Xcel Energy 2015 Annual Report Download - page 78
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Regulation
FERC and State Regulation — The FERC and various state and local regulatory commissions regulate Xcel Energy Inc.’s utility
subsidiaries and TransCo subsidiaries. Decisions by these regulators can significantly impact Xcel Energy’s results of operations.
Xcel Energy expects to periodically file for rate changes based on changing energy market and general economic conditions.
The electric and natural gas rates charged to customers of Xcel Energy Inc.’s utility subsidiaries are approved by the FERC or the
regulatory commissions in the states in which they operate. The rates are designed to recover plant investment, operating costs and an
allowed return on investment. Rates charged by Xcel Energy Inc.’s TransCo subsidiaries and WGI are approved by the FERC. Xcel
Energy requests changes in rates for utility services through filings with the governing commissions. Changes in operating costs can
affect Xcel Energy’s financial results, depending on the timing of filing general rate cases and the implementation of final rates. In
addition to changes in operating costs, other factors affecting rate filings are new investments, sales, conservation and DSM efforts,
and the cost of capital. In addition, the regulatory commissions authorize the ROE, capital structure and depreciation rates in rate
proceedings.
Wholesale Energy Market Regulation — Wholesale energy markets in the Midwest and South Central U.S. are operated by MISO
and SPP, respectively, to centrally dispatch all regional electric generation and apply a regional transmission congestion management
system. NSP-Minnesota and NSP-Wisconsin are members of MISO and SPS is a member of SPP. NSP-Minnesota, NSP-Wisconsin
and SPS expect to recover energy charges through either base rates or various recovery mechanisms. See Note 12 to the consolidated
financial statements for further discussion.
Capital Expenditure Regulation — Xcel Energy Inc.’s utility subsidiaries make substantial investments in plant additions to build and
upgrade power plants, and expand and maintain the reliability of the energy transmission and distribution systems. In addition to
filings for increases in base rates charged to customers to recover the costs associated with such investments, the CPUC, MPUC,
SDPUC, NDPSC and PUCT in certain instances have approved proposals to recover, through a rate rider, costs to upgrade generation
plants and lower emissions, increase transmission investment cost, and/or increase distribution investment cost, and increase
purchased power capacity cost. These non-fuel rate riders are expected to provide cash flows to enable recovery of costs incurred on a
more timely basis. For wholesale electric transmission and production services, Xcel Energy has, consistent with FERC policy,
implemented formula rates for each of the utility subsidiaries that will provide annual rate changes as transmission or production
investments increase in a manner similar to the retail rate riders. In November 2014, the FERC approved transmission formula rates
for XETD and XEST, which would apply to electric transmission assets the TransCos may own. NSP-Minnesota and NSP-Wisconsin
have no cost-based wholesale production customers and therefore have not implemented a production formula rate.
Environmental Matters
Environmental costs include accruals for nuclear plant decommissioning and payments for storage of spent nuclear fuel, disposal of
hazardous materials and waste, remediation of contaminated sites, monitoring of discharges to the environment and compliance with
laws and permits with respect to emissions. A trend of greater environmental awareness and increasingly stringent regulation may
continue to cause higher operating expenses and capital expenditures for environmental compliance.
Costs charged to operating expenses for nuclear decommissioning and spent nuclear fuel disposal expenses, environmental monitoring
and disposal of hazardous materials and waste were approximately:
• $292 million in 2015;
• $292 million in 2014; and
• $275 million in 2013.
Xcel Energy estimates an average annual expense of approximately $338 million from 2016 through 2020 for similar costs. The
precise timing and amount of environmental costs, including those for site remediation and disposal of hazardous materials, are
unknown. Additionally, the extent to which environmental costs will be included in and recovered through rates may fluctuate.
Capital expenditures for environmental improvements at regulated facilities were approximately:
• $184 million in 2015;
• $373 million in 2014; and
• $517 million in 2013.
See Item 7 — Capital Requirements for further discussion.