Xcel Energy 2010 Annual Report Download - page 75

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Regulation
FERC and State Regulation — The FERC and various state regulatory commissions regulate Xcel Energy’s utility subsidiaries.
Decisions by these regulators can significantly impact Xcel Energy’s results of operations. Xcel Energy expects to periodically
file for rate changes based on changing energy market and general economic conditions.
The electric and natural gas rates charged to customers of Xcel Energy’s utility subsidiaries are approved by the FERC and the
regulatory commissions in the states in which they operate. The rates are generally designed to recover plant investment,
operating costs and an allowed return on investment. Xcel Energy requests changes in rates for utility services through filings
with the governing commissions. Because comprehensive general rate changes are not requested annually in some states, changes
in operating costs can affect Xcel Energy’s financial results. In addition to changes in operating costs, other factors affecting rate
filings are new investments, sales growth, which is affected by overall economic conditions, conservation and DSM efforts and
the cost of capital. In addition, the ROE authorized is set by regulatory commissions in rate proceedings.
Wholesale Energy Market Regulation — Wholesale energy markets in the Midwest are operated by MISO to centrally dispatch
all regional electric generation and apply a regional transmission congestion management system. MISO centrally issues bills and
payments for many costs formerly incurred directly by NSP-Minnesota and NSP-Wisconsin. In January 2009, MISO
implemented modifications to the original market to establish a regional ASM. The ASM provides further efficiencies in
generation dispatch by allowing for regional regulation response and contingency reserve services through a bid-based market
mechanism co-optimized with the original energy market. NSP-Minnesota and NSP-Wisconsin expect to recover MISO charges
through either base rates or various recovery mechanisms. See Note 13 to the consolidated financial statements for further
discussion.
Capital Expenditure Regulation — Xcel Energy’s utility subsidiaries make substantial investments in plant additions to build and
upgrade power plants, and expand and maintain the reliability of the energy transmission and distribution systems. In addition to
filing for increases in base rates charged to customers to recover the costs associated with such investments, the CPUC, MPUC,
SDPUC and PUCT approved proposals to recover, through a rate rider, costs to upgrade generation plants and lower emissions,
and/or increase transmission investment cost. These non-fuel rate riders are expected to provide significant cash flows to enable
recovery of costs incurred on a timely basis. For wholesale electric transmission services, Xcel Energy has, consistent with FERC
policy, implemented or proposed to establish formula rates for each of the utility subsidiaries that will provide annual rate
changes as transmission investments increase in a manner similar to the rate riders.
Environmental Matters
Environmental costs include payments for nuclear plant decommissioning, storage and ultimate disposal of spent nuclear fuel,
disposal of hazardous materials and waste, remediation of contaminated sites, monitoring of discharges to the environment and
compliance with laws and permits with respect to Xcel Energy’s air emissions. A trend of greater environmental awareness and
increasingly stringent regulation may continue to cause, higher operating expenses and capital expenditures for environmental
compliance.
In addition to nuclear decommissioning and spent nuclear fuel disposal expenses, costs charged to operating expenses for
environmental monitoring and disposal of hazardous materials and waste were approximately:
● $256 million in 2010;
● $225 million in 2009; and
● $213 million in 2008.
Xcel Energy expects to expense an average of approximately $298 million per year from 2011 through 2015 for similar costs.
However, the precise timing and amount of environmental costs, including those for site remediation and disposal of hazardous
materials, are currently unknown. Additionally, the extent to which environmental costs will be included in and recovered through
rates may fluctuate.
Capital expenditures for environmental improvements at regulated facilities were approximately:
● $473 million in 2010;
● $89 million in 2009; and
● $230 million in 2008.