Xcel Energy 2008 Annual Report Download - page 26

NSP-Minnesota expects sufficient uranium, conversion and enrichment to be available for the total fuel requirements of
its nuclear generating plants. Contracts for additional uranium are currently being negotiated that would provide
additional supply requirements through 2012. Some exposure to price volatility will remain, due to index-based pricing
structures on the contracts.
Natural gas — The NSP System uses both firm and interruptible natural gas and standby oil in combustion turbines
and certain boilers. Natural gas supplies and associated transportation and storage services for power plants are procured
under contracts with various terms to provide an adequate supply of fuel. The supply, transportation and storage
contracts expire in various years from 2009 to 2028. Certain natural gas supply and transportation agreements include
obligations for the purchase and/or delivery of specified volumes of natural gas or to make payments in lieu of delivery.
At Dec. 31, 2008, NSP-Minnesota’s commitments related to supply contracts were $89 million and commitments
related to transportation and storage contracts were approximately $652 million. The NSP System has limited on-site
fuel oil storage facilities and relies on the spot market for incremental supplies, if needed.
Wholesale Commodity Marketing Operations
NSP-Minnesota conducts various wholesale marketing operations, including the purchase and sale of electric capacity,
energy and energy related products. NSP-Minnesota uses physical and financial instruments to reduce commodity price
and credit risk and hedge supplies and purchases. See additional discussion under Item 7A — Quantitative and
Qualitative Disclosures About Market Risk.
NSP-Wisconsin
Public Utility Regulation
Summary of Regulatory Agencies and Areas of Jurisdiction — Retail rates, services and other aspects of NSP-Wisconsin’s
operations are regulated by the PSCW and the MPSC, within their respective states. In addition, each of the state
commissions certifies the need for new generating plants and electric transmission lines before the facilities may be sited
and built. NSP-Wisconsin is subject to the jurisdiction of the FERC with respect to its wholesale electric operations,
hydroelectric generation licensing, accounting practices, wholesale sales for resale and the transmission of electricity in
interstate commerce. NSP-Wisconsin has received authorization from the FERC to make wholesale electric sales at
market-based prices (see market-based rate authority discussion).
The PSCW has a biennial base-rate filing requirement. By June of each odd-numbered year, NSP-Wisconsin must
submit a rate filing for the test year beginning the following January.
Bay Front Biomass Gasification — On Feb. 23, 2009, NSP-Wisconsin filed an application for a certificate of authority
to install biomass gasification technology at the Bay Front Power Plant in Ashland, Wis. Currently, two of the three
boilers at Bay Front use biomass as their primary fuel to generate electricity. The proposed project will convert the
existing coal-fired unit to biomass gasification technology allowing the plant to use 100 percent biomass in all three
boilers. The project, estimated at $58 million, will require additional biomass receiving and handling facilities at the
plant, an external gasifier, minor modifications to the plant’s remaining coal-fired boiler and an enhanced air quality
control system. The total generation output of the plant is not expected to change significantly as a result of the
project. However, the project will improve the environmental performance of the plant and contribute towards state
renewable energy standards in the region. Following all state regulatory approvals, engineering and design work is
expected to begin in 2010, and the unit could be operational by late 2012. When complete, the Bay Front Power Plant
will be the largest biomass-fueled power plant in the Midwest and one of the largest in the nation.
Fuel and Purchased Energy Cost Recovery Mechanisms — NSP-Wisconsin does not have an automatic electric fuel
adjustment clause for Wisconsin retail customers. Instead, it has a procedure that compares actual monthly and
anticipated annual fuel costs with those costs that were included in the latest retail electric rates. If the comparison
results in a difference of 2 percent above or below base rates, the PSCW may hold hearings limited to fuel costs and
revise rates upward or downward. Any revised rates would remain in effect until the next rate change. The adjustment
approved is calculated on an annual basis, but applied prospectively. NSP-Wisconsin’s wholesale electric rate schedules
include an FCA to provide for adjustments to billings and revenues for changes in the cost of fuel and purchased
energy.
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