1 of 6 - insurance - miller testimony (pdf)

PUBLIC DOCUMENT – TRADE SECRET INFORMATION EXCISED – PUBLIC DATA

Direct Testimony and Schedules Robert L. Miller

Before the Minnesota Public Utilities Commission State of Minnesota

In the Matter of the Application of Northern States Power Company for Authority to Increase Rates for Electric Service in Minnesota

Docket No. E002/GR-15-826 Exhibit __(RLM-1)

Insurance

November 2, 2015


TABLE OF CONTENTS

I. Introduction 1

II. Executive Summary 2

III. Overview of Insurance Program 4

A. Program and Benefits 4

B. Selection, Procurement and Availability 8

C Premiums 15

IV. Major Insurance Programs 20

A. Master Property Insurance 20

B. Excess Liability Insurance 23

C. Directors’ and Officers’ Liability Insurance 27

D. Fiduciary Liability Insurance 31

E. Nuclear Insurance Program 34

F. Primary Casualty Insurance Program 39

V. Other Insurance Programs 44

VI. Conclusion 44

SCHEDULES

Statement of Qualifications Schedule 1

Policy and Premium Overview Schedule 2

2012- 2016 Insurance Premiums Schedule 3

Master Property Insurance Program Schedule 4

Master Property Insurance Sublimits Schedule 5

Master Property Insurance Industry Comparison Schedule 6

Excess Liability Insurance Program Schedule 7

i Docket No. E002/GR-15-826 Miller Direct


Directors’ and Officers’ Liability Insurance Program Schedule 8

Fiduciary Liability Insurance Program Schedule 9

Nuclear Property Insurance Program Schedule 10

Nuclear Accidental Outage Insurance Program Schedule 11

Nuclear Secondary Financial Protection Insurance Program Schedule 12

Primary Casualty Insurance Program Schedule 13

Other Insurance Programs Schedule 14

ii Docket No. E002/GR-15-826 Miller Direct


I. INTRODUCTION 1

2

Q. PLEASE STATE YOUR NAME, TITLE AND BUSINESS ADDRESS. 3

A. My name is Robert L. Miller. I am the Director of Hazard Insurance for Xcel 4

Energy Services Inc. My business address is: 414 Nicollet Mall, Minneapolis, 5

Minnesota 55401. 6

7

Q. PLEASE SUMMARIZE YOUR QUALIFICATIONS AND EXPERIENCE. 8

A. I have been practicing risk management since 1985. I have served in a risk 9

management role with Xcel Energy Inc. since 2004. Since 2015 I have served 10

as Director of Hazard Insurance for Xcel Energy Inc. I oversee the 11

Company’s property and casualty insurance operations as well as our loss 12

control services. 13

14

While at Xcel Energy Inc., I have been actively involved with various utility 15

associations, industry mutual insurers and the Risk and Insurance 16

Management Society (RIMS). My resume is included as Exhibit__ (RLM-1), 17

Schedule 1. 18

19

Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THIS PROCEEDING? 20

A. I support the request of Northern States Power Company – Minnesota to 21

recover in electric rates the 2016 test-year costs associated with its Insurance 22

Program. Consistent with past Commission Orders, my testimony presents 23

the Commission with detailed information about the Company’s Risk 24

Management and Insurance Programs, including a description of the 25

Company’s coverage, the benefits provided by the coverage, an explanation of 26

Docket No. E002/GR-15-826 Miller Direct

1


insurance costs, and the Company’s cost mitigation efforts. It also provides 1

updated information concerning aspects of these Programs since the 2014 test 2

year rate case. 3

4

II. EXECUTIVE SUMMARY 5

6

Q. PLEASE PROVIDE AN EXECUTIVE SUMMARY OF YOUR TESTIMONY. 7

A. Our Risk Management and Insurance Programs are methodical, appropriate 8

and prudent. We have a best-in-class Loss Control Program that seeks to 9

proactively identify and reduce risk at our generation plants, which helps us 10

mitigate premiums for our property insurance. However, since avoiding all 11

risk is impossible, we have a robust Insurance Program to address those 12

potential liabilities the Company has determined are appropriate to cover 13

when balancing cost and potential liabilities. 14

15

We have several different types of insurance, as one would expect with a large 16

utility company with electric and gas operations that serve millions of 17

customers and extend over a large geographic area. The majority of these 18

policies include coverage for catastrophic losses. However, we also maintain a 19

program that covers our smaller yet still unpredictable losses, such as workers 20

compensation claims, to help stabilize our costs. 21

22

Though we do have a unique risk profile as a utility, we have various risk 23

mitigation mechanisms in place to reduce our risk. These tools include 24

membership in industry mutual insurance pools, centralizing our insurance 25

risk management at Xcel Energy Inc., and layering our coverage. 26

2 Docket No. E002/GR-15-826 Miller Direct


The Company also has a variety of processes in place to ensure that we not 1

only have the appropriate levels and types of insurance, but that we are also 2

paying reasonable rates. These procurement steps include extensive 3

negotiation and policy renewal processes that can start six months before 4

renewal is due, engagement of expert insurance brokers with industry wide 5

experience, and maintaining ongoing relationships with our underwriters 6

throughout the year to keep them informed of updates at the Company, allow 7

them to understand our current risk profile, and offer them comfort in 8

insuring our risk. In addition, we also have several programs and review 9

processes in place internally to mitigate our costs and reduce our claims. These 10

vary with each policy but some initiatives include monitoring industry losses 11

and ensuring we have measures in place to prevent similar events at Xcel 12

Energy; implementing a particular focus on safety performance and training 13

programs; and executing corporate procedures and policies that help reduce 14

the potential for claims. 15

16

It is for all these reasons that our Insurance Program is not only prudent and 17

beneficial but a necessary cost of doing business. Therefore, I recommend the 18

Commission approve the Company’s request to recover the 2016 test year 19

costs of the Insurance Program in its electric rates. I also provide information 20

related to our 2017 and 2018 budgets for insurance costs in support of our 21

overall rate request in this case. 22

23

24

25

26



III. OVERVIEW OF INSURANCE PROGRAM 1

2

A. Program and Benefits 3

Q. WHAT IS THE PURPOSE OF THE COMPANY’S RISK MANAGEMENT PROGRAM? 4

A. The primary purpose of our risk management program is to identify, assess, 5

prioritize, and reduce risk to protect the Company. We do this through our 6

Loss Control Program and cost-effective financing of risk. We also mitigate 7

and transfer risk through commercial insurance products, industry mutual 8

insurance companies, or other financial instruments. 9

10

Q. PLEASE DESCRIBE THE COMPANY’S LOSS CONTROL PROGRAM. 11

A. Our Loss Control Program is a structured process to identify, assess and 12

minimize risks at our power plants. We have five engineers in our Risk 13

Management department whose full-time job is to look for opportunities to 14

decrease risks at our power plants. Our engineers make site visits to the plants 15

to identify potential risks; they then prepare reports to share with our plant 16

directors and underwriters who evaluate our risk accordingly. Our insurers 17

trust our internal engineers and their reports, and rely on them. In fact, our 18

insurers periodically audit our internal processes and confirm our methods 19

and reports continue to meet their standards. 20

21

Q. IS THE COMPANY’S LOSS CONTROL PROGRAM A UNIQUE APPROACH TO 22

IDENTIFYING RISK? 23

A. Yes. It is my understanding that most companies in our industry rely on the 24

insurance companies or other external third parties to evaluate their risk. Our 25

practice is a best-in-class approach and our prices reflect this as we have the 26



lowest rates for comparable utilities for our Master Property Insurance, as 1

discussed below. 2

3

Q. HOW DOES THE COMPANY’S LOSS CONTROL PROGRAM COMPLEMENT THE 4

COMPANY’S INSURANCE PROGRAM? 5

A. Though our first priority is to avoid as much risk as possible, there will always 6

remain some level of risk in a company such as ours. Once the known risks 7

have been identified, the next step is to ask whether we want to accept that 8

risk or we want to insure against that risk. The Loss Control Program helps to 9

identify and prioritize the known risk. 10

11

Q. WHAT WOULD CAUSE THE COMPANY TO ACCEPT A RISK AND NOT INSURE 12

AGAINST IT? 13

A. First, not all risks are foreseeable such that we may insure against them. Also, 14

some risks are sufficiently remote that we must utilize prudent business 15

judgment to determine if the long-term costs of insuring against such a risk 16

make sense for the Company and our customers. Last, some forms of 17

insurance are so expensive as to lead us to the decision to carry the risk 18

instead of insuring against it. 19

20

For example, we do not have insurance covering our wires, lines, pipes and 21

poles. This decision is based mostly on the volatility and cost of the insurance 22

and the relatively low risk that a large percentage of the assets will meet with a 23

catastrophic event at any one time. It is more cost effective for the Company 24

to repair and replace these assets as necessary than it is to buy insurance. Our 25

reasons for doing so are primarily related to the difficulty of procuring such 26



insurance at remotely reasonable costs, as well as the imposition of risk 1

profiles of utilities more prone to natural disasters such as hurricanes on our 2

risk coverage. 3

4

Q. WHY DOES THE COMPANY NEED INSURANCE? 5

A. The Company could not provide safe, reliable and cost-effective electric 6

service to ratepayers without insuring the risks associated with delivering that 7

service. The Company takes steps on a continuing basis to ensure that our 8

Insurance Program provides us with proper risk protection necessary to 9

deliver safe, reliable and cost-effective service. By insuring potential liabilities 10

rather than the Company itself taking on the risk of liabilities, the associated 11

costs are level, largely predictable and capped. In the long term, this results in 12

lower and more consistent rates. 13

14

Q. WHAT IS THE GOAL OF THE COMPANY’S INSURANCE PROGRAM? 15

A. Our Insurance Program is intended to insure against reasonable risks at cost-16

effective prices over the long term. Our business is capital intensive and many 17

of the investments we make to serve our customers are expected to be in-18

service for many years. Consequently, we must make insurance decisions 19

utilizing a long-term cost and benefit analysis and not simply pursue the 20

cheapest cost option in any given year. By doing so, we ultimately seek to 21

minimize the cost of our risk over time. 22

23

Q. HOW ARE THE COMPANY’S INSURANCE PROGRAMS STRUCTURED? 24

A. The holding company, Xcel Energy, Inc., is the holder of all of the non-25

nuclear insurance policies. The operating companies, including NSPM, are all 26



named insureds, so that there is coverage for each entity as needed as claims 1

arise. The policies do not designate a “beneficiary”—that term is unique to 2

life and health insurance and is not utilized for property and casualty insurance 3

