Item 1.01. Entry into a Material Definitive Agreement
On Jan. 21, 2005, Xcel Energy Inc. received the written order of the Colorado
Public Utilities Commission (CPUC) approving a comprehensive settlement
agreement regarding its least-cost resource plan. The agreement was approved
without revision from the agreement filed as Exhibit 99.02 to Xcel Energy Form
8-K, dated Dec. 3, 2004 (file number 1-3034). In addition, a settlement
agreement was reached on Dec. 3, 2004 among Xcel Energy's operating company,
Public Service Company of Colorado (PSCo), and concerned environmental and
community parties regarding issues of public health and environmental issues.
This agreement was filed as Exhibit 99.03 to Xcel Energy 8-K, dated Dec. 3, 2004
(file number 1-3034) and is a part of the comprehensive settlement agreement
approved by the CPUC.
Under the comprehensive settlement agreement, PSCo can move forward with its
plan to satisfy a resource need of approximately 3,600 megawatts of new
generating capacity by 2013. The resource need will be met through a
combination of competitive bids for both fossil-fueled and renewable energy
resources, energy conservation programs, and a new coal-fired generating unit
built by the company. Approximately 1,600 megawatts of existing supply
contracts that will expire over the 10-year planning period covered by the
least-cost resource plan could be renewed. One megawatt provides enough
electricity for approximately 1,000 customers on an average day.
PSCo will, according to the comprehensive settlement agreement, install
state-of-the-art emissions reduction equipment on all generating units at the
Comanche Generating Station near Pueblo, Colo., including the new, 750-megawatt
unit that will be built at that location. Although PSCo will more than double
the station's current, 660-megawatt capacity, sulfur dioxide (SO2) and nitrogen
oxide (NOX) emissions from the enlarged station would decline.
The new coal-fired unit near Pueblo will be the first such unit built by PSCo in
Colorado since the Pawnee Generating Station went into service in 1981. The
total cost of the project, including required transmission, is estimated to be
$1.35 billion. The settlement is estimated to save customers between $500
million and $1.4 billion as compared to other resource options considered.
PSCo will also significantly expand its energy conservation programs, accelerate
a study of the feasibility of additional renewable power resources and account
for potential carbon reduction regulation in resource planning.
Key components of the comprehensive settlement agreement include:
Least-cost resource plan
Construction of a new, 750-megawatt coal-fired generating unit near
Pueblo, Colo.;
Additional supply and demand-side resources, acquired through an
all-source competitive solicitation, could include natural gas, renewable,
energy efficiency and coal resources to be selected as part of a least-cost mix
of resources; and
Net present value savings to customers are predicted to be $500
million to $1.43 billion as compared with other resource option mixes
considered.
Comanche Generating Station
The new unit would feature state-of-the-art SO2, NOX, particulate and
mercury emissions reduction technology;
2
The new unit would be built under a confidential construction cost
cap; and
Two existing Comanche generating units would receive SO2, NOXand
mercury reduction technologies.
Energy conservation
PSCo will spend up to $196 million to attempt to reduce peak demand
by 320 megawatts and conserve 800,000 megawatt-hours of energy through
demand-side management (DSM) programs by 2014; and
PSCo will conduct a study to determine the potential for additional
DSM resources in Colorado.
Carbon emissions management
PSCo will promote legislation to pursue innovative technologies to
reduce greenhouse gas emissions; and
Resources in the least-cost resource plan will be evaluated assuming
a $9-per-ton CO2cost for potential environmental regulation.
Renewable energy
PSCo will continue with plans to acquire up to 500 megawatts of wind
power capacity, through its renewable energy solicitation;
Renewable energy providers may submit bids in the all-source
solicitation of the least-cost resource plan; and
PSCo will accelerate completion of a system impact study to determine
the feasibility of a 15-percent penetration of wind power on its Colorado
system.
Regulatory Plan
The comprehensive settlement agreement recognizes PSCo's need to
increase the percentage of common equity in PSCo's financial capital structure
to 56 percent to address the financial impact of existing power purchase
contracts on the company's balance sheet; and
PSCo may be permitted to include construction work in progress in
rate base, without allowance for funds used during construction, beginning with
the planned 2006 rate case filing, depending upon PSCo's capital structure and
its senior unsecured debt rating.
3