Northern States Power Company

04/25/2024 | Press release | Distributed by Public on 04/25/2024 10:19

Quarterly Report for Quarter Ending 3/31/2024 (Form 10-Q)

nspw-20240331


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-03140
Northern States Power Company
(Exact Name of Registrant as Specified in its Charter)
Wisconsin 39-0508315
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S Employer Identification No.)
1414 West Hamilton Avenue Eau Claire Wisconsin 54701
(Address of Principal Executive Offices) (Zip Code)
(715) 852-5812
(Registrant's Telephone Number, Including Area Code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
N/A N/A N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class
Outstanding at April 25, 2024
Common Stock, $100 par value 933,000 shares
Northern States Power Company meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) to such Form 10-Q.


TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1 -
Financial Statements (unaudited)
4
Consolidated Statements of Income
4
Consolidated Statements of Cash Flows
5
Consolidated Balance Sheets
6
Consolidated Statements of Common Stockholder's Equity
7
Notes to Consolidated Financial Statements
8
Item 2 -
Management's Discussion and Analysis of Financial Condition and Results of Operations
12
Item 4 -
Controls and Procedures
13
PART II OTHER INFORMATION
Item 1 -
Legal Proceedings
14
Item 1A -
Risk Factors
14
Item 5 -
Other Information
14
Item 6 -
Exhibits
14
SIGNATURES
15
This Form 10-Q is filed by NSP-Wisconsin. NSP-Wisconsin is a wholly owned subsidiary of Xcel Energy Inc. Additional information on Xcel Energy is available in various filings with the SEC. This report should be read in its entirety.


Definitions of Abbreviations
Xcel Energy Inc.'s Subsidiaries and Affiliates (current and former)
e prime e prime inc.
NSP-Minnesota Northern States Power Company, a Minnesota corporation
NSP System The electric production and transmission system of NSP-Minnesota and NSP-Wisconsin operated on an integrated basis and managed by NSP-Minnesota
NSP-Wisconsin Northern States Power Company, a Wisconsin corporation
PSCo Public Service Company of Colorado
SPS Southwestern Public Service Company
Utility subsidiaries NSP-Minnesota, NSP-Wisconsin, PSCo and SPS
Xcel Energy Xcel Energy Inc. and its subsidiaries
Federal and State Regulatory Agencies
D.C. Circuit United States Court of Appeals for the District of Columbia Circuit
EPA United States Environmental Protection Agency
FERC Federal Energy Regulatory Commission
MPUC Minnesota Public Utilities Commission
MPSC Michigan Public Service Commission
PSCW Public Service Commission of Wisconsin
SEC Securities and Exchange Commission
Other
C&I Commercial and Industrial
CEO Chief executive officer
CERCLA
Comprehensive Environmental Response, Compensation, and Liability Act
CFO Chief financial officer
GAAP United States generally accepted accounting principles
IRP Integrated Resource Plan
MGP Manufactured gas plant
MISO Midcontinent Independent System Operator, Inc.
NOx Nitrogen Oxides
PFAS
Per- and Polyfluoroalkyl Substances
O&M Operating and maintenance
RFP Request for proposal
ROE Return on equity
RTO Regional Transmission Organization
Measurements
MW Megawatts
Forward-Looking Statements
Except for the historical statements contained in this report, the matters discussed herein are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements, including those relating to future sales, future expenses, future tax rates, future operating performance, estimated base capital expenditures and financing plans, projected capital additions and forecasted annual revenue requirements with respect to rider filings, expected rate increases to customers, expectations and intentions regarding regulatory proceedings, and expected impact on our results of operations, financial condition and cash flows of resettlement calculations and credit losses relating to certain energy transactions, as well as assumptions and other statements are intended to be identified in this document by the words "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "objective," "outlook," "plan," "project," "possible," "potential," "should," "will," "would" and similar expressions. Actual results may vary materially. Forward-looking statements speak only as of the date they are made, and we expressly disclaim any obligation to update any forward-looking information. The following factors, in addition to those discussed in NSP-Wisconsin's Annual Report on Form 10-Kfor the fiscal year ended Dec. 31, 2023 and subsequent filings with the SEC, could cause actual results to differ materially from management expectations as suggested by such forward-looking information: operational safety; successful long-term operational planning; commodity risks associated with energy markets and production; rising energy prices and fuel costs; qualified employee workforce and third-party contractor factors; violations of our Codes of Conduct; our ability to recover costs; changes in regulation; reductions in our credit ratings and the cost of maintaining certain contractual relationships; general economic conditions, including recessionary conditions, inflation rates, monetary fluctuations, supply chain constraints and their impact on capital expenditures and/or the ability of NSP-Wisconsin to obtain financing on favorable terms; availability or cost of capital; our customers' and counterparties' ability to pay their debts to us; assumptions and costs relating to funding our employee benefit plans and health care benefits; tax laws; uncertainty regarding epidemics, the duration and magnitude of business restrictions including shutdowns (domestically and globally), the potential impact on the workforce, including shortages of employees or third-party contractors due to quarantine policies, vaccination requirements or government restrictions, impacts on the transportation of goods and the generalized impact on the economy; effects of geopolitical events, including war and acts of terrorism; cybersecurity threats and data security breaches; seasonal weather patterns; changes in environmental laws and regulations; climate change and other weather events; natural disaster and resource depletion, including compliance with any accompanying legislative and regulatory changes; costs of potential regulatory penalties and wildfire damages in excess of liability insurance coverage; regulatory changes and/or limitations related to the use of natural gas as an energy source; challenging labor market conditions and our ability to attract and retain a qualified workforce; and our ability to execute on our strategies or achieve expectations related to environmental, social and governance matters including as a result of evolving legal, regulatory and other standards, processes, and assumptions, the pace of scientific and technological developments, increased costs, the availability of requisite financing, and changes in carbon markets.

