Xcel Energy 2008 Annual Report Download - page 47

• Third party sites, such as landfills, to which we are alleged to be a potentially responsible party that sent
hazardous materials and wastes.
We are also subject to mandates to provide customers with clean energy, renewable energy and energy conservation
offerings. These mandates are designed in part to mitigate the potential environmental impacts of utility operations.
Failure to meet the requirements of these mandates may result in fines or penalties, which could have a material adverse
effect on our results of operations. If our regulators do not allow us to recover all or a part of the cost of capital
investment or the operating and maintenance costs incurred to comply with the mandates, it could have a material
adverse effect on our results of operations.
In addition, existing environmental laws or regulations may be revised, new laws or regulations seeking to protect the
environment may be adopted or become applicable to us and we may incur additional unanticipated obligations or
liabilities under existing environmental laws and regulations.
We are subject to physical and financial risks associated with climate change.
There is a growing consensus that emissions of GHGs are linked to global climate change. Climate change creates
physical and financial risk. Physical risks from climate change include an increase in sea level and changes in weather
conditions, such as an increase in changes in precipitation and extreme weather events. Xcel Energy does not serve any
coastal communities so the possibility of sea level rises does not directly affect Xcel Energy or its customers. Our
customers’ energy needs vary with weather conditions, primarily temperature and humidity. For residential customers,
heating and cooling represent their largest energy use. To the extent weather conditions are affected by climate change,
customers’ energy use could increase or decrease depending on the duration and magnitude of the changes. Increased
energy use due to weather changes may require us to invest in more generating assets, transmission and other
infrastructure to serve increased load. Decreased energy use due to weather changes may affect our financial condition,
through decreased revenues. Extreme weather conditions in general require more system backup, adding to costs, and
can contribute to increased system stresses, including service interruptions. Weather conditions outside of the company’s
service territory could also have an impact on Xcel Energy revenues. Xcel Energy buys and sells electricity depending
upon system needs and market opportunities. Extreme weather conditions creating high energy demand on our own
and/or other systems may raise electricity prices as we buy short-term energy to serve our own system, which would
increase the cost of energy we provide to our customers. Severe weather impacts Xcel Energy service territories,
primarily through thunderstorms, tornadoes and snow or ice storms. We include storm restoration in our budgeting
process as a normal business expense and we anticipate continuing to do so. To the extent the frequency of extreme
weather events increases, this could increase our cost of providing service. Changes in precipitation resulting in droughts
or water shortages could adversely affect our operations, principally our fossil generating units. A negative impact to
water supplies due to long-term drought conditions could adversely impact our ability to provide electricity to
customers, as well as increase the price they pay for energy. We may not recover all costs related to mitigating these
physical and financial risks.
To the extent climate change impacts a region’s economic health, it may also impact Xcel Energy revenues. Xcel
Energy’s financial performance is tied to the health of the regional economies we serve. The price of energy, as a factor
in a region’s cost of living as well as an important input into the cost of goods, has an impact on the economic health
of our communities. The cost of additional regulatory requirements, such as a tax on GHGs or additional
environmental regulation, would normally be borne by consumers through higher prices for energy and purchased
goods. To the extent financial markets view climate change and emissions of GHGs as a financial risk, this could
negatively affect our ability to access capital markets or cause Xcel Energy to receive less than ideal terms and
conditions.
We may be subject to legislative and regulatory responses to climate change, with which compliance could be difficult
and costly.
Legislative and regulatory responses related to climate change create financial risk. Increased public awareness and
concern may result in more regional and/or federal requirements to reduce or mitigate the effects of GHG. Numerous
states have announced or adopted programs to stabilize and reduce GHG and federal legislation has been introduced in
both houses of Congress. Likewise, the EPA has issued an Advanced Notice of Proposed Rulemaking that proposes to
regulate GHGs under the Clean Air Act. Xcel Energy’s electric generating facilities are likely to be subject to regulation
under climate change laws introduced at either the state or federal level within the next few years. Xcel Energy is
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