Xcel Energy 2010 Annual Report Download - page 79

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● Xcel Energy contributed $62.2 million and $48.4 million during 2009 and 2010, respectively, to the postretirement
health care plans.
● Xcel Energy expects to contribute approximately $40.5 million during 2011.
Xcel Energy recovers employee benefits costs in its regulated utility operations consistent with accounting guidance with the
exception of the areas noted below.
● NSP-Minnesota recognizes pension expense in all regulatory jurisdictions based on expense as calculated using the
aggregate normal cost actuarial method. Differences between aggregate normal cost and expense as calculated under
accounting guidance are deferred as a regulatory liability.
● Colorado, Texas, New Mexico and FERC jurisdictions allow the recovery of other post retirement benefit costs only to
the extent that recognized expense is matched by cash contributions to an irrevocable trust. The company has
consistently funded at a level to allow full recovery of costs in these jurisdictions.
See Note 9 to the consolidated financial statements for further discussion.
Nuclear Decommissioning
NSP-Minnesota owns nuclear generation facilities and regulations require NSP-Minnesota to decommission its nuclear power
plants after each facility is taken out of service. Xcel Energy records future plant removal obligations as a liability at fair value.
This liability will be increased over time by applying the interest method of accretion to the liability. Due to regulation,
depreciation expense is recorded to match the recovery of the future cost of decommissioning, or retirement, of its nuclear
generating plants. This recovery is calculated using an annuity approach designed to provide for full rate recovery of the future
decommissioning costs.
Amounts recorded for nuclear AROs, in excess of decommissioning expense and investment returns, both realized and unrealized,
cumulatively are deferred through the establishment of a regulatory asset for future recovery.
A portion of the rates charged to customers is deposited into an external trust fund, during the facilities’ operating lives, in order
to provide for this obligation. The fair value of external nuclear decommissioning trust fund investments are generally estimated
based on quoted market prices for those or similar investments. The fair values for commingled funds and international equity
funds within the nuclear decommissioning fund take into consideration the value of underlying fund investments. Realized
investment returns from these investments and recovery to date is used by regulators when determining future decommissioning
recovery.
NSP-Minnesota conducts periodic decommissioning cost studies to estimate the costs that will be incurred to decommission the
facilities. The costs are initially presented in amounts prior to inflation adjustments and then inflated to future periods using
decommissioning specific cost inflators. Decommissioning of NSP-Minnesota’s nuclear facilities is planned for the period from
cessation of operations through 2067 assuming the prompt dismantlement method. The following key assumptions have a
significant effect on these estimates:
● Escalation Rate — The MPUC determines the escalation rate based on various presumptions surrounded by the fact that
associated costs will escalate at a certain rate over time. The most recent decommissioning study set the escalation rate at
2.89 percent. An escalation rate for the cost of disposing of nuclear fuel waste was set at 6.0 percent. Over the short-
term, these rates can differ from the set rates and accrual estimates can be significantly affected by small changes in
assumed escalation rates.
● Life Extension — Currently, decommissioning recovery periods end in 2030 for Monticello and in 2023 and 2024 for
Prairie Island’s two facilities. Changes made to decommissioning cost estimates, the escalation rate and the earnings rate
can be affected by changes to these life periods. With the recent re-licensing of Monticello and the application for the re-
licensing of Prairie Island, any change in license life could have a material effect on the accrual. Current
decommissioning cost calculations for Monticello have assumed full life extension, which brings the regulatory recovery
period up to 2030. An application to extend the operating licenses for both reactors at Prairie Island by 20 years was
submitted to the NRC in 2008. The NRC is expected to decide on the application in 2011. Prairie Island’s operating
license would be extended to 2033 and 2034 if life extension is approved. In the interim, the MPUC has extended the
recovery period for Prairie Island Unit 1 to 2023 and Unit 2 to 2024. These changes were effective Jan. 1, 2009.