Table of Contents

PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(amounts in millions)
Three Months Ended March 31
2024 2023
Operating revenues
Electric, non-affiliates $ 203 $ 204
Electric, affiliates 53 50
Natural gas 54 77
Total operating revenues 310 331
Operating expenses
Electric fuel and purchased power, non-affiliates 4 4
Purchased power, affiliates 103 103
Cost of natural gas sold and transported 24 46
Operating and maintenance expenses 56 58
Conservation program expenses 3 3
Depreciation and amortization 45 41
Taxes (other than income taxes) 9 8
Total operating expenses 244 263
Operating income 66 68
Allowance for funds used during construction - equity 3 2
Interest charges and financing costs
Interest charges and other financing costs 14 13
Allowance for funds used during construction - debt (1) (1)
Total interest charges and financing costs 13 12
Income before income taxes 56 58
Income tax expense 13 13
Net income $ 43 $ 45

See Notes to Consolidated Financial Statements

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NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(amounts in millions)
Three Months Ended March 31
2024 2023
Operating activities
Net income $ 43 $ 45
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization 46 42
Deferred income taxes 3 (2)
Allowance for equity funds used during construction (3) (2)
Provision for bad debts 1 2
Changes in operating assets and liabilities:
Accounts receivable (13) (16)
Accrued unbilled revenues 9 20
Inventories 3 15
Other current assets 5 13
Accounts payable (7) (10)
Net regulatory assets and liabilities (1) 17
Other current liabilities 5 -
Pension and other employee benefit obligations (7) (3)
Other, net 2 1
Net cash provided by operating activities 86 122
Investing activities
Capital/construction expenditures (121) (101)
Net cash used in investing activities (121) (101)
Financing activities
Repayments of short-term borrowings, net (60) (35)
Borrowings under utility money pool arrangement 130 -
Repayments under utility money pool arrangement (111) -
Capital contributions from parent 106 36
Dividends paid to parent (25) (23)
Net cash provided (used in) by financing activities 40 (22)
Net change in cash, cash equivalents and restricted cash 5 (1)
Cash, cash equivalents and restricted cash at beginning of period 6 2
Cash, cash equivalents and restricted cash at end of period $ 11 $ 1
Supplemental disclosure of cash flow information:
Cash paid for interest (net of amounts capitalized) $ (12) $ (13)
Cash paid for income taxes, net (7) (4)
Supplemental disclosure of non-cash investing and financing transactions:
Accrued property, plant and equipment additions $ 33 $ 33
Inventory transfers to property, plant and equipment 2 2
Allowance for equity funds used during construction 3 2

See Notes to Consolidated Financial Statements
5
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NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(amounts in millions, except share and per share data)
March 31, 2024 Dec. 31, 2023
Assets
Current assets
Cash and cash equivalents $ 11 $ 6
Accounts receivable, net 90 89
Accrued unbilled revenues 53 63
Inventories 24 29
Regulatory assets 23 24
Prepaid taxes 21 28
Prepayments and other 7 6
Total current assets 229 245
Property, plant and equipment, net 3,332 3,237
Other assets
Regulatory assets 181 185
Other 3 3
Total other assets 184 188
Total assets $ 3,745 $ 3,670
Liabilities and Equity
Current liabilities
Current portion of long-term debt $ 200 $ 200
Short-term debt - 60
Borrowings under utility money pool arrangement 19 -
Accounts payable 61 64
Accounts payable to affiliates 20 21
Dividends payable to parent 18 25
Regulatory liabilities 41 42
Taxes accrued 19 16
Accrued interest 13 13
Other 24 23
Total current liabilities 415 464
Deferred credits and other liabilities
Deferred income taxes 336 330
Deferred investment tax credits 5 5
Regulatory liabilities 412 407
Customer advances 26 25
Pension and employee benefit obligations 20 27
Other 34 35
Total deferred credits and other liabilities 833 829
Commitments and contingencies
Capitalization
Long-term debt 1,011 1,011
Common stock - 1,000,000 shares authorized of $100 par value; 933,000 shares outstanding at March 31, 2024 and Dec. 31, 2023, respectively
93 93
Additional paid in capital 938 843
Retained earnings 455 430
Total common stockholder's equity 1,486 1,366
Total liabilities and equity $ 3,745 $ 3,670

