Xcel Energy 2012 Annual Report Download - page 49

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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.
The NRC has authority to impose licensing and safety-related requirements for the operation of nuclear generation facilities. In
the event of non-compliance, the NRC has the authority to impose fines or shut down a unit, or both, depending upon its
assessment of the severity of the situation, until compliance is achieved. Revised NRC safety requirements could necessitate
substantial capital expenditures or a substantial increase in operating expenses at NSP-Minnesota’s nuclear plants. In addition, the
Institute for Nuclear Power Operations reviews NSP-Minnesota’s nuclear operations and nuclear generation facilities.
Compliance with the Institute for Nuclear Power Operations’ recommendations could result in substantial capital expenditures or
a substantial increase in operating expenses.
If an incident did occur, it could have a material effect on our results of operations or financial condition. Furthermore, the non-
compliance of other nuclear facilities operators with applicable regulations or the occurrence of a serious nuclear incident at other
facilities could result in increased regulation of the industry as a whole, which could then increase NSP-Minnesota’s compliance
costs and impact the results of operations of its facilities.
NSP-Wisconsin’s production and transmission system is operated on an integrated basis with NSP-Minnesota’s production and
transmission system, and NSP-Wisconsin may be subject to risks associated with NSP-Minnesota’s nuclear generation.
Our utility operations are subject to long-term planning risks.
On a periodic basis our utility operations file long-term resource plans with our regulators. These plans are based on numerous
assumptions over the relevant planning horizon such as: sales growth, customer usage patterns, economic activity, costs,
regulatory mechanisms, impact of technology on energy efficiency on sales and production, customer behavioral response and
continuation of the existing utility business model. Given the uncertainty in these planning assumptions, there is a risk that the
magnitude and timing of resource additions and demand may not coincide. This could lead to under recovery of costs or
insufficient resources to meet customer demand.
In some of our state jurisdictions, large industrial customers may leave our system and invest in their own on-site distributed
generation or seek law changes to give them the authority to purchase directly from other suppliers or organized markets. The
recent low natural gas price environment has caused some customers to consider their options in this area, particularly customers
with industrial processes using steam. Wholesale customers may purchase directly from other suppliers and procure only
transmission service from our utility subsidiaries. These circumstances provide for greater long-term planning uncertainty related
to future load growth. Similarly, distributed solar generation may become an economic competitive threat to our load growth in
the future, however we believe the economics, absent significant subsidies, do not support such a trend in the near term unless a
state mandates the purchase of such generation. Some state legislatures have considered such legislation.