Xcel Energy 2009 Annual Report Download - page 148

PSCo Notice of Violation (NOV) — In July 2002, PSCo received an NOV from the EPA alleging violations of the
New Source Review (NSR) requirements of the CAA at the Comanche Station and Pawnee Station in Colorado. The
NOV specifically alleges that various maintenance, repair and replacement projects undertaken at the plants in the mid-
to late-1990s should have required a permit under the NSR process. PSCo believes it has acted in full compliance with
the CAA and NSR process. PSCo believes that the projects identified in the NOV fit within the routine maintenance,
repair and replacement exemption contained within the NSR regulations or are otherwise not subject to the NSR
requirements. PSCo disagrees with the assertions contained in the NOV and intends to vigorously defend its position.
Cunningham Draft Compliance Order — On Feb. 18, 2010, SPS received a draft compliance order from the New
Mexico Environment Department (NMED) for Cunningham Station. In the draft order, NMED alleges that
Cunningham exceeded its permit limits for NOx on 7,336 occasions and failed to report these exceedances as required
by its permit. The draft order includes a proposed penalty of $16.1 million. SPS denies these allegations and will have
an opportunity to discuss the alleged violations and proposed penalty with NMED prior to the issuance of a final
order. SPS will vigorously defend its position in negotiations with NMED.
Asset Retirement Obligations
Xcel Energy records future plant removal obligations as a liability at fair value with a corresponding increase to the
carrying values of the related long-lived assets in accordance with ASC 410 Asset Retirement and Environmental
Obligations. This liability will be increased over time by applying the interest method of accretion to the liability and
the capitalized costs will be depreciated over the useful life of the related long-lived assets. The recording of the
obligation for regulated operations has no income statement impact due to the deferral of the adjustments through the
establishment of a regulatory asset.
Recorded ARO — AROs have been recorded for plant related to nuclear production, steam production, electric
transmission and distribution, natural gas transmission and distribution and office buildings. The steam production
obligation includes asbestos, ash-containment facilities, radiation sources and decommissioning. The asbestos recognition
associated with the steam production includes certain plants at NSP-Minnesota, PSCo and SPS. NSP-Minnesota also
recorded asbestos recognition for its general office building. Generally, this asbestos abatement removal obligation
originated in 1973 with the CAA, which applied to the demolition of buildings or removal of equipment containing
asbestos that can become airborne on removal. AROs also have been recorded for NSP-Minnesota, PSCo and SPS
steam production related to ash-containment facilities such as bottom ash ponds, evaporation ponds and solid waste
landfills. The origination date on the ARO recognition for ash-containment facilities at steam plants was the in-service
date of various facilities. Additional AROs have been recorded for NSP-Minnesota and PSCo steam production plant
related to radiation sources in equipment used to monitor the flow of coal, lime and other materials through feeders.
Xcel Energy recognized an ARO for the retirement costs of natural gas mains at NSP-Minnesota, NSP-Wisconsin and
PSCo. In addition, an ARO was recognized for the removal of electric transmission and distribution equipment at
NSP-Minnesota, NSP-Wisconsin, PSCo and SPS. The electric transmission and distribution ARO consists of many
small potential obligations associated with polychlorinated biphenyls (PCBs), mineral oil, storage tanks, treated poles,
lithium batteries, mercury and street lighting lamps. These electric and natural gas assets have many in-service dates for
which it is difficult to assign the obligation to a particular year. Therefore, the obligation was measured using an
average service life.
For the nuclear assets, the ARO associated with the decommissioning of two NSP-Minnesota nuclear generating plants,
Monticello and Prairie Island, originates with the in-service date of the facility. Monticello began operation in 1971.
Prairie Island units 1 and 2 began operation in 1973 and 1974, respectively. See Note 18 to the consolidated financial
statements for further discussion of nuclear obligations.
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