8-KOther Events

XCEL ENERGY INC 8-K Report, Corporate Update (Oct 23, 2006)

Filed October 23, 2006For Securities:XELXELLL

Summary

This 8-K filing from Xcel Energy Inc. (XEL) reports on a significant development regarding a rate increase request by its wholly owned subsidiary, Public Service Company of Colorado (PSCo). Initially seeking an annual electricity rate increase of $208 million, PSCo, along with various intervenor groups and regulatory staff, engaged in a process with differing proposals for the rate hike. These proposals ranged from an $83 million increase recommended by CPUC staff to a more modest $35 million increase suggested by the Office of Consumer Counsel. The most crucial update is that on October 20, 2006, PSCo entered into a comprehensive settlement agreement with several key parties. This settlement, if approved by the Colorado Public Utilities Commission (CPUC), proposes a total annual revenue increase of approximately $151 million, a reduction from the original request and many of the initial counter-proposals. This agreement outlines specific adjustments to base rates, purchased capacity costs, and the implementation of new mechanisms for energy cost recovery and customer incentives.

Key Highlights

  • 1Public Service Company of Colorado (PSCo), a subsidiary of Xcel Energy, filed for a $208 million annual electricity rate increase in April 2006.
  • 2Intervenor groups and CPUC staff proposed significantly lower rate increases, ranging from $35 million to $91.4 million (excluding PCCA).
  • 3On October 20, 2006, PSCo reached a settlement agreement with several parties, including CPUC staff and the Office of Consumer Counsel.
  • 4The settlement proposes an overall annual revenue increase of approximately $151 million, including $107 million in base rate increases, $39.4 million in Purchased Capacity Cost Adjustment (PCCA) revenue, and $4.6 million in Electric Commodity Adjustment (ECA) revenue.
  • 5Key terms of the settlement include a 10.50% return on equity and a 60% equity ratio.
  • 6The settlement introduces a PCCA rider for all purchased capacity costs without a revenue credit and allows for recovery of certain WindSource program costs through the ECA.
  • 7New mechanisms for cost recovery include a quarterly-changing ECA with interest on deferred balances, customer incentives for exceeding baseload energy production targets, and revenue sharing on trading margins.

Frequently Asked Questions

This 8-K filing reports on a significant development in the rate increase proceeding for Xcel Energy's subsidiary, Public Service Company of Colorado (PSCo). Specifically, it announces a comprehensive settlement agreement reached with several parties that, if approved, will result in a moderated annual revenue increase for PSCo's customers.

PSCo initially requested an annual electricity rate increase of $208 million. The settlement agreement, if approved, proposes an overall annual revenue increase of approximately $151 million.

Key terms include an authorized base rate increase of $107 million, an estimated $39.4 million in PCCA revenue, and an estimated $4.6 million in ECA revenue. The settlement also establishes a 10.50% return on equity, a 60% equity ratio, and introduces new mechanisms for cost recovery, including a PCCA rider and an ECA with customer incentive and trading margin sharing provisions.

The settlement proposes that the rate increase would be effective starting January 1, 2007, provided it is approved by the Colorado Public Utilities Commission (CPUC). Hearings on the settlement are scheduled to begin on November 2, 2006.