Fair Value of Financial Assets and Liabilities

6 Months Ended

Jun. 30, 2024

Fair Value Disclosures [Abstract]

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:

Investments in equity securities and other funds — Equity securities are valued using quoted prices in active markets. The fair values for commingled funds are measured using NAVs. The investments in commingled funds may be redeemed for NAV with proper notice. Private equity commingled funds require approval of the fund for any unscheduled redemption, and such redemptions may be approved or denied by the fund at its sole discretion. Unscheduled distributions from real estate commingled funds may be redeemed with proper notice, however, withdrawals may be delayed or discounted as a result of fund illiquidity.

Investments in debt securities — Fair values for debt securities are determined by a third party pricing service using recent trades and observable spreads from benchmark interest rates for similar securities.

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.

Electric commodity derivatives held by NSP-Minnesota and SPS include transmission congestion instruments, generally referred to as FTRs. FTRs purchased from an RTO are financial instruments that entitle or obligate the holder to monthly revenues or charges based on transmission congestion across a given transmission path.

The values of these instruments are derived from, and designed to offset, the costs of transmission congestion. In addition to overall transmission load, congestion is also influenced by the operating schedules of power plants and the consumption of electricity pertinent to a given transmission path. Unplanned plant outages, scheduled plant maintenance, changes in the relative costs of fuels used in generation, weather and overall changes in demand for electricity can each impact the operating schedules of the power plants on the transmission grid and the value of these instruments.

FTRs are recognized at fair value and adjusted each period prior to settlement. Given the limited observability of certain variables underlying the reported auction values of FTRs, these fair value measurements have been assigned a Level 3 classification.

Net congestion costs, including the impact of FTR settlements, are shared through fuel and purchased energy cost recovery mechanisms. As such, the fair value of the unsettled instruments (i.e., derivative asset or liability) is offset/deferred as a regulatory asset or liability.

Non-Derivative Fair Value Measurements

Nuclear Decommissioning Fund

The NRC requires NSP-Minnesota to maintain a portfolio of investments to fund the costs of decommissioning its nuclear generating plants. Assets of the nuclear decommissioning fund are legally restricted for the purpose of decommissioning these facilities. The fund contains cash equivalents, debt securities, equity securities and other investments. NSP-Minnesota uses the MPUC approved asset allocation for the investment targets by asset class for the qualified trust.

NSP-Minnesota recognizes the costs of funding the decommissioning over the lives of the nuclear plants, assuming rate recovery of all costs. Realized and unrealized gains on fund investments over the life of the fund are deferred as an offset of NSP-Minnesota’s regulatory asset for nuclear decommissioning costs. Consequently, any realized and unrealized gains and losses on securities in the nuclear decommissioning fund are deferred as a component of the regulatory asset.

Unrealized gains for the nuclear decommissioning fund were $1.3 billion and $1.2 billion as of June 30, 2024 and Dec. 31, 2023, respectively, and unrealized losses were $40 million and $29 million as of June 30, 2024 and Dec. 31, 2023, respectively.

Non-derivative instruments with recurring fair value measurements in the nuclear decommissioning fund:

	June 30, 2024
			Fair Value
(Millions of Dollars)	Cost		Level 1		Level 2		Level 3		NAV		Total
Nuclear decommissioning fund (a)
Cash equivalents	$	43	$	43	$	—	$	—	$	—	$	43
Commingled funds	713		—		—		—		1,036		1,036
Debt securities	834		—		801		14		—		815
Equity securities	517		1,493		1		—		—		1,494
Total	$	2,107	$	1,536	$	802	$	14	$	1,036	$	3,388

(a)Reported in nuclear decommissioning fund and other investments on the consolidated balance sheets, which also includes $251 million of equity method investments and $152 million of rabbi trust assets and other miscellaneous investments.

