Xcel Energy 2009 Annual Report Download - page 126

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12. Other Income, Net
Other income (expense), net, for the years ended Dec. 31 consisted of the following:
2009 2008 2007
(Thousands of Dollars)
Interest income .................................. $14,928 $ 29,753 $24,093
Other nonoperating income .......................... 3,650 6,320 6,510
Insurance policy (expenses) income ...................... (8,646) 4,337 (21,548)
Other nonoperating expenses .......................... (161) (4) (7)
Other income, net ............................... $9,771 $ 40,406 $ 9,048
13. Derivative Instruments
Effective Jan. 1, 2009, Xcel Energy adopted new guidance on disclosures about derivative instruments and hedging
activities contained in ASC 815 Derivatives and Hedging, which requires additional disclosures regarding why an entity
uses derivative instruments, the volume of an entity’s derivative activities, the fair value amounts recorded to the
consolidated balance sheet for derivatives, the gains and losses on derivative instruments included in the consolidated
statement of income or deferred, and information regarding certain credit-risk-related contingent features in derivative
contracts.
Xcel Energy and its utility subsidiaries enter into derivative instruments, including forward contracts, futures, swaps and
options, for trading purposes and to reduce risk in connection with changes in interest rates, utility commodity prices
and vehicle fuel prices, as well as variances in forecasted weather. See additional information pertaining to the valuation
of derivative instruments in Note 15 to the consolidated financial statements.
Interest Rate Derivatives — Xcel Energy and its utility subsidiaries enter into various instruments that effectively fix the
interest payments on certain floating rate debt obligations or effectively fix the yield or price on a specified benchmark
interest rate for a specific period. These derivative instruments are generally designated as cash flow hedges for
accounting purposes.
At Dec. 31, 2009, accumulated OCI related to interest rate derivatives included $1.1 million of net gains expected to
be reclassified into earnings during the next 12 months as the related hedged interest rate transactions impact earnings.
During the fourth quarter of 2009, Xcel Energy settled a $25 million notional value interest rate swap at SPS. This
interest rate swap was not designated as a hedging instrument, as such, gains and losses from changes in the fair value
of the interest rate swap were recorded to earnings.
Commodity Derivatives — Xcel Energy’s utility subsidiaries enter into derivative instruments to manage variability of
future cash flows from changes in commodity prices in their electric and natural gas operations, as well as for trading
purposes. This could include the purchase or sale of energy or energy-related products, natural gas to generate electric
energy, gas for resale and vehicle fuel.
At Dec. 31, 2009, Xcel Energy had various vehicle fuel contracts designated as cash flow hedges extending through
December 2012. Xcel Energy’s utility subsidiaries also enter into derivative instruments that mitigate commodity price
risk on behalf of electric and natural gas customers but are not designated as qualifying hedging transactions. Changes
in the fair value of non-trading commodity derivative instruments are recorded in OCI or deferred as a regulatory asset
or liability. The classification as a regulatory asset or liability is based on commission approved regulatory recovery
mechanisms. Xcel Energy recorded immaterial amounts to income related to the ineffectiveness of cash flow hedges for
the years ended Dec. 31, 2009 and 2008.
At Dec. 31, 2009, accumulated OCI related to vehicle fuel cash flow hedges included $3.0 million of net losses
expected to be reclassified into earnings during the next 12 months as the hedged transactions occur.
Additionally, Xcel Energy’s utility subsidiaries enter into commodity derivative instruments for trading purposes not
directly related to commodity price risks associated with serving their electric and natural gas customers. Changes in the
fair value of these commodity derivatives are recorded in income, subject to applicable customer margin-sharing
mechanisms.
Xcel Energy had no derivative instruments designated as fair value hedges during the period ended Dec. 31, 2009.
Therefore, no gains or losses from fair value hedges or related hedged transactions were recognized for the period.
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