Xcel Energy 2009 Annual Report Download - page 20

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Xcel Energy’s retail electric business faces competition as industrial and large commercial customers have the ability to
own or operate facilities to generate their own electricity. In 2009, FERC adopted rules requiring MISO and SPP to
allow ARCs to offer demand response aggregation services to end-use customers in the states served by NSP-Minnesota,
NSP-Wisconsin and SPS, respectively, unless the applicable state regulatory authority prohibits ARCs from serving retail
customers in its state. See further discussion in Public Utility Regulation below. In addition, customers may have the
option of substituting other fuels, such as natural gas, steam or chilled water for heating, cooling and manufacturing
purposes, or the option of relocating their facilities to a lower cost region. While each of Xcel Energy’s utility
subsidiaries faces these challenges, their rates are competitive with currently available alternatives.
NSP-Minnesota
Public Utility Regulation
Summary of Regulatory Agencies and Areas of Jurisdiction — Retail rates, services and other aspects of NSP-Minnesota’s
operations are regulated by the MPUC, the NDPSC and the SDPUC within their respective states. The MPUC has
regulatory authority over aspects of NSP-Minnesota’s financial activities, including security issuances, property transfers,
mergers and transactions between NSP-Minnesota and its affiliates. In addition, the MPUC reviews and approves
NSP-Minnesota’s electric resource plans for meeting customers’ future energy needs. The MPUC also certifies the need
for generating plants greater than 50 MW and transmission lines greater than 100 KV.
No large power plant or transmission line may be constructed in Minnesota except on a site or route designated by the
MPUC. The NDPSC and SDPUC have regulatory authority over generating and transmission facilities, and the siting
and routing of new generation and transmission facilities in North Dakota and South Dakota, respectively.
NSP-Minnesota is subject to the jurisdiction of the FERC with respect to its wholesale electric operations, hydroelectric
licensing, accounting practices, wholesale sales for resale, transmission of electricity in interstate commerce and certain
natural gas transactions in interstate commerce. NSP-Minnesota has received authorization from the FERC to make
wholesale electric sales at market-based prices (see Market Based Rate Rules discussion) and is a transmission-owner
member of the MISO RTO.
Fuel, Purchased Energy and Conservation Cost-Recovery Mechanisms — NSP-Minnesota has several retail adjustment
clauses that recover fuel, purchased energy and other resource costs:
•CIP — The CIP invests in programs that help customers save energy. CIP includes a comprehensive list of
programs that benefit all customers including Saver’s Switch, energy efficiency rebates and energy audits.
•EIR — The EIR recovers the costs of environmental improvements to the A. S. King, High Bridge and Riverside
plants, which were renovated under the MERP program.
•GAP — The GAP is a surcharge billed to all non-interruptible customers to recover the costs of offering a
low-income customer co-pay program designed to reduce natural gas service disconnections.
•MCR — The MCR recovers costs related to reducing Mercury emissions at two NSP-Minnesota fossil fuel
power plants.
•RDF — The RDF allocates money to support development of renewable energy projects research and
development of renewable energy technologies.
•RES — In 2007, the Minnesota legislature passed new requirements mandating that a certain percent of energy
produced by utilities like NSP-Minnesota come from renewable resources. In order to ensure these mandates can
be met, the legislature allows utilities to recover the costs of new renewable generation projects to meet the RES
in a rider.
•SEP — The SEP recovers costs related to various energy policies approved by the Minnesota legislature.
•TCR — The TCR recovers costs associated with new investments in the electric transmission system necessary to
deliver electric energy to customers.
NSP-Minnesota’s retail electric rate schedules in Minnesota, North Dakota and South Dakota include a FCA for
monthly billing adjustments for changes in prudently incurred cost of fuel, fuel related items and purchased energy.
NSP-Minnesota is permitted to recover these costs through FCA mechanisms approved by the regulators in each
jurisdiction.
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