	Dec. 31, 2023
			Fair Value
(Millions of Dollars)	Cost		Level 1		Level 2		Level 3		NAV		Total
Nuclear decommissioning fund (a)
Cash equivalents	$	41	$	41	$	—	$	—	$	—	$	41
Commingled funds	721		—		—		—		1,049		1,049
Debt securities	784		—		771		9		—		780
Equity securities	508		1,339		2		—		—		1,341
Total	$	2,054	$	1,380	$	773	$	9	$	1,049	$	3,211

(a)Reported in nuclear decommissioning fund and other investments on the consolidated balance sheets, which also includes $244 million of equity investments in unconsolidated subsidiaries and $144 million of rabbi trust assets and other miscellaneous investments.

For the three and six months ended June 30, 2024 and 2023, there were no transfers of Level 3 investments between levels.

Contractual maturity dates of debt securities in the nuclear decommissioning fund as of June 30, 2024:

	Final Contractual Maturity
(Millions of Dollars)	Due in 1 Year or Less		Due in 1 to 5 Years		Due in 5 to 10 Years		Due after 10 Years		Total
Debt securities	$	5	$	289	$	266	$	255	$	815

Rabbi Trusts

Xcel Energy has established rabbi trusts to provide partial funding for future distributions of a deferred compensation plan. The fair value of assets held in the rabbi trusts were $94 million and $88 million at June 30, 2024 and Dec. 31, 2023, respectively, comprised of cash equivalents and mutual funds (level 1 valuation methods). Amounts are reported in nuclear decommissioning fund and other investments on the consolidated balance sheet.

Derivative Activities and Fair Value Measurements

Xcel Energy 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 — Xcel Energy 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 June 30, 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 June 30, 2024, Xcel Energy had no unsettled interest swaps outstanding.

See Note 11 for the financial impact of qualifying interest rate cash flow hedges on Xcel Energy’s accumulated other comprehensive loss included in the consolidated statements of common stockholder’s equity and in the consolidated statements of comprehensive income.

Wholesale and Commodity Trading — Xcel Energy Inc.’s utility subsidiaries conduct 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. Xcel Energy 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 — Xcel Energy 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 FTRs.

The most significant derivative positions outstanding at June 30, 2024 and Dec. 31, 2023 for this purpose relate to FTR instruments administered by MISO and SPP. These instruments are intended to offset the impacts of transmission system congestion.

When Xcel Energy 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 June 30, 2024, Xcel Energy had no commodity contracts designated as cash flow hedges.

Gross notional amounts of commodity forwards, options and FTRs:

(Amounts in Millions) (a)(b)	June 30, 2024	Dec. 31, 2023
Megawatt hours of electricity	75	48
Million British thermal units of natural gas	79	84

(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 — Xcel Energy 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.

Xcel Energy’s utility subsidiaries’ most significant concentrations of credit risk with particular entities or industries are contracts with counterparties to their wholesale, trading and non-trading commodity activities.

As of June 30, 2024, four of Xcel Energy’s ten most significant counterparties for these activities, comprising $41 million, or 21%, of this credit exposure, had investment grade credit ratings from S&P Global Ratings, Moody’s Investor Services or Fitch Ratings.

Five of the ten most significant counterparties, comprising $64 million, or 33%, of this credit exposure, were not rated by these external ratings agencies, but based on Xcel Energy’s internal analysis, had credit quality consistent with investment grade.

One of these significant counterparties, comprising $60 million, or 31%, of this credit exposure, had credit quality less than investment grade, based on internal analysis. Eight of these significant counterparties are municipal or cooperative electric entities, RTOs or other utilities.

Credit Related Contingent Features — Contract provisions for derivative instruments that the utility subsidiaries enter, 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 the applicable utility subsidiary’s credit ratings are downgraded below its investment grade credit rating by any of the major credit rating agencies.

As of June 30, 2024 and Dec. 31, 2023, there were $17 million and $12 million, respectively, of derivative liabilities with such underlying contract provisions, respectively.

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 June 30, 2024 and Dec. 31, 2023, there were approximately $86 million and $88 million of derivative liabilities 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 a given utility subsidiary’s ability to fulfill its contractual obligations is reasonably expected to be impaired.

