Xcel Energy 2010 Annual Report Download - page 151

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Cabin Creek Hydro Generating Station Accident — In October 2007, employees of RPI Coatings Inc. (RPI), a contractor
retained by PSCo, were applying an epoxy coating to the inside of a penstock at PSCo’s Cabin Creek Hydro Generating Station
(CCH) near Georgetown, Colo. A fire occurred inside a pipe used to deliver water from a reservoir to the hydro facility. Five RPI
employees were unable to exit the pipe and rescue crews confirmed their deaths. The accident was investigated by several state
and federal agencies, including the federal OSHA, the CSB and the Colorado Bureau of Investigations.
In March 2008, OSHA proposed penalties totaling $189,900 for 22 serious violations and three willful violations arising out of
the accident. In April 2008, Xcel Energy notified OSHA of its decision to contest all of the proposed citations. Pursuant to a court
order this proceeding has been stayed until July 1, 2011.
Three lawsuits were filed (two in Colorado state court and one in California state court) on behalf of the five deceased workers
and by seven employees of RPI allegedly injured in the accident. PSCo and Xcel Energy were among the defendants named in
each lawsuit. Settlements were subsequently reached in all three lawsuits by Xcel Energy and PSCo. These confidential
settlements did not have a material adverse effect upon Xcel Energy’s consolidated results of operations, cash flows or financial
position.
In August 2009, the U.S. Government announced that Xcel Energy and PSCo have been charged with five misdemeanor counts in
federal court in Colorado for violation of an OSHA regulation related to the accident at Cabin Creek in October 2007. RPI
Coatings, the contractor performing the work at the plant, and two individuals employed by RPI have also been indicted. In
September 2009, both Xcel Energy and PSCo entered a not guilty plea, and both will vigorously defend against these charges.
The trial date has been set for May 31, 2011. No accrual has been recorded for this proceeding nor is it expected that this
proceeding will have a material adverse effect upon Xcel Energy’s consolidated results of operations, cash flows or financial
position.
In August 2010, the CSB issued a report related to its investigation of the CCH accident. The report contains several findings and
recommendations, some of which pertain to PSCo. Consistent with its delegated authority, the CSB investigation did not result in
the issuance of any fines or penalties. PSCo has responded to the CSB concerning its recommendations.
Stone & Webster, Inc. vs. PSCo — In July 2009, Stone & Webster, Inc. (Shaw) filed a complaint against PSCo in State District
Court in Denver, Colo. for damages allegedly arising out of its construction work on the Comanche Unit 3 coal-fired plant. Shaw,
a contractor retained to perform certain engineering, procurement and construction work on Comanche Unit 3, alleges, among
other things, that PSCo mismanaged the construction of Comanche Unit 3. Shaw further claims that this alleged mismanagement
caused delays and damages. The complaint also alleges that Xcel Energy and related entities guaranteed Shaw $10 million in
future profits under the terms of a 2003 settlement agreement. Shaw alleges that it will not receive the $10 million to which it is
entitled. Accordingly, Shaw seeks an amount up to $10 million relating to the 2003 settlement agreement. In total, Shaw seeks
approximately $144 million in damages.
PSCo denies these allegations and believes the claims are without merit. PSCo filed an answer and counterclaim in August 2009,
denying the allegations in the complaint and alleging that Shaw has failed to discharge its contractual obligations and has caused
delays, and that PSCo is entitled to liquidated damages and excess costs incurred. In total, PSCo is seeking approximately $82
million in damages. In June 2010, PSCo exercised its contractual right to draw on Shaw’s letter of credit in the total amount of
approximately $29.6 million. In September 2010, Shaw filed a second lawsuit related to PSCo’s decision to draw on the letter of
credit. PSCo denied the merits of this claim.
Trial commenced in October 2010 and addressed only those issues raised in the first complaint and did not include Shaw’s claim
asserted in the second lawsuit related to the letter of credit. In November 2010, a jury returned a verdict that awarded damages to
Shaw and to PSCo. Specifically the jury awarded a total of $84.5 million to Shaw but also awarded $70.0 million to PSCo for
damages related to its counterclaims, for a net verdict to Shaw in the amount of $14.5 million. Shaw subsequently filed post trial
motions, which the court denied. It is uncertain whether Shaw will file an appeal. If the jury verdict remains unchanged it is not
expected to have a material adverse effect on Xcel Energy’s consolidated results of operations, cash flows or financial position.
Other Contingencies
See Note 13 to the consolidated financial statements for further discussion.