Public Service Company of Colorado

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)

psco-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: 001-03280
Public Service Company of Colorado
(Exact Name of Registrant as Specified in its Charter)
Colorado 84-0296600
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
1800 Larimer Street, Suite 1100 Denver CO 80202
(Address of Principal Executive Offices) (Zip Code)
(303) 571-7511
(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, $0.01 par value 100 shares
Public Service Company of Colorado 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 Comprehensive Income
5
Consolidated Statements of Cash Flows
6
Consolidated Balance Sheets
7
Consolidated Statements of Common Stockholder's Equity
8
Notes to Consolidated Financial Statements
9
Item 2 -
Management's Discussion and Analysis of Financial Condition and Results of Operations
16
Item 4 -
Controls and Procedures
19
PART II- OTHER INFORMATION
Item 1 -
Legal Proceedings
19
Item 1A -
Risk Factors
20
Item 5 -
Other Information
20
Item 6 -
Exhibits
20
SIGNATURES
21
This Form 10-Q is filed by PSCo, a Colorado corporation. PSCo 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-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
CPUC Colorado Public Utilities Commission
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
SEC Securities and Exchange Commission
Other
C&I Commercial and Industrial
CCR Coal combustion residuals
CCR Rule Final rule (40 CFR 257.50 - 257.107) published by the EPA regulating the management, storage and disposal of CCRs as a nonhazardous waste
CEO Chief executive officer
CERCLA
Comprehensive Environmental Response, Compensation, and Liability Act
CFO Chief financial officer
CORE CORE Electric Cooperative
CPCN Certificate of public convenience and necessity
CSPV Crystalline Silicon Photovoltaic
ECA Retail electric commodity adjustment
ETR Effective Tax Rate
GAAP United States generally accepted accounting principles
GCA Gas cost adjustment
IPP Independent power producing entity
MGP Manufactured gas plant
MPH Miles per hour
O&M Operating and maintenance
PFAS
Per- and Polyfluoroalkyl Substances
PIM Performance incentive mechanism
PPA Power purchase agreement
PTC Production tax credit
ROE Return on equity
RFP Request for proposal
TEP Transportation electrification plan
WACC Weighted average cost of capital
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 PSCo'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 PSCo 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
PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(amounts in millions)
Three Months Ended March 31
2024 2023
Operating revenues
Electric $ 923 $ 920
Natural gas 613 811
Other 13 16
Total operating revenues 1,549 1,747
Operating expenses
Electric fuel and purchased power 341 382
Cost of natural gas sold and transported 319 501
Cost of sales - other 4 5
Operating and maintenance expenses 234 230
Demand side management expenses 40 36
Depreciation and amortization 244 228
Taxes (other than income taxes) 73 73
Total operating expenses 1,255 1,455
Operating income 294 292
Other income, net 9 1
Allowance for funds used during construction - equity 13 7
Interest charges and financing costs
Interest charges and other financing costs 88 73
Allowance for funds used during construction - debt (6) (4)
Total interest charges and financing costs 82 69
Income before income taxes 234 231
Income tax expense 15 17
Net income $ 219 $ 214
See Notes to Consolidated Financial Statements
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PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(amounts in millions)
Three Months Ended March 31
2024 2023
Net income $ 219 $ 214
Other comprehensive income
Pension and retiree medical benefits:
Reclassification of loss to net income, net of tax - 1
Total other comprehensive income - 1
Total comprehensive income $ 219 $ 215
See Notes to Consolidated Financial Statements

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PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(amounts in millions)
Three Months Ended March 31
2024 2023
Operating activities
Net income $ 219 $ 214
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization 245 230
Deferred income taxes (3) (31)
Allowance for equity funds used during construction (13) (7)
Provision for bad debts 8 10
Changes in operating assets and liabilities:
Accounts receivable (12) 40
Accrued unbilled revenues 49 200
Inventories 45 120
Other current assets 5 24
Accounts payable (118) (195)
Net regulatory assets and liabilities 70 62
Other current liabilities 109 98
Pension and other employee benefit obligations (5) -
Other, net (15) (5)
Net cash provided by operating activities 584 760
Investing activities
Utility capital/construction expenditures (663) (464)
Investments in utility money pool arrangement (64) -
Repayments from utility money pool arrangement 64 -
Net cash used in investing activities (663) (464)
Financing activities
Repayments of short-term borrowings, net (52) 65
Borrowings under utility money pool arrangement 381 -
Repayments under utility money pool arrangement (182) -
Repayments of long-term debt - (250)
Capital contributions from parent 79 74
Dividends paid to parent (130) (173)
Net cash provided by (used in) financing activities 96 (284)
Net change in cash, cash equivalents and restricted cash 17 12
Cash, cash equivalents and restricted cash at beginning of period 13 10
Cash, cash equivalents and restricted cash at end of period $ 30 $ 22
Supplemental disclosure of cash flow information:
Cash paid for interest (net of amounts capitalized) $ (77) $ (79)
Cash received for income taxes, net; includes proceeds from tax credit transfers 42 20
Supplemental disclosure of non-cash investing and financing transactions:
Accrued property, plant and equipment additions $ 215 $ 154
Inventory transfers to property, plant and equipment 18 15
Operating lease right-of-use assets - 17
Allowance for equity funds used during construction 13 7
See Notes to Consolidated Financial Statements
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PUBLIC SERVICE CO. OF COLORADO 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 $ 30 $ 13
