What is the main impact of the Texas legislation on Xcel Energy's subsidiary, SPS?

The primary impact is the postponement of electric utility deregulation and restructuring for SPS until at least 2007. This means SPS will continue to operate under traditional cost-of-service regulation rather than facing retail electric competition in Texas as previously planned.

Will SPS be able to recover the costs it incurred in preparing for deregulation?

Yes, the new Texas legislation allows SPS to recover all reasonable and necessary expenditures made or incurred before September 1, 2001, to comply with the previous deregulation requirements. SPS plans to file an application to recover these costs through a rate rider.

What is SFAS 71, and why is SPS reapplying it?

SFAS 71 is a Statement of Financial Accounting Standards related to accounting for the effects of certain types of regulation. SPS is reapplying it because the delays in deregulation mean its generation business will continue to be subject to traditional rate regulation, which is consistent with the accounting treatment under SFAS 71.

XEL/XELLL 8-K SEC Disclosure

Q: Has Xcel Energy or SPS incurred significant costs due to these restructuring plans?

Yes, SPS has incurred more than $40 million in pre-tax costs associated with restructuring efforts. The company plans to seek regulatory recovery for a portion of these costs from customers in New Mexico and Texas, although the timing of regulatory decisions is uncertain.

Summary

Xcel Energy Inc. (XEL) filed an 8-K report on June 22, 2001, announcing a significant development for its subsidiary, Southwestern Public Service Company (SPS). On June 15, 2001, the Governor of Texas signed legislation postponing the deregulation and restructuring of SPS by at least five years, effectively pushing the timeline to 2007. This legislation nullifies prior orders related to customer choice and allows SPS to recover expenditures made in preparation for deregulation. Similarly, New Mexico previously enacted legislation delaying customer choice until 2007. As a consequence of these legislative changes, SPS will revert to applying Statement of Financial Accounting Standards No. 71 (SFAS 71) for its generation business, returning to traditional cost-of-service regulation. The company had previously incurred charges related to discontinuing SFAS 71 and has spent over $40 million on restructuring efforts, with plans to seek regulatory recovery for a portion of these costs.

Key Highlights

1Texas legislation postpones electric utility deregulation and restructuring for Southwestern Public Service Company (SPS) until at least 2007.
2Prior Texas Public Utility Commission (PUCT) orders related to SPS's restructuring and customer choice are now void.
3SPS will be allowed to recover reasonable and necessary expenditures incurred before September 1, 2001, in preparation for deregulation.
4New Mexico also previously delayed customer choice until 2007, impacting SPS's operations in that state.
5SPS will reapply Statement of Financial Accounting Standards No. 71 (SFAS 71) for its generation business, returning to traditional rate regulation.
6The company incurred over $40 million in pre-tax costs for restructuring efforts, with plans to seek regulatory recovery in Texas and New Mexico.
7Xcel Energy does not expect an immediate earnings impact from the reapplication of SFAS 71 in 2001, though extraordinary charges were recognized in 2000 related to its discontinuation.

XCEL ENERGY INC 8-K Report (Jun 22, 2001)

Summary

Key Highlights

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