-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WLCw8pV/Zxxu2uINvGgD6FsG8LfIlFb9CT5f1aVkPUA1J0WYW3cTBMMU/tNHJcb3 OxQ5kEeG/2g4GN0vQYgqvA== 0000912057-01-515922.txt : 20010516 0000912057-01-515922.hdr.sgml : 20010516 ACCESSION NUMBER: 0000912057-01-515922 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHERN STATES POWER CO CENTRAL INDEX KEY: 0001123852 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 411967505 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-31709 FILM NUMBER: 1637544 BUSINESS ADDRESS: STREET 1: 414 NICOLLET MALL CITY: MINNEAPOLIS STATE: MN ZIP: 55401 BUSINESS PHONE: 6123305500 MAIL ADDRESS: STREET 1: 414 NICOLLET MALL CITY: MINNEAPOLIS STATE: MN ZIP: 55401 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHERN STATES POWER CO /WI/ CENTRAL INDEX KEY: 0000072909 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 390508315 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03140 FILM NUMBER: 1637545 BUSINESS ADDRESS: STREET 1: 1414 W HAMILTON AVE CITY: EAU CLAIRE STATE: WI ZIP: 54702 BUSINESS PHONE: 7158392621 MAIL ADDRESS: STREET 1: P O BOX 8 CITY: EAU CLAIRE STATE: WI ZIP: 54702-008 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC SERVICE CO OF COLORADO CENTRAL INDEX KEY: 0000081018 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 840296600 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03280 FILM NUMBER: 1637546 BUSINESS ADDRESS: STREET 1: 1225 17TH ST STE 900 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3035717511 MAIL ADDRESS: STREET 1: P O BOX 840 STE 300 CITY: DENVER STATE: CO ZIP: 80201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHWESTERN PUBLIC SERVICE CO CENTRAL INDEX KEY: 0000092521 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 750575400 STATE OF INCORPORATION: NM FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03789 FILM NUMBER: 1637547 BUSINESS ADDRESS: STREET 1: SPS TOWER STREET 2: TYLER AT SIXTH ST CITY: AMARILLO STATE: TX ZIP: 79101 BUSINESS PHONE: 8063782121 MAIL ADDRESS: STREET 1: PO BOX 1261 CITY: AMARILLO STATE: TX ZIP: 79170 10-Q 1 a2048458z10-q.htm 10-Q Prepared by MERRILL CORPORATION
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q

(Mark One)


/x/

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2001

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
  Exact name of registrant as specified in its charter, State or other jurisdiction of incorporation or organization, Address of principal executive offices and Registrant's Telephone Number, including area code

  IRS Employer Identification No.
000-31709   NORTHERN STATES POWER COMPANY
(a Minnesota Corporation)
414 Nicollet Mall, Minneapolis, Minn. 55401
Telephone (612) 330-5500
  41-1967505
001-3140   NORTHERN STATES POWER COMPANY
(a Wisconsin Corporation)
1414 W. Hamilton Ave., Eau Claire, Wisc. 54701
Telephone (715) 839-2621
  39-0508315
001-3280   PUBLIC SERVICE COMPANY OF COLORADO
(a Colorado Corporation)
1225 17th Street, Denver, Colo. 80202
Telephone (303) 571-7511
  84-0296600
001-3789   SOUTHWESTERN PUBLIC SERVICE COMPANY
(a New Mexico Corporation)
Tyler at Sixth, Amarillo, Tex. 79101
Telephone (303) 571-7511
  75-0575400

   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 /x/ No / /

   Northern States Power Co. (a Minnesota corporation), Northern States Power Co. (a Wisconsin corporation), Public Service Co. of Colorado and Southwestern Public Service Co. meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H (2) to such Form 10-Q.

   Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. All outstanding common stock is owned beneficially and of record by Xcel Energy Inc., a Minnesota corporation. Shares outstanding at April 30, 2001:

Northern States Power Co. (a Minnesota Corporation)   Common Stock, $0.01 par value   1,000,000 Shares
Northern States Power Co. (a Wisconsin Corporation)   Common Stock, $100 par value   933,000 Shares
Public Service Co. of Colorado   Common Stock, $0.01 par value   100 Shares
Southwestern Public Service Co.   Common Stock, $1 par value   100 Shares



Table of Contents

PART I—FINANCIAL INFORMATION
Item l.   Financial Statements   2
Item 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations   29

PART II—OTHER INFORMATION
Item 1.   Legal Proceedings   36
Item 6.   Exhibits and Reports on Form 8-K   36

    This combined Form 10-Q is separately filed by Northern States Power Co., a Minnesota corporation (NSP-Minnesota), Northern States Power Co., a Wisconsin corporation (NSP-Wisconsin), Public Service Co. of Colorado (PSCo) and Southwestern Public Service Co. (SPS). NSP-Minnesota, NSP-Wisconsin, PSCo and SPS are all wholly owned subsidiaries of Xcel Energy Inc. Xcel Energy is a registered holding company under the Public Utility Holding Company Act (PUHCA). Additional information on Xcel Energy is available on various filings with the SEC.

    Information contained in this report relating to any individual company is filed by such company on its own behalf. Each registrant makes representations only as to itself and makes no other representations whatsoever as to information relating to the other registrants.

    This report should be read in its entirety. No one section of the report deals with all aspects of the subject matter.

1





PART 1. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
NSP-MINNESOTA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Thousands of Dollars)

 
  Three Months Ended
March 31

 
  2001
  2000
Operating revenues:            
  Electric utility   $ 614,115   $ 550,014
  Gas utility     352,738     163,503
   
 
    Total operating revenues     966,853     713,517
Operating expenses:            
  Electric fuel and purchased power     243,047     197,458
  Cost of gas sold and transported     288,392     110,503
  Other operating and maintenance expenses     199,724     191,310
  Depreciation and amortization     83,179     80,434
  Taxes (other than income taxes)     51,848     53,055
   
 
    Total operating expenses     866,190     632,760
   
 
Operating income     100,663     80,757
Other (deductions) income—net     (1,062 )   2,175
Interest charges and financing costs:            
  Interest charges—net of amount capitalized     25,114     29,979
  Distributions on redeemable preferred securities of subsidiary trust     3,938     3,938
   
 
    Total interest charges and financing costs     29,052     33,917
   
 
Income before income taxes     70,549     49,015
Income taxes     28,377     18,778
   
 
Net income   $ 42,172   $ 30,237
   
 

The Notes to Consolidated Financial Statements are an integral part of the Financial Statements

2


NSP-MINNESOTA AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Thousands of Dollars)

 
  Three Months Ended
March 31

 
 
  2001
  2000
 
Operating activities:              
  Net income   $ 42,172   $ 30,237  
  Adjustments to reconcile net income to net cash provided by operating activities:              
    Depreciation and amortization     86,727     84,835  
    Nuclear fuel amortization     9,441     9,228  
    Deferred income taxes     (2,628 )   (3,102 )
    Amortization of investment tax credits     (2,052 )   (2,091 )
    Allowance for equity funds used during construction     423     (1,179 )
    Change in accounts receivable     (2,449 )   37,886  
    Change in inventories     14,536     12,006  
    Change in other current assets     50,350     22,192  
    Change in accounts payable     (79,218 )   (39,336 )
    Change in other current liabilities     24,896     22,806  
    Change in other assets and liabilities     24,413     18,772  
   
 
 
      Net cash provided by operating activities     166,611     192,254  
Investing activities:              
  Capital/construction expenditures     (74,788 )   (82,000 )
  Allowance for equity funds used during construction     (423 )   1,179  
  Investments in external decommissioning fund     (14,426 )   (8,926 )
  Other investments—net     (9,766 )   (2,402 )
   
 
 
      Net cash used in investing activities     (99,403 )   (92,149 )
Financing activities:              
  Short-term borrowings—net     (128,002 )   (12,001 )
  Proceeds from issuance of long-term debt—net         7,463  
  Repayment of long-term debt, including reacquisition premiums     (364 )   (6,728 )
  Capital contributions from parent     175,000      
  Dividends and cash distributions paid to parent     (37,606 )   (72,239 )
   
 
 
      Net cash provided by (used) in financing activities     9,028     (83,505 )
   
 
 
  Net increase in cash and cash equivalents     76,236     16,600  
  Cash and cash equivalents at beginning of period     11,926     11,344  
   
 
 
  Cash and cash equivalents at end of period   $ 88,162   $ 27,944  
   
 
 

The Notes to Consolidated Financial Statements are an integral part of the Financial Statements

3


NSP-MINNESOTA AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Thousands of Dollars)

 
  March 31
2001

  Dec. 31
2000

 
ASSETS              
Current assets:              
  Cash and cash equivalents   $ 88,162   $ 11,926  
  Accounts receivable—net of allowance for bad debts of $5,948 and $4,952, respectively     300,304     281,611  
  Accounts receivables from affiliates     33,455     49,699  
  Accrued unbilled revenues     134,036     194,547  
  Materials and supplies inventories at average cost     107,438     103,863  
  Fuel and gas inventories at average cost.     33,664     51,775  
  Prepayments and other     54,976     44,843  
   
 
 
    Total current assets     752,035     738,264  
   
 
 
Property, plant and equipment, at cost:              
  Electric utility     6,392,600     6,388,697  
  Gas utility     666,488     666,078  
  Other and construction work in progress     569,277     531,678  
   
 
 
    Total property, plant and equipment     7,628,365     7,586,453  
  Less: accumulated depreciation     (4,081,970 )   (4,017,813 )
  Nuclear fuel—net of accumulated amortization of $977,369 and $967,928, respectively     90,108     86,499  
   
 
 
    Net property, plant and equipment     3,636,503     3,655,139  
   
 
 
Other assets:              
  Nuclear decommissioning fund investments     546,874     563,812  
  Other investments     26,976     24,892  
  Regulatory assets     201,222     226,547  
  Deferred charges and other     184,186     151,334  
   
 
 
    Total other assets     959,258     966,585  
   
 
 
    Total Assets   $ 5,347,796   $ 5,359,988  
   
 
 
LIABILITIES AND EQUITY              
Current liabilities:              
  Current portion of long-term debt   $ 303,894   $ 303,773  
  Short-term debt     231,187     359,189  
  Accounts payable     230,348     303,053  
  Accounts payable to affiliates     24,451     30,965  
  Taxes accrued     189,128     130,870  
  Other     128,499     162,683  
   