coverage. 4

5

Q. WHAT TYPES OF INSURANCE DOES THE COMPANY CARRY? 6

A. The Company has six main categories of insurance policies: 7

1) Master property insurance (non-nuclear assets); 8

2) Excess liability insurance; 9

3) Directors’ and officers’ (D&O) liability insurance; 10

4) Fiduciary liability insurance; 11

5) Nuclear insurance; and 12

6) Primary casualty (general, auto, and workers’ compensation). 13

In addition to these main policies, the Company also carries other necessary 14

insurance policies, including: professional liability (for our engineers and 15

attorneys); fidelity insurance; cyber risk insurance; terrorism insurance; 16

aviation insurance; foreign liability insurance; builders risk insurance; and 17

railroad protective insurance (covers certain requirements imposed by 18

railroads impacted by operations). 19

20

Exhibit__ (RLM-1), Schedule 2 identifies the different types of policies we 21

carry, the premiums we pay for these policies, and the policy holder. 22

23

Q. DO THESE POLICIES GENERALLY COVER DIFFERENT LEVELS OF RISK? 24

A. Yes. The first five categories of insurance policies listed above (Master 25

Property, Excess, D&O, Fiduciary, and Nuclear) are where our greatest risks 26



lie, and therefore the potential for the highest claims. Claims in these 1

categories could easily get into the hundreds of millions of dollars. 2

3

The last category, the Primary Casualty, is where our claims are generally 4

smaller in nature. Though we do have more claims under this policy, they are 5

unpredictable and vary from year to year. 6

7

Q. IN GENERAL, HOW DOES THE COMPANY DETERMINE WHICH RISKS IT INSURES? 8

A. The composition of the Company’s Insurance Program is informed by several 9

considerations: 10

• Statutory requirements such as workers compensation requirements or 11

professional liability requirements; 12

• Obligations to protect assets that are financed by third parties under our 13

mortgage indenture and other covenants; 14

• Benchmarking coverage against our utility industry peers; and 15

• Balancing long-term costs of the program against the risks we are 16

insuring, to assure our insurance costs and insured risks are reasonably 17

level over the long term. 18

19

B. Selection, Procurement and Availability 20

Q. PLEASE EXPLAIN THE OVERALL PROCESS FOR SELECTING INSURANCE 21

PRODUCTS AND ADMINISTERING THE INSURANCE PROGRAM. 22

A. Protecting the wide array of Xcel Energy Inc. operations and assets requires 23

input from and coordination with many business units and departments as 24

well as outside experts. We have generally had the same insurance framework 25

in place for the past twelve years. However, our insurance policies are on 26



one-year terms and thus need to be renegotiated on an annual basis. Prior to 1

each renewal, we perform a fresh evaluation of risks and alternatives to ensure 2

that our insurance program continues to appropriately balance costs and 3

benefits. We determine our insurance needs by: 4

• Reviewing current insurance programs to determine if they still match 5

our risk profile and are cost effective, or if any additional coverage or 6

levels might be appropriate to obtain given current market conditions; 7

• Conferring with experts to identify trends or potential issues and 8

benchmark our costs to industry norms; and 9

• Working with experienced insurance brokers who handle similar clients 10

and bring additional risk management experience to the decision. 11

12

Our insurance needs are divided into various lines of business. Working with 13

the Company’s chief financial officer, treasurer, and other operating units and 14

subsidiaries, we measure property replacement values, potential risks and 15

prudence of retaining risk. We then analyze whether to treat the risk through 16

loss control, through risk financing, or through risk transfer with contracts or 17

agreements. For some of our operations, such as our nuclear insurance, we 18

have very limited options or no options at all in what we can do, or where we 19

can go for coverage. For other operations, we have determined that the cost 20

of carrying certain forms of insurance outweigh the benefits in the long-term. 21

22

Q. ONCE YOU HAVE IDENTIFIED THE NEED FOR AN INSURANCE PRODUCT, HOW 23

DO YOU GO ABOUT PROCURING IT? 24

A. We have several different types of insurance and we procure each type in a 25

slightly different way. However, overall, we have an extensive and rigorous 26



procurement process in place that helps ensure we are paying reasonable 1

insurance premiums. Below are some of the procurement and review efforts 2

we engage in: 3

• We use specialized and expert insurance brokers to assist us with 4

matching willing insurers with our needs and to help inform us as to if 5

we are obtaining reasonable pricing. We often start this process six 6

months before the renewal date. Our brokers have extensive experience 7

working with similar companies and have deep industry knowledge 8

about available products and reasonable premiums. 9

• We actively participate in various insurance markets around the world, 10

including the US commercial market, European markets (including 11

Lloyd’s of London), Bermuda markets, and through our industry 12

mutual insurance companies. 13

• To ensure we are receiving appropriate coverage and are paying 14

appropriate premiums, we meet with each underwriter in each 15

insurance market to explain the Company’s risk profile, the types of 16

claims that have been made historically and what we are forecasting 17

from a risk perspective. 18

• We ensure that our potential underwriters are creditworthy and work 19

with them to develop the policy terms. Our general policy and 20

premium negotiations are extensive and involve many meetings with 21

our underwriters individually. In fact, we had at least twenty meetings 22

for our property insurance negotiations alone. Our senior management, 23

as well as our relevant business unit representatives, is actively involved 24

in these negotiations to ensure that our underwriters have a full and 25

complete understanding of our unique risk and operational excellence. 26



Through these meetings and negotiations, we are able to differentiate 1

ourselves from our utility peers. This, combined with our unique risk 2

mitigation efforts, ultimately results in premiums lower than those of 3

our peers. 4

• We work to develop long term relationships with our key insurers to 5

develop confidence and trust. To that end, we meet several times each 6

year with our underwriters to discuss current issues in an effort to allow 7

our underwriters to understand our risk profile better and feel more 8

comfortable insuring our risk. For example, we meet at least two times 9

annually with our property insurance panel to keep them abreast of 10

developments within the Company and for them to provide feedback 11

and information with respect to industry trends. I understand this to be 12

a unique relationship strengthening effort, which is not generally done 13

by any of our peer utilities. 14

15

Q. WHY IS YOUR PROCUREMENT PROCESS NOTABLE? 16

A. Because our unique and thorough insurance procurement process strengthens 17

our partnerships with our underwriters, enlists the help of expert brokers, and 18

involves extensive negotiations, it helps us mitigate costs and ensure we are 19

paying reasonable insurance premiums. 20

21

Q. WHAT ARE SOME FACTORS THAT IMPACT THE AVAILABILITY OF INSURANCE 22

PRODUCTS TO THE COMPANY? 23

A. The main factors that limit our insurance options are availability and cost. A 24

large utility such as Xcel Energy Inc. has a different risk profile than other 25

types of businesses. Consequently, for many of our operations we require 26



more specialized types of insurance products that more closely match our risk 1

profile than are generally available in established insurance markets. Insuring 2

our nuclear operations is a good example of this. Another example is the 3

significant exposure to large liability claims that are prevalent in our industry. 4

Given the unique risk profile of a utility, oftentimes certain insurance products 5

may be cost prohibitive or unavailable. In addition, certain macro-economic 6

factors can have significant effects on the cost and availability of insurance. 7

These include large, wide-spread property losses, such as hurricanes, as well as 8

declining investment markets. 9

10

Q. WHY DO UTILITIES HAVE A UNIQUE RISK PROFILE? 11

A. Unlike most business, even heavy industries, a utility, by its very nature, has 12

operations spread over a large geographic area and, because those operations 13

generate and transport electricity and gas, they are inherently more dangerous, 14

and therefore riskier, than other types of infrastructure. 15

16

Q. WHAT CAN THE COMPANY DO TO MITIGATE THIS? 17

A. The Company utilizes various insurance mechanisms to mitigate the unique 18

risk profile we carry. For instance, we layer our coverage, we belong to mutual 19

insurance pools and we leverage our company size to help mitigate insurance 20

availability and cost. 21

22

Q. WHAT DO YOU MEAN WHEN YOU SAY YOU LAYER YOUR COVERAGE? 23

A. We layer our insurance coverage both across the entire Insurance Program 24

and also within some of the individual components as well. This is part of our 25

effort to spread risk across various markets to ensure the stability of our 26



Insurance Program. This is particularly important to mitigate counterparty 1

credit risk, and it also utilizes competition to help mitigate premium costs. 2

3

The layered structure is an industry convention for the placement of our 4

insurance, whereby different underwriters undertake a certain portion of our 5

total insured risk for any particular program. This structure has many 6

advantages: it provides credit exposure protections to the Company; it 7

provides additional risk protection to our underwriters, which decreases the 8

level of risk they are insuring thereby driving down our premiums; and it 9

mitigates each underwriter’s overall financial exposure to us. 10

11

Q. PLEASE EXPLAIN THE COMPANY’S UTILIZATION OF INDUSTRY MUTUAL 12

INSURANCE POOLS FURTHER. 13

A. Although a utility presents a different risk profile than other businesses, the 14

utility industry is large and has many different entities participating in it. As a 15

result, many utilities, including us, belong to mutual insurance pools to 16

provide their insurance. Examples of these pools are Associated Electric & 17

Gas Insurance Services (AEGIS) and Energy Insurance Mutual (EIM), which 18

insure utility liability risk, and Nuclear Electric Insurance Limited (NEIL). 19

20

For many of our risks, AEGIS, EIM and/or NEIL are really the only insurers 21

available to cost-effectively insure these types of utility risk because, given the 22

nature of our business, there is a relatively high likelihood that we will make 23

certain types of claims. Although commercial insurance may be available, we 24

have found it to be provided on narrow, unfavorable terms at significantly 25

higher pricing. 26



In years prior to the establishment of AEGIS, EIM and NEIL, we had 1

extensive experience with the commercial insurance market. During this time, 2

the cost fluctuations for the insurance coverage now provided through pools 3

were extreme, and coverage terms were not reliable. Also, we have found that 4

a majority of the companies that provided this insurance coverage in the past 5

are now insolvent. Industry mutual insurance pools were formed to meet our 6

insurance needs instead of requiring utilities to rely on the volatile market. 7

8

A good example of the type of risk that we place with industry mutual pools 9

would be environmental claims should an ash pond at one of our plants fail. 10

While we make great efforts to operate and maintain our ash ponds in a 11

responsible manner, there is always a risk of failure. Such a failure could have 12

claims in the many millions. For AEGIS and EIM, it is a familiar and 13

foreseeable risk they are insuring. Other insurers are unwilling to take this risk 14

at reasonable prices because of the nature of the ash ponds. This is the type 15

of risk that the mutual insurance pools were developed to address because 16

many utilities share this risk. Nuclear liability is even more unique. 17

18

Q. HOW DOES THE COMPANY USE ITS SIZE TO MITIGATE COSTS? 19

A. Xcel Energy Inc. uses a sophisticated approach to handling risks. With 20

operations in eight states and over 12,000 employees, Xcel Energy Inc. 21

centralizes the insurance risk management function. This allows for greater 22

economies of scale, the smoothing of risk over time, and a concentration of 23

effort in managing risk. Our size makes us a significant participant in utility 24