Accounts receivable, net 484 492
Accounts receivable from affiliates 11 28
Accrued unbilled revenues 312 361
Inventories 196 258
Regulatory assets 226 304
Derivative instruments 5 11
Prepayments and other 90 95
Total current assets 1,354 1,562
Property, plant and equipment, net 21,602 21,035
Other assets
Regulatory assets 1,271 1,267
Derivative instruments 12 15
Operating lease right-of-use assets 343 366
Other 259 383
Total other assets 1,885 2,031
Total assets $ 24,841 $ 24,628
Liabilities and Equity
Current liabilities
Borrowings under utility money pool arrangement 250 51
Short-term debt 268 320
Accounts payable 573 704
Accounts payable to affiliates 59 83
Regulatory liabilities 55 70
Taxes accrued 379 261
Accrued interest 69 68
Dividends payable to parent 106 72
Derivative instruments 8 17
Operating lease liabilities 102 102
Other 168 177
Total current liabilities 2,037 1,925
Deferred credits and other liabilities
Deferred income taxes 1,907 1,894
Regulatory liabilities 2,584 2,562
Asset retirement obligations 387 383
Customer advances 116 124
Pension and employee benefit obligations 33 40
Operating lease liabilities 264 290
Other 214 218
Total deferred credits and other liabilities 5,505 5,511
Commitments and contingencies
Capitalization
Long-term debt 7,452 7,450
Common stock - 100 shares authorized of $0.01 par value; 100 shares outstanding at March 31, 2024 and Dec. 31, 2023, respectively
- -
Additional paid in capital 7,462 7,412
Retained earnings 2,405 2,350
Accumulated other comprehensive loss (20) (20)
Total common stockholder's equity 9,847 9,742
Total liabilities and equity $ 24,841 $ 24,628
See Notes to Consolidated Financial Statements
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PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY (UNAUDITED)
(amounts in millions, except share data)
Common Stock Issued Retained Earnings Accumulated Other Comprehensive Loss Total Common Stockholder's Equity
Shares Par Value Additional Paid
In Capital
Three Months Ended March 31, 2024 and 2023
Balance at Dec. 31, 2022 100 $ - $ 6,992 $ 2,260 $ (22) $ 9,230
Net income 214 214
Other comprehensive income 1 1
Dividends declared to parent (183) (183)
Contribution of capital by parent 65 65
Balance at March 31, 2023 100 $ - $ 7,057 $ 2,291 $ (21) $ 9,327
Balance at Dec. 31, 2023 100 $ - $ 7,412 $ 2,350 $ (20) $ 9,742
Net income 219 219
Dividends declared to parent (164) (164)
Contribution of capital by parent 50 50
Balance at March 31, 2024 100 $ - $ 7,462 $ 2,405 $ (20) $ 9,847
See Notes to Consolidated Financial Statements



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PUBLIC SERVICE CO. OF COLORADO 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 PSCo as of March 31, 2024 and Dec. 31, 2023; the results of PSCo's operations, including the components of net income, comprehensive income, cash flows and changes in stockholders' 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 PSCo 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 PSCo 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 PSCo'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 PSCo 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, the financial impact of severe weather events and other natural conditions and Scope 1 and 2 greenhouse gas emissions. 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.
3. Selected Balance Sheet Data
(Millions of Dollars) March 31, 2024 Dec. 31, 2023
Accounts receivable, net
Accounts receivable $ 537 $ 548
Less allowance for bad debts (53) (56)
Accounts receivable, net $ 484 $ 492
(Millions of Dollars) March 31, 2024 Dec. 31, 2023
Inventories
Materials and supplies $ 93 $ 91
Fuel 64 83
Natural gas 39 84
Total inventories $ 196 $ 258
(Millions of Dollars) March 31, 2024 Dec. 31, 2023
Property, plant and equipment, net
Electric plant $ 16,832 $ 16,698
Natural gas plant 6,421 6,321
Common and other property 1,474 1,472
Plant to be retired (a)
1,164 1,203
Construction work in progress 1,799 1,310
Total property, plant and equipment 27,690 27,004
Less accumulated depreciation (6,088) (5,969)
Property, plant and equipment, net $ 21,602 $ 21,035
(a)Amounts include Comanche Units 2 and 3, Craig Units 1 and 2, Hayden Units 1 and 2 and coal generation assets at Pawnee pending facility gas conversion. Amounts are presented net of accumulated depreciation.
4. Borrowings and Other Financing Instruments
Short-Term Borrowings
PSCo 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 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 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.
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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 $ 250 $ 250
Amount outstanding at period end 250 51
Average amount outstanding 91 23
Maximum amount outstanding 250 250
Weighted average interest rate, computed on a daily basis 5.33 % 5.31 %
Weighted average interest rate at period end 5.33 5.34
Commercial Paper - Commercial paper outstanding:
(Amounts in Millions, Except Interest Rates) Three Months Ended March 31, 2024 Year Ended Dec. 31, 2023
Borrowing limit $ 700 $ 700
Amount outstanding at period end 268 320
Average amount outstanding 270 124
Maximum amount outstanding 492 454
Weighted average interest rate, computed on a daily basis 5.58 % 5.17 %
Weighted average interest rate at period end 5.49 5.56
Letters of Credit- PSCo uses letters of credit, generally with terms of one year, to provide financial guarantees for certain obligations. At March 31, 2024 and Dec. 31, 2023, there were $30 million and $29 million, respectively,of letters of credit outstanding under the credit facility. Amounts approximate their fair value and are subject to fees.
Revolving Credit Facility- In order to issue its commercial paper, PSCo must have a revolving credit facility equal to or greater than the amount of its 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.
PSCo has the right to request an extension of the revolving credit facility termination date for two additional one-year periods. All extension requests are subject to majority bank group approval.
