Xcel Energy 2012 Annual Report Download - page 42

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GENERAL
Seasonality
The demand for electric power and natural gas is affected by seasonal differences in the weather. In general, peak sales of
electricity occur in the summer and winter months, and peak sales of natural gas occur in the winter months. As a result, the
overall operating results may fluctuate substantially on a seasonal basis. Additionally, Xcel Energy’s operations have historically
generated less revenues and income when weather conditions are milder in the winter and cooler in the summer. See Item 7 —
Management’s Discussion of Financial Condition and Results of Operations.
Competition
Xcel Energy’s industrial and large commercial customers have the ability to own or operate facilities to generate their own
electricity. In addition, customers may have the option of substituting other fuels, such as natural gas, steam or chilled water for
heating, cooling and manufacturing purposes, or the option of relocating their facilities to a lower cost region. The FERC has
continued to promote competitive wholesale markets through open access transmission and other means. As a result, Xcel Energy
Inc.’s utility subsidiaries and their wholesale customers can purchase the output from generation resources of competing
wholesale suppliers and use the transmission systems of the utility subsidiaries on a comparable basis to serve their native load.
Xcel Energy Inc.’s utility subsidiaries also have franchise agreements with certain cities subject to periodic renewal. If a city
elected not to renew the franchise agreement, it could seek alternative means for its citizens to access electric power or gas, such
as municipalization. While each of Xcel Energy Inc.’s utility subsidiaries faces these challenges, Xcel Energy believes their rates
are competitive with currently available alternatives.
ENVIRONMENTAL MATTERS
Xcel Energy’s facilities are regulated by federal and state environmental agencies. These agencies have jurisdiction over air
emissions, water quality, wastewater discharges, solid wastes and hazardous substances. Various company activities require
registrations, permits, licenses, inspections and approvals from these agencies. Xcel Energy has received all necessary
authorizations for the construction and continued operation of its generation, transmission and distribution systems. Xcel Energy’s
facilities have been designed and constructed to operate in compliance with applicable environmental standards. Xcel Energy
strives to comply with all environmental regulations applicable to its operations. However, it is not possible to determine when or
to what extent additional facilities or modifications of existing or planned facilities will be required as a result of changes to
environmental regulations, interpretations or enforcement policies or, what effect future laws or regulations may have upon Xcel
Energy’s operations. See Item 7 and Notes 12 and 13 to the consolidated financial statements for further discussion.
There are significant future environmental regulations under consideration to encourage the use of clean energy technologies and
regulate emissions of GHGs to address climate change. While environmental regulations related to climate change and clean
energy continue to evolve, Xcel Energy has undertaken a number of initiatives to meet current requirements and prepare for
potential future regulations, reduce GHG emissions and respond to state renewable and energy efficiency goals. Although the
impact of these policies on Xcel Energy will depend on the specifics of state and federal policies, legislation, and regulation, we
believe that, based on prior state commission practice, we would recover the cost of these initiatives through rates.
Xcel Energy is committed to addressing climate change and potential climate change regulation through efforts to reduce its GHG
emissions in a balanced, cost-effective manner. Xcel Energy adopted a methodology for calculating CO2 emissions based on the
reporting protocols of The Climate Registry, a nonprofit organization that provides and compiles GHG emissions data from
reporting entities. As third-party CO2 reporting protocols continue to evolve, Xcel Energy expects additional changes in reporting
methodology and reported CO2 emissions. Starting in 2011, Xcel Energy began reporting GHG emissions to the EPA. Currently,
EPA reporting rules do not address REC transactions. It is not clear whether future GHG reporting regulations could require
reporting of CO2 emissions for REC transactions.
Based on The Climate Registry’s current reporting protocol, Xcel Energy estimated that its current electric generating portfolio,
which includes coal- and gas-fired plants, emitted approximately 59.1 million and 59.8 million tons of CO2 in 2012 and 2011,
respectively. Xcel Energy also estimated emissions associated with electricity purchased for resale to Xcel Energy customers
from generation facilities owned by third parties. Xcel Energy estimates that these third-party facilities emitted approximately
15.1 million and 19.9 million tons of CO2 in 2012 and 2011, respectively. Estimated total CO2 emissions, associated with service
to Xcel Energy electric customers, decreased by 5.5 million tons in 2012 compared to 2011. The decrease in emissions was
associated with a decrease of 3.9 million MWh of generation. The average annual decrease in CO2 emissions since 2010 is
approximately 2.1 million tons of CO2 per year.