Xcel Energy 2008 Annual Report Download - page 39

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NSP-Minnesota conducts natural gas price hedging activity that has been approved by the MPUC. This diversification
involves numerous domestic and Canadian supply sources with varied contract lengths.
The following table summarizes the average delivered cost per MMBtu of natural gas purchased for resale by
NSP-Minnesota’s regulated retail natural gas distribution business:
2008 .................................................................. $8.41
2007 .................................................................. 7.67
2006 .................................................................. 8.32
The cost of natural gas supply, transportation service and storage service is recovered through the PGA cost recovery
mechanism.
NSP-Minnesota has firm natural gas transportation contracts with several pipelines, which expire in various years from
2009 through 2028.
NSP-Minnesota has certain natural gas supply, transportation and storage agreements that 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 was committed to approximately $688 million in such obligations under these contracts.
NSP-Minnesota purchases firm natural gas supply utilizing long-term and short-term agreements from approximately 27
domestic and Canadian suppliers. This diversity of suppliers and contract lengths allows NSP-Minnesota to maintain
competition from suppliers and minimize supply costs.
See additional discussion of natural gas costs under Factors Affecting Results of Continuing Operations in Item 7 —
Management’s Discussion and Analysis.
NSP-Wisconsin
Public Utility Regulation
Summary of Regulatory Agencies and Areas of Jurisdiction — NSP-Wisconsin is regulated by the PSCW and the
MPSC. 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 period beginning the following January. The filing procedure and review
generally allow the PSCW sufficient time to issue an order and implement new base rates effective with the start of the
test year.
Natural Gas Cost Recovery Mechanisms — NSP-Wisconsin has a retail PGA cost recovery mechanism for Wisconsin
operations to recover changes in the actual cost of natural gas and transportation and storage services. The PSCW has
the authority to disallow certain costs if it finds the utility was not prudent in its procurement activities.
NSP-Wisconsin’s natural gas rate schedules for Michigan customers include a natural gas cost recovery factor, which is
based on 12-month projections. After each 12-month period, a reconciliation is submitted whereby over-collections are
refunded and any under-collections are collected from the customers over the subsequent 12-month period.
Capability and Demand
Natural gas supply requirements are categorized as firm or interruptible (customers with an alternate energy supply).
The maximum daily send-out (firm and interruptible) for NSP-Wisconsin was 143,216 MMBtu for 2008, which
occurred on Jan. 30, 2008.
NSP-Wisconsin purchases natural gas from independent suppliers. These purchases are generally priced based on market
indices that reflect current prices. The natural gas is delivered under transportation agreements with interstate pipelines.
These agreements provide for firm deliverable pipeline capacity of approximately 133,546 MMBtu/day. In addition,
NSP-Wisconsin has contracted with providers of underground natural gas storage services. These storage agreements
provide storage for approximately 26 percent of winter natural gas requirements and 39 percent of peak day, firm
requirements of NSP-Wisconsin.
NSP-Wisconsin also owns and operates one LNG plant with a storage capacity of 270,000 Mcf equivalent and one
propane-air plant with a storage capacity of 2,700 Mcf equivalent to help meet its peak requirements. These
peak-shaving facilities have production capacity equivalent to 18,408 MMBtu of natural gas per day, or approximately
13 percent of peak day firm requirements. LNG and propane-air plants provide a cost-effective alternative to annual
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