Xcel Energy 2011 Annual Report Download - page 23

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Natural gas — The NSP System uses both firm and interruptible natural gas supply and standby oil in combustion turbines and
certain boilers. Natural gas supplies and associated transportation and storage services for power plants are procured under
contracts with various terms to provide an adequate supply of fuel. However, as natural gas primarily serves intermediate and
peak demand, remaining forecasted requirements are able to be procured through a liquid spot market. Generally, natural gas
supply contracts have pricing that is tied to various natural gas indices. Most transportation contract pricing is based on FERC
approved transportation tariff rates. These transportation rates are subject to revision based upon FERC approval of changes in the
timing or amount of allowable cost recovery by providers. Certain natural gas supply and transportation agreements include
obligations for the purchase and/or delivery of specified volumes of natural gas or to make payments in lieu of delivery. At Dec.
31, 2010, the NSP System’s commitments related to gas supply contracts were $14 million and commitments related to gas
transportation and storage contracts were approximately $499 million. At Dec. 31, 2011, the NSP System did not have any
commitments related to gas supply contracts; however, commitments related to gas transportation and storage contracts, which
expire in various years from 2012 to 2028, were approximately $462 million. The NSP System has limited on-site fuel oil storage
facilities and relies on the spot market for incremental supplies, if needed.
Renewable Energy Sources
The NSP System’s renewable energy portfolio includes wind, biomass, solar and hydroelectric power from both owned
generating facilities and purchased power agreements. Renewable energy comprised 19.7 percent and 18.3 percent of the NSP
System’s total owned and purchased energy for 2011 and 2010, respectively. Biomass and solar power comprised approximately
2.8 percent and 2.9 percent of renewable energy for 2011 and 2010, respectively, with the remaining renewable energy provided
by wind and hydroelectric sources. As of Dec. 31, 2011, the NSP System is in compliance with its renewable portfolio standards,
which require generation from renewable resources of 15 percent and 8.89 percent of Minnesota and Wisconsin electric retail
sales, respectively.
The NSP System also offers customer-focused renewable energy initiatives. The Windsource® program allows customers in
Minnesota and Wisconsin to purchase a portion or all of their electricity from renewable sources. Approximately 22,715 and
22,676 customers purchased 176,522 MWh and 166,979 MWh of electricity under the Windsource program in 2011 and 2010,
respectively. Additionally, to encourage the growth of solar energy on the system, customers are offered incentives to install solar
panels on their homes and businesses under the Solar*Rewards® program. Over 300 PV systems with approximately 3 MW of
aggregate capacity and 166 PV systems with approximately 1 MW of aggregate capacity have been installed in Minnesota under
this program as of Dec. 31, 2011 and Dec. 31, 2010, respectively.
Wind — The NSP System acquires the majority of its wind energy from purchased power agreements with wind farm owners,
primarily in Southwestern Minnesota. The NSP System currently has more than 100 of these agreements in place, with facilities
ranging in size from under 1 MW to more than 200 MW. In addition to receiving purchased wind energy under these agreements,
the NSP System also typically receives wind RECs, which are used to meet state renewable resource requirements. The average
cost per MWh of wind energy under these contracts was approximately $39 and $37 for 2011 and 2010, respectively. The cost per
MWh of wind energy varies by contract and may be influenced by a number of factors including regulation, state specific
renewable resource requirements, and the year of contract execution.
Generally, contracts executed in 2011 have benefited from improvements in technology, excess capacity among manufacturers,
and motivation to complete new construction prior to expiration of the Federal Production Tax Credits in 2012.
The NSP System also fully owns and operates two wind farms. The 101 MW Grand Meadow Wind Farm began generating
electricity in 2008 and the 201 MW Nobles Wind Farm began generating electricity in 2010. Collectively, the NSP System had
over 1,600 MW and nearly 1,500 MW of wind energy on its system at the end of 2011 and 2010, respectively. Wind energy
comprised 9.4 percent and 8.0 percent of the total owned and purchased energy on the NSP System for 2011 and 2010,
respectively.
In 2011, NSP-Minnesota agreed to purchase 200 MW of wind power from Geronimo Wind Energy’s Prairie Rose Wind Farm,
which is expected to be completed in 2012. By the end of 2012, the NSP System plans to have over 1,900 MW of wind energy on
its system.