Xcel Energy 2014 Annual Report Download - page 155

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In August 2012, NSP-Wisconsin also filed litigation against other PRPs for their share of the cleanup costs for the Ashland site. Trial
for this matter is scheduled for April-May of 2015. Negotiations between the EPA, NSP-Wisconsin and several of the other PRPs
regarding the PRPs’ fair share of the cleanup costs for the Ashland site are also ongoing. A settlement in principle has been reached
with two PRPs, Wisconsin Central Ltd. and Soo Line Railroad Co. (collectively, the “Railroad PRPs”), the EPA and NSP-Wisconsin
resolving claims relating to the Railroad PRPs’ share of the costs of cleanup at the Ashland site. Under the agreement, the Railroad
PRPs have agreed to contribute $10.5 million to the costs of the cleanup at the Ashland site. The agreement is currently subject to a
30-day public comment period and must be entered by the U.S. District Court for the Western District of Wisconsin before it will
become final. It is anticipated that the agreement will be entered in the first quarter of 2015. As discussed below, existing PSCW
policy requires that any payments received from PRPs be used to reduce the amount of the cleanup costs ultimately recovered from
customers.
At Dec. 31, 2014 and 2013, NSP-Wisconsin had recorded a liability of $107.6 million and $104.6 million, respectively, for the
Ashland site based upon potential remediation and design costs together with estimated outside legal and consultant costs; of which
$28.9 million and $25.2 million, respectively, was considered a current liability. NSP-Wisconsin’s potential liability, the actual cost of
remediation and the time frame over which the amounts may be paid are subject to change. NSP-Wisconsin also continues to work to
identify and access state and federal funds to apply to the ultimate remediation cost of the entire site. Unresolved issues or factors that
could result in higher or lower NSP-Wisconsin remediation costs for the Ashland site include the cleanup approach implemented for
the Sediments, which party implements the cleanup, the timing of when the cleanup is implemented, potential contributions by other
PRPs and whether federal or state funding may be directed to help offset remediation costs at the Ashland site.
NSP-Wisconsin has deferred the estimated site remediation costs, as a regulatory asset, based on an expectation that the PSCW will
continue to allow NSP-Wisconsin to recover payments for environmental remediation from its customers. The PSCW has consistently
authorized in NSP-Wisconsin rates recovery of all remediation costs incurred at the Ashland site, and has authorized recovery of MGP
remediation costs by other Wisconsin utilities. Under the established PSCW policy, external MGP remediation costs are subject to
deferral in the Wisconsin retail jurisdiction and are reviewed for prudence as part of the Wisconsin retail rate case process. Any
payments received from insurance carriers or PRPs are recorded as a reduction of the regulatory asset. Once deferred MGP
remediation costs are determined by the PSCW to be prudent, utilities are allowed to recover those deferred costs in natural gas rates,
typically over a four- to six-year amortization period. The PSCW historically has not allowed utilities to recover their carrying costs
on unamortized regulatory assets for MGP remediation.
In the 2013 rate case decision, the PSCW recognized the potential magnitude of the future liability for the cleanup at the Ashland site
and granted an exception to its existing policy at the request of NSP-Wisconsin. The elements of this exception include: (1) approval
to begin recovery of estimated Phase 1 Project costs beginning on Jan. 1, 2013; (2) approval to amortize these estimated costs over a
ten-year period; and (3) approval to apply a three percent carrying cost to the unamortized regulatory asset. In the 2014 rate case
decision, the PSCW continued the cost recovery treatment with respect to the 2013 and 2014 cleanup costs for the Phase I Project
Area. The PSCW determined the timing of the cleanup of the Sediments was uncertain and declined NSP-Wisconsin’s request to
begin cost recovery for this portion of the cleanup in 2014 rates. However, the PSCW allowed NSP-Wisconsin to increase its 2014
amortization expense related to the cleanup by an additional $1.1 million to offset the need for a rate decrease for the natural gas
utility.
Other MGP Sites — Xcel Energy is currently involved in investigating and/or remediating several other MGP sites where hazardous
or other regulated materials may have been deposited. Xcel Energy has identified eight sites across all of its service territories where
former MGP activities have or may have resulted in site contamination and are under current investigation and/or remediation. At
some or all of these MGP sites, there are other parties that may have responsibility for some portion of any remediation. Xcel Energy
anticipates that the majority of the remediation at these sites will continue through at least 2015. Xcel Energy had accrued $2.1
million and $5.1 million for all of these sites at Dec. 31, 2014 and 2013, respectively. There may be insurance recovery and/or
recovery from other PRPs that will offset any costs incurred. Xcel Energy anticipates that any amounts spent will be fully recovered
from customers.
Environmental Requirements
Water and Waste
Asbestos Removal — Some of Xcel Energy’s facilities contain asbestos. Most asbestos will remain undisturbed until the facilities that
contain it are demolished or removed. Xcel Energy has recorded an estimate for final removal of the asbestos as an ARO. It may be
necessary to remove some asbestos to perform maintenance or make improvements to other equipment. The cost of removing
asbestos as part of other work is not expected to be material and is recorded as incurred as operating expenses for maintenance
projects, capital expenditures for construction projects or removal costs for demolition projects.