Xcel Energy 2008 Annual Report Download - page 33

Purchased Transmission Services — SPS has contractual arrangements with SPP and regional transmission service
providers to deliver power and energy to its native load customers, which are retail and wholesale load obligations with
terms of more than one year.
All of the transmission arrangements for the SPS systems are through FERC approved OATT. SPS also has several
transmission arrangements through the SPP OATT. The SPP is a RTO that, among other things, administers an OATT
for all its members. SPS’ entire service territory is within the SPP footprint, and SPS is a member of the SPP. The SPP
owns no transmission facilities. Rather, the SPP is responsible for ensuring that transmission service across facilities
owned by others, including SPS, is made available and used on a reliable and non-discriminatory basis. These OATTs
contain policies and procedures for reliable use of the transmission systems for transmission, generation and load
variations.
Fuel Supply and Costs
The following table shows the delivered cost per MMBtu of each significant category of fuel consumed for electric
generation, the percentage of total fuel requirements represented by each category of fuel and the total weighted average
cost of all fuels.
Weighted
Coal Natural Gas Average Fuel
SPS Generating Plants Cost Percent Cost Percent Cost
2008 ...................................... $1.86 71% $8.41 29% $3.78
2007 ...................................... 1.64 67 6.45 33 3.22
2006 ...................................... 1.89 66 6.30 34 3.38
See additional discussion of fuel supply and costs under Item 7 — Factors Affecting Results of Continuing Operations
in Management’s Discussion and Analysis and under Item 1A — Risks Associated with Our Business.
Fuel Sources
Coal — SPS purchases all of its coal requirements for its two coal facilities, Harrington and Tolk electric generating
stations, from TUCO, Inc. (TUCO). TUCO arranges for the purchase, receiving, transporting, unloading, handling,
crushing, weighing, and delivery of coal to meet SPS’ requirements. With oversight from Xcel Energy, TUCO is
responsible for negotiating and administering contracts with coal suppliers, transporters, and handlers. For the
Harrington station, the coal supply contract with TUCO expires in 2016. For the Tolk station, the coal supply contract
with TUCO expires in 2017. As of Dec. 31, 2008, coal supplies at the Harrington and Tolk sites were approximately
43 and 45 days supply, respectively. TUCO has coal agreements to supply 100 percent of SPS’ coal requirements in
2009, 85 percent of SPS’ coal requirements in 2010, and 40 percent of SPS’ coal requirements in 2011, which are
sufficient quantities to meet the primary needs of the Harrington and Tolk stations.
Natural gas — SPS uses both firm and interruptible natural gas and standby oil in combustion turbines and certain
boilers. Natural gas for SPS’ power plants are procured under contracts to provide an adequate supply of fuel. The
supply contracts expire in 2009 and 2010. The transportation and storage contracts expire in various years from 2009
to 2033. 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, SPS’ commitments
related to supply contracts were approximately $15 million and transportation and storage contracts were approximately
$271 million.
Wholesale Commodity Marketing Operations
SPS conducts various wholesale marketing operations, including the purchase and sale of electric capacity, energy and
energy related products. SPS uses physical and financial instruments to minimize commodity price and credit risk and
hedge supplies and purchases. See additional discussion under Item 7A — Quantitative and Qualitative Disclosures
About Market Risk.
Summary of Recent Federal Regulatory Developments
The FERC has jurisdiction over rates for electric transmission service in interstate commerce and electricity sold at
wholesale, hydro facility licensing, natural gas transportation, accounting practices and certain other activities of Xcel
Energy’s utility subsidiaries. State and local agencies have jurisdiction over many of Xcel Energy’s utility activities,
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