Xcel Energy 2015 Annual Report Download - page 37
Download and view the complete annual report
Please find page 37 of the 2015 Xcel Energy annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.19
Fuel Sources
Coal — PSCo normally maintains approximately 41 days of coal inventory. Coal supply inventories at Dec. 31, 2015 and 2014 were
approximately 49 and 36 days usage, respectively. At Dec. 31, 2015, milder weather, purchase commitments and resolution of railcar
congestion resulted in coal inventories being slightly above optimal levels. PSCo’s generation stations use low-sulfur western coal
purchased primarily under contracts with suppliers operating in Colorado and Wyoming. During 2015 and 2014, PSCo’s coal
requirements for existing plants were approximately 10.5 million tons and 10.3 million tons, respectively. The estimated coal
requirements for 2016 are approximately 10.1 million tons.
PSCo has contracted for coal supply to provide 96 percent of its estimated coal requirements in 2016, and a declining percentage of
requirements in subsequent years. PSCo’s general coal purchasing objective is to contract for approximately 90 percent of
requirements for the first year, 60 percent of requirements in year two, and 30 percent of requirements in year three. Remaining
requirements will be filled through the procurement process or over-the-counter transactions.
PSCo has coal transportation contracts that provide for delivery of 100 percent and 86 percent of its coal requirements in 2016 and
2017, respectively. Coal delivery may be subject to interruptions or reductions due to operation of the mines, transportation problems,
weather and availability of equipment.
Natural gas — PSCo uses both firm and interruptible natural gas supply and standby oil in combustion turbines and certain boilers.
Natural gas supplies for PSCo’s power plants are procured under contracts to provide an adequate supply of fuel. However, as natural
gas primarily serves intermediate and peak demand, any remaining forecasted requirements are able to be procured through a liquid
spot market. The majority of natural gas supply under contract is covered by a long-term agreement with Anadarko Energy Services
Company, the balance of natural gas supply contracts have variable pricing features tied to changes in various natural gas indices.
PSCo hedges a portion of that risk through financial instruments. See Note 11 to the consolidated financial statements for further
discussion.
Most transportation contract pricing is based on FERC approved transportation tariff rates. Certain natural gas supply and
transportation agreements include obligations for the purchase and/or delivery of specified volumes of natural gas or to make
payments in lieu of delivery.
• At Dec. 31, 2015, PSCo’s commitments related to gas supply contracts, which expire in various years from 2016 through
2023, were approximately $750 million and commitments related to gas transportation and storage contracts, which expire in
various years from 2016 through 2060, were approximately $684 million.
• At Dec. 31, 2014, PSCo’s commitments related to gas supply contracts were approximately $902 million and commitments
related to gas transportation and storage contracts were approximately $685 million.
PSCo has limited on-site fuel oil storage facilities and primarily relies on the spot market for incremental supplies.
PSCo Natural Gas Reserves Investments — In January 2016, PSCo filed a request with the CPUC for approval of a long-term natural
gas procurement and price hedging framework. Under the proposal, a wholly-owned subsidiary of PSCo, PSCo Gas Reserves
Company (PGRCo), will be formed to partner with Wexpro, a subsidiary of Questar Corporation, to acquire, develop and operate
natural gas producing properties on a 50/50 joint basis, with production recovered under cost of service pricing through PSCo’s GCA.
The CPUC has 240 days to review the proposed framework. If approved, PGRCo may invest up to approximately $500 million in gas
properties over 10 years, which is not reflected in the current base capital expenditures forecast.
The requested cost of service pricing formulas provide PGRCo and Wexpro different risks and incentives. For PGRCo, the investment
would include all costs of property acquisition and development. The ROE would be based on PSCo’s allowed ROE, adjusted up or
down a maximum of 100 basis points, based on the price of gas produced relative to market prices.
Following approval of the framework, PSCo plans to partner with Wexpro to seek to identify and acquire specific natural gas
producing properties that would be beneficial to PSCo’s gas customers, and seek CPUC approval of these specific investments.
Renewable Energy Sources
PSCo’s renewable energy portfolio includes wind, hydroelectric, biomass and solar power from both owned generating facilities and
PPAs. As of Dec. 31, 2015, PSCo was in compliance with mandated RPS, which require generation from renewable resources of 20
percent of electric retail sales.
• Renewable energy comprised 21.9 percent and 21.4 percent of PSCo’s total energy for 2015 and 2014, respectively;