See Notes to Consolidated Financial Statements
6
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NSP-WISCONSIN AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)
(amounts in millions, except share data)
Common Stock Issued Retained Earnings Total Common Stockholder's Equity
Shares Par Value Additional Paid
In Capital
Three Months Ended March 31, 2024 and 2023
Balance at December 31, 2022 933,000 $ 93 $ 761 $ 405 $ 1,259
Net income 45 45
Common dividends declared to parent (24) (24)
Contribution of capital by parent 30 30
Balance at March 31, 2023 933,000 $ 93 $ 791 $ 426 $ 1,310
Balance at December 31, 2023 933,000 $ 93 $ 843 $ 430 $ 1,366
Net income 43 43
Common dividends declared to parent (18) (18)
Contribution of capital by parent 95 95
Balance at March 31, 2024 933,000 $ 93 $ 938 $ 455 $ 1,486
Total Common Stockholder's Equity
See Notes to Consolidated Financial Statements




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NSP-WISCONSIN AND SUBSIDIARIES
Notes to Consolidated Financial Statements (UNAUDITED)
In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly, in accordance with GAAP, the financial position of NSP-Wisconsin and its subsidiaries as of March 31, 2024 and Dec. 31, 2023; the results of NSP-Wisconsin's operations, including the components of net income, cash flows, and changes in stockholder's equity for the three months ended March 31, 2024 and 2023.
All adjustments are of a normal, recurring nature, except as otherwise disclosed. Management has also evaluated the impact of events occurring after March 31, 2024 up to the date of issuance of these consolidated financial statements. These statements contain all necessary adjustments and disclosures resulting from that evaluation. The Dec. 31, 2023 balance sheet information has been derived from the audited 2023 consolidated financial statements included in the NSP-Wisconsin Annual Report on Form 10-Kfor the year ended Dec. 31, 2023.
Notes to the consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC for Quarterly Reports on Form 10-Q. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP on an annual basis have been condensed or omitted pursuant to such rules and regulations. For further information, refer to the consolidated financial statements and notes thereto included in the NSP-Wisconsin Annual Report on Form 10-Kfor the year ended Dec. 31, 2023, filed with the SEC on Feb. 21, 2024. Due to the seasonality of NSP-Wisconsin's electric and natural gas sales, interim results are not necessarily an appropriate base from which to project annual results.
1. Summary of Significant Accounting Policies
The significant accounting policies set forth in Note 1 to the consolidated financial statements in the NSP-Wisconsin Annual Report on Form 10-Kfor the year ended Dec. 31, 2023 appropriately represent, in all material respects, the current status of accounting policies and are incorporated herein by reference.
2. Accounting Pronouncements
Recently Issued
Segment Reporting - In November 2023, the FASB issued ASU 2023-07 - Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures, which extends the existing requirements for annual disclosures to quarterly periods, and requires that both annual and quarterly disclosures present segment expenses using line items consistent with information regularly provided to the chief operating decision maker. The ASU is effective for annual periods beginning after Dec. 15, 2023 and quarterly periods beginning after Dec. 15, 2024, and Xcel Energy does not expect implementation of the new disclosure guidance to have a material impact to its consolidated financial statements.
Income Taxes - In December 2023, the FASB issued ASU 2023-09 - Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, with new disclosure requirements including presentation of prescribed line items in the effective tax rate reconciliation and disclosures regarding state and local tax payments. The ASU is effective for annual periods beginning after Dec. 15, 2024, and Xcel Energy does not expect implementation of the new disclosure guidance to have a material impact to its consolidated financial statements.
Climate-Related Disclosures -In March 2024, the SEC issued Final Rule 33-11275 - The Enhancement and Standardization of Climate-Related Disclosures for Investors. This rule requires registrants to provide standardized disclosures in Form 10-K related to climate-related risks, Scope 1 and 2 greenhouse gas emissions, as well as to include in a footnote to the consolidated financial statements the financial impact of severe weather events and other natural conditions. The rule requires implementation in phases between 2025 and 2033. In April 2024, the SEC announced that it would voluntarily stay its final climate disclosure rules pending judicial review. Xcel Energy does not expect implementation of the new guidance to have a material impact on the consolidated financial statements.
3. Selected Balance Sheet Data
(Millions of dollars) March 31, 2024 Dec. 31, 2023
Accounts receivable, net
Accounts receivable $ 98 $ 98
Less allowance for bad debts (8) (9)
Accounts receivable, net $ 90 $ 89
(Millions of dollars) March 31, 2024 Dec. 31, 2023
Inventories
Materials and supplies $ 12 $ 11
Fuel 10 10
Natural gas 2 8
Total inventories $ 24 $ 29
(Millions of dollars) March 31, 2024 Dec. 31, 2023
Property, plant and equipment, net
Electric plant $ 3,895 $ 3,845
Natural gas plant 504 502
Common and other property 287 278
Construction work in progress 306 252
Total property, plant and equipment 4,992 4,877
Less accumulated depreciation (1,660) (1,640)
Property, plant and equipment, net $ 3,332 $ 3,237
4. Borrowings and Other Financing Instruments
Short-Term Borrowings
NSP-Wisconsin meets its short-term liquidity requirements primarily through the issuance of commercial paper and borrowings under its credit facility and the money pool.
Money Pool- Xcel Energy Inc. and its utility subsidiaries have established a money pool arrangement that allows for short-term investments in and borrowings between the utility subsidiaries. Xcel Energy Inc. may make investments in the utility subsidiaries at market-based interest rates; however, the money pool arrangement does not allow the utility subsidiaries to make investments in Xcel Energy Inc.
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Money pool borrowings:
(Amounts in Millions, Except Interest Rates) Three Months Ended March 31, 2024 Year Ended Dec. 31, 2023
Borrowing limit $ 150 $ 150
Amount outstanding at period end 19 -
Average amount outstanding 12 6
Maximum amount outstanding 54 43
Weighted average interest rate, computed on a daily basis 5.33 % 4.98 %
Weighted average interest rate at period end 5.33 N/A
Commercial Paper -Commercial paper outstanding:
(Amounts in Millions, Except Interest Rates) Three Months Ended March 31, 2024 Year Ended Dec. 31, 2023
Borrowing limit $ 150 $ 150
Amount outstanding at period end - 60
Average amount outstanding 41 15
Maximum amount outstanding 99 93
Weighted average interest rate, computed on a daily basis 5.49 % 4.85 %
Weighted average interest rate at period end N/A 5.50
Letters of Credit - NSP-Wisconsin uses letters of credit, generally with terms of one year, to provide financial guarantees for certain obligations. At both March 31, 2024 and Dec. 31, 2023, there were immaterialletters of credit outstanding under the credit facility.
