the ROE should be 9.33 percent; (2) rates should be based on a 12 CP
allocator; and (3) the treatment of market based rate contracts in the test year should be to credit revenues to
the cost of service rather than allocating costs to the agreements. The revenue requirement established by the
FERC results in proposed revenues that are estimated to be approximately $25 million, or approximately
$6.9 million below the level charged these customers during this 18-month period. Rates for full requirements
customers, the New Mexico Cooperatives and Cap Rock, as well as an interruptible contract with PNM for the
period beginning July 1, 2006, are the subject of settlements that have either been approved or are pending
before the FERC. These settlements are described in Wholesale 2005 Power Base Rate Application below.
•Fuel Clause: The FERC determined that the method for calculating fuel and purchased energy cost charges to
the complaining customer is to deduct from such costs incremental fuel and purchased energy costs, which it is
attributing to SPS’ market based intersystem sales on the basis that these are ‘‘opportunity’’ sales under its
precedent. The FERC ordered that refunds of fuel cost charges based on this method of determining the FCAC
should begin as of Jan. 1, 2005 (the refund effective date in the case). The FERC ordered SPS to file a
compliance filing calculating its refund obligation and implement the instructions in the order in calculating its
FCAC charges going forward from that date. While the order is subject to interpretation with respect to aspects
of the calculation of the refund obligation, SPS does not expect its refund obligation to its full requirements
customers from Jan. 1, 2005 through March 31, 2008, to exceed $11 million. PNM has filed a separate
complaint that any refund obligation to PNM will be determined in that docket. SPS is reviewing the Order
and has not yet determined whether to seek rehearing.
• The FERC also ruled on two other FCA issues. First, it required that wind contracts be evaluated on an
individual contract basis rather than in aggregate. Second, the FERC determined that an after-the-fact screen
should be applied to all QF purchases to determine if they are economic. While this review will require
additional effort, it is not expected that this will result in additional refunds as all of the individual wind
contracts as well as the QF purchases are typically economic when compared to market energy prices.
Several parties, including SPS, filed requests for rehearing on the order. These requests are pending before the FERC. In
July 2008, SPS submitted its compliance report to the FERC. In the report, SPS has calculated the base rate refund for
the 18-month period to be equal to $6.1 million and the fuel refund to be equal to $4.4 million. Several wholesale
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