Xcel Energy 2008 Annual Report Download - page 35

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standards violations, and if so whether any associated penalties will have a material adverse impact on operations, cash
flows or financial condition.
Electric Transmission Rate Regulation — The FERC regulates the rates charged and terms and conditions for electric
transmission services. FERC policy encourages utilities to turn over the functional control of their electric transmission
assets for the sale of electric transmission services to an RTO. NSP-Minnesota and NSP-Wisconsin are members of the
MISO RTO. SPS is a member of the SPP RTO. Each RTO separately files regional transmission tariff rates for
approval by the FERC. All members within that RTO are then subjected to those rates. PSCo is currently participating
with other utilities in the development of WestConnect, which is expected to provide certain regionalized transmission
services in the first quarter of 2009 and may provide wholesale energy market functions in the future, but would not be
an RTO.
In February 2007, the FERC issued final rules (Order No. 890) adopting revisions to its open access transmission
service rules. In December 2007, the FERC issued an order on rehearing (Order No. 890-A) making certain
modifications to Order No. 890, effective in March 2008. In June 2008, the FERC issued a further order on rehearing
(Order No. 890-B) making certain additional modifications to Order Nos. 890 and 890-A effective in September 2008.
Xcel Energy has submitted several compliance filings to modify its OATT to reflect the modified FERC rules.
Certain transmission service customers objected to aspects of the Xcel Energy Order No. 890, 890-A and 890-B
compliance filings. The various compliance filings are pending final FERC action.
Under Order No. 890, transmission providers are required to post certain information on their OASIS systems. In June
2008, the FERC initiated an audit of PSCo’s Order No. 890 OASIS compliance postings. PSCo was one of several
electric utilities notified that the FERC was commencing such an audit. In November 2008, the FERC issued an order
requiring certain compliance actions but did not impose financial penalties. PSCo concurred with the audit report, and
the audit is now completed.
The FERC issued proposed rules to modify the current standards of conduct rules governing the functional separation
of the Xcel Energy electric transmission function from the wholesale sales and marketing function. On Oct. 16, 2008,
the FERC issued revised final rules. On Dec. 15, 2008, the FERC extended the compliance deadline for certain
compliance actions to Jan. 30, 2009. Xcel Energy is taking actions to be compliant with the revised rules.
Centralized Regional Wholesale Markets — The FERC rules allow RTOs to operate centralized regional wholesale
energy markets. In April 2005, MISO began operation of a ‘‘Day 2’’ regional day-ahead and real time wholesale energy
market. MISO uses security constrained regional economic dispatch and congestion management using locational
marginal pricing (LMP) and FTRs. The Day 2 market is designed to provide more efficient generation dispatch over
the 15 state MISO region, including the NSP System. In 2007, SPP began operation of an Energy Imbalance Service
(EIS) market, which will provide a more limited wholesale energy balancing market for the region that includes the SPS
system.
In September 2007, MISO filed for FERC approval to establish a centralized regional wholesale ASM in 2008. The
ASM is intended to provide further efficiencies in generation dispatch by allowing for regional regulation response and
contingency reserve services through a bid-based market mechanism co-optimized with the Day 2 energy market. In
February 2008, the FERC issued an order conditionally approving the ASM tariff, but requiring certain changes. In
December 2008, the FERC issued orders approving the MISO filings necessary for MISO to start the ASM. MISO
began ASM operations in January 2009. To date, the ASM has generally functioned as anticipated.
In December 2007, MISO filed proposed changes to the TEMT (called Module E) to establish a long-term resource
adequacy proposal. The proposal contains mandatory requirements for any market participant serving load in the MISO
region, including the NSP System, to have and maintain access to sufficient resources to meet adequacy standards. The
resources used to meet a resource adequacy requirement may include self-generation capacity, firm purchased power and
demand response capability.
Under the Module E proposal, MISO will establish a Planning Reserve Margin for each Load-Serving Entity (LSE).
The MISO resource adequacy tariff would replace the NSP System current planning reserve obligations. In March
2008, the FERC issued an order approving the Module E tariff. Various parties requested rehearing of the FERC order.
MISO is expected to start Module E on March 1, 2009.
Market Based Rate Rules — In June 2007, the FERC issued a final order governing its market-based rate authorizations
to electric utilities. The FERC reemphasized its commitment to market-based pricing, but is revising the tests it uses to
assess whether a utility has market power and has emphasized that it intends to exercise greater oversight where it has
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