 
 
    Total current liabilities     1,107,507     1,290,533  
   
 
 
Deferred credits and other liabilities:              
  Deferred income taxes     676,194     678,849  
  Deferred investment tax credits     89,035     91,088  
  Regulatory liabilities     484,766     496,313  
  Benefit obligations and other     153,373     146,541  
   
 
 
    Total deferred credits and other liabilities     1,403,368     1,412,791  
   
 
 
Long-term debt     1,047,166     1,048,995  
Mandatorily redeemable preferred securities of subsidiary trust     200,000     200,000  
Common stock—authorized 5,000,000 shares of $0.01 par value, outstanding 1,000,000 shares     10     10  
Premium on common stock     658,030     479,387  
Retained earnings     954,636     952,889  
Leveraged shares held by ESOP at cost     (22,921 )   (24,617 )
   
 
 
    Total common stockholder's equity     1,589,755     1,407,669  
Commitments and Contingent Liabilities (see Note 5)              
   
 
 
    Total Liabilities and Equity   $ 5,347,796   $ 5,359,988  
   
 
 

The Notes to Consolidated Financial Statements are an integral part of the Financial Statements

4


NSP-WISCONSIN
STATEMENTS OF INCOME (UNAUDITED)
(Thousands of Dollars)

 
  Three Months Ended
March 31

 
  2001
  2000
Operating revenues:            
  Electric utility   $ 113,892   $ 105,893
  Gas utility     69,550     38,561
   
 
    Total operating revenues     183,442     144,454
Operating expenses:            
  Electric fuel and purchased power     60,523     52,776
  Cost of gas sold and transported     57,032     26,858
  Other operating and maintenance expenses     24,832     24,507
  Depreciation and amortization     10,243     10,522
  Taxes (other than income taxes)     4,062     3,972
   
 
    Total operating expenses     156,692     118,635
   
 
Operating income     26,750     25,819
Other income—net     109     152
Interest charges and financing costs     5,539     4,708
   
 
Income before income taxes     21,320     21,263
Income taxes     8,228     8,512
   
 
Net income   $ 13,092   $ 12,751
   
 

The Notes to Financial Statements are an integral part of the Financial Statements

5


NSP-WISCONSIN
STATEMENTS OF CASH FLOWS (UNAUDITED)
(Thousands of Dollars)

 
  Three Months Ended
March 31

 
 
  2001
  2000
 
Operating activities:              
  Net income   $ 13,092   $ 12,751  
  Adjustments to reconcile net income to net cash provided by operating activities:              
    Depreciation and amortization     10,495     10,760  
    Deferred income taxes     806     164  
    Amortization of investment tax credits     (205 )   (207 )
    Allowance for equity funds used during construction     (291 )   (75 )
    Undistributed equity earnings of unconsolidated affiliates     (60 )   (114 )
    Change in accounts receivable     1,507     1,214  
    Change in inventories     3,275     2,633  
    Change in other current assets     14,250     7,543  
    Change in accounts payable     (27,251 )   (7,447 )
    Change in other current liabilities     7,304     9,564  
    Change in other assets and liabilities     (924 )   (751 )
   
 
 
      Net cash provided by operating activities     21,998     36,035  
Investing activities:              
  Capital/construction expenditures     (12,621 )   (26,049 )
  Allowance for equity funds used during construction     291     75  
  Other investments—net     (21 )   42  
   
 
 
    Net cash used in investing activities     (12,351 )   (25,932 )
Financing activities:              
  Short-term borrowings—net     (9,500 )   (3,100 )
  Dividends paid to parent         (6,749 )
   
 
 
    Net cash used in financing activities     (9,500 )   (9,849 )
   
 
 
  Net increase in cash and cash equivalents     147     254  
  Cash and cash equivalents at beginning of period     31     51  
   
 
 
  Cash and cash equivalents at end of period   $ 178   $ 305  
   
 
 

The Notes to Financial Statements are an integral part of the Financial Statements

6


NSP-WISCONSIN
BALANCE SHEETS (UNAUDITED)
(Thousands of Dollars)

 
  March 31
2001

  Dec. 31
2000

 
ASSETS              
Current assets:              
  Cash and cash equivalents   $ 178   $ 31  
  Accounts receivable—net of allowance for bad debts of $891 and $798, respectively     51,940     53,447  
  Accrued unbilled revenues     21,719     29,113  
  Materials and supplies inventories at average cost     6,502     6,544  
  Fuel and gas inventories at average cost.     4,787     8,021  
  Prepayments and other     9,110     15,966  
   
 
 
    Total current assets     94,236     113,122  
   
 
 
Property, plant and equipment, at cost:              
  Electric utility     1,074,469     1,066,446  
  Gas utility     123,980     123,979  
  Other and construction work in progress     128,658     127,408  
   
 
 
    Total property, plant and equipment     1,327,107     1,317,833  
  Less: accumulated depreciation     (523,956 )   (515,798 )
   
 
 
    Net property, plant and equipment     803,151     802,035  
   
 
 
Other assets              
  Other investments     9,948     9,867  
  Regulatory assets     37,579     38,536  
  Deferred charges and other     24,307     22,515  
   
 
 
    Total other assets     71,834     70,918  
   
 
 
    Total Assets   $ 969,221   $ 986,075  
   
 
 
LIABILITIES AND EQUITY              
Current Liabilities:              
  Current portion of long term debt   $ 34   $ 34  
  Short-term debt—notes payable to affiliate     6,400     15,900  
  Accounts payable     19,287     37,981  
  Accounts payable to affiliates     15,409     25,202  
  Taxes accrued     2,610     0  
  Interest accrued     7,165     5,570  
  Dividend payable to parent company Xcel Energy     11,207     0  
  Accrued payroll     5,266     8,395  
  Purchased gas cost recovery liability     6,778     390  
  Other     5,437     5,596  
   
 
 
    Total current liabilities     79,593     99,068  
   
 
 
Deferred credits and other liabilities:              
  Deferred income taxes     117,066     115,682  
  Deferred investment tax credits     16,245     16,451  
  Regulatory liabilities     18,905     18,818  
  Benefit obligations and other     32,237     32,787  
   
 
 
    Total other liabilities     184,453     183,738  
   
 
 
Long-term debt     313,022     313,000  
Common stock—authorized 1,000,000 shares of $100 par value, outstanding 933,000 shares     93,300     93,300  
Premium on common stock     33,417     33,418  
Retained earnings     265,436     263,551  
   
 
 
    Total common stockholder's equity     392,153     390,269  
Commitments and Contingent Liabilities (see Note 5)              
   
 
 
    Total Liabilities and Equity   $ 969,221   $ 986,075  
   
 
 

The Notes to Financial Statements are an integral part of the Financial Statements

7


PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Thousands of Dollars)

 
  Three Months Ended
March 31

 
 
  2001
  2000
 
Operating revenues:              
  Electric utility   $ 589,682   $ 403,286  
  Electric trading     298,432     44,816  
  Gas utility     547,800     270,721  
  Steam utility     7,500     3,734  
   
 
 
    Total operating revenues     1,443,414     722,557  
Operating expenses:              
  Electric fuel and purchased power     338,815     190,690  
  Electric trading costs     277,142     40,675  
  Cost of gas sold and transported     448,296     176,349  
  Other operating and maintenance expenses     100,037     97,666  
  Depreciation and amortization     58,096     50,364  
  Taxes (other than income taxes)     21,849     21,346  
   
 
 
    Total operating expenses     1,244,235     577,090  
   
 
 
Operating income     199,179     145,467  
Other income (deductions)—net     4,843     (438 )
Interest charges and financing costs:              
  Interest charges—net of amount capitalized     30,165     36,673  
  Distributions on redeemable preferred securities of subsidiary trust     3,800     3,800  
   
 
 
    Total interest charges and financing costs     33,965     40,473  
   
 
 
Income before income taxes     170,057     104,556  
Income taxes     62,667     35,797  
   
 
 
Net income   $ 107,390   $ 68,759  
   
 
 

The Notes to Consolidated Financial Statements are an integral part of the Financial Statements

8


PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Thousands of Dollars)

 
  Three Months Ended
March 31

 
 
  2001
  2000
 
Operating activities:              
  Net income   $ 107,390   $ 68,759  
  Adjustments to reconcile net income to net cash provided by operating activities:              
    Depreciation and amortization     59,956     52,384  
    Deferred income taxes     3,753     3,586  
    Amortization of investment tax credits     (1,030 )   (1,124 )
    Change in accounts receivable     (39,233 )   13,503  
    Change in inventories     26,652     33,265  
    Change in other current assets     87,102     167,331  
    Change in accounts payable     (161,173 )   (145,969 )
    Change in other current liabilities     64,215     17,246  
    Change in other assets and liabilities     21,146     (7,005 )
   
 
 
      Net cash provided by operating activities     168,778     201,976  
Investing activities:              
  Capital/construction expenditures     (69,724 )   (68,493 )
  Proceeds from disposition of property, plant and equipment     2,709     2,203  
  Other investments—net     3,245     1,272  
   
 
 
      Net cash used for investing activities     (63,770 )   (65,018 )
Financing activities:              
  Short-term borrowings—net     94,625     (123,799 )
  Proceeds from issuance of long-term debt—net     100,180     0  
  Repayment of long-term debt, including reacquisition premiums     (239,876 )   (749 )
  Dividends paid to parent     (57,615 )   (44,575 )
   
 
 
      Net cash used for financing activities     (102,686 )   (169,123 )
   
 
 
  Net increase (decrease) in cash and cash equivalents     2,322     (32,165 )
  Cash and cash equivalents at beginning of period     15,696     51,731  
   
 
 
  Cash and cash equivalents at end of period   $ 18,018   $ 19,566  
   
 
 

The Notes to Consolidated Financial Statements are an integral part of the Financial Statements

9


PUBLIC SERVICE CO. OF COLORADO AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Thousands of Dollars)