insurance markets, which makes us a more attractive client to our underwriters 25

and therefore helps us to drive premium discounts. 26



However, we also work to ensure that the costs of insurance are appropriately 1

allocated to the individual operating companies with proper recognition of the 2

respective differences in risk characteristics due to the differing sizes, 3

activities, and characteristics of each operating company. 4

5

Q. ARE THERE ANY OTHER WAYS THE COMPANY MITIGATES RISK? 6

A. Yes. Due to our size, we are also able to use an insurance structure known as 7

captive insurance. This allows us to get a better pricing on our primary layer 8

of property and casualty insurance by isolating and pricing our specific risk 9

profile. In addition to saving us money on these insurance layers, this allows 10

us to be better analyze and forecast our risk, implement loss control programs 11

to mitigate insurance costs, and better manage our claims. Last, utilizing this 12

structure provides us with an enhanced negotiating position when insuring the 13

higher layers of risk above our captive amounts. 14

15

C. Premiums 16

Q. ARE THE COMPANY’S PREMIUMS REASONABLE? 17

A. Yes. As discussed above, we take extensive cost-mitigating efforts during 18

our annual policy renewal process and negotiations. Although each 19

component of our Insurance Program has different cost drivers, insurance 20

costs are generally driven by the Company’s risk profile and claims history, 21

as well as industry-wide trends that affect particular risks. Given this, we 22

believe we utilize appropriate mechanisms to ensure reasonable insurance 23

costs. 24

25



First, by utilizing the captive structure for our primary layer of our Primary 1

Casualty and Master Property Insurance Programs, we can price this 2

coverage in accordance with our unique risk and claims history, and insulate 3

ourselves from general industry trends for these often used insurance types. 4

To determine this specific risk, we take into account our claims history and 5

we retain independent actuarial firms to perform an actuarial analysis of our 6

risk profile. Based on this information, we set an appropriate premium for 7

our captive layers to reflect the expected claims as well as certain fixed costs 8

that we also expect to incur. 9

10

Second, by utilizing AEGIS, EIM and NEIL, we are able to obtain insurance 11

for difficult to place risks. These industry mutual pools are, in many ways, 12

the only reasonably available insurers for these types of risks. As industry 13

mutual pools, these entities seek to set their pricing based on concepts of 14

mutuality and fairness. Consequently, we believe that the premiums we pay 15

to these industry mutual insurance pools are reasonable. 16

17

Third, by utilizing specialized insurance brokers to place our risk and provide 18

industry wide intelligence, we can be reasonably confident that we have 19

obtained an appropriate amount of coverage at a reasonable price. Our 20

insurance brokers are an invaluable resource for our procurement efforts. 21

The prime function of our insurance brokers is to have knowledge of the 22

market and the insurance underwriters that are willing to take on our risk; in 23

fact in some insurance markets, such as London and Bermuda, we are 24

required to utilize brokers. In addition, as key market players, our brokers 25

help provide us with key counterparty information to ensure that our 26



underwriters are and will continue to be creditworthy. They also have 1

extensive experience working with similar companies and can therefore 2

provide us with industry and market intelligence that would be impossible to 3

obtain otherwise. Consequently, engaging and utilizing high quality brokers 4

allows us to develop a cost-effective and reliable Insurance Program. 5

6

In addition to our procurement efforts, we undertake extensive risk and 7

safety programs to help proactively lower our inherent risk profile. These 8

activities include employee safety programs to help reduce workers 9

compensation claims; driver safety programs to help reduce automobile 10

liability claims; public safety programs to help reduce third-party liability 11

claims; and the Loss Control Program I mentioned earlier, which helps 12

reduce property claims. We also work closely with contractors and other 13

members of the public to instill better practices when they operate in the 14

vicinity of our pipes, lines and poles. 15

16

Q. WHAT IS THE TOTAL 2016 TEST YEAR BUDGET FOR INSURANCE PROGRAM 17

COSTS, THE NSPM PORTION OF THESE COSTS, AND THE AMOUNT 18

ALLOCATED TO THE STATE OF MINNESOTA ELECTRIC JURISDICTION? 19

A. The total 2016 test year insurance premium costs for Xcel Energy are $54.1 20

million. The portion assigned to the NSPM Operating Company is $21.8 21

million. The State of Minnesota Electric jurisdiction allocation is $19.0 22

million. I note that this amount does not include the costs associated with 23

our workers compensation coverage, which is addressed by Company 24

witness Mr. Richard R. Schrubbe in his Direct Testimony. Exhibit __ 25



(RLM-1), Schedule 3 contains additional details supporting these 1

calculations. 2

3

Q. PLEASE DISCUSS THE COMPANY’S ACCOUNTING PROCESS TO TRACK THE 4

COSTS AND INSURANCE PROCEEDS ASSOCIATED WITH AN INSURANCE CLAIM? 5

A. The costs are initially charged to O&M or capital accounts. At the end of 6

each month, these amounts are transferred to an “insurance holding 7

account.” As the Company receives insurance proceeds, they are applied to 8

the insurance holding account. If costs are later determined to be non- 9

reimbursable by insurance, they are transferred from the insurance holding 10

account to a separate capital work order where all non-reimbursable costs 11

are accumulated. If the costs are known to be upgrades clearly not eligible 12

for insurance recovery, they are placed against the capital account upon 13

initial entry. 14

15

Q. HOW DOES THE COMPANY ENSURE THAT PROJECT COSTS THAT WILL BE 16

REIMBURSED BY INSURANCE ARE NOT ALSO RECOVERED FROM CUSTOMERS? 17

A. The accounting process described above ensures that all project costs that 18

are expected to be reimbursed by insurance are appropriately removed from 19

the capital and O&M expenses of the Company, and are recorded to an 20

insurance holding account to be offset by insurance proceeds as received. 21

Any balance in this insurance holding account is due to differences in the 22

timing of costs incurred and insurance proceeds received and is therefore 23

appropriately excluded from recovery in a rate case. 24

25

Q. WHAT ARE THE TRENDS FOR THE COMPANY’S INSURANCE PREMIUMS? 26



A. Like many of our costs of service, our insurance premiums are generally 1

trending up, due to a variety of factors. Schedule 3 provides our actual and 2

forecasted premiums for the years 2012 – 2016. 3

4

The main drivers for our insurance costs are our claims history and industry 5

trends. We try to insulate ourselves from industry trends, where possible. 6

Further, as described elsewhere in this testimony, we undertake mitigation 7

measures to attempt to reduce the amount of claims we make on our 8

policies. 9

10

Q. IN LIGHT OF THESE TRENDS, WHAT IS THE COMPANY’S 2017 AND 2018 11

BUDGET FOR INSURANCE PREMIUMS? 12

A: In general, the Company’s insurance coverage is issued in policies that cover 13

a twelve-month period; the twelve-month period generally does not 14

correspond to the calendar year. Thus, for example, the 2016 test year 15

premium costs identified above are partly for policies issued in 2015 and 16

partly for policies issued in 2016. With this concept in mind, we have 17

estimated a 2017 budget for premium costs of $56.3 million and a 2018 18

budget for premium costs of $59.1 million. 19

20

21

22

23

24

25

26



IV. MAJOR INSURANCE PROGRAMS 1

2

A. Master Property Insurance 3

Q. WHAT RISKS DO THE COMPANY’S MASTER PROPERTY INSURANCE PROGRAM 4

COVER? 5

A. Our Master Property Insurance program is intended to insure the Company, 6

and its affiliates, against all risk of direct physical loss of or damage to its non-7

nuclear generating fleet and other property except for transmission and 8

distribution lines beyond 1,000 feet of insured locations. We carry up to 9

[TRADE SECRET BEGINS TRADE SECRET ENDS] in 10

coverage per occurrence. 11

12

Q. WHY DOES THE COMPANY NEED THIS TYPE OF INSURANCE? 13

A. The Company operates a non-nuclear fleet valued at over $26 billion. Further, 14

we operate over $13 billion of non-generation assets that we believe would be 15

prudent to insure and which are paid for by our customers. Further, our debt 16

covenants require us to maintain minimum levels of insurance to protect our 17

collateral. Our Master Property Insurance Program acts much like 18

homeowners insurance, which any prudent homeowner would carry to protect 19

their house and comply with their mortgage. 20

21

Q. HOW IS THE MASTER PROPERTY INSURANCE PROGRAM STRUCTURED AND 22

WHAT AMOUNT OF COVERAGE DOES THE COMPANY CARRY? 23

A. Our Master Property Insurance Program utilizes a layered structure. 24

Exhibit__ (RLM-1), Schedule 4 identifies the structure of this insurance 25

program. 26



Q. HOW DID THE COMPANY DETERMINE THAT [TRADE SECRET BEGINS 1

TRADE SECRET ENDS] PER OCCURRENCE WAS AN APPROPRIATE 2

AMOUNT OF COVERAGE FOR ITS MASTER PROPERTY INSURANCE PROGRAM? 3

A. Xcel Energy Inc. is responsible for providing insurance to protect property 4

with total replacement cost valuation of about [TRADE SECRET BEGINS 5

TRADE SECRET ENDS]. Although a number of sites have 6

estimated replacement costs exceeding [TRADE SECRET BEGINS 7

TRADE SECRET ENDS], we have chosen insurance with a per 8

occurrence limit of [TRADE SECRET BEGINS TRADE 9

SECRET ENDS] based on a number of factors, including: 10

• The largest loss in our industry, world-wide, of about [TRADE 11

SECRET BEGINS TRADE SECRET ENDS]; 12

• Engineering evaluation of maximum foreseeable loss, at our largest site, 13

less than [TRADE SECRET BEGINS TRADE SECRET 14

ENDS]; and 15

• Review of peer group practices by our broker of other utilities. 16

17

Q. PLEASE DESCRIBE THE SUBLIMITS OF THE MASTER PROPERTY INSURANCE 18

PROGRAM AND WHY THEY EXIST. 19

A. There are several sublimits on the Master Property Insurance Program. 20

Exhibit__ (RLM-1), Schedule 5 identifies these sub-limits and amounts. 21

22

Q. WHY ARE THESE SUBLIMITS APPROPRIATE? 23

A. We compare these sublimits to estimated exposures in these areas and explore 24

increased limits where considered necessary. In many cases there is not 25

additional coverage available on the conventional market and, if available, 26



additional increases in sublimits would come at a substantial cost increase. 1

This increased cost is not justified to protect against the remote chance of 2

catastrophic failures that could jeopardize the coverage cap. 3

4

Q. ARE THE PREMIUMS FOR THE MASTER PROPERTY INSURANCE PROGRAM 5

REASONABLE? 6

A. Yes. Through our annual review process, we probe the market to ensure we 7

are paying reasonable premiums where possible. We also rely on our broker 8

to advise us with respect to premiums and procurement. Last, we benchmark 9

our pricing against our utility peers. Exhibit__ (RLM-1), Schedule 6 indicates 10

