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Rate Matters Rate Matters (Notes)
3 Months Ended
Mar. 31, 2015
Public Utilities, General Disclosures [Abstract]  
Public Utilities Disclosure [Text Block]
Rate Matters

Pending Regulatory Proceedings — Minnesota Public Utilities Commission (MPUC)

Nuclear Project Prudence Investigation — In 2013, NSP-Minnesota completed the Monticello life cycle management (LCM)/extended power uprate (EPU) project. The multi-year project extended the life of the facility and increased the capacity from 600 to 671 megawatts (MW). Monticello LCM/EPU project expenditures were approximately $665 million. Total capitalized costs were approximately $748 million, which includes allowance for funds used during construction (AFUDC). In 2008, project expenditures were initially estimated at approximately $320 million, excluding AFUDC.

In 2013, the MPUC initiated an investigation to determine whether the final costs for the Monticello LCM/EPU project were prudent.

On March 6, 2015, the MPUC voted to allow for full recovery, including a return, on approximately $415 million of the total plant costs (inclusive of AFUDC), but only allow recovery of the remaining $333 million of costs with no return on this portion of the investment over the remaining life of the plant. Further, the MPUC determined that only 50 percent of the investment was considered used and useful for 2014.  As a result of these determinations and assuming the other state commissions within the NSP System jurisdictions adopt the MPUC’s decisions, Xcel Energy recorded an estimated pre-tax loss of $129 million in the first quarter of 2015. The remaining book value of the Monticello project represents the present value of the estimated future cash flows allowed for by the MPUC. As NSP-Wisconsin shares in the costs of the Monticello plant through the Interchange Agreement with NSP-Minnesota, the MPUC decision also affects NSP-Wisconsin. NSP-Wisconsin's portion of the $129 million pre-tax loss, recorded in the first quarter of 2015, was approximately $5 million.

Review of the final written order, which is anticipated in the second quarter of 2015, could impact these calculations. NSP-Minnesota will have the ability to file for reconsideration and any changes to the final order could impact NSP-Wisconsin as well.

Pending Regulatory Proceedings — Michigan Public Service Commission (MPSC)

Michigan 2015 Electric Rate Case — In October 2014, NSP-Wisconsin filed a request with the MPSC to increase rates for electric service by $900,000, or 6.1 percent. The filing was based on a 2015 forecast test year, a 10.3 percent return on equity (ROE), an equity ratio of 52.59 percent and a forecasted average rate base of approximately $35.2 million. The primary driver of the requested increase is continuing investment in transmission and distribution infrastructure. The filing also included a request for a $289,000, or 1.9 percent, step increase in 2016, to reflect the expiration in 2016 of certain credits that were used to offset the 2015 rate request. In addition to the MPSC staff, intervenors in the case include the Michigan Attorney General (AG) and the Association of Businesses Advocating Tariff Equity (ABATE), a voluntary association of large industrial businesses.

In March 2015, NSP-Wisconsin reached a multi-year settlement with the MPSC staff and the AG. Under the agreement, NSP-Wisconsin will increase rates by $720,000 annually, or 4.9 percent, in the first year and an additional $289,000 annually, or 2.0 percent, in the second year. Rates will not increase in the third year. The new rates are based on an authorized ROE of 10.1 percent. ABATE did not sign the settlement agreement, but rather filed a statement of non-objection. On March 23, 2015, the MPSC issued an order approving the settlement agreement and authorizing new rates which were effective April 1, 2015.

Pending Regulatory Proceedings — Federal Energy Regulatory Commission (FERC)

Midcontinent Independent System Operator, Inc. (MISO) ROE Complaint/ROE Adder — In November 2013, a group of customers filed a complaint at the FERC against MISO transmission owners (TOs), including NSP-Minnesota and NSP-Wisconsin. The complaint argued for a reduction in the ROE in transmission formula rates in the MISO region from 12.38 percent to 9.15 percent, a prohibition on capital structures in excess of 50 percent equity, and the removal of ROE adders (including those for regional transmission organization (RTO) membership and being an independent transmission company), effective Nov. 12, 2013.

In June 2014, the FERC issued an order in a different ROE proceeding adopting a new ROE methodology for electric utilities. The new ROE methodology requires electric utilities to use a two-step discounted cash flow analysis to estimate cost of equity that incorporates both short-term and long-term growth projections.

In October 2014, the FERC upheld the determination of the long-term growth rate to be used together with a short-term growth rate in its new ROE methodology. The FERC separately set the ROE complaint against the MISO TOs for settlement and hearing procedures. The FERC directed parties to apply the new ROE methodology, but denied the complaints related to equity capital structures and ROE adders. The FERC established a Nov. 12, 2013 refund effective date. The settlement procedures were unsuccessful. FERC action is pending. In January 2015, the ROE complaint was set for full hearing procedures, with an administrative law judge initial decision to be issued by November 2015 and a FERC order issued no earlier than 2016.

In November 2014, the MISO TOs filed a request for FERC approval of a 50 basis point RTO membership ROE adder, with collection deferred until resolution of the ROE complaint. In January 2015, the FERC approved the ROE adder, subject to the outcome of the ROE complaint. The total ROE, including the RTO membership adder, may not exceed the top of the discounted cash flow range under the new ROE methodology. In 2015, several intervenors sought rehearing of the commission order.

In February 2015, a separate group of customers filed an additional complaint proposing to reduce the MISO region ROE to 8.67 percent , prior to any 50 basis point RTO adder, with a refund effective date of Feb. 12, 2015.  The FERC has to date taken no action on the second complaint.

NSP-Minnesota recorded a current liability representing the current best estimate of a refund obligation associated with the new ROE as of March 31, 2015. The new FERC ROE methodology is estimated to reduce transmission revenue, net of expense, between $7 million and $9 million annually for the NSP System.