 
  March 31
2001

  Dec. 31
2000

 
ASSETS              
Current assets:              
  Cash and cash equivalents   $ 18,018   $ 15,696  
  Accounts receivable—net of allowance for bad debts of $10,623 and $11,352, respectively     268,190     228,957  
  Accrued unbilled revenues     286,742     369,018  
  Recoverable purchased gas and electric energy costs     157,213     159,013  
  Derivative instruments valuation—at market     207,709     0  
  Materials and supplies inventories at average cost     38,022     41,106  
  Fuel and gas inventories at average cost, except for gas storage underground at LIFO     42,642     66,211  
  Prepayments and other     14,958     15,974  
   
 
 
    Total current assets     1,033,494     895,975  
   
 
 
Property, plant and equipment, at cost:              
  Electric utility     4,916,125     4,896,863  
  Gas utility     1,358,699     1,345,380  
  Other and construction work in progress     898,046     876,332  
   
 
 
    Total property, plant and equipment     7,172,870     7,118,575  
  Less: accumulated depreciation     (2,617,109 )   (2,576,126 )
   
 
 
    Net property, plant and equipment     4,555,761     4,542,449  
   
 
 
Other assets:              
  Other investments     7,913     11,158  
  Regulatory assets     241,016     251,154  
  Deferred charges and other     60,356     73,577  
   
 
 
    Total other assets     309,285     335,889  
   
 
 
    Total Assets   $ 5,898,540   $ 5,774,313  
   
 
 
LIABILITIES AND EQUITY              
Current liabilities:              
  Current portion of long-term debt   $ 2,909   $ 142,043  
  Short-term debt     249,825     155,200  
  Derivative instruments valuation—at market     215,598     0  
  Accounts payable     399,439     575,948  
  Accounts payable to affiliates     61,910     46,573  
  Taxes accrued     135,391     54,718  
  Dividends payable     55,229     57,615  
  Recovered electric energy costs     24,267     27,060  
  Other     132,640     146,309  
   
 
 
    Total current liabilities     1,277,208     1,205,466  
   
 
 

10


Deferred credits and other liabilities:              
  Deferred income taxes     543,616     543,715  
  Deferred investment tax credits     82,775     83,804  
  Regulatory liabilities     44,215     45,027  
  Other deferred credits     24,066     24,632  
  Customers' advances for construction     75,373     70,714  
  Benefit obligations and other     74,583     73,028  
   
 
 
    Total deferred credits and other liabilities     844,628     840,920  
   
 
 
Long-term debt     1,610,180     1,610,741  
Mandatorily redeemable preferred securities of subsidiary trust     194,000     194,000  
Common stock—authorized 100 shares of $0.01 par value; outstanding 100 shares     0     0  
Paid-in capital     1,574,835     1,574,835  
Retained earnings     400,512     348,351  
Accumulated other comprehensive income     (2,823 )   0  
   
 
 
    Total common stockholder's equity     1,972,524     1,923,186  
Commitments and Contingent Liabilities (see Note 5)              
   
 
 
    Total Liabilities and Equity   $ 5,898,540   $ 5,774,313  
   
 
 

The Notes to Consolidated Financial Statements are an integral part of the Financial Statement.

11


SOUTHWESTERN PUBLIC SERVICE CO.
STATEMENTS OF INCOME (UNAUDITED)
(Thousands of Dollars)

 
  Three Months Ended
March 31

 
  2001
  2000
Electric operating revenues   $ 329,273   $ 216,232
Operating expenses:            
  Electric fuel and purchased power     198,379     107,854
  Other operating and maintenance expenses     41,583     35,861
  Depreciation and amortization     20,269     19,354
  Taxes (other than income taxes)     14,909     12,082
   
 
    Total operating expenses     275,140     175,151
   
 
Operating income     54,133     41,081
Other income—net     1,823     3,410
Interest charges and financing costs:            
  Interest charges—net of amount capitalized     12,080     13,342
  Distributions on redeemable preferred securities of subsidiary trust     1,963     1,963
   
 
    Total interest charges and financing costs     14,043     15,305
   
 
Income before income taxes     41,913     29,186
Income taxes     15,864     10,930
   
 
Net income   $ 26,049   $ 18,256
   
 

The Notes to Financial Statements are an integral part of the Financial Statements

12


SOUTHWESTERN PUBLIC SERVICE CO.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(Thousands of Dollars)

 
  Three months ended
March 31

 
 
  2001
  2000
 
Operating activities:              
  Net income   $ 26,049   $ 18,256  
  Adjustments to reconcile net income to net cash provided by operating activities:              
    Depreciation and amortization     21,355     20,352  
    Deferred income taxes     18,632     3,803  
    Amortization of investment tax credits     (63 )   (63 )
    Change in accounts receivable     18,831     21,904  
    Change in inventories     2,725     (3,484 )
    Change in other current assets     (43,387 )   (18,955 )
    Change in accounts payable     (9,369 )   5,048  
    Change in other current liabilities     (19,305 )   (2,590 )
    Change in other assets and liabilities     (2,131 )   (14,889 )
   
 
 
      Net cash provided by operating activities     13,337     29,382  
Investing activities:              
  Capital/construction expenditures     (27,810 )   (22,356 )
  Proceeds/costs from disposition of property, plant and equipment     2,193     (629 )
  Other investments—net     456     (33 )
   
 
 
      Net cash used for investing activities     (25,161 )   (23,018 )
Financing activities:              
  Short-term borrowings—net     54,546     47,488  
  Repayment of long-term debt, including reacquisition premiums     168     (27,000 )
  Dividends paid to parent     (22,354 )   (20,957 )
   
 
 
    Net cash provided by (used for) financing activities     32,360     (469 )
   
 
 
  Net increase in cash and cash equivalents     20,536     5,895  
  Cash and cash equivalents at beginning of period     10,826     1,532  
   
 
 
  Cash and cash equivalents at end of period   $ 31,362   $ 7,427  
   
 
 

The Notes to Financial Statements are an integral part of the Financial Statements

13


SOUTHWESTERN PUBLIC SERVICE CO.
BALANCE SHEETS (UNAUDITED)
(Thousands of Dollars)

 
  March 31
2001

  Dec. 31
2000

 
ASSETS              
Current assets:              
  Cash and cash equivalents   $ 31,362   $ 10,826  
  Accounts receivable—net of allowance for bad debts of $918 and $845, respectively     54,743     73,986  
  Accounts receivable from affiliates     5,304     4,893  
  Accrued unbilled revenues     71,404     87,484  
  Recoverable electric energy costs.     147,230     104,249  
  Materials and supplies inventories at average cost     9,703     13,500  
  Fuel and gas inventories at average cost     2,133     1,061  
  Prepayments and other     2,976     38  
   
 
 
    Total current assets     324,855     296,037  
   
 
 
Property, plant and equipment, at cost:              
  Electric utility     2,896,642     2,884,702  
  Other and construction work in progress     130,394     115,210  
   
 
 
    Total property, plant and equipment     3,027,036     2,999,912  
  Less: accumulated depreciation     (1,221,488 )   (1,199,158 )
   
 
 
    Net property, plant and equipment     1,805,548     1,800,754  
   
 
 
Other assets:              
  Notes receivable from affiliate     119,036     119,036  
  Other investments     11,838     12,295  
  Regulatory assets     71,406     74,359  
  Prepaid pension asset     66,604     61,359  
  Deferred charges and other     28,401     28,796  
   
 
 
    Total other assets     297,285     295,845  
   
 
 
    Total Assets   $ 2,427,688   $ 2,392,636  
   
 
 
LIABILITIES AND EQUITY              
Current liabilities:              
  Short-term debt   $ 729,125   $ 674,579  
  Accounts payable     90,476     97,285  
  Accounts payable to affiliates     10,546     13,107  
  Taxes accrued     5,361     19,141  
  Interest accrued     3,466     7,139  
  Dividends payable     21,585     22,354  
  Current portion of accumulated deferred income taxes     51,827     36,307  
  Other     42,102     57,122  
   
 
 
    Total current liabilities     954,488     927,034  
   
 
 

14


Deferred credits and other liabilities:              
  Deferred income taxes     361,002     362,206  
  Deferred investment tax credits     4,655     4,718  
  Regulatory liabilities     0     1,275  
  Derivative instruments valuation—at market     5,465     0  
  Benefit obligations and other     23,063     19,268  
   
 
 
    Total deferred credits and other liabilities     394,185     387,467  
   
 
 
Long-term debt     226,678     226,506  
Mandatorily redeemable preferred securities of subsidiary trust     100,000     100,000  
Common stock—authorized 200 shares of $1 par value; outstanding 100 shares     0     0  
Paid in capital     353,099     353,099  
Retained earnings     402,994     398,530  
Accumulated other comprehensive income     (3,756 )   0  
   
 
 
    Total common stockholder's equity     752,337     751,629  
   
 
 
Commitments and Contingent Liabilities (see Note 5)              
    Total Liabilities and Equity   $ 2,427,688   $ 2,392,636  
   
 
 

The Notes to Financial Statements are an integral part of the Financial Statements.

15



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

    In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of NSP-Minnesota, NSP-Wisconsin, PSCo and SPS (collectively referred to as the Utility Subsidiaries of Xcel Energy) as of March 31, 2001, and Dec. 31, 2000, the results of their operations for the three months ended March 31, 2001 and 2000, and their cash flows for the three months ended March 31, 2001 and 2000. Due to the seasonality of electric and gas sales of the Utility Subsidiaries of Xcel Energy, quarterly and year-to-date results are not necessarily an appropriate base from which to project annual results.

    The accounting policies of NSP-Minnesota, NSP-Wisconsin, PSCo and SPS are set forth in Note 1 to the financial statements in their respective Annual Reports on Form 10-K for the year ended Dec. 31, 2000. The following notes should be read in conjunction with such policies and other disclosures in the Form 10-K's.

1.  Merger to Create Xcel Energy (NSP-Minnesota, NSP-Wisconsin, PSCo and SPS)

    On Aug. 18, 2000, New Century Energies Inc. (NCE) and Northern States Power Co. (NSP) merged and formed Xcel Energy Inc. Xcel Energy, a Minnesota corporation, is a registered holding company under the Public Utility Holding Company Act of 1935. Each share of NCE common stock was exchanged for 1.55 shares of Xcel Energy common stock. NSP shares became Xcel Energy shares on a one-for-one basis. The merger was structured as a tax-free, stock-for-stock exchange for shareholders of both companies (except for fractional shares), and accounted for as a pooling of interests.

