Xcel Energy 2008 Annual Report Download - page 34

including regulation of retail rates and environmental matters. In addition to the matters discussed below, see Note 16
to the consolidated financial statements for a discussion of other regulatory matters.
FERC Rules Implementing Energy Policy Act of 2005 (Energy Act) — The Energy Act repealed PUHCA effective
Feb. 8, 2006 and required the FERC to conduct several rulemakings to adopt new regulations to implement various
aspects of the Energy Act. Since August 2005, the FERC has completed a number of rulemaking proceedings to modify
its regulations on a number of subjects, including:
• Adopting regulations requiring NERC to establish mandatory electric reliability standards; and
• Certifying more than 120 NERC reliability standards mandatory and subject to potential financial penalties up
to $1 million per day per violation for non-compliance. The FERC also approved certain WECC regional
reliability standards as mandatory, which are applicable to PSCo.
While Xcel Energy cannot predict the ultimate impact the new regulations will have on its operations or financial
results, Xcel Energy is taking actions that are intended to comply with and implement these new rules and regulations
as they become effective.
Electric Reliability Standards Compliance — The 2008 developments regarding reliability standards include the
following:
Compliance Audits
The NSP System and PSCo were subject to electric reliability standards compliance audits in the first and second
quarters of 2008, respectively. The Midwest Reliability Organization (MRO) found the NSP System in compliance with
all NERC standards audited. In September 2008, the Western Electricity Coordinating Council (WECC) auditors
issued a preliminary report finding PSCo possibly non-compliant with one of the standards for which PSCo was
audited. The audit report is subject to further WECC procedures.
Compliance with NERC Protective Maintenance Standards
In April 2008, the NSP System, PSCo and SPS filed self-reports with the MRO, WECC and SPP, respectively, relating
to failure to complete certain generation station battery tests required by NERC protective maintenance standards.
Based on preliminary discussions with the MRO, Xcel Energy expects that penalties may be assessed by certain of the
NERC regional entities in conjunction with the self-reports related to incomplete generation station battery tests. The
penalties are not expected to be material.
In June 2008, as a follow-up to the WECC compliance audit, PSCo filed a self-report with WECC regarding violations
of its relay maintenance plan. These reviews also found a lack of complete maintenance documentation for relays on
the NSP System and SPS system. The NSP System and SPS self-reported the NERC standards violations to the MRO
and SPP respectively. As required by NERC procedures, PSCo, NSP, and SPS also filed mitigation plans with the
regional entities to correct the testing deficiencies. The PSCo and SPS mitigation plans are complete and the NSP
mitigation plan is in progress.
In September 2008, as a result of a review of its procedures implementing certain NERC critical infrastructure
protection standards applicable to control centers effective July 1, 2008, PSCo, the NSP System and SPS filed
self-reports disclosing certain deficiencies in requirements applicable to access to critical cyber assets to the WECC,
MRO and SPP, respectively. PSCo, the NSP System and SPS filed mitigation plans within 30 days from the date of the
self-reports discussing how the deficiencies were corrected.
Except as noted, Xcel Energy is uncertain if the WECC compliance audit of PSCo or the NERC standards violations
self-reported in 2008 will result in financial penalties. If so, the penalties are not expected to be material.
MRO/NERC Compliance Investigation
In March 2008, NSP-Minnesota received notice that the MRO was commencing a compliance investigation of the
Sept. 18, 2007 event, when portions of the NSP System briefly islanded from the rest of the Eastern Interconnection,
as a result of a series of transmission line outages. Because the event affected more than one region, the NERC took
over the investigation. The final outcome of the NERC compliance investigation is unknown at this time. Given the
ongoing investigation, Xcel Energy is unable to determine if the outcome of this matter will result in any finding of
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