New and changing federal and state environmental mandates can create financial liabilities for NSP-Wisconsin, which are normally recovered through the regulated rate process.

Various federal and state environmental laws impose liability where hazardous substances or other regulated materials have been released to the environment. NSP-Wisconsin may sometimes pay all or a portion of the cost to remediate sites where past activities of NSP-Wisconsin’s predecessors or other parties have caused environmental contamination. Environmental contingencies could arise from various situations, including sites of former MGPs; and third-party sites, such as landfills, for which NSP-Wisconsin is alleged to have sent wastes to that site.

Ashland MGP Site — NSP-Wisconsin was named a responsible party for contamination at the Ashland/Northern States Power Lakefront Superfund Site (the Site) in Ashland, Wisconsin. Remediation was completed in 2019 and restoration activities were completed in 2020. Groundwater treatment activities will continue for many years.

The cost estimate for remediation and restoration of the entire site is approximately $199 million. At Dec. 31, 2020 and 2019, NSP-Wisconsin had a total liability of $19 million and $23 million, respectively, for the entire site.

NSP-Wisconsin has deferred the unrecovered portion of the estimated Site remediation and restoration costs as a regulatory asset. The PSCW has authorized NSP-Wisconsin rate recovery for all remediation and restoration costs incurred at the Site and application of a 3% carrying charge to the regulatory asset.

In January 2021, the EPA confirmed that NSP-Wisconsin completed its work on the soils and sediments at the Site and all that remains is the long-term groundwater pump and treat program.

In addition to the Ashland Site, NSP-Wisconsin is currently investigating, remediating or performing post-closure actions at one other MGP, landfill or other disposal site across its service territory.

NSP-Wisconsin has recognized its best estimate of costs/liabilities that will result from final resolution of these issues, however, the outcome and timing is unknown. In addition, there may be insurance recovery and/or recovery from other potentially responsible parties, offsetting a portion of costs incurred.

Federal CWA WOTUS Rule — In April 2020, the EPA and U.S. Army Corps of Engineers (“Agencies”) replaced the 2015 WOTUS rule and narrowed the definition of WOTUS (“2020 WOTUS Rule”). The new definition simplifies the process whether waters are subject to CWA jurisdiction and streamlines the permitting process. NSP-Wisconsin does not anticipate that compliance costs will be material.

Federal CWA Section 316(b) — The federal CWA requires the EPA to regulate cooling water intake structures to assure that these structures reflect the best technology available for minimizing impingement and entrainment of aquatic species. NSP-Wisconsin estimates the likely cost for complying with impingement requirements is approximately $4 million, to be incurred between 2021 and 2028, while the total cost of entrainment improvements is anticipated to be immaterial. NSP-Wisconsin believes two plants could be required to make improvements to reduce impingement and entrainment. The exact total cost of the impingement and entrainment improvements is uncertain but could be up to $4 million. NSP-Wisconsin anticipates these costs will be fully recoverable through regulatory mechanisms.


	2020
(Millions of Dollars)	Jan. 1, 2020		Cash Flow Revisions (a)		Dec. 31, 2020 (b)
Electric
Distribution	$	5	$	—	$	5
Steam, hydro and other production	4		4		8
Natural gas
Distribution	9		—		9
Total liability (c)	$	18	$	4	$	22

(a)In 2020, AROs were revised for changes in timing and estimates of cash flows. Revisions in steam, hydro and other production AROs primarily related to changes in cost estimates for remediation of ash containment facilities.


	2019
(Millions of Dollars)	Jan. 1, 2019		Accretion		Cash Flow Revisions		Dec. 31, 2019 (a)
Electric
Distribution	$	5	$	—	$	—	$	5
Steam, hydro and other production	4		—		—		4
Natural gas
Distribution	9		1		(1)		9
Total liability (b)	$	18	$	1	$	(1)	$	18

The electric production and transmission system of NSP-Wisconsin is managed as the NSP System. The electric production and transmission costs of the entire NSP System are shared by NSP-Minnesota and NSP-Wisconsin. A FERC approved agreement between the two companies, called the Interchange Agreement, provides for the sharing of all costs of generation and transmission facilities of the system, including capital costs. Such costs include current and potential obligations of NSP-Minnesota related to its nuclear generating facilities.

