Xcel Energy 2014 Annual Report Download - page 31

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Wind — The NSP System acquires the majority of its wind energy from PPAs with wind farm owners, primarily located in
Southwestern Minnesota. Currently, the NSP System has more than 100 of these agreements in place, with facilities ranging in size
from under one MW to more than 200 MW. The NSP System owns and operates two wind farms which have the capacity to generate
302 MWs. Collectively, the NSP System had approximately 1,860 MWs of wind energy on its system at the end of 2014 and 2013. In
October 2013, the MPUC approved four new projects, which are anticipated to provide up to 750 MW of capacity, including two
projects totaling 350 MW that will be owned by NSP-Minnesota. One additional 20 MW project was approved in 2014. All five
projects are targeted to be operational in late 2015. With the new projects, the NSP System is anticipated to have approximately 2,630
MWs of wind power. In addition to receiving purchased wind energy under these agreements, the NSP System also typically receives
wind RECs, which are used to meet state renewable resource requirements. The average cost per MWh of wind energy under the
existing contracts was approximately $41 for 2014 and 2013. 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 2014 continued to benefit from improvements in technology, excess capacity among
manufacturers, and motivation to commence new construction prior to the expiration of the Federal PTCs in 2014, with certain
projects qualifying into future years.
Hydroelectric — The NSP System acquires its hydroelectric energy from both owned generation and PPAs. The NSP System owns 20
hydroelectric plants throughout Wisconsin and Minnesota which provide 268 MW of capacity. For 2014, PPAs provided
approximately 38 MW of hydroelectric capacity. Additionally, the NSP System purchases approximately 850 MW of generation from
Manitoba Hydro which is sourced primarily from its fleet of hydroelectric facilities.
Wholesale Commodity Marketing Operations
NSP-Minnesota conducts various wholesale marketing operations, including the purchase and sale of electric capacity, energy and
energy-related products. See Item 7 for further discussion.
NSP-Wisconsin
Public Utility Regulation
Summary of Regulatory Agencies and Areas of Jurisdiction — Retail rates, services and other aspects of NSP-Wisconsin’s
operations are regulated by the PSCW and the MPSC, within their respective states. In addition, each of the state commissions
certifies the need for new generating plants and electric transmission lines before the facilities may be sited and built. NSP-Wisconsin
is subject to the jurisdiction of the FERC with respect to its wholesale electric operations, hydroelectric generation licensing,
accounting practices, wholesale sales for resale, the transmission of electricity in interstate commerce, compliance with the NERC
electric reliability standards, asset transactions and mergers, and natural gas transactions in interstate commerce. NSP-Wisconsin and
NSP-Minnesota have been granted continued joint authorization from the FERC to make wholesale electric sales at market-based
prices. NSP-Wisconsin is a transmission owning member of the MISO RTO.
The PSCW has a biennial base rate filing requirement. By June of each odd numbered year, NSP-Wisconsin must submit a rate filing
for the test year beginning the following January. In recent years, NSP-Wisconsin has been submitting rate filings each year.
Fuel and Purchased Energy Cost Recovery Mechanisms — NSP-Wisconsin does not have an automatic electric fuel adjustment
clause for Wisconsin retail customers. Instead, under Wisconsin rules, utilities submit a forward-looking annual fuel cost plan to the
PSCW for approval. Once the PSCW approves the fuel cost plan, utilities defer the amount of any fuel cost under-collection or over-
collection in excess of a two percent annual tolerance band, for future rate recovery or refund. Approval of a fuel cost plan and any
rate adjustment for refund or recovery of deferred costs is determined by the PSCW after an opportunity for a hearing. Rate recovery
of deferred fuel cost is subject to an earnings test based on the utility’s most recently authorized ROE. Fuel cost under-collections that
exceed the two percent annual tolerance band for a calendar year may not be recovered if the utility earnings for that year exceed the
authorized ROE.
NSP-Wisconsin’s retail electric rate schedules for Michigan customers include power supply cost recovery factors, which are based on
12-month projections. After each 12-month period, a reconciliation is submitted whereby over-collections are refunded and any
under-collections are collected from the customers over the subsequent 12-month period.
Wisconsin Energy Efficiency Program — In Wisconsin, the primary energy efficiency program is funded by the state’s utilities, but
operated by independent contractors subject to oversight by the PSCW and the utilities. NSP-Wisconsin recovers these costs in rates
charged to Wisconsin retail customers.
Capacity and Demand
NSP-Wisconsin operates an integrated system with NSP-Minnesota. See NSP-Minnesota Capacity and Demand.