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28
The higher cost of natural gas was primarily due to higher at market prices from increased demand because of cold weather in early
2014.
NSP-Minnesota has firm natural gas transportation contracts with several pipelines, which expire in various years from 2015 through
2033.
NSP-Minnesota has certain natural gas supply, transportation and storage agreements that include obligations for the purchase and/or
delivery of specified volumes of natural gas or to make payments in lieu of delivery. At Dec. 31, 2014, NSP-Minnesota was
committed to approximately $294 million in such obligations under these contracts.
NSP-Minnesota purchases firm natural gas supply utilizing long-term and short-term agreements from approximately 31 domestic and
Canadian suppliers. This diversity of suppliers and contract lengths allows NSP-Minnesota to maintain competition from suppliers
and minimize supply costs.
See Items 1A and 7 for further discussion of natural gas supply and costs.
NSP-Wisconsin
Public Utility Regulation
Summary of Regulatory Agencies and Areas of Jurisdiction — NSP-Wisconsin is regulated by the PSCW and the MPSC. 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 period beginning the following January. NSP-Wisconsin is subject to the jurisdiction of the FERC with respect to certain
natural gas transactions in interstate commerce. NSP-Wisconsin is subject to the DOT, the PSCW and the MPSC for pipeline safety
compliance.
Natural Gas Cost-Recovery Mechanisms — NSP-Wisconsin has a retail PGA cost-recovery mechanism for Wisconsin operations to
recover the actual cost of natural gas and transportation and storage services. The PSCW has the authority to disallow certain costs if
it finds NSP-Wisconsin was not prudent in its procurement activities.
NSP-Wisconsin’s natural gas rate schedules for Michigan customers include a natural gas cost-recovery factor, which is based on 12-
month projections.
Capability and Demand
Natural gas supply requirements are categorized as firm or interruptible (customers with an alternate energy supply). The maximum
daily send-out (firm and interruptible) for NSP-Wisconsin was 163,520 MMBtu, which occurred on Jan. 6, 2014, and 155,087
MMBtu, which occurred on Jan. 21, 2013.
NSP-Wisconsin purchases natural gas from independent suppliers, generally based on market indices that reflect current prices. The
natural gas is delivered under transportation agreements with interstate pipelines. These agreements provide for firm deliverable
pipeline capacity of approximately 131,857 MMBtu per day. In addition, NSP-Wisconsin contracts with providers of underground
natural gas storage services. These agreements provide storage for approximately 31 percent of winter natural gas requirements and
34 percent of peak day firm requirements of NSP-Wisconsin.
NSP-Wisconsin also owns and operates one LNG plant with a storage capacity of 270,000 Mcf equivalent and one propane-air plant
with a storage capacity of 2,700 Mcf equivalent to help meet its peak requirements. These peak-shaving facilities have production
capacity equivalent to 18,408 MMBtu of natural gas per day, or approximately 13 percent of peak day firm requirements. LNG and
propane-air plants provide a cost-effective alternative to annual fixed pipeline transportation charges to meet the peaks caused by firm
space heating demand on extremely cold winter days.
NSP-Wisconsin is required to file a natural gas supply plan with the PSCW annually to change natural gas supply contract levels to
meet peak demand. NSP-Wisconsin’s winter 2014-2015 supply plan was approved by the PSCW in October 2014.
Natural Gas Supply and Costs
NSP-Wisconsin actively seeks natural gas supply, transportation and storage alternatives to yield a diversified portfolio that provides
increased flexibility, decreased interruption and financial risk and economical rates. In addition, NSP-Wisconsin conducts natural gas
price hedging activity that has been approved by the PSCW.