Xcel Energy 2014 Annual Report Download - page 141

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The ALJ recommended no recovery of the Monticello EPU project costs in 2014, accepting the DOC’s argument that the EPU portion
was not used and useful in 2014 and should be treated as a 2015 step project. NSP-Minnesota fully met the NRC’s requirements for
the EPU as of Dec. 31, 2014. NSP-Minnesota is currently executing the power ascension plan consistent with the NRC license
amendment approval and as of Dec. 31, 2014 had operated the plant using 56 MW of the additional 71 MW from the EPU. The full
71 MW of additional EPU output is expected to be attained in the first half of 2015. Although the final NRC requirements have been
met, rate recovery is still subject to true-up. The ALJ recommendation does not reflect any potential adjustments for the pending
Monticello prudence review.
The ALJ did not make a recommendation on the use of the surplus depreciation reserve in NSP-Minnesota’s rate moderation proposal.
The table above reflects NSP-Minnesota’s filed position for the use of the proposed amortization of the surplus depreciation reserve.
The ALJ also recommended adoption of a full decoupling pilot for the residential and small C&I classes, based on actual sales,
effective the month after the MPUC issues its final order in 2015. Full decoupling would eliminate the impact of weather variability
on electric sales for the residential and small C&I classes for NSP-Minnesota.
NSP-Minnesota has also filed a plan for any potential refund that treats the multi-year case as a single period. In January 2015, the
DOC recommended an alternative option that views each year of the multi-year case separately, which would result in lower 2015
revenues.
A current regulatory liability representing NSP-Minnesota’s best estimate of a refund obligation for 2014 associated with interim rates
was recorded as of Dec. 31, 2014. The estimated amount is generally consistent with the ALJ recommendation.
The MPUC is expected to deliberate on March 26, 2015 and a final order is anticipated in the second quarter of 2015.
NSP-Minnesota – Nuclear Project Prudence Investigation — In 2013, NSP-Minnesota completed the Monticello LCM/EPU project.
The multi-year project extended the life of the facility and increased the capacity from 600 to 671 MW. Monticello LCM/EPU project
expenditures were approximately $665 million. Total capitalized costs were approximately $748 million, which includes AFUDC. In
2008, project expenditures were initially estimated at approximately $320 million, excluding AFUDC.
In 2013, the MPUC initiated an investigation to determine whether the final costs for the Monticello LCM/EPU project were prudent.
NSP-Minnesota filed a report to support the prudence of the incurred costs. The filing indicated the increase in costs was primarily
attributable to three factors: (1) the original estimate was based on a high level conceptual design and the project scope increased as
the actual conditions of the plant were incorporated into the design; (2) implementation difficulties, including the amount of work that
occurred in confined and radioactive or electrically sensitive spaces and NSP-Minnesota’s and its vendors’ ability to attract and retain
experienced workers; and (3) additional NRC licensing related requests over the five-plus year application process.
The cost deviation is in line with similar nuclear upgrade projects undertaken by other utilities. In addition, the project remains
economically beneficial to customers. NSP-Minnesota has received all necessary licenses from the NRC for the Monticello EPU, and
as of Dec. 31, 2014, has fully complied with the NRC’s license requirements for higher power levels.
In July 2014, the DOC filed testimony and recommended a disallowance of recovery of approximately $71.5 million of project costs
on a Minnesota jurisdictional basis.
In August 2014, the OAG filed rebuttal testimony and recommended a disallowance of recovery of $321 million for the entire NSP
System (based on a total capitalized cost of $748 million), and no return on $107 million. NSP-Minnesota believes the costs of the
project were prudent and its decisions and actions do not warrant a disallowance.
In February 2015, an ALJ issued his report finding that NSP-Minnesota was imprudent in managing the project. Consistent with the
DOC’s position, the ALJ proposed: (1) 85 percent of the project cost be assigned to EPU costs and applied the DOC’s cost-
effectiveness test; and (2) disallowance of recovery of approximately $71.5 million of EPU costs, resulting in a reduction of $10.24
million to the 2015 revenue requirement on a Minnesota jurisdictional basis. This would equate to a total NSP System disallowance of
approximately $94 million if the MPUC and other state commissions accepted this recommendation. NSP-Minnesota plans to file
exceptions to the ALJ’s report with the MPUC.