Xcel Energy 2013 Annual Report Download - page 37

19
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, 2013, PSCo’s commitments related to gas supply contracts, which expire in various
years from 2014 through 2023, were approximately $1.1 billion and commitments related to gas transportation and storage contracts,
which expire in various years from 2014 through 2060, were approximately $723 million. At Dec. 31, 2012, PSCo’s commitments
related to gas supply contracts were approximately $1.1 billion and commitments related to gas transportation and storage contracts
were approximately $754 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, 2013, PSCo was in compliance with mandated RPS, which require generation from renewable resources of 12
percent of electric retail sales. Renewable energy comprised 21.9 percent and 18.4 percent of PSCo’s total owned and purchased
energy for 2013 and 2012, respectively. Wind energy comprised 19.3 percent and 16.0 percent of PSCo’s total owned and purchased
energy for 2013 and 2012, respectively. Hydroelectric, biomass and solar power comprised approximately 2.6 percent and 2.4 percent
of PSCo’s total owned and purchased energy for 2013 and 2012.
PSCo also offers customer-focused renewable energy initiatives. Windsource allows customers to purchase a portion or all of their
electricity from renewable sources. In 2013, the number of customers increased to approximately 37,000 from 34,000 in 2012.
Windsource MWh sales declined slightly, due in part to residential attrition, from approximately 201,000 MWh in 2012 to 197,000
MWh in 2013. 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 18,250 PV systems with approximately 188 MW of
aggregate capacity and over 12,500 PV systems with approximately 138 MW of aggregate capacity have been installed in Colorado
under this program as of Dec. 31, 2013 and 2012, respectively.
Wind — PSCo acquires the majority of its wind energy from PPAs with wind farm owners, primarily located in Colorado. PSCo
currently has 19 of these agreements in place, with facilities ranging in size from two MW to over 300 MW. In October 2013, the
CPUC approved the addition of 450 MW of Colorado wind generation PPA’s. 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 $45 and $47 for 2013 and 2012, 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 2013 continued to benefit from
improvements in technology, excess capacity among manufacturers, and motivation to commence new construction prior to the
expiration of the Federal PTC in 2013.
Additionally, PSCo owns and operates the 26 MW Ponnequin Wind Farm in northern Colorado, which has been in service since 1999.
Collectively, PSCo had approximately 2,170 MW of wind energy on its system at the end of 2013 and 2012, respectively. With the
new projects, PSCo is anticipated to have approximately 2,650 MW of wind power.
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.