Xcel Energy 2008 Annual Report Download - page 145

discovered in the Cache la Poudre River. In November 2004, PSCo entered into an agreement with the EPA, the city
of Fort Collins and Schrader Oil Co. under which PSCo performed remediation and monitoring work. PSCo has
substantially completed work at the site, with the exception of ongoing maintenance and monitoring.
In November 2006, PSCo filed a natural gas rate case with the CPUC requesting recovery of additional clean-up costs
at the Fort Collins MGP site spent through September 2006, plus unrecovered amounts previously authorized from the
last rate case, which amounted to $10.8 million to be amortized over four years. In June 2007, PSCo entered into a
settlement agreement that included recovery of the full $10.8 million, but with a five-year amortization period. The
CPUC approved the agreement on June 18, 2007. The total amount to be recovered from customers is $13.1 million.
Estimated future project costs, based upon an assumed 30-year system operating life, including EPA oversight costs, are
approximately $2.8 million. This reflects a reduction in estimated EPA oversight costs over the life of the project, based
upon the most recent EPA oversight billing.
In April 2005, PSCo brought a contribution action against Schrader and related parties (collectively ‘‘Schrader’’) alleging
Schrader released hazardous substances into the environment and these releases caused MGP byproducts to migrate to
the Cache la Poudre River, thereby substantially increasing the scope and cost of remediation. PSCo requested damages,
including a portion of the costs PSCo incurred, to investigate and remove contaminated sediments from the Cache la
Poudre River. In November 2008, PSCo and Schrader entered into a settlement agreement whereby Schrader paid
$2.75 million to PSCo, and will make additional payments of $50,000 per year for the next five years for a total
settlement of $3.0 million. Net proceeds from the settlement will be credited to customers.
Third Party and Other Environmental Site Remediation
Asbestos Removal — Some of our facilities contain asbestos. Most asbestos will remain undisturbed until the facilities
that contain it are demolished or renovated. Xcel Energy has recorded an estimate for final removal of the asbestos as
an ARO.
See additional discussion of AROs below. It may be necessary to remove some asbestos to perform maintenance or
make improvements to other equipment. The cost of removing asbestos as part of other work is immaterial and is
recorded as incurred as operating expenses for maintenance projects, capital expenditures for construction projects or
removal costs for demolition projects.
Other Environmental Requirements
CAIR — In March 2005, the EPA issued the CAIR to further regulate SO2 and NOx emissions. The objective of
CAIR was to cap emissions of SO2 and NOx in the eastern United States, including Minnesota, Texas and Wisconsin,
which are within Xcel Energy’s service territory. In July 2008, the U. S. Court of Appeals for the District of Columbia
vacated CAIR and remanded the rule to EPA. On Dec. 23, 2008, the court reinstated CAIR while the EPA develops
new regulations in accordance with the court’s July opinion.
As currently written, CAIR has a two-phase compliance schedule, beginning in 2009 for NOx and 2010 for SO2, with
a final compliance deadline in 2015 for both emissions. Under CAIR, each affected state will be allocated an emissions
budget for SO2 and NOx that will result in significant emission reductions. It will be based on stringent emission
controls and forms the basis for a cap-and-trade program. State emission budgets or caps decline over time. States can
choose to implement an emissions reduction program based on the EPA’s proposed model program, or they can propose
another method, which the EPA would need to approve.
Under CAIR’s cap-and-trade structure, SPS can comply through capital investments in emission controls or purchase of
emission allowances from other utilities making reductions on their systems. The remaining capital investments for
NOx controls in the SPS region are estimated at $ 4.5 million. For 2009, the estimated NOx allowance compliance
costs are $2.5 million. Annual purchases of SO2 allowances are estimated in the range of $3 million to $17 million
each year, beginning in 2013, for phase I, based on expected allowance costs and fuel quality at the end of 2008.
The EPA has drafted a proposed rule to stay the effectiveness of CAIR in Minnesota. As such, cost estimates are not
included at this time for NSP-Minnesota. Purchases of NOx allowances for NSP-Wisconsin are estimated at
$2.1 million in 2009.
Xcel Energy believes the cost of any required capital investment or allowance purchases will be recoverable from
customers in rates.
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