Xcel Energy 2012 Annual Report Download - page 71

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Environmental Matters
Environmental costs include accruals for nuclear plant decommissioning and payments for storage of spent nuclear fuel, disposal
of hazardous materials and waste, remediation of contaminated sites, monitoring of discharges to the environment and compliance
with laws and permits with respect to emissions. A trend of greater environmental awareness and increasingly stringent regulation
may continue to cause higher operating expenses and capital expenditures for environmental compliance.
In addition to nuclear decommissioning and spent nuclear fuel disposal expenses, costs charged to operating expenses for
environmental monitoring and disposal of hazardous materials and waste were approximately:
• $263 million in 2012;
• $265 million in 2011; and
• $256 million in 2010.
Xcel Energy estimates an average annual expense of approximately $305 million from 2013 through 2017 for similar costs.
However, the precise timing and amount of environmental costs, including those for site remediation and disposal of hazardous
materials, are currently unknown. Additionally, the extent to which environmental costs will be included in and recovered through
rates may fluctuate.
Capital expenditures for environmental improvements at regulated facilities were approximately:
• $180 million in 2012;
• $48 million in 2011; and
• $473 million in 2010.
See Item 7 — Capital Requirements for further discussion.
Xcel Energy’s operations are subject to federal and state laws and regulations related to air emissions, water discharges, and waste
management. These laws and regulations regulate air emissions from various sources, including electrical generating units, and
impose certain monitoring and reporting requirements. Such laws and regulations may require Xcel Energy to obtain pre-approval
for the construction or modification of certain projects that increase air emissions, obtain and strictly comply with air permits that
contain emission and operational limitations or mandate the installation and operation of pollution control equipment at facilities.
Xcel Energy will likely be required to incur capital expenditures in the future to comply with these requirements for remediation
plans of MGP sites and various regulations for air emissions and water intake. Actual expenditures could be higher or lower than
the estimates presented, and the scope and timing of these expenditures cannot be fully determined until any new or revised
regulations become final.
In July 2011, the EPA issued the CSAPR, to address long-range transport of PM and ozone by requiring reductions in SO2 and NOx
from utilities located in the eastern half of the U.S. In August 2012, the D.C. Circuit issued an opinion that vacated the CSAPR, but
required continued implementation of the CAIR pending the EPA’s development of a replacement program. 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.
In addition, there are emission controls, known as BART, for industrial facilities releasing emissions that reduce visibility in certain
national parks and wilderness areas. Xcel Energy generating facilities in Minnesota and Colorado are subject to BART requirements.
Further, generating facilities throughout the Xcel Energy territory are subject to mercury reduction requirements at the state level.
In December 2011, the EPA adopted a regulation setting national emission limits for EGUs for mercury, certain metals, and acid
gas emissions.
See Note 13 to the consolidated financial statements for further discussion of Xcel Energy’s environmental contingencies.
Inflation
Inflation at its current level is not expected to materially affect Xcel Energy’s prices or returns to shareholders. However,
potential future inflation could result from economic conditions or the economic and monetary policies of the U.S. Government
and the Federal Reserve. This could lead to future price increases for materials and services required to deliver electric and natural
gas services to customers. These potential cost increases could in turn lead to increased prices to customers.