14. 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. NSP-Minnesota has funded its portion of the DOE's permanent disposal program since 1981. The fuel disposal fees are based on a charge of 0.1 cent per KWh sold to customers from nuclear generation. Fuel expense includes the DOE fuel disposal assessments of approximately $11 million in 2011, $13 million in 2010 and $12 million in 2009. In total, NSP-Minnesota had paid approximately $422.3 million to the DOE through Dec. 31, 2011. The Nuclear Waste Policy Act of 1982 required the DOE to begin accepting spent nuclear fuel no later than Jan. 31, 1998. NSP-Minnesota and other utilities have commenced lawsuits against the DOE to recover damages caused by the DOE's failure to meet its statutory and contractual obligations. In 2011, NSP-Minnesota received from the DOE pursuant to a Settlement with the DOE, an initial payment of approximately $100 million to cover damages through the end of 2008. As of Dec. 31, 2011, NSP-Minnesota has recorded the payment as restricted cash and a regulatory liability.

NSP-Minnesota has its own temporary on-site storage facilities for spent fuel at its Monticello and Prairie Island nuclear plants, which consist of storage pools and dry cask facilities at both sites. The amount of spent fuel storage capacity currently authorized by the NRC and the MPUC will allow NSP-Minnesota to continue operation of its Prairie Island nuclear plant until the end of its renewed licenses terms in 2033 for Unit 1 and 2034 for Unit 2 and its Monticello nuclear plant until the end of its renewed operating license in 2030. Other alternatives for spent fuel storage are being investigated until a DOE facility is available, including pursuing the establishment of a private facility for interim storage of spent nuclear fuel as part of a consortium of electric utilities.

Regulatory Plant Decommissioning Recovery - Decommissioning of NSP-Minnesota's nuclear facilities is planned for the period from cessation of operations through at least 2067, assuming the prompt dismantlement method. NSP-Minnesota is currently recording the regulatory costs for decommissioning over the MPUC-approved cost-recovery period and including the accruals in a regulatory liability account. The total decommissioning cost obligation is recorded as an ARO in accordance with the applicable accounting guidance.

Monticello received its initial operating license in 1970 and began commercial operation in 1971. With its renewed operating license and CON for spent fuel capacity to support 20 years of extended operation, Monticello can operate until 2030. The Monticello 20-year depreciation life extension until September 2030 was granted by the MPUC in 2007. Construction of the Monticello dry-cask storage facility is complete, and 10 of the 30 canisters authorized have been filled and placed in the facility.

Prairie Island Units 1 and 2 received their initial operating license and began commercial operations in 1973 and 1974. In April 2008, NSP-Minnesota filed an application with the NRC to renew the operating license of its two nuclear reactors at Prairie Island that allowed for operation for an additional 20 years until 2033 and 2034, respectively. The NRC approved Prairie Island's license renewal application in 2011. Based on the NRC approval, a full life extension for Prairie Island's depreciation life was approved by the MPUC in September 2011, bringing the depreciation remaining life in line with the NRC approved operating license. The Prairie Island dry-cask storage facility currently stores 29 casks, with MPUC approval for the use of 35 additional casks, to support operations until the end of the renewed operating licenses in 2033 and 2034.

The total obligation for decommissioning currently is expected to be funded 100 percent by the external decommissioning trust fund, as approved by the MPUC, when decommissioning commences. The MPUC last approved NSP-Minnesota's nuclear decommissioning study request in October 2009, using 2008 cost data. An updated nuclear decommissioning study was submitted to the MPUC in both November and December 2011. Due to new state statute requirements, five decommissioning scenarios were presented, which each reflected a different timeline for the removal of spent nuclear fuel from the sites. A decision on this filing is expected either in late 2012 or the beginning of 2013.

Consistent with cost-recovery in utility customer rates, NSP-Minnesota previously recorded annual decommissioning accruals based on periodic site-specific cost studies and a presumed level of dedicated funding. Cost studies quantify decommissioning costs in current dollars. The most recent study, which resulted in an authorization of no funding, presumes that costs will escalate in the future at a rate of 2.89 percent per year. The total estimated decommissioning costs that will ultimately be paid, net of income earned by the external decommissioning trust fund, is currently being accrued using an annuity approach over the approved plant-recovery period. This annuity approach uses an assumed rate of return on funding, which is currently 6.3 percent, net of tax, for external funding. The net unrealized gain or loss on nuclear decommissioning investments is deferred as a regulatory asset or liability, respectively.

The external funds are held in trust and in escrow. The portion in escrow is subject to refund if approved by the various commissions. The MPUC authorized the return of funds associated with the Monticello plant for the Minnesota retail jurisdictions in 2009, with refunds made on customers' bills in 2010. An amount of approximately $5.9 million was also withdrawn from the Monticello plant portion of the escrow fund in March 2010 in preparation for a refund to Wisconsin and Michigan retail customers. The funds have not yet been refunded as of Dec. 31, 2011, and the timing of the refunds will be determined in future rate cases in each jurisdiction.

At Dec. 31, 2011, NSP-Minnesota recorded and recovered in rates cumulative decommissioning expense of $1.3 billion. The following table summarizes the funded status of NSP-Minnesota's decommissioning obligation based on approved regulatory recovery parameters from the most recently approved decommissioning study. Xcel Energy believes future decommissioning cost expense, if necessary, will continue to be recovered in customer rates. These amounts are not those recorded in the financial statements for the ARO.

	Regulatory Basis
(Thousands of Dollars)	2011			2010
Estimated decommissioning cost obligation (2008 dollars)	$	2,308,196		$	2,308,196
Effect of escalating costs (to 2011 and 2010 dollars, respectively, at 2.89 percent per year)		205,960			135,342
Estimated decommissioning cost obligation (in current dollars)		2,514,156			2,443,538
Effect of escalating costs to payment date (2.89 percent per year)		2,602,207			2,672,825
Estimated future decommissioning costs (undiscounted)		5,116,363			5,116,363
Effect of discounting obligation (using risk-free interest rate)		(3,187,914	)		(3,856,516	)
Discounted decommissioning cost obligation		1,928,449			1,259,847
Assets held in external decommissioning trust		1,336,431			1,350,630
Underfunding (overfunding) of external decommissioning fund compared to the discounted decommissioning obligation	$	592,018		$	(90,783	)

Decommissioning expenses recognized as a result of regulation include the following components:

(Thousands of Dollars)	2011			2010			2009
Annual decommissioning recorded as depreciation expense: (a)
Externally funded	$	-		$	934		$	2,849
Internally funded (including interest costs)		(456	)		(777	)		(884	)
Net decommissioning expense recorded	$	(456	)	$	157		$	1,965

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

Reductions to expense for internally-funded portions in 2011, 2010 and 2009 are a direct result of the 2008 decommissioning study jurisdictional allocation and 100 percent external funding approval, effectively unwinding the remaining internal fund over the previously licensed operating life of the unit (2010 for Monticello, 2013 for Prairie Island Unit 1 and 2014 for Prairie Island Unit 2). The 2008 nuclear decommissioning filing approved in 2009 has been used for the regulatory presentation.