Xcel Energy 2008 Annual Report Download - page 154

Mallon vs. Xcel Energy Inc. — In August 2007, Xcel Energy, PSCo and PSRI commenced a lawsuit in Colorado state
court against Theodore Mallon and TransFinancial Corporation seeking damages for, among other things, breach of
contract and breach of fiduciary duties associated with the sale of COLI policies. In May 2008, Xcel Energy, PSCo and
PSRI filed an amended complaint that, among other things, adds Provident Life & Accident Insurance Company
(Provident) as a defendant and asserts claims for breach of contract, unjust enrichment and fraudulent concealment
against the insurance company. On June 23, 2008, Provident filed a motion to dismiss the complaint. On Oct. 22,
2008, the court granted Provident’s motion in part, but denied the motion with respect to a majority of the core causes
of action asserted by PSCo, Xcel Energy Inc. and PSRI. In January 2009, the court granted defendant Mallon’s motion
to amend his answer to, among other things, add a counterclaim for breach of contract and fraud against plaintiffs
PSRI, PSCo and Xcel Energy. Xcel Energy believes the counterclaims are without merit and intend to vigorously defend
against them.
Cabin Creek Hydro Generating Station Accident — In October 2007, employees of RPI Coatings Inc. (RPI), a
contractor retained by PSCo, were applying an epoxy coating to the inside of a penstock at PSCo’s Cabin Creek Hydro
Generating Station near Georgetown, Colo. This work was being performed as part of a corrosion prevention effort. A
fire occurred inside the penstock, which is a 4,000-foot long, 12-foot wide pipe used to deliver water from a reservoir
to the hydro facility. Four of the nine RPI employees working inside the penstock were positioned below the fire and
were able to exit the pipe. The remaining five RPI employees were unable to exit the penstock. Rescue crews located
the five employees a few hours later and confirmed their deaths. The accident was investigated by several state and
federal agencies, including the federal Occupational Safety and Health Administration (OSHA) and the U.S. Chemical
Safety Board and the Colorado Bureau of Investigations.
In March 2008, OSHA proposed penalties totaling $189,900 for twenty-two serious violations and three willful
violations arising out of the accident. In April 2008, Xcel Energy notified OSHA of its decision to contest all of the
proposed citations. On May 28, 2008 the Secretary of Labor filed its complaint, and Xcel Energy subsequently filed its
answer on June 17, 2008. The Court ordered this proceeding stayed until March 3, 2009 and indicated an extension of
the stay is possible. A lawsuit has been filed in Colorado state court in Denver on behalf of four of the deceased
workers and four of the injured workers (Foster, et. al. v. PSCo, et. al.). PSCo and Xcel Energy are named as
defendants in that case, along with RPI Coatings and related companies and the two other contractors who also
performed work in connection with the relining project at Cabin Creek. A second lawsuit (Ledbetter et. al vs. PSCo et.
al) has also been filed in Colorado state court in Denver on behalf of three employees allegedly injured in the accident.
A third lawsuit was filed on behalf of one of the deceased RPI workers in the California state court (Aguirre v. RPI, et.
al.), naming PSCo, RPI, and the two other contractors as defendants. The court subsequently dismissed the Aguirre
lawsuit, and it is anticipated that the plaintiff will refile the lawsuit in Colorado. Xcel Energy, Inc and PSCo intend to
vigorously defend themselves against the claims asserted in all three lawsuits.
Fru-Con Construction Corporation vs. UE et al. — In March 2005, Fru-Con Construction Corporation (Fru-Con)
commenced a lawsuit in U.S. District Court in the Eastern District of California against UE and the Sacramento
Municipal Utility District (SMUD) for damages allegedly suffered during the construction of a natural gas-fired,
combined-cycle power plant in Sacramento County. Fru-Con’s complaint alleges that it entered into a contract with
SMUD to construct the power plant and further alleges that UE was negligent with regard to the design services it
furnished to SMUD. In August 2005, the court granted UE’s motion to dismiss. Because SMUD remains a defendant
in this action, the court has not entered a final judgment subject to an appeal with respect to its order to dismiss UE
from the lawsuit. Because this lawsuit was commenced prior to the April 2005, closing of the sale of UE to Zachry,
Xcel Energy is obligated to indemnify Zachry for damages related to this case up to $17.5 million. Pursuant to the
terms of its professional liability policy, UE is insured up to $35 million.
Lamb County Electric Cooperative (LCEC) — In 1995, LCEC petitioned the PUCT for a cease and desist order
against SPS alleging SPS was unlawfully providing service to oil field customers in LCEC’s certificated area. In May
2003, the PUCT issued an order denying LCEC’s petition based on its determination that SPS in 1976 was granted a
certificate to serve the disputed customers. LCEC appealed the decision to the Texas state court. In August 2004, the
court affirmed the decision of the PUCT. In September 2004, LCEC appealed the decision to the Court of Appeals for
the Third Supreme Judicial District. In November 2008, the Court of Appeals issued an opinion affirming the decision
in favor of SPS. In December 2008, LCEC filed a petition for review with the Supreme Court of Texas. Consistent
with the standard practice before the Texas Supreme Court, on Jan. 20, 2009, the PUCT on behalf of all the
respondents in the case including SPS, notified the court that all the respondents would wait until the court determines
if it desired formal responses to LCEC’s request for review before they filed individual responses.
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