At March 31, 2024, PSCo had the following committed revolving credit facility available (in millions of dollars):
Credit Facility (a)
Drawn (b)
Available
$ 700 $ 298 $ 402
(a)Expires in September 2027.
(b)Includes outstanding commercial paper and letters of credit.
All credit facility bank borrowings, outstanding letters of credit and outstanding commercial paper reduce the available capacity under the credit facility. PSCo had no direct advances on the credit facility outstanding at March 31, 2024 and Dec. 31, 2023.
Long-Term Borrowings
On April 4, 2024, PSCo issued $450 million of 5.35% First Mortgage Bonds due May 15, 2034 and $750 million of 5.75% First Mortgage Bonds due May 15, 2054.
5. Revenues
Revenue is classified by the type of goods/services rendered and market/customer type. PSCo's operating revenues consisted of the following:
Three Months Ended March 31, 2024
(Millions of Dollars) Electric Natural Gas All Other Total
Major revenue types
Revenue from contracts with customers:
Residential $ 329 $ 400 $ 3 $ 732
C&I 418 162 10 590
Other 14 - - 14
Total retail 761 562 13 1,336
Wholesale 62 - - 62
Transmission 24 - - 24
Other 14 40 - 54
Total revenue from contracts with customers 861 602 13 1,476
Alternative revenue and other 62 11 - 73
Total revenues $ 923 $ 613 $ 13 $ 1,549
Three Months Ended March 31, 2023
(Millions of Dollars) Electric Natural Gas All Other Total
Major revenue types
Revenue from contracts with customers:
Residential $ 333 $ 541 $ 4 $ 878
C&I 423 216 12 651
Other 14 - - 14
Total retail 770 757 16 1,543
Wholesale 75 - - 75
Transmission 25 - - 25
Other 11 44 - 55
Total revenue from contracts with customers 881 801 16 1,698
Alternative revenue and other 39 10 - 49
Total revenues $ 920 $ 811 $ 16 $ 1,747
6. Income Taxes
Reconciliation between the statutory rate and ETR:
Three Months Ended March 31
2024 2023
Federal statutory rate 21.0 % 21.0 %
State tax (net of federal tax effect) 3.5 3.5
(Decreases) increases:
Wind PTCs (a)
(11.6) (11.7)
Plant regulatory differences (b)
(5.1) (4.8)
Other tax credits, net operating loss & tax credit allowances (1.3) (0.9)
Other (net) (0.1) 0.3
Effective income tax rate 6.4 % 7.4 %
(a)Wind PTCs net of estimated transfer discounts are credited to customers (reduction to revenue) and do not materially impact net income.
(b)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:
Interest rate derivatives -Fair values of interest rate derivatives are based on broker quotes that utilize current market interest rate forecasts.
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
PSCo enters into derivative instruments, including forward contracts, futures, swaps and options, for trading purposes and to manage risk in connection with changes in interest rates and utility commodity prices.
Interest Rate Derivatives-PSCo enters into contracts that effectively fix the interest rate on a specified principal amount of a hypothetical future debt issuance. These financial swaps net settle based on changes in a specified benchmark interest rate, acting as a hedge of changes in market interest rates that will impact specified anticipated debt issuances. These derivative instruments are designated as cash flow hedges for accounting purposes, with changes in fair value prior to occurrence of the hedged transactions recorded as other comprehensive income.
As of March 31, 2024, accumulated other comprehensive loss related to interest rate derivatives included $1 million of net losses expected to be reclassified into earnings during the next 12 months as the hedged transactions impact earnings. As of March 31, 2024, PSCo had no unsettled interest rate derivatives.
Wholesale and Commodity Trading -PSCo conducts various wholesale and commodity trading activities, including the purchase and sale of electric capacity, energy, energy-related instruments and natural gas-related instruments, including derivatives. PSCo is allowed to conduct these activities within guidelines and limitations as approved by its risk management committee, comprised of management personnel not directly involved in the activities governed by this policy.
Results of derivative instrument transactions entered into for trading purposes are presented in the consolidated statements of income as electric revenues, net of any sharing with customers. These activities are not intended to mitigate commodity price risk associated with regulated electric and natural gas operations. Sharing of these margins is determined through state regulatory proceedings as well as the operation of the FERC-approved joint operating agreement.
Commodity Derivatives-PSCo 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 energy or energy-related products, natural gas to generate electric energy, natural gas for resale, and vehicle fuel.
When PSCo enters into derivative instruments that mitigate commodity price risk on behalf of electric and natural gas customers, the instruments are not typically designated as qualifying hedging transactions. The classification of unrealized losses or gains on these instruments as a regulatory asset or liability, if applicable, is based on approved regulatory recovery mechanisms.
As of March 31, 2024, PSCo had no commodity contracts designated as cash flow hedges.
Gross notional amounts of commodity forwards and options:
(Amounts in Millions) (a)(b)
March 31, 2024 Dec. 31, 2023
Megawatt hours of electricity 2 2
Million British thermal units of natural gas 17 20
(a)Not reflective of net positions in the underlying commodities.
(b)Notional amounts for options included on a gross basis, but weighted for the probability of exercise.
Consideration of Credit Risk and Concentrations-PSCo 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.
PSCo's most significant concentrations of credit risk with particular entities or industries are contracts with counterparties to its wholesale, trading and non-trading commodity activities.
As of March 31, 2024, four of PSCo's ten most significant counterparties for these activities, comprising $25 million, or 39%, of this credit exposure, had investment grade credit ratings from S&P Global Ratings, Moody's Investor Services or Fitch Ratings.
Six of the ten most significant counterparties, comprising $25 million, or 40%, of this credit exposure, were not rated by these external ratings agencies, but based on PSCo's internal analysis, had credit quality consistent with investment grade.
