This excerpt taken from the XEL 8-K filed Jun 1, 2006.
10. Is Section 2(iv) of the New FCAC consistent with Commission regulations, precedent, and policy?
208. Section 2(iv) of SPS new FCAC contains the following language:
plus, energy charges for any purchase, including, without limitation, the total energy costs associated with purchases from any wind energy projects to the extent that the energy-related charges incurred for the purchase over the term of the purchase are less than the Companys total avoided variable costs. For energy purchases greater than one year, the Company will measure the monthly purchase price relative to the Companys total monthly avoided variable cost. The Company will only include in the FCA the lesser of the cumulative purchase price or the total avoided variable cost incurred through the term of the purchase to date[.]
209. Staff contends that Section 2(iv) of the new SPS FCAC is deficient in that it expands the scope of costs to include total energy costs associated with purchases as eligible for flow through, whereas the regulation is limited to energy charges. Staff also maintains that the SPS clause overreaches in that it includes accumulating and carrying costs over the full term of the purchase, instead of a periodic evaluation of
purchases. Finally, Staff questions whether the clause contemplates a post-purchase evaluation on a transaction by transaction basis, which it contends is required by the regulations.
210. CCG adheres to its position, described earlier in Issue Nos. II.A.2 and II.A.3, that the new clause is too broad in that it seeks recovery of the energy costs related to any purchase, regardless of length or whether or not it is made for reliability purposes. CCG contends that only actual identifiable fuel is allowed to be recovered if the purchase is made for reliability reasons and not as an economy purchase. Exh. CCG-38 at 31-32.
211. SPS argues that the Commissions regulation quoted above plainly states that energy charges (only) associated with any purchase may be recovered through the fuel clause if such charges are less than the buyers total avoided cost over the purchase period. It further maintains that it specifically singled out wind energy costs because it expects future transactions from wind projects too large to qualify for QF status, and wanted to provide notice as to what costs would be flowed through the clause.
Discussion and Conclusion
212. SPS is correct, as noted above, that the Commissions fuel clause regulation permits recovery through the fuel clause of the energy charges associated with any purchase may be recovered through the fuel clause if such charges are less than the buyers total avoided cost over the purchase period. Its mention of wind energy costs in its fuel clause is not inconsistent with the Commissions regulations. I rejected earlier the Staff objection to aggregation, and find that the SPS plan for testing wind energy charges against avoided costs necessarily involves a comparison with actual avoided costs.