Xcel Energy had no collateral posted related to adequate assurance clauses in derivative contracts as of June 30, 2024 and Dec. 31, 2023.

Recurring Derivative Fair Value Measurements

Impact of derivative activity:

	Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:
(Millions of Dollars)	Accumulated Other Comprehensive Loss		Regulatory Assets and Liabilities
Three Months Ended June 30, 2024
Other derivative instruments:
Electric commodity	$	—	$	42
Natural gas commodity	—		(1)
Total	$	—	$	41
Six Months Ended June 30, 2024
Derivatives designated as cash flow hedges:
Interest rate	$	29	$	—
Total	$	29	$	—
Other derivative instruments:
Electric commodity	$	—	$	41
Natural gas commodity	—		3
Total	$	—	$	44
Three Months Ended June 30, 2023
Derivatives designated as cash flow hedges:
Interest rate	$	18	$	—
Total	$	18	$	—
Other derivative instruments:
Electric commodity	$	—	$	(19)
Total	$	—	$	(19)
Six Months Ended June 30, 2023
Derivatives designated as cash flow hedges:
Interest rate	$	11	$	—
Total	$	11	$	—
Other derivative instruments:
Electric commodity	$	—	$	(111)
Natural gas commodity	—		3
Total	$	—	$	(108)

	Pre-Tax (Gains) Losses Reclassified into Income During the Period from:						Pre-Tax Gains (Losses) Recognized During the Period in Income
(Millions of Dollars)	Accumulated Other Comprehensive Loss			Regulatory Assets and Liabilities
Three Months Ended June 30, 2024
Derivatives designated as cash flow hedges:
Interest rate	$	1	(a)	$	—		$	—
Total	$	1		$	—		$	—
Other derivative instruments:
Commodity trading	$	—		$	—		$	(14)	(b)
Electric commodity	—			(15)		(c)	—
Total	$	—		$	(15)		$	(14)
Six Months Ended June 30, 2024
Derivatives designated as cash flow hedges:
Interest rate	$	2	(a)	$	—		$	—
Total	$	2		$	—		$	—
Other derivative instruments:
Commodity trading	$	—		$	—		$	(22)	(b)
Electric commodity	—			(3)		(c)	—
Natural gas commodity	—			—			(14)		(d)(e)
Total	$	—		$	(3)		$	(36)
Three Months Ended June 30, 2023
Derivatives designated as cash flow hedges:
Interest rate	$	1	(a)	$	—		$	—
Total	$	1		$	—		$	—
Other derivative instruments:
Commodity trading	$	—		$	—		$	(6)	(b)
Electric commodity	—			11		(c)	—
Total	$	—		$	11		$	(6)
Six Months Ended June 30, 2023
Derivatives designated as cash flow hedges:
Interest rate	$	3	(a)	$	—		$	—
Total	$	3		$	—		$	—
Other derivative instruments:
Commodity trading	$	—		$	—		$	(6)	(b)
Electric commodity	—			94		(c)	—
Natural gas commodity	—			10		(d)	(19)		(d)(e)
Total	$	—		$	104		$	(25)

(a)Recorded to interest charges.

(b)Recorded to electric revenues. Presented amounts do not reflect non-derivative transactions or margin sharing with customers.

(c)Recorded to electric fuel and purchased power. These derivative settlement gains and losses are shared with electric customers through fuel and purchased energy cost-recovery mechanisms, and reclassified out of income as regulatory assets or liabilities, as appropriate. FTR settlements are shared with customers and do not have a material impact on net income. Presented amounts reflect changes in fair value between auction and settlement dates, but exclude the original auction fair value.

(d)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.

(e)Relates primarily to option premium amortization.

Xcel Energy had no derivative instruments designated as fair value hedges during the six months ended June 30, 2024 and 2023.