NSP-Minnesota’s public liability for claims from any nuclear incident is limited to $13.8 billion under the Price-Anderson amendment to the Atomic Energy Act. NSP-Minnesota has secured $450 million of coverage for its public liability exposure with a pool of insurance companies. The remaining $13.3 billion of exposure is funded by the Secondary Financial Protection Program, available from assessments by the federal government.

NSP-Minnesota is subject to assessments of up to $138 million per reactor-incident for each of its three licensed reactors, for public liability arising from a nuclear incident at any licensed nuclear facility in the United States. The maximum funding requirement is $21 million per reactor-incident during any one year. Maximum assessments are subject to inflation adjustments by the NRC and state premium taxes. The NRC’s last adjustment was effective November 2018.

NSP-Minnesota purchases insurance for property damage and site decontamination cleanup costs from NEIL and EMANI. The coverage limits are $2.8 billion for each of NSP-Minnesota’s two nuclear plant sites. NEIL also provides business interruption insurance coverage up to $350 million, including the cost of replacement power during prolonged accidental outages of nuclear generating units. Premiums are expensed over the policy term.

All companies insured with NEIL are subject to retroactive premium adjustments if losses exceed accumulated reserve funds. Capital has been accumulated in the reserve funds of NEIL and EMANI to the extent that NSP-Minnesota would have no exposure for retroactive premium assessments in case of a single incident under the business interruption and the property damage insurance coverage. NSP-Minnesota could be subject to annual maximum assessments of approximately $11 million for business interruption insurance and $34 million for property damage insurance if losses exceed accumulated reserve funds.

NSP-Wisconsin has entered into various long-term commitments for the purchase and delivery of a significant portion of its refuse-derived fuel/wood and natural gas requirements. These contracts expire between 2021 and 2029. NSP-Wisconsin is required to pay additional amounts depending on actual quantities shipped under these agreements.

As NSP-Wisconsin does not have an automatic electric fuel adjustment clause for Wisconsin retail customers, NSP-Wisconsin utilizes deferred accounting treatment for future rate recovery or refund when fuel costs differ from the amount included in rates by more than 2% on an annual basis, as determined by the PSCW after an opportunity for a hearing and an earnings test based on NSP-Wisconsin’s authorized ROE.


(Millions of Dollars)	Refuse-derived fuel/wood		Natural gas supply		Natural gas storage and transportation
2021	$	5	$	8	$	16
2022	1		—		14
2023	1		—		11
2024	1		—		9
2025	1		—		8
Thereafter	3		—		14
Total (a)	$	12	$	8	$	72

Additional expenditures for fuel and natural gas storage and transportation will be required to meet expected future electric generation and natural gas needs.

NSP-Wisconsin has entered into limited partnerships for the construction and operation of affordable rental housing developments, which qualify for low-income housing tax credits. NSP-Wisconsin has determined the low-income housing partnerships to be VIEs primarily due to contractual arrangements within each limited partnership that establishes sharing of ongoing voting control and profits and losses that do not align with the partners’ proportional equity ownership.

NSP-Wisconsin has the power to direct the activities that most significantly impact these entities’ economic performance. Therefore, NSP-Wisconsin consolidates these limited partnerships in its consolidated financial statements. NSP-Wisconsin’s risk of loss for these partnerships is limited to its capital contributions, adjusted for any distributions and its share of undistributed profits and losses; no significant additional financial support has been, or is required to be provided to the limited partnerships by NSP-Wisconsin.


(Millions of Dollars)	Dec. 31, 2020		Dec. 31, 2019
Current assets	$	—	$	—
Property, plant and equipment, net	1		1
Other noncurrent assets	—		—
Total assets	$	1	$	1

Current liabilities	$	—	$	—
Mortgages and other long-term debt payable	1		1
Other noncurrent liabilities	—		—
Total liabilities	$	1	$	1

Guarantees — NSP-Wisconsin provides a guarantee for payment of customer loans related to NSP-Wisconsin’s farm rewiring program. NSP-Wisconsin’s exposure under the guarantee is based upon the net liability under the agreement. The guarantee issued by NSP-Wisconsin limits the exposure of NSP-Wisconsin to a maximum amount stated in the guarantee. The guarantee contains no recourse provisions and requires no collateral.

(Millions of Dollars)

Guarantor

Guarantee
Amount

Current
Exposure

Triggering
Event

Guarantee of customer loans for the Farm Rewiring Program (a)

NSP-Wisconsin

—

(b)