Xcel Energy 2009 Annual Report Download - page 156

Consistent with cost-recovery in utility customer rates, NSP-Minnesota previously recorded annual decommissioning
accruals based on periodic site-specific cost studies and a presumed level of dedicated funding. Cost studies quantify
decommissioning costs in current dollars. The most recent study, which resulted in an authorization of no funding,
presumes that costs will escalate in the future at a rate of 2.89 percent per year. The total estimated decommissioning
costs that will ultimately be paid, net of income earned by external trust funds, is currently being accrued using an
annuity approach over the approved plant-recovery period. This annuity approach uses an assumed rate of return on
funding, which is currently 6.30 percent, net of tax, for external funding. The net unrealized loss on nuclear
decommissioning investments is deferred as a regulatory liability based on the assumed offsetting against
decommissioning costs in current ratemaking treatment.
The external funds are held in trust and in escrow. The portion in escrow is subject to refund if approved by the
various rate commissions. The MPUC authorized the return of $23.5 million of funds associated with the Monticello
plant for the Minnesota retail jurisdictions. This amount was withdrawn in December 2009 and was refunded on
customer’s bills in February 2010.
At Dec. 31, 2009, NSP-Minnesota had recorded and recovered in rates cumulative decommissioning expense of
$1.3 billion. The following table summarizes the funded status of NSP-Minnesota’s decommissioning obligation based
on approved regulatory recovery parameters. Xcel Energy believes future decommissioning cost expense, if necessary, will
continue to be recovered in customer rates. These amounts are not those recorded in the financial statements for the
ARO.
2009 2008
(Thousands of Dollars)
Estimated decommissioning cost obligation from most recently approved study (2008 dollars) .... $2,308,196 $ 1,683,750
Effect of escalating costs to 2009 and 2008 dollars (2.89 and 3.61 percent per year, respectively) . . 66,707 189,012
Estimated decommissioning cost obligation in current dollars ....................... 2,374,903 1,872,762
Effect of escalating costs to payment date (2.89 and 3.61 percent per year, respectively) ....... 2,741,460 1,254,064
Estimated future decommissioning costs (undiscounted) .......................... 5,116,363 3,126,826
Effect of discounting obligation (using risk-free interest rate) ....................... (3,973,493) (1,847,526)
Discounted decommissioning cost obligation ................................ 1,142,870 1,279,300
Assets held in external decommissioning trust ................................ 1,248,739 1,075,294
Discounting decommissioning obligation compared to assets currently held in external trust ..... $ (105,869) $ 204,006
Decommissioning expenses recognized include the following components:
2009 2008 2007
(Thousands of Dollars)
Annual decommissioning cost expense reported as depreciation expense:
Externally funded ................................... $2,849 $43,239 $43,392
Internally funded (including interest costs) ..................... (884) (819) (759)
Net decommissioning expense recorded ........................ $1,965 $42,420 $42,633
Reductions to expense for internally-funded portions in 2009, 2008 and 2007 are a direct result of the 2008 or 2005
decommissioning study jurisdictional allocation and 100 percent external funding approval, effectively unwinding the
remaining internal fund over the remaining operating life of the unit. The 2008 nuclear decommissioning filing
approved in 2009 has been used for the regulatory presentation. The change in estimated decommissioning obligations
was calculated using a cost estimate for Monticello assuming a 60-year operating life.
19. Regulatory Assets and Liabilities
Xcel Energy’s regulated businesses prepare their consolidated financial statements in accordance with the provisions of
ASC 980 Regulated Operations, as discussed in Note 1 to the consolidated financial statements. Under this guidance,
regulatory assets and liabilities can be created for amounts that regulators may allow to be collected, or may require to
be paid back to customers in future electric and natural gas rates. Any portion of Xcel Energy’s business that is not
regulated cannot establish regulatory assets and liabilities. If changes in the utility industry or the business of Xcel
Energy no longer allow for the application of regulatory accounting guidance under GAAP, Xcel Energy would be
required to recognize the write-off of regulatory assets and liabilities in its consolidated statement of income.
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