Derivative assets and liabilities measured at fair value on a recurring basis were as follows:

	June 30, 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	$	6	$	43	$	22	$	71	$	(51)	$	20	$	8	$	51	$	32	$	91	$	(59)	$	32
Electric commodity	—		—		211		211		(3)		208		—		—		62		62		(7)		55
Natural gas commodity	—		4		—		4		—		4		—		14		—		14		—		14
Total current derivative assets	$	6	$	47	$	233	$	286	$	(54)	232		$	8	$	65	$	94	$	167	$	(66)	101
PPAs (b)											2												3
Current derivative instruments											$	234											$	104
Noncurrent derivative assets
Other derivative instruments:
Commodity trading	$	11	$	52	$	57	$	120	$	(36)	$	84	$	14	$	51	$	45	$	110	$	(34)	$	76
Total noncurrent derivative assets	$	11	$	52	$	57	$	120	$	(36)	$	84	$	14	$	51	$	45	$	110	$	(34)	$	76

	June 30, 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
Derivatives designated as cash flow hedges:
Interest rate	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	17	$	—	$	17	$	—	$	17
Other derivative instruments:
Commodity trading	$	6	$	77	$	6	$	89	$	(53)	$	36	$	6	$	86	$	5	$	97	$	(60)	$	37
Electric commodity	—		—		3		3		(3)		—		—		—		7		7		(7)		—
Natural gas commodity	—		1		—		1		—		1		—		12		—		12		—		12
Total current derivative liabilities	$	6	$	78	$	9	$	93	$	(56)	37		$	6	$	115	$	12	$	133	$	(67)	66
PPAs (b)											7												8
Current derivative instruments											$	44											$	74
Noncurrent derivative liabilities
Other derivative instruments:
Commodity trading	$	14	$	56	$	42	$	112	$	(40)	$	72	$	16	$	50	$	37	$	103	$	(39)	$	64
Total noncurrent derivative liabilities	$	14	$	56	$	42	$	112	$	(40)	72		$	16	$	50	$	37	$	103	$	(39)	64
PPAs (b)											19												22
Noncurrent derivative instruments											$	91											$	86

(a)Xcel Energy nets derivative instruments and related collateral on its consolidated balance sheets when supported by a legally enforceable master netting agreement. At June 30, 2024 and Dec. 31, 2023, derivative assets and liabilities include no obligations to return cash collateral. At June 30, 2024 and Dec. 31, 2023, derivative assets and liabilities include rights to reclaim cash collateral of $5 million and $7 million, respectively. Counterparty netting amounts presented exclude settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.

(b)Xcel Energy currently applies the normal purchase exception to qualifying PPAs. Balance relates to specific contracts that were previously recognized at fair value prior to applying the normal purchase exception, and are being amortized over the remaining contract lives along with the offsetting regulatory assets and liabilities.

Changes in Level 3 commodity derivatives:

	Three Months Ended June 30
(Millions of Dollars)	2024		2023
Balance at April 1	$	91	$	78
Purchases (a)	174		167
Settlements (a)	(110)		(47)
Net transactions recorded during the period:
Gains recognized in earnings (b)	3		10
Net gains recognized as regulatory assets and liabilities (a)	81		1
Balance at June 30	$	239	$	209
	Six Months Ended June 30
(Millions of Dollars)	2024		2023
Balance at Jan. 1	$	90	$	235
Purchases (a)	177		172
Settlements (a)	(161)		(76)
Net transactions recorded during the period:
Gains (losses) recognized in earnings (b)	3		(2)
Net gains (losses) recognized as regulatory assets and liabilities (a)	130		(120)
Balance at June 30	$	239	$	209

(a)Relates primarily to NSP-Minnesota and SPS FTR instruments administered by MISO and SPP.

(b)Relates to commodity trading and is subject to substantial offsetting losses and gains on derivative instruments categorized as levels 1 and 2 in the 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 June 30, 2024, other financial instruments for which the carrying amount did not equal fair value:

	June 30, 2024				Dec. 31, 2023
(Millions of Dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion	$	28,570	$	24,959	$	25,465	$	22,927

Fair value of Xcel Energy’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 June 30, 2024 and Dec. 31, 2023, and given the observability of the inputs, fair values presented for long-term debt were assigned as Level 2.