Xcel Energy 2009 Annual Report Download - page 31

PSCo has coal transportation contracts that provide for delivery of 95 percent of its coal requirements in 2010,
95 percent of its coal requirements in 2011 and 60 percent of its coal requirements in 2012. Coal delivery may be
subject to short-term interruptions or reductions due to operation of the mines, transportation problems, weather, and
availability of equipment.
Natural gas — PSCo uses both firm and interruptible natural gas and standby oil in combustion turbines and certain
boilers. Natural gas supplies for PSCo’s power plants are procured under contracts to provide an adequate supply of
fuel. The supply contracts expire in various years from 2010 through 2020. The transportation and storage contracts
expire in various years from 2010 to 2040. Certain natural gas supply and transportation agreements include obligations
for the purchase and/or delivery of specified volumes of natural gas or to make payments in lieu of delivery. At
Dec. 31, 2009, PSCo’s commitments related to supply contracts were approximately $159 million and transportation
and storage contracts were approximately $1.1 billion.
Wholesale Commodity Marketing Operations
PSCo conducts various wholesale marketing operations, including the purchase and sale of electric capacity, energy and
energy related products. PSCo uses physical and financial instruments to minimize commodity price and credit risk and
hedge supplies and purchases. See additional discussion under Item 7A — Quantitative and Qualitative Disclosures
About Market Risk.
SPS
Public Utility Regulation
Summary of Regulatory Agencies and Areas of Jurisdiction — The PUCT and NMPRC regulate SPS’ retail electric
operations and have jurisdiction over its retail rates and services and the construction of transmission or generation in
their respective states. The municipalities in which SPS operates in Texas have original jurisdiction over SPS’ rates in
those communities. SPS can and does then appeal municipal rate decisions to the PUCT. The NMPRC also has
jurisdiction over the issuance of securities. SPS is subject to the jurisdiction of the FERC with respect to its wholesale
electric operations, accounting practices, wholesale sales for resale, the transmission of electricity in interstate commerce
and certain natural gas transactions in interstate commerce.
Fuel, Purchased Energy and Conservation Cost-Recovery Mechanisms — Fuel and purchased energy costs are recovered
in Texas through a fixed fuel and purchased energy recovery factor, which is part of SPS’ retail electric tariff. The
regulations allow retail fuel factors to change up to three times per year.
Because regulations require that actual fuel and purchased energy costs be recovered from ratepayers, there is an
accounting of over- or under-recovery of fuel and purchased energy expenses under the fixed factor. Regulations also
require refunding or surcharging over- or under- recovery amounts, including interest, when they exceed 4 percent of
the utility’s annual fuel and purchased energy costs on a rolling 12-month basis, if this condition is expected to
continue.
PUCT regulations require periodic examination of SPS fuel and purchased energy costs, the efficiency of the use of fuel
and purchased energy, fuel acquisition and management policies and purchased energy commitments. SPS is required to
file an application for the PUCT to retrospectively review fuel and purchased energy costs at least every three years.
The NMPRC has authorized SPS to continue to use a monthly adjustment factor for a fuel and purchased power cost
adjustment clause (FPPCAC) for SPS’ New Mexico retail jurisdiction. NMPRC regulations require SPS to periodically
request authority to continue using its FPPCAC. In that proceeding, the NMPRC reviews SPS’ use of its FPPCAC
since the filing of its previous fuel clause continuation filing. SPS’ next fuel clause continuation filing is due Aug. 26,
2010.
SPS recovers fuel and purchased energy costs from its wholesale customers through a monthly wholesale fuel and
purchased economic energy cost adjustment clause accepted for filing by the FERC.
Performance-Based Regulation and Quality of Service Requirements — In Texas, SPS is subject to a QSP requiring SPS
to comply with electric service reliability performance targets. In October 2008, the PUCT staff served SPS with notice
that it had initiated an investigation to determine whether SPS is in compliance with the Texas statutes and PUCT
rules on reliability and continuity of service.
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