Xcel Energy 2012 Annual Report Download - page 145

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The EPA also plans to propose GHG regulations applicable to emissions from existing power plants under the CAA. It is not
known when the EPA will propose new standards for existing sources.
New Mexico GHG Regulations — In 2010, the EIB adopted two regulations to limit GHG emissions, including CO2 emissions
from power plants and other industrial sources. The EIB repealed both regulations in the first quarter of 2012. Western Resource
Advocates and New Energy Economy, Inc. have since filed appeals with the New Mexico Court of Appeals to challenge each of
the EIB’s decisions to repeal the two GHG rules.
CSAPR — In 2011, the EPA issued the CSAPR to address long range transport of PM and ozone by requiring reductions in SO2
and NOx from utilities in the eastern half of the United States. For Xcel Energy, the rule would have applied in Minnesota,
Wisconsin and Texas. The CSAPR would have set more stringent requirements than the proposed Clean Air Transport Rule and
specifically would have required plants in Texas to reduce their SO2 and annual NOx emissions. The rule also would have created
an emissions trading program.
In August 2012, the U.S. Court of Appeals for the D.C. Circuit vacated the CSAPR and remanded it back to the EPA. The D.C.
Circuit also stated that the EPA must continue administering the CAIR pending adoption of a valid replacement. In October 2012,
the EPA, as well as state and local governments and environmental advocates, petitioned the D.C. Circuit to rehear the CSAPR
appeal. In January 2013, the D.C. Circuit denied all requests for rehearing. It is not yet known whether the D.C. Circuit’s decision
will be appealed, or how the EPA might approach a replacement rule. Therefore, it is not known what requirements may be
imposed in the future.
If the EPA continues administering the CAIR while the CSAPR or a replacement rule is pending, Xcel Energy expects to comply
with the CAIR as described below.
CAIR — In 2005, the EPA issued the CAIR to further regulate SO2 and NOx emissions. The CAIR applies to Texas and
Wisconsin. The CAIR does not apply to Minnesota.
Under the CAIR’s cap and trade structure, companies can comply through capital investments in emission controls or purchase of
emission allowances from other utilities making reductions on their systems. NSP-Wisconsin purchased allowances in 2012 and
plans to continue to purchase allowances in 2013 to comply with the CAIR. In the SPS region, installation of low-NOx
combustion control technology was completed in 2012 on Tolk Unit 1. SPS plans to install the same combustion control
technology on Tolk Unit 2 in 2014. These installations will reduce or eliminate SPS’ need to purchase NOx emission allowances.
In addition, SPS has sufficient SO2 allowances to comply with the CAIR in 2013. At Dec. 31, 2012, the estimated annual CAIR
NOx allowance cost for Xcel Energy did not have a material impact on the results of operations, financial position or cash flows.
Electric Generating Unit (EGU) Mercury and Air Toxics Standards (MATS) Rule — The final EGU MATS rule became
effective in April 2012. The EGU MATS rule sets emission limits for acid gases, mercury and other hazardous air pollutants and
requires coal-fired utility facilities greater than 25 MW to demonstrate compliance within three to four years of the effective date.
Xcel Energy expects to comply with the EGU MATS rule through a combination of mercury and other emission control projects.
Xcel Energy plans to cease coal combustion at Bay Front Unit 5 before the MATS compliance date, therefore the MATS rule will
not be applicable for NSP-Wisconsin. Bay Front Unit 5 will become a natural gas-fired unit subject to the Industrial Boiler (IB)
MACT. Xcel Energy believes EGU MATS costs will be recoverable through regulatory mechanisms and does not expect a
material impact on results of operations, financial position or cash flows.
Minnesota Mercury Legislation — NSP-Minnesota installed sorbent control systems at the Sherco Unit 3 and A.S. King
generating plants and has obtained MPUC approval to install mercury controls on Sherco Units 1 and 2 by the end of 2014. NSP-
Minnesota projects installation costs of $9.0 million for the mercury controls on the units and believes these costs would be
recoverable through regulatory mechanisms.
IB MACT Rules — In 2011, the EPA finalized IB MACT rules to regulate boilers and process heaters fueled with coal, biomass
and liquid fuels, which would apply to NSP-Wisconsin’s Bay Front Units 1 and 2. The capital cost to install controls to meet the
requirements in the final reconsidered rule is estimated to be $9.0 million per unit, which are targeted for completion in 2014.
Regional Haze Rules — In 2005, the EPA finalized amendments to its regional haze rules, known as BART, which require the
installation and operation of emission controls for industrial facilities emitting air pollutants that reduce visibility in certain
national parks and wilderness areas. Xcel Energy generating facilities in several states are subject to BART requirements.
Individual states were required to identify the facilities located in their states that will have to reduce SO2, NOx and PM emissions
under BART and then set emissions limits for those facilities.