Xcel Energy 2008 Annual Report Download - page 36

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market-based rate authorizations. Each of the Xcel Energy utility subsidiaries has been granted market-based rate
authority and will be subject to the new rule. The Xcel Energy utility subsidiaries may not sell power at market-based
rates within the PSCo and SPS balancing authorities, where they have been found to have market power under the
FERC’s applicable analysis. Both PSCo and SPS have cost-based coordination tariffs that they may use to make sales in
their balancing authorities.
The FERC’s market rate orders allow mitigated utilities such as PSCo and SPS to sell at their borders at market-based
rates subject to certain conditions. Requests for rehearing addressing that aspect of the FERC’s market-based rate orders
are presently pending. Because PSCo makes such border sales, Xcel Energy sought such clarification from the FERC.
The outcome of the rehearing request may impact the Xcel Energy utilities subsidiaries’ continued ability to make such
border sales at market-based rates.
Affiliate Transaction Rules — On Feb. 21, 2008, the FERC issued Order No. 707, which amended the FERC’s
regulations to codify restrictions on affiliate transactions between franchised public utilities that have captive customers
or that own or provide transmission service over jurisdictional transmission facilities, and their market-regulated power
sales affiliates or non-utility affiliates. The Xcel Energy utility subsidiaries are subject to the new rules. The rules apply
historic SEC ‘‘at cost’’ pricing standards to transactions between service companies of utility holding company systems
and their FERC jurisdictional public utility affiliates. In September 2008, the National Rural Electric Cooperative
Association and the American Public Power Association filed a petition for review of Order No. 707 with the U.S.
Court of Appeals for the District of Columbia. The appeal is pending.
FERC Tie Line Investigation — In October 2007, the FERC Office of Enforcement, Division of Investigations (DOI),
commenced a non-public investigation of use of network transmission service across the Lamar Tie Line, a transmission
facility that connects PSCo and SPS. In July 2008, the DOI issued a preliminary report alleging Xcel Energy violated
certain FERC policies and rules and approved tariffs. The report represents the preliminary conclusions of the DOI and
is subject to additional procedures. The report does not constitute a finding by the FERC, which may accept, modify
or reject any or all of the preliminary conclusions set forth in the report. Xcel Energy disagrees with the preliminary
report and responded to the DOI allegations. Given the preliminary nature of this matter, Xcel Energy is unable to
determine if the resolution of this matter will have a material adverse impact on operations, cash flows or financial
condition.
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