    As part of the merger, NSP transferred its existing utility operations that were being conducted directly by NSP at the parent company level to a newly formed wholly-owned subsidiary of Xcel Energy named NSP-Minnesota. The results of NSP-Minnesota for periods prior to the merger have been restated for comparability with post-merger results. Xcel Energy has the following wholly owned public utility subsidiary companies that are Registrants reported herein: NSP-Minnesota, NSP-Wisconsin, PSCo and SPS.

2.  Special Charges (NSP-Minnesota, NSP-Wisconsin, PSCo and SPS)

    Upon consummation of the merger in 2000, Xcel Energy expensed pretax special charges related to its regulated operations totaling $199 million. During 2000, an allocation of approximately $188 million of merger costs was made to Xcel Energy's utility subsidiaries consistent with prior regulatory filings and is reported on the accompanying financial statements as special charges. Of the total pretax special charges recorded by Xcel Energy that related to its regulated operations, $159 million was recorded during the third quarter of 2000, and $40 million was recorded during the fourth quarter of 2000.

    The total pretax charges included $52 million related to one-time transaction-related costs incurred in connection with the merger of NSP and NCE. Also included in the total were $147 million of pretax charges pertaining to incremental costs of transition and integration activities associated with merging operations. The transition costs included costs for severance and related expenses associated with staff reductions of 721 employees, 677 of whom were released through April 30, 2001.

16


    A portion of these special charges was accrued as a liability at Dec. 31, 2000. The following table summarizes the change in the liability (reported in other current liabilities) for special charges during the first quarter of 2001.

Millions of Dollars

  Dec. 31, 2000
Liability

  Accrual
Adjustments Expensed

  Payments
Against Liability

  March 31, 2001
Liability

Employee separation and other related costs   $ 48     $ (9 ) $ 39
Regulatory transition costs     5           5
Other transition and integration costs     2       (2 )  
   
 
 
 
  Total accrued merger costs   $ 55     $ (11 ) $ 44
   
 
 
 
NSP-Minnesota portion   $ 19     $ (5 ) $ 14
NSP-Wisconsin portion   $ 3     $ (1 ) $ 2
PSCo portion   $ 2         $ 2
SPS portion   $ 1         $ 1

3.  Business Developments (NSP-Minnesota)

    In April 2001, NSP-Minnesota selected a developer to add more wind-generated electricity to its portfolio. Chanarambie Power Partners, LLC, will build wind turbines in southwestern Minnesota to add another 80 megawatts of wind power. Completion of the project will mean that NSP-Minnesota has fulfilled a 1994 Minnesota legislative requirement to develop 425 megawatts of Minnesota wind energy relating to the authorization to store spent nuclear fuel in dry casks outside the Prairie Island nuclear plant.

4.  Restructuring and Regulation (NSP-Wisconsin and SPS)

SPS

    Restructuring legislation has been enacted in Texas and New Mexico. Recent developments include a five-year delay in the implementation date for New Mexico and legislation introduced in Texas and Oklahoma to delay the implementation of electric utility restructuring for the SPS system. Regulatory filings before the Public Utility Commission of Texas (PUCT), the New Mexico Public Regulation Commission (NMPRC) and the Federal Energy Regulatory Commission (FERC) are on hold pending final legislative action.

    Due to expected restructuring impacts, SPS discontinued regulatory accounting under SFAS 71 for the generation portion of its business during the second quarter of 2000. SPS' transmission and distribution business continues to meet the requirements of SFAS 71, as that business is expected to remain regulated.

    New Mexico Restructuring—In April 1999, New Mexico enacted the Electric Utility Restructuring Act of 1999, which provides for customer choice. In March 2001, the Governor of New Mexico signed into law a five-year delay in the implementation of customer choice. Customer choice is expected to be available in 2007. SPS must submit its transition plan for NMPRC approval by January 2005. By January 2006, SPS must separate its utility operations into at least two entities: energy generation and competitive services, and transmission and distribution utility services, either by the creation of separate affiliates that may be owned by a common holding company or by the sale of assets to one or more third parties. A regulated company, in general, is prohibited from providing unregulated services.

    Texas Restructuring—In June 1999, an electric utility restructuring act (SB-7) was passed in Texas, which provides for the implementation of retail competition for most areas of the state, including SPS' service area, beginning January 2002. The Texas Legislature is currently considering amendments to

17


SB-7 that would delay the implementation of business separation and customer choice in SPS' market area for five years.

    SPS Texas Retail Fuel Factor and Fuel Surcharge Application—SPS has filed an application with the PUCT to increase its fixed fuel factor and to surcharge past fuel cost under-recoveries. Intervenors in the proceeding are protesting SPS' application and are claiming SPS should be crediting revenues from wholesale firm sales to Texas retail eligible fuel expenses. Hearings are scheduled for May 2001 and a final decision is expected by June 2001. SPS opposes the revenue treatment suggested by the Intervenors. The final outcome or impact of the wholesale firm sales on Xcel Energy's earnings will not be known until later in 2001.

NSP-Wisconsin

    NSP-Wisconsin Electric Rate Request—On May 11, 2001, NSP-Wisconsin filed an application with the Public Service Commission of Wisconsin (PSCW) requesting an emergency increase in Wisconsin retail electric rates due to significant increases in power supply costs. This increase is necessary to recover fuel and purchased power costs from wholesale suppliers whose commodities are priced at unregulated market prices. In addition, rising gas prices and the potential volatility of wholesale electric prices have combined to increase the cost of power supply. NSP-Wisconsin is requesting a surcharge to be implemented July 1, 2001. If approved, this rate request would increase NSP-Wisconsin's electric revenue by approximately $6.4 million for 2001.

5.  Commitments and Contingent Liabilities (NSP-Minnesota, NSP-Wisconsin and PSCo)

    Lawsuits and claims arise in the normal course of business. Management, after consultation with legal counsel, has recorded an estimate of the probable cost of settlement or other disposition of them.

    Xcel Energy's Utility Subsidiaries have been or are currently involved with the cleanup of contamination from certain hazardous substances at several sites. In many situations, Xcel Energy's Utility Subsidiaries are pursuing, or intend to pursue, insurance claims and believes it will recover some portion of these costs through such claims. Additionally, where applicable, Xcel Energy's Utility Subsidiaries are pursuing, or intend to pursue, recovery from other potentially responsible parties and through the rate regulatory process. To the extent any costs are not recovered through the options listed above, Xcel Energy's Utility Subsidiaries would be required to recognize an expense for such unrecoverable amounts.

    The circumstances set forth in Notes 12 and 13 to the financial statements in NSP-Minnesota's, NSP-Wisconsin's, PSCo's and SPS' Annual Reports on Form 10-K for the year-ended Dec. 31, 2000, appropriately represent, in all material respects, the current status of commitments and contingent liabilities, including those regarding public liability for claims resulting from any nuclear incident, except as for the following updated developments.

NSP-Minnesota

    Conservation Incentive RecoveryIn June 1999, the Minnesota Public Utilities Commission (MPUC) denied NSP-Minnesota recovery of 1998 lost margins, load management discounts and incentives associated with state-mandated programs for electric energy conservation. NSP-Minnesota recorded a $35 million charge in 1999, based on this action. NSP-Minnesota appealed the MPUC decision and in December 2000, the Minnesota Court of Appeals reversed the MPUC decision.

    In January 2001, the MPUC appealed the lower court decision to the Minnesota Supreme Court. On Feb. 23, 2001, the Minnesota Supreme Court declined to hear the MPUC's appeal. As of March 31, 2001, NSP-Minnesota had recorded a liability of approximately $41 million, including carrying charges, for potential refunds to customers, pending the resolution of this matter.

18


NSP-Minnesota is awaiting an order from the MPUC regarding the implementation of the appeals court decision before adjusting any liabilities recorded for this matter.

NSP-Wisconsin

    French Island—NSP-Wisconsin's French Island plant generates electricity by burning a mixture of wood waste and refuse derived fuel. The fuel is derived from municipal solid waste furnished under a contract with LaCrosse County, Wisconsin. In 1997, the EPA found that the French Island plant was a "small municipal waste combustor" and therefore not subject to EPA regulations applicable to large combustors. In October 2000, the EPA reversed its decision and found that the plant was subject to the large combustor regulations. Those regulations became effective on Dec. 19, 2000. NSP-Wisconsin did not have adequate time to install the emission controls necessary to come into compliance with the large combustor regulations by the compliance date. As a result, on March 29, 2001, the EPA issued a finding of violation to the company. On April 2, 2001, a conservation group sent NSP-Wisconsin a notice of intent to sue under the citizen suit provisions of the Clean Air Act. In addition, the state of Wisconsin has alleged that the French Island plant has violated an emission limit contained in its state emission permit. NSP-Wisconsin is engaged in negotiations with La Crosse County regarding the effect of these issues on the contract for delivery of waste to the French Island plant. It is also attempting to work with the EPA, the state, and the conservation group to resolve the environmental compliance issues related to the facility. Resolution of these issues, whether through litigation or settlement, may require changes in the French Island plant's operations, the installation of control equipment and/or the payment of penalties.

PSCo

    Postemployment Benefits—PSCo adopted accrual accounting for postemployment benefits under SFAS No. 112—"Employers Accounting for Postemployment Benefits" in 1994. The costs of these benefits were historically recorded on a pay-as-you go basis and, accordingly, PSCo recorded regulatory assets in anticipation of obtaining future rate recovery of these costs. PSCo recovered its FERC jurisdictional portion of these costs. PSCo requested approval to recover its Colorado retail natural gas jurisdictional portion in a 1996 retail rate case and its retail electric jurisdictional portion in the electric earnings test filing for 1997. In the 1996 rate case, the Colorado Public Utilities Commission (CPUC) allowed recovery of postemployment benefit costs on an accrual basis, but denied PSCo's request to amortize the regulatory asset. PSCo appealed this decision to the Denver District Court. In 1998, the CPUC deferred the final determination of the regulatory treatment of the electric jurisdictional costs pending the outcome of PSCo's appeals on the natural gas rate case. On Dec. 16, 1999, the Denver District Court affirmed the decision by the CPUC. On Jan. 31, 2000, PSCo filed a Notice of Appeal with the Colorado Supreme Court and in February 2001 presented oral arguments. A final decision on this matter is expected during 2001. PSCo continues to believe that it will ultimately be allowed to recover this regulatory asset. If PSCo is unsuccessful in its appeal, the unrecoverable portion of deferral amounts totaling approximately $23 million will be written off.

