Xcel Energy 2008 Annual Report Download - page 48

advocating with state and federal policy makers to design climate change regulation that is effective, flexible, low-cost
and consistent with our environmental leadership strategy.
Many of the federal and state climate change legislative proposals use a ‘‘cap and trade’’ policy structure, in which GHG
emissions from a broad cross-section of the economy would be subject to an overall cap. Under the proposals, the cap
becomes more stringent with the passage of time. The proposals establish mechanisms for GHG sources, such as power
plants, to obtain ‘‘allowances’’ or permits to emit GHGs during the course of a year. The sources may use the
allowances to cover their own emissions or sell them to other sources that do not hold enough emissions for their own
operations. Proponents of the cap and trade policy believe it will result in the most cost effective, flexible emission
reductions. The impact of legislation and regulations, including a ‘‘cap and trade’’ structure, on Xcel Energy and its
customers will depend on a number of factors, including whether GHG sources in multiple sectors of the economy are
regulated, the overall GHG emissions cap level, the degree to which GHG offsets are allowed, the allocation of
emission allowances to specific sources and the indirect impact of carbon regulation on natural gas and coal prices. An
important factor is Xcel Energy’s ability to recover the costs incurred to comply with any regulatory requirements that
are ultimately imposed. We may not recover all costs related to complying with regulatory requirements imposed on
Xcel Energy or its operating subsidiaries. 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.
For further discussion see the Management’s Discussion and Analysis section and Note 17 to the consolidated financial
statements.
Our subsidiary, NSP-Minnesota, is subject to the risks of nuclear generation.
NSP-Minnesota’s two nuclear stations, Prairie Island and Monticello, subject it to the risks of nuclear generation, which
include:
• The risks associated with storage, handling and disposal of radioactive materials and the current lack of a
long-term disposal solution for radioactive materials;
• Limitations on the amounts and types of insurance commercially available to cover losses that might arise in
connection with nuclear operations; and
• Uncertainties with respect to the technological and financial aspects of decommissioning nuclear plants at the
end of its licensed lives.
The NRC has authority to impose licensing and safety-related requirements for the operation of nuclear generation
facilities. In the event of non-compliance, the NRC has the authority to impose fines or shut down a unit, or both,
depending upon its assessment of the severity of the situation, until compliance is achieved. Revised safety requirements
promulgated by the NRC could necessitate substantial capital expenditures at NSP-Minnesota’s nuclear plants. In
addition, the Institute for Nuclear Power Operations (INPO) reviews our nuclear operations and nuclear generation
facilities. Compliance with INPO recommendations could result in substantial capital expenditures or a substantial
increase in operating expenses.
If an incident did occur, it could have a material adverse effect on our results of operations or financial condition.
Furthermore, the non-compliance of other nuclear facilities operators with applicable regulations or the occurrence of a
serious nuclear incident at other facilities could result in increased regulation of the industry as a whole, which could
then increase NSP-Minnesota’s compliance costs and impact the results of operations of its facilities.
Economic conditions could negatively impact our business.
Our operations are affected by local, national and worldwide economic conditions. The consequences of a prolonged
recession may include a lower level of economic activity and uncertainty regarding energy prices and the capital and
commodity markets. A lower level of economic activity might result in a decline in energy consumption, which may
adversely affect our revenues and future growth. Instability in the financial markets, as a result of recession or otherwise,
also may affect the cost of capital and our ability to raise capital, which are discussed in greater detail in the Capital
Markets risk section above.
Current economic conditions may be exacerbated by insufficient financial sector liquidity leading to potential increased
unemployment, which may impact customers’ ability to pay timely, increase customer bankruptcies, and may lead to
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