None of these significant counterparties, had credit quality less than investment grade, based on internal analysis. Eight of these significant counterparties are independent system operators, municipal or cooperative electric entities, Regional Transmission Organizations or other utilities.
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Credit Related Contingent Features - Contract provisions for derivative instruments that PSCo enters into, including those accounted for as normal purchase and normal sale contracts and therefore not reflected on the consolidated balance sheets, may require the posting of collateral or settlement of the contracts for various reasons, including if PSCo's credit ratings are downgraded below its investment grade credit rating by any of the major credit rating agencies.
As of March 31, 2024 and Dec. 31, 2023, there were no derivative liabilities position with such underlying contract provisions.
Certain contracts also contain cross default provisions that may require the posting of collateral or settlement of the contracts if there was a failure under other financing arrangements related to payment terms or other covenants.
As of March 31, 2024 and Dec. 31, 2023, there were $2 million and $8 million of derivative instruments in a liability position with such underlying contract provisions, respectively.
Certain derivative instruments are also subject to contract provisions that contain adequate assurance clauses. These provisions allow counterparties to seek performance assurance, including cash collateral, in the event that PSCo's ability to fulfill its contractual obligations is reasonably expected to be impaired. PSCo had no collateral posted related to adequate assurance clauses in derivative contracts as of March 31, 2024 and Dec. 31, 2023.
Recurring Derivative Fair Value Measurements
Changes in the fair value of natural gas commodity derivatives recognized as regulatory assets and liabilities included immaterial net losses for the three months ended March 31, 2024 and 2023. The classification as a regulatory asset or liability is based on commission approved regulatory recovery mechanisms.
Pre-Tax Losses Reclassified into Income During the Period from: Pre-Tax Gains (Losses) Recognized During the Period in Income
(Millions of Dollars) Regulatory Assets and Liabilities
Three Months Ended March 31, 2024
Other derivative instruments
Commodity trading $ - $ (8)
(a)
Natural gas commodity -

(8)
(b)(c)
Total $ - $ (16)
Three Months Ended March 31, 2023
Other derivative instruments
Natural gas commodity $ 9
(b)
$ (12)
(b)(c)
Total $ 9 $ (12)
(a)Recorded to electric revenues. Presented amounts do not reflect non-derivative transactions or margin sharing with customers.
(b)Other than $2 million of 2024 losses recorded to electric fuel and purchased power, amounts are recorded to cost of natural gas sold and transported. Amounts are subject to cost-recovery mechanisms and reclassified out of income to a regulatory asset, as appropriate.
(c)Relates primarily to option premium amortization.
PSCo had no derivative instruments designated as fair value hedges during the three months ended March 31, 2024 and 2023.

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Derivative assets and liabilities measured at fair value on a recurring basis were as follows:
March 31, 2024 Dec. 31, 2023
Fair Value Fair Value Total
Netting (a)
Total Fair Value Fair Value Total
Netting (a)
Total
(Millions of Dollars) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Current derivative assets
Other derivative instruments:
Commodity trading $ 1 $ 11 $ - $ 12 $ (7) $ 5 $ 1 $ 19 $ - $ 20 $ (17) $ 3
Natural gas commodity - - - - - - - 8 - 8 - 8
Total current derivative assets $ 1 $ 11 $ - $ 12 $ (7) $ 5 $ 1 $ 27 $ - $ 28 $ (17) $ 11
Noncurrent derivative assets
Other derivative instruments:
Commodity trading $ 6 $ 6 $ - $ 12 $ - $ 12 $ 6 $ 9 $ - $ 15 $ - $ 15
Total noncurrent derivative assets $ 6 $ 6 $ - $ 12 $ - $ 12 $ 6 $ 9 $ - $ 15 $ - $ 15
March 31, 2024 Dec. 31, 2023
Fair Value Fair Value Total
Netting (a)
Total Fair Value Fair Value Total
Netting (a)
Total
(Millions of Dollars) Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Current derivative liabilities
Other derivative instruments:
Commodity trading $ - $ 16 $ - $ 16 $ (8) $ 8 $ 1 $ 25 $ - $ 26 $ (17) $ 9
Natural gas commodity - - - - - - - 8 - 8 - 8
Total current derivative liabilities $ - $ 16 $ - $ 16 $ (8) $ 8 $ 1 $ 33 $ - $ 34 $ (17) $ 17
Noncurrent derivative liabilities
Other derivative instruments:
Commodity trading $ 2 $ 1 $ - $ 3 $ (3) $ - $ 2 $ 1 $ - $ 3 $ (3) $ -
Total noncurrent derivative liabilities $ 2 $ 1 $ - $ 3 $ (3) $ - $ 2 $ 1 $ - $ 3 $ (3) $ -
(a)PSCo nets derivative instruments and related collateral on its consolidated balance sheets when supported by a legally enforceable master netting agreement. At March 31, 2024 and Dec. 31, 2023, derivative assets and liabilities include no obligations to return cash collateral. At both March 31, 2024 and Dec. 31, 2023, derivative assets and liabilities include rights to reclaim cash collateral of $4 million. Counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.
Changes in Level 3 commodity derivatives:
Three Months Ended March 31
(Millions of Dollars) 2024 2023
Balance at Jan. 1 $ - $ 9
Net transactions recorded during the period:
Gains recognized in earnings (a)
- 1
Balance at March 31 $ - $ 10
(a)Relates to commodity trading and is subject to substantial offsetting losses and gains on derivative instruments categorized as levels 1 and 2 in the consolidated income statement. See above tables for the income statement impact of derivative activity, including commodity trading gains and losses.
