Xcel Energy 2012 Annual Report Download - page 76

Download and view the complete annual report

Please find page 76 of the 2012 Xcel Energy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 172

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172

66
Commodity Price Risk — Xcel Energy Inc.’s utility subsidiaries are exposed to commodity price risk in their electric and natural
gas operations. Commodity price risk is managed by entering into long- and short-term physical purchase and sales contracts for
electric capacity, energy and energy-related products and for various fuels used in generation and distribution activities.
Commodity price risk is also managed through the use of financial derivative instruments. Xcel Energy’s risk management policy
allows it to manage commodity price risk within each rate-regulated operation to the extent such exposure exists.
Wholesale and Commodity Trading Risk — Xcel Energy Inc.’s utility subsidiaries conduct various wholesale and commodity
trading activities, including the purchase and sale of electric capacity, energy and energy-related instruments. Xcel Energy’s risk
management policy allows management to conduct these activities within guidelines and limitations as approved by its risk
management committee, which is made up of management personnel not directly involved in the activities governed by this policy.
At Dec. 31, 2012, the fair values by source for net commodity trading contract assets were as follows:
Futures / Forwards
Maturity
Maturity
Total Futures/
Source of
Less Than
Maturity
Maturity
Greater Than
Forwards
(Thousands of Dollars)
Fair Value
1 Year
1 to 3 Years
4 to 5 Years
5 Years
Fair Value
NSP-Minnesota ..................
1
$
7,207
$
16,207
$
1,251
$
1,201
$
25,866
NSP-Minnesota ..................
2
50
-
277
612
939
PSCo ............................
1
474
318
-
-
792
$
7,731
$
16,525
$
1,528
$
1,813
$
27,597
Options
Maturity
Maturity
Source of
Less Than
Maturity
Maturity
Greater Than
Total Options
(Thousands of Dollars)
Fair Value
1 Year
1 to 3 Years
4 to 5 Years
5 Years
Fair Value
NSP-Minnesota ..................
2
$
641
$
76
$
-
$
-
$
717
1 — Prices actively quoted or based on actively quoted prices.
2 — Prices based on models and other valuation methods.
Changes in the fair value of commodity trading contracts before the impacts of margin-sharing mechanisms for the years ended
Dec. 31, were as follows:
(Thousands of Dollars)
2012
2011
Fair value of net commodity trading contract assets outstanding at Jan. 1 ........................ $
20,424
$
20,249
Contracts realized or settled during the period.................................................
(12,185)
(10,672)
Unrealized commodity trading transactions during the period...................................
20,075
10,847
Fair value of net commodity trading contract assets outstanding at Dec. 31 ...................... $
28,314
$
20,424
At Dec. 31, 2012, a 10 percent increase in market prices for commodity trading contracts would increase pretax income from
continuing operations by approximately $0.5 million, whereas a 10 percent decrease would decrease pretax income from
continuing operations by approximately $0.5 million. At Dec. 31, 2011, a 10 percent increase in market prices for commodity
trading contracts would increase pretax income from continuing operations by approximately $0.2 million, whereas a 10 percent
decrease would decrease pretax income from continuing operations by approximately $0.2 million.
Xcel Energy Inc.’s utility subsidiaries’ wholesale and commodity trading operations measure the outstanding risk exposure to
price changes on transactions, contracts and obligations that have been entered into, but not closed, including transactions that are
not recorded at fair value, using an industry standard methodology known as Value at Risk (VaR). VaR expresses the potential
change in fair value on the outstanding transactions, contracts and obligations over a particular period of time under normal
market conditions. The VaRs for the NSP-Minnesota and PSCo commodity trading operations, calculated on a consolidated basis
using a Monte Carlo simulation with a 95 percent confidence level and a one-day holding period, were as follows:
Year Ended
(Millions of Dollars)
Dec. 31
VaR Limit
Average
High
Low
2012...............................
$
0.45
$
3.00
$
0.36
$
1.56
$
0.06
2011...............................
0.09
3.00
0.14
0.33
0.04