Xcel Energy 2012 Annual Report Download - page 30

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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, 2012, PSCo’s commitments related to gas supply contracts, which expire in
various years from 2013 through 2023, were approximately $1.1 billion and commitments related to gas transportation and storage
contracts, which expire in various years from 2013 through 2060, were approximately $754 million. At Dec. 31, 2011, PSCo’s
commitments related to gas supply contracts were approximately $730 million and commitments related to gas transportation and
storage contracts were approximately $819 million.
PSCo has limited on-site fuel oil storage facilities and primarily relies on the spot market for incremental supplies.
Renewable Energy Sources
PSCo’s renewable energy portfolio includes wind, hydroelectric, biomass and solar power from both owned generating facilities
and PPAs. As of Dec. 31, 2012, PSCo was in compliance with mandated RPS, which require generation from renewable
resources of 12 percent of electric retail sales. Renewable energy comprised 18.7 percent and 14.6 percent of PSCo’s total owned
and purchased energy for 2012 and 2011, respectively. Wind energy comprised 16.0 percent and 12.4 percent of PSCo’s total
owned and purchased energy for 2012 and 2011, respectively. Hydroelectric, biomass and solar power comprised approximately
2.7 percent and 2.2 percent of renewable energy for 2012 and 2011.
PSCo also offers customer-focused renewable energy initiatives. Windsource, one of the nation’s largest voluntary renewable
energy programs, allows customers to purchase a portion or all of their electricity from renewable sources. Approximately 34,000
and 36,000 customers in Colorado purchased 201,000 MWh and 212,000 MWh of electricity under the Windsource program in
2012 and 2011, respectively. Additionally, to encourage the growth of solar energy on the system, customers are offered
incentives to install solar panels on their homes and businesses under the Solar*Rewards program. Over 12,500 PV systems with
approximately 138 MW of aggregate capacity and over 9,600 PV systems with approximately 110 MW of aggregate capacity
have been installed in Colorado under this program as of Dec. 31, 2012 and 2011, respectively.
PSCo acquires the majority of its wind energy from PPAs with wind farm owners, primarily in Colorado and Wyoming. PSCo
currently has 19 of these agreements in place, with facilities ranging in size from 2 MW to over 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 $47 and $45 for 2012
and 2011, respectively. 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 2012 benefited from improvements in technology, excess capacity among manufacturers, and motivation to complete
new construction prior to the anticipated expiration of the Federal PTCs in 2012. In January 2013, the Federal PTC was extended
through 2013.
In November 2012, the 200 MW Limon Wind Energy Center and 200 MW Limon Wind Energy Center II began commercial
operations. PSCo has long-term PPAs to acquire the output of both facilities. The average cost over the 25 year term of the Limon
II contract is approximately $35 per MWh, which is lower than the average cost per MWh of purchased wind energy on the PSCo
system.
Additionally, PSCo owns and operates the 26 MW Ponnequin Wind Farm in northern Colorado, which has been in service since
1999. PSCo collectively had approximately 2,200 MW and 1,800 MW of wind energy on its system at the end of 2012 and 2011,
respectively.
Wholesale Commodity Marketing Operations
PSCo conducts various wholesale marketing operations, including the purchase and sale of electric capacity, energy and energy
related products. See Item 7 for further discussion.