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 $ 7,452 $ 6,319 $ 7,450 $ 6,580
Fair value of PSCo'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 (Credit)
Three Months Ended March 31
2024 2023 2024 2023
(Millions of Dollars) Pension Benefits Postretirement Health
Care Benefits
Service cost $ 5 $ 5 $ - $ -
Interest cost (a)
14 14 4 4
Expected return on plan assets (a)
(19) (19) (4) (4)
Amortization of net loss (a)
2 1 1 1
Net periodic benefit cost 2 1 1 1
Effects of regulation - 3 - -
Net benefit cost recognized for financial reporting $ 2 $ 4 $ 1 $ 1
(a)The components of net periodic cost other than the service cost component are included in the line item "Other income, 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 PSCo. Xcel Energy does not expect additional pension contributions during 2024.
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9. Commitments and Contingencies
Legal
PSCo 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, 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 PSCo's consolidated financial statements. Legal fees are generally expensed as incurred.
Comanche Unit 3 Litigation - In 2021, CORE filed a lawsuit in Denver County District Court, alleging PSCo breached ownership agreement terms by failing to operate Comanche Unit 3 in accordance with prudent utility practices. In April 2022, CORE filed a supplement to include damages related to a 2022 outage. Also in 2022, CORE sent notice of withdrawal from the ownership agreement based on the same alleged breaches.
In October 2023, the jury ruled that CORE may not withdraw as a joint owner of the facility but awarded CORE lost power damages of $26 million. PSCo recognized $35 million of losses for the verdict in 2023, including estimated interest and other costs. In early 2024, PSCo and CORE each filed appeals of the trial court's decision to the Colorado Court of Appeals.
Marshall Wildfire
In December 2021, a wildfire ignited in Boulder County, Colorado (the "Marshall Fire"), which burned over 6,000 acres and destroyed or damaged over 1,000 structures. On June 8, 2023, the Boulder County Sheriff's Office released its Marshall Fire Investigative Summary and Review and its supporting documents (the "Sheriff's Report"). According to an October 2022 statement from the Colorado Insurance Commissioner, the Marshall Fire is estimated to have caused more than $2 billion in property losses.
According to the Sheriff's Report, on Dec. 30, 2021, a fire ignited on a residential property in Boulder, Colorado, located in PSCo's service territory, for reasons unrelated to PSCo's power lines. According to the Sheriff's Report, approximately one hour and 20 minutes after the first ignition, a second fire ignited just south of the Marshall Mesa Trailhead in unincorporated Boulder County, Colorado, also located in PSCo's service territory. According to the Sheriff's Report, the second ignition started approximately 80 to 110 feet away from PSCo's power lines in the area.
The Sheriff's Report states that the most probable cause of the second ignition was hot particles discharged from PSCo's power lines after one of the power lines detached from its insulator in strong winds, and further states that it cannot be ruled out that the second ignition was caused by an underground coal fire. According to the Sheriff's Report, no design, installation or maintenance defects or deficiencies were identified on PSCo's electrical circuit in the area of the second ignition. PSCo disputes that its power lines caused the second ignition.
PSCo is aware of 302 complaints, most of which have also named Xcel Energy Inc. and Xcel Energy Services Inc. as additional defendants, relating to the Marshall Fire. The complaints are on behalf of at least4,047plaintiffs, and one complaint is filed on behalf of a putative class of first responders who allegedly were exposed to the threat of serious bodily injury, or smoke, soot and ash from the Marshall Fire. The complaints generally allege that PSCo's equipment ignited the Marshall Fire and assert various causes of action under Colorado law, including negligence, premises liability, trespass, nuisance, wrongful death, willful and wanton conduct, negligent infliction of emotional distress, loss of consortium and inverse condemnation. In addition to seeking compensatory damages, certain of the complaints also seek exemplary damages.
In September 2023, the Boulder County District Court Judge consolidated eight lawsuits that were pending at that time into a single action for pretrial purposes and has subsequently consolidated additional lawsuits that have been filed. At the case management conference in February 2024, a trial date was set for September 2025. Discovery is now underway.
Colorado courts do not apply strict liability in determining an electric utility company's liability for fire-related damages. For inverse condemnation claims, Colorado courts assess whether a defendant acted with intent to take a plaintiff's property or intentionally took an action which has the natural consequence of taking the property. For negligence claims, Colorado courts look to whether electric power companies have operated their system with a heightened duty of care consistent with the practical conduct of its business, and liability does not extend to occurrences that cannot be reasonably anticipated.
Colorado law does not impose joint and several liability in tort actions. Instead, under Colorado law, a defendant is liable for the degree or percentage of the negligence or fault attributable to that defendant, except where the defendant conspired with another defendant. A jury's verdict in a Colorado civil case must be unanimous. Under Colorado law, in a civil action other than a medical malpractice action, the total award for noneconomic loss is capped at $0.6 million per defendant for claims that accrued at the time of the Marshall Fire unless the court finds justification to exceed that amount by clear and convincing evidence, in which case the maximum doubles.
Colorado law caps punitive or exemplary damages to an amount equal to the amount of the actual damages awarded to the injured party, except the court may increase any award of punitive damages to a sum up to three times the amount of actual damages if the conduct that is the subject of the claim has continued during the pendency of the case or the defendant has acted in a willful and wanton manner during the action which further aggravated plaintiff's damages.
In the event Xcel Energy Inc. or PSCo was found liable related to this litigation and were required to pay damages, such amounts could exceed our insurance coverage of approximately $500 million and have a material adverse effect on our financial condition, results of operations or cash flows. However, due to uncertainty as to the cause of the fire and the extent and magnitude of potential damages, Xcel Energy Inc. and PSCo are unable to estimate the amount or range of possible losses in connection with the Marshall Fire.