our coverage amounts are within industry norms and our rates are the lowest 11

among this group of large utilities. 12

13

Q. WHAT ARE THE MAIN DRIVERS OF THE COSTS OF THE COMPANY’S MASTER 14

PROPERTY INSURANCE PROGRAM? 15

A. The main cost drivers are the Company’s risk profile and its claims history. 16

17

Q. WHAT IS THE COMPANY DOING TO MITIGATE THE AMOUNT OF CLAIMS? 18

A. Our internal loss control group is continuously evaluating our risk profile and 19

making recommendations for risk improvements where necessary. We quickly 20

learn from industry losses and ensure measures are in place to prevent similar 21

events at our facilities. 22

23

Q. WHAT TRENDS IS THE COMPANY SEEING IN ITS MASTER PROPERTY 24

INSURANCE PROGRAM PREMIUMS? 25



A. The cost of this insurance decreased by about three percent at the June 30, 1

2014 renewal. At the subsequent renewal, June 30, 2015, the cost decreased 2

by about fourteen percent. 3

4

Q. PLEASE EXPLAIN COST MITIGATION EFFORTS WITH RESPECT TO THE MASTER 5

PROPERTY INSURANCE PROGRAM. 6

A. The Company has undertaken several initiatives to minimize the potential for 7

increases in insurance costs. We met with several new Insurers to increase our 8

options for program structure changes if necessary. We have increased our 9

deductible by [TRADE SECRET BEGINS TRADE SECRET 10

ENDS] to help reduce the cost of insurance. We also started our renewal 11

planning process six months in advance of the renewal date to allow for 12

program structure changes if necessary. 13

14

Importantly, we include our senior Energy Supply managers in meetings with 15

underwriters. We believe that their participation helps our underwriters better 16

understand our operations and how we manage our plants to help mitigate 17

risk. Our broker informs us that this goes beyond what many utilities do to 18

provide information to their underwriters. 19

20

B. Excess Liability Insurance 21

Q. WHAT RISKS DO THE COMPANY’S EXCESS LIABILITY INSURANCE PROGRAM 22

COVER? 23

A. Our Excess Liability Insurance Program is intended to insure the Company 24

against liability to third parties for coverage limits over and above those 25

provided by our Primary Casualty Insurance Program, discussed later in my 26



Testimony. We carry Excess Liability coverage up to [TRADE SECRET 1

BEGINS TRADE SECRET ENDS]. Exhibit__ (RLM-1), 2

Schedule 7 illustrates the structure of our Excess Liability Insurance Program. 3

4

Q. CAN YOU PROVIDE SOME EXAMPLES OF THE TYPES OF RISKS COVERED BY 5

EXCESS LIABILITY INSURANCE? 6

A. The claims that we have made under this program have been the few claims 7

that have been large enough to exceed the limits of our Primary Casualty 8

Insurance Program. Thus, the risks covered by the Excess Liability Insurance 9

Program are large liability claims exceeding [TRADE SECRET BEGINS 10

TRADE SECRET ENDS] Examples include serious injuries or 11

death to members of the public caused by the Company’s employees or the 12

Company’s equipment or facilities, for example power line contact or a gas 13

explosion, as well as claims alleging damage to the environment. 14

15


A. The Company must have a sound financial response to claims in excess of the 17

Primary Casualty Insurance Program limits. The excess liability risk is an ideal 18

example of a risk that should be transferred to an insurance company instead 19

of being borne by our customers as an outcome of the risks we incur in 20

providing service. 21

22

Q. HOW DID THE COMPANY DETERMINE THAT THE TOTAL AMOUNT OF 23

AGGREGATE EXCESS LIABILITY COVERAGE IS APPROPRIATE? 24

A. While our Primary Casualty Insurance Program covers more common types of 25

claims, our Excess Liability insurance is intended to cover larger but less 26



frequent claims as well as protect the Company from catastrophic damage. To 1

arrive at the [TRADE SECRET BEGINS TRADE SECRET 2

ENDS] in Excess Liability coverage, we identified the major catastrophic 3

risks that could occur, and also conferred with our broker and examined 4

industry surveys to determine the appropriate amount of total coverage. 5

6

Q. PLEASE EXPLAIN HOW THE LAYERED COVERAGE IN THE EXCESS LIABILITY 7

INSURANCE PROGRAM OPERATES. 8

A. As indicated in Exhibit__ (RLM-1), Schedules 2 and 7, we utilize different 9

underwriters to obtain our total coverage of [TRADE SECRET BEGINS 10

TRADE SECRET ENDS]. Each underwriter provides 11

coverage of a specific layer of our risk. For example, AIG provides us with 12

coverage of [TRADE SECRET BEGINS TRADE SECRET 13

ENDS]; however, we can only make a claim on our policy with AIG if our 14

overall claim is more than [TRADE SECRET BEGINS 15

TRADE SECRET ENDS]. The same is true for our coverage with Ace, 16

who provides us with [TRADE SECRET BEGINS TRADE 17

SECRET ENDS] in coverage after our overall claim is more than [TRADE 18

SECRET BEGINS TRADE SECRET ENDS]. Please also 19

note that for those layers with multiple underwriters, each underwriter has 20

taken on a share of that tranche of risk. Our premiums and policy terms for 21

each layer reflect this. 22

23

Q. ARE THE EXCESS LIABILITY INSURANCE PROGRAM PREMIUMS REASONABLE? 24

A. Yes. The first two layers of our Excess Liability Insurance Program are 25

provided by our industry mutual insurers, AEGIS and EIM. Though we do 26



negotiate with them, the market price is essentially set. Utilization of AEGIS 1

and EIM for this layer of insurance is industry standard and our broker 2

informs us that we are obtaining a reasonable price for this coverage. For the 3

remaining layers of our Excess Liability Insurance Program, we utilize our 4

broker to place this insurance at reasonable prices with creditworthy 5

underwriters. Our broker informs us we are paying premiums for these layers 6

consistent with industry practice adjusted for our unique risk profile. 7

8

Q. WHAT ARE THE MAIN DRIVERS OF THE COSTS OF THE COMPANY’S EXCESS 9

LIABILITY INSURANCE PROGRAM? 10

A. The main cost drivers of the Excess Liability Insurance Program are the 11

Company’s inherent risk profile, its claims history, industry wide loss 12

experience, as well as macro-economic factors which affect the investment 13

markets. 14

15

Q. WHAT IS THE COMPANY DOING TO MITIGATE THE AMOUNT OF THESE CLAIMS? 16

A. The risk mitigation efforts described elsewhere in this testimony are directly 17

applicable to our Excess Liability Insurance Program. 18

19

Q. WHAT TRENDS IS THE COMPANY SEEING IN ITS EXCESS LIABILITY INSURANCE 20

PROGRAM PREMIUMS? 21

A. The cost of this insurance has experienced increases of about 10 percent per 22

year over the past several years with a slightly reduced increase this past year. 23

These increases are driven by adverse industry-wide loss experiences. In 24

addition to our claims mitigation efforts, we continue to review higher 25

attachment points to determine if premium credits would be helpful in 26



reducing overall costs. In fact, beginning with our 2014 policy we increased 1

our attachment point to [TRADE SECRET BEGINS TRADE 2

SECRET ENDS]. 3

4

C. Directors’ and Officers’ Liability Insurance 5

Q. WHAT RISKS DO THE COMPANY’S DIRECTORS’ & OFFICERS’ LIABILITY 6

INSURANCE PROGRAM COVER? 7

A. Like any corporation, the Company’s bylaws indemnify directors and officers 8

in the event they are personally sued -- often in addition to the company being 9

sued -- by investors, employees, vendors, competitors, and customers, among 10

other parties. The Directors’ & Officers’ (D&O) Liability Insurance Program 11

insures this liability. 12

13

Q. CAN YOU PROVIDE SOME EXAMPLES OF THESE TYPES OF RISKS? 14

A. Directors and officers are responsible for, among other things (1) adopting a 15

business strategy for the Company, (2) approving major policies and 16

procedures for the Company, and (3) ensuring compliance with federal and 17

state laws. Given these important responsibilities, courts have long held that 18

directors and officers have a fiduciary relationship to their corporations, and 19

owe them duties of care, loyalty and obedience. 20

21

Shareholders of corporations in all business segments file suits against 22

directors and officers. These types of suits, called derivative actions, are filed 23

against directors and officers for transactions involving undisclosed conflicts 24

of interest, insider trading, authorization of loans of corporate funds on 25

preferential terms, imprudent investment choices, mismanagement of the 26



corporation, or decisions that might make that cause a diminution in the 1

profits or value of a corporation. These types of cases are often without merit 2

and are particularly common in difficult economic times. 3

4

I note that no D&O claim will be paid if a director or officer is found guilty of 5

any wrongdoing, so the coverage does not incent them toward, or protect 6

them from, reckless or ill informed decisions. 7

8


A. The Company has a legal obligation to indemnify its directors and officers 10

under Minnesota law.1 Purchasing insurance to cover this obligation is both 11

reasonable and prudent. Furthermore, attracting qualified directors and 12

officers requires indemnification, which creates a liability for the Company 13

that it is prudent to insure. Individuals will not risk their personal assets to 14

serve as a corporate director or officer without mitigating the risks associated 15

with these positions, especially when all comparable positions at other 16

companies will provide the necessary protection. 17

18

Q. HOW IS THE D&O LIABILITY INSURANCE PROGRAM STRUCTURED AND WHAT 19

AMOUNT OF COVERAGE DOES THE COMPANY CARRY? 20

A. Our D&O Insurance Program is comprised of layers of policies from a panel 21

of various underwriters, and is also divided into Side A and Side B/C coverage 22

