Xcel Energy 2012 Annual Report Download - page 27

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Purchased Power — PSCo has contracts to purchase power from other utilities and independent power producers. Long-term
purchased power contracts typically require a periodic payment to secure the capacity and a charge for the associated energy
actually purchased. PSCo also makes short-term purchases to meet system load and energy requirements, to replace generation
from company-owned units under maintenance or during outages, to meet operating reserve obligations, or to obtain energy at a
lower cost.
Purchased Transmission Services — In addition to using its own transmission system, PSCo has contracts with regional
transmission service providers to deliver power and energy to PSCo’s customers.
PSCo Resource Plan — In July 2012, PSCo filed two separate applications to update its resource plan. The first was an
application to purchase Brush Power, LLC and all of its assets including Brush generating Units 1, 3 and 4 for a total purchase
price of approximately $75 million. The Brush units currently provide 237 MW of natural gas fueled capacity and energy to PSCo
under PPAs that are set to expire in 2017 for Brush Unit 1 and Brush Unit 3, and 2022 for Brush Unit 4.
The second application sought approval to retire Arapahoe Unit 4, a 109 MW coal-fired company-owned generating station at the
end of 2013. This was presented as an alternative to permanently fuel switching Arapahoe Unit 4 to natural gas and instead
replacing the capacity and associated energy with a natural gas PPA with an existing generator.
In September 2012, the FERC approved the acquisition of Brush Power, LLC. In January 2013, the CPUC denied approval of the
acquisition due to the risks associated with the transaction. PSCo has the ability to terminate the transaction pursuant to the terms
of the purchase agreement. The CPUC also decided that it was best not to make the decision to retire Arapahoe Unit 4 in this first
phase of the resource plan and instead determined that the decision is best made after the retirement can be compared to bids
received in the second phase.
RES Compliance Plan — Colorado law mandates that at least 30 percent of PSCo’s energy sales are supplied by renewable
energy by 2020 and includes a distributed generation standard. The CPUC has approved PSCo’s 2012 and 2013 RES compliance
plan to acquire up to 30 MW of customer-sited solar projects each year and up to 9 MW of community solar garden projects. The
CPUC also approved moving solely to a pay-for-performance basis under the Solar*Rewards distributed solar generation
program, which PSCo implemented in June 2012. Based on CPUC approval, PSCo implemented a solar gardens program called
Solar*Rewards Community, which will allow customers who either cannot or who prefer not to install solar generation on their
property to join together to own interests in a common solar facility and receive a credit related to their share of the solar garden’s
electric production on their electric bill. PSCo filled the 9 MW allotted for Solar*Rewards Community in 2012 and will seek to
acquire an additional 9 MW in 2013. See Renewable Energy Sources for further discussion.
CACJA — The CACJA required PSCo to file a comprehensive plan to reduce annual emissions of NOx from the coal-fired
generation identified in the plan by at least 70 to 80 percent or greater from 2008 levels by 2017. The plan allows PSCo to
propose emission controls, plant refueling or plant retirement of at least 900 MW of coal-fired generating units in Colorado by
2017. The total investment associated with the adopted plan is approximately $1.0 billion through 2017. In September 2012, the
EPA formally approved the Colorado SIP, including the proposed changes at the PSCo plants.
PSCo’s plan as of Dec. 31, 2012 is as follows:
• Cherokee Units 2 and 1 were shut down in 2011 and 2012, respectively, and Cherokee Unit 3 (365 MW in total) is
expected to be shut down by the end of 2016, after a new natural gas combined-cycle unit is built at Cherokee Station
(569 MW);
• Cherokee Unit 2 was converted to a synchronous condenser to support the transmission system in 2012;
• Fuel switch Cherokee Unit 4 (352 MW) to natural gas by 2017, unless a more cost-effective bid is provided to PSCo in
response to the RFP to be issued in Phase 2 of the PSCo Resource Plan in early 2013. If a more cost-effective bid is
obtained, then Cherokee Unit 4 would be retired at the end of 2017;
• Shutdown Arapahoe Unit 3 (45 MW) at the end of 2013;
• Fuel Switch Arapahoe Unit 4 (111 MW) at the end of 2013, unless a more cost-effective bid is provided to PSCo in
response to the RFP to be issued in Phase 2 of the PSCo Resource Plan in early 2013. If a more cost effective bid is
obtained, then Arapahoe Unit 4 would be retired at the end of 2013;
• Shutdown Valmont Unit 5 (186 MW) in 2017;
• Install SCR for controlling NOx and a scrubber for controlling SO2 on Pawnee Generating Station in 2014; and
• Install SCRs on Hayden Unit 1 in 2015 and Hayden Unit 2 in 2016.