Xcel Energy 2012 Annual Report Download - page 143

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In connection with the acquisition of 900 MW of natural gas-fired generation from subsidiaries of Calpine Development Holdings
Inc. in 2010, PSCo agreed to indemnify the seller for losses arising out of a breach of certain representations and warranties. The
aggregate liability for PSCo pursuant to these indemnities is not subject to a capped dollar amount. The indemnification
obligation expired in December 2012. PSCo has not recorded a liability related to this indemnity at Dec. 31, 2012 or 2011.
Xcel Energy Inc. and its subsidiaries provide other indemnifications through contracts entered into in the normal course of
business. These are primarily indemnifications against adverse litigation outcomes in connection with underwriting agreements,
as well as breaches of representations and warranties, including corporate existence, transaction authorization and income tax
matters with respect to assets sold. Xcel Energy Inc.’s and its subsidiaries’ obligations under these agreements may be limited in
terms of time and amount. The maximum potential amount of future payments under these indemnifications cannot be reasonably
estimated as the obligated amounts of these indemnifications often are not explicitly stated.
Environmental Contingencies
Xcel Energy has been or is currently involved with the cleanup of contamination from certain hazardous substances at several
sites. In many situations, the subsidiary involved believes it will recover some portion of these costs through insurance claims.
Additionally, where applicable, the subsidiary involved is pursuing, or intends to pursue, recovery from other PRPs and through
the regulated rate process. New and changing federal and state environmental mandates can also create added financial liabilities
for Xcel Energy, which are normally recovered through the regulated rate process. To the extent any costs are not recovered
through the options listed above, Xcel Energy would be required to recognize an expense.
Site Remediation — Various federal and state environmental laws impose liability, without regard to the legality of the original
conduct, where hazardous substances or other regulated materials have been released to the environment. Xcel Energy Inc.’s
subsidiaries may sometimes pay all or a portion of the cost to remediate sites where past activities of their predecessors or other
parties have caused environmental contamination. Environmental contingencies could arise from various situations, including
sites of former MGPs operated by Xcel Energy Inc.’s subsidiaries or their predecessors, or other entities; and third-party sites,
such as landfills, for which one or more of Xcel Energy Inc.’s subsidiaries are alleged to be a PRP that sent hazardous materials
and wastes to that site.
MGP Sites
Ashland MGP Site — NSP-Wisconsin has been named a PRP for contamination at a site in Ashland, Wis. The Ashland site
includes property owned by NSP-Wisconsin, which was a site previously operated by a predecessor company as a MGP facility
(the Upper Bluff), and two other properties: an adjacent city lakeshore park area (Kreher Park), on which an unaffiliated third
party previously operated a sawmill and conducted creosote treating operations; and an area of Lake Superior’s Chequamegon
Bay adjoining the park (the Sediments).
The EPA issued its Record of Decision (ROD) in 2010, which describes the preferred remedy the EPA has selected for the
cleanup of the Ashland site. In 2011, the EPA issued special notice letters identifying several entities, including NSP-Wisconsin,
as PRPs, for future remediation at the site. The special notice letters requested that those PRPs participate in negotiations with the
EPA regarding how the PRPs intended to conduct or pay for the remediation at the Ashland site. As a result of those settlement
negotiations, the EPA agreed to segment the Ashland site into separate areas. The first area (Phase I Project Area) includes soil
and groundwater in Kreher Park and the Upper Bluff. The second area includes the Sediments.
In October 2012, a settlement among the EPA, the WDNR, the Bad River and Red Cliff Bands of the Lake Superior Tribe of
Chippewa Indians and NSP-Wisconsin was approved by the U.S. District Court for the Western District of Wisconsin. This
settlement resolves claims against NSP-Wisconsin for its alleged responsibility for the remediation of the Phase I Project Area.
Under the terms of the settlement, NSP-Wisconsin agreed to perform the remediation of the Phase I Project Area, but does not
admit any liability with respect to the Ashland site. The settlement reflects a cost estimate for the clean up of the Phase I Project
Area of $40 million. The settlement also resolves claims by the federal, state and tribal trustees against NSP-Wisconsin for
alleged natural resource damages at the Ashland site, including both the Phase I Project Area and the Sediments. As part of the
settlement, NSP-Wisconsin will convey approximately 1,390 acres of land to the State of Wisconsin. Fieldwork to address the
Phase I Project Area at the Ashland site began at the end of 2012 and will continue into 2013.
Negotiations between the EPA and NSP-Wisconsin regarding who will pay or perform the cleanup of the Sediments are ongoing.
The EPA’s ROD for the Ashland site includes estimates that the cost of the preferred remediation related to the Sediments is
between $63 million and $77 million, with a potential deviation in such estimated costs of up to 50 percent higher to 30 percent
lower.