Xcel Energy 2010 Annual Report Download - page 139

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129
SPS agreed not to file another rate case until Sept. 15, 2012. In addition, SPS cannot file a TCRF until 2013, and if SPS files a
TCRF application before the effective date of rates in its next rate case, it must reduce the calculated TCRF revenue requirement
by $12.2 million.
Interim rates became effective on Feb. 16, 2011, subject to refund pending PUCT approval of the settlement. PUCT approval of
the settlement would result in no refund of interim rates. The PUCT is expected to consider the final order during the first half of
2011.
Pending and Recently Concluded Regulatory Proceedings — FERC
Wholesale Rate Complaints — In November 2004, Golden Spread Electric, Lyntegar Electric, Farmer’s Electric, Lea County
Electric, Central Valley Electric and Roosevelt County Electric, all wholesale cooperative customers of SPS, filed a rate
complaint with the FERC alleging that SPS’ rates for wholesale service were excessive and that SPS had incorrectly calculated
monthly fuel cost adjustment charges to such customers (the complaint). Cap Rock, another full-requirements customer of SPS,
Public Service Company of New Mexico (PNM) and Occidental Permian Ltd. and Occidental Power Marketing, L.P.
(Occidental), SPS’ largest retail customer, intervened in the proceeding.
In April 2008, the FERC issued its order on the complaint applied to the remaining non-settling parties. In July 2008, SPS
submitted its compliance report to the FERC and calculated the base rate refund for the 18-month period to be $6.1 million and
the fuel refund to be $4.4 million. Several wholesale customers protested these calculations. The status of various settlements and
the applicable regulatory approvals are discussed below. At this time, PNM, which filed a separate complaint, is the only party
that has not settled. As of Dec. 31, 2010, SPS has accrued an amount it believes is sufficient to cover the estimated refund
obligation related to the PNM complaint.
Golden Spread Complaint Settlement — SPS reached a settlement with Golden Spread (which included Lyntegar
Electric) and Occidental in December 2007 regarding base rate and fuel issues raised in the complaint described above as
well as a subsequent rate proceeding. The FERC approved the settlement in April 2008. The PUCT and NMPRC
approvals were obtained in the first quarter of 2010 eliminating the potential contingent payments by SPS resulting from
an adverse cost assignment decision or a failure to obtain state approvals.
New Mexico Cooperatives’ Complaint Settlement — In June 2010, the FERC approved the settlement with Farmers’
Electric Cooperative of New Mexico, Lea County Electric Cooperative, Central Valley Electric Cooperative and
Roosevelt County Electric Cooperative, and Occidental. The settlement resolves all issues arising from the complaint
docket and implements a replacement contract with a formula production rate at 10.5 percent ROE and extended the term
of its requirements sale to the four wholesale customers.
The four wholesale customers must reduce their power purchases by 90 to 100 MW in 2012, and implement staged
reductions in system average cost power purchases through the term of the agreement, which terminates in May 2026.
The settlement made the replacement contract contingent on certain state approvals, which were obtained by SPS. In the
event that all state regulatory approvals had not been received, the settlement included a one time contingent payment of
$12 million by SPS to these wholesale customers.
These wholesale customers agreed to hold SPS harmless from any future adverse regulatory treatment regarding the
proposed wholesale power sale. As a result of the FERC approval of the settlement and resolution of the complaint with
the New Mexico cooperatives, SPS released previously established reserves of $11.5 million in the second quarter of
2010.
The New Mexico parties and NMPRC staff filed a stipulation to resolve the NMPRC proceeding. The NMPRC issued a
final order approving the stipulation in August 2010. The PUCT approved the settlement replacement arrangement in
September 2010.
Cap Rock Complaint Settlement — In July 2010, SPS and Cap Rock filed a settlement agreement with the FERC. Cap
Rock agrees that its production base rates will be converted to a formula rate design. In December 2010, the FERC
approved the settlement. Pursuant to the settlement, SPS released previously established reserves of $3.3 million in the
fourth quarter of 2010 and paid Cap Rock $1 million.