consistent with general industry practice. Side A is “executive 23

indemnification,” which insures our directors, officers, and employees for 24

their defense costs, settlement fees, or judgments in the event that they are 25

1 Minn. Stat. § 302A.521.



outside of the bylaw’s indemnification provision or if the Company cannot 1

cover them, such as if the Company has declared bankruptcy. Side B/C is 2

“corporate reimbursement,” which covers the Company for directors', 3

officers', and employees' losses when it does indemnify them and also 4

provides corporate coverage whenever the Company is sued along with the Ds 5

and Os. Most claims are made under Side B/C coverage. The Company 6

maintains total D&O insurance limits of [TRADE SECRET BEGINS 7

TRADE SECRET ENDS] for Side A & B/C coverage, plus 8

[TRADE SECRET BEGINS TRADE SECRET ENDS] Side 9

A only coverage. Exhibit__ (RLM-1), Schedule 8 illustrates the structure for 10

our D&O Liability Insurance Program. 11

12


TRADE SECRET ENDS] SIDE A & B/C COVERAGE AND 14

[TRADE SECRET BEGINS TRADE SECRET ENDS] 15

SIDE A ONLY COVERAGE WAS AN APPROPRIATE AMOUNT OF D&O LIABILITY 16

INSURANCE? 17

A. Our experience with this program has informed our decision to maintain our 18

coverage at [TRADE SECRET BEGINS TRADE SECRET 19

ENDS] and [TRADE SECRET BEGINS TRADE SECRET 20

ENDS]. Further, our liability insurance broker and industry benchmarking 21

also show that for a Company of our size these are appropriate amounts. 22

23

Q. PLEASE EXPLAIN WHY YOU BELIEVE THE D&O INSURANCE PREMIUMS ARE 24

REASONABLE. 25



A. The first two layers of our D&O Liability Insurance Program are provided by 1

our industry mutual insurers, AEGIS and EIM. Though we do negotiate with 2

them, the market price is essentially set. Utilization of AEGIS and EIM for 3

this layer of insurance is industry standard and our broker informs us that we 4

are obtaining a reasonable price for this coverage. We are unaware of other 5

qualified providers that will insure this risk let alone at better pricing. For the 6

remaining layers of our D&O Liability Insurance Program, we utilize our 7

broker to place this insurance at reasonable prices with creditworthy 8

underwriters. Our broker informs us we are paying premiums for these layers 9

consistent with industry practice adjusted for our unique risk profile. 10

11

Q. WHAT ARE THE MAIN DRIVERS OF THE COSTS OF THE COMPANY’S D&O 12


A. Like any insurance coverage, the main cost drivers are the Company’s inherent 14

risk profile as well as its claims history. The most significant factor of the 15

Company’s risk profile is the stability of its financial results. 16

17

Further, D&O premiums are also affected by utility industry trends affecting 18

D&O suits. In the past decade there have been a number of shareholder suits 19

against utilities in excess of $100 million. Such suits can affect our 20

underwriters’ view of our inherent D&O risk, even though those suits have 21

nothing to do with our actions. 22

23


A. We have not had any claims under this program in the past ten years. And our 25

directors and officers are encouraged to adhere to corporate procedures, 26



thoroughly evaluate all disclosure decisions, articulate business rationales for 1

their decisions, and avoid even the appearance of self-interest or self-dealing. 2

3

Q. WHAT TRENDS IS THE COMPANY SEEING IN ITS D&O LIABILITY INSURANCE 4

PROGRAM PREMIUMS? 5

A. Premium costs have been fairly flat for the last six years. 6

7

Q. PLEASE EXPLAIN COST MITIGATION EFFORTS WITH RESPECT TO THE DIRECTOR 8

D&O LIABILITY INSURANCE PROGRAM. 9

A. We utilize the same efforts to control cost under this program as those we use 10

under our Excess Liability Insurance Program. Namely we start planning very 11

early, usually six months in advance of the renewal date; we prepare detailed 12

submissions to underwriters; and we meet personally with the insurance 13

company underwriters to explain the latest activities at the Company. 14

15

D. Fiduciary Liability Insurance 16

Q. WHAT RISKS DO THE COMPANY’S FIDUCIARY LIABILITY INSURANCE PROGRAM 17

COVER? 18

A. Our Fiduciary Liability Insurance Program protects those serving as 19

“fiduciaries” as defined by the Employee Retirement Income Security Act 20

(ERISA). Specifically, this coverage protects the Company’s employees who 21

design and administer employee pension and benefit plans, including the 22

management of the assets and liabilities of the plans, and who are therefore 23

liable for any breach of the fiduciary duties owed in doing such work. 24

25

Q. CAN YOU PROVIDE SOME EXAMPLES OF THESE TYPES OF RISKS? 26



A. ERISA activities that give rise to fiduciary duties, and therefore also carry the 1

risk of claims for breach of those duties, include: selecting and monitoring 2

plan investment vehicles; selecting and monitoring third party service 3

providers; interpreting plan provisions; and exercising discretion in denying or 4

approving benefit claims. Oftentimes, the insured fiduciary liability is 5

implicated in a shareholder suit making claims upon our D&O insurance. 6

7


A. Employee benefit and pension plans are a cost of providing electric service. 9

These plans must be managed responsibly for all stakeholders. In order to 10

attract quality and experienced plan administrators, the Company must 11

minimize the personal risk associated with the positions. 12

13

Q. HOW IS THE FIDUCIARY LIABILITY INSURANCE PROGRAM STRUCTURED AND 14


A. The Company maintains limits of [TRADE SECRET BEGINS 16

TRADE SECRET ENDS] for this insurance. There is a [TRADE 17

SECRET BEGINS TRADE SECRET ENDS] deductible per 18

occurrence. Exhibit__ (RLM-1), Schedule 9 illustrates the structure for our 19

Fiduciary Liability Insurance Program. 20

21


TRADE SECRET ENDS] WAS AN APPROPRIATE AMOUNT OF 23

FIDUCIARY LIABILITY INSURANCE? 24

A. Our Fiduciary coverage is intended to cover the types of claims that a 25

company of our size and in the utility industry is likely to have made against its 26



fiduciaries. Our experience with these claims has informed our decision to 1

maintain our coverage at [TRADE SECRET BEGINS TRADE 2

SECRET ENDS]. Further, our insurance broker and industry 3

benchmarking also show that for a company of our size this is an appropriate 4

amount. 5

6

Q. PLEASE EXPLAIN WHY THE COMPANY’S FIDUCIARY LIABILITY INSURANCE 7

PROGRAM PREMIUMS ARE REASONABLE. 8

A. Much the same as for D&O insurance, AEGIS underwrites this coverage and 9

sets the terms and premiums for the first layer. We meet with our broker 10

approximately six months prior to policy expiration for a renewal strategy 11

meeting. At this time we discuss ways to enhance the expiring program, 12

current insurance market conditions, and analyze which insurer is best suited 13

to be the lead on this program. 14

15

Q. WHAT ARE THE MAIN DRIVERS OF THE COSTS OF THE COMPANY’S FIDUCIARY 16


A. Like any insurance coverage, the main cost drivers are the Company’s inherent 18

risk profile as well as its claims history. The Company’s financial performance 19

and the make-up of the Company’s pension plans are important parts of the 20

Company’s risk profile for this type of insurance. 21

22

Q. WHAT IS THE TREND IN THE NUMBER OF THESE CLAIMS OVER THE LAST 23

SEVERAL YEARS? 24

A. We have had no claims in the past six years. 25

26




A. The Company always seeks opportunities to minimize potential plan benefit 2

fiduciary claims. For example, by focusing on good plan governance, we 3

minimize the possibility for claims of inconsistency between plan terms and 4

the administration of the terms. The Company also undertakes fiduciary 5

audits to review fiduciary action. 6

7

Q. WHAT TRENDS IS THE COMPANY SEEING IN ITS FIDUCIARY LIABILITY 8

INSURANCE PROGRAM PREMIUMS? 9

A. The cost of this insurance has been stable for some time. 10

11

Q. PLEASE EXPLAIN COST MITIGATION EFFORTS WITH RESPECT TO THE 12

FIDUCIARY LIABILITY INSURANCE PROGRAM. 13

A. We have undertaken several actions to minimize the potential for cost 14

increases for our Fiduciary Liability Insurance Program. We have increased 15

the number of underwriters potentially offering this coverage to increase the 16

size of the potential market. 17

18

E. Nuclear Insurance Program 19

Q. WHAT RISKS DO THE COMPANY’S NUCLEAR INSURANCE PROGRAM COVER? 20

A. Our Nuclear Insurance Program is intended to insure the Company against 21

property damage, environmental remediation, business interruption and third-22

party liability that can arise from our nuclear generating facilities. 23

24




A. We own and operates two nuclear power generation sites. Monticello is a one-1

unit site and Prairie Island is a two-unit site. We require insurance to cover the 2

risks of ownership of these facilities and to comply with applicable law. 3

4

Q. HOW IS THE NUCLEAR INSURANCE PROGRAM STRUCTURED AND WHAT 5

AMOUNT OF COVERAGE DOES THE COMPANY CARRY? 6

A. Our Nuclear Insurance Program consists of three components: (1) nuclear 7

property damage; (2) nuclear accidental outage; and (3) nuclear liability 8

insurance. Our Nuclear property damage insurance is provided by Nuclear 9

Electric Insurance Limited (NEIL), an industry owned mutual insurer. For 10

each nuclear plant we maintain limits of [TRADE SECRET BEGINS 11

TRADE SECRET ENDS] per loss for accidental property damage 12

and any resulting costs to stabilize and decontaminate the site. The insurance 13

is layered with each of our Monticello and Prairie Island plants having 14

[TRADE SECRET BEGINS TRADE SECRET ENDS] in 15

primary coverage. Our total nuclear operations also carry a [TRADE 16

SECRET BEGINS TRADE SECRET ENDS] blanket excess 17

policy. These policies include a deductible of [TRADE SECRET BEGINS 18

TRADE SECRET ENDS] per loss. Exhibit__ (RLM-1), Schedule 19

10 illustrates the structure of this component of our Nuclear Property 20

Insurance Program. 21

22

Our nuclear business interruption insurance, otherwise called accidental 23

outage insurance, is also provided by NEIL. The maximum limits that could 24

be paid under these policies are [TRADE SECRET BEGINS 25

TRADE SECRET ENDS] per reactor. This coverage is provided on the 26



basis of [TRADE SECRET BEGINS TRADE SECRET 1

ENDS] per week for [TRADE SECRET BEGINS TRADE 2

SECRET ENDS], subject to the above total limit and a waiting period 3

(deductible) of [TRADE SECRET BEGINS TRADE SECRET 4

ENDS]. Exhibit__ (RLM-1), Schedule 11 illustrates the structure of this 5

component of our Nuclear Property Insurance Program. 6

7

Our nuclear liability insurance is provided by American Nuclear Insurers 8

(ANI), a joint underwriting association. These ANI “facility form” policies 9

each provide limits of [TRADE SECRET BEGINS TRADE 10

SECRET ENDS] per loss with no deductible provision. Since there is no 11

deductible, ANI and its team of claims specialists are able to defend claims 12

very soon after such claim is made. 13

14

In addition to the ANI facility form policies, the Company participates in the 15

