Xcel Energy 2009 Annual Report Download - page 37

NATURAL GAS UTILITY OPERATIONS
Natural Gas Utility Trends
The most significant recent developments in the natural gas operations of the utility subsidiaries are continued volatility
in natural gas market prices and the continued trend of declining use per residential customer, as well as small
commercial and industrial customers (C&I), as a result of improved building construction technologies, higher
appliance efficiencies and conservation. From 1999 to 2009, average annual sales to the typical residential customer
declined from 99 MMBtu per year to 81 MMBtu per year and to a typical small C&I customer declined from
472 MMBtu per year to 393 MMBtu per year, on a weather-normalized basis. Although wholesale price increases do
not directly affect earnings because of natural gas cost-recovery mechanisms, high prices can encourage further efficiency
efforts by customers.
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 and the NDPSC within their respective states. The MPUC has regulatory
authority over aspects of NSP-Minnesota’s financial activities, including security issuances, certain property transfers,
mergers with other utilities and transactions between NSP-Minnesota and its affiliates. In addition, the MPUC reviews
and approves NSP-Minnesota’s natural gas supply plans for meeting customers’ future energy needs. NSP-Minnesota is
subject to the jurisdiction of the FERC with respect to certain natural gas transactions in interstate commerce.
Purchased Gas and Conservation Cost-Recovery Mechanisms — NSP-Minnesota’s retail natural gas rates for Minnesota
and North Dakota include a PGA clause that provides for prospective monthly rate adjustments to reflect the forecasted
cost of purchased natural gas. The annual difference between the natural gas cost revenues collected through PGA rates
and the actual natural gas costs are collected or refunded over the subsequent 12-month period. The MPUC and
NDPSC have the authority to disallow recovery of certain costs if they find the utility was not prudent in its
procurement activities.
NSP-Minnesota is required by Minnesota law to spend a minimum of 0.5 percent of Minnesota natural gas revenue on
conservation improvement programs in the state of Minnesota. These costs are recovered from Minnesota customers
through an annual cost-recovery mechanism for natural gas conservation and energy management program expenditures.
This law will change to an energy savings-based requirement beginning in 2010, and the costs of conservation
improvement programs will continue to be recoverable in Minnesota through a rate adjustment mechanism.
Capability and Demand
Natural gas supply requirements are categorized as firm or interruptible (customers with an alternate energy supply).
The maximum daily send-out (firm and interruptible) for NSP-Minnesota was 720,983 MMBtu for 2009, which
occurred on Jan. 15, 2009.
NSP-Minnesota purchases natural gas from independent suppliers. These purchases are generally priced based on market
indices that reflect current prices. The natural gas is delivered under transportation agreements with interstate pipelines.
These agreements provide for firm deliverable pipeline capacity of 589,492 MMBtu per day. In addition,
NSP-Minnesota has contracted with providers of underground natural gas storage services. These storage agreements
provide storage for approximately 26 percent of winter natural gas requirements and 32 percent of peak day firm
requirements of NSP-Minnesota.
NSP-Minnesota also owns and operates one LNG plant with a storage capacity of 2.0 Bcf equivalent and three
propane-air plants with a storage capacity of 1.3 Bcf equivalent to help meet its peak requirements. These peak-shaving
facilities have production capacity equivalent to 246,000 MMBtu of natural gas per day, or approximately 32 percent of
peak day firm requirements. LNG and propane-air plants provide a cost-effective alternative to annual fixed pipeline
transportation charges to meet the peaks caused by firm space heating demand on extremely cold winter days.
NSP-Minnesota is required to file for a change in natural gas supply contract levels to meet peak demand, to
redistribute demand costs among classes, or to exchange one form of demand for another. The 2008-2009 and
2009-2010 entitlement levels are pending MPUC action.
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