Revolving Credit Facility-In order to issue its commercial paper, NSP-Wisconsin must have a revolving credit facility equal to or greater than the commercial paper borrowing limit and cannot issue commercial paper exceeding available capacity under this credit facility. The credit facility provides short-term financing in the form of notes payable to banks, letters of credit and back-up support for commercial paper borrowings.
NSP-Wisconsin has the right to request an extension of the revolving credit facility termination date for an additional one-year period. All extension requests are subject to majority bank group approval.
As of March 31, 2024, NSP-Wisconsin had the following committed revolving credit facility available (in millions of dollars):
Credit Facility (a)
Outstanding (b)
Available
$ 150 $ - $ 150
(a)Expires in September 2027.
(b)Includes outstanding commercial paper.
All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility. NSP-Wisconsinhad no directadvances on the credit facility outstanding at March 31, 2024 and Dec. 31, 2023.
Other Short-Term Borrowings -Clearwater Investments, Inc., a NSP-Wisconsin subsidiary, had an immaterial note payable to Xcel Energy Inc. as of March 31, 2024 and Dec. 31, 2023, respectively.
5. Revenues
Revenue is classified by the type of goods/services rendered and market/customer type. NSP-Wisconsin's operating revenues consisted of the following:
Three Months Ended
March 31, 2024
(Millions of Dollars) Electric Natural Gas Total
Major revenue types
Revenue from contracts with customers:
Residential $ 77 $ 30 $ 107
C&I 118 22 140
Other 2 - 2
Total retail 197 52 249
Interchange and other 56 1 57
Total revenue from contracts with customers 253 53 306
Alternative revenue and other 3 1 4
Total revenues $ 256 $ 54 $ 310
Three Months Ended
March 31, 2023
(Millions of Dollars) Electric Natural Gas Total
Major revenue types
Revenue from contracts with customers:
Residential $ 82 $ 41 $ 123
C&I 120 34 154
Other 2 - 2
Total retail 204 75 279
Interchange and other 47 1 48
Total revenue from contracts with customers 251 76 327
Alternative revenue and other 3 1 4
Total revenues $ 254 $ 77 $ 331
6. Income Taxes
Reconciliation between the statutory rate and effective tax rate:
Three Months Ended March 31
2024 2023
Federal statutory rate 21.0 % 21.0 %
State tax (net of federal tax effect) 6.2 6.2
(Decreases) increases:
Plant regulatory differences (a)
(4.3) (3.5)
Other (net) 0.3 (1.3)
Effective income tax rate 23.2 % 22.4 %
(a)Plant regulatory differences primarily relate to the credit of excess deferred taxes to customers through the average rate assumption method. Income tax benefits associated with the credit are offset by corresponding revenue reductions.
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7. Fair Value of Financial Assets and Liabilities
Fair Value Measurements
Accounting guidance for fair value measurements and disclosures provides a hierarchical framework for disclosing the observability of the inputs utilized in measuring assets and liabilities at fair value.
•Level 1 - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. The types of assets and liabilities included in Level 1 are actively traded instruments with observable actual trading prices.
•Level 2 - Pricing inputs are other than actual trading prices in active markets, but are either directly or indirectly observable as of the reporting date. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts or priced with models using highly observable inputs.
•Level 3 - Significant inputs to pricing have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 include those valued with models requiring significant judgment or estimation.
Specific valuation methods include:
Commodity Derivatives -Methods used to measure the fair value of commodity derivative forwards and options utilize forward prices and volatilities, as well as pricing adjustments for specific delivery locations, and are generally assigned a Level 2 classification. When contracts relate to inactive delivery locations or extend to periods beyond those readily observable on active exchanges, the significance of the use of less observable inputs on a valuation is evaluated, and may result in Level 3 classification.
Derivative Activities and Fair Value Measurements
NSP-Wisconsin enters into derivative instruments, including forward contracts, futures, swaps and options, to manage risk in connection with changes in utility commodity prices.
Commodity Derivatives - NSP-Wisconsin enters into derivative instruments to manage variability of future cash flows from changes in commodity prices in its electric and natural gas operations. This could include the purchase or sale of natural gas to generate electric energy and natural gas for resale.
As of March 31, 2024, NSP-Wisconsin had no commodity contracts designated as cash flow hedges.
Consideration of Credit Risk and Concentrations - NSP-Wisconsin continuously monitors the creditworthiness of counterparties to its interest rate derivatives and commodity derivative contracts prior to settlement, and assesses each counterparty's ability to perform on the transactions set forth in the contracts. Impact of credit risk was immaterial to the fair value of unsettled commodity derivatives presented on the consolidated balance sheets.
Recurring Derivative Fair Value Measurements
Impact of derivative activity:
Changes in the fair value of natural gas commodity derivatives resulted in immaterial and $1 million of net gains for the three months ended March 31, 2024 and 2023, respectively, which were recognized as regulatory assets and liabilities. The classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms.
During the three months ended March 31, 2024 and 2023, $1 million and $2 million, respectively, of pre-tax losses were recognized during the period related to option premium amortization subject to natural gas cost recovery mechanisms and reclassified out of income to a regulatory asset, as appropriate.
NSP-Wisconsin had immaterial outstanding derivative assets or liabilities measured at fair value as of March 31, 2024 and Dec. 31, 2023.
Fair Value of Long-Term Debt
As of March 31, 2024, other financial instruments for which the carrying amount did not equal fair value:
March 31, 2024 Dec. 31, 2023
(Millions of Dollars) Carrying Amount Fair Value Carrying Amount Fair Value
Long-term debt, including current portion $ 1,211 $ 1,104 $ 1,211 $ 1,117
Fair value of NSP-Wisconsin's long-term debt is estimated based on recent trades and observable spreads from benchmark interest rates for similar securities. Fair value estimates are based on information available to management as of March 31, 2024 and Dec. 31, 2023, and given the observability of the inputs, fair values presented for long-term debt were assigned as Level 2.
8. Benefit Plans and Other Postretirement Benefits
Components of Net Periodic Benefit Cost
Three Months Ended March 31
2024 2023
(Millions of Dollars) Pension Benefits
Service cost $ 1 $ 1
Interest cost (a)
2 2
Expected return on plan assets (a)
(2) (2)
Net periodic benefit cost $ 1 $ 1
(a)The components of net periodic cost other than the service cost component are included in the line item "Other income (expense), net" in the consolidated statements of income or capitalized on the consolidated balance sheets as a regulatory asset.
