Xcel Energy 2007 Annual Report Download - page 109

Benefit Costs — The components of net periodic pension cost (credit) are:
2007 2006 2005
(Thousands of Dollars)
Service cost ................................................. $ 61,392 $ 61,627 $ 60,461
Interest cost ................................................. 162,774 155,413 160,985
Expected return on plan assets ..................................... (264,831) (268,065) (280,064)
Amortization of prior service cost ................................... 25,056 29,696 30,035
Amortization of net loss ......................................... 15,845 17,353 6,819
Net periodic pension cost (credit) under SFAS No. 87 ..................... 236 (3,976) (21,764)
Credits not recognized due to effects of regulation ......................... 9,682 12,637 19,368
Net benefit credit recognized for financial reporting ...................... $ 9,918 $ 8,661 $ (2,396)
Significant Assumptions Used to Measure Costs
Discount rate ................................................ 6.00% 5.75% 6.00%
Expected average long-term increase in compensation level .................... 4.00 3.50 3.50
Expected average long-term rate of return on assets ........................ 8.75 8.75 8.75
Pension costs include an expected return impact for the current year that may differ from actual investment
performance in the plan. The return assumption used for 2008 pension cost calculations will be 8.75 percent. The cost
calculation uses a market-related valuation of pension assets. Xcel Energy uses a calculated value method to determine
the market-related value of the plan assets. The market-related value begins with the fair market value of assets as of the
beginning of the year. The market-related value is determined by adjusting the fair market value of assets to reflect the
investment gains and losses (the difference between the actual investment return and the expected investment return on
the market-related value) during each of the previous five years at the rate of 20 percent per year.
Xcel Energy also maintains noncontributory, defined benefit supplemental retirement income plans for certain qualifying
executive personnel. Benefits for these unfunded plans are paid out of Xcel Energy’s operating cash flows.
Defined Contribution Plans
Xcel Energy maintains 401(k) plans that cover substantially all employees. Total contributions to these plans were
approximately $21.8 million in 2007, $18.3 million in 2006 and $19.6 million in 2005.
Postretirement Health Care Benefits
Xcel Energy has a contributory health and welfare benefit plan that provides health care and death benefits to most
Xcel Energy retirees.
• The former NSP discontinued contributing toward health care benefits for nonbargaining employees retiring after
1998 and for bargaining employees of NSP-Minnesota and NSP-Wisconsin who retired after 1999.
• Xcel Energy discontinued contributing toward health care benefits for former NCE nonbargaining employees
retiring after June 30, 2003.
• Employees of NCE who retired in 2002 continue to receive employer-subsidized health care benefits.
• Nonbargaining employees of the former NSP who retired after 1998, bargaining employees of the former NSP
who retired after 1999 and nonbargaining employees of NCE who retired after June 30, 2003, are eligible to
participate in the Xcel Energy health care program with no employer subsidy.
In conjunction with the 1993 adoption of SFAS No. 106 — ‘‘Employers’ Accounting for Postretirement Benefits Other
Than Pension,’’ Xcel Energy elected to amortize the unrecognized accumulated postretirement benefit obligation
(APBO) on a straight-line basis over 20 years.
Regulatory agencies for nearly all of Xcel Energy’s retail and wholesale utility customers have allowed rate recovery of
accrued benefit costs under SFAS No. 106. The Colorado jurisdictional SFAS No. 106 costs deferred during the
transition period are being amortized to expense on a straight-line basis over the 15-year period from 1998 to 2012.
NSP-Minnesota also transitioned to full accrual accounting for SFAS No. 106 costs, with regulatory differences fully
amortized prior to 1997.
Plan Assets — Certain state agencies that regulate Xcel Energy’s utility subsidiaries also have issued guidelines related to
the funding of SFAS No. 106 costs. SPS is required to fund SFAS No. 106 costs for Texas and New Mexico
jurisdictional amounts collected in rates and PSCo is required to fund SFAS No. 106 costs in irrevocable external trusts
that are dedicated to the payment of these postretirement benefits. Also, a portion of the assets contributed on behalf of
nonbargaining retirees has been funded into a sub-account of the Xcel Energy pension plans. These assets are invested
in a manner consistent with the investment strategy for the pension plan.
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