Xcel Energy 2011 Annual Report Download - page 49

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Increasing costs associated with health care plans may adversely affect our results of operations.
Our self-insured costs of health care benefits for eligible employees and costs for retiree health care plans have increased
substantially in recent years. Increasing levels of large individual health care claims and overall health care claims could have an
adverse impact on our operating results, financial position, and liquidity. We believe that our employee benefit costs, including
costs related to health care plans for our employees and former employees, will continue to rise. Legislation related to health care
could also significantly change our benefit programs and costs.
We must rely on cash from our subsidiaries to make dividend payments.
We are a holding company and our investments in our subsidiaries are our primary assets. Substantially all of our operations are
conducted by our subsidiaries. Consequently, our operating cash flow and our ability to service our indebtedness and pay
dividends depends upon the operating cash flows of our subsidiaries and the payment of funds by them to us in the form of
dividends. Our subsidiaries are separate legal entities that have no obligation to pay any amounts due pursuant to our obligations
or to make any funds available for that purpose or for dividends on our common stock, whether by dividends or otherwise. In
addition, each subsidiary’s ability to pay dividends to us depends on any statutory and/or contractual restrictions that may be
applicable to such subsidiary, which may include requirements to maintain minimum levels of equity ratios, working capital or
assets. Also, our utility subsidiaries are regulated by various state utility commissions, which generally possess broad powers to
ensure that the needs of the utility customers are being met.
If our utility subsidiaries were to cease making dividend payments, our ability to pay dividends on our common stock or
otherwise meet our financial obligations could be adversely affected.
Operational Risks
We are subject to commodity risks and other risks associated with energy markets and energy production.
We engage in wholesale sales and purchases of electric capacity, energy and energy-related products and are subject to market
supply and commodity price risk. Commodity price changes can affect the value of our commodity trading derivatives. We mark
certain derivatives to estimated fair market value on a daily basis (mark-to-market accounting), which may cause earnings
volatility. Actual settlements can vary significantly from these estimates, and significant changes from the assumptions
underlying our fair value estimates could cause significant earnings variability.
If we encounter market supply shortages or our suppliers are otherwise unable to meet their contractual obligations, we may be
unable to fulfill our contractual obligations to our retail, wholesale and other customers at previously authorized or anticipated
costs. Any such disruption, if significant, could cause us to seek alternative supply services at potentially higher costs or suffer
increased liability for unfulfilled contractual obligations. Any significantly higher energy or fuel costs relative to corresponding
sales commitments would have a negative impact on our cash flows and could potentially result in economic losses. Potential
market supply shortages may not be fully resolved through alternative supply sources and such interruptions may cause short-term
disruptions in our ability to provide electric and/or natural gas services to our customers. The impact of these cost and reliability
issues vary in magnitude for each operating subsidiary depending upon unique operating conditions such as generation fuels mix,
availability of water for cooling, availability of fuel transportation, electric generation capacity, transmission, etc.
Our subsidiary, NSP-Minnesota, is subject to the risks of nuclear generation.
NSP-Minnesota’s two nuclear stations, Prairie Island and Monticello, subject it to the risks of nuclear generation, which include:
• The risks associated with use of radioactive material in the production of energy, the management, handling, storage and
disposal of these radioactive materials and the current lack of a long-term disposal solution for radioactive materials;
• Limitations on the amounts and types of insurance commercially available to cover losses that might arise in connection
with nuclear operations; and
• Uncertainties with respect to the technological and financial aspects of decommissioning nuclear plants at the end of
licensed lives.