In January 2024, contributions totaling $100 million were made across Xcel Energy's pension plans, of which $7 million was attributable to NSP-Wisconsin. Xcel Energy does not expect additional pension contributions during 2024.
9. Commitments and Contingencies
Legal
NSP-Wisconsin is involved in various litigation matters in the ordinary course of business. The assessment of whether a loss is probable or is a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. Management maintains accruals for losses probable of being incurred and subject to reasonable estimation. Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories.
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In such cases, there is considerable uncertainty regarding the timing or ultimate resolution, including a possible eventual loss. For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, would have a material effect on NSP-Wisconsin's consolidated financial statements. Legal fees are generally expensed as incurred.
Gas Trading Litigation - e prime is a wholly owned subsidiary of Xcel Energy. e prime was in the business of natural gas trading and marketing but has not engaged in natural gas trading or marketing activities since 2003. Multiple lawsuits involving multiple plaintiffs seeking monetary damages were commenced against e prime and its affiliates, including Xcel Energy, between 2003 and 2009 alleging fraud and anticompetitive activities in conspiring to restrain the trade of natural gas and manipulate natural gas prices. Cases were all consolidated in the U.S. District Court in Nevada.
One case remains active which includes a multi-district litigation matter consisting of a Wisconsin purported class (Arandell Corp.). The Court issued a ruling in June 2022 granting plaintiffs' class certification. In April 2023, the Seventh Circuit Court of Appeals heard the defendants' appeal challenging whether the district court properly assessed class certification. A decision relating to class certification is expected imminently. Xcel Energy considers the reasonably possible loss associated with this litigation to be immaterial.
Rate Matters
NSP-Wisconsin is involved in various regulatory proceedings arising in the ordinary course of business. Until resolution, typically in the form of a rate order, uncertainties may exist regarding the ultimate rate treatment for certain activities and transactions. Amounts have been recognized for probable and reasonably estimable losses that may result. Unless otherwise disclosed, any reasonably possible range of loss in excess of any recognized amount is not expected to have a material effect on the financial statements.
Environmental
New and changing federal and state environmental mandates can create financial liabilities for NSP-Wisconsin, which are normally recovered through the regulated rate process.
Site Remediation
Various federal and state environmental laws impose liability where hazardous substances or other regulated materials have been released to the environment. NSP-Wisconsin may sometimes pay all or a portion of the cost to remediate sites where past activities of their predecessors or other parties have caused environmental contamination.
Environmental contingencies could arise from various situations, including sites of former MGPs; and third-party sites, such as landfills, for which NSP-Wisconsin is alleged to have sent wastes to that site.
MGP, Landfill and Disposal Sites
NSP-Wisconsin is investigating, remediating or performing post-closure actions at one MGP, landfill or other disposal sites across its service territories.
NSP-Wisconsin has recognized approximately $13 million of costs/liabilities from final resolution of these issues, however, the outcome and timing are unknown. In addition, there may be regulatory recovery, insurance recovery and/or recovery from other potentially responsible parties, offsetting a portion of costs incurred.
Environmental Requirements - Water and Waste
Federal Clean Water Act Section 316(b)- The Federal Clean Water Act requires the EPA to regulate cooling water intake structures to assure they reflect the best technology available for minimizing impingement and entrainment of aquatic species. NSP-Wisconsin estimates capital expenditures of approximately $5 million may be required to comply with the requirements. NSP-Wisconsin believes two plants could be required to make improvements to reduce impingement and entrainment. NSP-Wisconsin anticipates these costs will be recoverable through regulatory mechanisms.
Environmental Requirements - Air
Clean Air Act NOx Allowance Allocations - In June 2023, the EPA published final regulations under the "Good Neighbor" provisions of the Clean Air Act. The final rule applies to generation facilities in Wisconsin, as well as other states outside of our service territory. The rule establishes an allowance trading program for NOx that will impact NSP-Wisconsin's fossil fuel-fired electric generating facilities. Subject facilities will have to secure additional allowances, install NOx controls and/or develop a strategy of operations that utilizes the existing allowance allocations. Guidelines are also established for allowance banking and emission limit backstops.
While the financial impacts of the final rule are uncertain and dependent on market forces and anticipated generation, NSP-Wisconsin anticipates the costs would be recoverable through regulatory mechanisms.
10. Segment Information
NSP-Wisconsin evaluates performance based on profit or loss generated from the product or service provided. These segments are managed separately because the revenue streams are dependent upon regulated rate recovery, which is separately determined for each segment.
NSP-Wisconsin has the following reportable segments:
•Regulated Electric- The regulated electric utility segment generates electricity, which is transmitted and distributed in Wisconsin and Michigan.
•Regulated Natural Gas- The regulated natural gas utility segment purchases, transports, stores and distributes natural gas in portions of Wisconsin and Michigan.
Asset and capital expenditure information is not provided for NSP-Wisconsin's reportable segments. As an integrated electric and natural gas utility, NSP-Wisconsin operates significant assets that are not dedicated to a specific business segment. Reporting assets and capital expenditures by business segment would require arbitrary and potentially misleading allocations, which may not necessarily reflect the assets that would be required for the operation of the business segments on a stand-alone basis.
Certain costs, such as common depreciation, common O&M expenses and interest expense are allocated based on cost causation allocators across each segment. In addition, a general allocator is used for certain general and administrative expenses, including office supplies, rent, property insurance and general advertising.
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NSP-Wisconsin's segment information:
Three Months Ended March 31
(Millions of Dollars) 2024 2023
Regulated Electric
Total revenues (a)
$ 256 $ 254
Net income 33 33
Regulated Natural Gas
Total revenues $ 54 $ 77
Net income 10 11
All Other
Net income $ - $ 1
Consolidated Total
Total revenues (a)
$ 310 $ 331
Net income 43 45