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Rate Matters
PSCo 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 consolidated financial statements.
Environmental
New and changing federal and state environmental mandates can create financial liabilities for PSCo, 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. PSCo 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 PSCo is alleged to have sent wastes to that site.
MGP, Landfill and Disposal Sites
PSCo is investigating, remediating or performing post-closure actions at two MGP, landfill or other disposal sites across its service territory, excluding sites that are being addressed under current coal ash regulations (see below).
PSCo has recognized approximately $6 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
Coal Ash Regulation - PSCo's operations are subject to federal and state regulations that impose requirements for handling, storage, treatment and disposal of solid waste, including the CCR Rule. As a specific requirement of the CCR Rule, utilities must complete groundwater sampling around their applicable landfills and surface impoundments as well as perform corrective actions where offsite groundwater has been impacted.
If certain impacts to groundwater are detected, utilities are required to perform additional groundwater investigations and/or perform corrective actions beginning with an Assessment of Corrective Measures.
Investigation and/or corrective action related to groundwater impacts are currently underway at four PSCo sites under the federal CCR program at a current estimated cost of at least $40 million. A liability has been recorded, deferred accounting related to these costs has been approved by the CPUC and amounts are expected to be fully recoverable through regulatory mechanisms.
For required coal ash disposal, PSCo has executed an agreement with a third party that will excavate and process ash for beneficial use (at two sites) at a cost of approximately $45 million. An estimated liability has been recorded, deferred accounting related to these costs has been approved by the CPUC and amounts are expected to be fully recoverable through regulatory mechanisms.
Leases
PSCo evaluates contracts that may contain leases, including PPAs and arrangements for the use of office space and other facilities, vehicles and equipment. A contract contains a lease if it conveys the exclusive right to control the use of a specific asset.
Components of lease expense:
Three Months Ended March 31
(Millions of Dollars) 2024 2023
Operating leases
PPA capacity payments $ 21 $ 22
Other operating leases (a)
5 5
Total operating lease expense(b)
$ 26 $ 27
Finance leases
Amortization of ROU assets $ 1 $ 1
Interest expense on lease liability 4 4
Total finance lease expense $ 5 $ 5
(a)Includes immaterial short-term lease expense for both 2024 and 2023.
(b)PPA capacity payments are included in electric fuel and purchased power on the consolidated statements of income. Expense for other operating leases is included in O&M expense and electric fuel and purchased power.
Commitments under operating and finance leases as of March 31, 2024:
(Millions of Dollars) PPA Operating Leases Other Operating Lease Total Operating Leases Finance Leases
Total minimum obligation $ 348 $ 55 $ 403 $ 413
Interest component of obligation (31) (6) (37) (300)
Present value of minimum obligation $ 317 $ 49 366 113
Less current portion (102) (3)
Noncurrent operating and finance lease liabilities $ 264 $ 110
Variable Interest Entities
Under certain PPAs, PSCo purchases power from IPPs for which PSCo is required to reimburse fuel costs, or to participate in tolling arrangements under which PSCo procures the natural gas required to produce the energy that it purchases. PSCo has determined that certain IPPs are VIEs, however PSCo is not subject to risk of loss from the operations of these entities, and no significant financial support is required other than contractual payments for energy and capacity.
PSCo evaluated each of these VIEs for possible consolidation, including review of qualitative factors such as the length and terms of the contract, control over O&M, control over dispatch of electricity, historical and estimated future fuel and electricity prices and financing activities. PSCo concluded that these entities are not required to be consolidated in its consolidated financial statements because PSCo does not have the power to direct the activities that most significantly impact the entities' economic performance.
PSCo had approximately 1,207 MW of capacity under long-term PPAs at both March 31, 2024 and Dec. 31, 2023, with entities that have been determined to be VIEs. These agreements have expiration dates through 2032.
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10. Other Comprehensive Income
Changes in accumulated other comprehensive loss, net of tax:
Three Months Ended March 31, 2024 Three Months Ended March 31, 2023
(Millions of Dollars) Gains and Losses on Cash Flow Hedges Defined Benefit Pension and Postretirement Items Total Gains and Losses on Cash Flow Hedges Defined Benefit Pension and Postretirement Items Total
Accumulated other comprehensive loss at Jan. 1 $ (19) $ (1) $ (20) $ (20) $ (2) $ (22)
Losses reclassified from net accumulated other comprehensive loss:
Amortization of net actuarial loss (a)
- - - - 1 1
Net current period other comprehensive income - - - - 1 1
Accumulated other comprehensive loss at March 31 $ (19) $ (1) $ (20) $ (20) $ (1) $ (21)
(a)Included in the computation of net periodic pension and postretirement benefit costs. See Note 8 for further information.
11. Segment Information
PSCo 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.
PSCo has the following reportable segments:
•Regulated Electric - The regulated electric utility segment generates electricity which is transmitted and distributed in Colorado. This segment includes sales for resale and provides wholesale transmission service to various entities in the United States. The regulated electric utility segment also includes PSCo's wholesale commodity and trading operations.
•Regulated Natural Gas- The regulated natural gas utility segment transports, stores and distributes natural gas in portions of Colorado.
PSCo also presents All Other, which includes operating segments with revenues below the necessary quantitative thresholds. Those operating segments primarily include steam revenue, appliance repair and non-utility real estate activities.
Asset and capital expenditure information is not provided for PSCo's reportable segments because, as an integrated electric and natural gas utility, PSCo operates significant assets that are not dedicated to a specific business segment and 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.
