Xcel Energy 2013 Annual Report Download - page 27

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Annual Automatic Adjustment (AAA) of Charges — In June 2013, the DOC proposed that the MPUC adopt a fuel clause incentive
that would normalize FCA recovery using monthly patterns derived from averages of the prior three year period, setting and fixing this
level during a rate case with no adjustment between rate cases. In August 2013, NSP-Minnesota filed comments opposing the DOC’s
proposal including a demonstration of the random and volatile results the DOC’s fuel clause incentive proposal would have had if it
were in place during the 2008-2012 period. Other utilities filed comments expressing similar concern with the DOC’s incentive
proposal, further indicating no support for modification to operation of the fuel clause. Subsequently, the DOC requested the MPUC
convene a stakeholder meeting to discuss general purpose and function of the FCA program. In October 2013, the MPUC allowed the
DOC an opportunity to discuss current challenges in evaluating the prudence of fuel clause costs and the DOC recommended that the
MPUC consider using a three-year average of fuel costs established in base rates. The DOC continues to independently meet with a
stakeholder group to explore alternative options to their proposal. The 2012 AAA docket is pending.
Additionally, the DOC has indicated it will review prudence of replacement power costs associated with the Sherco Unit 3 outage
event within the 2013 AAA docket.
Minneapolis, Minn. Franchise Agreement — The franchise agreement with the City of Minneapolis expires Dec. 31, 2014. In June
2013, the Minneapolis City Council authorized (i) public hearings to be held regarding the establishment of a municipal electric and
natural gas utility and (ii) a $250,000 study that will explore the various paths the City of Minneapolis could take to achieve its energy
goals, including examination of potential utility partnerships, changes to how the City of Minneapolis uses energy utility franchise
fees and the potential for municipalization of one or both energy utilities. In August 2013, following public hearings, the Minneapolis
City Council elected not to conduct a special election to pursue forming a municipal utility. Results of the exploratory study
authorized by the Minneapolis City Council are due in the first quarter of 2014.
Nuclear Power Operations and Waste Disposal
NSP-Minnesota owns two nuclear generating plants: the Monticello plant and the Prairie Island plant. Nuclear power plant operations
produce gaseous, liquid and solid radioactive wastes. The discharge and handling of such wastes are controlled by federal regulation.
High-level radioactive wastes primarily include used nuclear fuel. LLW consists primarily of demineralizer resins, paper, protective
clothing, rags, tools and equipment that have become contaminated through use in a plant.
NRC Regulation — The NRC regulates the nuclear operations of NSP-Minnesota. Decisions by the NRC can significantly impact the
operations of the nuclear generating plants. The event at the nuclear generating plant in Fukushima, Japan in 2011 has resulted in
additional regulation, which is expected to require additional capital expenditures and operating expenses. The NRC created an
internal task force that developed recommendations on requirements for immediate emergency preparedness and mitigating
enhancements at U.S. reactors and any changes to NRC regulations, inspection procedures and licensing processes. The task force
released its recommendations in July 2011 in a written report which recommended actions to enhance U.S. nuclear generating plant
readiness to safely manage severe events.
In March 2012, the NRC issued three orders which included requirements for mitigation strategies for beyond-design-basis external
events, requirements with regard to reliable spent fuel instrumentation and requirements with regard to reliable hardened containment
vents, which are applicable to boiling water reactor containments at the Monticello plant. The NRC also requested additional
information including requirements to perform walkdowns of seismic and flood protection, to evaluate seismic and flood hazards and
to assess the emergency preparedness staffing and communications capabilities at each plant. Based on current refueling outage plans
specific to each nuclear facility, the dates of the required compliance to meet the orders is expected to begin in the second quarter of
2015 with all units expected to be fully compliant by December 2016.
In June 2013, the NRC issued a revised order with regard to reliable hardened containment vents. The revised order added severe
accident conditions under which the existing hardened vent which comes off of the wet portion of the containment needs to operate
and requires a second hardened vent off of the dry portion of the containment. The revised order requires that any necessary changes
to the existing vent are to be completed by the second quarter of the 2017 refueling outage at the Monticello plant and a new vent to be
added by the second quarter of the 2019 refueling outage. Portions of the work that fall under the requests for additional information
are expected to be completed by 2018.
NSP-Minnesota expects that complying with these external event requirements will cost approximately $50 to $60 million at the
Monticello and Prairie Island plants. The majority of these costs are expected to be capital in nature and are included in NSP-
Minnesota’s capital expenditure forecasts. NSP-Minnesota believes the costs associated with compliance would be recoverable from
customers through regulatory mechanisms and does not expect a material impact on its results of operations, financial position, or cash
flows.