Xcel Energy 2010 Annual Report Download - page 138

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REC Sharing Settlement — In August 2009, PSCo filed an application seeking approval of treatment of margins associated with
sales of Colorado RECs that are bundled with energy into California. In January 2010, PSCo, the OCC, the CPUC staff, the
Colorado Governor’s Energy Office and Western Resource Advocates entered into a unanimous settlement in this case. The
settlement establishes a pilot program and defines certain margin splits during this pilot period. The settlement provides that
margins would be shared based on the following allocations:
Margin Customers PSCo Carbon Offsets
Less than $10 million ...................................................... 50% 40% 10
%
$10 million to $30 million .................................................. 55 35 10
Greater than $30 million .................................................... 60 30 10
Amounts designated as carbon offsets are recorded as a regulatory liability until carbon offset-related expenditures are
incurred. Carbon offsets are capped at $10 million, with the remaining 10 percent going to customers after the cap is
reached. The unanimous settlement also clarified that margins associated with RECs bundled with Colorado energy would be
shared 20 percent to PSCo and 80 percent to customers. Margins associated with sales of unbundled stand-alone RECs without
energy would be credited 100 percent to customers, and PSCo has the right to file a separate application for sharing margins from
stand-alone REC sales. The CPUC approved the settlement in May 2010. Since the settlement, PSCo has filed an application to
share margins from the sales of stand alone RECs at 20 percent to PSCo and 80 percent to customers. The application will be
decided in the first quarter of 2011. PSCo is expected to file a proposal for permanent treatment of REC margins, except the
stand-alone REC margins in March 2011.
Pending and Recently Concluded Regulatory Proceedings — FERC
Wholesale Rate Case — On Feb. 8, 2011, PSCo filed a request with the FERC to change Colorado wholesale electric customer rates
to formula based rates with an expected increase of $16.1 million annually for 2011. PSCo is seeking to make the request effective
in April 2011; however, the FERC has the authority to grant a five month suspension from the April date. The request was based on
a 2011 forecast test year, a 10.9 percent ROE, a total PSCo wholesale production rate base of $407.4 million and an equity ratio of
57.1 percent. Under the proposal, the formula rate would be estimated each year for the following year and then would be trued up to
actual costs after the conclusion of the calendar year. The primary drivers of the revenue deficiency are the inclusion of the recently
acquired Blue Spruce Energy Center and Rocky Mountain Energy Center generating units and inclusion of the costs of early
retirement of certain coal plants under the CACJA emissions reduction plan, all of which were approved by the CPUC in late 2010.
SPS
Pending and Recently Concluded Regulatory Proceedings — PUCT
Base Rate
SPS Texas Retail Base Rate Case — In May 2010, SPS filed an electric rate case in Texas seeking an annual base rate increase
of approximately $71.5 million inclusive of franchise fees. On a net basis, the request seeks to increase customer bills by
approximately $53.4 million or 7 percent. The rate filing is based on a 2009 test year adjusted for known and measurable changes,
a requested ROE of 11.35 percent, an electric rate base of $1.031 billion and an equity ratio of 51.0 percent. The filing with the
PUCT also includes a request to reconcile SPS’ fuel and purchased power costs for calendar years 2008 and 2009. As of Dec. 31,
2009, SPS had a fuel cost under-recovery of approximately $3.3 million.
In November 2010, SPS filed an update to the cost of service to reflect the impact on Texas retail rates, primarily resulting from
its sale of Lubbock facilities. The total request was reduced to approximately $63.7 million and the net request $47.6 million.
On Feb. 11, 2011, the parties reached an unopposed settlement to resolve all issues in the case. Effective Feb. 16, 2011, base rates
increased by $39.4 million, of which $16.9 is associated with the transfer of two riders, the TCRF and Power Cost Recovery
Factor into base rates and a $22.5 million traditional base rate increase. In addition, SPS is allowed to defer up to $2.3 million of
pension and benefit costs and $1.6 million of renewable energy credits that had been included in SPS’ base rate request.
Effective Jan. 1, 2012, the settlement provides for SPS to increase base rates by $13.1 million and allows SPS to seek an energy
efficiency cost recovery factor rider for $2.9 million that if approved would result in an effective rate increase of $16.0 million.
SPS plans to make its filing for the rider by May 1, 2011 pursuant to a recent PUCT order. In addition, SPS is allowed to track
and defer up to $4.3 million of pension and benefit costs above the test year levels as well as $1.6 million of renewable energy
credits, as described above.