(a)Total revenues include $53 million and $50 million of affiliate electric revenue for the three months ended March 31, 2024 and 2023, respectively.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Discussion of financial condition and liquidity for NSP-Wisconsin is omitted per conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q for wholly owned subsidiaries. It is replaced with management's narrative analysis of the results of operations set forth in General Instruction H(2)(a) of Form 10-Q for wholly owned subsidiaries (reduced disclosure format).
Non-GAAP Financial Measures
The following discussion includes financial information prepared in accordance with GAAP, as well as certain non-GAAP financial measures such as ongoing earnings. Generally, a non-GAAP financial measure is a measure of a company's financial performance, financial position or cash flows that adjusts measures calculated and presented in accordance with GAAP.
NSP-Wisconsin's management uses non-GAAP measures for financial planning and analysis, for reporting of results to the Board of Directors, in determining performance-based compensation and communicating its earnings outlook to analysts and investors. Non-GAAP financial measures are intended to supplement investors' understanding of our performance and should not be considered alternatives for financial measures presented in accordance with GAAP. These measures are discussed in more detail below and may not be comparable to other companies' similarly titled non-GAAP financial measures.
Earnings Adjusted for Certain Items (Ongoing Earnings)
Ongoing earnings reflect adjustments to GAAP earnings (net income) for certain items.
We use this non-GAAP financial measure to evaluate and provide details of NSP-Wisconsin's core earnings and underlying performance. We believe this measurement is useful to investors to evaluate the actual and projected financial performance and contribution of NSP-Wisconsin. For the three months ended March 31, 2024 and 2023, there were no such adjustments to GAAP earnings and therefore GAAP earnings equal ongoing earnings.
Results of Operations
NSP-Wisconsin's net income was $43 million and $45 million for the three months ended March 31, 2024 and 2023, respectively, as lower O&M expenses were offset by increased depreciation.
Electric Revenue
Electric revenues are impacted by fluctuations in the price of natural gas, coal and uranium, regulatory outcomes, market prices and seasonality. Electric revenues increased $2 million for the first quarter.
(Millions of Dollars) Three Months Ended March. 31, 2024 vs. 2023
Estimated impact of weather $ (3)
Sales and demand (2)
Regulatory rate outcomes 4
Interchange agreement revenue from NSP-Minnesota 3
Total increase $ 2
Natural Gas Revenues
Natural gas revenues vary with changing sales and the cost of natural gas and regulatory outcomes. Natural gas revenues decreased $23 million in the first quarter.
(Millions of Dollars) Three Months Ended March. 31, 2024 vs. 2023
Recovery of lower cost of natural gas $ (21)
Estimated impact of weather (3)
Other (net) 1
Total decrease $ (23)
Electric Fuel and Purchased Power - Expenses incurred for electric fuel and purchased power are impacted by fluctuations in market prices of natural gas, coal and uranium, as well as seasonality. However, these incurred expenses are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are generally offset in operating revenues and have minimal earnings impact.
Electric fuel and purchased power expenses remained flat for the first quarter of 2024.
Cost of Natural Gas Sold and Transported - Expenses incurred for the cost of natural gas sold are impacted by market prices and seasonality. These costs are generally recovered through various regulatory recovery mechanisms. As a result, changes in these expenses are generally offset in operating revenues and have minimal earnings impact.
Natural gas sold and transported decreased $22 million for the first quarter of 2024. The decrease is primarily due to lower commodity prices and lower volumes.
Non-Fuel Operating Expenses and Other Items
O&M Expenses -O&M expenses decreased $2 million year to date, primarily due to lower storm costs.
Depreciation and Amortization - Depreciation and amortization increased $4 million year to date, primarily due to system expansion.
Public Utility Regulation and Other
The FERC and various state and local regulatory commissions regulate NSP-Wisconsin. The electric and natural gas rates charged to customers of NSP-Wisconsin are approved by the FERC or the regulatory commissions in the states in which it operates.
Rates are designed to recover plant investment, operating costs and an allowed return on investment. NSP-Wisconsin requests changes in utility rates through commission filings.
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Changes in operating costs can affect NSP-Wisconsin's financial results, depending on the timing of rate case filings and implementation of final rates. Other factors affecting rate filings are new investments, sales, conservation and demand side management efforts, and the cost of capital. In addition, the regulatory commissions authorize the ROE, capital structure and depreciation rates in rate proceedings. Decisions by these regulators can significantly impact NSP-Wisconsin's results of operations.
Except to the extent noted below, the circumstances set forth in Public Utility Regulation included in Item 7 of NSP-Wisconsin's Annual Report on Form 10-Kfor the year ended Dec. 31, 2023 appropriately represent, in all material respects, the current status of public utility regulation and are incorporated herein by reference.
Pending Regulatory Proceedings - NSP-System
2022 Upper Midwest IRP Resource Acquisition
Following the MPUC's approval of NSP-Minnesota and NSP-Wisconsin's latest IRP in April 2022, NSP-Minnesota and NSP-Wisconsin have been engaged in multiple resource acquisition processes and proceedings to meet the need identified in the IRP.
•In the second quarter of 2023, NSP-Minnesota initiated the process with the MPUC for acquisition of 800 MW of firm dispatchable resources. In January 2024, NSP-Minnesota and other companies submitted proposed resources and filed for project approval with the MPUC. NSP-Minnesota expects a decision by the second quarter of 2025.
•In July 2023, NSP-Wisconsin issued an RFP seeking approximately 650 MW of solar and/or solar plus storage development assets that will be developed in the 2027-2029 timeframe to replace the capacity from the retiring King Generating Station. The RFP closed in September 2023 and bids are being evaluated.
•In October 2023, NSP-Minnesota issued an RFP seeking approximately 1,200 MW of wind development assets to replace capacity and reutilize interconnection rights associated with the retiring Sherco coal facilities. The RFP closed in December 2023 and NSP-Minnesota expects to file for approval of recommended projects by mid-2024.
2024 Upper Midwest Resource Plan
In February 2024, NSP-Minnesota filed its Upper Midwest Resource Plan with the MPUC which included the following key items:
•Reduced carbon emissions by more than 80%, potentially up to 88%, by 2030.
•Extends the operation of Prairie Island and Monticello through the early 2050s.
•Adds 3,600 MWs of new wind and solar resources by 2030.
•Adds 600 MWs of battery energy storage by 2030.
•Adds more than 2,200 MWs of dispatchable resources by 2030.
These proposed resources are in addition to projects already approved by the MPUC. NSP-Minnesota anticipates a MPUC decision in 2025.