6.  Short-Term Borrowings and Financing Activities (NSP-Minnesota, NSP-Wisconsin, PSCo and SPS)

NSP-Minnesota

    At March 31, 2001, NSP-Minnesota had approximately $231 million of short-term debt outstanding at a weighted average interest rate of 5.35 percent.

    In April 2001, NSP-Minnesota filed a $600 million long-term debt shelf registration with the SEC. NSP-Minnesota intends to issue debt under this shelf registration during the second or third quarter of 2001.

19


NSP-Wisconsin

    At March 31, 2001, NSP-Wisconsin had approximately $6 million of short-term notes payable to NSP-Minnesota outstanding at a weighted average interest rate of 5.35 percent.

PSCo

    At March 31, 2001, PSCo had approximately $250 million of short-term debt outstanding at a weighted average interest rate of 5.45 percent.

SPS

    At March 31, 2001, SPS had approximately $729 million of short-term debt outstanding at a weighted average interest rate of 5.54 percent.

7.  Segment Information (NSP-Minnesota, NSP-Wisconsin, PSCo and SPS)

    Xcel Energy's utility subsidiaries each have two reportable segments Electric Utility and Gas Utility, with the exception of SPS, which has only a Electric Utility reportable segment. All figures are in thousands of dollars.

20


NSP-Minnesota

Three months ended:
March 31, 2001

  Electric
Utility

  Gas
Utility

  All
Other

  Consolidated
Total

Revenues from:                        
  External customers   $ 613,936   $ 351,166   $   $ 965,102
  Internal customers     179     1,572         1,751
   
 
 
 
    Total revenue     614,115     352,738         966,853
Segment net income   $ 26,162   $ 16,133   $ (123 ) $ 42,172

March 31, 2000

 

 

 

 

 

 

 

 

 

 

 

 
Revenues from:                        
  External customers   $ 549,852   $ 162,976   $   $ 712,828
  Internal customers     162     527         689
   
 
 
 
    Total revenue     550,014     163,503         713,517
Segment net income   $ 17,880   $ 12,461   $ (104 ) $ 30,237

NSP-Wisconsin

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended:
March 31, 2001


 

Electric
Utility


 

Gas
Utility


 

All
Other


 

Consolidated
Total

Revenues from:                        
  External customers   $ 113,842   $ 69,109   $   $ 182,951
  Internal customers     50     441         491
   
 
 
 
    Total revenue     113,892     69,550         183,442
Segment net income   $ 8,118   $ 4,974   $   $ 13,092

March 31, 2000

 

 

 

 

 

 

 

 

 

 

 

 
Revenues from:                        
  External customers   $ 105,853   $ 37,877   $   $ 143,730
  Internal customers     40     684         724
   
 
 
 
    Total revenue     105,893     38,561         144,454
Segment net income   $ 8,181   $ 4,570   $   $ 12,751

PSCo

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended:
March 31, 2001


 

Electric
Utility


 

Gas
Utility


 

All
Other


 

Consolidated
Total

Revenues from:                        
  External customers   $ 888,081   $ 547,239   $ 7,500   $ 1,442,820
  Internal customers     33     561         594
   
 
 
 
    Total revenue     888,114     547,800     7,500     1,443,414
Segment net income   $ 70,185   $ 25,309   $ 11,896   $ 107,390

March 31, 2000

 

 

 

 

 

 

 

 

 

 

 

 
Revenues from:                        
  External customers   $ 448,102   $ 270,721   $ 3,734   $ 722,557
  Internal customers                
   
 
 
 
    Total revenue     448,102     270,721     3,734     722,557
Segment net income   $ 40,470   $ 24,075   $ 4,214   $ 68,759

21


SPS

    SPS operates in the regulated electric utility industry providing wholesale and retail electric services in the states of Texas, New Mexico, Kansas and Oklahoma. Revenues from external customers were $329.2 million and $216.2 million for the three months ended March 31, 2001 and 2000, respectively.

8.  Adoption of Statement of Financial Accounting Standards (SFAS) No. 133 (PSCo and SPS)

    On Jan. 1, 2001, Xcel Energy's Utility Subsidiaries adopted Statement of Financial Accounting Standard (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activity," as amended. This statement requires that all derivative instruments be recorded on the balance sheet at fair value. Changes in the derivative instrument's fair value must be recognized currently in earnings unless specific accounting criteria are met or specific exclusions are applicable. Accounting for qualifying hedges within the terms of SFAS 133 allows a derivative instrument's gains and losses to offset related results on the hedged item in the income statement, to the extent effective. SFAS 133 requires that a company formally document, designate and assess the effectiveness of transactions that receive hedge accounting.

    Xcel Energy's Utility Subsidiaries have applied SFAS No. 133 to energy and energy related commodities, financial instruments, long-term power sales contracts and long-term gas purchase contracts used to mitigate variability in earnings due to fluctuations in spot market prices, hedge fuel requirements at generation facilities and protect investment in fuel inventories. SFAS No. 133 also applies to various interest rate swaps used to mitigate the risks associated with movements in interest rates.

    Xcel Energy conducts energy acquisition, wholesale sales and trading activities through its utility operations. The primary objective of Xcel Energy's energy acquisition and trading operations is to maximize asset value while simultaneously minimizing pricing and credit risks. These activities are subject to SFAS 133 as they typically meet the definition of derivative instruments. For the company's regulated utility customers, Xcel Energy acquires electric capacity and energy as well as natural gas supplies. Included in this operation are certain wholesale trading activities to optimize asset utilization. Xcel Energy is exposed to some level of market and credit risk under its obligation to manage its retail electric distribution and natural gas needs. Xcel Energy enters into derivative instruments to hedge fuel requirements, inventories, excess generation capacity, and purchase power contracts.

    Xcel Energy's Utility Subsidiaries formally document hedge relationships, including the identification of the hedging instrument and the hedged transaction, as well as the risk management objectives and strategies for undertaking the hedged transaction. Derivatives are recorded in the balance sheet at fair value. Xcel Energy's Utility Subsidiaries also formally assesses both at inception and at least quarterly thereafter, whether the derivative instruments being used are highly effective in offsetting changes in either the fair value or cash flows of the hedged items.

    For fair value hedges, both the effective and ineffective portion of the changes in the fair value of the derivative instrument, along with the gain or loss on the hedged item are required to be recorded currently in earnings and reported in the income statement. The effective portion of the changes in fair value of a derivative instrument that is designated as a cash flow hedge is reported in other comprehensive income. When the hedged item is realized, the gain or loss included in other comprehensive income is reported in the income statement. Additionally, both the fair value changes excluded from the effectiveness assessment, the time value component of options, and the ineffective portion of the changes in fair value of the derivative instruments used as cash flow hedges are recorded in the income statement.

22


    The adoption of SFAS 133 on Jan. 1, 2001, by Xcel Energy's Utility Subsidiaries did not result in an impact to earnings. However, upon adoption of SFAS 133 PSCo and SPS recorded a net transition gain (loss) of approximately $1.6 million and $(2.6) million, respectively, recorded in other comprehensive income. The impact to other comprehensive income is related to existing cash flow hedges during increasing price conditions.

    PSCo's earnings for the first quarter of 2001 were increased by approximately $1.1 million (before tax), due to the mark-to-market impacts of SFAS 133 on the valuation of derivative instruments and is recorded in electric fuel and purchased power in the income statement. During the first quarter of 2001, PSCo and SPS recorded after-tax losses of approximately $3.1 million and $1.2 million, respectively. These losses related to changes in fair values of the derivatives accounted for as hedges recorded on Jan. 1, 2001 and new hedges recorded during the period. Also during the first quarter of 2001, PSCo and SPS reclassified from other comprehensive income into earnings $1.1 million and $(0.1) million of accumulated net derivative gains (losses), respectively. The cumulative balance in other comprehensive income relating to SFAS 133 valuation adjustments as of March 31, 2001, were losses of approximately $2.8 million and $3.8 million for PSCo and SPS, respectively.

    Interest rates—To manage interest rate risk, SPS has entered into interest rate swaps that effectively fix the interest payments of certain floating rate debt instruments. Interest rate swap agreements are accounted for as cash flow hedges. The effective portion of the cumulative gain or loss on the derivative instrument is reported as a component of other comprehensive income in shareholders' equity and recognized into earnings as the underlying interest payments are made. No ineffectiveness was recognized on interest rate cash flow hedges during the first quarter of 2001. SPS expects to reclassify into earnings in interest expense during the next twelve months net losses from other comprehensive income of approximately $0.2 million.

    Energy and energy related commodities—Xcel Energy's Utility Subsidiaries are exposed to commodity price variability and credit risk in their generation, retail distribution and energy trading operations. In order to manage these commodity price risks, Xcel Energy's utility subsidiaries enter into financial instruments, which may take the form of fixed price, floating price or indexed sales or purchases, and options, such as puts, calls, basis transactions and swaps.

    Derivatives designated to be hedges by Xcel Energy's Utility Subsidiaries are accounted for as cash flow hedges. The effective portion of the cumulative gain or loss on the derivative instrument is reported as a component of other comprehensive income in shareholders' equity and recognized into earnings in the same period or periods during which the hedged transaction affects earnings i.e., when electricity is generated, fuel is consumed etc.

    At March 31, 2001, PSCo had various commodity related contracts extending through October 2002. PSCo expects to reclassify into earnings during the next twelve months net losses from other comprehensive income of approximately $2.7 million.

    For the quarter ending March 31, 2001, PSCo recorded a $0.3 million net gain related to cash flow hedge ineffectiveness and a $1.4 million net gain related to derivative instruments excluded from the assessment of effectiveness in the income statement. Two cash flow hedges were discontinued during the period because the hedged transactions were no longer probable. The amount transferred out of other comprehensive income for these hedges was $0.02 million.

23


9.  Comprehensive Income (NSP-Minnesota, NSP-Wisconsin, PSCo, SPS)

NSP-Minnesota

    Comprehensive income equals net income for the quarter ended March 31, 2001 and 2000.

