Xcel Energy 2012 Annual Report Download - page 153

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Prairie Island Units 1 and 2 received their initial operating license and began commercial operations in 1973 and 1974. In 2011,
the NRC approved Prairie Island’s license renewal application for its nuclear reactors, allowing operations for an additional 20
years until 2033 and 2034, respectively. In 2011, the MPUC approved a depreciation life extension for Prairie Island 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.
NSP-Minnesota previously recorded annual decommissioning accruals based on periodic site-specific cost studies and a presumed
level of dedicated funding consistent with cost-recovery in utility customer rates. Cost studies quantify decommissioning costs in
current dollars. This study presumed that costs will escalate in the future at a rate of 3.63 percent per year during operations and
radiological portion of decommissioning and 2.63 percent during the independent spent fuel storage installation and site
restoration portion of decommissioning. 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 an after-tax return between 4.57
percent and 5.53 percent, depending on production unit and time frame for external funding. The net unrealized gain or loss on
nuclear decommissioning investments is deferred as a regulatory asset or liability.
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. In November 2012, the MPUC approved NSP-Minnesota’s
most recent nuclear decommissioning study which used 2011 cost data. The MPUC approved the use of a 60-year
decommissioning scenario. This resulted in an approved annual accrual for 2013 of $14.2 million for Minnesota retail customers
to be offset by funds received in October 2012 of $15.3 million from the DOE settlement.
The external funds are held in trust and in escrow. The portion in escrow is subject to refund if approved by the various
commissions. In 2009, the MPUC authorized the return of funds associated with the Monticello plant for the Minnesota retail
jurisdictions with refunds made on customers’ bills in 2010. In March 2010, approximately $5.9 million was also withdrawn from
the Monticello plant portion of the escrow fund for a refund to Wisconsin and Michigan retail customers through general rates in
2011 and 2012.
As of Dec. 31, 2012, NSP-Minnesota has recorded and recovered in rates cumulative decommissioning expense of $1.5 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) 2012 2011
Estimated decommissioning cost obligation from most recently approved study (2011
dollars for 2012 and 2008 dollars for 2011) ..................................... $
2,694,079
$
2,308,196
Effect of escalating costs (to 2012 and 2011 dollars, respectively, at 3.63/2.63 percent
for 2012 and 2.89 percent for 2011) ............................................
93,327
205,960
Estimated decommissioning cost obligation (in current dollars) .....................
2,787,406
2,514,156
Effect of escalating costs to payment date (3.63/2.63 percent for 2012 and 2.89
percent for 2011) .............................................................
5,793,882
2,602,207
Estimated future decommissioning costs (undiscounted) ...........................
8,581,288
5,116,363
Effect of discounting obligation (using risk-free interest rate).......................
(6,243,332
)
(3,187,914
)
Discounted decommissioning cost obligation .....................................
2,337,956
1,928,449
Assets held in external decommissioning trust.....................................
1,489,542
1,336,431
Underfunding of external decommissioning fund compared to the discounted
decommissioning obligation ...................................................
$
848,414
$
592,018
Decommissioning expenses recognized as a result of regulation include the following components:
(Thousands of Dollars)
2012 2011 2010
Annual decommissioning recorded as depreciation expense: (a)
Externally funded ................................
..............
$ - $
-
$
934
Internally funded (including interest costs)
........................
(1,251 )
(456
)
(777
)
Net decommissioning expense recorded
............................
$ (1,251 ) $
(456
) $
157
(a) Decommissioning expense does not include depreciation of the capitalized nuclear asset retirement costs.