Xcel Energy 2009 Annual Report Download - page 111

PSCo’s current operational assets include approximately 320 MWs of jointly owned generating capacity, excluding
Comanche Unit 3. PSCo’s share of operating expenses and construction expenditures are included in the applicable
utility accounts. Each of the respective owners is responsible for the issuance of its own securities to finance its portion
of the construction costs. PSCo began major construction on a new jointly owned 750 MW, coal-fired unit in Pueblo,
Colo. in January 2006. Major construction on the new unit, Comanche Unit 3, was still underway in 2009 and
in-service is expected by the end of the first quarter of 2010. The plant experienced certain boiler tube leaks in the
start-up process that are being resolved. PSCo is the operating agent under the joint ownership agreement.
8. Income Taxes
COLI — In 2007, Xcel Energy and the U. S. government settled an ongoing dispute regarding PSCo’s right to deduct
interest expense on policy loans related to its COLI program that insured lives of certain PSCo employees. These COLI
policies were owned and managed by PSRI, a wholly owned subsidiary of PSCo. The total exposure for the tax years in
dispute through 2007 was approximately $583 million, which includes income tax, interest and potential penalties. As a
result of the settlement, the lawsuit filed by Xcel Energy in the United States District Court has been dismissed and the
Tax Court proceedings are in the process of being dismissed. Xcel Energy anticipates these proceedings to be dismissed
in 2010.
Terms of the Final Settlement
1. Xcel Energy paid the government a total of $64.4 million in full settlement of the government’s claims for tax,
penalty, and interest for tax years 1993-2007.
2. The recognition of this settlement resulted in total expense of $59.5 million, including federal and state tax,
interest on the federal and state tax liabilities, penalties, and tax benefits on the interest expense for the nine
months ended Sept. 30, 2007. The expense of $59.5 million includes $43.4 million of interest and penalties and
income tax of $16.1 million (net of tax benefit on the interest expense of $14.3 million).
3. Xcel Energy surrendered the policies to its insurer on Oct. 31, 2007, without recognizing a taxable gain
Federal Audit — Xcel Energy files a consolidated federal income tax return. In 2008, the IRS completed an
examination of Xcel Energy’s federal income tax returns for 2004 and 2005 (and research credits for 2003). The IRS
did not propose any material adjustments for those tax years. The statute of limitations applicable to Xcel Energy’s
2004 and 2005 federal income tax returns expired on Dec. 31, 2009. The IRS commenced an examination of tax years
2006 and 2007 in 2008, and this audit is expected to be completed in the first quarter of 2010. As of Dec. 31, 2009,
the IRS had not proposed any material adjustments to tax years 2006 and 2007.
State Audits — Xcel Energy files consolidated state tax returns based on income in its major operating jurisdictions of
Colorado, Minnesota, Texas, and Wisconsin, and various other state income-based tax returns. In 2008, the state of
Minnesota concluded an income tax audit through tax year 2001 and the state of Texas concluded an income tax audit
through tax year 2005. No material adjustments were proposed for these state audits. As of Dec. 31, 2009,
Xcel Energy’s earliest open tax years that are subject to examination by state taxing authorities in its major operating
jurisdictions are as follows:
State Year
Colorado ........................................................... 2004
Minnesota .......................................................... 2004
Texas ............................................................. 2005
Wisconsin .......................................................... 2005
The state of Texas has notified Xcel Energy of its intent to audit tax years 2006 and 2007. As of Dec. 31, 2009, the
Texas audit had not been scheduled. There currently are no other state income tax audits in progress. In 2009,
Xcel Energy received a request for information from the state of Minnesota relating to tax years 2002 through 2007 in
order to determine whether to undertake an audit of those years. As of Dec. 31, 2009, the state of Minnesota had not
informed Xcel Energy of its intentions.
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