Fair Value of Financial Assets and Liabilities

12 Months Ended

Dec. 31, 2022

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:

Commodity derivatives — Methods used to measure the fair value of commodity derivative forwards and options utilize forward prices and volatilities, as well as pricing adjustments for specific delivery locations, and are generally assigned a Level 2 classification. When contracts relate to inactive delivery locations or extend to periods beyond those readily observable on active exchanges, the significance of the use of less observable inputs on a valuation is evaluated, and may result in Level 3 classification.

Derivative Activities and Fair Value Measurements

NSP-Wisconsin enters into derivative instruments, including forward contracts, futures, swaps and options, to manage risk in connection with changes in utility commodity prices.

Commodity Derivatives — NSP-Wisconsin enters into derivative instruments to manage variability of future cash flows from changes in commodity prices in its electric and natural gas operations. This could include the purchase or sale of natural gas to generate electric energy and natural gas for resale.

As of Dec. 31, 2022, NSP-Wisconsin had no commodity contracts designated as cash flow hedges.

Consideration of Credit Risk and Concentrations — NSP-Wisconsin continuously monitors the creditworthiness of counterparties to its interest rate derivatives and commodity derivative contracts prior to settlement, and assesses each counterparty’s ability to perform on the transactions set forth in the contracts. Impact of credit risk was immaterial to the fair value of unsettled commodity derivatives presented on the consolidated balance sheets.

Recurring Derivative Fair Value Measurements

Impact of derivative activity:

Pre-Tax Fair Value Gains (Losses) Recognized During the Period in:
(Millions of Dollars)	Regulatory (Assets) and Liabilities
Year Ended Dec. 31, 2022
Other derivative instruments
Natural gas commodity	(1)
Total	$	(1)
Year Ended Dec. 31, 2021
Other derivative instruments
Natural gas commodity	(1)
Total	$	(1)
Year Ended Dec. 31, 2020
Other derivative instruments
Natural gas commodity	(1)
Total	$	(1)

Pre-Tax (Gains) 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)
Year Ended Dec. 31, 2022
Other derivative instruments
Natural gas commodity	—			(2)		(a)
Total	$	—		$	(2)
Year Ended Dec. 31, 2021
Other derivative instruments
Natural gas commodity	—			(1)		(a)
Total	$	—		$	(1)
Year Ended Dec. 31, 2020
Other derivative instruments
Natural gas commodity	1		(a)	(1)		(a)
Total	$	1		$	(1)

(a)    Recorded to cost of natural gas sold and transported. These losses are subject to cost-recovery mechanisms and reclassified out of income to a regulatory asset, as appropriate.

NSP-Wisconsin had no derivative instruments designated as fair value hedges during the years ended Dec. 31, 2022, 2021 and 2020.

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

	Dec. 31, 2022												Dec. 31, 2021
	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 (b)
Natural gas commodity	$	—	$	2	$	—	$	2	$	—	$	2	$	—	$	1	$	—	$	1	$	—	$	1
Current derivative liabilities (c)
Natural gas commodity	$	—	$	1	$	—	$	1	$	—	$	1	$	—	$	1	$	—	$	1	$	—	$	1

(a)NSP-Wisconsin nets derivative instruments and related collateral on its consolidated balance sheets when supported by a legally enforceable master netting agreement. Counterparty netting excludes settlement receivables and payables and non-derivative amounts that may be subject to the same master netting agreements.

(b)Included in prepayments and other current assets at Dec. 31, 2022 and Dec. 31, 2021 on the consolidated balance sheet.

(c)Included in other current liabilities at Dec. 31, 2022 and Dec. 31, 2021 on the consolidated balance sheet.

Fair Value of Long-Term Debt

As of Dec. 31, other financial instruments for which the carrying amount did not equal fair value:

	2022				2021
(Millions of Dollars)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Long-term debt, including current portion	$	1,086	$	980	$	987	$	1,143

Fair value of NSP-Wisconsin’s long-term debt is estimated based on recent trades and observable spreads from benchmark interest rates for similar securities. Fair value estimates are based on information available to management as of Dec. 31, 2022 and 2021, and given the observability of the inputs, fair values presented for long-term debt were assigned as Level 2.