PSCo's segment information:
Three Months Ended March 31
(Millions of Dollars) 2024 2023
Regulated Electric
Total revenues $ 923 $ 920
Net income 122 99
Regulated Natural Gas
Total revenues $ 613 $ 811
Net income 93 113
All Other
Total revenues (a)
$ 13 $ 16
Net income 4 2
Consolidated Total
Total revenues (a)
$ 1,549 $ 1,747
Net income 219 214
(a)Total revenues include $1 million of other affiliate revenue for both the three months ended March 31, 2024 and 2023.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Discussion of financial condition and liquidity for PSCo 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.
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PSCo'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 PSCo'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 PSCo. 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
PSCo's net income was $219 million for the three months ended March 31, 2024 compared with $214 million for the prior year. The change was driven by increased recovery of electric infrastructure investments, which was offset by unfavorable weather and increased depreciation and interest charges.
Electric Revenues
Electric revenues are impacted by fluctuations in the price of natural gas, coal and uranium, regulatory outcomes, market prices and seasonality. In addition, electric customers receive a credit for PTCs generated, which reduce electric revenue and income taxes. In the first quarter, electric revenues increased $3 million.
(Millions of Dollars) Three Months Ended March 31, 2024 vs. 2023
Regulatory rate outcomes $ 20
Non-fuel riders 19
Recovery of lower cost of electric fuel and purchased power (43)
Wholesale generation revenues (8)
Other, net 15
Total increase $ 3
Natural Gas Revenues
Natural gas revenues vary with changing sales, the cost of natural gas and regulatory outcomes. In the first quarter, natural gas revenues decreased $198 million.
(Millions of Dollars) Three Months Ended March 31, 2024 vs. 2023
Recovery of lower cost of natural gas $ (180)
Estimated impact of weather (27)
Retail sales growth 8
Other (net) 1
Total decrease $ (198)
Electric Fuel and Purchased Power - Expenses incurred for electric fuel and purchased power are impacted by fluctuations in market prices of natural gas and coal, 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 decreased $41 million for the first quarter of 2024. The decrease is primarily due to lower commodity prices, partially offset by increased volumes.
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 $182 million for the first quarter of 2024. The decrease is primarily due to lower commodity prices and volumes, partially offset by timing of deferred fuel costs.
Non-Fuel Operating Expenses and Other Items
Depreciation and Amortization -Depreciation and amortization expense increased $16 million for the first quarter of 2024. The increase was primarily due to system expansion.
Interest Charges - Interest charges increased $15 million for the first quarter of 2024, largely due to higher interest rates and increased long-term debt levels to fund capital investments.
Public Utility Regulation and Other
The FERC and state and local regulatory commissions regulate PSCo. PSCo is subject to rate regulation by state utility regulatory agencies, which have jurisdiction with respect to the rates of electric and natural gas distribution companies in Colorado.
Rates are designed to recover plant investment, operating costs and an allowed return on investment. PSCo requests changes in utility rates through commission filings. Changes in operating costs can affect PSCo's financial results, depending on the timing of rate cases 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 PSCo's results of operations.
Except to the extent noted below, the circumstances set forth in Public Utility Regulation included in Item 7 of PSCo'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 and Recently Concluded Regulatory Proceedings
Colorado Natural Gas Rate Case - In January 2024, PSCo filed a request with the CPUC seeking an increase to retail natural gas rates of $171 million, or an approximately 9.5% increase in the average residential customer bill. The request is based on a 2023 test year, a 10.25% ROE, an equity ratio of 55% and a $4.2 billion retail rate base which includes projected capital additions through Dec. 31, 2023. PSCo has requested a proposed effective date of Nov. 1, 2024.
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PSCo has proposed to defer collection of the increased rates until Feb. 15, 2025 (following the expiration of the rider to recover Winter Storm Uri costs) to mitigate customer bill impacts, with revenues for the deferred period collected over a 12-month period beginning on that date.
Procedural schedule:
•Intervenor testimony: July 11, 2024
•Rebuttal testimony: Aug. 15, 2024
•Settlement deadline: Aug. 27, 2024
•Evidentiary hearing: Sept. 4-12, 2024
•Statement of position: Sept. 26, 2024
Colorado Resource Plan - In December 2023, the CPUC approved a portfolio of 5,835 MW, which includes approximately 3,100 MW of company owned resources and 2,700 MW of PPAs. PSCo expects to invest approximately $4.8 billion in generation resources under the portfolio for the benefit of its customers and achieving the state's clean energy goals.
In December 2023, the CPUC approved two PIMs associated with the generation projects in the portfolio, including a two-way sharing measure related to capital construction costs and another related to ongoing levelized energy costs. These PIMs will be further defined in related proceedings throughout 2024.
In March 2024, PSCo filed its first CPCN for the Rocky Mountain and Arroyo 2 solar projects on an expedited basis in order to begin construction in time for planned in-service dates in 2025 and 2026. PSCo expects to file additional generation and transmission CPCNs throughout the remainder of 2024.
Transportation Electrification Plan - In April 2024, the CPUC approved PSCo's TEP with modification, including a three-year budget of $264 million and continued cost recovery through the TEP rider. The CPUC approved PSCo's proposal to offer rebates for residential chargers and wiring to be paired with residential managed charging programs and vehicle rebates for Income-Qualified customers, as well as its proposal to offer rebates for commercial public chargers and electric vehicle supply infrastructure. Additionally, the CPUC approved PSCo's proposed budget to support innovation projects including electric school buses, Vehicle-to-Everything demonstrations, and stakeholder-driven projects with a focus on disproportionately impacted communities. The Commission also approved a WACC return on rebates with a 3-year amortization.
