Xcel Energy 2013 Annual Report Download - page 54

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Risks Associated with Our Business
Environmental Risks
We are subject to environmental laws and regulations, with which compliance could be difficult and costly.
We are subject to environmental laws and regulations that affect many aspects of our past, present and future operations, including air
emissions, water quality, wastewater discharges and the generation, transport and disposal of solid wastes and hazardous substances.
These laws and regulations require us to obtain and comply with a wide variety of environmental requirements including those for
protected natural and cultural resources (such as wetlands, endangered species and other protected wildlife, and archaeological and
historical resources), licenses, permits, inspections and other approvals. Environmental laws and regulations can also require us to
restrict or limit the output of certain facilities or the use of certain fuels, install pollution control equipment at our facilities, clean up
spills and other contamination and correct environmental hazards. Environmental regulations may also lead to shutdown of existing
facilities, either due to the difficulty in assuring compliance or that the costs of compliance no longer makes operation of the units
economic. Both public officials and private individuals may seek to enforce the applicable environmental laws and regulations against
us. We may be required to pay all or a portion of the cost to remediate (i.e., cleanup) sites where our past activities, or the activities of
certain other parties, caused environmental contamination. At Dec. 31, 2013, these sites included:
• Sites of former MGPs operated by our subsidiaries, predecessors, or other entities; and
• Third party sites, such as landfills, for which we are alleged to be a PRP that sent hazardous materials and wastes.
We are also subject to mandates to provide customers with clean energy, renewable energy and energy conservation offerings. These
mandates are designed in part to mitigate the potential environmental impacts of utility operations. Failure to meet the requirements
of these mandates may result in fines or penalties, which could have a material effect on our results of operations. If our regulators do
not allow us to recover all or a part of the cost of capital investment or the O&M costs incurred to comply with the mandates, it could
have a material effect on our results of operations, financial position or cash flows.
In addition, existing environmental laws or regulations may be revised, and new laws or regulations seeking to protect the
environment may be adopted or become applicable to us, including but not limited to, regulation of mercury, NOx, SO2, CO2 and other
GHGs particulates, coal ash and cooling water intake systems. We may also incur additional unanticipated obligations or liabilities
under existing environmental laws and regulations.
We are subject to physical and financial risks associated with climate change.
There is a growing consensus that emissions of GHGs are linked to global climate change. Climate change creates physical and
financial risk. Physical risks from climate change include an increase in sea level and changes in weather conditions, such as changes
in precipitation and extreme weather events. We do not serve any coastal communities so the possibility of sea level rises does not
directly affect us or our customers.
Our customers’ energy needs vary with weather conditions, primarily temperature and humidity. For residential customers, heating
and cooling represent their largest energy use. To the extent weather conditions are affected by climate change, customers’ energy use
could increase or decrease depending on the duration and magnitude of the changes. Increased energy use due to weather changes
may require us to invest in additional generating assets, transmission and other infrastructure to serve increased load. Decreased
energy use due to weather changes may affect our financial condition, through decreased revenues. Extreme weather conditions in
general require more system backup, adding to costs, and can contribute to increased system stress, including service interruptions.
Weather conditions outside of our service territory could also have an impact on our revenues. We buy and sell electricity depending
upon system needs and market opportunities. Extreme weather conditions creating high energy demand on our own and/or other
systems may raise electricity prices as we buy short-term energy to serve our own system, which would increase the cost of energy we
provide to our customers.
Severe weather impacts our service territories, primarily when thunderstorms, tornadoes and snow or ice storms occur. To the extent
the frequency of extreme weather events increases, this could increase our cost of providing service. Changes in precipitation
resulting in droughts or water shortages could adversely affect our operations, principally our fossil generating units. A negative
impact to water supplies due to long-term drought conditions could adversely impact our ability to provide electricity to customers, as
well as increase the price they pay for energy. We may not recover all costs related to mitigating these physical and financial risks.