Xcel Energy 2015 Annual Report Download - page 131
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If forecasted costs of electric transmission congestion increase or decrease for a given FTR path, the value of that particular FTR
instrument will likewise increase or decrease. Given the limited observability of management’s forecasts for several of the inputs to
this complex valuation model – including expected plant operating schedules and retail and wholesale demand, fair value
measurements for FTRs have been assigned a Level 3. Non-trading monthly FTR settlements are included in fuel and purchased
energy cost recovery mechanisms as applicable in each jurisdiction, and therefore changes in the fair value of the yet to be settled
portions of most FTRs are deferred as a regulatory asset or liability. Given this regulatory treatment and the limited magnitude of
FTRs relative to the electric utility operations of NSP-Minnesota and SPS, the numerous unobservable quantitative inputs to the
complex model used for valuation of FTRs are insignificant to the consolidated financial statements of Xcel Energy.
Non-Derivative Instruments Fair Value Measurements
The NRC requires NSP-Minnesota to maintain a portfolio of investments to fund the costs of decommissioning its nuclear generating
plants. Together with all accumulated earnings or losses, the assets of the nuclear decommissioning fund are legally restricted for the
purpose of decommissioning the Monticello and PI nuclear generating plants. The fund contains cash equivalents, debt securities,
equity securities and other investments – all classified as available-for-sale. NSP-Minnesota plans to reinvest matured securities until
decommissioning begins. NSP-Minnesota uses the MPUC approved asset allocation for the escrow and investment targets by asset
class for both the escrow and qualified trust.
NSP-Minnesota recognizes the costs of funding the decommissioning of its nuclear generating plants over the lives of the plants,
assuming rate recovery of all costs. Given the purpose and legal restrictions on the use of nuclear decommissioning fund assets,
realized and unrealized gains on fund investments over the life of the fund are deferred as an offset of NSP-Minnesota’s regulatory
asset for nuclear decommissioning costs. Consequently, any realized and unrealized gains and losses on securities in the nuclear
decommissioning fund, including any other-than-temporary impairments, are deferred as a component of the regulatory asset for
nuclear decommissioning.
Unrealized gains for the nuclear decommissioning fund were $328.8 million and $312.1 million at Dec. 31, 2015 and 2014,
respectively, and unrealized losses and amounts recorded as other-than-temporary impairments were $100.2 million and $74.1 million
at Dec. 31, 2015 and 2014, respectively.
The following tables present the cost and fair value of Xcel Energy’s non-derivative instruments with recurring fair value
measurements in the nuclear decommissioning fund at Dec. 31, 2015 and 2014:
Dec. 31, 2015
Fair Value
(Thousands of Dollars) Cost Level 1 Level 2 Level 3 Total
Nuclear decommissioning fund (a)
Cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,484 $ 27,484 $ — $ — $ 27,484
Commingled funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . 392,838 — 410,634 — 410,634
International equity funds . . . . . . . . . . . . . . . . . . . . . . 259,114 — 231,122 — 231,122
Private equity investments. . . . . . . . . . . . . . . . . . . . . . 105,965 — — 157,528 157,528
Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,816 — — 84,750 84,750
Debt securities:
Government securities. . . . . . . . . . . . . . . . . . . . . . . 24,444 — 21,356 — 21,356
U.S. corporate bonds. . . . . . . . . . . . . . . . . . . . . . . . 73,061 — 65,276 — 65,276
International corporate bonds . . . . . . . . . . . . . . . . . 13,726 — 12,801 — 12,801
Municipal bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,255 — 51,589 — 51,589
Asset-backed securities. . . . . . . . . . . . . . . . . . . . . . 2,837 — 2,830 — 2,830
Mortgage-backed securities . . . . . . . . . . . . . . . . . . 11,444 — 11,621 — 11,621
Equity securities:
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473,615 647,159 — — 647,159
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,495,599 $ 674,643 $ 807,229 $ 242,278 $ 1,724,150
(a) Reported in nuclear decommissioning fund and other investments on the consolidated balance sheet, which also includes $130.0 million of equity investments in
unconsolidated subsidiaries and $48.9 million of miscellaneous investments.