Wildfire Mitigation Plan - PSCo will file a Wildfire Mitigation Plan and request for recovery of costs to execute the plan in the second quarter of 2024. The plan will include a number of new and expanded programs from the currently approved Wildfire Mitigation Plan including distribution undergrounding, distribution covered conductor, enhanced wildfire safety settings, increased scope and scale for vegetation management, updated frequency of inspections of poles and other equipment in wildfire risk zones, transmission line rebuilds, proactive line de-energization and situational awareness programs including weather stations, cameras, and other monitoring software.
CPUC Proactive Line De-Energization Investigation - In early April 2024, PSCo proactively de-energized certain lines in Colorado due to winds that were over 90 MPH to reduce potential wildfire risk. Later in April, the CPUC opened a Miscellaneous Proceeding to seek information on:
•Utility operations during, after, and leading up to the wind event to identify risks, de-energize lines and re-energize lines.
•Customer communications (including what was communicated to whom and when).
•Community engagement to assess the coordination with neighboring electric providers, telecom companies, 911, medical providers, and other first responders and community leaders.
The CPUC held sessions to hear public comments and will hold Commissioner Information Meetings in May 2024 to hear directly from PSCo, impacted customers, and other first responders and community leaders on power shutoffs. A potential order, rules, procedures or report is expected later this year.
Colorado Legislation- In May 2023, Colorado Senate Bill 23-291 passed and was signed into law. The bill includes a number of topics including natural gas and electric fuel incentive mechanisms, natural gas planning rules, regulatory filing requirements, and non-recovery of certain expenses (e.g., certain organizational or membership dues, tax penalties or fines).
In November 2023, the CPUC approved PSCo's natural gas price risk management plan, establishing upper and lower limits for changes in the GCA rate. As a result costs above the upper limit are deferred for future recovery, with interest, and costs below the lower limit are deferred as a reserve against future cost increases.
The legislation also calls for the CPUC to adopt rules to establish fuel cost mechanisms to align the financial incentives of a utility with the interests of the utility's customers by Jan. 1, 2025. In the first quarter of 2024, the CPUC discussed proposed rules for the gas utility. The written notice of the proposed rule is expected in the second quarter of 2024, which will be followed by a comment period. The Commission's proposed rules for electric utilities are expected later in 2024.
Other
Supply Chain
PSCo's ability to meet customer energy requirements, respond to storm-related disruptions and execute our capital expenditure program are dependent on maintaining an efficient supply chain. Manufacturing processes have experienced disruptions related to scarcity of certain raw materials and interruptions in production and shipping. These disruptions have been further exacerbated by inflationary pressures, labor shortages and the impact of international conflicts/issues. PSCo continues to monitor the situation as it remains fluid and seeks to mitigate the impacts by securing alternative suppliers, modifying design standards, and adjusting the timing of work.
Solar Resources
In August 2023, the U.S. Department of Commerce completed its anti-circumvention investigation and concluded that CSPV solar panels and cells imported from Malaysia, Vietnam, Thailand, and Cambodia would be subject to incremental tariffs ranging from 50% to 250%. These countries account for more than 80% of CSPV panel imports.
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An interim stay on tariffs remains in effect until June 2024 and many significant solar projects have resumed with modified costs and projected in-service dates, including certain PPAs in PSCo. Further policy action, a change in the interim stay of tariffs, or other restrictions on solar imports (e.g., as a result of implementation of the Uyghur Forced Labor Protection Act), disruptions in solar imports from key suppliers or any new trade complaint could impact project timelines and costs.
On April 24, 2024, the American Alliance for Solar Manufacturing Trade Committee filed a petition related to new anti-dumping and countervailing duty cases targeting solar products from Cambodia, Malaysia, Thailand and Vietnam with the United States Department of Commerce and the United States International Trade Commission. PSCo continues to assess the impacts (if any) of this trade complaint on its business.
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. PSCo 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.
Coal Ash Regulation
In April 2024, the EPA published final rules to regulate additional areas under the CCR Rule for the first time, including legacy CCR surface impoundments at inactive facilities and previously exempt areas where CCR was placed directly on land at regulated CCR facilities. The rule subjects these areas to groundwater monitoring, corrective action and closure and post-closure care requirements, among other requirements, with several of the deadlines accelerated. PSCo believes that the cost of these requirements would be recoverable through rates based on prior state commission practices. In January 2024, PSCo received approval from the CPUC for deferred accounting for costs associated with compliance with the legacy CCR rule.
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. PSCo 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.
Effluent Limitation Guidelines
In April 2024, the EPA published final rules under the Clean Water Act, setting forth Effluent Limitations Guidelines and Standards for steam generating coal plants. This rule establishes more stringent wastewater discharge standards for bottom ash transport water, flue-gas desulfurization wastewater, and combustion residuals leachate from steam electric power plants, particularly coal-fired power plants. PSCo continues to evaluate the impact of these rules and believes that any costs associated with these requirements would be recoverable through rates based on prior state commission practices.
ITEM 4 - CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
PSCo 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 PSCo's management, including the CEO and CFO, of the effectiveness of its disclosure controls and procedures, the CEO and CFO have concluded that PSCo's disclosure controls and procedures were effective.
Internal Control Over Financial Reporting
No changes in PSCo's internal control over financial reporting occurred during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, PSCo's internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
PSCo 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 PSCo'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.
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ITEM 1A - RISK FACTORS
PSCo'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*
PSCo Form 10-Q for the quarter ended Sept. 30, 2017 3.01
3.02*
PSCo Form 10-K for the year ended Dec. 31, 2018 3.02
PSCo Form 8-K dated April 4, 2024 4.01
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.
Public Service Company of Colorado
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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