Secondary Financial Protection (SFP) program. The SFP is a Nuclear 16

Regulatory Commission (NRC) administered program that provides for an 17

additional [TRADE SECRET BEGINS TRADE SECRET 18

ENDS] of financial protection under the Price-Anderson Act. Exhibit__ 19

(RLM-1), Schedule 12 illustrates the structure of this component of our 20

Nuclear Property Insurance Program. Unlike insurance, which requires a 21

premium payment in advance, the SFP is administered as a “post-loss” 22

funding vehicle. This means that following a very large nuclear event, 23

participating companies would be assessed a fee to fund the coverage for that 24

loss, subject to a cap of [TRADE SECRET BEGINS TRADE 25

SECRET ENDS] per reactor per year. 26



Q. ARE THESE THE APPROPRIATE COVERAGES? 1

A. The coverage limits for nuclear liability insurance are industry standard 2

amounts and are the maximum reasonably available in the specialized context 3

of nuclear generation. 4

5

Q. YOUR NUCLEAR INSURANCE PROGRAM APPEARS TO BE STRUCTURED 6

SIGNIFICANTLY DIFFERENTLY FROM YOUR OTHER INSURANCE PROGRAMS. 7

WHY? 8

A. The commercial markets generally exclude anything to do with the nuclear 9

energy hazard. Nuclear plant operators therefore needed to create their own 10

market. The nuclear liability program has evolved over time and is currently 11

the only option for nuclear power generation owners is to place coverage with 12

ANI and excess coverage with the SFP. 13

14

Q. PLEASE EXPLAIN WHY YOU BELIEVE THE NUCLEAR INSURANCE PREMIUMS ARE 15

REASONABLE. 16

A. Fundamentally, given the very thin market for the products that comprise our 17

Nuclear Insurance Program, the market price is set. As stated above the 18

premiums are all driven by established formulas. 19

20

We rely on our broker to confirm that the premiums we pay to ANI are 21

reasonable. We rely on NEIL to exercise good faith and fairness as an industry 22

mutual insurer. One of their primary missions is to be equitable regarding 23

premium determination. 24

25



Q. WHAT ARE THE MAIN DRIVERS OF THE COSTS OF THE COMPANY’S NUCLEAR 1

INSURANCE PROGRAM? 2

A. The Company’s risk profile, as represented by its INPO rating, its operating 3

statistics, and its claims history all significantly impact our costs. Further, 4

because of the nature of our nuclear industry mutual, NEIL, industry claims 5

also contribute to increasing premiums. 6

7

Q. WHY DO CLAIMS OF OTHER COMPANIES INCREASE THE COMPANY’S PREMIUMS? 8

A. Since NEIL is our only option for this insurance and since we are, in effect, a 9

part owner of NEIL, it is in our best interest that NEIL be solvent and 10

available for us in the future to pay claims as needed. Another factor causing 11

NEIL to increase premiums is that the nation’s nuclear fleet poses an 12

increasing risk of claims. 13

14

Q. HAVE THERE BEEN ANY UNUSUALLY LARGE CLAIMS IN THE LAST SEVERAL 15

YEARS? 16

A. Yes. Over the past several years there have been two very large claims that 17

have had a significant adverse effect on NEIL’s financial position. Duke 18

Power’s Crystal River claim from 2009 cost $835 million and AEP’s D. C. 19

Cook claim from 2008 cost another $468 million. NEIL has generally 20

experienced a growing trend of large claims over the past ten years. 21

22

Q. WHAT TRENDS IS THE COMPANY SEEING IN ITS NUCLEAR INSURANCE 23

PROGRAM PREMIUMS? 24

A. As I mentioned, the nuclear industry has experienced several very significant 25

losses in the past several years and as a result, the costs for nuclear property 26



insurance were increasing by about 15 percent per year until recently 1

stabilizing. The most recent renewal saw a decrease of about 19 percent. The 2

cost for nuclear business interruption insurance has remained stable. The cost 3

for nuclear liability insurance has experienced gradual increases over the past 4

five years. The Company has made no recent claims. 5

6

Q. PLEASE EXPLAIN COST MITIGATION EFFORTS WITH RESPECT TO THE NUCLEAR 7

INSURANCE PROGRAM. 8

A. There are two main factors that we can undertake to mitigate the costs of our 9

Nuclear Insurance Program. The first is to improve our INPO rating. 10

Company witness Timothy J. O’Connor discusses our efforts to do so in his 11

Direct Testimony. The second is to seek opportunities outside the domestic 12

nuclear insurance market. We continue to weigh foreign nuclear insurance 13

options and have been in discussion with the European Nuclear Mutual 14

Insurance Association (EMANI) to understand their program and coverages. 15

While we are still exploring other options, at this time, we believe that the 16

domestic insurance pools are the most appropriate available coverages for the 17

Company. 18

19

F. Primary Casualty Insurance Program 20

Q. WHAT RISKS DO THE COMPANY’S PRIMARY CASUALTY INSURANCE PROGRAM 21

COVER? 22

A. Our Primary Casualty Insurance Program is intended to insure the Company 23

against liability to third parties and employees. Our Primary Casualty 24

Insurance Program includes general liability coverage, automobile liability 25



coverage, environmental liability coverage, and workers compensation 1

coverage. 2

3

Risks covered under this program include claims that Xcel Energy Inc. 4

equipment or personnel damaged property or injured someone, claims that 5

Xcel Energy Inc.’s operations have harmed the environment, and claims for 6

worker compensation where an employee has been injured on the job. 7

8


A. Xcel Energy Inc. serves 3.5 million electric customers and 2 million gas 10

customers; we employ over 12,000 employees and we own and operate, 11

among other things, 30 hydro-electric facilities, thousands of miles of gas 12

transmission and distribution piping, and a fleet of nearly 3,800 licensed 13

vehicles – all of which are exposed to injury and damage claims from the 14

public. Additionally, the Company is obligated to meet various legal and 15

regulatory requirements with respect to automobile liability and workers’ 16

compensation insurance. Without this insurance, the Company would be 17

forced to bear the costs of these claims which derive from our provision of 18

service. 19

20

Q. HOW IS THE PRIMARY CASUALTY INSURANCE PROGRAM STRUCTURED AND 21


A. Our Primary Casualty Insurance Program is comprised of three main 23

components: (1) general liability insurance; (2) auto liability insurance; and (3) 24

workers’ compensation insurance. Each of these components is structured 25

differently. 26



For our general liability insurance, which comprises the first layer of our 1

Primary Casualty Insurance Program, the Company is protected with a total 2

limit of [TRADE SECRET BEGINS TRADE SECRET 3

ENDS] per loss under policies issued by Old Republic Insurance Company 4

and our captive insurance structure. This general liability insurance 5

component is structured in a manner that is intended to minimize costs to 6

Xcel Energy Inc. and provide for the first dollar coverage of each loss. Under 7

this structure, we manage these third-party claims in-house. By insuring the 8

first dollar of each loss, we ensure that each and every third-party claim is 9

professionally managed so that we may identify trends and implement 10

mitigations measure for common risks, as well as shift the overall cost burden 11

to our Insurance Program thereby helping to stabilize the effects of extreme 12

fluctuations in insurance costs and rates. 13

14

Similarly, the auto liability component consists of a policy with [TRADE 15

SECRET BEGINS TRADE SECRET ENDS] coverage issued 16

by Old Republic and a companion policy issued by our captive structure. 17

18

Our workers’ compensation insurance is structured in a slightly different 19

manner in order to meet certain legal requirements. Minnesota law requires 20

that all excess insurance and all reinsurance for the workers’ compensation 21

risk be insured by the Workers’ Compensation Reinsurance Association 22

(WCRA). Our workers’ compensation insurance is therefore divided between 23

coverage for employees in Minnesota and coverage for employees in all other 24

states. For the Minnesota portion, the Company maintains a deductible of 25

[TRADE SECRET BEGINS TRADE SECRET ENDS] 26



which is then insured by Old Republic through a deductible reimbursement 1

policy. The WCRA provides coverage for all losses in excess of this 2

[TRADE SECRET BEGINS TRADE SECRET 3

ENDS]. Exhibit__ (RLM-1), Schedule 13 illustrates the structure for our 4

Primary Casualty Insurance Program. 5

6

Q. HOW DID THE COMPANY DETERMINE THAT THE TOTAL AMOUNT OF PRIMARY 7

CASUALTY COVERAGE IS APPROPRIATE? 8

A. Because the Primary Casualty coverage is a layer of coverage that sits below 9

the Excess Liability coverage, the goal in determining the appropriate amount 10

of Primary Casualty coverage is to strike the right balance between the two 11

types of coverage so as to minimize premium costs and maximize flexibility. 12

In 2014, we increased the coverage to [TRADE SECRET BEGINS 13

TRADE SECRET ENDS] to reduce the amount of 14

premiums we pay under our Excess Liability Insurance Program and bring 15

that risk into coverage under our Primary Casualty Insurance Program. Our 16

actuarial analysis shows this change to be budget neutral while providing us 17

with increased flexibility with claims management. 18

19

Q. ARE THE PRIMARY CASUALTY INSURANCE PROGRAM PREMIUMS REASONABLE? 20

A. Yes. About 95 percent of the annual premiums under our Primary Casualty 21

Insurance Program are based on claims and losses. Our Primary Casualty 22

Insurance Program is difficult to benchmark because even though utilities, 23

generally, carry many of the same risks, each utility has a different risk profile 24

and general liability insurance premiums are developed based on this unique 25

risk profile. However, we do probe the market to ensure we are paying 26



reasonable premiums where possible through our annual review process. 1

Through this, we continue to find alternative insurance structures and 2

providers to be more expensive than our current structure. 3

4

Q. WHAT ARE THE MAIN DRIVERS OF THE COSTS OF THE COMPANY’S PRIMARY 5

CASUALTY INSURANCE PROGRAM? 6

A. The main driver is loss experience. In other words, much like any insurance, 7

our premiums are a function of the amount and type of claims made on this 8

policy. 9

10

Q. WHAT IS THE COMPANY DOING TO MITIGATE THE AMOUNT OF CLAIMS? 11

A. The Company has taken the following actions to mitigate the amount of 12

general liability claims: 13

• Continued aggressive public safety programs; 14

• Coordinated with our insurers’ loss control consultants; 15

• Investigated all claims thoroughly; and 16

• Defended claims rigorously. 17

18

Q. GIVEN THIS, WHAT TRENDS IS THE COMPANY SEEING IN ITS PRIMARY 19

CASUALTY INSURANCE PROGRAM PREMIUMS? 20

A. The cost of this insurance has increased about 10 percent per year over the 21

past several years. The cost increase is directly related to the forecasted cost of 22

