Xcel Energy 2014 Annual Report Download - page 104

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If restructuring or other changes in the regulatory environment occur, regulated utility subsidiaries may no longer be eligible to apply
this accounting treatment, and may be required to eliminate regulatory assets and liabilities from their balance sheets. Such changes
could have a material effect on Xcel Energy’s financial condition, results of operations and cash flows. See Note 15 for further
discussion of regulatory assets and liabilities.
Revenue Recognition — Revenues related to the sale of energy are generally recorded when service is rendered or energy is delivered
to customers. However, the determination of the energy sales to individual customers is based on the reading of their meter, which
occurs on a systematic basis throughout the month. At the end of each month, amounts of energy delivered to customers since the date
of the last meter reading are estimated and the corresponding unbilled revenue is recognized. Xcel Energy presents its revenues net of
any excise or other fiduciary-type taxes or fees.
NSP-Minnesota participates in MISO, and SPS participates in SPP. The revenues and charges from these RTOs related to serving
retail and wholesale electric customers comprising the native load of the NSP-System and SPS are recorded on a net basis within cost
of sales. Revenues and charges for short term wholesale sales of excess energy transacted through RTOs are recorded on a gross basis
in electric revenues and cost of sales.
Xcel Energy Inc.’s utility subsidiaries have various rate-adjustment mechanisms in place that provide for the recovery of natural gas,
electric fuel and purchased energy costs. These cost-adjustment tariffs may increase or decrease the level of revenue collected from
customers and are revised periodically for differences between the total amount collected under the clauses and the costs incurred.
When applicable, under governing regulatory commission rate orders, fuel cost over-recoveries (the excess of fuel revenue billed to
customers over fuel costs incurred) are deferred as regulatory liabilities and under-recoveries (the excess of fuel costs incurred over
fuel revenues billed to customers) are deferred as regulatory assets.
Conservation Programs — Xcel Energy Inc.’s utility subsidiaries have implemented programs in many of their retail jurisdictions to
assist customers in conserving energy and reducing peak demand on the electric and natural gas systems. These programs include
efficiency and redesign programs, as well as rebates for the purchase of items such as high efficiency lighting, air conditioner controls
and energy-efficient heating and cooling appliances.
The costs incurred for DSM and CIP programs are deferred if it is probable future revenue will be provided to permit recovery of the
incurred cost. Recorded revenues for incentive programs designed for recovery of lost margins and/or conservation performance
incentives are limited to amounts expected to be collected within 24 months from the annual period in which they are earned.
For PSCo, SPS and NSP-Minnesota, DSM and CIP program costs are recovered through a combination of base rate revenue and rider
mechanisms. The revenue billed to customers recovers incurred costs for conservation programs and also incentive amounts that are
designed to encourage Xcel Energy’s achievement of energy conservation goals and compensate for related lost sales margin. For
these utility subsidiaries, regulatory assets are recognized to reflect the amount of costs or earned incentives that have not yet been
collected from customers. NSP-Wisconsin recovers approved conservation program costs in base rate revenue.
Property, Plant and Equipment and Depreciation — Property, plant and equipment is stated at original cost. The cost of plant
includes direct labor and materials, contracted work, overhead costs and AFUDC. The cost of plant retired is charged to accumulated
depreciation and amortization. Amounts recovered in rates for future removal costs are recorded as regulatory liabilities. Significant
additions or improvements extending asset lives are capitalized, while repairs and maintenance costs are charged to expense as
incurred. Maintenance and replacement of items determined to be less than a unit of property are charged to operating expenses as
incurred. Planned major maintenance activities are charged to operating expense unless the cost represents the acquisition of an
additional unit of property or the replacement of an existing unit of property. Property, plant and equipment also includes costs
associated with property held for future use. The depreciable lives of certain plant assets are reviewed annually and revised, if
appropriate. Property, plant and equipment that is required to be decommissioned early by a regulator is reclassified as plant to be
retired.
Property, plant and equipment is tested for impairment when it is determined that the carrying value of the assets may not be
recoverable. A loss is recognized in the current period if it becomes probable that part of a cost of a plant under construction or
recently completed plant will be disallowed for recovery from customers and a reasonable estimate of the disallowance can be made.
For investments in property, plant and equipment that are abandoned and not expected to go into service, incurred costs and related
deferred tax amounts are compared to the discounted estimated future rate recovery, and a loss is recognized, if necessary.