Xcel Energy 2009 Annual Report Download - page 141

term of its partial requirements sale to Golden Spread beginning 2012 at 500 MW and ramping down to 200 MW for
the two years prior to the end of the term in 2019. The settlement made the extended purchase contingent on certain
state approvals. Golden Spread agreed to hold SPS harmless from any future adverse regulatory treatment regarding the
proposed sale and SPS agreed to contingent payments ranging from $3 million to a maximum of $12 million, payable
in 2012, in the event that there is an adverse cost assignment decision or a failure to obtain state approvals. Request for
approvals are currently pending before the NMPRC and the PUCT, and SPS anticipates actions by the state
commissions during the first quarter of 2010.
New Mexico Cooperatives’ Complaint Settlement — In January 2010, SPS reached a settlement with Farmers’ Electric
Cooperative of New Mexico, Lea County Electric Cooperative, Central Valley Electric Cooperative and Roosevelt
County Electric Cooperative, all wholesale customers of SPS located in New Mexico, and Occidental regarding the
same base rate and fuel issues raised in the complaint described above. The settlement with these wholesale customers is
now pending approval by the FERC. The settlement resolves all issues arising from the complaint docket and
implements a replacement contract with a formula production rate at 10.5 percent ROE and extended term of its
requirements sale to the four wholesale customers. The four wholesale customers must reduce their system average cost
power purchases by 90 to 100 MW in 2012, and implement staged reductions in system average cost power purchases
through the term of the agreement, which terminates on May 31, 2026. The settlement made the replacement contract
contingent on certain state approvals. In the event all regulatory approvals are not received, the Settlement includes a
one time total contingent payment of $12 million by SPS to these wholesale customers. These wholesale customers
agreed to hold SPS harmless from any future adverse regulatory treatment regarding the proposed wholesale power sale.
Order on Wholesale Rate Complaints — In April 2008, the FERC issued its Order on the Complaint applied to the
remaining non-settling parties. The Order addresses base rate issues for the period from Jan. 1, 2005 through June 30,
2006, for SPS’ full requirements customers who pay traditional cost-based rates and requires certain refunds.
Several parties, including SPS, filed requests for rehearing on the order. These requests are pending before the FERC. In
July 2008, SPS submitted its compliance report to the FERC and calculated the base rate refund for the 18-month
period to be $6.1 million and the fuel refund to be $4.4 million. Several wholesale customers have protested the
calculations. Once the final refund amounts are approved by the FERC, interest will be added to the refund due to the
remaining non-settled customers. As of Dec. 31, 2009, SPS has accrued an amount sufficient to cover the estimated
refund obligation.
SPS 2008 Wholesale Rate Case — In March 2008, SPS filed a wholesale rate case seeking an annual revenue increase
of $14.9 million or an overall 5.14 percent increase, based on 12.20 percent requested ROE. In April 2009, the parties
reached a settlement in which SPS will receive an annual revenue increase of approximately $9.6 million or an increase
of 3.3 percent. The FERC issued an order approving the uncontested settlement in September 2009.
SPS 2008 Transmission Formula Rate Case — In December 2007, Xcel Energy submitted an application to implement
a transmission formula rate for the SPS zone of the Xcel Energy OATT. The changed rates affect all wholesale
transmission service customers using the SPS transmission network under either the Xcel Energy OATT or the SPP
Regional OATT.
In September 2009, Xcel Energy filed an uncontested offer of settlement with the FERC which resolves all issues in the
proceeding with the exception of the ratemaking and rate design treatment for certain radial lines under the SPP
OATT. The parties are still formulating the methodology for designating direct assignment of radial transmission lines
to wholesale and retail customers pursuant to the SPP OATT.
The settlement provides for a formula rate using a fully forecasted test year effective Jan. 1, 2009, with a stated ROE of
11.27 percent (including the 50 basis point adder for SPP RTO participation). The settlement will result in
approximately $0.8 million in additional revenues for 2008 and 2009 in aggregate and will allow SPS to update its
transmission rates annually for predicted costs and loads, subject to an annual true-up. In October 2009, SPS
announced the 2010 costs and charges pursuant to the formula rate and are expected to provide $2.7 million in
additional revenue, subject to true-up. The settlement was approved by the FERC in December 2009, and SPS and
SPP are now effectuating the settlement.
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