What is the main issue addressed in this 8-K filing?

This 8-K filing addresses a recommended decision by a hearing examiner regarding Southwestern Public Service Company's (SPS), a subsidiary of Xcel Energy, fuel and purchased power cost adjustment clause (FPPCAC) in New Mexico. The core issue involves disputes over how SPS assigns fuel costs to wholesale sales and includes purchased power costs in its recovery mechanism, as well as whether past costs should be refunded.

What is the financial impact of the hearing examiner's recommended decision on Xcel Energy?

The recommended decision is largely favorable as it dismisses intervenors' claims for approximately $45 million in retroactive refunds for past periods. However, SPS is required to refund about $1.6 million for previously acknowledged erroneous collection of purchased power capacity costs. The decision also allows SPS to continue using its FPPCAC, subject to potential adjustments determined in future proceedings.

What are the next steps for this regulatory proceeding?

Parties have until May 15, 2007, to file exceptions to the recommended decision with the New Mexico Public Regulation Commission (NMPRC), with responses due by May 23, 2007. The NMPRC will then issue a final order. Given that SPS plans to file a general rate case in the third quarter of 2007, it is likely the NMPRC will issue its final decision prior to or in conjunction with that rate case.

Does this decision affect Xcel Energy's ability to recover future costs?

The hearing examiner's recommendation allows SPS to continue using its FPPCAC, indicating that Xcel Energy, through SPS, can continue to recover current fuel and purchased power costs. However, specific methodologies for assigning costs to wholesale sales and the prudence of certain contracts will be examined in future proceedings, which could lead to adjustments in future recovery amounts.

XEL/XELLL 8-K SEC Disclosure

Summary

Xcel Energy Inc. (XEL) has filed an 8-K report detailing a significant development regarding its wholly owned subsidiary, Southwestern Public Service Company (SPS), and its fuel and purchased power cost adjustment clause (FPPCAC) in New Mexico. On May 2, 2007, a hearing examiner issued a recommended decision on a filing made by SPS in August 2005 concerning the continuation of its cost recovery methodology. The decision addresses objections raised by staff and intervenors regarding the assignment of system average fuel costs to wholesale sales and the inclusion of certain purchased power costs. The hearing examiner's recommended decision largely favors Xcel Energy by ruling that the New Mexico Public Regulation Commission (NMPRC) cannot grant the retroactive refunds or financial penalties totaling approximately $45 million that intervenors had sought for the period of October 1, 2001, through May 31, 2005. The decision suggests that issues related to the assignment of system average fuel costs for firm wholesale sales subsequent to March 7, 2006, and the prudence of affiliate transactions, should be addressed in SPS's upcoming rate case or a separate parallel proceeding. This approach aims to resolve these matters prospectively, as the hearing examiner found that SPS was not put on notice of concerns with its cost assignment practices until March 7, 2006.

Key Highlights

1A hearing examiner issued a recommended decision regarding Southwestern Public Service Company's (SPS) fuel and purchased power cost recovery clause in New Mexico.
2The recommended decision rejects retroactive refunds or financial penalties of approximately $45 million sought by intervenors for the period October 1, 2001, through May 31, 2005.
3The hearing examiner found the New Mexico Public Regulation Commission (NMPRC) lacked legal authority to apply changes in cost assignment methodology retroactively before March 7, 2006, the date SPS was put on notice of concerns.
4Issues concerning the assignment of system average fuel costs for firm wholesale sales after March 7, 2006, and affiliate transactions, are recommended for resolution in SPS's next rate case or a separate parallel proceeding.
5SPS is ordered to refund approximately $1.6 million for acknowledged erroneous collection of long-term purchased power capacity costs.
6SPS is authorized to continue using its FPPCAC pending a final order, likely in conjunction with its upcoming rate case expected in the third quarter of 2007.
7Decisions on renewable energy certificates and sulfur dioxide allowance credit proceeds are to be addressed separately.

XCEL ENERGY INC 8-K Report, Corporate Update (May 7, 2007)

Summary

Key Highlights

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