Emerging Environmental Regulation
Clean Air Act
Power Plant Greenhouse Gas Regulations -In April 2024, the EPA published final rules addressing control of CO2emissions from the power sector. The rules regulate new natural gas generating units and emission guidelines for existing coal and certain natural gas generation. The rules create subcategories of coal units based on planned retirement date and subcategories of natural gas combustion turbines and combined cycle units based on utilization. The CO2control requirements vary by subcategory. NSP-Wisconsin continues to evaluate the impact of these rules and believes that the cost of these initiatives or replacement generation would be recoverable through rates based on prior state commission practices.
Waste-to-Energy Air Regulations - In January 2024, the EPA proposed air regulations addressing new and existing large municipal waste combustors. The proposed rules lower current emission standards for certain pollutants and would require installation of new pollution controls and/or more intense use of existing pollution controls at French Island Generating Station. Until final rules are issued, it is not certain what the impact will be on NSP-Wisconsin. NSP-Wisconsin believes that the cost of these initiatives or replacement generation would be recoverable through rates based on prior state commission practices.
Emerging Contaminants of Concern
PFAS are man-made chemicals that are widely used in consumer products and can persist and bio-accumulate in the environment. NSP-Wisconsin does not manufacture PFAS but because PFAS are so ubiquitous in products and the environment, it may impact our operations.
In September 2022, the EPA proposed to designate two types of PFAS as "hazardous substances" under the CERCLA.
In March 2023, the EPA published a proposed rule that would establish enforceable drinking water standards for certain PFAS chemicals.
In February 2024, the EPA proposed to change the Resource Conservation and Recovery Act by adding nine PFAS to its list of hazardous constituents.
Final rules for all three proposals are expected in 2024 which could result in new obligations. Potential costs are uncertain until final rules are published and/or agency action is taken.
ITEM 4 - CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
NSP-Wisconsin maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms.
In addition, the disclosure controls and procedures ensure that information required to be disclosed is accumulated and communicated to management, including the CEO and CFO, allowing timely decisions regarding required disclosure.
As of March 31, 2024, based on an evaluation carried out under the supervision and with the participation of NSP-Wisconsin's management, including the CEO and CFO, of the effectiveness of its disclosure controls and procedures, the CEO and CFO have concluded that NSP-Wisconsin's disclosure controls and procedures were effective.
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Internal Control Over Financial Reporting
No changes in NSP-Wisconsin's internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, NSP-Wisconsin's internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
NSP-Wisconsin is involved in various litigation matters in the ordinary course of business. The assessment of whether a loss is probable or is a reasonable possibility, and whether the loss or a range of loss is estimable, often involves a series of complex judgments about future events. Management maintains accruals for losses probable of being incurred and subject to reasonable estimation.
Management is sometimes unable to estimate an amount or range of a reasonably possible loss in certain situations, including but not limited to, when (1) the damages sought are indeterminate, (2) the proceedings are in the early stages, or (3) the matters involve novel or unsettled legal theories. In such cases, there is considerable uncertainty regarding the timing or ultimate resolution of such matters, including a possible eventual loss.