NSP-Wisconsin

    Comprehensive income equals net income for the quarter ended March 31, 2001 and 2000.

PSCo

    The components of total comprehensive income are shown below:

 
  Three months ended
March 31

 
  2001
  2000
Net income   $ 107,390   $ 68,759
Cumulative effect of accounting change-SFAS 133     1,649    
Gains (losses) on derivatives     (4,472 )  
   
 
Comprehensive income   $ 104,567   $ 68,759
   
 

    Accumulated comprehensive loss at March 31, 2001 relates to SFAS 133 valuation adjustments.

SPS

    The components of total comprehensive income are shown below:

 
  Three months ended
March 31

 
  2001
  2000
Net income   $ 26,049   $ 18,256
Cumulative effect of accounting change-SFAS 133     (2,626 )  
Gains (losses) on derivatives     (1,130 )  
   
 
Comprehensive income   $ 22,293   $ 18,256
   
 

    Accumulated comprehensive loss at March 31, 2001 relates to SFAS 133 valuation adjustments.

24


REPORTS OF INDEPENDENT PUBLIC ACCOUNTANTS

To Northern States Power Company-Minnesota:

    We have reviewed the accompanying consolidated balance sheet of Northern States Power Company-Minnesota (a Minnesota corporation) and subsidiaries as of March 31, 2001, and the related consolidated statements of income and cash flows for the three-month period ended March 31, 2001. These financial statements are the responsibility of the Company's management.

    We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

    Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States.

    We have previously audited, in accordance with auditing standards generally accepted in the United States, the balance sheet of Northern States Power Company-Minnesota and subsidiaries as of December 31, 2000 (not presented herein), and, in our report dated March 2, 2001, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2000, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

ARTHUR ANDERSEN LLP

Minneapolis, Minnesota
May 14, 2001

25


To Northern States Power Company-Wisconsin:

    We have reviewed the accompanying balance sheet of Northern States Power Company-Wisconsin (a Wisconsin corporation) and subsidiaries as of March 31, 2001, and the related statements of income and cash flows for the three-month period ended March 31, 2001. These financial statements are the responsibility of the Company's management.

    We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

    Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States.

    We have previously audited, in accordance with auditing standards generally accepted in the United States, the balance sheet of Northern States Power Company-Wisconsin as of December 31, 2000 (not presented herein), and, in our report dated March 2, 2001, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2000, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

ARTHUR ANDERSEN LLP

Minneapolis, Minnesota
May 14, 2001

26



To Public Service Company of Colorado:

    We have reviewed the accompanying consolidated balance sheet of Public Service Company of Colorado (a Colorado corporation) and subsidiaries as of March 31, 2001, and the related consolidated statements of income and cash flows for the three-month periods ended March 31, 2001 and 2000. These financial statements are the responsibility of the Company's management.

    We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

    Based on our review, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States.

    We have previously audited, in accordance with auditing standards generally accepted in the United States, the balance sheet of Public Service Company of Colorado and subsidiaries as of December 31, 2000 (not presented herein), and, in our report dated March 2, 2001, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2000, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

ARTHUR ANDERSEN LLP

Minneapolis, Minnesota
May 14, 2001

27



To Southwestern Public Service Company:

    We have reviewed the accompanying balance sheet of Southwestern Public Service Company (a New Mexico corporation) as of March 31, 2001, and the related statements of income and cash flows for the three-month periods ended March 31, 2001 and 2000. These financial statements are the responsibility of the Company's management.

    We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

    Based on our review, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States.

    We have previously audited, in accordance with auditing standards generally accepted in the United States, the balance sheet of Southwestern Public Service Company as of December 31, 2000 (not presented herein), and, in our report dated March 2, 2001, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying balance sheet as of December 31, 2000, is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived.

ARTHUR ANDERSEN LLP

Minneapolis, Minnesota
May 14, 2001

28



Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

    Discussion of financial condition and liquidity for the Utility Subsidiaries of Xcel Energy are 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 and the results of operations as set forth in general instructions H (2) (a) of Form 10-Q for wholly owned subsidiaries (reduced disclosure format).

Forward Looking Information

    The following discussion and analysis by management focuses on those factors that had a material effect on the financial condition and results of operations of Xcel Energy's Utility Subsidiaries during the periods presented, or are expected to have a material impact in the future. It should be read in conjunction with the accompanying unaudited Consolidated Financial Statements and Notes.

    Except for the historical statements contained in this report, the matters discussed in the following discussion and analysis are forward-looking statements that are subject to certain risks, uncertainties and assumptions. Such forward-looking statements are intended to be identified in this document by the words "anticipate," "estimate," "expect," "objective," "outlook," "possible," "potential" and similar expressions. Actual results may vary materially. Factors that could cause actual results to differ materially include, but are not limited to:

    general economic conditions, including their impact on capital expenditures and the ability of the Xcel Energy's utility subsidiaries to obtain financing on favorable terms;

    business conditions in the energy industry;

    competitive factors, including the extent and timing of the entry of additional competition in the markets served by the Utility Subsidiaries of Xcel Energy;

    unusual weather;

    state, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rate structures, and affect the speed and degree to which competition enters the electric and gas markets;

    risks associated with the California power markets; and

    the other risk factors listed from time to time by the Utility Subsidiaries of Xcel Energy in reports filed with the Securities and Exchange Commission (SEC), including Exhibit 99.01 to this Report on Form 10-Q for the quarter ended March 31, 2001.

Market Risks

    The utility subsidiaries of Xcel Energy and its subsidiaries are exposed to market risks, including changes in commodity prices, interest rates and currency exchange rates as disclosed in Management's Discussion and Analysis in their annual reports on Form 10-K for the year ended Dec. 31, 2000. The Utility Subsidiaries of Xcel Energy have limited exposure to commodity price and interest rate risk due to cost-based rate regulation. There have been no material changes in the market risk exposures that affect the quantitative and qualitative disclosures presented as of Dec. 31, 2000.

29



NSP-MINNESOTA'S MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

    NSP-Minnesota's net income was approximately $42.2 million for the first three months of 2001, compared with approximately $30.2 million for the first three months of 2000.

Electric Utility Margins

    The following table details the change in electric revenue and margin. Electric production expenses tend to vary with changing retail and wholesale sales requirements and unit cost changes in fuel and purchased power. Due to fuel clause cost recovery mechanisms for retail customers in several states and the ability to vary wholesale prices with changing market conditions, most fluctuations in energy costs do not affect electric margin. However, the fuel clause cost recovery in the Minnesota, North Dakota and South Dakota jurisdictions does not allow for complete recovery of all variable production expenses and, therefore, higher costs in periods of extreme temperatures can result in an adverse earnings impact.

 
  Three months ended March 31
(Millions of dollars)

  2001
  2000
Electric retail, firm wholesale and other revenue   $ 568   $ 509
Short-term wholesale revenue     46     41
   
 
  Total electric utility revenue     614     550
Electric retail and firm wholesale fuel and purchase power     210     170
Short-term wholesale fuel and purchase power     33     27
   
 
  Total electric utility fuel and purchase power     243     197
Electric retail, firm wholesale and other margin     358     339
Short-term wholesale margin     13     14
   
 
  Total electric utility margin   $ 371   $ 353
   
 

    Electric revenue increased by approximately $64 million, or 11.7 percent, in the first quarter of 2001, compared with the first three months of 2000. Electric margin increased by approximately $18 million, or 5.1 percent, in the first quarter of 2001. The increase in retail revenue was primarily due to an increase in purchase power costs recovered in electric rates. Additionally, more favorable temperatures during the first quarter of 2001 increased retail revenue by approximately $12 million and retail margin by approximately $9 million. Retail revenue and margin were reduced by approximately $2 million in the first quarter of 2001 due to a rate reduction in Minnesota that was agreed to as part of the merger approval process. The increase in revenue and margin was also attributed to the shared trading margins from the Joint Operating Agreement (JOA) for the operating utilities of Xcel Energy. The JOA was approved and placed into effect by the FERC as part of the NSP/NCE Merger in August 2000.

Gas Utility Margins

    The following table details the change in gas revenue and margin. The cost of gas tends to vary with changing sales requirements and unit cost of gas purchases. However, due to purchased gas cost

30


recovery mechanisms for retail customers, fluctuations in the cost of gas have little effect on gas margin.

 
  Three months ended March 31
 
(Millions of dollars)

 
  2001
  2000
 
Gas revenue   $ 353   $ 164  
Cost of gas purchased and transported     (288 )   (111 )
   
 
 
Gas margin   $ 65   $ 53  
   
 
 

    Gas revenue for the first three months of 2001 increased by $189 million, or 115.7 percent, compared with the first three months of 2000, largely due to higher cost of gas. Gas margin for the first three months of 2001 increased by $12 million, or 22.6 percent, compared with the first three months of 2000. Cooler winter temperatures increased gas sales in the first quarter of 2001, increasing gas revenues by approximately $27 million and gas margins by approximately $9 million.

Non-Fuel Operating Expense and Other Costs

    Regulated Other Operating and Maintenance Expense increased by approximately $9 million, or 4.6 percent, for the first three months of 2001, compared with the first three months of 2000. The change is largely due to increased reserves for uncollectible accounts and start-up costs to establish the Nuclear Management Co.

    Depreciation and Amortization Expense increased by approximately $3 million, or 3.4 percent, for the three months of 2001, compared with the first three months of 2000, primarily due to increased capital additions to utility plant.

    Interest expense decreased by approximately $5 million, or 16.2 percent, for the first three months of 2001, compared with the first three months of 2000. The change is largely due to decreased debt levels and decreasing interest rates.

31


NSP-WISCONSIN'S MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

    NSP-Wisconsin's net income was $13.1 million for the first three months of 2001, compared with $12.8 million for the first three months of 2000.

Electric Utility Margins

    The following table details the change in electric revenue and margin. Electric production expenses tend to vary with changing retail and wholesale sales requirements and unit cost changes in fuel and purchased power. Wisconsin does not have an automatic retail electric fuel adjustment clause. Instead, it has a procedure, which compares actual monthly and anticipated annual fuel costs with those costs that were included in the latest retail electric rates approved by the PSCW. If the comparison results in a difference outside a certain range, the PSCW may hold hearings limited to fuel costs and revise rates. Therefore, the fuel clause cost recovery in Wisconsin does not allow for complete recovery of all variable production expenses and higher costs, particularly in periods of extreme temperatures, can result in an adverse earnings impact.

