Xcel Energy 2011 Annual Report Download - page 28

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Fuel Sources
Coal — PSCo normally maintains approximately 41 days of coal inventory. Coal supply inventories at Dec. 31, 2011 and 2010
were approximately 48 and 34 days usage, respectively. PSCo’s generation stations use low-sulfur western coal purchased
primarily under contracts with suppliers operating in Colorado and Wyoming. During 2011 and 2010, PSCo’s coal requirements
for existing plants were approximately 10.5 and 10.7 million tons, respectively. The estimated coal requirements for 2012 are
approximately 11.6 million tons.
PSCo has contracted for coal supply to provide 100 percent of its coal requirements in 2012, and a declining percentage of
requirements in subsequent years. PSCo’s general coal purchasing objective is to contract for approximately 100 percent of
requirements for the following year, 67 percent of requirements in two years, and 33 percent of requirements in three years.
Remaining requirements will be filled through the procurement process or over-the-counter transactions.
PSCo has coal transportation contracts that provide for delivery of 100 percent of its coal requirements in 2012 and 2013. Coal
delivery may be subject to short-term interruptions or reductions due to operation of the mines, transportation problems, weather,
and availability of equipment.
Natural gas — PSCo uses both firm and interruptible natural gas supply and standby oil in combustion turbines and certain
boilers. Natural gas supplies for PSCo’s power plants are procured under contracts to provide an adequate supply of fuel.
However, as natural gas primarily serves intermediate and peak demand, any remaining forecasted requirements are able to be
procured through a liquid spot market. The majority of natural gas supply under contract is covered by a long-term agreement
with Anadarko Energy Services Company, the balance of natural gas supply contracts have pricing features tied to changes in
various natural gas indices. PSCo hedges a portion of that risk through financial instruments. See Note 11 to the consolidated
financial statements for further discussion. 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, PSCo’s
commitments related to gas supply contracts were approximately $817 million and commitments related to gas transportation and
storage contracts were approximately $838 million. At Dec. 31, 2011, PSCo’s commitments related to gas supply contracts,
which expire in various years from 2012 through 2021, were approximately $730 million and commitments related to gas
transportation and storage contracts, which expire in various years from 2012 through 2060, were approximately $819 million.
Renewable Energy Sources
PSCo’s renewable energy portfolio includes wind, biomass, solar, and hydroelectric power from both owned generating facilities
and purchased power agreements. Renewable energy comprised 14.6 percent and 11.7 percent of PSCo’s total owned and
purchased energy for 2011 and 2010, respectively. Biomass, solar and hydroelectric power comprised approximately 2.2 percent
and 1.4 percent of renewable energy for 2011 and 2010, respectively, with the remaining renewable energy provided by wind. As
of Dec. 31, 2011, PSCo is in compliance with its renewable portfolio standards which require generation from renewable
resources of 12 percent of electric retail sales.
PSCo acquires the majority of its wind energy from purchased power agreements with wind farm owners, primarily in Colorado
and Wyoming. PSCo currently has 18 of these agreements in place, with facilities ranging in size from under 3 MW to 300 MW.
In addition to receiving purchased wind energy under these agreements, PSCo 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 $45 for each of 2011 and 2010.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.
In 2011, the new 252 MW Cedar Point Wind Project and the 251 MW Cedar Creek II Wind Farm began commercial operations.
PSCo has long-term purchased power agreements to acquire the output of both facilities. PSCo has agreed to purchase 200 MW
of wind power from NextEra Energy Resources’ Limon Wind Energy Center and an additional 200 MW from NextEra Energy
Resources’ Limon Wind Energy Center II, which are both expected to be completed in 2012. The average cost over the 25 year
term of these contracts is approximately $35 per MWh, which is lower than the average cost per MWh of purchased wind energy
on the PSCo system. By the end of 2012, PSCo plans to have approximately 2,200 MW of wind on its system.