For current proceedings not specifically reported herein, management does not anticipate that the ultimate liabilities, if any, would have a material effect on NSP-Wisconsin's consolidated financial statements. Legal fees are generally expensed as incurred.
See Note 9 to the consolidated financial statements and Part I Item 2 for further information.
ITEM 1A - RISK FACTORS
NSP-Wisconsin's risk factors are documented in Item 1A of Part I of its Annual Report on Form 10-Kfor the year ended Dec. 31, 2023, which is incorporated herein by reference. There have been no material changes from the risk factors previously disclosed in the Form 10-K.
ITEM 5 - OTHER INFORMATION
None of the Company's directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company's fiscal quarter ended March 31, 2024.
ITEM 6 - EXHIBITS
* Indicates incorporation by reference
Exhibit Number Description Report or Registration Statement Exhibit Reference
3.01*
NSP-Wisconsin Form S-4 dated Jan. 21, 2004 3.01
3.02*
NSP-Wisconsin Form 10-K for the year ended Dec. 31, 2018 3.02
31.01
Principal Executive Officer's certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.02
Principal Financial Officer's certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.01
Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH Inline XBRL Schema
101.CAL Inline XBRL Calculation
101.DEF Inline XBRL Definition
101.LAB Inline XBRL Label
101.PRE Inline XBRL Presentation
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Northern States Power Company (a Wisconsin corporation)
4/25/2024 By: /s/ MELISSA L. OSTROM
Melissa L. Ostrom
Vice President, Controller
(Principal Accounting Officer)
By: /s/ BRIAN J. VAN ABEL
Brian J. Van Abel
Executive Vice President, Chief Financial Officer
(Principal Financial Officer)
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