 
  Three months ended March 31
 
(Millions of dollars)

 
  2001
  2000
 
Electric revenue   $ 114   $ 106  
Electric fuel and purchased power     (61 )   (53 )
   
 
 
Electric margin   $ 53   $ 53  
   
 
 

    Electric revenue increased, and margin for the first three months of 2001 was relatively flat for the first quarter of 2001, compared with the first quarter of 2000. Electric revenue increased for the first quarter of 2001, largely due to a fuel surcharge that was in effect during the first quarter of 2001 to recover increased fuel and purchased power costs.

Gas Utility Margins

    The following table details the change in gas revenue and margin. The cost of gas tends to vary with changing sales requirements and unit cost of gas purchases. However, due to purchased gas cost recovery mechanisms for retail customers, fluctuations in the cost of gas have little effect on gas margin.

 
  Three months ended March 31
 
(Millions of dollars)

 
  2001
  2000
 
Gas revenue   $ 70   $ 39  
Cost of gas purchased and transported     (57 )   (27 )
   
 
 
Gas margin   $ 13   $ 12  
   
 
 

    Gas revenue for the first three months of 2001 increased by $31.0 million, or 80.4 percent, compared with the first three months of 2000, largely due to the higher cost of natural gas. Gas margin for the first three months of 2001 increased by approximately $1 million, compared with the first three months of 2000, largely due to more favorable temperatures, which increased gas revenue by approximately $3.8 million and gas margin by approximately $1.4 million.

32


Non-Fuel Operating Expense and Other Costs

    Regulated Other Operation and Maintenance Expense increased by approximately $0.3 million, or 1.3 percent, for the first three months of 2001, compared with the first three months of 2000. The change is largely due to expense timing and general inflation.

    Depreciation and Amortization Expense decreased by approximately $0.3 million, or 2.7 percent, for the three months of 2001, compared with the first three months of 2000. Increased capital additions were offset by decreases due to computer equipment and software becoming fully depreciated.

    Interest expense increased by approximately $0.8 million, or 17.7 percent, for the first three months of 2001 compared with the first three months of 2000, due to increased long-term debt levels.

PSCo'S MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

    PSCo's net income was $107.4 million for the first three months of 2001, compared with $68.8 million for the first three months of 2000.

Electric Utility Margins

    The following table details the change in electric revenue and margin. Electric production expenses tend to vary with changing retail and wholesale sales requirements and unit cost changes in fuel and purchased power. Electric margins reflect the impact of sharing of energy costs and savings relative to a target cost per delivered kilowatt-hour and certain trading margins under the incentive cost adjustment (ICA). In addition to the ICA, PSCo has other adjustment clauses that allow certain costs to be passed through to retail customers. The Qualifying Facilities Capacity Cost Adjustment (QFCCA) provides for recovery of purchased capacity costs from certain Qualifying Facilities projects not otherwise reflected in base electric rates. The fuel clause cost recovery does not allow for complete recovery of all variable production expenses and higher costs can result in an adverse earnings impact.

 
  Three months ended March 31
(Millions of dollars)

  2001
  2000
Electric retail and firm wholesale revenue   $ 351   $ 382
Short-term wholesale revenue     239     21
   
 
  Total electric utility revenue     590     403
Electric retail and firm wholesale fuel and purchase power     172     171
Short-term wholesale fuel and purchase power     167     20
   
 
  Total electric utility fuel and purchase power     339     191
Electric retail and firm wholesale margin     179     211
Short-term wholesale margin     72     1
   
 
  Total electric utility margin   $ 251   $ 212
   
 

    Electric revenue increased by approximately $187 million, or 46.4 percent, in the first quarter of 2001. Electric margin increased by approximately $39 million, or 18.4 percent, in the first quarter of 2001. Retail margin declined in the first quarter of 2001, due to increased fuel and purchased power costs, which are not completely recoverable from customers in Colorado due to various sharing mechanisms. Retail revenue and margin was reduced by approximately $3 million in the first quarter of 2001, due to a rate reduction in Colorado that was agreed to as part of the merger approval process. Short-term wholesale revenue and margin increased due to the expansion of the wholesale marketing operations and favorable market conditions.

33


Gas Utility Margins

    The following table details the change in gas revenue and margin. The cost of gas tends to vary with changing sales requirements and unit cost of gas purchases. PSCo has in place a Gas Cost Adjustment mechanism for natural gas sales, which recognizes the majority of the effects of changes in the cost of gas purchased for resale and adjusts revenues to reflect such changes in costs on a timely basis. Therefore, fluctuations in the cost of gas have little effect on gas margin.

 
  Three months ended March 31
 
(Millions of dollars)

 
  2001
  2000
 
Gas revenue   $ 548   $ 271  
Cost of gas purchased and transported     (448 )   (176 )
   
 
 
Gas margin   $ 100   $ 95  
   
 
 

    Gas revenue for the first three months of 2001 increased by $277 million, or 102 percent, compared with the first three months of 2000, due to higher cost of gas and sales growth. Gas margin for the first three months of 2001 increased by $5 million, or 5.3 percent, compared with the first three months of 2000, due to cooler temperatures in the first quarter of 2001, which increased gas sales.

Electric Trading Margins

    Trading revenues and costs of goods sold do not include the revenue and production costs associated with energy produced from generation assets. The following table details the changes in electric trading revenue and margin. Trading margins reflect the impact of sharing of certain trading margins under the ICA.

 
  Three months ended March 31
 
(Millions of dollars)

 
  2001
  2000
 
Trading revenue   $ 298   $ 45  
Trading cost of sales     (277 )   (41 )
   
 
 
Trading margin   $ 21   $ 4  
   
 
 

    Trading revenue increased by approximately $253 million and trading margin increased by approximately $17 million in 2000. The increase in trading revenue and margin is a result of the expansion of PSCo's electric trading. The trading revenue and margin was reduced under the provisions of the JOA for the operating utilities of Xcel Energy. The JOA requires certain PSCo trading margins to be shared with NSP-Minnesota and SPS and was approved and placed into effect by the FERC as part of the NSP/NCE Merger in August 2000.

Non-Fuel Operating Expense and Other Costs

    Regulated Other Operation and Maintenance Expense increased by approximately $2.4 million, or 2.4 percent, for the first three months of 2001, compared with the first three months of 2000. The change is largely due to general inflation and increased costs due to customer growth.

    Depreciation and Amortization Expense increased by approximately $7.7 million, or 15.4 percent, for the first three months of 2001, compared with the first three months of 2000, primarily due to increased amortization costs of software and increased capital additions to utility plant.

    Interest expense decreased by approximately $6.5 million, or 17.7 percent, for the first three months of 2001, compared with the first three months of 2000.

34


    Other income and expense increased in the first quarter of 2001, compared with the first quarter of 2000. In March 2001, PSCo sold its Boulder Hydro facility in Colorado and recorded a gain of $11 million (before tax) on this transaction. The gain on this sale will be shared with customers due to its inclusion in the PSCo Electric Earnings Test in Colorado.

SPS' MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

    SPS' net income was $26.0 million for the first three months of 2001, compared with $18.3 million for the first three months of 2000.

Electric Utility Margins

    The following table details the change in electric revenue and margin. Electric production expenses tend to vary with changing retail and wholesale sales requirements and unit cost changes in fuel and purchased power. Fuel and purchased power costs are recoverable in SPS' Texas jurisdiction through a fixed fuel factor, which is included in rates. In the New Mexico retail jurisdiction, fuel and purchased energy costs are adjusted through a fuel clause and a fixed annual factor. In all other jurisdictions, SPS currently recovers substantially all increases and refunds substantially all decreases in fuel and purchased power costs pursuant to monthly adjustment clauses. Due to these fuel clause cost recovery mechanisms for retail customers and the ability to vary wholesale prices with changing market conditions, most fluctuations in energy costs do not affect electric margin. However, the fuel clause cost recovery does not allow for complete recovery of all variable production expenses and, therefore, higher costs can result in an adverse earnings impact.

 
  Three months ended March 31
(Millions of dollars)

  2001
  2000
Electric retail, firm wholesale and other revenue   $ 328   $ 214
Short-term wholesale revenue     1     2
   
 
  Total electric utility revenue     329     216
Electric retail and firm wholesale fuel and purchase power     197     106
Short-term wholesale fuel and purchase power     1     2
   
 
  Total electric utility fuel and purchase power     198     108
Electric retail, firm wholesale and other margin     131     108
Short-term wholesale margin     0     0
   
 
  Total electric utility margin     131     108
   
 

    Electric revenue increased by approximately $113 million, or 52.3 percent, in the first quarter of 2001. Electric margin increased by approximately $23 million, or 21.3 percent, in the first quarter of 2001. Electric revenues increased in the first quarter of 2001, largely due to increases in fuel and purchased power costs, particularly the increased cost of natural gas generation. More favorable temperatures during the first quarter of 2001 increased retail revenue by approximately $9 million and retail margin by approximately $5 million. In addition, recovery of higher transmission costs from the Southwest Power Pool increased electric revenue and margin by approximately $8 million for the first quarter of 2001. The increase in revenue and margin was also attributed to the shared trading margins from the JOA for the operating utilities of Xcel Energy. The JOA was approved and placed into effect by the FERC as part of the NSP/NCE Merger in August 2000.

35


Non-Fuel Operating Expense and Other Costs

    Regulated Other Operation and Maintenance Expense increased by approximately $5.7 million, or 16 percent, for the first three months of 2001, compared with the first three months of 2000. The change is largely due to increased transmission costs from the Southwest Power Pool (which are offset by increased electric revenue).

    Depreciation and Amortization Expense increased by approximately $0.9 million, or 4.7 percent, for the first three months of 2001, compared with the first three months of 2000, primarily due to increased capital additions to utility plant.

    Interest expense decreased by approximately $1.3 million, or 9.5 percent, for the first three months of 2001, compared with the first three months of 2000. The change is largely due to lower interest expense due to a shift to more short-term debt and less long-term debt.


