Xcel Energy 2002 Annual Report Download - page 73

NRG Site Remediation As part of acquiring existing generating assets, NRG has acquired certain environmental liabilities associated
with regulatory compliance and site contamination. Often, potential compliance implementation plans are changed, delayed or abandoned
due to one or more of the following conditions: (a) extended negotiations with regulatory agencies, (b) a delay in promulgating rules
critical to dictating the design of expensive control systems, (c) changes in governmental/regulatory personnel, (d) changes in governmental
priorities or (e) selection of a less expensive compliance option than originally envisioned.
In response to liabilities associated with these activities, NRG has established accruals where reasonable estimates of probable liabilities
are possible. As of Dec. 31, 2002 and 2001, NRG has established such accruals in the amount of approximately $3.8 million and
$5.0 million, respectively, primarily related to its Northeast region facilities. NRG has not used discounting in determining its accrued
liabilities for environmental remediation and no claims for possible recovery from third party issuers or other parties related to environmental
costs have been recognized in NRG’s consolidated financial statements. NRG adjusts the accruals when new remediation responsibilities
are discovered and probable costs become estimable, or when current remediation estimates are adjusted to reflect new information.
During the years ended Dec. 31, 2002, 2001 and 2000, NRG recorded expenses of approximately $10.9 million, $15.3 million and
$3.4 million related to environmental matters, respectively.
Asbestos Removal Some of our facilities contain asbestos. Most asbestos will remain undisturbed until the facilities that contain it are
demolished or renovated. Since we intend to operate most of these facilities indefinitely, we cannot estimate the amount or timing of
payments for its final removal. 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 immaterial and is recorded as incurred as operating expenses for
maintenance projects, capital expenditures for construction projects or removal costs for demolition projects.
Leyden Gas Storage Facility In February 2001, the CPUC granted PSCo’s application to abandon the Leyden natural gas storage facility
(Leyden) after 40 years of operation. In July 2001, the CPUC decided that the recovery of all Leyden costs would be addressed in a
future rate proceeding when all costs were known. Since late 2001, PSCo has operated the facility to withdraw the recoverable gas in
inventory. Beginning in 2003, PSCo will start to flood the facility with water, as part of an overall plan to convert Leyden into a municipal
water storage facility owned and operated by the city of Arvada, Colo. As of Dec. 31, 2002, PSCo has deferred approximately $4.5 million
of costs associated with engineering buffer studies, damage claims paid to landowners and other closure costs. PSCo expects to incur an
additional $6 million to $8 million of costs through 2005 to complete the decommissioning and closure of the facility. PSCo believes
that these costs will be recovered through future rates. Any costs that are not recoverable from customers will be expensed.
PSCo Notice of Violation On Nov. 3, 1999, the United States Department of Justice filed suit against a number of electric utilities for
alleged violations of the Clean Air Act’s New Source Review (NSR) requirements related to alleged modifications of electric generating
stations located in the South and Midwest. Subsequently, the U. S. Environmental Protection Agency (EPA) also issued requests for
information pursuant to the Clean Air Act to numerous other electric utilities, including Xcel Energy, seeking to determine whether
these utilities engaged in activities that may have been in violation of the NSR requirements. In 2001, Xcel Energy responded to EPA’s
initial information requests related to PSCo plants in Colorado.
On July 1, 2002, Xcel Energy received a Notice of Violation (NOV) from the EPA alleging violations of the NSR requirements of the
Clean Air Act at the Comanche and Pawnee stations in Colorado. The NOV specifically alleges that various maintenance, repair and
replacement projects undertaken at the plants in the mid- to late-1990s should have required a permit under the NSR process. Xcel
Energy believes it acted in full compliance with the Clean Air Act and NSR process. It believes that the projects identified in the NOV
fit within the routine maintenance, repair and replacement exemption contained within the NSR regulations or are otherwise not subject
to the NSR requirements. Xcel Energy also believes that the projects would be expressly authorized under the EPA’s NSR policy
announced by the EPA administrator on June 22, 2002, and proposed in the Federal Register on Dec. 31, 2002. Xcel Energy disagrees
with the assertions contained in the NOV and intends to vigorously defend its position. As required by the Clean Air Act, the EPA
met with Xcel Energy in September 2002 to discuss the NOV.
If the EPA is successful in any subsequent litigation regarding the issues set forth in the NOV or any matter arising as a result of its
information requests, it could require Xcel Energy to install additional emission-control equipment at the facilities and pay civil penalties.
Civil penalties are limited to not more than $25,000 to $27,500 per day for each violation, commencing from the date the violation
began. The ultimate financial impact to Xcel Energy is not determinable at this time.
NSP-Minnesota NSR Information Request As stated previously, on Nov. 3, 1999, the United States Department of Justice filed suit
against a number of electric utilities for alleged violations of the Clean Air Act’s NSR requirements related to alleged modifications of
electric generating stations located in the South and Midwest. Subsequently, the EPA also issued requests for information pursuant to
the Clean Air Act to numerous other electric utilities, including Xcel Energy, seeking to determine whether these utilities engaged in
activities that may have been in violation of the NSR requirements. In 2001, Xcel Energy responded to the EPA’s initial information
requests related to NSP-Minnesota plants in Minnesota. On May 22, 2002, the EPA issued a follow-up information request to Xcel
Energy seeking additional information regarding NSR compliance at its plants in Minnesota. Xcel Energy completed its response to
the follow-up information request during the fall of 2002.
notes to consolidated financial statements
xcel energy inc. and subsidiaries page 87