Nuclear Obligations

Fuel Disposal — NSP-Minnesota is responsible for temporarily storing used or spent nuclear fuel from its nuclear plants. The DOE is responsible for permanently storing spent fuel from NSP-Minnesota’s nuclear plants as well as from other U.S. nuclear plants, but no such facility is yet available. NSP-Minnesota has funded its portion of the DOE’s permanent disposal program since 1981. Through May 2014, the fuel disposal fees were based on a charge of 0.1 cent per KWh sold to customers from nuclear generation. Since that time, the DOE has set the fee to zero.

Fuel expense includes the DOE fuel disposal assessments of approximately $5 million in 2014. There were no DOE fuel disposal assessments in 2016 or 2015. In total, NSP-Minnesota paid approximately $452.1 million to the DOE through Dec. 31, 2014.

NSP-Minnesota has its own temporary on-site storage facilities for spent fuel at its Monticello and PI nuclear plants, which consist of storage pools and dry cask facilities at both sites. The amount of spent fuel storage capacity is determined by the NRC and the MPUC. The Monticello dry-cask storage facility currently stores 16 of the 30 authorized canisters, and the PI dry-cask storage facility currently stores 40 of the 64 authorized casks.

Regulatory Plant Decommissioning Recovery — Decommissioning activities related to NSP-Minnesota’s nuclear facilities are planned to begin at the end of each unit’s operating license and be completed by 2091. NSP-Minnesota’s current operating licenses allow continued use of its Monticello nuclear plant until 2030 and its PI nuclear plant until 2033 for Unit 1 and 2034 for Unit 2.

Future decommissioning costs of nuclear facilities are estimated through triennial periodic studies that assess the costs and timing of planned nuclear decommissioning activities for each unit. The MPUC most recently approved NSP-Minnesota’s 2014 nuclear decommissioning study in October 2015. This cost study quantified decommissioning costs in 2014 dollars and utilized escalation rates of 4.36 percent per year for plant removal activities, and 3.36 percent for spent fuel management and site restoration activities over a 60-year decommissioning scenario.

The total obligation for decommissioning is expected to be funded 100 percent by the external decommissioning trust fund when decommissioning commences. NSP-Minnesota’s most recently approved decommissioning study resulted in an annual funding requirement of $14 million to be recovered in utility customer rates which started in 2016. This cost study assumes the external decommissioning fund will earn an after-tax return between 5.23 percent and 6.30 percent. Realized and unrealized gains on fund investments are deferred as an offset of NSP-Minnesota’s regulatory asset for nuclear decommissioning costs.

As of Dec. 31, 2016, NSP-Minnesota has accumulated $1.9 billion of assets held in external decommissioning trusts. The following table summarizes the funded status of NSP-Minnesota’s decommissioning obligation based on parameters established in the most recently approved decommissioning study. Xcel Energy believes future decommissioning costs, if necessary, will continue to be recovered in customer rates. The amounts presented below were prepared on a regulatory basis, and are not recorded in the financial statements for the ARO.



	Regulatory Basis
(Thousands of Dollars)	2016			2015
Estimated decommissioning cost obligation from most recently approved study (in 2014 dollars)	$	3,012,342		$	3,012,342
Effect of escalating costs (to 2016 and 2015 dollars, respectively, at 4.36/3.36 percent)	258,278			126,464
Estimated decommissioning cost obligation (in current dollars)	3,270,620			3,138,806
Effect of escalating costs to payment date (4.36/3.36 percent)	7,934,874			8,066,688
Estimated future decommissioning costs (undiscounted)	11,205,494			11,205,494
Effect of discounting obligation (using average risk-free interest rate of 3.25 percent and 3.01 percent for 2016 and 2015, respectively)	(7,068,362		)	(6,891,392		)
Discounted decommissioning cost obligation	$	4,137,132		$	4,314,102

Assets held in external decommissioning trust	$	1,860,762		$	1,724,150
Underfunding of external decommissioning fund compared to the discounted decommissioning obligation	2,276,370			2,589,952

Calculations and data used by the regulator in approving NSP-Minnesota’s rates are useful in assessing future cash flows. The regulatory basis information is a means to reconcile amounts previously provided to the MPUC and utilized for regulatory purposes to amounts used for financial reporting. The following table provides a reconciliation of the discounted decommissioning cost obligation - regulated basis to the ARO recorded in accordance with GAAP:



(Thousands of Dollars)	2016			2015
Discounted decommissioning cost obligation - regulated basis	$	4,137,132		$	4,314,102
Differences in discount rate and market risk premium	(1,043,655		)	(1,275,438		)
O&M costs not included for GAAP	(844,155		)	(897,640		)
Nuclear production decommissioning ARO - GAAP	$	2,249,322		$	2,141,024

Decommissioning expenses recognized as a result of regulation for the years ending Dec. 31 were:



(Thousands of Dollars)	2016		2015		2014
Annual decommissioning recorded as depreciation expense: ^{(a) (b)}	$	20,372	$	6,862	$	7,138


^(a)	Decommissioning expense does not include depreciation of the capitalized nuclear asset retirement costs.


^(b)	Decommissioning expense in 2016 includes Minnesota’s retail jurisdiction annual funding requirement of approximately $14 million. The 2014 and 2015 expense was offset by the DOE settlement refund.

The 2014 nuclear decommissioning filing approved in 2015 has been used for the regulatory presentation for both 2015 and 2016.