Xcel Energy 2011 Annual Report Download - page 146

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Prairie Island Units 1 and 2 received their initial operating license and began commercial operations in 1973 and 1974. In
April 2008, NSP-Minnesota filed an application with the NRC to renew the operating license of its two nuclear reactors at Prairie
Island that allowed for operation for an additional 20 years until 2033 and 2034, respectively. The NRC approved Prairie Island’s
license renewal application in 2011. Based on the NRC approval, a full life extension for Prairie Island’s depreciation life was
approved by the MPUC in September 2011, bringing the depreciation remaining life in line with the NRC approved operating
license. The Prairie Island dry-cask storage facility currently stores 29 casks, with MPUC approval for the use of 35 additional
casks, to support operations until the end of the renewed operating licenses in 2033 and 2034.
The total obligation for decommissioning currently is expected to be funded 100 percent by the external decommissioning trust
fund, as approved by the MPUC, when decommissioning commences. The MPUC last approved NSP-Minnesota’s nuclear
decommissioning study request in October 2009, using 2008 cost data. An updated nuclear decommissioning study was submitted
to the MPUC in both November and December 2011. Due to new state statute requirements, five decommissioning scenarios
were presented, which each reflected a different timeline for the removal of spent nuclear fuel from the sites. A decision on this
filing is expected either in late 2012 or the beginning of 2013.
Consistent with cost-recovery in utility customer rates, NSP-Minnesota previously recorded annual decommissioning accruals
based on periodic site-specific cost studies and a presumed level of dedicated funding. Cost studies quantify decommissioning
costs in current dollars. The most recent study, which resulted in an authorization of no funding, presumes that costs will escalate
in the future at a rate of 2.89 percent per year. The total estimated decommissioning costs that will ultimately be paid, net of
income earned by the external decommissioning trust fund, is currently being accrued using an annuity approach over the
approved plant-recovery period. This annuity approach uses an assumed rate of return on funding, which is currently 6.3 percent,
net of tax, for external funding. The net unrealized gain or loss on nuclear decommissioning investments is deferred as a
regulatory asset or liability, respectively.
The external funds are held in trust and in escrow. The portion in escrow is subject to refund if approved by the various
commissions. The MPUC authorized the return of funds associated with the Monticello plant for the Minnesota retail jurisdictions
in 2009, with refunds made on customers’ bills in 2010. An amount of approximately $5.9 million was also withdrawn from the
Monticello plant portion of the escrow fund in March 2010 in preparation for a refund to Wisconsin and Michigan retail
customers. The funds have not yet been refunded as of Dec. 31, 2011, and the timing of the refunds will be determined in future
rate cases in each jurisdiction.
At Dec. 31, 2011, NSP-Minnesota recorded and recovered in rates cumulative decommissioning expense of $1.3 billion. The
following table summarizes the funded status of NSP-Minnesota’s decommissioning obligation based on approved regulatory
recovery parameters from the most recently approved decommissioning study. Xcel Energy believes future decommissioning cost
expense, if necessary, will continue to be recovered in customer rates. These amounts are not those recorded in the financial
statements for the ARO.
Regulatory Basis
(Thousands of Dollars) 2011 2010
Estimated decommissioning cost obligation (2008 dollars) ................................
..
$ 2,308,196 $
2,308,196
Effect of escalating costs (to 2011 and 2010 dollars, respectively, at 2.89 percent per year)
.....
205,960
135,342
Estimated decommissioning cost obligation (in current dollars)
..............................
2,514,156
2,443,538
Effect of escalating costs to payment date (2.89 percent per year)
............................
2,602,207
2,672,825
Estimated future decommissioning costs (undiscounted) ................................
....
5,116,363
5,116,363
Effect of discounting obligation (using risk-free interest rate)
................................
(3,187,914 )
(3,856,516
)
Discounted decommissioning cost obligation ................................
..............
1,928,449
1,259,847
Assets held in external decommissioning trust................................
..............
1,336,431
1,350,630
Underfunding (overfunding) of external decommissioning fund compared to the discounted
decommissioning obligation ................................
............................
$ 592,018 $
(90,783
)
Decommissioning expenses recognized as a result of regulation include the following components:
(Thousands of Dollars) 2011 2010 2009
Annual decommissioning recorded as depreciation expense: (a)
Externally funded........................................................ $ - $ 934 $ 2,849
Internally funded (including interest costs)................................. (456) (777) (884)
Net decommissioning expense recorded ..................................... $ (456) $ 157 $ 1,965
(a) Decommissioning expense does not include depreciation of the capitalized nuclear asset retirement costs.