Xcel Energy 2014 Annual Report Download - page 89

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Regulation of Derivatives — In July 2010, financial reform legislation was passed that provides for the regulation of derivative
transactions amongst other provisions. Provisions within the bill provide the CFTC and the SEC with expanded regulatory authority
over derivative and swap transactions. Regulations effected under this legislation could preclude or impede some types of over-the-
counter energy commodity transactions and/or require clearing through regulated central counterparties, which could negatively
impact the market for these transactions or result in extensive margin and fee requirements.
As a result of this legislation, there will be material increased reporting requirements for certain volumes of derivative and swap
activity. In April 2012, the CFTC ruled that swap dealing activity conducted by entities for the preceding 12 months under a notional
limit, initially set at $8 billion with further potential reduction to $3 billion after five years, will fall under the general de minimis
threshold and will not subject an entity to registering as a swap dealer. An entity may deal in utility operations-related swaps and not
be required to register as a swap dealer provided that the aggregate gross notional amount of swap dealing activity (including utility
operations-related swaps) does not exceed the general de minimis threshold and provided that the entity has not exceeded the special
entity de minimis threshold (excluding utility operations-related swaps) of $25 million for the preceding 12 months. Xcel Energy’s
current and projected swap activity is well below these de minimis thresholds. The bill also contains provisions that should exempt
certain derivatives end users from much of the clearing and margin requirements. Xcel Energy does not expect to be materially
impacted by the margining provisions. Xcel Energy is currently meeting all other reporting requirements.
SPP FTR Margining Requirements — The SPP conducted its first annual FTR auction in the spring of 2014 associated with the
implementation of the SPP IM. The process for transmission owners involves the receipt of Auction Revenue Rights (ARRs) and, if
elected by the transmission owner, conversion of those ARRs to firm FTRs. SPP requires that the transmission owner post collateral
for the conversion of ARRs to FTRs. At Dec. 31, 2014, SPS had a $30 million letter of credit posted with SPP, which was a reduction
from the initial requirement of $41 million.
Pension Fund — Xcel Energy’s pension assets are invested in a diversified portfolio of domestic and international equity securities,
short-term to long-duration fixed income and interest rate swap securities, and alternative investments, including private equity, real
estate, hedge funds and commodity investments.
The funded status and pension assumptions are summarized in the following tables:
(Millions of Dollars) Dec. 31, 2014 Dec. 31, 2013
Fair value of pension assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,084 $ 3,010
Projected pension obligation (a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,747 3,441
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (663) $ (431)
(a) Excludes nonqualified plan of $47 million and $37 million at Dec. 31, 2014 and 2013, respectively.
Pension Assumptions 2014 2013
Discount rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.11% 4.75%
Expected long-term rate of return. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.09 7.05
Capital Sources
Short-Term Funding Sources — Xcel Energy uses a number of sources to fulfill short-term funding needs, including operating cash
flow, notes payable, commercial paper and bank lines of credit. The amount and timing of short-term funding needs depend in large
part on financing needs for construction expenditures, working capital and dividend payments.
Short-Term Investments — Xcel Energy Inc., NSP-Minnesota, NSP-Wisconsin, PSCo and SPS maintain cash operating and short-
term investment accounts. At Dec. 31, 2014 and 2013, there was $3.3 million and $21.7 million of cash held in these accounts,
respectively.
Commercial Paper — Xcel Energy Inc., NSP-Minnesota, NSP-Wisconsin, PSCo and SPS each have individual commercial paper
programs. The authorized levels for these commercial paper programs are:
• $1 billion for Xcel Energy Inc.;
• $700 million for PSCo;
• $500 million for NSP-Minnesota;
• $400 million for SPS; and
• $150 million for NSP-Wisconsin.