Xcel Energy 2009 Annual Report Download - page 34

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Summary of Recent Federal Regulatory Developments
The FERC has jurisdiction over rates for electric transmission service in interstate commerce and electricity sold at
wholesale, hydro facility licensing, natural gas transportation, accounting practices and certain other activities of Xcel
Energy’s utility subsidiaries, including enforcement of NERC mandatory electric reliability standards. State and local
agencies have jurisdiction over many of Xcel Energy’s utility activities, including regulation of retail rates and
environmental matters. In addition to the matters discussed below, see Note 16 to the consolidated financial statements
for a discussion of other regulatory matters.
FERC Rules Implementing Energy Policy Act of 2005 (Energy Act) — The Energy Act required the FERC to adopt
new regulations to implement various aspects of the Energy Act. Violations of FERC rules are potentially subject to
enforcement action by the FERC including financial penalties up to $1 million per day per violation.
While Xcel Energy cannot predict the ultimate impact the new regulations will have on its operations or financial
results, Xcel Energy is taking actions that are intended to comply with and implement new FERC rules and regulations
as they become effective.
Electric Reliability Standards Compliance
Compliance Audits
On Oct. 31, 2008, the Western Electricity Coordinating Council (WECC) auditors issued their final audit report on
PSCo’s compliance with electric reliability standards. The report found a possible violation of one reliability standard
related to relay maintenance.
In 2008, the NSP System, PSCo and SPS filed self-reports with the Midwest Reliability Organization (MRO), WECC
and SPP regional entities, respectively, relating to failure to complete certain generation station battery tests, relay
maintenance intervals and record keeping associated with certain critical infrastructure protection standards. In 2009,
the NSP System, PSCo, and SPS each reached agreement with the relevant regional entity that would resolve the PSCo
open 2008 audit finding and the 2008 self reports by payment of a non-material penalty. Xcel Energy is in the process
of developing definitive settlement agreements with the regional entities. These settlement agreements will be subject to
NERC and FERC approval.
NERC Compliance Investigation
On Sept. 18, 2007, portions of the NSP System and transmission systems west and north of the NSP System briefly
islanded from the rest of the Eastern Interconnection, as a result of a series of transmission line outages. In addition,
service to approximately 790 MW of load was temporarily interrupted, primarily in Saskatchewan, Canada. The initial
transmission line outages occurred on the NSP System. In March 2008, NSP-Minnesota received notice that the MRO
was commencing a compliance investigation of the September 2007 event. Because the event affected more than one
region, the NERC took over the investigation. In January 2010, the NERC issued a preliminary report alleging the
NSP System violated certain NERC reliability standards. The report represents the preliminary conclusions of the
NERC and is subject to additional procedures at NERC, and ultimately FERC review. Xcel Energy disagrees with the
many aspects of the preliminary report and filed its response with NERC on Feb. 19, 2010. The final outcome of the
NERC compliance investigation, and whether and to what extent penalties for violations may be assessed, is unknown
at this time.
Electric Transmission Rate Regulation — The FERC regulates the rates charged and terms and conditions for electric
transmission services. FERC policy encourages utilities to turn over the functional control of their electric transmission
assets for the sale of electric transmission services to an RTO. NSP-Minnesota and NSP-Wisconsin are members of the
MISO RTO. SPS is a member of the SPP RTO. Each RTO separately files regional transmission tariff rates for
approval by the FERC. All members within that RTO are then subjected to those rates. In 2009, PSCo filed a tariff to
participate with other utilities in WestConnect, a consortium of utilities offering regionalized non-firm transmission
services. The WestConnect tariff was effective in the first quarter of 2009. The WestConnect tariff has not had a
material impact on PSCo transmission usage or revenues. WestConnect may provide wholesale energy market functions
in the future, but would not be an RTO.
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