Xcel Energy 2007 Annual Report Download - page 18

ELECTRIC UTILITY OPERATIONS
Electric Utility Trends
Overview
Climate Change and Clean Energy — Like most other utilities, Xcel Energy is subject to a significant array of
environmental regulations focused on many different aspects of its operations. There are significant future
environmental regulations under consideration to encourage the use of clean energy technologies and regulate emissions
of GHGs to address climate change. Xcel Energy’s electric generating facilities are likely to be subject to regulation
under climate change policies introduced at either the state or federal level within the next few years. Several of the
states in which we operate have proposed or implemented clean energy policies, such as renewable energy portfolio
standards or DSM programs, in part designed to reduce the emissions of GHGs. Congress and federal policy makers
are considering climate change legislation and a variety of national climate change policies. Xcel Energy is advocating
with state and federal policy makers for climate change and clean energy policies that will result in significant long-term
reduction in GHG emissions, develop low-emitting technologies and secure, cost-effective energy supplies for our
customers and our nation.
While Xcel Energy is not currently subject to state or federal limits on its GHG emissions, we have undertaken a
number of initiatives to prepare for climate change regulation and reduce our GHG emissions. These initiatives include
emission reduction programs, energy efficiency and conservation programs, renewable energy development and
technology exploration projects. Although the impact of climate change policy on Xcel Energy will depend on the
specifics of state and federal policies and legislation, we believe that, based on prior state commission practice, we
would be granted the authority to recover the cost of these initiatives through rates.
Additional information regarding climate change and clean energy is presented in the Management’s Discussion and
Analysis section.
Utility Restructuring and Retail Competition — The FERC has continued with its efforts to promote more competitive
wholesale markets through open-access transmission and other means. As a consequence, Xcel Energy’s utility
subsidiaries and their wholesale customers can purchase from competing wholesale suppliers and use the transmission
systems of the utility subsidiaries on a comparable basis to the utility subsidiaries’ to serve their native load.
Xcel Energy supports the continued development of wholesale competition and non-discriminatory wholesale open
access transmission services. Xcel Energy will continue to work with the SPP on RTO development for the Texas
Panhandle region and the incorporation of independent transmission operations to insure non-discriminatory open
access. Xcel Energy is also still pursuing strengthening its transmission system internally to alleviate north and south
congestion within the Texas Panhandle and other lines to increase the transfer capability between the Texas Panhandle
and other electric systems.
One state served by Xcel Energy’s utility subsidiaries has implemented retail electric utility competition. In 2002, Texas
implemented retail competition, but it is presently limited to utilities within the Electric Reliability Council of Texas
(ERCOT), which does not include SPS. Under current law, SPS can file a plan to implement competition, subject to
regulatory approval, in Texas. Local market conditions and political realities must be considered in proposing the
transition to competition. Xcel Energy has been unable to develop a plan for the Texas Panhandle to move toward
competition that would be in the best interests of its customers. As a result, Xcel Energy does not plan to propose retail
competition in the Texas Panhandle until required by law. New Mexico repealed its legislation related to retail electric
utility competition.
In 2002, NSP-Wisconsin began providing its Michigan electric customers with the opportunity to select an alternative
electric energy provider. To date, no NSP-Wisconsin customers have selected an alternative electric energy provider.
Xcel Energy’s retail electric business faces competition as industrial and large commercial customers have the ability to
own or operate facilities to generate their own electricity. In addition, customers may have the option of substituting
other fuels, such as natural gas or steam/chilled water for heating, cooling and manufacturing purposes, or the option of
relocating their facilities to a lower cost region. While each of Xcel Energy’s utility subsidiaries faces these challenges,
their rates are competitive with currently available alternatives.
Summary of Recent Federal Regulatory Developments
The FERC has jurisdiction over rates for electric transmission service in interstate commerce and electricity sold at
wholesale, hydro facility licensing, natural gas transportation, accounting practices and certain other activities of Xcel
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