Part II. OTHER INFORMATION
Item 1. Legal Proceedings

    In the normal course of business, various lawsuits and claims have arisen against the Utility Subsidiaries of Xcel Energy. Management, after consultation with legal counsel, has recorded an estimate of the probable cost of settlement or other disposition for such matters. See Notes 4 and 5 of the Financial Statements in this Form 10-Q for further discussion of legal proceedings, including Regulatory Matters and Commitments and Contingent Liabilities, which are hereby incorporated by reference. Reference also is made to Item 3 of NSP-Minnesota, NSP-Wisconsin's, PSCo's and SPS' 2000 Form 10-K for a description of certain legal proceedings presently pending. There are no new significant cases to report against the Utility Subsidiaries of Xcel Energy and there have been no notable changes in the previously reported proceedings, except as set forth below.

    Light Rail Transit (LRT)—On Feb. 16, 2001, NSP-Minnesota filed a suit in the United States District Court in Mpls., against the Minnesota Metropolitan Council, Minnesota Department of Transportation, State of Minnesota and the Federal Transit Administration to prevent pave-over of NSP-Minnesota's underground facilities during construction of the LRT system. NSP-Minnesota is also seeking recovery of relocation expenses. State defendants countersued, seeking delay damages and a $330 million surety bond. A hearing on state defendants' Motion for Preliminary Injunction is scheduled for May 15, 2001. This matter is at the very early stages of litigation. NSP-Minnesota denies the merits of the defendants' countersuits and intends to vigorously defend against their claims.


Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

    The following Exhibits are filed with this report:

15(a)   Letter from Arthur Andersen LLP regarding unaudited interim information for NSP-Minnesota.
15(b)   Letter from Arthur Andersen LLP regarding unaudited interim information for PSCo.
15(C)   Letter from Arthur Andersen LLP regarding unaudited interim information for SPS.
99.01   Statement pursuant to Private Securities Litigation Reform Act.

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(b) Reports on Form 8-K

    The following reports on Form 8-K were filed either during the three months ended March 31, 2001, or between March 31, 2001, and the date of this report:

NSP-Minnesota

    None

NSP-Wisconsin

    None.

PSCo

    None.

SPS

    None.

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NORTHERN STATES POWER CO. (A MINNESOTA CORPORATION) 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 on May 14, 2001.

    Northern States Power Co. (a Minnesota corporation)
(Registrant)

 

 

 

/s/ 
DAVID E. RIPKA   
David E. Ripka
Vice President and Controller

 

 

 

/s/ 
EDWARD J. MCINTYRE   
Edward J. McIntyre
Vice President and Chief Financial Officer

NORTHERN STATES POWER CO. (A WISCONSIN CORPORATION) 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 on May 14, 2001.

    Northern States Power Co. (a Wisconsin corporation)
(Registrant)

 

 

 

/s/ 
DAVID E. RIPKA   
David E. Ripka
Vice President and Controller

 

 

 

/s/ 
EDWARD J. MCINTYRE   
Edward J. McIntyre
Vice President and Chief Financial Officer

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PUBLIC SERVICE CO. OF COLORADO 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 on May 14, 2001.

    Public Service Co. of Colorado
(Registrant)

 

 

 

/s/ 
DAVID E. RIPKA   
David E. Ripka
Vice President and Controller

 

 

 

/s/ 
EDWARD J. MCINTYRE   
Edward J. McIntyre
Vice President and Chief Financial Officer

SOUTHWESTERN PUBLIC SERVICE CO.

    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 on May 14, 2001.

    Southwestern Public Service Co.
(Registrant)

 

 

 

/s/ 
GARY L. GIBSON   
Gary L. Gibson
President and Chairman

 

 

 

/s/ 
DAVID HUDSON   
David Hudson
Secretary & Treasurer

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PART 1. FINANCIAL INFORMATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
NSP–MINNESOTA'S MANAGEMENT'S DISCUSSION AND ANALYSIS
Part II. OTHER INFORMATION
Part II. OTHER INFORMATION
SIGNATURES
EX-15.(A) 2 a2048458zex-15_a.htm EXHIBIT 15(A) Prepared by MERRILL CORPORATION

Exhibit 15 (a)

May 14, 2001

Northern States Power Company-Minnesota:

    We are aware that Northern States Power Company-Minnesota has incorporated by reference in its Registration Statement (Form S-3, File No. 333-59098) pertaining to debt securities, its Form 10-Q for the quarter ended March 31, 2001, which includes our report dated May 14, 2001, covering the unaudited financial statements contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statement prepared or certified by our Firm or a report prepared or certified by our Firm within the meaning of Sections 7 and 11 of the Act.

                        Very truly yours,

                        ARTHUR ANDERSEN LLP

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EX-15.(B) 3 a2048458zex-15_b.htm EXHIBIT 15(B) Prepared by MERRILL CORPORATION

Exhibit 15 (b)

May 14, 2001

Public Service Company of Colorado:

    We are aware that Public Service Company of Colorado has incorporated by reference in its Registration Statement (Form S-3, File No. 33-37431) as amended on Dec. 4, 1990, pertaining to the shelf registration of Public Service Co. of Colorado's First Mortgage Bonds; its Registration Statement (Form S-3, File No. 33-51167) pertaining to the shelf registration of Public Service Co. of Colorado's First Collateral Trust Bonds; its Registration Statement (Form S-3, File No. 33-54877) pertaining to the shelf registration of Public Service Co. of Colorado's First Collateral Trust Bonds and Cumulative Preferred Stock and its Registration Statement (Form S-3, File No. 333-81791) pertaining to the shelf registration of Public Service Co. of Colorado's Senior Debt Securities, its Form 10-Q for the quarter ended March 31, 2001, which includes our report dated May 14, 2001, covering the unaudited consolidated financial statements contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statement prepared or certified by our Firm or a report prepared or certified by our Firm within the meaning of Sections 7 and 11 of the Act.

                        Very truly yours,

                        ARTHUR ANDERSEN LLP

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EX-15.(C) 4 a2048458zex-15_c.htm EXHIBIT 15(C) Prepared by MERRILL CORPORATION

Exhibit 15 (c)

May 14, 2001

Southwestern Public Service Company:

    We are aware that Southwestern Public Service Company has incorporated by reference in its Registration Statement (Form S-3, File No. 333-05199) pertaining to Southwestern Public Service Company's Preferred Stock and Debt Securities, its Form 10-Q for the quarter ended March 31, 2001, which includes our report dated May 14, 2001, covering the unaudited financial statements contained therein. Pursuant to Regulation C of the Securities Act of 1933, that report is not considered a part of the registration statement prepared or certified by our Firm or a report prepared or certified by our Firm within the meaning of Sections 7 and 11 of the Act.

                        Very truly yours,

                        ARTHUR ANDERSEN LLP

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EX-99.01 5 a2048458zex-99_01.htm EXHIBIT 99.01 Prepared by MERRILL CORPORATION
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Exhibit 99.01

    Utility Subsidiaries of Xcel Energy Cautionary Factors

    The Private Securities Litigation Reform Act provides a "safe harbor" for forward-looking statements to encourage such disclosures without the threat of litigation, providing those statements are identified as forward-looking and are accompanied by meaningful, cautionary statements identifying important factors that could cause the actual results to differ materially from those projected in the statement. Forward-looking statements are made in written documents and oral presentations of the Utility Subsidiaries of Xcel Energy. These statements are based on management's beliefs as well as assumptions and information currently available to management. When used in the Utility Subsidiaries of Xcel Energy's documents or oral presentations, the words "anticipate," "estimate," "expect," "projected," objective," "outlook," "forecast," "possible," "potential" and similar expressions are intended to identify forward-looking statements. In addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements, factors that could cause the actual results of the Utility Subsidiaries of Xcel Energy to differ materially from those contemplated in any forward-looking statements include, among others, the following:

    Economic conditions, including inflation rates and monetary fluctuations;

    Trade, monetary, fiscal, taxation and environmental policies of governments, agencies and similar organizations in geographic areas where the Utility Subsidiaries of Xcel Energy have a financial interest;

    Customer business conditions, including demand for their products or services and supply of labor and materials used in creating their products and services;

    Financial or regulatory accounting principles or policies imposed by the Financial Accounting Standards Board, the SEC, the Federal Energy Regulatory Commission and similar entities with regulatory oversight;

    Availability or cost of capital such as changes in: interest rates; market perceptions of the utility industry, Xcel Energy or any of its subsidiaries; or security ratings;

    Factors affecting utility and nonutility operations such as unusual weather conditions; catastrophic weather-related damage; unscheduled generation outages, maintenance or repairs; unanticipated changes to fossil fuel, nuclear fuel or gas supply costs or availability due to higher demand, shortages, transportation problems or other developments; nuclear or environmental incidents; or electric transmission or gas pipeline constraints;

    Employee workforce factors, including loss or retirement of key executives, collective bargaining agreements with union employees, or work stoppages;

    Increased competition in the utility industry;

    State, federal and foreign legislative and regulatory initiatives that affect cost and investment recovery, have an impact on rate structures and affect the speed and degree to which competition enters the electric and gas markets; industry restructuring initiatives; transmission system operation and/or administration initiatives; recovery of investments made under traditional regulation; nature of competitors entering the industry; retail wheeling; a new pricing structure; and former customers entering the generation market;

    Rate-setting policies or procedures of regulatory entities, including environmental externalities, which are values established by regulators assigning environmental costs to each method of electricity generation when evaluating generation resource options;

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    Nuclear regulatory policies and procedures, including operating regulations and spent nuclear fuel storage;

    Social attitudes regarding the utility and power industries;

    Risks associated with the California power market;

    Cost and other effects of legal and administrative proceedings, settlements, investigations and claims;

    Technological developments that result in competitive disadvantages and create the potential for impairment of existing assets;

    Factors associated with nonregulated investments, including conditions of final legal closing, foreign government actions, foreign economic and currency risks, political instability in foreign countries, partnership actions, competition, operating risks, dependence on certain suppliers and customers, domestic and foreign environmental and energy regulations; and

    Other business or investment considerations that may be disclosed from time to time in the SEC filings of the Utility Subsidiaries of Xcel Energy or in other publicly disseminated written documents.

    The Utility Subsidiaries of Xcel Energy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors should not be construed as exhaustive.

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Exhibit
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