future claims as developed by our independent actuaries. 23

24

Q. PLEASE EXPLAIN COST MITIGATION EFFORTS WITH RESPECT TO THE PRIMARY 25

CASUALTY INSURANCE PROGRAM. 26



A. We meet with our broker approximately six months prior to policy expiration 1

for a renewal strategy meeting. At this time we discuss ways to enhance the 2

expiring program, current insurance market conditions, and analyze which 3

insurer is best suited to be the lead on this program. We also meet several 4

times each year with our underwriter to explain issues unique to Xcel Energy 5

Inc. to help them understand our risk profile and feel comfortable insuring 6

our risk. 7

8

V. OTHER INSURANCE PROGRAMS 9

10

Q. DOES THE COMPANY HAVE OTHER TYPES OF INSURANCE PROGRAMS? 11

A. Yes. As I mentioned above, we carry other coverages for unusual types of 12

events or as may be required by our lenders and other stakeholders such as 13

railroads and contractors. Exhibit__ (RLM-1), Schedule 14 identifies these 14

additional coverages and other pertinent information. 15

16

VI. CONCLUSION 17

18

Q. PLEASE SUMMARIZE YOUR TESTIMONY AND RECOMMENDATIONS. 19

A. We have a best-in-class proactive Loss Control program that seeks to reduce 20

risk at our generation plants. In addition, we have an Insurance Program that 21

is intended to insure against reasonable risks at cost-effective prices over the 22

long term. 23

24

Though we have a unique risk profile as a utility, we have various risk 25

mitigation mechanisms in place to reduce our risk. In addition, we have a 26



variety of procurement and mitigation processes to ensure that we not only 1

have the appropriate levels and types of insurance, but that we are also paying 2

reasonable rates. 3

4

The Company provides an Insurance Program that is reasonable, appropriate 5

and comparable to that of our industry peers. The costs of our Insurance 6

Program are reasonable, prudent and necessary to continue to insure the risks 7

inherent in providing service to ratepayers. Therefore, I recommend the 8

Commission approve the Company’s request to recover the 2016 test year 9

level costs of the Insurance Program in electric rates. 10

11

Q. DOES THIS CONCLUDE YOUR TESTIMONY? 12

A. Yes, it does. 13


Northern States Power Company Docket No. E002/GR-15-826 Exhibit____(RHM-1), Trade Secret Justification Page 1 of 1

PUBLIC DOCUMENT: TRADE SECRET INFORMATION EXCISED – PUBLIC DATA

Trade Secret Justification

Xcel Energy has included information as part of the Direct Testimony and Schedules of Company Witness Robert L. Miller which derives independent economic value from not being generally known to the public and which the Company has taken reasonable precautions to maintain confidential and is therefore trade secret pursuant to Minn. Stat. 13.37. Such information includes our insurers, the risk they insure, the premiums we pay, and how we structure our insurance coverage. Xcel Energy procures insurance in competitive insurance markets around the globe. To maintain our competitiveness in these markets, we must maintain the confidentiality of certain information. Information with respect to our insurance premium amounts and what we pay for each unique layer of risk we insure is proprietary to both the Company and our insurers and if it was made publicly available would provide a competitive advantage to other participants in the markets by creating a known benchmark in the market. When such information is made available by insurance brokers or other market participants, it is made anonymous so that particular risk profiles of particular companies cannot be benchmarked against premium tables. Further, while the components of an overall insurance program (i.e. who our participating underwriters are) need not be confidential, who a particular underwriter is for a particular layer of risk can provide competitive advantages to third parties since identifying the risks particular underwriters are willing to take would take is generally kept confidential in the various insurance markets where we procure insurance. Similarly, our insurance structure and the amount of coverage in each layer can also provide competitive advantage to other participants in various insurance markets. Consequently, we have marked this information in several of the following Schedules as Trade Secret.

Northern States Power Company Docket No. E002/GR-15-826 Exhibit___(RLM-1), Schedule 1 Page 1 of 2

Robert L. Miller , P.E.

Experience Director, Hazard Insurance Jan 2015 - Present Xcel Energy Inc., Minneapolis, MN

• Established “best in class” property loss control program • Directed $50 million property & casualty insurance

program • Led insurance procurement and loss control services on

multiple large construction projects • Led multi-line captive insurance program • Led negotiations on variety of multi-million dollar claims

Manager, Hazard Insurance Nov 2006 – Jan 2015 Xcel Energy Inc., Minneapolis, MN • Managed staff of 5 insurance and loss control

professionals Loss Control Consultant Jul 2004 – Nov 2006 Xcel Energy Inc., Minneapolis, MN • Advised corporation on Property and Mechanical

exposures Loss Control Manager May 2001 – Jul 2004

NRG Energy, Inc., Minneapolis, MN • Advised corporation on Property and Mechanical

exposures

Environment, Health & Safety Eng Apr 1997 – May 2001 Cargill, Inc., Minnetonka, MN

• Technical resource for property loss control and personnel safety

Loss Control Engineer Jun 1985 – Apr 1997

FM Global, Minneapolis, MN • Provided loss control services for insureds

Education Master of Business Administration May 2012

Emphasis – Finance University of St. Thomas, St. Paul Bachelor of Science May 1985 Major – Chemical Engineering SDSM&T, Rapid City

Northern States Power Company Docket No. E002/GR-15-826 Exhibit___(RLM-1), Schedule 1 Page 2 of 2 Professional Associate in Risk Management

Licensed Professional Engineer, State of Minnesota

Associations Edison Electric Institute 2006 - Present Risk Management Committee

Nuclear Electric Insurance Limited 2006 - Present Insurance Advisory Committee

Risk & Insurance Management Society 2004 - Present Minnesota Chapter

Presentations Have given numerous presentations to industry conferences

on topics including risk management, claims and insurance coverage

Northern States Power Company PUBLIC DOCUMENT:TRADE SECRET INFORMATION EXCISED - PUBLIC DATA

Docket No. E002/GR-15-826 Exhibit____(RLM-1), Schedule 2

Page 1 of 5

SUMMARYPolicy Limits Deductible Premium Fees Total

[TRADE SECRET BEGINSMaster PropertyExcess LiabilityTerrorismDirectors & Officers LiabilityProfessional LiabilityFiduciary LiabilityPrimary CasualtyOther*Sub Total

Nuclear PropertyNuclear Business InterruptionNuclear LiabilityNuclear Subtotal

Agregate XS of Loss

Grand TotalTRADE SECRET ENDS

* Fidelity insirance , Special coverage, aviation insurance, foreign liability, cyber liability



Page 2 of 5

COVERAGE DESCRIPTION INSURANCE POLICY BROKER POLICY LIMITS Attachment UNDERLYING COVERAGE TERM FINANCE PLAN PREMIUM POLICY HOLDERCOMPANY NUMBER Deductible FROM TO

[TRADE SECRET BEGINS [TRADE SECRET BEGINSMASTER PROPERTYMaster Property Program PRIMARY EIS (1) 6/30/2016 Xcel Energy Inc. and all subsidiaries FIRST EXCESS LAYER Various (see below) 6/30/2016 Xcel Energy Inc. and all subsidiaries SECOND EXCESS LAYER Various (see below) 6/30/2016 Xcel Energy Inc. and all subsidiariesTotal Raw PreimuimTotal Fees Total Master Property

EXCESS LIABILITY LAYER 1 AEGIS - Excld- TRIA 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 2 EIM 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 3 Lloyds/Price Forbes (London) Various 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 3 Price Forbes (London) - Starr Surplus 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 4 Axis/JLT Park 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 4 OIL Casulaty/JLT Park 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 4 Argo Re/JLT Park 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 4 XL Ins/JLT Park 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 5 ACE-Bermuda 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 6 ARCH Re/ARCH RE 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 6 XL Ins/JLT Park 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 7 Iron-Starr/JLT Park 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 7 Argo Re/JLT Park (new) 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 8 American Int Re/JLT PARK 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiariesTotal Raw PremiumTotal FeesTotal Excess Liability

TERRORISM Property EIS (1) 1/1/2015 1/1/2016 Xcel Energy Inc. and all subsidiaries Excess Liability Lloyd's (Miller) 1/1/2015 1/1/2016 Xcel Energy Inc. and all subsidiariesTotal Raw PremiumTotal Fees Total Terrorism

DIRECTORS & OFFICERS LIABILITY LAYER 1 AEGIS (Primary) 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 2 EIM (1st XS) 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 3 U S Specialty/ HCC (2nd XS) 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 4 RLI (3rd XS) 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 5 Chubb/Federal (4th XS) 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 6 AIG/ National Union Fire (5th XS) 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 7 Allied World Assur (6th XS) 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 7 Endurance/JLT (7th XS) 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 8 Side "A" Only Allied World Assurance 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 9 Side "A" Only ACE-Bermuda/JLT (8th XS) 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 10 Side "A" Only Argo Re/JLT Park (9th XS) 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiaries LAYER 11 Side "A" Only ARCH/Arch Re- JLT Park 8/18/2015 8/18/2016 Xcel Energy Inc. and all subsidiariesTotal Raw premiumTotal fees Total D&O Liability

PROFESSIONAL LIABILITY Engineers & Lawyers AEGIS (2) 8/18/2014 8/18/2015 Xcel Energy Inc. and all subsidiariesTotal Raw premiumTotal Fees Total Professional Liability

TRADE SECRET ENDS] TRADE SECRET ENDS]

SCHEDULE OF INSURANCE



Page 3 of 5 [TRADE SECRET BEGINS [TRADE SECRET BEGINS

FIDUCIARY LIABILITY LAYER 1 AEGIS (Primary) 8/18/2014 8/18/2015 Xcel Energy Inc. and all subsidiaries LAYER 2 U S Specialty/ HCC (1st) 8/18/2014 8/18/2015 Xcel Energy Inc. and all subsidiaries LAYER 3 Federal Ins/Chubb (2nd) 8/18/2014 8/18/2015 Xcel Energy Inc. and all subsidiaries LAYER 4 EIM (3rd) 8/18/2014 8/18/2015 Xcel Energy Inc. and all subsidiaries LAYER 5 National Union Fire/AIG (4th) 8/18/2014 8/18/2015 Xcel Energy Inc. and all subsidiariesTotal Raw PremiumTotal FeesTOTAL LIABILITY

PRIMARY CASUALTY GENERAL LIABILITY Old Republic Ins. Co. 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries GENERAL LIABILITY EIS (1) 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries GENERAL LIABILITY EIS (1) 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries

AUTO LIABILITY Old Republic Ins. Co. 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries AUTO LIABILITY & APD EIS (1) 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries

WORKERS' COMP. - All States Old Republic Ins. Co. 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries WORKERS' COMP. LARGE Deductible EIS (1) 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries

RAILROAD PROTECTIVE - SPS 3 Crossings Old Republic Ins. Co. 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries RAILROAD PROTECTIVE - SPS 3 Crossings EIS (1) 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries

