Xcel Energy 2008 Annual Report Download - page 134

NSP-Wisconsin actual retail fuel costs in 2008 were approximately $14.8 million less than assumed in the April 2008
forecast used to set the interim fuel surcharge, primarily due to lower market prices for fuel and purchased power.
Based on actual fuel costs for 2008, NSP-Wisconsin has established a liability of $9.8 million to reflect the expected
refund of interim surcharge revenues that will be determined by the PSCW. Notwithstanding the interim surcharge and
lower than forecast fuel costs, NSP-Wisconsin’s 2008 calendar year fuel costs exceeded authorized revenues by
approximately $1.7 million, net of the anticipated refund.
In accordance with the stipulation agreement approved by the PSCW in NSP-Wisconsin’s 2009 limited electric rate
case, the estimated 2008 interim fuel surcharge refund liability of $9.8 million will be offset by the $5.6 million 2009
rate increase, and the remaining liability will be refunded to customers in 2009, after the PSCW completes its final
review of 2008 actual fuel costs.
Fuel Cost Recovery Rulemaking — In June 2006, the PSCW opened a rulemaking docket to address potential revisions
to the electric fuel cost recovery rules. Wisconsin statutes prohibit the use of automatic adjustment clauses by large
investor-owned electric public utilities. The statutes authorize the PSCW to approve a rate increase for these utilities to
allow for the recovery of costs caused by an emergency or extraordinary increase in the cost of fuel.
In August 2007, the PSCW staff issued its draft revisions to the fuel rules and requested comments. The proposed rules
incorporate a plan year fuel cost forecast, deferred accounting for differences between actual and forecast costs if the
difference is greater than 2 percent, and an after-the-fact reconciliation proceeding to allow the opportunity to recover
or refund the deferred balance.
On July 3, 2008, the PSCW issued its notice of hearing in the rulemaking and requested public comments on the
proposed revisions to the fuel rules. The proposed revisions to the rules were substantively the same as the version
issued in August 2007, described above. A public hearing was held Aug. 4, 2008, and written comments were filed by
the parties on Aug. 6, 2008. The utilities subject to the fuel rules, including NSP-Wisconsin, the Wisconsin Utilities
Association, and Wisconsin Utility Investors, Inc. filed comments generally supporting the revised rule. An ad hoc
coalition of intervenors, consisting of consumer and industrial customer groups, filed joint comments in opposition to
the proposed rules.
The PSCW did not forward the proposed rules to the legislature for approval before the statutory deadline for action in
the 2007-08 legislative session. At this time it is uncertain what, if any, additional action the PSCW will take with
respect to this rulemaking, or the fuel rules in general.
Bay Front Emission Controls Certificate of Authority — In March 2008, the PSCW issued a certificate of authority and
order approving NSP-Wisconsin’s application to install equipment relating to combustion improvement and NOx
emission controls in boilers 1 and 2 at the Bay Front power plant in Ashland, Wis. Construction began in May and
was completed in the fourth quarter of 2008. The new equipment and systems are in the testing and tuning phase,
which is expected to be completed in the first quarter of 2009.
PSCo
Pending and Recently Concluded Regulatory Proceedings — CPUC
Base Rate
PSCo Electric Rate Case — On Nov. 14, 2008, PSCo filed a request with the CPUC to increase Colorado electric rates
by $174.7 million annually, or approximately 7.4 percent. The rate filing is based on a 2009 forecast test year, an
electric rate base of $4.2 billion, a requested ROE of 11.0 percent and an equity ratio of 58.08 percent.
On Feb. 13, 2009, parties filed answer testimony in the case. The CPUC staff accepted PSCo’s forecast test-year and
recommended an increase of $110 million based on a 10.37 percent ROE. The CPUC staff also recommended that the
increase be split into two parts, the first part consisting of $69.9 million, effective in July 2009 and the remaining
$40 million to take effect on or about Jan. 1, 2010 to coincide with the implementation of rates from the next rate
case. In addition to ROE, the primary CPUC staff adjustments are related to the sales forecast, debt rate, incentive pay,
and wage increases. The CPUC staff also recommends an earnings test to refund any earnings above authorized levels to
customers.
The Office of Consumer Council (OCC) recommended a $3.8 million increase based on a historic test year increase of
$69.9 million. The OCC recommended an ROE of 9.75 percent and an equity ratio of 53 percent. The OCC
recommended adjustments to the cash working capital and rate case expense.
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