RAILROAD PROTECTIVE - WI Central Old Republic Ins. Co. 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries RAILROAD PROTECTIVE - WI Central EIS (1) 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries

RAILROAD PROTECTIVE - UP - Hayden Old Republic Ins. Co. 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries RAILROAD PROTECTIVE - UP - Hayden EIS (1) 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries

RAILROAD PROTECTIVE - UP - Black Dog Old Republic Ins. Co. 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries RAILROAD PROTECTIVE - UP - Black Dog EIS (1) 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries

RAILROAD PROTECTIVE - SPS Artesia Old Republic Ins. Co. 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries RAILROAD PROTECTIVE - SPS Artesia EIS (1) 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries

RAILROAD PROTECTIVE - Red River Valley Old Republic Ins. Co. 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries RAILROAD PROTECTIVE - Red River Valley EIS (1) 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiariesTotal Raw Premium

Brokerage Fees

Total Primary Casualty

OTHER POLICIES FIDELITY INSURANCE Great American Ins. Co. 3/1/2015 3/1/2016 Xcel Energy Inc. and all subsidiaries SPECIAL COVERAGE Hiscox 6/1/2013 6/1/2016 Xcel Energy Inc. and all subsidiaries AVIATION INSURANCE USAIG (5) 8/3/2015 8/3/2016 Xcel Energy Inc. and all subsidiaries FOREIGN LIABILITY ACE Insurance Companies 11/1/2014 11/1/2015 Xcel Energy Inc. and all subsidiaries CYBER LIABILITY Aegis/Lloyds of London 4/1/2015 4/1/2016 Xcel Energy Inc. and all subsidiariesTotal Raw PremiumTotal Fees Total Other Insurance

TRADE SECRET ENDS] TRADE SECRET ENDS]




NUCLEAR PROPERTY MONTICELLO NEIL (6) 4/1/2015 4/1/2016 NSP

NEIL (6) 4/1/2015 4/1/2016 NSPBrokerage Fee & Tax NSP

MONTICELLO TOTALS

PRAIRIE ISLAND NEIL (6) 4/1/2015 4/1/2016 NSPNEIL (6) 4/1/2015 4/1/2016 NSPBrokerage Fee & Tax NSP

PRAIRIE ISLAND TOTALS Total Nuclear Property

NUCLEAR BUSINESS INTERRUPTION MONTICELLO NEIL (6) 4/1/2015 4/1/2016 NSP

Brokerage Fee & Tax MONTICELLO TOTALS

PRAIRIE ISLAND NEIL (6) 4/1/2015 4/1/2016 NSPBrokerage Fee & Tax

PRAIRIE ISLAND TOTALS

Total Nuclear BI

NUCLEAR LIABILITY

FACILITY FORM POLICIES MONTICELLO ANI (7) 1/1/2015 1/1/2016 NSP

Brokerage Fee MONTICELLO TOTALS

PRAIRIE ISLAND ANI (7) 1/1/2015 1/1/2016 NSPBrokerage Fee

PRAIRIE ISLAND TOTALS

PATHFINDER ANI (7) 1/1/2015 1/1/2016 NSP Total Facility Form

WORKERS POLICIES MONTICELLO ANI (7) 1/1/2015 1/1/2016 NSP PRAIRIE ISLAND ANI (7) 1/1/2015 1/1/2016 NSP PATHFINDER ANI (7) 1/1/2015 1/1/2016 NSP Total Workers Policies

SECONDARY FINANCIAL PROTECTION MONTICELLO ANI (7) 1/1/2015 1/1/2016 NSP PRAIRIE ISLAND ANI (7) 1/1/2015 1/1/2016 NSP SFP Total

SUPPLIERS & TRANSPORTERS ANI (7) 1/1/2015 1/1/2016 NSP TOTALS NUCLEAR LIABILITY

GRAND TOTALTRADE SECRET ENDS]




Master Property InsuranceMaster Property First Excess AEGIS

AllianzChartisEIMLibertyAspenLondon (Travelers)1London (AEGIS)1London (Argenta)1London (Hiscox)1London (Amlin)1London (Arch)1Munich Re (AAIC)Scor

Master Property Second Excess AEGISAllianzChartisEIMLibertyLondon (Travelers)1Munich Re (AAIC)London (Munich Re)Swiss Re

Agregate XS of LossZurich (Steadfast Re) 7/1/2015 7/1/2016 Xcel Energy Inc. and all subsidiariesAllianz 7/1/2015 7/1/2016 Xcel Energy Inc. and all subsidiariesScor 7/1/2015 7/1/2016 Xcel Energy Inc. and all subsidiaries

Total Raw Premium TRADE SECRET ENDS]Total Fees Total Reinsurance

TRADE SECRET ENDS]

Notes:(1) Energy Insurance Services(2) Associated Electric & Gas Insurance Services(3) Energy Insurance Mutual(5) United States Aviation Underwriters(6) Nuclear Electric Insurance Limited(7) American Nuclear Insurers

Northern States Power Company Electric Utility - State of Minnesota

PUBLIC DOCUMENT:TRADE SECRET INFORMATION EXCISED - PUBLIC DATA

Docket No. E002/GR-15-826 Exhibit___(RLM-1), Schedule 3

Page 1 of 1

Total Xcel NSPM Electric MN Juris Electric Total Xcel NSPM Electric MN Juris Electric Total Xcel NSPM Electric MN Juris Electric Total Xcel NSPM Electric MN Juris Electric Total Xcel NSPM Electric MN Juris Electric[TRADE SECRET BEGINS

Property InsuranceGeneral Liability InsuranceExcess Liability InsuranceAuto Liab/Physical DamageDirectors and Officers InsuraneFiduciary InsuranceOther InsuranceCyber Insurance *Nuclear Property InsuranceNuclear Interupt InsuranceNuclear Liability InsuranceNuclear Liability ICRP **NEIL Surplus Insurance ***

TRADE SECRET ENDS]49,636,386$ 22,714,923$ 19,986,960$ 50,445,224$ 20,899,463$ 18,324,079$ 53,215,541$ 22,213,655$ 19,440,104$ 52,680,201$ 20,232,905$ 17,672,929$ 54,070,416$ 21,792,408$ 19,035,103$

* Previously a part of "Other Insurance"** This policy has an "Industry Credit Return Premium" program where each year we receive a portion of nuclear liability premiums back, ten years after they were paid.*** Surplus distributions

Xcel Energy Inc.Insurance Premiums: 2012 to 2016

2015 MN Elec Rate Case July Forecast 2016 Budget2012 Actuals 2013 Actuals 2014 Actuals

Xcel Energy Inc. Master Property Insurance

June 30, 2015 – June 30, 2016 [TRADE SECRET BEGINS:

TRADE SECRET ENDS]

Northern States Power Company

NON-PUBLIC DOCUMENT: CONTAINS TRADE SECRET INFORMATION - NON-PUBLIC DATA


Page 1 of 1

Northern States Power Company Docket No. E002/GR-15-826 Exhibit___(RLM-1), Schedule 5

Page 1 of 1


Master Property Insurance Sub-Limits Schedule

[Trade Secret Begins:

Trade Secret Ends]

ELECTRIC GASMW's

Generated

Total Insurable Values (TIV)

(Millions)Total

Premium Rate% Rate Change

Property Damage

GeneratingUnit Policy Limit

Flood (Zone A & V)

5 year loss ratio

[TRADE SECRET BEGINS:

Major Limits if applicableType of Utility Major Deductibles if applicable

Utility Property Insurance Benchmarkings (Xcel Energy is Shaded Gray)

PUBLIC DOCUMENT - TRADE SECRET INFORMATION EXCISED - PUBLIC DATA

Property Insurance Benchmarking



Page 1 of 2

Major Limits if applicableType of Utility Major Deductibles if applicable

TRADE SECRET ENDS]



Page 2 of 2PUBLIC DOCUMENT: TRADE SECRET INFORMATION EXCISED - PUBLIC DATA

Xcel Energy Inc.

Excess Liability Insurance August 18, 2015 - August 18, 2016


TRADE SECRET ENDS]


PUBLIC DOCUMENT -TRADE SECRET INFORMATION EXCISED - PUBLIC DATA

Docket No. E002/GR-15-826Exhibit____(RLM-1), Schedule 7

Page 1 of 1

Xcel Energy Inc. Directors’ & Officers’ Liability Insurance

August 18, 2015 – August 18, 2016

Side "A" Coverage(Executive Indemnification)

Side "B/C" Coverage(Corporate Reimbursement)


TRADE SECRET ENDS]




Page 1 of 1

Xcel Energy Inc.Fiduciary Liability Insurance

August 18, 2015 - August 18, 2016


TRADE SECRET ENDS]




Page 1 of 1

Monticello Prairie Island

NSPMNuclear Property Insurance

4/1/15 – 4/1/16[TRADE SECRET BEGINS:

TRADE SECRET ENDS]




Page 1 of 1

NSPM

Nuclear Accidental Outage Insurance4/1/15 – 4/1/16


TRADE SECRET ENDS]




Page 1 of 1

Xcel Energy Inc.Nuclear Liability Insurance

1/1/15 – 12/31/15[TRADE SECRET BEGINS:

TRADE SECRET ENDS]




Page 1 of 1

Xcel Energy Inc.Primary Casualty Insurance

November 1, 2014 - November 1, 2015

Northern States Power Company Docket No. E002/GR-15-826 Exhibit __(RLM-1), Schedule 13 Page 1 of 1

Document marked Trade Secret in its enirety.

PUBLIC DOCUMENT - TRADE SECRET DATA EXCISED - PUBLIC DATA

Northern States Power Company PUBLIC DOCUMENT -TRADE SECRET INFORMATION EXCISED - PUBLIC DATA

Docket No. E002/GR-15-826 Exhibit___(RLM-1), Schedule 14

Page 1 of 1Other Insurance Coverages

CurrentCoverage Type Insurer Limits Deductible Premium Description of Benefits of Coverage Policy Holder

Terrorism Insurance Energy Insurance Services Xcel Energy Inc. and all subsidiary companies

Professional Liability AEGIS Xcel Energy Inc. and all subsidiary companies

Fidelity (Crime) Insurance Great American Ins. Co. Xcel Energy Inc. and all subsidiary companies

Special Coverage Lloyd's of London Xcel Energy Inc. and all subsidiary companies

Aviation Insurance USAIG Xcel Energy Inc. and all subsidiary companies

Foreign Liability Insurance ACE Insurance Xcel Energy Inc. and all subsidiary companies

Cyber Risk AEGIS Xcel Energy Inc. and all subsidiary companies


TRADE SECRET ENDS]

1 of 6 - insurance - miller testimony (pdf)

Documents